Title 56 Insurance

Chapter 1 Department of Commerce and Insurance
Part 1 General Provisions
§ 56-1-101. Short title.
  1. This title shall be known and may be cited as the “Tennessee Insurance Law.”
§ 56-1-102. Definitions for this chapter, chapters 2-4, 7, 10 and 11 of this title.
  1. As used in this chapter and chapters 2-4, 7, 10 and 11 of this title, unless the context otherwise requires:
    1. (1) “Commissioner” means the commissioner of commerce and insurance;
    2. (2) “Company” or “insurance company” includes all corporations, associations, partnerships, or individuals engaged as principals in the business of insurance;
    3. (3) “Department” means the department of commerce and insurance;
    4. (4) “Domestic” designates those companies incorporated in this state;
    5. (5) “Foreign,” when used without limitation, includes all companies formed by authority of any other state or government;
    6. (6) “Net assets” means the funds of an insurance company available for the payment of its obligations in this state, including uncollected and deferred premiums not more than three (3) months due on policies actually in force, after deducting from the funds all unpaid losses and claims, and claims for losses, and all other debts and liabilities, inclusive of policy liability and exclusive of capital;
    7. (7) “TennCare health benefit plan” has the same meaning as defined in § 71-5-171; and
    8. (8) “Unearned premiums,” “reinsurance reserve,” and “net value of policies” or “premium reserve,” severally, mean the liability of an insurance company upon its insurance contracts, other than accrued claims computed by rules of valuation established by [former] §  56-1-402 [repealed], [former] §  56-1-403 [repealed], §§ 56-1-404, 56-1-405 [see the Compiler's Notes].
§ 56-1-103. Adoption of data disclosure requirements — Requests for data concerning rate adjustments.
  1. (a) The commissioner shall adopt data disclosure requirements developed by the National Association of Insurance Commissioners for Property and Casualty Insurors.
  2. (b) The commissioner is authorized to request other data that the commissioner deems necessary in considering requests for rate adjustments.
§ 56-1-104. Standardized forms for health care insurance claims.
  1. (a) The commissioner, in consultation with the commissioner of health, shall promulgate rules and regulations to effect the development and implementation of standardized forms for all health care insurance claims made in this state. In developing the rules and regulations, the commissioner shall give consideration to requiring the use of Form UB92.
  2. (b) The commissioner and the commissioner of health shall develop and implement the standardized forms in consultation with the insurance companies offering for sale health care policies in this state.
  3. (c) The commissioner, in consultation with the commissioner of health, shall promulgate the rules and regulations pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
  4. (d) All insurance companies offering for sale health care policies in this state shall require all policyholders and third party claimants to utilize the standardized forms when making a claim against any health care insurance policy in effect in this state.
  5. (e) As used in this section, “standardized forms” includes, but is not necessarily limited to, electronic storage systems and information.
§ 56-1-105. Exclusion of types of insurance from specific insurance definitions.
  1. (a) Notwithstanding any law to the contrary, “accident and health insurance,” “accident and sickness insurance,” “health insurance,” “health benefit plan” or other similar term used in any legislation enacted after May 24, 2000, shall not include, unless specifically provided, the following types of insurance or any combination of these types of insurance: hospital indemnity, accident, dental, specified disease, disability income, long-term care, Champus supplement, or Medicare supplement, except as provided in this section.
  2. (b) Nothing contained in this section shall apply to chapters 4 and 12 of this title.
  3. (c) Nothing contained in this section shall apply to programs and services provided pursuant to Title XIX of the Social Security Act (42 U.S.C. § 1396 et seq.), and regulations promulgated pursuant to Title XIX of the Social Security Act.
§ 56-1-106. Requests for information regarding complaints — Time limits — Exceptions — Penalties.
  1. (a)
    1. (1) Notwithstanding any other provision of law or rule to the contrary, if the department makes a request for information from an entity or individual licensed under this title, or required to be licensed under this title, concerning a complaint filed against the entity or individual, and the request requires a response, the entity or individual must respond to the request within a reasonable time.
    2. (2)
      1. (A) As used in this section, “reasonable time” means a period of time not to exceed thirty (30) days from the date the request is received by the entity or individual.
      2. (B) For the purposes of this section, the response by the entity or individual shall constitute a response if it acknowledges the inquiry from the department and sets forth a time frame to address the substantive issues in the inquiry.
  2. (b) This section does not apply to or preempt any other law that requires or allows the commissioner to require an individual or entity to respond to a request from the department within a period of time less than thirty (30) days.
  3. (c) The commissioner may levy a civil penalty in the amount of one hundred dollars ($100) per day upon any entity or individual that fails to respond within a reasonable time.
  4. (d) This section does not rescind or preempt any due process rights of entities regulated pursuant to this title.
  5. (e) This section does not apply to entities subject to regulation by the department that participate in the TennCare program under Title XIX of the Social Security Act (42 U.S.C. § 1396 et seq.), or any successor to the TennCare program.
§ 56-1-107. Authority to query the TBI's criminal history records system.
  1. Notwithstanding any other law to the contrary, in conjunction with the issuance of licenses, permits and registrations and the investigation of consumer complaints, the department has the authority to query the Tennessee bureau of investigation's (TBI) Tennessee criminal history records system for the following information:
    1. (1) Tennessee criminal history records;
    2. (2) Tennessee repository for apprehension of persons (TRAP);
    3. (3) State of Tennessee orders of protection files (STOP); and
    4. (4) Criminal history records of the federal government and other states to which the TBI may have access. Criminal history records of the federal bureau of investigation may be obtained for the reasons listed in this section only if fingerprints are obtained and submitted through the TBI.
§ 56-1-108. Study of impediments to insurance for use of justifiable force.
  1. (a) The commissioner shall conduct a study of Tennessee's insurance laws to determine what impediments, if any, exist under the insurance laws or policies of this state that may be acting as deterrents for insurance companies in this state to underwrite policies of insurance to insure a person who has used force that is justified, including deadly force, in protecting such person's self or property pursuant to §§ 39-11-611 and 39-11-612, commonly referred to as the castle doctrine, or any other law.
  2. (b) The commissioner shall report to the general assembly and to the governor the results of the study required by subsection (a) no later than March 1, 2012, with recommendations on whether such insurance should, in the commissioner's opinion, become available to Tennessee residents.
§ 56-1-109. License of person in default on student loans.
  1. (a) As used in this section, unless the context otherwise requires:
    1. (1) “Guarantee agency” means a guarantor of student loans that has an agreement with the United States secretary of education;
    2. (2) “License” means a license, certification, registration, permit, approval or other similar document issued to an individual evidencing admission to or granting authority to engage in a profession, trade, occupation, business, or industry;
    3. (3) “Licensing authority” means the department or any division, board, commission, committee, agency or other governmental entity under the authority of the department or attached to a division of the department that has been established by statute or regulation to oversee the issuance and regulation of any license; and
    4. (4) “TSAC” means the Tennessee student assistance corporation.
  2. (b)
    1. (1) Upon receiving a copy of a final order as provided in subsection (c) from TSAC or a guarantee agency, each licensing authority shall suspend, deny or revoke the license of any person who has defaulted on a repayment or service obligation under any federal family education loan program, the federal Higher Education Act of 1965 (20 U.S.C. § 1001 et seq.), a student loan guaranteed or administered by TSAC, or any other state or federal educational loan or service-conditional scholarship program.
    2. (2) Notwithstanding subdivision (b)(1), a licensing authority may elect not to suspend, deny, or revoke the license of a person if the default or delinquency is the result of a medical hardship that prevented the person from working in the person's licensed field and the medical hardship significantly contributed to the default or delinquency.
  3. (c)
    1. (1) Each licensing authority shall accept any determination of default from TSAC or a guarantee agency, after TSAC or the guarantee agency has afforded a debtor an opportunity to be heard in accordance with subdivision (c)(2); and the licensing authority shall rescind any disciplinary action and restore any license upon receiving notice from TSAC or the guarantee agency that the debtor has agreed to serve the debtor's obligation or is in compliance with an approved repayment plan.
    2. (2)
      1. (A) Unless a debtor has made satisfactory arrangements according to the lender, TSAC or the guarantee agency, which may include administrative wage garnishment, voluntary payment arrangements, deferment or forbearance, then the debtor shall be regarded as delinquent or in default. If a debtor is delinquent or in default on a repayment or service obligation under a guaranteed student loan identified in subsection (b), or the debtor has failed to enter into a payment plan, agreed to a service obligation or comply with a payment plan previously approved by TSAC or the guarantee agency, then TSAC or the guarantee agency shall issue to the debtor a notice of intent to file an order with the appropriate licensing authority to seek to suspend, deny or revoke the debtor's license. The notice shall:
        1. (i) Be served upon the debtor personally or by certified mail with return receipt requested; and
        2. (ii) State that the debtor's license shall be suspended, denied or revoked ninety (90) days after service unless within that time the debtor:
          1. (a) Pays the entire debt stated in the notice;
          2. (b) Enters into a payment plan or service obligation, or complies with a payment plan previously entered into and approved by TSAC or the guarantee agency;
          3. (c) Requests and qualifies for deferment, forbearance or other satisfactory compliance; or
          4. (d) Requests a hearing before TSAC or the guarantee agency.
      2. (B) The hearing request by the debtor shall be made in writing and must be received by TSAC or the guarantee agency within twenty (20) days of the date the notice is served.
      3. (C) TSAC or the guarantee agency, upon receipt of a request for a hearing from the debtor, shall schedule a hearing to determine whether a determination of delinquency or default which could result in suspension, denial or revocation of the debtor's license is appropriate. The debtor's license may not be suspended, denied or revoked until a determination is reached following the hearing. The issues that may be determined in the hearing are:
        1. (i) The amount of the debt, if any;
        2. (ii) Whether the debtor is delinquent or in default;
        3. (iii) Whether the debtor:
          1. (a) Has entered into a payment plan or service obligation approved by TSAC or the guarantee agency;
          2. (b) Is willing to enter into a payment plan or service obligation approved by TSAC or the guarantee agency; or
          3. (c) Is willing to comply with a payment plan or service obligation previously entered into and approved by TSAC or the guarantee agency;
        4. (iv) Whether the debtor is eligible for deferment, forbearance or other satisfactory compliance; and
        5. (v) Whether the debtor's default or delinquency is the result of a medical hardship that prevented the debtor from working in the debtor's licensed field and the medical hardship significantly contributed to the default or delinquency.
      4. (D) If a debtor, without good cause, fails to respond to the notice of intent, fails to timely request a hearing, or fails to appear at a regularly scheduled hearing, the debtor's defenses, objections, or request for a payment plan or compliance with a payment plan may be determined to be without merit; and TSAC or the guarantee agency shall enter a final decision and order, requesting suspension, denial or revocation of the debtor's license, and further requesting the licensing authority to order the debtor to refrain from engaging in the licensed activity. TSAC or the guarantee agency shall send a copy of the order to the licensing authority and the debtor.
      5. (E) The administrative hearings shall be conducted in accordance with rules and regulations adopted under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
      6. (F)
        1. (i) When TSAC or the guarantee agency determines that the debt is paid in full or the debtor has entered into a payment plan, entered into a service obligation, is otherwise in satisfactory compliance or complied with a payment plan previously approved by TSAC or the guarantee agency, TSAC or the guarantee agency shall enter an order requesting that the licensing authority terminate the order suspending, denying or revoking the license. TSAC or the guarantee agency shall send a copy of the order to the licensing authority and the debtor. Notwithstanding any other law, rule or regulation to the contrary, when the license is reinstated, the licensing authority shall not impose a reinstatement fee that exceeds fifty dollars ($50.00).
        2. (ii) Entry of an order seeking to terminate suspension, denial or revocation of a license does not limit the ability of TSAC or the guarantee agency to issue a new order which seeks to suspend, deny or revoke the license of the same debtor in the event of another delinquency or default.
      7. (G) TSAC is authorized to promulgate necessary rules and regulations to effectuate the purposes of this subsection (c). All such rules and regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act.
  4. (d) The commissioner is authorized to promulgate rules and regulations to effectuate the purposes of this section. All such rules and regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act.
§ 56-1-110. Claims to be brought in chancery court of Davidson county.
  1. (a) Claims challenging liability imposed by this title must be brought in the chancery court of Davidson County pursuant to the procedures set out in title 67, chapter 1, part 9.
  2. (b)
    1. (1) The commissioner may, against any person, agency, or company licensed, registered, or permitted by or operating under a certificate of authority issued by the commissioner, or acting in an unlawful capacity that brings such person, agency, or company under the jurisdiction of the commissioner, assess the actual and reasonable costs of the investigation, prosecution, and hearing of any disciplinary action held in accordance with the contested case provisions of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3, in which sanctions of any kind are imposed on that person, agency, or company. These costs may include, but are not limited to, those incurred and assessed for the time of the prosecuting attorneys, investigators, expert witnesses, administrative judges, and any other persons involved in the investigation, prosecution, and hearing of the action.
    2. (2) The commissioner may promulgate rules establishing a schedule of costs that may be assessed pursuant to this section. All rules must be promulgated in accordance with the Uniform Administrative Procedures Act.
    3. (3)
      1. (A) All costs assessed pursuant to this section become final thirty (30) days after the date of a final order of assessment is served.
      2. (B) If the individual or entity disciplined fails to pay an assessment when it becomes final, the commissioner may apply to the chancery court of Davidson County, which shall have jurisdiction over recovery of the costs, for a judgment and seek execution of the judgment.
Part 2 Organization and Personnel
§ 56-1-201. Creation of department of commerce and insurance.
  1. There is created a department of commerce and insurance, whose chief officer is the commissioner.
§ 56-1-202. Commissioner head of department.
  1. The commissioner shall be and act as the head of the department.
§ 56-1-203. Commissioner not to be financially interested in insurance corporations.
  1. The commissioner shall not be financially interested, directly or indirectly, in any insurance corporation subject to the supervision of the department.
§ 56-1-204. Inquisitorial power given commissioner and deputies.
  1. Inquisitorial power is given to the commissioner or the commissioner's deputies to inquire into any violation of this title, and to examine any person under oath, and to compel production of books, records, or papers relative to the inquiry.
§ 56-1-205. Traveling expenses of commissioner.
  1. The commissioner is entitled to, and shall be paid, all necessary traveling expenses, including railroad fare and hotel bills paid while away from the commissioner's office on official business.
§ 56-1-206. Special deputy commissioner — Compensation limited to half of fines.
  1. (a) The commissioner is empowered, with the consent of the governor, to appoint special deputy commissioners for the better enforcement, and to apprehend all persons found in violation, of the insurance laws of this state.
  2. (b) The special deputies shall be clothed with powers as may be delegated by the commissioner.
  3. (c) The compensation of special deputy commissioners shall be limited to one half (½) of any fine assessed against any person found guilty of violating any of the insurance laws of this state; provided, that the fine so assessed shall be due to the efforts of the special deputy commissioner arresting or causing the arrest of the guilty person.
§ 56-1-207. Employment of actuaries by commissioner — Duties — Compensation.
  1. (a) The commissioner is authorized to employ not more than three (3) actuaries, the qualifications of whom shall be acceptable to the commissioner, together with assistants deemed necessary by the commissioner for efficient administration of duties assigned to the actuaries. The commissioner shall assign the duties to be performed by the actuaries and assistants for the department.
  2. (b) The commissioner shall fix the compensation of the actuaries and assistants employed pursuant to this section and shall provide for the payment of expenses incurred by the actuaries and assistants while engaged in the performance of the duties assigned; provided, that any salary or per diem compensation shall not exceed a reasonable amount commensurate with usual compensation for like services, and the allowances of expenses shall not exceed the actual expenses incurred.
§ 56-1-208. Actuaries to compute net value of policies — Other duties.
  1. (a) The commissioner shall require the actuaries employed pursuant to § 56-1-207 to compute the net value of outstanding policies of life insurance in companies, associations or fraternal orders authorized to transact business in this state as required by law.
  2. (b) The commissioner may assign other duties to the actuaries that the commissioner deems necessary or proper.
§ 56-1-209. Payment of expenses of department — Record of receipts and expenditures — Excess fees.
  1. The commissioner shall pay out of the fees of the commissioner's office the necessary expenses of the department, shall keep an accurate record of all receipts and expenditures, and shall require and preserve sworn vouchers for each payment. The excess of fees, after paying necessary expenses, shall be turned into the state treasury.
§ 56-1-210. Advisory committee.
  1. (a) The commissioner shall appoint an advisory committee to assist the department. The advisory committee shall be composed of not more than twelve (12) members who are qualified professionals in the health insurance industry and related health fields.
  2. (b) The advisory committee shall meet with the commissioner or the commissioner's designee and shall report periodically to the department on its findings.
§ 56-1-211. Office to assist older persons concerning insurance.
  1. (a) The commissioner shall establish within the department an office to assist older Tennesseans in understanding, evaluating, and comparing insurance products available to them. The projects, programs, and services of the office shall be coordinated with those of the commission on aging and disability created by § 52-8-102. The office shall devote particular attention to addressing questions involving medicare supplement insurance policies.
  2. (b) Subject to the limits of any appropriation by the general assembly, the commissioner may, through the office established under subsection (a):
    1. (1) Employ or contract for the services of a consultant approved by the department of disability and aging;
    2. (2) Train the consultant to meet with and appear before senior citizens groups to disseminate and gather information on insurance products of interest to them;
    3. (3) Develop a computer system capable of comparing features and rates of various insurance policies;
    4. (4) Reimburse volunteers for travel expenses incurred in connection with the performance of duties assigned by the office; and
    5. (5) Undertake any other activities that are reasonably necessary to accomplish the purposes of this section.
§ 56-1-212. Commissioner's authority to regulate — Conversion of health insurance business.
  1. (a) Notwithstanding any provision of this title to the contrary, the commissioner shall have the same authority to regulate and shall apply the same substantive standards to hospital and medical service corporations licensed pursuant to chapter 29 of this title as shall apply to health insurers doing business pursuant to chapter 26, part 1 of this title.
  2. (b)
    1. (1) Prior to engaging in any transaction or series of transactions the net effect of which shall be to effectuate the conversion by any method, directly or indirectly, of all or substantially all of the health insurance business of the nonprofit hospital and medical service corporation, as measured by annual revenue on a consolidated basis, to a for-profit entity of any kind the equity interest of which is not wholly owned by the corporation or its insureds, the service corporation shall file with the commissioner a written notice of its intention to do so. The commissioner shall, upon receipt of the notice, forward a copy of the notice to the governor and to the speaker of the house of representatives and the speaker of the senate. The service corporation shall take no action to effectuate the completion of the conversion for a period of one (1) year from the date of the filing, or until the end of the next regular session of the general assembly in the year following the year in which the notice is given in the event the one-year period does not include a full, regular legislative session of the general assembly.
    2. (2) For the purposes of subdivision (b)(1):
      1. (A) “All or substantially all of the health insurance business” shall not include the sale of all or part of the assets of equity interest in a subsidiary company unless the subsidiary company constitutes in excess of seventy-five percent (75%) of the total consolidated annual revenue of the service corporation as reflected on its annual statement for the preceding year; and
      2. (B) The transfer of health insurance business of the service corporation shall not be deemed to include the contracting or subcontracting of business or business functions.
  3. (c) Notwithstanding any law to the contrary, the board of directors of the service corporation licensed pursuant to chapter 29 of this title, shall meet all of the requirements for boards of directors of nonprofit corporations pursuant to title 48, chapter 58, part 1. To the extent that chapter 29 of this title conflicts with title 48, chapter 58, title 48, chapter 58 shall control.
§ 56-1-213. Fee to cover costs of issuing or renewing licenses, registrations and permits.
  1. The commissioner is authorized to promulgate, by rule, a convenience fee to cover the costs of issuing or renewing licenses, registrations and permits. Any fee set by rule under the authority of this section may be assessed in addition to the fee or fees assessed for the costs of issuing or renewing licenses, registrations and permits by mail or in person. In no event shall the fee exceed the actual costs incurred in issuing or renewing a license, registration or permit.
Part 3 Division of Regulatory Boards
§ 56-1-301. Director for division of regulatory boards.
  1. The commissioner shall employ a director for the division of regulatory boards created under § 4-3-1303.
§ 56-1-302. Powers, duties and responsibilities of director — Alternative method of license renewals.
  1. (a) Notwithstanding any contrary law, except title 55, chapter 17, the director has the power, duty and responsibility to:
    1. (1) Act as chief administrative officer for each board;
    2. (2) Employ all consultants, investigators, inspectors, legal counsel, and other personnel necessary to staff and carry out the functions of the boards, and assign the personnel in a manner designed to ensure their most efficient use, excluding the board of pharmacy and the state board for licensing contractors;
    3. (3) Provide office space and necessary quarters for the boards;
    4. (4) Maintain a central filing system for official records and documents of all boards;
    5. (5) Promulgate rules and regulations for all administrative functions and activities of the boards;
    6. (6) Enforce all regulations promulgated by the boards;
    7. (7) Collect and account for all fees prescribed to be paid to each board, and, unless otherwise prescribed by law, deposit the fees in the state treasury, and the commissioner of finance and administration shall make allotments out of the general fund as may be necessary to defray the expenses of the division and boards as provided by law;
    8. (8) Perform other duties the commissioner prescribes, or as prescribed by law;
    9. (9)
      1. (A) Issue monthly a press release containing a disciplinary report, which shall list all disciplinary actions taken by each board during the prior month. The report shall list, by board, the following:
        1. (i) Name and professional address of any person disciplined the prior month;
        2. (ii) Disciplinary action taken; and
        3. (iii) Any civil penalty imposed; and
      2. (B) The disciplinary report for the prior month shall be made available to newspapers of general circulation in each of the state's metropolitan areas, Nashville, Memphis, Knoxville, Chattanooga and the tri-cities area composed of Bristol, Johnson City and Kingsport, by the fifteenth of each following month.
  2. (b)
    1. (1)
      1. (A) Notwithstanding any other law to the contrary, the director shall establish an alternative system of renewals of licenses issued by any regulatory board attached to the division of regulatory boards of the department under § 4-3-1304. The system shall be designed to allow for the distribution of the renewal workload as uniformly as is practicable throughout the calendar year.
      2. (B) Licenses issued under the alternative method are valid for twenty-four (24) months, and shall expire on the last day of the last month of the license period; however, during a transition period or at any time thereafter, if the director, after consultation with the affected board or boards, determines that the volume of work for any given interval is unduly burdensome or costly, either the licenses or renewals, or both of them, may be issued for terms of not less than six (6) months nor more than eighteen (18) months. The fee imposed for any license under the alternative interval method for a period other than twenty-four (24) months shall be proportionate to the annual fee and modified in no other manner, except that the proportional fee shall be rounded off to the nearest quarter of a dollar (25¢).
    2. (2) As used in subdivision (b)(1), “license” is defined as in § 4-5-102.
  3. (c) Notwithstanding any other law to the contrary, the director of the division of regulatory boards of the department may implement a system for electronic submission of complaints or applications for licensure or registration to any regulatory program attached to the division, including any renewal thereof, and to notify licensees electronically of renewals, rulemaking or any other notification.
§ 56-1-303. Consultations with boards — Conclusiveness of director's decisions.
  1. In providing the administrative functions required under §§ 56-1-301, 56-1-302 and 56-1-306, the director shall consult with each board as to its particular requirements, but the decision of the director in such matters shall be conclusive, except as otherwise directed by the commissioner.
§ 56-1-304. Director as member of each board — Notice to director of meetings.
  1. (a) The director or the director's duly authorized representative shall be an ex officio, nonvoting member of each board attached to the department, and shall be entitled to attend all meetings of the boards.
  2. (b) Each board shall advise the director of any meetings at which official action will be taken at least forty-eight (48) hours prior to the meeting, unless the director expressly waives the requirement.
§ 56-1-305. Bond of director and assistants.
  1. The director, and any assistants designated by the commissioner, shall give bond as provided by law, conditioned upon the faithful performance of the duties of the office and for the faithful accounting of all money and other property that comes into their hands.
§ 56-1-306. Personnel.
  1. Any employment of personnel by the director for the division of regulatory boards shall be in accordance with rules of the departments of human resources and finance and administration.
§ 56-1-307. Per diem and travel expenses of board, commission or agency members.
  1. (a) Members of each board, commission, or agency attached to the division of regulatory boards created under § 4-3-1303 shall receive the sum of fifty dollars ($50.00) for each day actually spent in the performance of their official duties.
  2. (b) All reimbursement for travel expenses shall be in accordance with the comprehensive travel regulations promulgated by the department of finance and administration and approved by the attorney general and reporter.
§ 56-1-308. Penalty for violation of statute, rule or order — Recovery.
  1. (a) With respect to any person required to be licensed, permitted, or authorized by any board, commission or agency attached to the division of regulatory boards, each respective board, commission or agency may assess a civil penalty against the person in an amount not to exceed one thousand dollars ($1,000) for each separate violation of a statute, rule or order pertaining to the board, commission or agency. Each day of continued violation constitutes a separate violation.
  2. (b) Each board, commission or agency shall by rule establish a schedule designating the minimum and maximum civil penalties that may be assessed under this section. In assessing civil penalties, the following factors may be considered:
    1. (1) Whether the amount imposed will be a substantial economic deterrent to the violator;
    2. (2) The circumstances leading to the violation;
    3. (3) The severity of the violation and the risk of harm to the public;
    4. (4) The economic benefits gained by the violator as a result of noncompliance; and
    5. (5) The interest of the public.
  3. (c)
    1. (1) Civil penalties assessed pursuant to this section shall become final thirty (30) days after the date a final order of assessment is served. Payment of any civil penalty assessed after a hearing held pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, is a prerequisite to issuance or renewal of any license issued by a board, commission or agency attached to the division unless the final decision of the board, commission or agency is stayed pursuant to § 4-5-322(c), or acceptable arrangements for payment of the civil penalty are made with the board, commission or agency prior to the issuance or renewal of any license issued by a board, commission or agency attached to the division.
    2. (2) If the violator fails to pay an assessment when it becomes final, the division may apply to the appropriate court for a judgment and seek execution of the judgment.
    3. (3) Jurisdiction for recovery of the penalties shall be in the chancery court of Davidson County, or the chancery court of the county in which all or part of the violations occurred.
  4. (d) All sums recovered pursuant to this section shall be paid into the state treasury.
§ 56-1-309. Expenditure estimates — Improvement recommendations.
  1. Before submitting an estimate of its expenditure requirements as provided in § 9-4-5103, the department shall consult with each board, commission, or agency that is attached to the division of regulatory boards created under § 4-3-1303 and is authorized or required to collect any fees. The board, commission, or agency shall timely submit to the commissioner an itemized list of any improvements recommended for inclusion in the department's expenditure estimate. In the preparation of the estimate, the department shall clearly indicate the disposition of each improvement recommendation received under this section. The department shall transmit with its expenditure estimate a copy of each list of recommended improvements received under this section to the commissioner of finance and administration.
§ 56-1-310. Moneys collected by boards attached to division of regulatory boards — Separate account in state general fund.
  1. (a) Notwithstanding any law to the contrary, all moneys collected by any board attached to the division of regulatory boards pursuant to § 4-3-1304 shall be deposited in the state general fund and credited to a separate account for each board.
  2. (b)
    1. (1) Disbursements from the accounts shall be made solely for the purpose of defraying expenses incurred in the implementation and enforcement of the boards' areas of regulation.
    2. (2) Notwithstanding subdivision (b)(1):
      1. (A) At a board's discretion and upon the approval of the commissioner of commerce and insurance and the commissioner of finance and administration, funds in board accounts may be expended for the following purposes:
        1. (i) Capital purchases, including technology upgrades;
        2. (ii) Communications and marketing programs related to the board's regulated industries, including consumer protection campaigns, public service announcements, and targeted media;
        3. (iii) Educational programs related to the board's regulated industries, including programs regarding consumer awareness, industry best practices, and industry recruitment;
        4. (iv) Payment of legal fees and related costs associated with legal representation by the attorney general and reporter; and
        5. (v) Other initiatives related to the department's strategic plan;
      2. (B) The commissioner of commerce and insurance, with the approval of the commissioner of finance and administration, may in extraordinary circumstances expend reserve funds in a board account for the purpose of administering the corresponding programs of that board; and
      3. (C) On or before December 31 in each year that reserve funds are expended under subdivision (b)(2)(B), the commissioner of commerce and insurance shall report to the chairs of the finance, ways and means committees of the senate and the house of representatives a list containing the name of each regulatory board reserve account for which funds were expended and the amount expended.
  3. (c) The expenses shall not be paid from any other state funds.
  4. (d) Funds remaining in board accounts at the end of any fiscal year shall not revert to the general fund but shall remain available for expenditure in accordance with law.
§ 56-1-311. Assessment of investigatory and hearing costs — Rules and regulations.
  1. (a) Notwithstanding any contrary law, the division of regulatory boards or any board, commission or agency attached to the division of regulatory boards may assess the actual and reasonable costs of the investigation, prosecution and hearing of any disciplinary action held in accordance with the contested case provisions of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3, and in which sanctions of any kind are imposed on any person or entity required to be licensed, permitted, registered or otherwise authorized by the division or respective board, commission or agency. These costs may include, but are not limited to, those incurred and assessed for the time of the prosecuting attorneys, investigators, expert witnesses, administrative judges and any other persons involved in the investigation, prosecution and hearing of the action.
  2. (b) The commissioner shall promulgate rules and regulations establishing a schedule of costs that may be assessed pursuant to this section.
  3. (c)
    1. (1) All costs assessed pursuant to this section shall become final thirty (30) days after the date a final order of assessment is served.
    2. (2) If the individual or entity disciplined fails to pay an assessment when it becomes final, the division may apply to the appropriate court for a judgment and seek execution of the judgment.
    3. (3) Jurisdiction for recovery of the costs shall be in the chancery court of Davidson County.
§ 56-1-312. Default on student loans by members of regulated professions.
  1. (a)
    1. (1) Upon receiving a copy of a final order as provided in subsection (b) from the Tennessee student assistance corporation (TSAC), or a guarantee agency that has an agreement with the United States secretary of education, referred to as “guarantee agency” in this section, each board, commission or agency, referred to as the “licensing authority” in this section, attached to the division of regulatory boards shall suspend, deny or revoke the license of, or take other appropriate disciplinary action against, any person who has defaulted on a repayment or service obligation under any federal family education loan program, the federal Higher Education Act of 1965 (20 U.S.C. § 1001 et seq.), as amended, a student loan guaranteed or administered by TSAC, or any other state or federal educational loan or service-conditional scholarship program.
    2. (2) Notwithstanding subdivision (a)(1), a licensing authority may elect not to suspend, deny, or revoke the license of a person if the default or delinquency is the result of a medical hardship that prevented the person from working in the person's licensed field and the medical hardship significantly contributed to the default or delinquency.
  2. (b)
    1. (1) Each board, commission, committee, agency or other governmental entity created pursuant to this title shall accept any determination of default from TSAC or a guarantee agency, after TSAC or the guarantee agency has afforded a debtor an opportunity to be heard in accordance with subdivision (b)(2); and the board, commission, committee, agency or other governmental entity shall rescind any disciplinary action and restore any license or certificate upon receiving notice from the corporation or guarantee agency that the person has agreed to serve the person's obligation or is in compliance with an approved repayment plan.
    2. (2)
      1. (A) Unless a debtor has made satisfactory arrangements according to the lender, TSAC or the guarantee agency, which may include administrative wage garnishment, voluntary payment arrangements, or deferment/forbearance, then the debtor shall be regarded as delinquent or in default. If a debtor is delinquent or in default on a repayment or service obligation under a guaranteed student loan identified in subsection (a), or the debtor has failed to enter into a payment plan or comply with a payment plan previously approved by TSAC or the guarantee agency, then TSAC or the guarantee agency shall issue to the debtor a notice of intent to file an order with the appropriate licensing authority to suspend, deny or revoke the debtor's license or certificate. The notice must:
        1. (i) Be served upon the debtor personally or by certified mail with return receipt requested; and
        2. (ii) State that the debtor's license or certificate will be suspended, denied or revoked ninety (90) days after service unless within that time the debtor:
          1. (a) Pays the entire debt stated in the notice;
          2. (b) Enters into a payment plan or complies with a payment plan previously entered into and approved by TSAC or the guarantee agency; or
          3. (c) Requests a hearing before TSAC or the guarantee agency.
      2. (B) The hearing request by the debtor shall be made in writing and must be received by TSAC or the guarantee agency within twenty (20) days of the date the notice is served.
      3. (C) TSAC or the guarantee agency, upon receipt of a request for a hearing from the debtor, shall schedule a hearing to determine whether suspension, denial or revocation of the debtor's license or certificate is appropriate. The debtor's license or certificate may not be suspended, denied or revoked until a determination is reached following the hearing. The only issues that may be determined in the hearing are:
        1. (i) The amount of the debt, if any;
        2. (ii) Whether the debtor is delinquent or in default;
        3. (iii) Whether the debtor has entered into, or the debtor is willing to enter into, a payment plan or to comply with a payment plan previously entered into and approved by TSAC or the guarantee agency; and
        4. (iv) Whether the debtor's default or delinquency is the result of a medical hardship that prevented the debtor from working in the debtor's licensed field and the medical hardship significantly contributed to the default or delinquency.
      4. (D) If a debtor fails to respond to the notice of intent, fails to timely request a hearing, or fails to appear at a regularly scheduled hearing, the debtor's defenses, objections, or request for a payment plan or compliance with a payment plan may be determined to be without merit; and TSAC or the guarantee agency shall enter a final decision and order, requesting suspension, denial or revocation of the debtor's license or certificate, and further requesting the licensing authority to order the debtor to refrain from engaging in the licensed activity or activity for which a certificate has been issued. TSAC or the guarantee agency shall send a copy of the order to the licensing authority and the debtor.
      5. (E) The administrative hearings shall be conducted in the same manner as those conducted pursuant to §§ 36-5-703 and 36-5-704.
      6. (F)
        1. (i) When TSAC or the guarantee agency determines that the debt is paid in full or the debtor has entered into a payment plan or complied with a payment plan previously approved by TSAC or the guarantee agency, TSAC or the guarantee agency shall terminate the order suspending, denying or revoking the license or certificate. TSAC or the guarantee agency shall send a copy of the order terminating the suspension, denial or revocation to the licensing authority and the debtor. Notwithstanding any other law, rule or regulation to the contrary, when the license or certificate is reinstated, the licensing authority shall not impose a reinstatement fee that exceeds fifty dollars ($50.00).
        2. (ii) Entry of an order terminating suspension, denial or revocation of a license or certificate does not limit the ability of TSAC or the guarantee agency to issue a new order suspending, denying or revoking the license or certificate of the same debtor in the event of another delinquency or default.
      7. (G) TSAC is authorized to promulgate necessary rules and regulations in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, to implement this subsection (b).
  3. (c) Each board, commission or agency attached to the division of regulatory boards shall promulgate rules and regulations to effectuate the purposes of this section.
§ 56-1-313. Disciplinary authority of governmental entities attached to the division of regulatory boards.
  1. (a) In addition to any other lawful disciplinary authority, any board, commission or agency attached to the division of regulatory boards may, upon receipt of a certified order, refuse to issue or renew a license, permit or authorization to practice, and revoke, suspend or restrict any license, permit or authorization to practice that the board, commission, or agency has issued to any person who:
    1. (1) Has had the person's license, permit or authorization to practice in the profession or occupation subject to the jurisdiction of the board, commission or agency suspended or revoked by another state or national board, commission or agency for any acts or omissions that would constitute grounds for discipline in this state; or
    2. (2) Has voluntarily surrendered the person's license, permit or authorization to practice in the profession or occupation that is subject to the jurisdiction of the board, commission or agency, as a result of or during the pendency of disciplinary proceedings by another state or national board, commission or agency, for any acts or omissions that would constitute grounds for discipline in this state.
  2. (b) The Uniform Administrative Procedures Act, compiled in title 4, chapter 5, shall govern all matters and procedures respecting the hearing and judicial review of any contested case, as defined in § 4-5-102, arising under the authority of this section.
  3. (c) Any board, commission or agency attached to the division of regulatory boards is authorized to promulgate rules to effectuate the purposes of this section. The rules and regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act.
Part 4 Financial Valuations and Examination of Companies
§ 56-1-401. Examination of companies by commissioner before granting of certificate to do business.
  1. Before granting certificates of authority to an insurance company to issue policies or make contracts of insurance, the commissioner shall be satisfied, by such examination and evidence as the commissioner sees fit to make and require, that the company is duly qualified under the laws of the state to transact business in the state.
§ 56-1-404. Determination of liability upon contracts of insurance on policies other than life for reinsurance.
  1. To determine the liability upon the contracts of insurance for insurance companies doing business in this state, foreign and domestic, other than life, the commissioner shall require the companies to charge, as the liability for reinsurance of outstanding policies, fifty percent (50%) of the premiums received on policies or risks having not more than one (1) year to run, and a pro rata of all premiums received on policies or risks having more than one (1) year to run.
§ 56-1-405. Assets allowable as credits in account of financial condition.
  1. The commissioner shall allow to the credit of an insurance company in the account of its financial condition only the assets that are or can be made available for the payment of losses in the state, but may credit any deposits of funds of the company set apart as security for a particular liability, or any deposits of funds of the company that are deposited for the purpose of meeting the requirements for doing business in another state or commonwealth. The commissioner may, in the commissioner's discretion, disallow stockholders' obligations of any description as part of the assets or capital of any insurance company, unless secured by competent collateral.
§ 56-1-406. Commissioner is custodian of collateral deposited.
  1. The commissioner shall be the custodian of all collateral in the form of stock certificates, bonds, debentures, notes and other evidences of indebtedness deposited or pledged with the commissioner under any existing law, and it shall be the commissioner's official duty safely to keep, surrender and account for the collateral deposited as provided by law, and for the safekeeping of that collateral both the commissioner and the sureties on the commissioner's official bond are liable.
§ 56-1-407. Valuation of bonds held by insurance companies — Basis.
  1. (a) All bonds or other evidences of debt having a fixed term and rate held by any life insurance company, assessment life association, or fraternal beneficiary association, authorized to do business in this state, may, if amply secured and not in default as to principal and interest, be valued as follows:
    1. (1) If purchased at par, at par value; or
    2. (2) If purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made.
  2. (b) The purchase shall in no case be taken at a higher figure than the actual market value at the time of purchase.
  3. (c) The commissioner shall have full discretion in determining the method of calculating values according to subsection (a).
§ 56-1-408. Examination of insurance companies — Frequency.
  1. As often as once in five (5) years, the commissioner shall, personally or by a deputy or some competent person appointed by the commissioner for that purpose, visit each insurance company licensed in this state and examine its affairs, especially as to its financial condition and ability to fulfill its obligations, and whether it has complied with the law.
§ 56-1-409. Examination when deemed prudent or requested.
  1. (a) The commissioner shall also make an examination of each insurance company licensed in this state whenever the commissioner deems it prudent to do so, or upon the request of five (5) or more of the stockholders or persons pecuniarily interested in the company, who shall make affidavit of their belief, with specifications of their reasons for the belief, that the company is in an unsound condition.
  2. (b) For the purpose of ascertaining financial condition or legality of conduct, the commissioner may, for good cause, make an investigation and examination, independent of any other examination of an insurer or proposed insurer, of any accounts, records, files, documents, and transactions pertaining to the business of insurance. The investigatory and examination authority shall extend to:
    1. (1) Any insurance agency, agent, general agent, surplus lines agent, insurance representative, or any person holding out to be an insurance agency, agent, general agent, surplus lines agent, or insurance representative;
    2. (2) Any person having a contract under which that person enjoys by terms or in fact the exclusive or dominant right to manage or control an insurer;
    3. (3) Any corporation, association, or person engaged in the business of adjusting losses, financing premiums, or furnishing insurance services in the form of administrative services only to self-insured groups;
    4. (4) Any other individual, corporation, association, partnership, reciprocal exchange, interinsurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance; and
    5. (5) Any employer that self-insures its workers' compensation liabilities pursuant to § 50-6-405(b) or a group of employers qualifying as self-insurers pursuant to § 50-6-405(c).
§ 56-1-410. Examination of foreign companies.
  1. (a) When the commissioner or the commissioner's deputy deems it prudent for the protection of policyholders in this state, the commissioner shall in like manner, visit and examine, or cause to be visited and examined by some competent person or persons the commissioner may appoint for that purpose, any foreign insurance company applying for admission to do business in this state.
  2. (b) In lieu of an examination under this section of any foreign or alien insurer licensed in this state, the commissioner may accept an examination report on the company as prepared by the department of insurance for the company's state of domicile or port-of-entry state until January 1, 1994. Thereafter, these reports may only be accepted if:
    1. (1) The department of insurance was at the time of the examination accredited under the National Association of Insurance Commissioners, Financial Regulation Standards and Accreditation Program; or
    2. (2) The examination is performed:
      1. (A) Under the supervision of a department of insurance so accredited; or
      2. (B) With the participation of one (1) or more examiners who are employed by such an accredited state department of insurance and who, after a review of the examination work papers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their department of insurance.
§ 56-1-411. Extent of examination — Report — Hearing — Order — Penalty — Confidentiality of records.
  1. (a) In the course of the examination, the commissioner, the commissioner's deputy, or the person appointed by the commissioner for the purpose of making the examination may examine:
    1. (1) Any insurance company transacting, or being organized to transact, business in this state;
    2. (2) Any corporation, association, or person engaged in or proposing to be engaged in the organization, promotion or solicitation of shares or capital contributions to, or aiding in the formation of, an insurance company;
    3. (3) As an incident to the examination of the insurance company itself, any corporation, association, or person holding shares of capital stock of an insurance company for the purpose of controlling the management of the insurance company as voting trustee or otherwise;
    4. (4) As an incident to the examination of the insurance company itself, any corporation, association, or person having a contract, written or oral, pertaining to the management or control of an insurance company as general agent, managing agent or attorney-in-fact;
    5. (5) As an incident to the examination of the insurance company itself, any corporation, association, or person that has substantial control, directly or indirectly, over any insurance company doing business in this state whether by ownership of its stock or otherwise, or any corporation, association, or person owning stock in any such insurance company, which stock constitutes a substantial proportion of the stock of the insurance company;
    6. (6) Any subsidiary or affiliate of any insurance company doing business in this state;
    7. (7) Any licensed agent, broker or solicitor or any corporation, association, or person making application for a license as an agent, broker or solicitor; and
    8. (8) Any corporation, association, or person engaged in the business of adjusting losses or financing premiums.
  2. (b)
    1. (1) Every company, corporation, association, or person being examined, its officers, directors and agents, shall provide to the commissioner, the commissioner's deputy, or the person appointed by the commissioner for the purpose of the examination, convenient and free access at its office to all books, records, securities, documents and any and all papers relating to the property, assets, business and affairs of the company. The officers, directors and agents of the company, corporation, association or person shall facilitate the examination and aid in the examination so far as it is in their power to do so.
    2. (2) The commissioner, the commissioner's deputy, or the person appointed by the commissioner for the purpose of the examination, has the power to:
      1. (A) Administer oaths and to examine under oath any person relative to the business of the company; and
      2. (B) Appraise or cause to be appraised by competent appraisers appointed by the commissioner or such other person all property in which the company has or claims an interest or that is security in any form for the payment of any debt or obligation to the company.
  3. (c)
    1. (1) The commissioner, the commissioner's deputy, or the person appointed by the commissioner for the purpose of the examination, shall make a full and true report of the examination, which shall comprise only facts ascertained from the books, papers, records, securities or documents or other evidence obtained by investigation and examined by them or ascertained from the testimony of officers or agents or other persons examined under oath concerning the business, affairs, assets and obligations of the company. The report of examination shall be verified by the oath of the examiner in charge of the examination and shall be prima facie evidence in any action or proceeding in the name of the state against the company, its officers or agents upon the facts stated in the report.
    2. (2) In the conduct of an examination, the criteria as set forth in the Examiners Handbook adopted by the National Association of Insurance Commissioners and the National Association of Insurance Commissioners Accounting Practices and Procedures Manuals that were in effect when the commissioner exercised discretion to make an examination under or to take other action permitted by this chapter shall be used. The commissioner may also employ other guidelines or procedures the commissioner deems appropriate.
  4. (d)
    1. (1) No later than sixty (60) days following completion of the examination, the examiner in charge shall file with the department a verified written report of examination under oath. Upon receipt of the verified report, the department shall transmit the report to the company examined, together with a notice that affords the company examined a reasonable opportunity of not more than thirty (30) days to make a written submission or rebuttal with respect to any matters contained in the examination report.
    2. (2) Within thirty (30) days of the end of the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's work papers and enter an order:
      1. (A) Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure the violation;
      2. (B) Rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation or information, and refiling pursuant to subdivision (c)(2); or
      3. (C) Calling for an investigatory hearing with no less than twenty (20) days' notice to the company for purposes of obtaining additional documentation, data, information and testimony.
    3. (3) If the examination reveals that the company is operating in violation of any law, regulation or prior order, the commissioner, in the written order, may require the company to take any action the commissioner considers necessary or appropriate in accordance with the report of examination or the hearing, if any, on the report. That order shall be subject to judicial review in accordance with title 27, chapter 9.
    4. (4) Nothing contained in this chapter shall prevent or be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating to the reports or results, to the department of insurance of this or any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as the agency or office receiving the report or matters relating to the reports agrees in writing to hold it confidential and in a manner consistent with this section.
  5. (e) Any company, corporation, or association that, or person who, violates or aids and abets any violation of a written order issued pursuant to this section shall be punished by a fine of not more than five thousand dollars ($5,000), which shall be sued for and recovered pursuant to § 56-1-802.
  6. (f) All working papers, recorded information, documents and copies of working papers, recorded information and documents produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this chapter must be given confidential treatment and may not be made public by the commissioner or any other person, except to the extent provided in subsection (d). Access may also be granted to the National Association of Insurance Commissioners. The parties must agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained.
§ 56-1-412. Failure to testify before commissioner — Obstruction of examination — Penalty.
  1. Whoever, without justifiable cause, neglects, upon due summons, to appear and testify before the commissioner, the commissioner's deputy, or person appointed by the commissioner as provided, and whoever obstructs the commissioner, the commissioner's deputy or examiner in examining insurance companies commits a Class C misdemeanor.
§ 56-1-413. Expenses of examination — Payment by company examined.
  1. (a)
    1. (1) Any insurance company authorized to do business in this state and examined under the law shall pay the proper charges incurred in the examination, including the expenses of the commissioner or the commissioner's deputy, and the expenses and compensation of the commissioner's assistants employed in the examination.
    2. (2) The compensation of the experts, actuaries and examiners designated by the commissioner for examining the books or business of insurance companies doing business in this state shall be fixed by the commissioner at a reasonable amount commensurate with usual compensation for like services.
  2. (b) All persons engaging, assisting, or making the required examination under this chapter shall be regular state employees, and their entire expenses and compensation shall be paid only by the state as now provided for by law. Notwithstanding this subsection (b), the commissioner may contract, in accordance with applicable state contracting procedures, for qualified actuaries and financial examiners the commissioner deems necessary due to the unavailability of qualified regular state employees to conduct a particular examination; provided, that, with respect to financial examinations, the compensation and per diem allowances paid to the persons shall be fixed by the commissioner at a reasonable amount commensurate with usual compensation for like services.
  3. (c) The full cost of the examination fixed by the commissioner shall be paid into the department for its use and benefit in meeting the expenses and compensation for the persons engaged in the examinations.
§ 56-1-414. Impairment of capital stock of domestic insurance company.
  1. When it appears to the commissioner that the capital stock of a domestic insurance company is impaired to the extent of twenty percent (20%) or more, the commissioner shall notify the company that its capital is legally subject to be made good; and, if the company does not, within sixty (60) days after the notice, satisfy the commissioner that it has fully repaired its capital, or reduced its capital as provided by law, the commissioner shall institute proceedings against it.
§ 56-1-415. Issuance of policies by domestic life insurance companies forbidden when assets are insufficient.
  1. When the actual funds of a domestic life insurance company, exclusive of its capital, are not of a net cash value equal to its liabilities, including the net value of its policies, computed by the rule of valuation established by part 9 of this chapter, the commissioner shall notify the company and its agents to issue no new policies until its funds become equal to its liabilities.
§ 56-1-416. Revocation or suspension of certificate of authority.
  1. (a) The commissioner shall revoke or suspend all certificates of authority granted to the company or its agents and cause notice of revocation or suspension to be published in one (1) or more newspapers of general circulation, if the commissioner is of the opinion, upon examination or other evidence, that:
    1. (1) A foreign insurance company is:
      1. (A) In an unsound condition; or
      2. (B) If a life insurance company, has actual funds, exclusive of its capital, less than its liabilities; or
    2. (2) A foreign insurance company has:
      1. (A) Failed to comply with the law; or
      2. (B) Its officers or agents have:
        1. (i) Refused to submit to examination;
        2. (ii) Refused to perform any legal obligations in relation to examinations; or
        3. (iii) Failed to pay any final judgment against the company recovered by a Tennessee citizen.
  2. (b) No new business shall be done by a company or its agents under suspension or revocation while the default or disability continues, nor until its authority to do business is restored by the commissioner.
§ 56-1-417. Notice required for revocation or suspension of certificate of authority.
  1. Unless the ground for revocation or suspension relates only to the financial condition or soundness of the company or to a deficiency in its assets, the commissioner shall notify the company no less than ten (10) days before revoking its authority to do business in this state, and the commissioner shall specify in the notice the particulars of the supposed violation.
§ 56-1-418. Calculation of disability benefit reserves.
  1. The commissioner shall annually cause to be made, or require the insurer to make, calculations of policy and claim reserves for accident and health policies providing disability benefits as defined in § 56-2-201 on the basis of regulations the commissioner prescribes from time to time regarding minimum reserve standards and tables of mortality, morbidity, interest or other contingencies to be used to compute the reserves. From July 1, 1995, until the date of promulgation of rules and regulations, all calculations with respect to policy and claim reserves for accident and health policies providing disability benefits shall be made at a rate of interest not exceeding four and one half percent (4.5%) per annum.
§ 56-1-419. Statement of actuarial opinion — Summary — Report and work papers — Liability for errors and omissions.
  1. (a) Statement of Actuarial Opinion. On or before March 1, 2012, and annually every year thereafter, every property and casualty insurance company doing business in this state, unless otherwise exempted by the domiciliary commissioner, shall submit the opinion of an appointed actuary entitled “Statement of Actuarial Opinion”. This opinion shall be filed with the appropriate National Association of Insurance Commissioners (NAIC) property and casualty annual statement instructions and shall cover the activity of the prior calendar year.
  2. (b) Actuarial Opinion Summary.
    1. (1) Every property and casualty insurance company domiciled in this state that is required to submit a statement of actuarial opinion shall annually submit an actuarial opinion summary, written by the company's appointed actuary. This actuarial opinion summary shall be filed in accordance with the appropriate NAIC property and casualty annual statement instructions and shall be considered as a document supporting the actuarial opinion required in subsection (a).
    2. (2) A company licensed but not domiciled in this state shall provide the actuarial opinion summary upon request.
  3. (c) Actuarial Report and Work Papers.
    1. (1) An actuarial report and underlying work papers as required by the appropriate NAIC property and casualty annual statement instructions shall be prepared to support each actuarial opinion.
    2. (2) If the insurance company fails to provide a supporting actuarial report and/or work papers at the request of the commissioner or the commissioner determines that the supporting actuarial report or work papers provided by the insurance company is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting actuarial report or work papers.
  4. (d) The appointed actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision or conduct with respect to the actuary's opinion, except in cases of fraud or willful misconduct on the part of the appointed actuary.
§ 56-1-420. Statement of actuarial opinion provided with annual statement and treated as public document — Materials provided in support of opinion that are confidential and privileged — Release of documents — Testimony — Powers of commissioner — Waiver of privilege or confidentiality.
  1. (a) The statement of actuarial opinion, submitted pursuant to § 56-1-419, shall be provided with the annual statement in accordance with the appropriate National Association of Insurance Commissioners (NAIC) property and casualty annual statement instructions and shall be treated as a public document.
  2. (b)
    1. (1) Notwithstanding § 10-7-503 or any other law to the contrary, documents, materials or other information in the possession or control of the department of commerce and insurance that are considered an actuarial report, work papers or actuarial opinion summary provided in support of the opinion, and any other material provided by the company to the commissioner in connection with the actuarial report, work papers or actuarial opinion summary, shall be confidential by law and privileged, shall not be subject to open records requests or sunshine laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
    2. (2) This subsection (b) shall not be construed to limit the commissioner's authority to release the documents to the Actuarial Board for Counseling and Discipline (ABCD) so long as the material is required for the purpose of professional disciplinary proceedings and that the ABCD establishes procedures satisfactory to the commissioner for preserving the confidentiality of the documents, nor shall this section be construed to limit the commissioner's authority to use the documents, materials or other information in furtherance of any regulatory or legal action brought as part of the commissioner's official duties.
  3. (c) Neither the commissioner nor any person who received documents, materials or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials or information subject to subsection (b).
  4. (d) In order to assist in the performance of the commissioner's duties, the commissioner:
    1. (1) May share documents, materials or other information, including the confidential and privileged documents, materials or information subject to subsection (b) with other state, federal and international regulatory agencies, with 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 and has the legal authority to maintain confidentiality;
    2. (2) May receive documents, materials or information, including otherwise confidential and privileged documents, materials or information, from 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. (3) May enter into agreements governing sharing and use of information consistent with subsections (b)-(d).
  5. (e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (d).
Part 5 Annual Statements
§ 56-1-501. Annual statements to commissioner — Form and contents — Promulgation of rules by commissioner.
  1. (a) Upon request, the commissioner shall in December each year furnish to domestic insurance companies two (2) blanks in the form adopted by rule for their annual statement.
  2. (b) All companies authorized to do business under chapters 2, 14-16, 18-21, 23, 24, 26-31 and 35 of this title shall annually, on or before March 1, file in the office of the commissioner an annual statement in the form adopted for use by companies, by class of business authorized, which statement shall exhibit its financial condition on December 31 of the previous year, and its business of that year, which statement shall be completed and filed in accordance with annual statement instructions established by the commissioner.
  3. (c) The assets and liabilities shall be computed and allowed in the statement in accordance with this chapter and chapters 2, 3, 14-16, 18-21, 23, 24, 26-31 and 35 of this title, as applicable to the company making the filing.
  4. (d) The commissioner is authorized to promulgate rules to require that the statement contains the opinion by a qualified actuary or loss reserve specialist on all policy claim reserves, and loss adjustment expense reserves for all insurers on an annual basis. The rules and regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
  5. (e) The statement shall be subscribed and sworn to by the president and secretary, or in their absence, by two (2) of the company's principal officers.
  6. (f) The annual statement of a company of a foreign country shall embrace only its business and condition in the United States, and shall be subscribed and sworn to by its resident manager or principal representative in charge of its United States business.
  7. (g) Financial statements or information required by this part shall be prepared in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual in effect for the period covered by the report.
  8. (h)
    1. (1) The commissioner is authorized to promulgate rules to require that all companies authorized to do business in this state file audited financial reports by independent certified public accountants annually, on or before June 1 for the year ended December 31 immediately preceding.
    2. (2) Any determination by the independent certified public accountant that an insurer has materially misstated its financial condition as reported to the commissioner, or that an insurer does not meet the minimum capital and surplus requirements of this title, shall be reported as set out in the rules promulgated pursuant to this section. No independent certified public accountant shall be liable in any manner to any person for any statement made in connection with this report of adverse financial condition if such statement is made in good faith in compliance with this section and the rules promulgated pursuant to this section.
  9. (i) The commissioner is authorized to promulgate by rule the manner in which filing of annual statements and payment of annual filing fees may be filed with the commissioner. The rules may include the acceptance of electronic filings and electronic payments. The commissioner is also authorized to promulgate rules that provide for a convenience fee to cover the cost of accepting electronic filings and electronic payments. Any fee set by rule under the authority of this subsection (i) may be assessed in addition to the fee or fees assessed for the cost of accepting filings or payments. In no event shall the convenience fee exceed the actual costs incurred by the department in accepting electronic filings or electronic payments.
§ 56-1-502. Forfeiture for failure to file statement — Suspension of authority to do new business.
  1. Any insurance company that neglects to make and file its annual statement in the form and within the time provided by § 56-1-501 shall forfeit one hundred dollars ($100) for each day neglected, and, upon notice by the commissioner to that effect, its authority to do new business shall cease while the default continues.
§ 56-1-503. False statement — Penalty — Perjury.
  1. (a) For willfully making a false annual or other statement it is required by law to make, an insurance company, and persons making oath to or subscribing to the statement, shall be severally punished by a fine of not less than five hundred dollars ($500) nor more than one thousand dollars ($1,000).
  2. (b) Any person making oath to the false statement commits perjury.
Part 6 Records and Documents
§ 56-1-601. Duty of commissioner to keep records of proceedings and examinations — Commissioner's report.
  1. (a) The commissioner shall preserve in a permanent form a record of the commissioner's proceedings, including a concise statement of the result of official examinations of insurance companies.
  2. (b) The commissioner shall, annually, and as early as consistent with full and accurate preparation, make a report to the governor of all official transactions, and shall include in the report a statement of the receipts and expenditures of the department for the preceding year, an exhibit of the financial condition and business transactions of the several insurance companies as disclosed by their annual statements, abstracts of which statements shall appear in the report, and other information and comments in relation to insurance and the public interest in insurance the commissioner deems fit to communicate.
§ 56-1-602. Records — Inspection by public.
  1. (a) The records of the department shall, at all times, be open to the inspection of the public, subject to rules made by the commissioner for their safekeeping, free from any charge whatever.
  2. (b) The commissioner shall, on demand, furnish certified copies of any paper, report, or document on file in the commissioner's office to any person requesting them, upon payment of the fee allowed by law.
§ 56-1-603. Seal of department.
  1. The commissioner, with the approval of the governor, shall devise a seal, with suitable inscription, for the department, a description of which, with a certificate of approval by the governor, together with an impression of the seal, shall be filed in the office of the secretary of state, and may be renewed whenever necessary.
§ 56-1-604. Documents to be recorded by commissioner or the commissioner's chief deputy — Certified copies of records to be evidence.
  1. Every certificate, assignment, or conveyance executed by the commissioner or the commissioner's chief deputy, relating to the business of insurance companies, in pursuance of authority conferred by law, and sealed with the seal of office, shall be recorded in the proper recording office in the same manner and with the same effect as a deed regularly acknowledged or proved before an officer authorized by law to take the proof or acknowledgment of deeds, and all copies of papers in the office of the department, certified by the commissioner or the chief deputy, and authenticated by the seal, shall in all cases be evidence equally and in like manner with the original.
Part 8 Penalties
§ 56-1-801. Violation of insurance laws — General penalty.
  1. A violation of this chapter and chapters 2-4, 7, 11 and 32 of this title, the penalty of which is not specifically provided, is a Class C misdemeanor.
§ 56-1-802. Recovery of penalties — Imprisonment for failure to pay penalties.
  1. (a) Every penalty fixed in this title, unless otherwise provided for, shall be sued for and recovered in the name of the state by the district attorney general of the district in which the delinquency occurs, and shall be paid into the state treasury.
  2. (b) Nonpayment of the penalties is a Class C misdemeanor.
Part 9 Standard Valuation Law
§ 56-1-901. Short title and part definitions.
  1. (a) This part shall be known and may be cited as the “Standard Valuation Law.”
  2. (b) For purposes of this part, the following definitions shall apply on or after the operative date of the valuation manual:
    1. (1) “Accident and health insurance contracts” means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness or medical conditions and as may be specified in the valuation manual;
    2. (2) “Appointed actuary” means a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required in § 56-1-903;
    3. (3) “Company” means an entity that:
      1. (A) Has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and has at least one (1) such policy in force or on claim; or
      2. (B) Has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance or deposit-type contracts in this state;
    4. (4) “Deposit-type contract” means contracts that do not incorporate mortality or morbidity risks, and as may be specified in the valuation manual;
    5. (5) “Life insurance” means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual;
    6. (6) “NAIC” means the National Association of Insurance Commissioners;
    7. (7) “Policyholder behavior” means any action a policyholder, contract holder or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this part including, but not limited to, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization or benefit elections prescribed by the policy or contract but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract;
    8. (8) “Principle-based valuation” means a reserve valuation that uses one (1) or more methods or one (1) or more assumptions determined by the insurer and is required to comply with § 56-1-915 as specified in the valuation manual;
    9. (9) “Qualified actuary” means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries' qualification standards for actuaries signing such statements and who meets the requirements specified in the valuation manual;
    10. (10) “Tail risk” means a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude; and
    11. (11) “Valuation manual” means the manual of valuation instructions adopted by the NAIC as specified in this part or as subsequently amended.
§ 56-1-902. Reserve valuation.
  1. (a) For policies and contracts issued prior to the operative date of the valuation manual:
    1. (1) The commissioner shall annually value, or cause to be valued, the reserve liabilities (reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state issued on or after January 1, 1962, and prior to the operative date of the valuation manual. In calculating reserves, the commissioner may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves required of a foreign or alien company, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this part.
    2. (2) Sections 56-1-904 — 56-1-913 shall apply to all policies and contracts, as appropriate, subject to this part issued on or after January 1, 1962, and prior to the operative date of the valuation manual and the provisions set forth in §§ 56-1-914 and 56-1-915 shall not apply to any such policies and contracts.
    3. (3) The minimum standard for the valuation of policies and contracts issued prior to January 1, 1962, shall be that provided by the laws in effect immediately prior to that date.
  2. (b) For policies and contracts issued on or after the operative date of the valuation manual:
    1. (1) The commissioner shall annually value, or cause to be valued, the reserves for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the valuation manual. In lieu of the valuation of the reserves required of a foreign or alien company, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this part; and
    2. (2) Sections 56-1-914 and 56-1-915 shall apply to all policies and contracts issued on or after the operative date of the valuation manual.
§ 56-1-903. Actuarial opinion of reserves.
  1. (a) For an actuarial opinion prior to the operative date of the valuation manual:
    1. (1) Every life insurance company doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state. The commissioner shall define by regulation the specifics of this opinion and add any other items deemed to be necessary to its scope;
    2. (2) For actuarial analysis of reserves and assets supporting reserves:
      1. (A) Every life insurance company, except as exempted by regulation, shall also annually include in the opinion required by subdivision (a)(1), an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including, but not limited to, the benefits under, and expenses associated with, the policies and contracts;
      2. (B) The commissioner may provide by regulation for a transition period for establishing any higher reserves that the qualified actuary may deem necessary in order to render the opinion required by this section;
    3. (3) Each opinion required by subdivision (a)(2) shall be governed by the following provisions:
      1. (A) A memorandum, in form and substance acceptable to the commissioner as specified by regulation, shall be prepared to support each actuarial opinion;
      2. (B) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified by regulation or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by regulations promulgated by the commissioner or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the commissioner;
    4. (4) Every opinion required by this subsection (a) shall be governed by the following provisions:
      1. (A) The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after December 31, 1995;
      2. (B) The opinion shall apply to all business in force including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by regulation;
      3. (C) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board and on such additional standards as the commissioner prescribes by regulation;
      4. (D) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state;
      5. (E) For purposes of this section, “qualified actuary” means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in the regulation;
      6. (F) Except in cases of fraud or willful misconduct, the qualified actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision or conduct with respect to the actuary's opinion;
      7. (G) Disciplinary action by the commissioner against the company or the qualified actuary shall be defined in regulations promulgated by the commissioner;
      8. (H) Except as provided in subdivisions (a)(4)(L)-(N), documents, materials or other information in the possession or control of the department that are a memorandum in support of the opinion, and any other material provided by the company to the commissioner in connection with the memorandum, shall be confidential by law and privileged, shall not be subject to § 10-7-501 or § 56-1-602, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties;
      9. (I) Neither the commissioner nor any person who received documents, materials or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials or information subject to subdivision (a)(4)(H);
      10. (J) In order to assist in the performance of the commissioner's duties, the commissioner may:
        1. (i) Share documents, materials or other information, including the confidential and privileged documents, materials or information subject to subdivision (a)(4)(H) 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. (ii) 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. (iii) Enter into agreements governing sharing and use of information consistent with subdivisions (a)(4)(H)-(J);
      11. (K) No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subdivision (a)(4)(J);
      12. (L) A memorandum in support of the opinion, and any other material provided by the company to the commissioner in connection with the memorandum, may be subject to subpoena for the purpose of defending an action seeking damages from the actuary submitting the memorandum by reason of an action required by this section or by regulation;
      13. (M) The memorandum or other material may otherwise be released by the commissioner with the written consent of the company or to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material; and
      14. (N) Once any portion of the confidential memorandum is cited by the company in its marketing or is cited before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum shall be no longer confidential.
  2. (b) For an actuarial opinion of reserves after the operative date of the valuation manual:
    1. (1) Every company with outstanding life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state and subject to regulation by the commissioner shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state. The valuation manual will prescribe the specifics of this opinion including any items deemed to be necessary to its scope;
    2. (2) For actuarial analysis of reserves and assets supporting reserves, every company with outstanding life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state and subject to regulation by the commissioner, except as exempted in the valuation manual, shall also annually include in the opinion required by subdivision (b)(1), an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including, but not limited to, the benefits under, and expenses associated with, the policies and contracts;
    3. (3) Each opinion required by subdivision (b)(2) shall be governed by the following provisions:
      1. (A) A memorandum, in form and substance as specified in the valuation manual, and acceptable to the commissioner, shall be prepared to support each actuarial opinion; and
      2. (B) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified in the valuation manual or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the valuation manual or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the commissioner;
    4. (4) Every opinion shall be governed by the following provisions:
      1. (A) The opinion shall be in form and substance as specified in the valuation manual and acceptable to the commissioner;
      2. (B) The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the valuation manual;
      3. (C) The opinion shall apply to all policies and contracts subject to this subsection (b), plus other actuarial liabilities as may be specified in the valuation manual;
      4. (D) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board or its successor, and on such additional standards as may be prescribed in the valuation manual;
      5. (E) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state;
      6. (F) Except in cases of fraud or willful misconduct, the appointed actuary shall not be liable for damages to any person, other than the insurance company and the commissioner for any act, error, omission, decision or conduct with respect to the appointed actuary's opinion; and
      7. (G) Disciplinary action by the commissioner against the company or the appointed actuary shall be defined in regulations promulgated by the commissioner.
§ 56-1-904. Computation of minimum standard.
  1. Except as provided in §§ 56-1-905, 56-1-906 and 56-1-913, the minimum standard for the valuation of policies and contracts issued prior to January 1, 1962, shall be that provided by the laws in effect immediately prior to that date. Except as otherwise provided in §§ 56-1-905, 56-1-906 and 56-1-913, the minimum standard for the valuation of all policies and contracts issued on or after January 1, 1962, shall be the commissioner's reserve valuation methods defined in §§ 56-1-907, 56-1-908, 56-1-911 and 56-1-913, three and one half percent (3.5%) interest, or in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, issued on or after May 6, 1973, four percent (4%) interest for policies issued prior to March 13, 1978, five and one half percent (5.5%) interest for single premium life insurance policies and four and one half percent (4.5%) interest for all other policies issued on or after March 13, 1978, and the following tables:
    1. (1) For ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies: the Commissioners 1941 Standard Ordinary Mortality Table for policies issued prior to the operative date of § 56-7-401(f), the Commissioners 1958 Standard Ordinary Mortality Table for policies issued on or after the operative date of § 56-7-401(f) and prior to the operative date of § 56-7-401(h); provided, that, for any category of policies issued on female risks, all modified net premiums and present values referred to in this part may be calculated according to an age not more than six (6) years younger than the actual age of the insured; and for policies issued on or after the operative date of § 56-7-401(h):
      1. (A) The Commissioners 1980 Standard Ordinary Mortality Table;
      2. (B) At the election of the company for any one (1) or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors; or
      3. (C) Any ordinary mortality table, adopted after 1980 by the NAIC, which is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies;
    2. (2) For industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies: the 1941 Standard Industrial Mortality Table for policies issued prior to the operative date of § 56-7-401(g), and for policies issued on or after the operative date of § 56-7-401(g), the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for the policies;
    3. (3) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies: the 1937 Standard Annuity Mortality Table, or at the option of the company, the Annuity Mortality Table for 1949, Ultimate or any modification of either of these tables approved by the commissioner;
    4. (4) For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies: the Group Annuity Mortality Table for 1951, a modification of the table approved by the commissioner, or at the option of the company, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts;
    5. (5) For total and permanent disability benefits in or supplementary to ordinary policies or contracts: for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates adopted after 1980 by the NAIC, that are approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for those policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either those tables or, at the option of the company, the Class (3) Disability Table (1926); and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies;
    6. (6) For accidental death benefits in or supplementary to policies issued on or after January 1, 1966: the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for those policies, for policies issued on or after January 1, 1961, and prior to January 1, 1966, either that table or, at the option of the company, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table for calculating the reserves for life insurance policies; and
    7. (7) For group life insurance, life insurance issued on the substandard basis and other special benefits: tables approved by the commissioner.
§ 56-1-905. Computation of minimum standard for annuities and pure endowment contracts.
  1. (a) Except as provided in § 56-1-906, the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after the operative date of this section and for annuities and pure endowments purchased on or after the operative date under group annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in §§ 56-1-907 and 56-1-908 and the following tables and interest rates:
    1. (1) For individual annuity and pure endowment contracts issued prior to March 13, 1978, excluding any disability and accidental death benefits in those contracts: the 1971 Individual Annuity Mortality Table, or any modification of this table approved by the commissioner, and six percent (6%) interest for single premium immediate annuity contracts and four percent (4%) interest for all other individual annuity and pure endowment contracts;
    2. (2) For individual single premium immediate annuity contracts issued on or after March 13, 1978, excluding any disability and accidental death benefits in those contracts: the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for these contracts, or any modification of these tables approved by the commissioner, and seven and one half percent (7.5%) interest;
    3. (3) For individual annuity and pure endowment contracts issued on or after March 13, 1978, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in those contracts: the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for those contracts, or any modification of these tables approved by the commissioner, and five and one half percent (5.5%) interest for single premium deferred annuity and pure endowment contracts and four and one half percent (4.5%) interest for all other individual annuity and pure endowment contracts;
    4. (4) For annuities and pure endowments purchased prior to March 13, 1978, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under those contracts: the 1971 Group Annuity Mortality Table or any modification of this table approved by the commissioner, and six percent (6%) interest; and
    5. (5) For annuities and pure endowments purchased on or after March 13, 1978, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under those contracts: the 1971 Group Annuity Mortality Table, or any group annuity mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one half percent (7.5%) interest.
  2. (b) After May 6, 1973, any company may file with the commissioner a written notice of its election to comply with this section after a specified date before January 1, 1979, which shall be the operative date of this section for that company. If a company makes no election, the operative date of this section for that company shall be January 1, 1979.
§ 56-1-906. Calendar year statutory valuation interest rates.
  1. (a) The interest rates used in determining the minimum standard for the valuation of the following shall be the calendar year statutory valuation interest rates as defined in this section:
    1. (1) Life insurance policies issued in a particular calendar year, on or after the operative date of § 56-7-401(h);
    2. (2) Individual annuity and pure endowment contracts issued in a particular calendar year, on or after January 1, 1983;
    3. (3) Annuities and pure endowments purchased in a particular calendar year, on or after January 1, 1983, under group annuity and pure endowment contracts; and
    4. (4) The net increase, if any, in a particular calendar year after January 1, 1983, in amounts held under guaranteed interest contracts.
  2. (b) For calendar year statutory valuation interest rates:
    1. (1) The calendar year statutory valuation interest rates, <em>I</em>, shall be determined as follows and the results rounded to the nearer one-quarter of one percent (0.25%), where R is the lesser of R and 0.09, R is the greater of R and 0.09, R is the reference interest rate defined in this section, and W is the weighting factor defined in this section:
      1. (A) For life insurance:
      2. (B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:
      3. (C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in subdivision (b)(1)(B), the formula for life insurance in subdivision (b)(1)(A) shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of ten (10) years and the formula for single premium immediate annuities in subdivision (b)(1)(B) shall apply to annuities and guaranteed interest contracts with guarantee duration of ten (10) years or less;
      4. (D) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities in subdivision (b)(1)(B) shall apply;
      5. (E) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities in subdivision (b)(1)(B) shall apply;
    2. (2)
      1. (A) However, if the calendar year statutory valuation interest rate for a life insurance policy issued in any calendar year determined without reference to this subdivision (b)(2)(A) differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one half of one percent (0.5%), the calendar year statutory valuation interest rate for the life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year;
      2. (B) For purposes of applying subdivision (b)(2)(A), the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, using the reference interest rate defined in 1979, and shall be determined for each subsequent calendar year regardless of when § 56-7-401(h) becomes operative;
  3. (c) The weighting factors referred to in the formulas described in subsection (b) are given in the following tables:
    1. (1)
      1. (A) Weighting factors for life insurance:
        1. Guarantee
        2. DurationWeighting
        3. Years  Factors
        4. 10 or less 0.50
        5. More than 10, but not more than 20    0.45
        6. More than 20       0.35
      2. (B) For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy;
    2. (2) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: 0.80;
    3. (3) Weighting factors for other annuities and for guaranteed interest contracts, except as provided in subdivision (c)(2), shall be as specified in subdivisions (c)(3)(A), (B) and (C), according to the rules and definitions in subdivisions (c)(3)(D), (E) and (F):
      1. (A) For annuities and guaranteed interest contracts valued on an issue year basis:
        1. Guarantee  Weighting Factor
        2. Duration    For Plan Type
        3. (Years) A     B     C
        4. 5 or less:0.80    0.60    0.50
        5. More than 5,
        6. but not more than 10:   0.75    0.60    0.50
        7. More than 10,
        8. but not more than 20:   0.65    0.50   0.45
        9. More than 20:      0.45    0.35  0.35
      2. (B) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors in subdivision (c)(3)(A) increased by:
        1. For Plan Type
        2. A     B     C
        3. 0.15    0.25    0.05
      3. (C) For annuities and guaranteed interest contracts valued on an issue year basis, other than those with no cash settlement options, that do not guarantee interest on considerations received more than one (1) year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis that do not guarantee interest rates on considerations received more than twelve (12) months beyond the valuation date, the factors in subdivision (c)(3)(A) or derived in subdivision (c)(3)(B) increased by:
        1. For Plan Type
        2. A     B     C
      4. (D) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty (20) years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guaranteed duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.
      5. (E) Plan type as used in subdivisions (c)(3)(A)-(C) is defined as follows:
        1. (i) Plan Type A: At any time policyholder may withdraw funds only:
          1. (a) With an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company;
          2. (b) Without an adjustment but installments over five (5) years or more;
          3. (c) As an immediate life annuity; or
          4. (d) No withdrawal permitted;
        2. (ii) Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only:
          1. (a) With an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company;
          2. (b) Without an adjustment but in installments over five (5) years or more;
          3. (c) No withdrawal permitted; or
          4. (d) At the end of interest rate guarantee, funds may be withdrawn without an adjustment in a single sum or installments over less than five (5) years;
        3. (iii) Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five (5) years either:
          1. (a) Without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or
          2. (b) Subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
      6. (F)
        1. (i) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis.
        2. (ii) As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.
  4. (d) The reference interest rate referred to in subsection (b) means:
    1. (1) For life insurance, the lesser of the average over a period of thirty-six (36) months and the average over a period of twelve (12) months, ending on June 30 of the calendar year preceding the year of issue, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;
    2. (2) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or year of purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;
    3. (3) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision (d)(2), with guarantee duration in excess of ten (10) years, the lesser of the average over a period of thirty-six (36) months and the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;
    4. (4) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision (d)(2), with guarantee duration of ten (10) years or less, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;
    5. (5) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; or
    6. (6) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in subdivision (d)(2), the average over a period of twelve (12) months, ending on June 30 of the calendar year of the change in the fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.
  5. (e) For alternative method for determining reference interest rates, in the event that the monthly average of the composite yield on seasoned corporate bonds is no longer published by Moody's Investors Service, Inc., or in the event that the NAIC determines that the monthly average of the composite yield on seasoned corporate bonds as published by Moody's Investors Service, Inc., is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate adopted by the NAIC and approved by regulations promulgated by the commissioner may be substituted.
§ 56-1-907. Reserve valuation method — Life insurance and endowment benefits.
  1. (a) Except as otherwise provided in §§ 56-1-908, 56-1-911 and 56-1-913, reserves according to the commissioner's reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by those policies, over the then present value of any future modified net premiums therefore. The modified net premiums for a policy shall be the uniform percentage of the respective contract premiums for the benefits such that the present value, at the date of issue of the policy, of all modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the policy and the excess of subdivision (a)(1) over subdivision (a)(2), as follows:
    1. (1) A net level annual premium equal to the present value, at the date of issue, of the benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one (1) per annum payable on the first and each subsequent anniversary of the policy on which a premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan for insurance of the same amount at an age one (1) year higher than the age at issue of the policy;
    2. (2) A net one-year term premium for the benefits provided for in the first policy year.
  2. (b) For a life insurance policy issued on or after January 1, 1986, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and which provides an endowment benefit or a cash surrender value or a combination in an amount greater than the excess premium, the reserve according to the commissioner's reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined in this part as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium shall, except as otherwise provided in § 56-1-911, be the greater of the reserve as of the policy anniversary calculated as described in subsection (a) and the reserve as of the policy anniversary calculated as described in subsection (a), but with:
    1. (1) The value defined in subdivision (a)(1) being reduced by fifteen percent (15%) of the amount of such excess first year premium;
    2. (2) All present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date;
    3. (3) The policy being assumed to mature on that date as an endowment; and
    4. (4) The cash surrender value provided on that date being considered as an endowment benefit.
  3. (c) In making the comparison the mortality and interest bases in §§ 56-1-904 and 56-1-906 shall be used.
  4. (d) Reserves according to the commissioner's reserve valuation method shall be calculated by a method consistent with subsections (a) and (b) for:
    1. (1) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums;
    2. (2) Group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under § 408 of the Internal Revenue Code (26 U.S.C. § 408), as amended;
    3. (3) Disability and accidental death benefits in all policies and contracts; and
    4. (4) All other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts.
§ 56-1-908. Reserve valuation method — Annuity and pure endowment benefits.
  1. (a) This section shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under § 408 of the Internal Revenue Code (26 U.S.C. § 408), as amended.
  2. (b) Reserves according to the commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by the contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of the contract, that become payable prior to the end of the respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values.
§ 56-1-909. Minimum reserves.
  1. (a) In no event shall a company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after March 13, 1978, be less than the aggregate reserves calculated in accordance with the methods set forth in §§ 56-1-907, 56-1-908, 56-1-911 and 56-1-912 and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the policies.
  2. (b) In no event shall the aggregate reserves for all policies, contracts and benefits be less than the aggregate reserves determined by the appointed actuary to be necessary to render the opinion required by § 56-1-903.
§ 56-1-910. Optional reserve calculation.
  1. (a) Reserves for policies and contracts issued prior to March 13, 1978, may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by the laws in effect immediately prior to March 13, 1978.
  2. (b) Reserves for any category of policies, contracts or benefits established by the commissioner, issued on or after March 13, 1978, may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for the category than those calculated according to the minimum standard provided in this part, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided in the policies or contracts.
  3. (c) A company, which adopts at any time a standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided under this part may adopt a lower standard of valuation with the approval of the commissioner, but not lower than the minimum provided herein; provided that, for the purposes of this section, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by § 56-1-903 shall not be deemed to be the adoption of a higher standard of valuation.
§ 56-1-911. Reserve calculation — Valuation net premium exceeding the gross premium charged.
  1. (a) If in any contract year the gross premium charged by a company on a policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for the policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest and method actually used for the policy or contract; or the reserve calculated by the method actually used for the policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in §§ 56-1-904 and 56-1-906.
  2. (b) For a life insurance policy issued on or after January 1, 1986, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and which provides an endowment benefit or a cash surrender value, or a combination, in an amount greater than the excess premium, subsection (a) shall be applied as if the method actually used in calculating the reserve for the policy were the method described in § 56-1-907, without consideration of § 56-1-907(b). The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with § 56-1-907, including § 56-1-907(b), and the minimum reserve calculated in accordance with this section.
§ 56-1-912. Reserve calculation — Indeterminate premium plans.
  1. In the case of a plan of life insurance that provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of a plan of life insurance or annuity that is of such a nature that the minimum reserves cannot be determined by the methods described in §§ 56-1-907, 56-1-908 and 56-1-911, the reserves that are held under the plan shall, as determined by regulations promulgated by the commissioner:
    1. (1) Be appropriate in relation to the benefits and the pattern of premiums for that plan; and
    2. (2) Be computed by a method that is consistent with the principles of this part.
§ 56-1-913. Minimum standard for accident and health insurance contracts.
  1. (a) For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under § 56-1-902(b).
  2. (b) For disability, accident and sickness, accident and health insurance contracts issued on or after January 1, 1962, and prior to the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the commissioner by regulation.
§ 56-1-914. Valuation manual for policies issued on or after the operative date of the valuation manual.
  1. (a) For policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under § 56-1-902(b), except as provided under subsections (e) or (g).
  2. (b) The operative date of the valuation manual is January 1 of the first calendar year following the first July 1 as of which all of the following have occurred:
    1. (1) The valuation manual has been adopted by the NAIC by an affirmative vote of at least forty-two (42) members, or three-fourths (¾) of the members voting, whichever is greater;
    2. (2) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than seventy-five percent (75%) of the direct premiums written as reported in the following annual statements submitted for 2008: life, accident and health annual statements; health annual statements; or fraternal annual statements;
    3. (3) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least forty-two (42) of the following fifty-five (55) jurisdictions: The fifty (50) states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam and Puerto Rico.
  3. (c) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on January 1 following the date when the change to the valuation manual has been adopted by the NAIC by an affirmative vote representing:
    1. (1) At least three-fourths (¾) of the members of the NAIC voting, but not less than a majority of the total membership; and
    2. (2) Members of the NAIC representing jurisdictions totaling greater than seventy-five percent (75%) of the direct premiums written as reported in the following annual statements most recently available prior to the vote in subdivision (c)(1): life, accident and health annual statements, health annual statements or fraternal annual statements.
  4. (d) The valuation manual shall specify all of the following:
    1. (1) Minimum valuation standards for and definitions of the policies or contracts subject to § 56-1-902(b). Such minimum valuation standards shall be:
      1. (A) The commissioner's reserve valuation method for life insurance contracts, other than annuity contracts, subject to § 56-1-902(b);
      2. (B) The commissioner's annuity reserve valuation method for annuity contracts subject to § 56-1-902(b); and
      3. (C) Minimum reserves for all other policies or contracts subject to § 56-1-902(b);
    2. (2) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in § 56-1-915(a) and the minimum valuation standards consistent with those requirements;
    3. (3) For policies and contracts subject to a principle-based valuation under § 56-1-915:
      1. (A) Requirements for the format of reports to the commissioner under § 56-1-915(b)(2) and which shall include information necessary to determine if the valuation is appropriate and in compliance with this part;
      2. (B) Assumptions shall be prescribed for risks over which the company does not have significant control or influence; and
      3. (C) Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures;
    4. (4) For policies not subject to a principle-based valuation under § 56-1-915, the minimum valuation standard shall either:
      1. (A) Be consistent with the minimum standard of valuation prior to the operative date of the valuation manual; or
      2. (B) Develop reserves that quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring;
    5. (5) Other requirements, including, but not limited to, those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules and internal controls; and
    6. (6) The data and form of the data required under § 56-1-916, with whom the data must be submitted, and may specify other requirements including data analyses and reporting of analyses.
  5. (e) In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual is not, in the opinion of the commissioner, in compliance with this part, then the company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the commissioner by regulation.
  6. (f) The commissioner may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company's compliance with any requirement set forth in this part. The commissioner may rely upon the opinion, regarding provisions contained within this part, of a qualified actuary engaged by the commissioner of another state, district or territory of the United States. As used in this subsection (f), “engage” includes employment and contracting.
  7. (g) The commissioner may require a company to change any assumption or method that in the opinion of the commissioner is necessary in order to comply with the requirements of the valuation manual or this part; and the company shall adjust the reserves as required by the commissioner. The commissioner may take other disciplinary action as permitted pursuant to § 56-2-305 and the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
§ 56-1-915. Requirements of a principle-based valuation.
  1. (a) A company shall establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:
    1. (1) Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk;
    2. (2) Incorporate assumptions, risk analysis methods and financial models and management techniques that are consistent with, but not necessarily identical to, those utilized within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods;
    3. (3) Incorporate assumptions that are derived in one (1) of the following manners:
      1. (A) The assumption is prescribed in the valuation manual;
      2. (B) For assumptions that are not prescribed, the assumptions shall:
        1. (i) Be established utilizing the company's available experience to the extent it is relevant and statistically credible; or
        2. (ii) To the extent that company data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience;
    4. (4) Provide margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.
  2. (b) A company using a principle-based valuation for one (1) or more policies or contracts subject to this section as specified in the valuation manual shall:
    1. (1) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual;
    2. (2) Provide to the commissioner and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. Such controls shall be designed to assure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year;
    3. (3) Develop, and file with the commissioner upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.
  3. (c) A principle-based valuation may include a prescribed formulaic reserve component.
§ 56-1-916. Experience reporting for policies in force on or after the operative date of the valuation manual.
  1. A company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the valuation manual.
§ 56-1-917. Confidentiality.
  1. (a) For purposes of this section, “confidential information” means:
    1. (1) A memorandum in support of an opinion submitted under § 56-1-903 and any other documents, materials and other information, including, but not limited to, all working papers, and copies thereof, created, produced or obtained by or disclosed to the commissioner or any other person in connection with such memorandum;
    2. (2) All documents, materials and other information, including, but not limited to, all working papers and copies thereof, created, produced or obtained by or disclosed to the commissioner or any other person in the course of an examination made under § 56-1-914(f); provided, however, that if an examination report or other material prepared in connection with an examination made under § 56-1-411 is not held as private and confidential information under § 56-1-411, an examination report or other material prepared in connection with an examination made under § 56-1-914(f) shall not be confidential information to the same extent as if such examination report or other material had been prepared under § 56-1-411;
    3. (3) Any reports, documents, materials and other information developed by a company in support of, or in connection with, an annual certification by the company under § 56-1-915(b)(2) evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials and other information, including, but not limited to, all working papers and copies thereof, created, produced or obtained by or disclosed to the commissioner or any other person in connection with such reports, documents, materials and other information;
    4. (4) Any principle-based valuation report developed under § 56-1-915(b)(3) and any other documents, materials and other information, including, but not limited to, all working papers and copies thereof, created, produced or obtained by or disclosed to the commissioner or any other person in connection with such report; and
    5. (5) Any documents, materials, data and other information submitted by a company under § 56-1-916, collectively, experience data, and any other documents, materials, data and other information, including, but not limited to, all working papers, and copies thereof, created or produced in connection with such experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the commissioner (together with any experience data, the experience materials) and any other documents, materials, data and other information, including, but not limited to, all working papers, and copies thereof, created, produced or obtained by or disclosed to the commissioner or any other person in connection with such experience materials.
  2. (b) For privilege for, and confidentiality of, confidential information:
    1. (1) Except as provided in this section, a company's confidential information is confidential by law and privileged, and shall not be subject to § 10-7-503 or § 56-1-602, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private civil action; provided, however, that the commissioner is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the commissioner's official duties;
    2. (2) Neither the commissioner nor any person who received confidential information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential information;
    3. (3) In order to assist in the performance of the commissioner's duties, the commissioner may share confidential information:
      1. (A) With other state, federal and international regulatory agencies and with the NAIC and its affiliates and subsidiaries;
      2. (B) In the case of confidential information specified in subdivisions (a)(1) and (4) only, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal and international law enforcement officials; and
      3. (C) Provided that such recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data and other information in the same manner and to the same extent as required for the commissioner;
    4. (4) The commissioner may receive documents, materials, data and other information, including otherwise confidential and privileged documents, materials, data or information, from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions and from the Actuarial Board for Counseling and Discipline or its successor and shall maintain as confidential or privileged any document, material, data or other 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 other information;
    5. (5) The commissioner may enter into agreements governing sharing and use of information consistent with this subsection (b);
    6. (6) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subdivision (b)(3);
    7. (7) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this subsection (b) shall be available and enforced in any proceeding in, and in any court of, this state;
    8. (8) In this section, “regulatory agency,” “law enforcement agency” and “NAIC” include, but are not limited to, their employees, agents, consultants and contractors.
  3. (c) Notwithstanding subsection (b), any confidential information specified in subdivisions (a)(1) and (4):
    1. (1) May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under § 56-1-903 or principle-based valuation report developed under § 56-1-915(b)(3) by reason of an action required pursuant to this part or by regulations promulgated by the commissioner;
    2. (2) May otherwise be released by the commissioner with the written consent of the company; and
    3. (3) Once any portion of a memorandum in support of an opinion submitted under § 56-1-903 or a principle-based valuation report developed under § 56-1-915(b)(3) is cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential.
§ 56-1-918. Single state exemption.
  1. (a) The commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in this state from § 56-1-914; provided, that:
    1. (1) The commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing; and
    2. (2) The company computes reserves using assumptions and methods used prior to the operative date of the valuation manual in addition to any requirements established by the commissioner and promulgated by regulation.
  2. (b) For any company granted an exemption under this section, §§ 56-1-903 — 56-1-913 shall be applicable. With respect to any company applying this exemption, any reference to § 56-1-914 found in §§ 56-1-903 — 56-1-913 shall not be applicable.
§ 56-1-919. Conflicts with other laws — Applicability date.
  1. To the extent that this part conflicts with or is inconsistent with any law, this part shall control. This part shall apply to policies and contracts issued on or after January 1, 1962.
Part 10 Health Benefit Plans
§ 56-1-1001. Definitions.
  1. As used in this part:
    1. (1) “Health benefit plan” means a policy, contract, certificate, or agreement entered into, offered by, or issued by an insurer to provide, deliver, arrange for, pay for, or reimburse any of the costs of healthcare services, including a vision or dental benefit plan and a nonprofit dental service plan, as defined in § 56-30-102; and
    2. (2) “Plan sponsor” means an insured person, other than a regulated entity, who establishes, adopts, or maintains a health benefit plan that covers residents of this state, including a plan established, adopted, or maintained by an employer or jointly by an employer and one (1) or more employee organizations, an association, a committee, a joint board of trustees, or any similar group of representatives who establish, adopt, or maintain a plan.
§ 56-1-1002. Electronic opt-out provisions.
  1. (a) The plan sponsor of a health benefit plan may, on behalf of covered persons in the plan, provide consent to the delivery of all communications related to the plan by electronic means, including the electronic delivery of a health insurance identification card.
  2. (b) Before consenting on behalf of insureds a plan sponsor shall confirm that the party routinely uses electronic communications during the normal course of employment.
  3. (c) Before providing delivery by electronic means, the insurer for the health benefit plan shall:
    1. (1) Provide the insured with an opportunity to opt out of delivery by electronic means; and
    2. (2) Implement and adhere to a policy that contains the following criteria:
      1. (A) If the insurer becomes aware that the insured's email address at which the insured has consented to receive notices or documents is no longer valid, the insurer shall send physical notices or documents to the insured at the insured's mailing address on file with the insurer;
      2. (B) The insurer will retain records for five (5) years, including proof of the date of each electronic mailing and the email address to which each mailing was sent. The records must be retrievable for a period of five (5) years after the date of the mailing;
      3. (C) The insured may withdraw his or her consent to receive mailings electronically at any time;
      4. (D) All conditions have been satisfied to facilitate the electronic mailing of notices and documents, unless existing law requires notices and documents to be delivered by a particular method;
      5. (E) All conditions to facilitate the electronic mailing of notices and documents have been satisfied under the federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7001, et seq.); and
      6. (F) The insurer will not cancel, refuse to issue, or refuse to renew a policy because the applicant or insured refuses to agree to receive electronic mailings of notices and documents pursuant to this section.
  4. (d) This section does not apply to TennCare or any successor program provided for in title 71, chapter 5, or to the CoverKids Act of 2006 or any successor program provided for in title 71, chapter 3, part 11.
Chapter 2 Insurance Companies
Part 1 General Requirements for Doing Business
§ 56-2-101. Applicability to foreign and domestic companies.
  1. This section, §§ 56-2-102 — 56-2-104, 56-2-113 — 56-2-115, 56-2-201, and 56-2-301 shall be applicable to both domestic and foreign insurance companies unless otherwise specifically provided in a particular section or subsection.
§ 56-2-102. Requisites for commencing business — Foreign insurance companies qualifying as domestic corporations — Foreign credit life reinsurance companies.
  1. (a) No domestic insurance company or foreign insurance company shall commence business in this state until it has complied with § 56-2-101, this section, §§ 56-2-103, 56-2-104, 56-2-113 — 56-2-115, 56-2-201, and 56-2-301, and has received from the commissioner a certificate of authority to do business.
  2. (b) Any company organized under the laws of any other state or country, and that is admitted to do business in this state for the purpose of writing insurance authorized by this chapter, upon complying with all of the requirements of law relative to the organization of domestic insurance companies and payment of fees by like domestic insurance corporations, and designating its principal place of business at a place in this state, may become a domestic corporation and be entitled to like certificates of its corporate existence and license to transact business in this state, and be subject in all respects to the authority and jurisdiction of this state.
  3. (c) A foreign credit life reinsurance company that meets the capital requirements of § 56-2-114(b) and that has at least fifty percent (50%) of its outstanding voting stock owned by persons or entities domiciled in this state, shall be entitled to obtain certificates of its corporate existence and shall be licensed to transact its business in this state, and be subject in all respects to the authority and jurisdiction of this state, if the following conditions are met:
    1. (1) Approval by the commissioner of commerce and insurance in its state of domicile to change its state of domicile to this state;
    2. (2) Submission to the Tennessee commissioner of commerce and insurance of a certificate of good standing from its state of domicile;
    3. (3) Compliance with all of the requirements of law relative to the organization of domestic insurance companies and payment of fees required by domestic insurance companies; and
    4. (4) Designation of a place in this state as its principal place of business.
§ 56-2-103. Qualifications necessary to do business — Commissioner to accept process — Deposit of securities.
  1. (a) No domestic or foreign insurance company shall be qualified and authorized to do business in this state until:
    1. (1) It files or deposits with the commissioner a properly certified copy of its charter or deed of settlement and, if a foreign insurance company, a statement of its financial condition and business on December 31 preceding the date on which it applies for permission to transact business, in the form and detail the commissioner requires, signed and sworn to by its president and secretary, or other proper officers, and pays for the filing of the copy and statement the sum of one hundred dollars ($100). If it is a foreign insurance corporation, it shall also file and deposit with the commissioner a certified statement of the secretary of state to the effect that its name complies with the requirements of title 48, chapter 14 or title 48, chapter 54, as applicable;
    2. (2) It satisfies the commissioner that it is fully and legally organized under the laws of the state or foreign nation of its incorporation, and that it possesses and maintains the amount of capital, if a stock company, or surplus funds, if a mutual, reciprocal or Lloyd's plan insurer, required by § 56-2-114 and the amount of additional surplus required by § 56-2-115, to do the kind or kinds of business it proposes to transact;
    3. (3) It, by duly executed instrument filed in the commissioner's office, constitutes and appoints the commissioner, the commissioner's chief deputy, or their successors, its true and lawful attorneys upon either of whom all lawful process in any action or legal proceeding against it may be served, and in the instrument agrees that any lawful process against it, which may be served upon its attorney, shall be of the same force and validity as if served on the company, and that the authority of the instrument shall continue in force, irrevocably, as long as any liability of the company remains outstanding in this state. Any process issued by any court of record in this state and served upon the commissioner or the commissioner's chief deputy by the proper officer of the county in which the commissioner or the chief deputy may have an office shall be deemed a sufficient process on the company, and it is the duty of the commissioner or the chief deputy, promptly, after service of process by any claimant, to forward, by registered mail, an exact copy of the notice to the company. Service of process from any county in this state upon the commissioner or the chief deputy by the proper officer of the county in which the commissioner or the chief deputy may have an office shall establish proper venue in the county from which the process was issued, if the plaintiff resides in that county, whether the insurance company has an office or agency located in one (1) or more other counties of this state or not;
    4. (4)
      1. (A) If it is a foreign stock or mutual life insurance company, it satisfies the commissioner that it has and shall maintain on deposit with the state treasurer, or with the proper officer of some other state, securities in the actual cash value of at least two hundred thousand dollars ($200,000) consisting of bonds of the United States, or any agency or instrumentality of the United States, which have been included in the three (3) highest grades by any of the recognized securities rating firms, bonds of this state, bonds of the state of domicile, or bonds publicly issued by any solvent institution created or existing under the laws of the United States or any state of the United States, which have been included in the three (3) highest grades by any of the recognized securities rating firms, and the company files with the commissioner the certificate of the official with whom the securities are deposited, stating the time and amount, and that the official is satisfied that they are worth two hundred thousand dollars ($200,000) and that the deposit is made with the official by the company for the protection of all policyholders and creditors in the United States;
      2. (B) Notwithstanding subdivision (a)(4)(A), the commissioner may decline to accept as a deposit any specific issue of securities that the commissioner has determined may not provide the necessary protection to policyholders and creditors in the United States;
    5. (5) If it is a foreign insurance company, it files a report of its real estate holdings, if required by the commissioner in the commissioner's discretion, so as to give the information required concerning domestic life insurance companies in § 56-3-305. The commissioner may refuse to admit and authorize a foreign insurance company to do business in this state in the event its land and the building or buildings on the land in which it has its principal office, and its other real property used in the transaction of insurance business, exceeds the maximum percentage of its admitted assets prescribed for domestic life insurance companies in § 56-3-305; and
    6. (6) The commissioner shall not approve any articles of incorporation or issue a certificate of authority to any company until finding that:
      1. (A) The company has submitted a plan of operation; and
      2. (B) The incorporators, directors and proposed officers are of known good character and there is no good reason to believe that they are affiliated, directly or indirectly, through ownership, control, management, reinsurance transactions or other insurance or business relations with any person or persons known to have been involved in the improper manipulation of assets, accounts, reinsurance, or any matter inimical to the business of insurance.
  2. (b) The commissioner is authorized to promulgate rules and regulations the commissioner deems reasonable and necessary requiring the furnishing of information relative to election or appointment of new officers and directors by insurance companies licensed to do business in this state. If, after a hearing afforded the officer or director and the insurance company, the commissioner finds that the officer or director is incompetent, untrustworthy, or of known bad character, the commissioner may order the removal of the person as an officer or director of the insurance company. If the insurance company does not comply with the removal order within thirty (30) days after its receipt of the order, the commissioner may suspend the insurance company's certificate of authority to do business in this state until such time as the company is in compliance with the order.
§ 56-2-104. Contents of statement — Deposits.
  1. (a) Any domestic company shall satisfy the commissioner that:
    1. (1) It is fully and legally organized under the laws of this state to do the business it proposes to transact;
    2. (2)
      1. (A) If it is a stock life insurance company or a mutual life insurance company, it has and will maintain on deposit with the state treasurer, or with such other officer designated by law, at least two hundred thousand dollars ($200,000) in cash or its equivalent; but the commissioner may, in the commissioner's discretion, accept as an equivalent bonds of the United States, or any agency or instrumentality of the United States, which have been included in the three (3) highest grades by any of the recognized securities rating firms, bonds of this state, bonds of the state of domicile, or bonds publicly issued by any solvent institution created or existing under the laws of the United States or any state of the United States, which have been included in the three (3) highest grades by any of the recognized securities rating firms;
      2. (B) Notwithstanding subdivision (a)(2)(A), the commissioner may decline to accept as a deposit any specific issue of securities that the commissioner has determined may not provide the necessary protection to policyholders and creditors in the United States;
      3. (C)
        1. (i) The company shall likewise be required to file with the commissioner the certificate of the official with whom the securities are deposited, stating the time and amount of bonds of the United States, or any agency or instrumentality of the United States, which have been included in the three (3) highest grades by any of the recognized securities rating firms, bonds of this state, bonds of the state of domicile, or bonds publicly issued by any solvent institution created or existing under the laws of the United States or any state, which have been included in the three (3) highest grades by any of the recognized securities rating firms, and that the commissioner is satisfied they are worth two hundred thousand dollars ($200,000), and that the deposit was made with the commissioner by the company for the protection of all policyholders and creditors in the United States;
        2. (ii) Notwithstanding subdivision (a)(2)(C)(i), the commissioner may decline to accept as a deposit any specific issue of securities that the commissioner has determined may not provide the necessary protection to policyholders and creditors in the United States;
      4. (D)
        1. (i) If the applicant is an insurance company other than a stock or mutual life insurance company, each company shall maintain on deposit at least one hundred thousand dollars ($100,000) in cash or its equivalent for each kind or class of insurance as defined in § 56-2-201; but the commissioner, in the commissioner's discretion, may accept as an equivalent bonds of the United States, or any agency or instrumentality of the United States, which have been included in the three (3) highest grades by any of the recognized securities rating firms, bonds of this state, bonds of the state of domicile, or bonds publicly issued by any solvent institution created or existing under the laws of the United States or any state, which have been included in the three (3) highest grades by any of the recognized securities rating firms;
        2. (ii) Notwithstanding subdivision (a)(2)(D)(i), the commissioner may decline to accept as a deposit any specific issue of securities that the commissioner has determined may not provide the necessary protection to policyholders and creditors in the United States. The deposits shall be subject to the same conditions as required in the case of stock or mutual life insurance companies; and
    3. (3)
      1. (A) The insurer's principal place of business is or will be located and maintained in this state. This subdivision (a)(3)(A) also applies to domestic health maintenance organizations. This subdivision (a)(3)(A) does not apply to:
        1. (i) Any insurer that was a domestic insurer prior to July 1, 1993, and whose primary executive, administrative and home offices were located outside of the state prior to July 1, 1993; or
        2. (ii) Any domestic reciprocal whose primary executive, administrative and home offices, and original books and records, were located and maintained outside the state prior to January 1, 1996;
      2. (B) The commissioner may suspend or revoke, after notice and hearing, the certificate of authority of a domestic company found to be in violation of subdivision (a)(3)(A);
      3. (C) The commissioner, in the commissioner's sole discretion, may waive the requirement in subdivision (a)(3)(A) for any company.
  2. (b)
    1. (1) The deposit required by this section is not applicable to foreign stock or mutual life insurance companies, or to domestic or foreign insurance companies writing workers' compensation insurance or fidelity and surety bonds. Companies writing that type or form of insurance shall make deposits in accordance with the requirements of existing laws.
    2. (2) The provisions of this section applicable to domestic insurance companies shall apply to all insurance companies and associations except those specifically exempted in this section, whether the companies are stock or mutual, and it is specifically provided that §§ 56-2-101 — 56-2-103, this section, §§ 56-2-113 — 56-2-115, 56-2-201, and 56-2-301 fully apply to all such companies or associations regardless of what law or statute of this state under which the companies or associations may have been organized.
    3. (3) No requirement in this section not in effect on January 1, 1967, shall be considered applicable to any insurance company properly licensed to transact business in this state as of that date, except that any stock casualty company, foreign or domestic, not having at least one hundred thousand dollars ($100,000) in cash or equivalent on deposit for each kind of insurance as defined in § 56-2-201, shall meet the requirement by December 31, 1978. Domestic stock casualty companies not maintaining capital paid up of at least one hundred thousand dollars ($100,000) shall make a deposit equal to their capital paid up by December 31, 1977.
    4. (4) This section shall not apply to, or affect, or be construed as in anywise applying to, or affecting, domestic state and county mutual fire insurance companies, the organization of which was and is authorized by chapters 19-21 of this title.
§ 56-2-105. Certificate of authority required — Exceptions.
  1. It is unlawful for any company to enter into a contract of insurance as an insurer or to transact insurance business in this state without a certificate of authority from the commissioner; provided, that this section shall not apply to:
    1. (1) Contracts procured by agents or brokers under the authority of the Surplus Lines Insurance Act, compiled in chapter 14 of this title;
    2. (2) Contracts of reinsurance;
    3. (3) Transactions in this state involving policies lawfully solicited, written and delivered outside of this state covering only subjects of insurance not resident, located or expressly to be performed in this state at the time of issuance or covering property in the course of transportation by land, air or water, to, from or through this state and including any preparation or storage incidental thereto, and which transactions are subsequent to the issuance of those policies;
    4. (4) Transactions in this state involving group or blanket insurance and group annuities where the master policy of the groups was lawfully issued and delivered in a state in which the company was authorized to transact insurance business;
    5. (5) Transactions in this state involving a policy issued prior to April 3, 1968;
    6. (6) Any life insurance or annuity company that holds a certificate of exemption from the commissioner as provided in § 56-2-106; or
    7. (7)
      1. (A) The procuring of contracts of insurance issued to an industrial insured;
      2. (B) For the purposes of subdivision (7)(A), an “industrial insured” is an insured:
        1. (i) Who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer;
        2. (ii) Whose aggregate annual premiums for insurance on all risks total at least twenty-five thousand dollars ($25,000); and
        3. (iii) Who has at least twenty-five (25) full-time employees.
§ 56-2-106. Certificate of exemption.
  1. (a) The commissioner shall, upon the payment of a filing fee of one hundred dollars ($100), grant a certificate of exemption to any life insurance or annuity company:
    1. (1) That is organized and operated without profit to any private shareholder or individual;
    2. (2) That is organized and operated exclusively for the purpose of aiding educational or scientific institutions that are also organized and operated without profit to any private shareholder or individual;
    3. (3) That serves that purpose by issuing insurance and annuity contracts only to or for the benefit of the educational or scientific institutions or to individuals engaged in the service of the institutions;
    4. (4) That appoints the commissioner, and the commissioner's successors in office, as its attorney to receive the service of process issued against it in this state, which appointment shall be irrevocable, shall bind the company and any successor in interest, and shall remain in effect so long as there is in force in this state any contract or policy made or issued by the company or any obligation arising from the contract or policy;
    5. (5) That is fully and legally organized and qualified to do business and that has been actively doing business under the laws of the state of its incorporation for a period of at least three (3) years prior to its application for a certificate of exemption, and possesses and maintains the amount of capital and surplus that would be required for a company to be qualified in this state to do the kind or kinds of business it transacts; and
    6. (6) Whose directors and officers are of known good character and are not affiliated, directly or indirectly, through ownership, control, management, reinsurance transactions, or other insurance or business relations with any person known to have been involved in the improper manipulation of assets, accounts, reinsurance or any matter inimical to the business of insurance.
  2. (b) If, after reasonable notice and a hearing, the commissioner finds that any company holding a certificate of exemption no longer meets the requirements of subdivisions (a)(1)-(6), or finds that any company holding a certificate of exemption has been guilty of any unfair method of competition or any unfair or deceptive acts or practices, as defined in § 56-8-104, the commissioner may enter an order suspending or revoking the certificate of exemption, which order may be reviewed by the writs of certiorari and supersedeas as otherwise provided by law.
  3. (c) Any company holding a certificate of exemption shall pay the premium tax imposed by § 56-4-205 on all policies of life insurance issued after April 4, 1968, to residents of the state, which policies are not issued pursuant to a plan or program authorized by the governing board of the educational or scientific institution, and the premiums for which are not paid for in whole or in part by the educational or scientific institution.
§ 56-2-107. Acts of unauthorized insurers constituting doing business in state.
  1. Any of the following acts in this state, effected by mail or otherwise by an unauthorized insurer, are included among those deemed to constitute transacting insurance business in this state:
    1. (1) The issuance or delivery of contracts of insurance to residents of this state;
    2. (2) The solicitation of applications for contracts of insurance;
    3. (3) The collection of premiums, membership fees, assessments or other considerations for contracts of insurance; or
    4. (4) The transaction of matters subsequent to the execution of contracts of insurance and arising out of them.
§ 56-2-108. Violation of § 56-2-105 — Penalty.
  1. (a) Any company that violates § 56-2-105 is subject to a fine or a civil penalty, or both, of not less than one hundred dollars ($100) nor more than five thousand dollars ($5,000) for each violation.
  2. (b) Each day in which a violation occurs constitutes a separate violation.
§ 56-2-109. No action to be maintained without certificate of authority.
  1. The failure of a company to obtain a certificate of authority shall not impair the validity of any act or contract of the company, and shall not prevent the company from defending any action at law or suit in equity in any court of this state; but no company transacting insurance business in this state without a certificate of authority shall be permitted to maintain an action at law or suit in equity in any court of this state to enforce any right, claim or demand arising out of the transaction of insurance business until the company has obtained a certificate of authority, nor shall an action at law or suit in equity be maintained in any court of this state by any successor or assignee of the company on any right, claim or demand originally held by the company until a certificate of authority has been obtained by the company or by a company that has acquired all or substantially all of its assets.
§ 56-2-110. Injunction to prevent violation of § 56-2-105.
  1. (a) Whenever the commissioner believes, from evidence satisfactory to the commissioner, that any foreign or alien company is violating or is about to violate § 56-2-105, the commissioner may, through the attorney general and reporter, cause a bill to be filed in the chancery court of Davidson County to enjoin and restrain the company from continuing the violation, engaging in the violation or doing any act in furtherance of the violation.
  2. (b) The court shall have jurisdiction of the proceeding and shall have the power to make and enter an order or decree awarding the preliminary or final injunctive relief as in its judgment is proper.
§ 56-2-111. Liability for tax on gross premium.
  1. Any company violating § 56-2-105 shall be liable, with respect to any contract of insurance or transaction of insurance business as defined and limited in § 56-2-105, for the payment of all taxes on gross premiums imposed in chapter 4 of this title.
§ 56-2-112. Deposits in trust to secure policyholders.
  1. (a) The state treasurer, in an official capacity, shall take and hold in trust deposits made by any domestic insurance company for the purpose of complying with the laws of any other state, to enable the company to do business in the other state, and shall also, in a like manner, take and hold any deposits made by a foreign insurance company under any law of the state.
  2. (b) The company making the deposits shall be entitled to the income of the deposits, and may, from time to time, with the consent of the state treasurer, when not forbidden by the law under which the deposits are made, change, in whole or in part, the securities that compose the deposit for other competent securities of equal value.
  3. (c)
    1. (1) Upon the request of any domestic insurance company, the state treasurer may return to the company the whole or any portion of the securities of the company, when the state treasurer is satisfied that the securities so asked to be returned are subject to no liability, and not required to be longer held by any law or purpose of the original deposit.
    2. (2) The state treasurer may return to the trustees or other representatives, authorized for that purpose, of a foreign insurance company, any deposit made by the company, when it appears that the company has ceased to do business in the state, and is under no obligations to policyholders or other persons in the state or in the United States, for whose benefit the deposit was made.
§ 56-2-113. Period of organization before admission of foreign companies — Exceptions.
  1. (a) No foreign insurance company transacting any of the kinds of insurance as defined in § 56-2-201 shall be admitted and authorized to do business in this state until it can satisfy the commissioner that it has been organized and actively engaged in the insurance business in the state of its incorporation for a period of three (3) years prior to the date of its application to be admitted and authorized to do business in this state.
  2. (b) Subsection (a) does not apply to a foreign insurance company that is:
    1. (1) The wholly-owned subsidiary of an insurance company or health maintenance organization admitted and authorized to do business in this state;
    2. (2) The continuing corporation resulting from a merger or consolidation of insurance companies at least one (1) of which, prior to the merger or consolidation, met all the requirements for admission and authorization to do business in this state, including the requirement of having been actively engaged in the insurance business in its state of incorporation for three (3) years;
    3. (3) The wholly-owned subsidiary of a holding company that also owns one hundred percent (100%) of the common capital stock, excluding qualifying shares required to be held by directors, of an insurance company or health maintenance organization admitted and authorized to do business in this state; or
    4. (4) A foreign insurance company originally chartered and licensed to transact business in this state, and making application to redomesticate to this state upon furnishing the following from the commissioner of commerce and insurance of its state of domicile:
      1. (A) Letter of approval to redomesticate;
      2. (B) Letter of intent to permit the company to transfer its business and assets to this state; and
      3. (C) A certificate of good standing.
  3. (c) “Owned” and “owns,” as used in subsection (b), mean ownership either directly or indirectly through one (1) or more intermediaries.
  4. (d) The commissioner, in the commissioner's sole discretion, may waive the requirement in subsection (a) for any company, if the commissioner determines it is in the public interest.
§ 56-2-114. Capital requirements for insurance combinations and reinsurance.
  1. (a) An insurer otherwise qualified therefor may be authorized to transact combinations of kinds of insurance while processing and maintaining capital, if a stock company, or surplus funds, if a mutual, reciprocal, or Lloyd's plan insurer, in the amount of one million dollars ($1,000,000).
  2. (b) To transact the business of reinsuring credit life and credit accident insurance and health insurance, an insurer must possess and maintain capital in the amount of one hundred fifty thousand dollars ($150,000); provided, that a company so authorized shall not be authorized to conduct any other line of business unless otherwise qualified.
§ 56-2-115. Additional surplus requirement.
  1. In addition to the paid up capital stock or surplus as required under §§ 56-2-103 and 56-2-114(a), all insurance companies doing business in this state shall possess and maintain bona fide surplus funds in the amount of one million dollars ($1,000,000), except for insurance companies authorized under § 56-2-114(b), which shall possess and maintain bona fide surplus funds equaling in amounts not less than fifty percent (50%) of the capital stock or surplus otherwise required by § 56-2-114(b).
§ 56-2-116. Exemption of previously licensed companies — Termination of exemption for foreign insurance companies.
  1. (a) No requirement of §§ 56-2-101 — 56-2-103, 56-2-113 — 56-2-115, 56-2-201, and 56-2-301 not in effect on March 1, 1986, shall be considered applicable to any insurance company properly licensed to transact business in this state on that date.
  2. (b) Notwithstanding subsection (a), any foreign insurance company filing an annual statement under § 56-1-501, not possessing the minimum capital and surplus required by §§ 56-2-114 and 56-2-115 on and after January 1, 1987, shall cease to write any new business until the minimum capital and surplus required are met.
  3. (c) Subsection (b) shall not apply to the procedures and capital requirements of a casualty company for the exclusive purpose of writing bonds only.
  4. (d) Any domestic insurer otherwise exempt under subsection (a) that at any time meets the capital and surplus requirements under this chapter shall thereafter be required to maintain the required capital and surplus limits.
§ 56-2-118. Address and phone number of policyholder service office outside state.
  1. (a) Every policy of life insurance, accident and health insurance, property insurance or casualty insurance issued after January 1, 1989, covering risks in this state by a company not maintaining a policyholder service office in this state, shall be accompanied by the complete address and telephone number, toll-free if available, of the policyholder service office of the company issuing the policy. In the event an insurance company that has a policyholder's service office in this state ceases to maintain the office, the company shall provide its policyholders residing in this state with a written notice containing the complete address and telephone number, toll-free if available, of the servicing agent or the nearest policyholder service office of the company.
  2. (b) The commissioner may promulgate rules and regulations in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, to effectuate the purposes of this section.
  3. (c) Failure to include the information required by subsection (a) shall be a deceptive act or practice and the procedures and penalties established by chapter 8, part 1 of this title, shall be applicable.
§ 56-2-119. Insurance company's address to appear on insurance policy.
  1. (a) On every policy of insurance covering risks in this state that is issued after July 1, 1991, by an insurance company doing business in this state, there shall be printed the address of the company's home office, regional office or service center.
  2. (b) Failure to include the information required by subsection (a) is a deceptive act or practice, and the procedures and penalties established by chapter 8, part 1 of this title are applicable.
§ 56-2-120. Insurers — Financial requirements — Hearings.
  1. (a) In addition to the minimum requirements set out in §§ 56-2-114 and 56-2-115, and notwithstanding any other law to the contrary, the commissioner may require, after notice and hearing, additional amounts so that an insurer's capital, surplus funds, or surplus as regards policyholders shall be reasonable in relation to the insurer's outstanding liabilities and premiums, and adequate to its financial needs. For purposes of this part, in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and premiums and adequate to its financial needs, the following factors, among others, shall be considered:
    1. (1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria;
    2. (2) The extent to which the insurer's business is diversified among the several lines of insurance;
    3. (3) The number and size of risks insured in each line of business;
    4. (4) The extent of the geographical dispersion of the insurer's insured risks;
    5. (5) The nature and extent of the insurer's reinsurance program;
    6. (6) The quality, diversification and liquidity of the insurer's investment portfolio;
    7. (7) The recent past and projected future trend in the size of the insurer's investment portfolio;
    8. (8) The surplus as regards policyholders maintained by other comparable insurers;
    9. (9) The adequacy of the insurer's reserves; and
    10. (10) The quality and liquidity of investments in affiliates. The commissioner may treat the investments as a disallowed asset for purposes of determining the adequacy or surplus as regards policyholders whenever, in the commissioner's judgment, the investment so warrants.
  2. (b) Before the commissioner takes any action pursuant to this section, the commissioner shall give written notice to the insurer involved, stating specifically the nature of the alleged deficiency in capital and surplus. Within ten (10) days after receiving notice, the insurer may request a hearing, which shall be held within thirty (30) days of the request. The burden of proof shall be on the commissioner to show the inadequacy of capital and surplus by the preponderance of the evidence. After the hearing, or if the insurer fails to request a hearing, the commissioner, if the commissioner finds a deficiency, may enter an appropriate order under this section as the commissioner deems advisable.
  3. (c) When the commissioner takes action in any or all of the ways set out in this section, the party aggrieved may appeal from the action to the chancery court of Davidson County.
§ 56-2-121. Exempt entities.
  1. (a) A plan sponsored by a nonprofit corporation organized and created in this state primarily to promote programs for the improvement of the health of rural people in the state, which plan has provided health care benefits to the members of the corporation for a period in excess of ten (10) years, shall be deemed not to be insurance and not subject to this title, to the extent the plan, after July 1, 1993, provides the benefits under a self-funded arrangement; provided, that any stop-loss, excess or similar insurance coverage purchased as part of the plan shall be insurance subject to this title.
  2. (b) The provisions of this title to the contrary notwithstanding, a Program for All-Inclusive Care for the Elderly (PACE) project that is sponsored by a religious or charitable organization that is itself or is controlled by a person that is organized under § 501(c)(3) of the Internal Revenue Code (26 U.S.C. § 501(c)(3)), and that has had its application for the operation of a PACE program approved by the health care financing administration of the United States department of health and human services (HHS), and is operating under such approval, shall not be deemed to be engaged in any business required to be licensed pursuant to this title. This exemption applies only to business conducted pursuant to the approved PACE contract, and not to any other business that such organization conducts that is subject to this title.
§ 56-2-122. Nonprofit health maintenance organization as subsidiary of certain hospital corporations.
  1. A nonprofit health maintenance organization that, with the approval of the commissioner, was created prior to January 1, 1981, by a corporation operated pursuant to chapter 28 or chapter 29 of this title may be treated by the corporation as a subsidiary solely for the purpose of determining the status of the nonprofit health maintenance organization as an admitted asset; provided, that the corporation otherwise has a net worth at least equal to the capital and surplus requirements for an insurance company under §§ 56-2-114(a) and 56-2-115.
§ 56-2-123. Confirmation of verbal authorization for medical care.
  1. If verbal authorization is given to a health care provider, insured, or enrollee for medical care under any individual, franchise, blanket or group health insurance policy, medical service plan or contract, hospital service corporation contract, hospital and medical service corporation contract, fraternal benefit society, health maintenance organization, or managed care organization, the verbal authorization shall be confirmed by written authorization, facsimile transmission, or verbally by means of a confirmation number or other confirmation code.
§ 56-2-124. Hold harmless requirements prohibited.
  1. No health insurer, prepaid group health plan, health maintenance organization, preferred provider organization or similar entity licensed under this part that provides or administers health insurance shall require, by contract or otherwise, any title 63 or title 68 licensee to indemnify or hold harmless the licensee under this title for tort or patent or copyright infringement liability that the licensee under this title incurs, experiences, or causes by act or omission, or by act or omission of the title 63 or title 68 provider to the extent the act or omission was pursuant to a directive of the licensee under this title.
§ 56-2-125. Establishment and maintenance of an all payer claims database — Establishment of Tennessee health information committee.
  1. (a) As used in this section, unless the context otherwise requires:
    1. (1) “All payer claims database” means a database comprised of health insurance issuer and group health plan claims information that excludes the data elements in 45 CFR 164.514(e)(2);
    2. (2) “Commissioner” means the commissioner of commerce and insurance;
    3. (3) “Department” means the department of commerce and insurance;
    4. (4) “Group health plan” means an employee welfare benefit plan, as defined in § 3(1) of the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1002(1)), to the extent that the plan provides medical care to employees or their dependents, as defined under the terms of the plan, or an administrator of the plan. For purposes of this section, “group health plan” shall not mean any plan that is offered through a health insurance issuer;
    5. (5) “Health insurance coverage” means health insurance coverage as defined in § 56-7-2902, as well as medicare supplemental health insurance; and
    6. (6) “Health insurance issuer” means an entity subject to the insurance laws of this state, or subject to the jurisdiction of the commissioner, that contracts or offers to contract to provide health insurance coverage, including, but not limited to, an insurance company, a health maintenance organization and a nonprofit hospital and medical service corporation. “Health insurance issuer” also means a pharmacy benefits manager, a third party administrator and an entity described in § 56-2-121.
  2. (b)
    1. (1) The commissioner shall establish and maintain an all payer claims database to enable the commissioner of finance and administration to carry out the following duties:
      1. (A) Improving the accessibility, adequacy and affordability of patient health care and health care coverage;
      2. (B) Identifying health and health care needs and informing health and health care policy;
      3. (C) Determining the capacity and distribution of existing health care resources;
      4. (D) Evaluating the effectiveness of intervention programs on improving patient outcomes;
      5. (E) Reviewing costs among various treatment settings, providers and approaches; and
      6. (F) Providing publicly available information on health care providers' quality of care.
    2. (2) Nothing in this section shall preclude a health insurance issuer from providing information on health care providers' quality of care in accordance with § 56-32-130(e).
  3. (c) [Deleted by 2018 amendment.]
  4. (d)
    1. (1) As required by HIPAA, the all payer claims database shall not publicly disclose any individually identifiable health information as defined in 45 CFR 160.103. Use of the all payer claims database shall be subject to restrictions required by HIPAA and other applicable privacy laws and policies. The all payer claims database shall be accessed only by staff or a designated entity authorized in writing by the commissioner of finance and administration to perform the analyses contemplated by this section. The commissioner shall develop procedures and safeguards to protect the integrity and confidentiality of any data contained in the all payer claims database.
    2. (2)
      1. (A)
        1. (i) The all payer claims database, summaries, source, or draft information used to construct or populate the all payer claims database, patient level claims data, reports derived from the all payer claims database, and other information submitted under this section, whether in electronic or paper form, shall not be considered a public record and shall not be open for inspection by members of the public under § 10-7-503(a)(1). The information contained in the all payer claims database shall be considered confidential and not subject to subpoena.
        2. (ii) The commissioner may promulgate rules to authorize the public release of reports derived from the information. Any release of reports shall not result in such information losing its confidentiality or cause it to be admissible, except in administrative proceedings authorized under the rules adopted by the commissioner.
      2. (B) The commissioner shall, through memoranda of understanding, allow the use of the all payer claims database by the department of finance and administration, the department of health, the department of mental health and substance abuse services, the department of disability and aging, and other departments of state government for the purposes listed in subdivision (b)(1).
      3. (C) Except for officials of the state or those officials' designees as permitted by subdivision (d)(1), nothing in this section shall be construed as permitting access to or discovery of the source or draft information used to construct or populate the all payer claims database.
  5. (e) The all payer claims database shall contain unique health care provider identifiers that may be used in public reports; provided, however, that no information that could reveal the identity of any patient from the all payer claims database shall be made available to the public. To ensure that individual patients are not identified, the following data shall not be included in any transmission by a group health plan or health insurance issuer to the state or designated entity for the all payer claims database or in any source or draft information used to construct or populate the all payer claims database:
    1. (1) Patient names;
    2. (2) Patient street addresses;
    3. (3) All elements of patient birth dates, except year of birth;
    4. (4) Patient telephone numbers;
    5. (5) Patient facsimile numbers;
    6. (6) Patient electronic mail addresses;
    7. (7) Patient social security numbers;
    8. (8) Medical record numbers;
    9. (9) Health plan beneficiary numbers;
    10. (10) Patient account numbers;
    11. (11) Patient certificate/license numbers;
    12. (12) Vehicle identifiers and serial numbers including license plate numbers;
    13. (13) Device identifiers and serial numbers;
    14. (14) Web universal resource locators (URLs);
    15. (15) Internet protocol (IP) address numbers;
    16. (16) Biometric identifiers including fingerprints, voiceprints, and genetic code;
    17. (17) Full-face photographic images and any comparable images; or
    18. (18) Any other unique patient identifying number, characteristic or code, except encrypted index numbers assigned prior to the transmission by group health plans or health insurance issuers to the state or designated entity for the purpose of linking procedures by patient; provided, that a patient's identity cannot be known from the encrypted index number.
  6. (f)
    1. (1)
      1. (A) No later than January 1, 2010, and every month thereafter, all group health plans and health insurance issuers shall provide electronic health insurance claims data for state residents to the commissioner or a designated entity authorized by the commissioner, in accordance with standards and procedures recommended by the Tennessee health information committee pursuant to subdivision (c)(2) and adopted by the commissioner by rule.
      2. (B) All group health plans and health insurance issuers shall provide additional information as the Tennessee health information committee recommends and the commissioner subsequently establishes by rule for the purpose of creating and maintaining an all payer claims database.
      3. (C) The Tennessee health information committee and the commissioner shall strive for standards and procedures that are the least burdensome for data submitters.
    2. (2) The collection, storage and release of health and health care data and statistical information that is subject to the federal requirements of HIPAA shall be governed by the rules adopted in 45 CFR parts 160 and 164.
    3. (3) All group health plans and health insurance issuers that collect the health employer data and information set (HEDIS) shall annually submit the HEDIS information to the commissioner in a form and in a manner prescribed by the National Committee for Quality Assurance (NCQA).
    4. (4) If any group health plan or health insurance issuer fails to submit required data to the commissioner on a timely basis, the commissioner may impose a civil penalty of up to one hundred dollars ($100) for each day of delay.
  7. (g) The commissioner, in the commissioner's discretion, may allow some group health plans and health insurance issuers to submit data on a quarterly basis. The commissioner may also establish by rule exceptions to the reporting requirements of this section for entities based upon an entity's size or amount of claims or other relevant factors deemed appropriate.
  8. (h)
    1. (1) The commissioner may, subject to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, promulgate rules and regulations for purposes of implementing this section. The commissioner is authorized to promulgate the initial rules as emergency rules pursuant to the Uniform Administrative Procedures Act prior to January 1, 2010, for the purpose of creating the all payer claims database.
    2. (2) The commissioner of finance and administration may, subject to the Uniform Administrative Procedures Act, promulgate rules and regulations concerning the operation of the all payer claims database and the distribution and use of information maintained or created thereby. The commissioner of finance and administration is authorized to promulgate the initial rules as emergency rules pursuant to the Uniform Administrative Procedures Act prior to January 1, 2010, for the purpose of creating the all payer claims database.
§ 56-2-126. Service contracts not to be construed as business of insurance.
  1. (a) The marketing, sale, offering for sale, issuance, making, proposing to make and administration of a service contract shall not be construed to be the business of insurance and shall be exempt from regulation as insurance pursuant to this title.
  2. (b)
    1. (1) For purposes of this section, “service contract” means a contract or agreement for a separately stated consideration for a specific duration to perform the service, repair, replacement or maintenance of property or indemnification for service, repair, replacement or maintenance, for the operational or structural failure due to a defect in materials, workmanship, or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances, including, but not limited to, towing, rental, road hazard and emergency road service. “Service contract” includes motor vehicle extended service contracts and agreements. Service contracts may provide for the service, repair, replacement, or maintenance of property for damage resulting from power surges and accidental damage from handling.
    2. (2)
      1. (A) For the purposes of this section, “service contract” also means a contract or agreement that provides one (1) or more of the following:
        1. (i) The repair or replacement of tires or wheels on a motor vehicle damaged as a result of coming into contact with road hazards;
        2. (ii) The removal of dents, dings, or creases on a motor vehicle that can be repaired using the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels, sanding, bonding, or painting;
        3. (iii) The repair of chips or cracks in, or the replacement of, motor vehicle windshields as a result of damage caused by road hazards; or
        4. (iv) The replacement of a motor vehicle key or key-fob in the event that the key or key-fob becomes inoperable or is lost or stolen.
      2. (B) For purposes of subdivision (b)(2)(A), “road hazard” means a hazard that is encountered while driving a motor vehicle, which may include potholes, rocks, wood debris, metal parts, glass, plastic, curbs, or composite scraps.
  3. (c) A contract excluded from the definition of a “pre-need funeral contract” pursuant to § 62-5-403(9)(C) is not a contract of insurance within the meaning of this title.
Part 2 Kinds of Insurance
§ 56-2-201. Definitions of kinds of insurance.
  1. Kinds of insurance are defined as follows:
    1. (1) “Accident and health insurance” means insurance against bodily injury, disablement or death, by accident or accidental means, or the expense of bodily injury, disablement or death, against disablement or expense resulting from sickness, and every insurance pertaining thereto; providing for the mental and emotional welfare of an individual and members of the individual's family by defraying the cost of legal services; or providing aggregate or excess stop-loss coverage in connection with employee welfare benefit plans, managed care organizations participating in commercial plans or the TennCare program, or both, health maintenance organizations, long-term care facilities, physician-hospital organizations as defined in § 56-32-102 and provider aggregate or per-patient stop-loss protection insurance coverage as authorized by § 56-32-104;
    2. (2) “Casualty insurance” includes vehicle insurance, disability insurance, and in addition is:
      1. (A) “Boiler insurance,” which is insurance against any liability and loss or damage to property resulting from accidents to or explosion of boilers, pipes, pressure containers, machinery, or apparatus, and to make inspection of and issue certificates of inspection upon boilers, machinery and apparatus of any kind, whether or not insured;
      2. (B) “Burglary and theft insurance,” which is insurance against loss or damage by burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation or wrongful conversion, disposal or concealment, or from any attempt of burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation or wrongful conversion, disposal or concealment; also insurance against loss of or damage to moneys, coins, bullion, securities, notes, drafts, acceptances or any other valuable papers or documents, resulting from any cause, except while in the custody or possession of and being transported by any carrier for hire or in the mail;
      3. (C) “Collision insurance,” which is insurance against loss of or damage to any property of the insured resulting from collision of any other object with the property, but not including collision to or by elevators, or to or by vessels, craft, piers or other instrumentalities of ocean or inland navigation;
      4. (D) “Credit insurance,” which is insurance against loss or damage resulting from failure of debtors to pay their obligations to the insured;
      5. (E) “Elevator insurance,” which is insurance against loss or damage to any property of the insured resulting from the ownership, maintenance or use of elevators, except loss or damage by fire, and to make inspection of and issue certificates of inspection on elevators;
      6. (F) “Glass insurance,” which is insurance against loss of or damage to glass and its appurtenances resulting from any cause;
      7. (G) “Liability insurance,” which is insurance against legal liability for the death, injury, or disability of any person, or for damage to property; and insurance of medical, hospital, surgical and funeral benefits to persons injured, regardless of legal liability of the insured, when issued as an incidental coverage with or supplemental to liability insurance;
      8. (H) “Livestock insurance,” which is insurance against loss of or damage to any domesticated or wild animal resulting from any cause;
      9. (I) “Personal property floater,” which is insurance of individuals, by an all-risk type of policy commonly known as the “personal property floater,” against any and all kinds of loss of or damage to, or loss of use of, any personal property other than merchandise;
      10. (J) “Professional liability insurance,” which is insurance against legal liability of the insured, and against loss, damage or expense incident to a claim of legal liability, and including any obligation of the insured to pay medical, hospital, surgical and funeral benefits to injured persons, regardless of legal liability of the insured, arising out of the death or injury of any person, or arising out of injury to the economic interest of any person as the result of negligence in rendering expert, fiduciary or professional service;
      11. (K) “Water insurance,” which is insurance against loss of or damage to any property caused by the breakage or leakage of sprinklers, water pipes and other apparatus, or by water entering through leaks or openings in buildings, other than flood waters;
      12. (L) “Workers' compensation and employer's liability insurance,” which is insurance of the obligations accepted by, imposed upon, or assumed by employers under law for death, disablement, or injury of employees; and
      13. (M) Insurance against any other kind of loss, damage, or liability properly the subject of insurance and not within any other kind or kinds of insurance as defined in this section, if the insurance is not disapproved by the commissioner as being contrary to law or public policy;
    3. (3) “Credit insurance” includes:
      1. (A) “Credit accident and health insurance,” which means that form of insurance under which a borrower of money or a purchaser of goods is indemnified in connection with a specific loan or credit transaction against loss of time resulting from accident or sickness; and
      2. (B) “Credit life insurance,” which means that form of insurance under which the life of a borrower of money or a purchaser of goods is insured in connection with a specified loan or credit transaction;
    4. (4) “Life insurance” means insurance on human lives and insurance appertaining to human lives or connected with human lives. For the purposes of this title, the transacting of life insurance includes the granting of annuities, both with and without a life or mortality contingency or element, and endowment benefits, additional benefits in the event of death by accident or accidental means, additional benefits in the event of the total and permanent disability of the insured, and optional modes of settlement of proceeds;
    5. (5)
      1. (A) “Property insurance” means insurance against loss of or damage to real or personal property of every kind and interest in the real or personal property, from any or all hazards or causes, and against loss consequential upon the loss or damage;
      2. (B) “Property insurance” includes, but is not limited to:
        1. (i) Insurance against loss or damage to property and loss of use and occupancy by fire, lightning, storm, flood, frost, freezing, snow, hail, ice, weather or climatic conditions, including excess or deficiency of moisture, rain or rising of the waters of the ocean or its tributaries, drought, insects, vermin, forces of nature, smoke, smudge, riot, riot attending strike, strikes, sabotage, civil commotion, vandalism or malicious mischief or caused by wrongful conversion, disposal or concealment of a motor vehicle or aircraft, whether or not handled under a conditional sales contract or subject to chattel mortgage, civil war, rebellion, insurrection, invasion, bombardment, military or usurped power, or by any order of civil authorities meant to prevent the spread of conflagration or epidemic or catastrophe, explosion with no fire ensuing, except explosion by steam boilers or flywheels, but there may be insured explosion of pressure vessels, not including steam boilers of more than fifteen pounds (15 lbs.) pressure, in buildings designed and used solely for residential purposes by not more than four (4) families, explosion of any kind originating outside the insured building, or outside the building containing the property insured, and explosion of pressure vessels that do not contain steam or that are not operated with steam coils or steam jackets;
        2. (ii) Insurance against loss or damage by insects or disease to farm crops or products, and loss of rental value of land used in producing the crops or products;
        3. (iii) Insurance against accidental injury to sprinklers, pumps, water pipes, elevator tanks and cylinders, steam pipes and radiators, plumbing and its fixtures, ventilating, refrigerating, heating, lighting or cooking apparatus, or their connections, or conduits or containers of any gas, fluid, or other substance, and against loss or damage to property of the insured caused by the breakage or leakage thereof, or by water, hail, rain, sleet or snow seeping or entering through water pipes, leaks or openings in buildings;
        4. (iv) Insurance against loss or damage caused by railroad equipment, motor vehicles, airplanes, seaplanes, dirigibles or other aircraft;
        5. (v) Insurance against loss of or damage to vessels, crafts, aircrafts, cars, automobiles and vehicles of every kind, as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidence of debt, valuable papers, bottomry and respondentia interests therein, in respect to, appertaining to or in connection with, any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the being assembled, packed, crated, baled, compressed or similarly prepared for shipment or during any delays, storage, transshipment incident thereto, including marine builder's risks and all personal property floater risks, and persons or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of the insurance, but not including life insurance or surety bonds, and precious stones, jewels, jewelry, gold, silver and other precious metals, whether used in business or trade, or otherwise, and whether in course of transportation or otherwise, and bridges, tunnels and other instrumentalities of transportation, and communication, excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage, unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and/or civil commotion, are the only hazards to be covered, and piers, wharves, docks and ships, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and/or civil commotion, and other aids to navigation and transportation, including dry docks and marine railways, against all risks;
        6. (vi) “Marine protection and indemnity insurance,” which means insurance against, or against legal liability of the insured for, loss, damage or expense arising out of, or incident to, the ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person; and
        7. (vii) Vehicle insurance;
      3. (C) Matters set out in subdivision (5)(B) are not deemed to limit the scope of property insurance as defined in subdivision (5)(A), nor shall the fact that certain coverages coming within the scope of property insurance, as defined in subdivision (5)(A), are also defined as part of another kind of insurance be deemed to limit the scope of the definition of property insurance or the right of a property insurer to provide the coverage;
    6. (6) “Surety insurance” includes:
      1. (A) Credit insurance;
      2. (B) “Fidelity insurance,” which is insurance guaranteeing the fidelity of persons holding positions of public or private trust;
      3. (C) Guaranteeing the performance of contracts, and guaranteeing and executing bonds, undertakings, and contracts of suretyship;
      4. (D) Indemnifying banks, bankers, brokers, financial or moneyed corporations or associations or other persons against loss, resulting from any cause, of bills of exchange, notes, bonds, securities, evidences of debts, deeds, mortgages, warehouse receipts, or other valuable papers, documents, money, precious metals and articles made from precious metals, jewelry, watches, necklaces, bracelets, gems, precious and semiprecious stones, including any loss while the items are being transported in armored motor vehicles, or by messenger, but not including any other risks of transportation or navigation; also against loss or damage to the insured's premises, or to the insured furnishings, fixtures, equipment, safes and vaults in safes, caused by burglary, robbery, theft, vandalism or malicious mischief, or any attempt of burglary, robbery, theft, vandalism or malicious mischief; and
      5. (E) Insurance that guarantees the performance of any debt obligation of a public or private corporation; and
    7. (7)
      1. (A) “Vehicle insurance” means insurance against loss of or damage to any land vehicle or aircraft or any draft or riding animal or to property while contained therein or thereon, or being loaded or unloaded therein or therefrom, and against any loss, expense or liability for loss or damage to persons or property resulting from or incident to ownership, maintenance, or use of the vehicle or aircraft or animal;
      2. (B) Insurance against accidental death or accidental injury to individuals, including the named insured, while in, entering, alighting from, adjusting, repairing, cranking, or caused by being struck by a vehicle, aircraft, or draft or riding animal, if the insurance is issued as part of insurance on the vehicle, aircraft, or draft or riding animal, shall be deemed to be vehicle insurance.
§ 56-2-202. Kinds of property insurance authorized.
  1. (a) The company has the power generally to insure against loss by fire, earthquakes, storms, floods, explosions, except the explosions of the kind contemplated in § 56-19-108(5), riots, civil commotions, and any and all other damages on all kinds and species of property.
  2. (b) This section shall apply to every insurance corporation heretofore or hereafter organized under the laws of this state.
  3. (c) All policies of insurance heretofore issued by insurance corporations organized under the laws of this state insuring against loss from any cause included in the authorization in subsection (a) are validated, insofar as the corporation was without specific charter power to insure against those losses.
§ 56-2-203. Life insurance — Annuity or contract loans — Trusts accepted and executed.
  1. The company has the further right to insure the lives of persons, and engage in the general business of life insurance, and, coupled with that right, the right to grant and sell annuity, or contract loans based on life annuity, with benefit of survivorship, and accept and execute all legal trusts that may be confided to it.
§ 56-2-204. Casualty, accident, sickness, theft and marine insurance.
  1. The company also has the power to insure:
    1. (1) Against all accidents:
      1. (A) To property in transit; and
      2. (B) To persons traveling or otherwise;
    2. (2) Against disabilities to persons by disease or sickness, or other bodily infirmities;
    3. (3) Against thefts of property;
    4. (4) Ships, steamboats, and other craft; and
    5. (5) Freight and sailors' wages, including all marine risks.
§ 56-2-205. Insurance company may exercise one or all branches of authorized business.
  1. The corporation may, at its option, exercise one (1) or more or all of the branches of business in which it is authorized to engage.
§ 56-2-206. Companies on Lloyd's plan authorized to do business.
  1. (a) Associations of individuals, citizens of the United States, whether organized within this state or elsewhere within the United States, formed on the plan known as Lloyd's, whereby each associate underwriter becomes liable for a proportionate part of the whole amount insured by policy, may be authorized to transact insurance other than life in this state, in like manner and upon the same terms and conditions as are required of and imposed upon insurance companies of the United States, or one (1) of the states.
  2. (b) All Lloyd's, whether organized within this state or elsewhere in the United States, not having an actual, paid-up cash capital, shall make the same deposit, and upon the same terms and conditions as is required by § 56-2-405 of foreign insurance companies incorporated or associated under the laws of any government or state other than the United States or one (1) of the states.
§ 56-2-207. Reinsurance contracts — Liability of ceding and assuming insurers.
  1. (a)
    1. (1) Every insurer authorized to do an insurance, surety or bonding business in this state, called the “ceding insurer” in this title, may, subject to the limitations of this section, reinsure its risks and policy liabilities in any other insurer, called the “assuming insurer” in this title, with the effects prescribed in this section; but no prohibition or limitation contained in this section shall invalidate the contract or reinsurance as between the parties.
    2. (2) No credit shall be allowed, as an admitted asset or as a deduction from liability, to any ceding insurer for reinsurance made, ceded, renewed, or otherwise becoming effective after June 12, 1947, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contract or contracts reinsured without diminution, because of the insolvency of the ceding insurer nor unless, under the contract or contracts of reinsurance, the liability for the reinsurance is assumed by the assuming insurer or insurers as of the same effective date.
    3. (3) The reinsurance agreement may provide that the liquidator or receiver or statutory successor of an insolvent ceding insurer shall give written notice of the pendency of a claim against the insolvent ceding insurer on the policy or bond reinsured, within a reasonable time after the claim is filed in the insolvency proceeding and that during the pendency of the claim, any assuming insurer may investigate the claim and interpose, at its own expense, in the proceeding where the claim is to be adjudicated, any defense or defenses that it may deem available to the ceding company or its liquidator or receiver or statutory successor.
    4. (4) The expense thus incurred by the assuming insurer shall be chargeable, subject to court approval, against the insolvent ceding insurer as part of the expense of liquidation to the extent of a proportionate share of the benefit, which may accrue to the ceding insurer, solely as a result of the defense undertaken by the assuming insurer.
  2. (b) Where two (2) or more assuming insurers are involved in the same claim and a majority in interest elect to interpose defense to the claim, the expense shall be apportioned in accordance with the terms of the reinsurance agreement, as though the expense had been incurred by the ceding company.
  3. (c) Notwithstanding anything in this section to the contrary, a risk retention group may not reinsure its risks in another risk retention group unless all of the members of the ceding risk retention group are eligible for membership in the assuming risk retention group.
§ 56-2-208. Credit for reinsurance — Reduction from liability for reinsurance.
  1. (a) The purpose of §§ 56-2-207, 56-2-208, and 56-2-209 is to protect the interest of the insureds, claimants, ceding insurers, assuming insurers and the public generally. It is the intent of the general assembly to ensure adequate regulation of insurers and reinsurers and adequate protection for those to whom insurers and reinsurers owe obligations. Upon the insolvency of a non-United States insurer or reinsurer that provides security to fund its United States obligations in accordance with §§ 56-2-207, 56-2-208 and 56-2-209, the assets representing the security shall be maintained in the United States and claims shall be filed with and valued by the state insurance commissioner with regulatory oversight, and the assets shall be distributed, in accordance with the insurance laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic United States insurance companies. The general assembly declares that the matters contained in §§ 56-2-207, 56-2-208, and 56-2-209 are fundamental to the business of insurance in accordance with 15 U.S.C. §§ 1011 and 1012.
  2. (b)
    1. (1)
      1. (A) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a reduction from liability on account of reinsurance ceded only when the insurer meets one (1) or more of the requirements set out in subdivisions (b)(2)-(8). However, the commissioner may adopt, by rule pursuant to § 56-2-209(g), specific additional requirements relating to or setting forth:
        1. (i) The valuation of assets or reserve credits;
        2. (ii) The amount and forms of security supporting reinsurance arrangements described in § 56-2-209(g); and
        3. (iii) The circumstances pursuant to which credit will be reduced or eliminated.
      2. (B) Credit shall be allowed under subdivision (b)(2), (b)(3), or (b)(4) only in respect to cessions of those kinds or classes of business which the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile or, in the case of the United States branch of a non-United States assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under subdivision (b)(4) or (b)(5) only if the applicable requirements of subdivision (b)(9) have been satisfied.
    2. (2) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state.
    3. (3) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the commissioner as a reinsurer in this state. In order to be eligible for accreditation, a reinsurer must:
      1. (A) File with the commissioner evidence of its submission to this state's jurisdiction;
      2. (B) Submit to this state's authority to examine its books and records;
      3. (C) Be licensed to transact insurance or reinsurance in at least one (1) state, or in the case of a United States branch of a non-United States assuming insurer, is entered through and licensed to transact insurance or reinsurance in at least one (1) state;
      4. (D) File annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement; and
      5. (E) Demonstrate to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount that is not less than twenty million dollars ($20,000,000) and its accreditation has not been denied by the commissioner within ninety (90) days after submission of its application.
    4. (4) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled and licensed in, or in the case of a United States branch of a non-United States assuming insurer, is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this title, and the assuming insurer or United States branch of a non-United States assuming insurer:
      1. (A) Maintains a surplus as regards policyholders in an amount of not less than twenty million dollars ($20,000,000); provided, that the requirement in this subdivision (b)(4)(A) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system; and
      2. (B) Submits to the authority of this state to examine its books and records.
    5. (5)
      1. (A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution, as defined in § 56-2-209(d), for the payment of the valid claims of its United States ceding insurers, their assigns and successors in interest. To enable the commissioner to determine the sufficiency of the trust fund, the assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on the National Association of Insurance Commissioners (NAIC) annual statement form by licensed insurers. The assuming insurer shall submit to an examination of its books and records by the commissioner and bear the expense of such examination.
      2. (B) Credit for reinsurance shall not be granted under this subdivision (b)(5) unless the form of the trust and any amendments to the trust have been approved by:
        1. (i) The commissioner of the state where the trust is domiciled; or
        2. (ii) The commissioner of another state that, pursuant to the terms of the trust instrument, has accepted principal regulatory oversight of the trust.
      3. (C) The following requirements apply to the following categories of assuming insurer:
        1. (i) The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars ($20,000,000), except as provided in subdivision (b)(5)(C)(ii);
        2. (ii) At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three (3) full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including, when applicable, the lines of business involved, the stability of the incurred loss estimates and the effect of surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty percent (30%) of the assuming insurer's liabilities attributable to reinsurance ceded by the United States ceding insurers covered by the trust;
        3. (iii)
          1. (a) In the case of a group including incorporated and individual unincorporated underwriters:
            1. (1) For reinsurance ceded under reinsurance agreements with an inception, amendment or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several liabilities attributable to business ceded by United States domiciled ceding insurers to any underwriter of the group;
            2. (2) For reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed on or after that date, notwithstanding §§ 56-2-207, 56-2-208, and 56-2-209, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States; and
            3. (3) In addition to the trusts set out in this subdivision (b)(5)(C)(iii)(<em>a</em>)(<em>3</em>), the group shall maintain in trust a trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of United States domiciled ceding insurers of any member of the group for all years of account; and
          2. (b) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group's domiciliary regulator as are the unincorporated members; and
          3. (c) Within ninety (90) days after its financial statements are due to be filed with the group's domiciliary regulator, the group shall provide to the commissioner an annual certification by the group's domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the group; and
        4. (iv) In the case of a group of incorporated insurers under common administration, the group shall:
          1. (a) Have continuously transacted an insurance business outside the United States for at least three (3) years immediately prior to making application for accreditation;
          2. (b) Maintain aggregate policyholders surplus of ten billion dollars ($10,000,000,000);
          3. (c) Maintain a trust fund in an amount not less than the group's several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of the group;
          4. (d) Maintain a joint trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of United States domiciled ceding insurers of any member of the group as additional security for the liabilities; and
          5. (e) Within ninety (90) days after its financial statements are due to be filed with the group's domiciliary regulator, make available to the commissioner an annual certification of each underwriter member's solvency by the member's domiciliary regulator and financial statements of each underwriter member of the group prepared by its independent public accountant.
      4. (D) The form of the trust and any trust amendments also shall be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in its trustees for the benefit of the assuming insurer's United States ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner.
      5. (E) The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. No later than February 28 of each year, the trustee of the trust shall report to the commissioner in writing the balance of the trust and list the trust's investments at the preceding year end and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire prior to the following December 31.
    6. (6)
      1. (A)
        1. (i) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the commissioner as a reinsurer in this state and secures its obligations in accordance with the requirements of this subdivision (b)(6).
        2. (ii) Any information submitted by an assuming insurer who is applying for certification as a reinsurer pursuant to subdivision (b)(6)(A)(i) and any information submitted to the commissioner pursuant to this section or any rule promulgated under this section by an assuming insurer who has been certified as a reinsurer pursuant to subdivision (b)(6)(A)(i) is confidential by law, is not open for inspection by members of the public under § 10-7-503 or § 56-1-602, is not subject to subpoena, and is not subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties and may share the documents, materials, or other information in accordance with the procedures set forth in § 56-11-108(c)-(f).
      2. (B) In order to be eligible for certification, the assuming insurer shall meet the following requirements:
        1. (i) The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to subdivision (b)(6)(D);
        2. (ii) The assuming insurer must maintain a minimum capital and surplus, or its equivalent, in an amount to be determined by the commissioner pursuant to rules promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5;
        3. (iii) The assuming insurer must maintain financial strength ratings from two (2) or more rating agencies deemed acceptable by the commissioner pursuant to rules promulgated in accordance with the Uniform Administrative Procedures Act;
        4. (iv) The assuming insurer must agree to submit to the jurisdiction of this state, appoint the commissioner as its agent for service of process in this state, and agree to provide security for one hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment;
        5. (v) The assuming insurer must agree to meet applicable information filing requirements as determined by the commissioner, both with respect to an initial application for certification and on an ongoing basis; and
        6. (vi) The assuming insurer must satisfy any other requirements for certification deemed relevant by the commissioner.
      3. (C) An association including incorporated and individual unincorporated underwriters may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying requirements of subdivision (b)(6)(B):
        1. (i) The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents (net of liabilities) of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in an amount determined by the commissioner to provide adequate protection;
        2. (ii) The incorporated members of the association shall not be engaged in any business other than the underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association's domiciliary regulator as are the unincorporated members; and
        3. (iii) Within ninety (90) days after its financial statements are due to be filed with the association's domiciliary regulator, the association shall provide to the commissioner an annual certification by the association's domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association.
      4. (D)
        1. (i) The commissioner shall create and publish a list of qualified jurisdictions, under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the commissioner as a certified reinsurer.
        2. (ii) In order to determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction must agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction does not adequately and promptly enforce final United States judgments and arbitration awards. Additional factors may be considered at the commissioner's discretion.
        3. (iii) A list of qualified jurisdictions shall be published through the NAIC committee process. The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the commissioner shall provide thoroughly documented justification in accordance with the criteria established in rules promulgated in accordance with the Uniform Administrative Procedures Act.
        4. (iv) United States jurisdictions that meet the requirement for accreditation under the NAIC financial standards and accreditation program shall be recognized as qualified jurisdictions.
        5. (v) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, the commissioner has the discretion to suspend the reinsurer's certification indefinitely, in lieu of revocation.
      5. (E) The commissioner shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the commissioner pursuant to rules promulgated in accordance with the Uniform Administrative Procedures Act. The commissioner shall publish a list of all certified reinsurers and their ratings.
      6. (F)
        1. (i) A certified reinsurer shall secure obligations assumed from the United States ceding insurers under this subdivision (b)(6) at a level consistent with its ratings, as specified in rules promulgated by the commissioner in accordance with the Uniform Administrative Procedures Act.
        2. (ii) In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the commissioner and consistent with § 56-2-209, or in a multi-beneficiary trust in accordance with subdivision (b)(5), except as otherwise provided in this subdivision (b)(6).
        3. (iii) If a certified reinsurer maintains a trust to fully secure its obligations subject to subdivision (b)(5), and chooses to secure its obligations incurred as a certified reinsurer in the form of a multi-beneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subdivision (b)(6) or comparable laws of other United States jurisdictions and for its obligations subject to subdivision (b)(5). It shall be a condition to grant the certification under this subdivision (b)(6) that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account.
        4. (iv) The minimum trusteed surplus requirements provided in subdivision (b)(5) are not applicable to a multi-beneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subdivision (b)(6), except that such trust shall maintain a minimum trusteed surplus of ten million dollars ($10,000,000).
        5. (v) With respect to obligations incurred by a certified reinsurer under this subdivision (b)(6), if the security is insufficient, the commissioner shall reduce the allowable credit by an amount proportionate to the deficiency, and has the discretion to impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer's obligations will not be paid in full when due.
        6. (vi)
          1. (a) For purposes of this subdivision (b)(6), a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure one hundred percent (100%) of its obligations.
          2. (b) As used in this subdivision (b)(6), “terminated” refers to revocation, suspension, voluntary surrender, or inactive status.
          3. (c) If the commissioner continues to assign a higher rating as permitted by other provisions of this section, this subdivision (b)(6)(F)(vi) does not apply to a certified reinsurer in active status or to a reinsurer whose certification has been suspended.
      7. (G) If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, the commissioner has the discretion to defer to that jurisdiction's certification, and has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in this state.
      8. (H) A certified reinsurer that ceases to assume a new business in this state may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subdivision (b)(6), and the commissioner shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.
    7. (7) Credits shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of any of subdivisions (b)(2)-(6), but only with respect to the insurance of risks located in jurisdictions where the reinsurance is required by applicable law, rule, or regulation of that jurisdiction.
    8. (8)
      1. (A) For purposes of this subdivision (b)(8):
        1. (i) “Covered agreement” means an agreement:
          1. (a) Entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (31 U.S.C. §§ 313 and 314);
          2. (b) That is currently in effect or in a period of provisional application; and
          3. (c) That addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state, or for allowing the ceding insurer to recognize credit for reinsurance; and
        2. (ii) “Reciprocal jurisdiction” means a jurisdiction that satisfies one (1) of the following criteria:
          1. (a) A non-U.S. jurisdiction that is subject to an in-force covered agreement to which the United States is a party or, in the case of a covered agreement between the United States and the European Union, is a member state of the European Union;
          2. (b) A U.S. jurisdiction that meets the requirements for accreditation under the National Association of Insurance Commissioners' financial standards and accreditation program; or
          3. (c) A qualified jurisdiction, as determined by the commissioner pursuant to subdivision (b)(6)(D), that does not meet the criteria of subdivisions (b)(8)(B)(i)<em>(a)(1)</em> or <em>(2)</em>, and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner by rule.
      2. (B)
        1. (i) Credit is allowed when the reinsurance is ceded to an assuming insurer that satisfies each of the following conditions:
          1. (a) The assuming insurer:
            1. (1) Has its head office in, or is domiciled in, a reciprocal jurisdiction; and
            2. (2) Is licensed in a reciprocal jurisdiction;
          2. (b) The assuming insurer has and maintains, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of the assuming insurer's domiciliary jurisdiction, in an amount set by the commissioner by rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, then the assuming insurer must have and maintain, on an ongoing basis, minimum capital and surplus equivalents (net of liabilities), calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts set by the commissioner by rule;
          3. (c) The assuming insurer has and maintains, on an ongoing basis, the minimum solvency or capital ratio, as applicable, set by the commissioner by rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, then the assuming insurer must have and maintain, on an ongoing basis, the minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is licensed;
          4. (d) The assuming insurer agrees to provide adequate assurance to the commissioner, in a form specified by the commissioner by rule, that:
            1. (1) The assuming insurer will provide prompt written notice and explanation to the commissioner if the assuming insurer falls below the minimum requirements of subdivisions (b)(8)(B)(i)(b) and (c), or if any regulatory action is taken against the assuming insurer for noncompliance with applicable law;
            2. (2) The assuming insurer consents in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may require an assuming insurer to include consent to service of process in each reinsurance agreement. This subdivision (b)(8)(B)(i)(d)(2) does not limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent those agreements are unenforceable under applicable insolvency or delinquency laws;
            3. (3) The assuming insurer consents in writing to pay, wherever enforcement is sought, any final judgment obtained by a ceding insurer or its legal successor that is enforceable in the jurisdiction where the judgment was obtained;
            4. (4) Each reinsurance agreement includes a provision requiring the assuming insurer to provide security in an amount equal to one hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate; and
            5. (5) The assuming insurer confirms that it is not presently participating in any solvent scheme of arrangement involving this state's ceding insurers, and, if the assuming insurer enters into a solvent scheme of arrangement, agrees to notify the ceding insurer and the commissioner and to provide security in an amount equal to one hundred percent (100%) of the assuming insurer's liabilities to the ceding insurer, which must be in a form consistent with subdivision (b)(6), § 56-2-209, and any rules promulgated by the commissioner;
          5. (e) The assuming insurer or its legal successor provides to the commissioner, upon request, on behalf of itself and any legal predecessors, certain documentation specified by the commissioner by rule;
          6. (f) The assuming insurer maintains a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set by rule; and
          7. (g) The assuming insurer's supervisory authority confirms to the commissioner on an annual basis that, as of the preceding December 31 or the annual date on which that information is statutorily reported to the reciprocal jurisdiction, the assuming insurer is in compliance with the requirements set forth in subdivisions (b)(8)(B)<em>(i)(b)</em> and <em>(c)</em>.
        2. (ii) This subdivision (b)(8)(B) does not preclude the assuming insurer from providing the commissioner with information on a voluntary basis.
      3. (C)
        1. (i) The commissioner shall timely create and publish a list of reciprocal jurisdictions.
        2. (ii) The commissioner shall include other jurisdictions published through the National Association of Insurance Commissioners' committee process on the list of reciprocal jurisdictions. The commissioner may also approve a jurisdiction that does not appear on the National Association of Insurance Commissioners' list of reciprocal jurisdictions in accordance with criteria specified by the commissioner through the promulgation of rules.
        3. (iii) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions, in accordance with a process specified by the commissioner by rule, if the commissioner determines that the jurisdiction no longer meets the criteria for a reciprocal jurisdiction. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer that has its home office or domicile in that jurisdiction is allowed, if otherwise allowed pursuant to this section, § 56-2-207, and § 56-2-209.
      4. (D) The commissioner shall timely create and publish a list of assuming insurers that satisfy the conditions in this subdivision (b)(8) and to which cessions are granted credit in accordance with this subdivision (b)(8). The commissioner may add an assuming insurer to this list if a jurisdiction accredited by the National Association of Insurance Commissioners adds the assuming insurer to a list of assuming insurers that satisfy the conditions in this subdivision (b)(8) or if, upon initial eligibility, the assuming insurer submits to the commissioner the information required under subdivision (b)(8)(B)(iv) and complies with any additional requirements that the commissioner imposes by rule, except to the extent that the rules conflict with an applicable covered agreement.
      5. (E)
        1. (i) If the commissioner determines that an assuming insurer no longer meets one (1) or more of the requirements under this subdivision (b)(8), then the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subdivision (b)(8) in accordance with procedures established by rule.
        2. (ii) If the commissioner suspends an assuming insurer's eligibility, then no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit, except to the extent that the assuming insurer's obligations under the contract are secured in accordance with § 56-2-209.
        3. (iii) If the commissioner revokes an assuming insurer's eligibility, then no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the commissioner and in accordance with § 56-2-209.
      6. (F) If subject to a legal process of rehabilitation, liquidation, or conservation, the ceding insurer or its representative may seek and, if determined appropriate by the court in which the proceedings are pending, obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.
      7. (G) This subdivision (b)(8) does not limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this section, § 56-2-207, § 56-2-209, or other applicable law.
      8. (H)
        1. (i) Credit taken under this subdivision (b)(8) applies only to reinsurance agreements entered into, amended, or renewed on or after July 1, 2021, and only with respect to losses incurred and reserves reported on or after the later of:
          1. (a) The date on which the assuming insurer meets all eligibility requirements pursuant to subdivision (b)(8)(B); or
          2. (b) The effective date of the new reinsurance agreement, amendment, or renewal.
        2. (ii) This subdivision (b)(8)(H) does not alter or impair a ceding insurer's right to take credit for reinsurance, to the extent that credit is not available under this subdivision (b)(8), if the reinsurance qualifies for credit under this section, § 56-2-207, and § 56-2-209.
        3. (iii) This subdivision (b)(8) does not authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement, except as permitted by the terms of the agreement.
        4. (iv) This subdivision (b)(8) does not limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate the agreement.
    9. (9)
      1. (A) If the assuming insurer is not licensed, accredited or certified to transact insurance or reinsurance in this state, the credit permitted by subdivisions (b)(4) and (5) shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:
        1. (i) That, in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, shall comply with all requirements necessary to give the court jurisdiction, and shall abide by the final judgment of the court or of any appellate court in the event of an appeal; and
        2. (ii) To designate the commissioner or a designated attorney to receive service of process in any action, suit or proceeding instituted by or on behalf of the ceding company.
      2. (B) This subdivision (b)(9) does not prohibit or otherwise prevent the parties to a reinsurance agreement from arbitrating disputes, if such an obligation is created in the agreement between the parties.
    10. (10) If the assuming insurer does not meet the requirements of subdivision (b)(2), (b)(3), or (b)(4), the credit permitted by subdivision (b)(5) or (b)(6) shall not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions:
      1. (A) Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by subdivision (b)(5)(C), or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the commissioner with regulatory oversight all of the assets of the trust fund;
      2. (B) The assets shall be distributed by and claims shall be filed with and valued by the commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies;
      3. (C) If the commissioner with regulatory oversight determines that assets of the trust fund or any part thereof are not necessary to satisfy the claims of the United States ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement; and
      4. (D) The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this subdivision (b)(10).
    11. (11)
      1. (A) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the commissioner may suspend or revoke the reinsurer's accreditation or certification.
      2. (B) The commissioner must give the reinsurer notice and an opportunity for hearing in accordance with the Uniform Administrative Procedures Act. The suspension or revocation may not take effect until after the commissioner's order or hearing, unless:
        1. (i) The reinsurer waives its right to hearing;
        2. (ii) The commissioner's order is based on regulatory action by the reinsurer's domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subdivision (b)(6)(F); or
        3. (iii) The commissioner finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the commissioner's action.
      3. (C) While a reinsurer's accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit, except to the extent that the reinsurer's obligations under the contract are secured in accordance with § 56-2-209. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation, except to the extent that the reinsurer's obligations under the contract are secured in accordance with subdivision (b)(6)(E) or § 56-2-209.
    12. (12) Concentration Risk.
      1. (A) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the commissioner within thirty (30) days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceeds fifty percent (50%) of the domestic ceding insurer's last reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, are likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
      2. (B) A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the commissioner within thirty (30) days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than twenty percent (20%) of the ceding insurer's gross written premium in the prior calendar year, or after it has determined that the reinsurance ceded to any single assuming insurer, or group of affiliated insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
§ 56-2-209. Assuming insurers — Determination of financial condition.
  1. (a)
    1. (1) An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of § 56-2-208 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer. However, the commissioner may adopt by rule pursuant to subsection (g) specific additional requirements relating to or setting forth:
      1. (A) The valuation of assets or reserve credits;
      2. (B) The amount and forms of security supporting reinsurance arrangements described in subsection (g); and
      3. (C) The circumstances pursuant to which credit will be reduced or eliminated.
    2. (2) The reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations under the contract, if the security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer, or, in the case of a trust, held in a qualified United States financial institution. This security may be in the form of:
      1. (A) Cash;
      2. (B) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office, and qualifying as admitted assets;
      3. (C) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States financial institution no later than December 31 of the year for which filing is being made, and in the possession of the ceding company on or before the filing date of its annual statement; or
      4. (D) Any other form of security acceptable to the commissioner.
  2. (b) Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance, or confirmation, shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs.
  3. (c) For purposes of subdivision (a)(3), a “qualified United States financial institution” means an institution that:
    1. (1) Is organized or licensed, in the case of a United States office of a foreign banking organization, under the laws of the United States or any state in the United States;
    2. (2) Is regulated, supervised and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and
    3. (3) Has been determined by either the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet the standards of financial condition and standing considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
  4. (d) For purposes of those provisions of this chapter specifying those institutions that are eligible to act as a fiduciary of a trust, “qualified United States financial institution” means an institution that:
    1. (1) Is organized or licensed, in the case of a United States branch or agency office of a foreign banking organization, under the laws of the United States or any state and has been granted authority to operate with fiduciary powers; and
    2. (2) Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.
  5. (e) The commissioner may adopt rules and regulations implementing this section and § 56-2-208. The rules and regulations shall be promulgated pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
  6. (f) This section and § 56-2-208 apply to all cessions after July 1, 1993, under reinsurance agreements that have had an inception, anniversary, or renewal date not less than six (6) months after July 1, 1993.
  7. (g)
    1. (1) The commissioner is further authorized to promulgate rules applicable to reinsurance arrangements described in this subdivision (g)(1) relating to:
      1. (A) Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits;
      2. (B) Universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period;
      3. (C) Variable annuities with guaranteed death or living benefits;
      4. (D) Long-term care insurance policies; or
      5. (E) Other life and health insurance and annuity products as to which the commissioner adopts regulatory requirements with respect to credit for reinsurance.
    2. (2) A rule promulgated pursuant to subdivision (g)(1)(A) or (g)(1)(B) may apply to any treaty containing:
      1. (A) Policies issued on or after January 1, 2015; or
      2. (B) Policies issued prior to January 1, 2015, if risk pertaining to such pre-2015 policies is ceded in connection with the treaty, in whole or in part, on or after January 1, 2015.
    3. (3) A rule promulgated pursuant to this subsection (g) may require the ceding insurer, in calculating the amounts or forms of security required to be held under rules promulgated under this authority, to use the Valuation Manual adopted by the National Association of Insurance Commissioners (NAIC) under Section 11B(1) of the NAIC Standard Valuation Law, including all amendments adopted by the NAIC and in effect on the date as of which the calculation is made, to the extent applicable.
    4. (4) A rule promulgated pursuant to this subsection (g) does not apply to cessions to an assuming insurer that:
      1. (A) Is certified in this state or certified in a minimum of five (5) other states; or
      2. (B) Maintains at least two hundred fifty million dollars ($250,000,000) in capital and surplus, determined in accordance with the NAIC Accounting Practices and Procedures Manual, including all amendments to such manual that are adopted by the NAIC, excluding the impact of any permitted or prescribed practices; and is:
        1. (i) Licensed in at least twenty-six (26) states; or
        2. (ii) Licensed in at least ten (10) states, and licensed or accredited in a total of at least thirty-five (35) states.
    5. (5) The authority to promulgate rules pursuant to this subsection (g) does not limit the commissioner's authority to adopt rules pursuant to subsection (e). All rules under this subsection (g) must be promulgated in accordance with the Uniform Administrative Procedures Act.
§ 56-2-210. Responsibilities and obligations of limited credit life and credit accident and health reinsurer.
  1. (a) As used in this section, “limited credit life and credit accident and health reinsurer” means a domestic credit life and credit accident and health reinsurer that:
    1. (1) Reinsures only credit life insurance or credit accident and health insurance as defined in § 56-2-201, or both, in the manner provided for in § 56-2-114(b);
    2. (2) Has been authorized by the commissioner to do so in Tennessee and is not so authorized in any other state; and
    3. (3) Secures all of its reinsurance reserve liabilities that have been assumed under a reinsurance agreement that has been approved by the commissioner with funds withheld or maintained in a trust fund that complies with §§ 56-2-207, 56-2-208 and 56-2-209 and in an amount that is not less than one hundred ten percent (110%) of the amount of the liabilities assumed.
  2. (b)
    1. (1) The responsibilities and obligations of a limited credit life and credit accident and health reinsurer under this title shall be modified as set out in this section. A limited credit life and credit accident and health reinsurer shall demonstrate its compliance with the requirements in subsection (a) in the annual statement filed with the commissioner for the preceding year and shall maintain assets to secure the liabilities in the percentage relationship at all times. In determining compliance with this requirement, the commissioner shall value securities in the manner prescribed in §§ 56-3-113 and 56-3-114, and shall take into account only the securities that constitute admitted assets under chapter 3, part 3 of this title, and § 56-1-405.
    2. (2) A company may not be a limited credit life and credit accident and health reinsurer during any period in which it is an affiliate of an insurer. In determining whether a company is an affiliate, tests provided for in § 56-11-101 shall be applied to determine a company's status.
  3. (c) Notwithstanding any contrary provision in this title, a limited credit life and credit accident and health reinsurer shall be excused from:
    1. (1) Filing personal financial statements to accompany insurance holding company forms under § 56-11-105;
    2. (2) Filing any audited financial statements pursuant to rules authorized by § 56-1-501(h);
    3. (3) Filing any risk-based capital reports under chapter 46 of this title;
    4. (4) Filing any management discussion and analysis;
    5. (5) Filing with respect to material transactions under §§ 56-10-301 — 56-10-303;
    6. (6) Filing any actuarial certification;
    7. (7) Any filing of its annual statement or quarterly statement with the National Association of Insurance Commissioners; and
    8. (8) Filing with respect to extraordinary dividends under § 56-11-106(b).
  4. (d) The commissioner is excused from any obligation to perform regular examination of a limited credit life and credit accident and health reinsurer under § 56-1-408, but shall retain the power to make an examination of any accounts, records, files, documents, and transactions pertaining to insurance of the limited credit life and credit disability reinsurer whenever the commissioner deems it prudent to do so under § 56-1-409.
  5. (e) A limited credit life and credit accident and health reinsurer shall file with the commissioner copies of all reinsurance agreements, including amendments to the agreements, to which the reinsurer is a party. The agreement or amendment shall not be effective until and unless the agreement or amendment is approved by the commissioner; provided, however, that the agreement or amendment shall be deemed approved if the commissioner does not disapprove the agreement or amendment in writing within thirty (30) days after the reinsurer files a copy of the agreement or amendment with the commissioner.
  6. (f) The commissioner may approve a merger in which a limited credit life and credit accident insurance company is a constituent party without holding the otherwise required hearing on a merger of a limited credit life and credit accident and health reinsurer with another entity, unless the requirement of a hearing under § 56-10-104(b) applies to another party to the merger.
  7. (g) The commissioner may permit an applicant to seek a certificate of authority pursuant to a simplified and abbreviated application form under which the company seeking authority from the commissioner to engage in the business of being a limited credit life and credit accident and health reinsurer may apply for a certificate of authority to engage in the business.
  8. (h) This section shall apply to all reports and documents required to be filed after December 31, 2000.
Part 3 Rules and Regulations
§ 56-2-301. Promulgation of rules and regulations.
  1. (a) The commissioner is authorized to promulgate rules and regulations not in conflict with this section and §§ 56-2-101, 56-2-103, 56-2-113 — 56-2-115, and 56-2-201 for the purpose of implementing those sections so as to regulate the writing of the various kinds and types of insurance provided for in those sections.
  2. (b) The commissioner is authorized to promulgate rules and regulations to allow for the filing of documents with the commissioner pursuant to this title through a designated filing depository.
  3. (c) Regulations promulgated pursuant to this section shall have the same force and effect of law.
§ 56-2-302. Notice of hearing on issuance of cease and desist order.
  1. Whenever the commissioner determines that a company, corporation, association, person, or entity of whatever nature is violating or is about to violate § 56-2-105, the commissioner may issue a notice of hearing and charges requiring the company, corporation, association, person, or entity of whatever nature to show cause why an order should not issue requiring the person or entity to cease and desist the unauthorized business of insurance in this state.
§ 56-2-303. Hearings.
  1. Any hearing conducted under this part shall be conducted pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
§ 56-2-304. Cease and desist orders.
  1. If the commissioner finds that public health, safety, or welfare imperatively requires emergency action, and incorporates a finding to that effect in an order, a summary cease and desist order may be issued pending proceedings for other actions under this part. These proceedings shall be promptly instituted and determined.
§ 56-2-305. Violations — Commissioner's orders — Penalties.
  1. (a) If, after providing notice consistent with the process established by § 4-5-320(c) and providing the opportunity for a contested case hearing held in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3, the commissioner finds that any insurer, person, or entity required to be licensed, permitted, or authorized by the division of insurance has violated any statute, rule or order, the commissioner may, at the commissioner's discretion, order:
    1. (1) The insurer, person, or entity to cease and desist from engaging in the act or practice giving rise to the violation;
    2. (2) Payment of a monetary penalty of not more than one thousand dollars ($1,000) for each violation, but not to exceed an aggregate penalty of one hundred thousand dollars ($100,000), unless the insurer, person, or entity knowingly violates a statute, rule or order, in which case the penalty shall not be more than twenty-five thousand dollars ($25,000) for each violation, not to exceed an aggregate penalty of two hundred fifty thousand dollars ($250,000). This subdivision (a)(2) shall not apply where a statute or rule specifically provides for other civil penalties for the violation. For purposes of this subdivision (a)(2), each day of continued violation shall constitute a separate violation; and
    3. (3) The suspension or revocation of the insurer’s, person’s, or entity's license.
  2. (b) In determining the amount of penalty to assess under this section, or in determining whether the violation was a knowing violation for the purpose of subdivision (a)(2), the commissioner shall consider any evidence relative to the following criteria:
    1. (1) Whether the insurer, person or entity could reasonably have interpreted its actions to be in compliance with the obligations required by a statute, rule or order;
    2. (2) Whether the amount imposed will be a substantial economic deterrent to the violator;
    3. (3) Whether the amount imposed would put the violator in a hazardous financial condition;
    4. (4) The circumstances leading to the violation;
    5. (5) The severity of the violation and the risk of harm to the public;
    6. (6) The economic benefits gained by the violator as a result of noncompliance;
    7. (7) The interest of the public; and
    8. (8) The insurer's, person's, or entity's efforts to cure the violation.
  3. (c) Notwithstanding the limitations set forth in subdivision (a)(2), no aggregate penalty limits shall apply to the following:
    1. (1) Failure to file audited statements required pursuant to § 56-1-501(h) and rules promulgated under § 56-1-501(h);
    2. (2) Failure to file quarterly financial statements as required by statute or regulation;
    3. (3) Failure to file actuarial opinions pursuant to § 56-1-501(d) and rules promulgated under § 56-1-501(d);
    4. (4) Failure to file annual reports pursuant to §§ 56-19-119, 56-28-111, 56-29-113, 56-30-117, 56-31-116, 56-43-108, and 56-44-104;
    5. (5) Failure to file a risk-based capital report pursuant to § 56-46-103; and
    6. (6) Violations of orders issued after a contested case hearing held in accordance with the Uniform Administrative Procedures and pursuant to subdivision (a)(1).
  4. (d) This section does not apply to individual or business entity insurance producers licensed pursuant to chapter 6, part 1 of this title.
  5. (e)
    1. (1) Notwithstanding any law to the contrary, civil penalties received under the authority of this section shall be utilized by the department, at the discretion of the commissioner, to:
      1. (A) Defray its expenses related to the liquidation of insurance companies as provided by chapter 9 of this title;
      2. (B) Promote consumer awareness of insurance; or
      3. (C) Provide training or educational opportunities to employees of the division of insurance.
    2. (2) Any subaccount currently used by the department for training and education may also be used for the promotion of consumer awareness.
  6. (f)
    1. (1) If, at any time following the certification of the vehicle insurance verification program under § 55-12-212, the commissioner of commerce and insurance finds that an automobile liability insurer, as defined in § 55-12-203, has intentionally violated § 56-7-1118, then the commissioner may, after providing the opportunity for a contested case hearing held in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, assess a civil penalty against the automobile liability insurer of up to two hundred fifty dollars ($250) for each day the insurer fails to comply with § 56-7-1118. The commissioner may excuse or reduce the civil penalty under this subdivision (f)(1) for good cause.
    2. (2) Until the certification of the program occurs, the commissioner shall not assess any civil penalty or convene a contested case hearing for an alleged violation of § 56-7-1118 by an automobile liability insurer.
Part 4 Foreign and Alien Insurance Companies
§ 56-2-401. Alien government controlled companies excluded — Definition.
  1. (a) Any insurance company or other insurance entity that is financially owned or financially controlled by any alien or foreign government outside the continental limits of the United States or the territories of the United States is prohibited from doing any kind of insurance business in this state.
  2. (b) For the purposes of this section and §§ 56-2-402 — 56-2-404, “alien or foreign government” means any foreign government or any state, province, municipality, or political subdivision of any foreign government, but does not apply to any insurance company organized under the laws of a foreign nation that is financially owned or financially controlled by the private citizens or private business interests of the foreign nation.
§ 56-2-402. Issuance of license to company controlled by foreign government prohibited.
  1. The commissioner is forbidden to grant a license to any insurance company or other insurance entity that is financially owned or financially controlled by any alien or foreign government outside the continental limits of the United States or the territories of the United States, or to authorize the company or entity to transact any kind of insurance business in this state.
§ 56-2-403. Penalty for violations.
  1. Any insurance company or other insurance entity that is financially owned or financially controlled by any alien or foreign government outside the continental limits of the United States or the territories of the United States, or any representative or agent of the company or entity, that violates §§ 56-2-401, 56-2-402, this section and § 56-2-404, commits a Class C misdemeanor.
§ 56-2-404. Foreign government controlled company as public nuisance — Injunction.
  1. Any violation of §§ 56-2-401 — 56-2-403 and this section by an insurance company or other insurance entity that is financially owned or financially controlled by any alien or foreign government outside the continental limits of the United States or the territories of the United States, or by any representative or agent of the company or entity, is declared to be a public nuisance, and the commissioner is authorized and empowered to enjoin the nuisance by injunctive proceedings in the chancery court in like manner as is provided by the general statutes pertaining to enjoining nuisances.
§ 56-2-405. Admission of companies of other countries — Deposits.
  1. (a) Any foreign company, if incorporated or associated under the laws of any government or state other than the United States, shall not be admitted until, besides complying with the conditions of §§ 56-2-101 — 56-2-103, 56-2-113 — 56-2-115, 56-2-201 and 56-2-301, it has made a deposit with the state treasurer, or with the financial officer of some other state of the United States, a sum of not less than two hundred thousand dollars ($200,000).
  2. (b) The deposit must be in exclusive trust for the benefit and security of all the company's policyholders and creditors in the United States, and may be made in bonds of this state or of the United States, or of some state in the United States, or other good securities satisfactory to the commissioner.
  3. (c) The deposit shall be in lieu of any other deposit required of life insurance companies incorporated under the laws of any government or state other than the United States.
§ 56-2-406. Trustees of companies of other countries.
  1. (a) Any admitted company of a foreign country may appoint trustees who are citizens of the United States, and approved by the commissioner, to hold funds in trust for the benefit of its policyholders and creditors in the United States.
  2. (b) These trustees shall be named by the directors of the company, and a certified copy of the record of the appointment of the trustees and of the deed of trust shall be filed in the office of the commissioner, who may examine the trustees and the assets in trust, and all books and papers relating to the trust, in the same manner that the commissioner may examine the officers, agents, assets, and affairs of insurance companies.
  3. (c) The funds held by the trustees, so far as the funds are in securities, money, or credits, admissible as sound assets in the financial accounts of insurance companies, shall, together with its deposits made in accordance with § 56-2-405, constitute the assets of the company as regards its policyholders and creditors in the United States.
§ 56-2-407. Revocation of authority of foreign companies.
  1. The authority of a foreign insurance company may be revoked:
    1. (1) If it violates or neglects to comply with any law obligatory upon it;
    2. (2) Whenever, in the opinion of the commissioner, its condition is unsound, or its assets above its liabilities exclusive of capital and inclusive of unearned premiums, as provided in §§ 56-1-402 — 56-1-405 [see the Compiler's Notes], are less than the amount of its original capital or required unimpaired funds; or
    3. (3) If any foreign company licensed to transact business in this state reinsures or accepts reinsurance on property located in this state for any company not authorized to transact the business of insurance in this state; provided, that § 56-1-102 does not apply to foreign marine policies.
§ 56-2-408. Licenses of foreign insurance companies expire on July 1.
  1. All licenses authorizing foreign insurance companies to transact their business in the state shall terminate or expire on July 1 next succeeding the date of their issuance, unless sooner revoked by the commissioner.
§ 56-2-409. Renewal of license of foreign fire or marine companies — Terms.
  1. Renewal of a license to transact the business of fire, fire marine, or marine insurance in this state, for companies or associations not incorporated under the laws of this state, shall only be issued after the secretary or manager of the company or association desiring to renew the license to do business in this state has first made oath that no policy or contract of insurance covering property located in the state has been issued, written, or placed during the twelve (12) months preceding, except by resident local agents of the company or association in the state, duly commissioned, and until and after the company or association has complied with all other laws of this state in respect to the admission of companies of other states and foreign countries.
§ 56-2-410. Revocation of license of fire or marine companies — Reinstatement.
  1. (a) If any fire, fire marine, or marine insurance company or association violates or fails to observe and comply with any or all of the provisions of § 56-2-409, this section and § 56-2-411 applicable to it, it immediately shall become the duty of the commissioner to investigate the company's or association's conduct, and if the commissioner is satisfied as to the guilt of the insurance company or association, it shall be the commissioner's duty to revoke the license of the company or association to transact business in this state, and the revocation shall continue for at least one (1) year from the date of revocation.
  2. (b) No insurance company or association whose authority to transact business in this state has been so revoked shall be again authorized or permitted to transact business until it has filed in the office of the commissioner a certificate, signed by its president or other chief officer, to the effect that the terms and obligations of § 56-2-409, this section and § 56-2-411 are accepted by it as a part of the condition of its right and authority to transact business in this state.
§ 56-2-411. Citizens procuring insurance with foreign companies — Liability for taxes.
  1. (a) Under §§ 56-2-409, 56-2-410, and this section are also included citizens of this state procuring and holding insurance contracts or policies on the types of coverage listed in § 56-2-201 upon property situated or located in this state in companies not authorized to transact business in this state.
  2. (b) The procuring or accepting policies or contracts of the insurance from unauthorized companies or associations makes every citizen of this state, including industrial insureds as defined in § 56-2-105(7), holding the contracts or policies liable for taxes, the same as if procured through a surplus lines agent. The taxes shall be paid at the same time, in the same manner, and at the same rate as the tax levied on surplus lines insurance in §§ 56-14-106 and 56-14-113.
§ 56-2-412. Retaliatory provisions — Dividing commissions between agents.
  1. (a) Whenever the laws of any other state of the United States require of insurance companies incorporated by or organized under the laws of this state, or the agents of the companies, any deposit of securities in such state for the protection of policyholders, or otherwise, greater than the amount required for similar purposes from similar companies of other states by the then existing laws of this state, then, in every such case, all companies of the states establishing an agency or agencies in this state shall be required to make the same deposit for a like purpose with the state treasurer and to pay into the state treasury the taxes, fines, penalties, license fees, or otherwise, an amount equal to the amount of the charges and payments imposed by law of such state upon companies of this state, and their agents.
  2. (b) Any commission received by a Tennessee resident agent may be shared with another resident agent or with a licensed nonresident insurance agent or broker; provided, that if the nonresident insurance agent or broker resides in, or is a licensed agent or broker in, a state that requires the retention of a stipulated percentage of the commission on risks placed in the state by nonresident agents or brokers, then and in that event the Tennessee resident agent shall require the same percentage of the commission as would be required if a Tennessee agent or broker placed similar insurance in the state of the residence of the nonresident insurance agent or broker; and provided further, that if the nonresident insurance agent or broker resides in a state, county or municipality that by statute or ordinance prohibits the division of commissions on insurance covering property or risks in the city, county or state of the nonresident agent or broker, then and in that event it shall be unlawful for the Tennessee resident agent or broker to pay the nonresident agent or broker any share or portion of the commission on insurance on property or risks in this state.
Part 5 Service of Process
§ 56-2-501. Service and acknowledgment of service of process against incorporated domestic insurance companies.
  1. (a) Every insurance company incorporated under the laws of this state shall, by a duly executed instrument, constitute and appoint the commissioner, the commissioner's deputy and their successors in office its true and lawful attorneys, upon whom all lawful processes in any action or legal proceeding against it may be served and who may acknowledge any such lawful processes.
  2. (b) Every insurance company incorporated under the laws of this state shall agree that any lawful process against it that may be served upon its attorneys or upon which they may acknowledge service, shall be of the same force and validity as if served on the company, and that the authority thereof shall continue in force irrevocably as long as any liability of the company remains outstanding.
  3. (c) Any process issued by any court of record in this state and acknowledged by or served upon the commissioner or the commissioner's deputy by the proper officer of the county in which the office of commissioner or deputy is located shall be deemed a sufficient process on the company. It is the duty of the commissioner and deputy, immediately after service of process, to forward by registered return receipt mail to the company an exact copy of the process.
  4. (d) A record of each service of process shall be kept in the office of the commissioner, showing the date of service, the name of the company on whose behalf service was acknowledged, the name of the plaintiff or complainant, the date the defendant is required to answer, the court issuing the process, and the county in which the suit is brought.
  5. (e) The power of attorney shall be filed and kept in the office of the commissioner.
§ 56-2-502. Service of process on foreign and alien companies — Definitions.
  1. As used in this section and §§ 56-2-503 and 56-2-504:
    1. (1) “Alien insurance company” means an insurance company organized under the laws of any country other than the United States or territory or insular possession of the United States or of the District of Columbia;
    2. (2) “Doing business in this state” by any foreign or alien insurance company means the doing in this state by the company of any act whatsoever, whether interstate or intrastate in nature, including the soliciting, making, or delivering of insurance contracts in this state, by an agent, mail or otherwise;
    3. (3) “Foreign insurance company” means an insurance company organized under the laws of any state of the United States, other than this state, or under the law of any territory or insular possession of the United States or the District of Columbia; and
    4. (4) “Insurance company” means an insurance or surety company, including mutual companies, and includes a corporation, company, partnership, association, social, fraternal or otherwise, order, individual or aggregation of individuals engaging in or proposing or attempting to engage in any kind of insurance or surety business, including the exchange of reciprocal or interinsurance contracts between individuals, partnerships and corporations.
§ 56-2-503. Commissioner as attorney for purpose of process.
  1. (a) Any foreign or alien insurance company, before doing business in this state, as defined in § 56-2-502, shall appoint the commissioner its true and lawful attorney as required by § 56-2-103(a)(3).
  2. (b) If the company does business in this state, as defined in § 56-2-502, without having appointed the commissioner its true and lawful attorney, as required in this part, it shall, by doing business in this state, be deemed to have thereby appointed the commissioner its true and lawful attorney for the purposes set forth in this part.
  3. (c) The requirements of this section shall be in addition to, and not in derogation of, any other law.
§ 56-2-504. Any lawful process may be served on commissioner or secretary of state — Requirements.
  1. (a) When the commissioner has been appointed or constituted attorney for a foreign or alien insurance company, either by power of attorney or by failure to comply with § 56-2-503, any lawful process against or notice to the company in any action or proceeding against it from any cause of action arising in the state may be served on the commissioner, and filing the power of attorney or doing business in the state shall be a signification of its agreement that the process or notice served shall be of the same legal force and validity as if served upon it in the state. In case of any action or proceeding instituted by or on behalf of the commissioner against or with reference to the company, process may be lawfully served on the secretary of state.
  2. (b) Service of process shall be made by leaving two (2) copies of the process or notice, together with a fee of fifteen dollars ($15.00), in the office of the commissioner, together with an affidavit giving the last known address of the defendant, and the service shall be sufficient if notice of the service, and a copy of the process or notice are forthwith sent by registered mail, with return receipt requested, or certified mail by the commissioner to the company at the last known address. An affidavit of the commissioner showing compliance with this subsection (b) shall be filed with the paper in the action or proceeding.
  3. (c) The court in which the action or proceeding is pending may order continuances necessary to afford the defendant reasonable opportunity to defend the action. No judgment shall be entered against the defendant under this section until at least thirty (30) days have elapsed after process or notice has been served on the commissioner.
  4. (d) The references in this section to the commissioner shall, in the case of any action or proceeding instituted by or on behalf of the commissioner, be deemed to refer to the secretary of state, and the duties and responsibilities imposed by this section shall, in such cases, be performed and discharged by the secretary of state.
§ 56-2-505. Unauthorized insurers doing business constitutes secretary of state as attorney for service of process.
  1. (a) Any act of entering into a contract of insurance as an insurer or transacting insurance business in this state, as set forth in § 56-2-107, by an unauthorized foreign or alien company, is equivalent to and constitutes an appointment by the company of the secretary of state to be its true and lawful attorney upon whom may be served all lawful process in any action or proceeding against it:
    1. (1) Arising out of a violation of § 56-2-105; or
    2. (2) To collect the taxes imposed in chapter 4 of this title.
  2. (b) The performance of any of the acts enumerated in § 56-2-107 is signification of the company's agreement that any such process against it that is so served is of the same legal force and validity as if served upon the company.
§ 56-2-506. Method of service — Notice to defendant — Filing with clerk.
  1. (a) Service of process shall be made by delivering and leaving with the secretary of state two (2) copies of the process.
  2. (b) The secretary of state shall forthwith mail by registered mail one (1) of the copies of the process to the company at its last known principal place of business, and shall keep a record of all process so served upon the secretary of state.
  3. (c) The service shall be sufficient service upon the company; provided, that notice of the service and a copy of the process are, within ten (10) days thereafter, sent by registered mail by or on behalf of the commissioner to the company at its last known principal place of business; and provided, further, that the receipt by the secretary of state and an affidavit of compliance with this section by or on behalf of the commissioner are filed with the clerk of the court in which the action or proceeding is pending on or before the return date of the process or within any further time that the court allows.
§ 56-2-507. Continuance may be granted — Motion to quash or set aside service.
  1. (a) The court in any action or proceeding in which service is made in the manner provided in § 56-2-506 may, in its discretion, order a postponement necessary to afford the company reasonable opportunity to defend the action or proceeding.
  2. (b) Nothing in this section is to be construed to prevent an unauthorized foreign or alien company from filing a motion to quash a writ or to set aside service of the motion made in the manner provided in § 56-2-506 on the ground that the unauthorized company has not done any of the acts referred to in § 56-2-107.
§ 56-2-508. Time allowed before judgment.
  1. No judgment by default shall be entered in the action or proceeding until the expiration of thirty (30) days from the date of the filing of the affidavit of compliance.
§ 56-2-509. Provisions supplemental.
  1. Nothing in §§ 56-2-505 — 56-2-508 or this section shall limit or affect the right to serve any process, notice or demand required or permitted by law to be served upon any company in any other manner now or hereafter permitted by law.
Part 6 Unauthorized Insurers Process Act
§ 56-2-601. Short title.
  1. This part shall be known and may be cited as the “Unauthorized Insurers Process Act.”
§ 56-2-602. Acts constituting commissioner as attorney for service of process.
  1. (a) Any of the following acts in this state, effected by mail or otherwise, by an unauthorized foreign or alien insurer, is equivalent to and shall constitute an appointment by the insurer of the commissioner and the commissioner's successor or successors in office, to be its true and lawful attorney, upon whom may be served all lawful process in any action, suit, or proceeding instituted by or on behalf of an insured or beneficiary arising out of the contract of insurance:
    1. (1) The issuance or delivery of contracts of insurance to residents of this state or to corporations authorized to do business in this state;
    2. (2) The solicitation of applications for the contracts;
    3. (3) The collection of premiums, membership fees, assessments or other considerations for the contracts; or
    4. (4) Any other transaction of insurance business.
  2. (b) Any of the acts mentioned in subdivsions (a)(1)-(4) shall be signification of the insurer's agreement that the service of process is of the same legal force and validity as personal service of process in this state upon the insurer.
§ 56-2-603. Method of service — Notice to defendant.
  1. (a) The service of process shall be made by delivering to and leaving with the commissioner or some person in apparent charge of the commissioner's office two (2) copies of the service of process and the payment to the commissioner or other person of the fees prescribed by law.
  2. (b) The commissioner shall forthwith mail by registered mail one (1) of the copies of the process to the defendant at its last known principal place of business, and shall keep a record of all process so served upon the commissioner.
  3. (c) The service of process is sufficient; provided, that notice of the service and a copy of the process are sent within ten (10) days thereafter by registered mail by plaintiff or plaintiff's attorney to the defendant at its last known principal place of business, and the defendant's receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiff's attorney showing a compliance with this section are filed with the clerk of the court in which the action is pending on or before the date the defendant is required to appear, or within a further time that the court allows.
§ 56-2-604. Personal service on agent or representative — Copy of process to defendant — Filing with clerk.
  1. Service of process in the action, suit or proceeding shall, in addition to the manner provided in § 56-2-603, be valid if:
    1. (1) Served upon any person within the state who, in this state on behalf of the insurer is soliciting insurance, is making, issuing or delivering any contract of insurance, or collecting or receiving any premium, membership fee, assessment or other consideration for insurance;
    2. (2) A copy of the process is sent within ten (10) days thereafter by registered mail by the plaintiff or plaintiff's attorney to the defendant at the last known principal place of business of the defendant; and
    3. (3) The defendant's receipt, or the receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiff's attorney showing a compliance with this section are filed with the clerk of the court in which the action is pending on or before the date the defendant is required to appear, or within a further time that the court allows.
§ 56-2-605. Time allowed before judgment.
  1. No plaintiff or complainant shall be entitled to a judgment by default, or a judgment with leave to prove damages, or a judgment pro confesso under §§ 56-2-602 — 56-2-604, this section and § 56-2-606 until the expiration of thirty (30) days from the date of the filing of the affidavit of compliance.
§ 56-2-606. Provisions supplemental.
  1. Nothing contained in §§ 56-2-602 — 56-2-605 and this section shall limit or abridge the right to serve any process, notice or demand upon any insurer in any other manner now or hereafter permitted by law.
§ 56-2-607. Defense by insurer — Bond or certificate of authority.
  1. Before any unauthorized foreign or alien insurer files or causes to be filed any pleading in any action, suit or proceeding instituted against it, the unauthorized insurer shall:
    1. (1) Deposit with the clerk of the court in which the action, suit or proceeding is pending cash or securities or file with the clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment that may be rendered in the action; or
    2. (2) Procure a certificate of authority to transact the business of insurance in this state.
§ 56-2-608. Discretionary continuances.
  1. The court, in any action, suit or proceeding in which service is made in the manner provided in § 56-2-603 or § 56-2-604, may, in its discretion, order a postponement that may be necessary to afford the defendant reasonable opportunity to comply with § 56-2-607, and to defend the action.
§ 56-2-609. Motions to quash or set aside service.
  1. Nothing in § 56-2-607 is to be construed to prevent an unauthorized foreign or alien insurer from filing a motion to quash a writ or to set aside service of the motion made in the manner provided in § 56-2-603 or § 56-2-604 on the ground either that:
    1. (1) The unauthorized insurer has not done any of the acts enumerated in § 56-2-602; or
    2. (2) The person on whom service was made pursuant to § 56-2-604 was not doing any of the acts enumerated in § 56-2-604.
Part 7 Enforcement of Decisions and Orders
§ 56-2-701. Enforcement of orders or decisions against unauthorized insurers.
  1. Upon the request of the commissioner, the attorney general and reporter may proceed in the courts of this state, or any reciprocal state, to enforce any order or decision in any court proceeding, or in any administrative proceeding before the commissioner, against any insurer arising out of a violation of §§ 56-2-105 — 56-2-111.
§ 56-2-702. Part definitions.
  1. As used in this part:
    1. (1) “Foreign decree” means any decree or order in equity of a court located in a reciprocal state, including a court of the United States located in the reciprocal state, against any insurer incorporated or authorized to do business in this state;
    2. (2) “Qualified party” means a state regulatory agency acting in its capacity to enforce the insurance laws of its state; and
    3. (3) “Reciprocal state” means any state or territory of the United States, the laws of which contain procedures substantially similar to those specified in this part for the enforcement of decrees or orders in equity issued by courts located in other states or territories of the United States, against any insurer incorporated or authorized to do business in the state or territory.
§ 56-2-703. List of reciprocal states.
  1. The commissioner shall determine which states and territories qualify as reciprocal states and shall maintain at all times an up-to-date list of those states.
§ 56-2-704. Enforcement of foreign decrees.
  1. (a) Filing and Status.
    1. (1) A copy of any foreign decree authenticated in accordance with the statutes of this state may be filed in the office of the clerk of the chancery court of Davidson County.
    2. (2) The clerk, upon verifying with the commissioner that the decree or order qualifies as a foreign decree, shall treat the foreign decree in the same manner as a decree of that court. A foreign decree so filed has the same effect and shall be deemed as a decree of that court, and is subject to the same procedures, defenses and proceedings for reopening, vacating, or staying as a decree of that court and may be enforced or satisfied in like manner.
  2. (b) Notice of Filing.
    1. (1) At the time of the filing of the foreign decree, the attorney general and reporter shall make and file with the clerk of the chancery court of Davidson County an affidavit setting forth the name and last known post office address of the defendant.
    2. (2) Promptly upon the filing of the foreign decree and the affidavit, the clerk shall mail notice of the filing of the foreign decree to the defendant at the address given and to the commissioner and shall make a note of the mailing in the docket. In addition, the attorney general and reporter may mail a notice of the filing of the foreign decree to the defendant and to the commissioner and may file proof of mailing with the clerk. Lack of mailing notice of filing by the clerk shall not affect the enforcement proceedings if proof of mailing by the attorney general and reporter has been filed.
    3. (3) No execution or other process for enforcement of a foreign decree filed under this part shall issue until thirty (30) days after the decree is filed.
  3. (c) Stay.
    1. (1) If the defendant shows the chancery court of Davidson County that an appeal from the foreign decree is pending or will be taken, or that a stay of execution has been granted, that court shall stay enforcement of the foreign decree until the appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated, upon proof that the defendant has furnished the security for the satisfaction of the decree required by the state in which it was rendered.
    2. (2) If the defendant shows the court any ground upon which enforcement of a decree of the court would be stayed, the court shall stay enforcement of the foreign decree for an appropriate period, upon requiring the same security for satisfaction of the decree that is required in this state.
  4. (d) Fees.
    1. Fees for docketing, transcription or other enforcement proceedings shall be as provided for decrees of the chancery court of Davidson County.
Part 8 Confidential Information
§ 56-2-801. Sharing of confidential information.
  1. The commissioner shall maintain as confidential all information received from the National Association of Insurance Commissioners (NAIC), any state or federal agency, and foreign countries that is confidential in those jurisdictions. The commissioner may allow for the sharing of otherwise confidential documents, materials, information, administrative or judicial orders, and other actions with the regulatory officials of any state or federal agency and foreign countries; provided, that the recipients are required, under their respective laws, to maintain such confidentiality. The commissioner may also allow for the sharing of otherwise confidential documents, materials, information, administrative or judicial orders, and other actions with the NAIC; provided, that the NAIC demonstrates by written statement its intent to maintain such confidentiality.
Part 9 Corporate Governance Annual Disclosure Act
§ 56-2-901. Short title.
  1. This part shall be known and may be cited as the “Corporate Governance Annual Disclosure Act.”
§ 56-2-902. Purpose and scope.
  1. (a) The purpose of this part is to:
    1. (1) Provide the commissioner a summary of an insurer or insurance group's corporate governance structure, policies, and practices to permit the commissioner to gain and maintain an understanding of the insurer's corporate governance framework;
    2. (2) Outline the requirements for completing a corporate governance annual disclosure with the commissioner; and
    3. (3) Provide for the confidential treatment of the corporate governance annual disclosure and related information.
  2. (b) Nothing in this part prescribes or imposes corporate governance standards and internal procedures beyond that which is required under applicable law. Notwithstanding this section, nothing in this part limits the commissioner's authority or the rights or obligations of third parties under §§ 56-1-408 — 56-1-413.
  3. (c) This part applies to all insurers domiciled in this state, except for:
    1. (1) Captive insurance companies licensed under the Revised Tennessee Captive Insurance Act, compiled in chapter 13 of this title; and
    2. (2) Risk retention groups licensed under chapter 45 of this title.
§ 56-2-903. Part definitions.
  1. As used in this part:
    1. (1) “Commissioner” means the commissioner of commerce and insurance;
    2. (2) “Corporate governance annual disclosure” or “CGAD” means a confidential report filed by the insurer or insurance group in accordance with this part;
    3. (3) “Department” means the department of commerce and insurance;
    4. (4) “Insurance group” means those insurers and affiliates included within an insurance holding company system as defined in § 56-11-101;
    5. (5) “Insurer” has the same meaning as “insurance company” in § 56-1-102, except that “insurer” does not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;
    6. (6) “NAIC” means the National Association of Insurance Commissioners; and
    7. (7) “ORSA summary report” means the report filed in accordance with chapter 11, part 2 of this title.
§ 56-2-904. Disclosure requirement.
  1. (a) An insurer, or the insurance group of which the insurer is a member, shall, no later than June 1 of each calendar year, submit to the commissioner a CGAD that contains the information described in § 56-2-906(b). However, an insurer or insurance group that files a CGAD pursuant to § 56-2-906(c) may elect to file the CGAD either no later than June 1 or December 31 of each calendar year. Notwithstanding any request from the commissioner made pursuant to subsection (c), if the insurer is a member of an insurance group, the insurer must submit the report required by this section to the applicable insurance commissioner of the lead state for the insurance group, in accordance with the laws of the lead state, as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the NAIC.
  2. (b) The CGAD must include a signature of the insurer or the insurance group's chief executive officer or corporate secretary attesting that, to the best of that individual's belief and knowledge, the insurer has implemented the corporate governance practices described in the CGAD and that a copy of the disclosure has been provided to the insurer's board of directors or the appropriate committee of the board.
  3. (c) An insurer not required to submit a CGAD under this part shall do so upon the commissioner's request.
  4. (d)
    1. (1) For the purposes of completing the CGAD, the insurer or insurance group may provide information regarding corporate governance at the ultimate controlling parent level, an intermediate holding company level, the individual legal entity level, or at a combination of levels depending upon how the insurer or insurance group has structured its system of corporate governance. The insurer or insurance group shall consider the following criteria in determining the level at which the CGAD should be filed:
      1. (A) The level at which the insurer's or insurance group's risk appetite is determined;
      2. (B) The level at which the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors are coordinated and exercised; or
      3. (C) The level at which legal liability for failure of general corporate governance duties would be placed.
    2. (2) If, subsequent to the initial filing of the CGAD, the insurer changes the level of reporting, the insurer shall explain the reason for the change in the first CGAD filed after the change in level of reporting.
  5. (e) The review of the CGAD and any additional requests for information must be made through the lead state as determined by the procedures within the most recent Financial Analysis Handbook adopted by the NAIC.
  6. (f) Insurers providing information substantially similar to the information required by this part in other documents provided to the commissioner, including proxy statements filed in conjunction with Form B requirements, or other state or federal filings provided to the commissioner, or as part of any department request or examination, are not required to duplicate that information in the CGAD, but are only required to cross reference the document in which the information is included.
§ 56-2-905. Rules.
  1. The commissioner may promulgate rules as are necessary to carry out this part in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
§ 56-2-906. Contents of corporate governance annual disclosure.
  1. (a) The insurer or insurance group has discretion over the responses to the CGAD inquiries, provided that the CGAD must contain the material information necessary to permit the commissioner to gain an understanding of the insurer's or group's corporate governance structure, policies, and practices. The commissioner may request additional information that the commissioner deems material and necessary to provide the commissioner with a clear understanding of the corporate governance policies, the reporting or information system, or the controls implementing those policies.
  2. (b) Notwithstanding subsection (a), the CGAD must be prepared consistent with rules promulgated pursuant to this part. The rules must be consistent with subsection (c). Documentation and supporting information must be maintained and made available upon examination or upon the request of the commissioner.
  3. (c) Rules promulgated under this part must prescribe separate but suitable corporate governance reporting requirements for any insurer or insurance group that is not admitted to write insurance on a direct basis in any other jurisdiction and is either:
    1. (1) Organized under the Tennessee Nonprofit Corporation Act, compiled in title 48, chapters 51-68; or
    2. (2) Governed by a board of which at least seventy-five percent (75%) of its voting directors receive no more than nominal compensation.
§ 56-2-907. Confidentiality.
  1. (a) Documents, materials, or other information, including the CGAD, in the possession or control of the department that are obtained by, created by, or disclosed to the commissioner or any other person under this part, are recognized as being proprietary and containing trade secrets. All such documents, materials, or other information are confidential by law and privileged, are not subject to public inspection under § 10-7-503 or § 56-1-602, are not subject to subpoena, and are not subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties. The commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer. Nothing in this section requires the written consent of the insurer before the commissioner may share or receive confidential documents, materials, or other CGAD-related information pursuant to subsection (c) to assist in the performance of the commissioner's official duties.
  2. (b) Neither the commissioner nor any person that receives documents, materials, or other CGAD-related information, through examination or otherwise, while acting under the authority of the commissioner, or with whom the documents, materials, or other information are shared pursuant to this part, are permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
  3. (c) In order to assist the commissioner in the performance of the commissioner's regulatory duties, the commissioner:
    1. (1) May, as necessary and upon request, share documents, materials, or other CGAD-related information, including the confidential and privileged documents, materials, or information subject to subsection (a), and including proprietary and trade secret documents and materials, with other state, federal, or international financial regulatory agencies, including members of any supervisory college as set forth in § 56-11-116, and with the NAIC, and with third-party consultants pursuant to § 56-9-108; provided, that the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials, or other information and has verified in writing its legal authority to maintain such confidentiality; and
    2. (2) May receive documents, materials, or other CGAD-related information, including otherwise confidential and privileged documents, materials, or information, and including proprietary and trade-secret information or documents, from regulatory officials of other state, federal, or international financial regulatory agencies, including members of any supervisory college as set forth in § 56-11-116, and from the NAIC, and shall maintain as confidential or privileged any such documents, materials, or information received with notice or the understanding that they are confidential or privileged under the laws of the jurisdiction that is the source of the documents, materials, or information.
  4. (d) The sharing of information and documents by the commissioner pursuant to this part does not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution, and enforcement of this part.
  5. (e) No waiver of any applicable privilege or claim of confidentiality in documents, proprietary and trade-secret materials, or other CGAD-related information shall occur as a result of disclosure of CGAD-related information or documents to the commissioner under this part or as a result of sharing as authorized under this part.
§ 56-2-908. NAIC and third-party consultants.
  1. (a) The commissioner may retain, at the insurer's expense, third-party consultants, including attorneys, actuaries, accountants, and other experts not otherwise part of the commissioner's staff, as may be reasonably necessary to assist the commissioner in reviewing the CGAD and related information or the insurer's compliance with this part.
  2. (b) Any persons retained under subsection (a) are under the direction and control of the commissioner and shall act in a purely advisory capacity.
  3. (c) The NAIC and any third-party consultants are subject to the same confidentiality standards and requirements as the commissioner.
  4. (d) As part of the retention process, a third-party consultant shall verify to the commissioner, with notice to the insurer, that it is free of conflicts of interest and that it has internal procedures in place to monitor compliance with conflicts and to comply with the confidentiality standards and requirements of this part.
  5. (e) A written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to this part must contain the following provisions and expressly require the written consent of the insurer prior to making public information provided under this part:
    1. (1) Specific procedures and protocols for maintaining the confidentiality and security of CGAD-related information shared with the NAIC or a third-party consultant pursuant to this part;
    2. (2) Procedures and protocols for sharing by the NAIC only with other state regulators from states in which the insurance group has domiciled insurers. The agreement must provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials, or other information and has verified in writing its legal authority to maintain confidentiality;
    3. (3) A provision specifying that ownership of the CGAD-related information shared with the NAIC or a third-party consultant remains with the department and that the NAIC's or third-party consultant's use of the information is subject to the direction of the commissioner;
    4. (4) A provision that prohibits the NAIC or a third-party consultant from storing the information shared pursuant to this part in a permanent database after the underlying analysis is completed;
    5. (5) A provision requiring the NAIC or third-party consultant to provide prompt notice to the commissioner and to the insurer or insurance group regarding any subpoena, request for disclosure, or request for production of the insurer's CGAD-related information; and
    6. (6) A requirement that the NAIC or a third-party consultant consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to this part.
§ 56-2-909. Sanctions.
  1. Any insurer failing, without just cause, to timely file the CGAD as required in this part is required, after notice and a hearing, to pay a civil penalty of one hundred dollars ($100) per day for each day of delay, to be recovered by the commissioner, which must be paid into the general fund of this state. The maximum penalty under this section is ten thousand dollars ($10,000). The commissioner may reduce the civil penalty if the insurer demonstrates to the commissioner that imposition of the civil penalty would constitute a financial hardship to the insurer in the commissioner's sole discretion.
§ 56-2-910. Severability.
  1. If any provision of this part other than § 56-2-907, or the application of this part to any person or circumstance, is held invalid, such determination shall not affect the provisions or applications of this part that can be given effect without the invalid provision or application, and to that end the provisions of this part, with the exception of § 56-2-907, are severable.
Part 10 Insurance Data Security Law
§ 56-2-1001. Short title.
  1. This part is known and may be cited as the “Insurance Data Security Law.”
§ 56-2-1002. Purpose and intent.
  1. (a) This part establishes the exclusive standards for data security, licensees' investigations of cybersecurity events, and licensees' notification of cybersecurity events to the commissioner and affected consumers.
  2. (b) This part does not create or imply a private cause of action for a violation of this part, nor does this part limit a private cause of action that otherwise exists.
§ 56-2-1003. Part definitions.
  1. As used in this part:
    1. (1) “Authorized individual” means an individual known to and screened by the licensee and determined to be necessary and appropriate to have access to the nonpublic information held by the licensee and the licensee's information systems;
    2. (2) “Commissioner” means the commissioner of commerce and insurance, or the commissioner's designee;
    3. (3) “Consumer” means an individual, including an applicant, policyholder, insured, beneficiary, claimant, or certificate holder, who is a resident of this state and whose nonpublic information is in a licensee's possession, custody, or control;
    4. (4) “Cybersecurity event”:
      1. (A) Means an event resulting in unauthorized access to, or disruption or misuse of, an information system or nonpublic information stored on an information system; and
      2. (B) Does not include:
        1. (i) The unauthorized acquisition of encrypted nonpublic information if the encryption, process, or key is not also acquired, released, or used without authorization; or
        2. (ii) An event in which the licensee determines that the nonpublic information accessed by an unauthorized person has not been used or released and has been returned or destroyed;
    5. (5) “Department” means the department of commerce and insurance;
    6. (6) “Encrypted” means the transformation of data into a form that results in a low probability that its meaning is discernible without the use of a protective process or key;
    7. (7) “Immediate family” means a spouse; child or grandchild by blood, adoption, or marriage; sibling; parent; or grandparent;
    8. (8) “Information security program” means the administrative, technical, and physical safeguards that a licensee uses to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle nonpublic information;
    9. (9) “Information system” means:
      1. (A) A discrete set of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of electronic nonpublic information; or
      2. (B) A specialized system, including an industrial or process control system, a telephone switching and private branch exchange system, and an environmental control system;
    10. (10) “Licensee”:
      1. (A) Means a person:
        1. (i) Licensed, authorized to operate, or registered pursuant to this title; or
        2. (ii) Required to be licensed, authorized to operate, or registered pursuant to this title; and
      2. (B) Does not include a purchasing group or risk retention group chartered and licensed in another state or a person acting as an assuming insurer and domiciled in another state or jurisdiction;
    11. (11) “Multi-factor authentication” means authentication through verification of at least two (2) of the following types of authentication factors:
      1. (A) Knowledge factors, such as by a password;
      2. (B) Possession factors, such as by a token or text message on a mobile phone; or
      3. (C) Inherence factors, such as by a biometric characteristic;
    12. (12) “Nonpublic information” means information that is not publicly available and that is:
      1. (A) Business-related information of a licensee, in which the tampering with, unauthorized disclosure of, access to, or use of, would cause a material adverse impact to the business, operations, or security of the licensee;
      2. (B) Information concerning a consumer that, because of a name, number, personal mark, or other identifier, can be used to identify that consumer, in combination with the following:
        1. (i) A social security number;
        2. (ii) A driver license number or non-driver identification card number;
        3. (iii) A financial account number or credit or debit card number;
        4. (iv) A security code, access code, or password that would permit access to the consumer's financial accounts; or
        5. (v) Biometric records; or
      3. (C) Information or data, except a person's age or sex, created by or derived from a healthcare provider or a consumer that relates to:
        1. (i) The past, present, or future physical, mental, or behavioral health or health condition of a consumer or a member of a consumer's immediate family;
        2. (ii) The provision of health care to a consumer; or
        3. (iii) Payment for the provision of health care to a consumer;
    13. (13) “Person” means an individual or non-governmental entity, including a sole proprietorship, corporation, limited liability company, partnership, trust, religious organization, association, nonprofit organization described in § 501(c) of the Internal Revenue Code that is exempt from federal income taxation under § 501(a) of the Internal Revenue Code (26 U.S.C. § 501(a)), or another legal entity, whether formed as a for-profit or not-for-profit entity;
    14. (14) “Publicly available information” means information that a licensee has a reasonable basis to believe is lawfully made available to the public. For purposes of this subdivision (14), a licensee has a reasonable basis to believe that information is lawfully made available to the public if the licensee has taken steps reasonably necessary to determine:
      1. (A) That the information is of a type that is available to the public through government records, widely distributed media, or public disclosures required by law; or
      2. (B) That a consumer can direct that the information not be made available to the public and, if so, that the consumer has not made that direction;
    15. (15) “Risk assessment” means the risk assessment that each licensee must conduct under § 56-2-1004(3); and
    16. (16) “Third-party service provider” means a person, not otherwise defined as a licensee, that contracts with a licensee to maintain, process, or store, or is otherwise permitted access to maintain, process, or store, nonpublic information through its provision of services to the licensee.
§ 56-2-1004. Information security program.
  1. By July 1, 2022, unless provided otherwise in this section:
    1. (1) Commensurate with the size and complexity of the licensee and the nature and scope of its activities, including its use of third-party service providers, and the sensitivity of the nonpublic information used by or in the possession, custody, or control of the licensee, each licensee shall develop, implement, and maintain a comprehensive, written information security program based on the licensee's risk assessment that contains administrative, technical, and physical safeguards for the protection of the nonpublic information and the licensee's information system;
    2. (2) A licensee's information security program must be designed to:
      1. (A) Protect the security and confidentiality of nonpublic information and the security of the information system;
      2. (B) Protect against threats or hazards to the security or integrity of nonpublic information and the information system;
      3. (C) Protect against unauthorized access to or use of nonpublic information and minimize the likelihood of harm to a consumer as a result of unauthorized access or use; and
      4. (D) Define and periodically reevaluate a schedule for retaining nonpublic information and a mechanism for the destruction of nonpublic information when the information is no longer needed;
    3. (3) A licensee shall conduct a risk assessment as follows:
      1. (A) Designate one (1) or more employees, an affiliate, or an outside vendor acting on behalf of the licensee who is responsible for the licensee's information security program;
      2. (B) Identify reasonably foreseeable internal or external threats that could result in unauthorized access, transmission, disclosure, misuse, alteration, or destruction of nonpublic information, including threats to the security of information systems and nonpublic information accessible to or held by third-party service providers;
      3. (C) Assess the likelihood and potential damage of reasonably foreseeable internal or external threats, taking into consideration the sensitivity of the nonpublic information involved;
      4. (D) Assess the sufficiency of policies, procedures, information systems, and other safeguards in place to manage threats throughout the licensee's operations, including in:
        1. (i) Employee training and management;
        2. (ii) Information systems, including network and software design, as well as information classification, governance, processing, storage, transmission, and disposal; and
        3. (iii) Detection, prevention, and response to attacks, intrusions, or other information systems failures; and
      5. (E) Implement information safeguards to manage the threats identified in the licensee's risk assessment and, no less than annually, assess the effectiveness of the safeguards' key controls, systems, and procedures;
    4. (4) Based on a licensee's risk assessment, the licensee shall:
      1. (A) Design an information security program to mitigate the identified risks, commensurate with the size and complexity of the licensee and the nature and scope of its activities, including its use of third-party service providers, and the sensitivity of the nonpublic information used by or in the possession, custody, or control of the licensee;
      2. (B) Determine which of the following security measures are appropriate for the licensee and implement those security measures:
        1. (i) Place access controls on information systems, including controls to authenticate and restrict access to authorized individuals to protect against the unauthorized acquisition of nonpublic information;
        2. (ii) Identify and manage the data, personnel, devices, systems, and facilities that enable the licensee to achieve the licensee's business objectives in accordance with the relative importance of the data, personnel, devices, systems, and facilities to the licensee's business objectives and risk strategy;
        3. (iii) Restrict physical access to nonpublic information to authorized individuals;
        4. (iv) Protect by encryption or other appropriate means nonpublic information being transmitted over an external network and nonpublic information stored on a laptop computer or other portable computing or storage device or media;
        5. (v) Adopt secure development practices for internally developed applications utilized by the licensee and procedures for evaluating, assessing, or testing the security of externally developed applications utilized by the licensee;
        6. (vi) Modify the licensee's information system in accordance with the licensee's information security program;
        7. (vii) Utilize effective controls that may include multi-factor authentication procedures for authorized individuals accessing nonpublic information;
        8. (viii) Regularly test and monitor systems and procedures to detect actual and attempted attacks on, or intrusions into, information systems;
        9. (ix) Include audit trails within the information security program designed to detect and respond to cybersecurity events and to reconstruct material financial transactions sufficient to support normal operations and obligations of the licensee;
        10. (x) Implement measures to protect against destruction, loss, or damage of nonpublic information due to environmental hazards, such as fire and water damage, technological failures, or other catastrophic events; and
        11. (xi) Develop, implement, and maintain procedures for the secure disposal of nonpublic information in any format;
      3. (C) Include cybersecurity risks in the licensee's enterprise risk management process;
      4. (D) Remain informed regarding emerging threats or vulnerabilities to the licensee and utilize reasonable security measures when sharing information, relative to the nature of the sharing and the type of information being shared; or
      5. (E) Provide personnel with cybersecurity awareness training that is updated as necessary to reflect risks identified by the licensee in the risk assessment;
    5. (5) If the licensee has a board of directors, then the board or an appropriate committee of the board shall, at a minimum:
      1. (A) Require the licensee's executive management or delegates to develop, implement, and maintain the licensee's information security program;
      2. (B) Require the licensee's executive management or delegates to report in writing, at least annually:
        1. (i) The status of the licensee's information security program and compliance with this part; and
        2. (ii) Material matters related to the licensee's information security program, including risk assessment, risk management and control decisions, third-party service provider arrangements, results of testing, cybersecurity events or violations and the licensee's responses thereto, and recommendations for changes to the information security program; and
      3. (C) If the licensee's executive management delegates any of the executive management's responsibilities under this section, then the executive management must oversee the development, implementation, and maintenance of the licensee's information security program prepared by the delegates and must either prepare the report or receive a copy of the report prepared by the delegates pursuant to subdivision (5)(B);
    6. (6) A licensee shall exercise due diligence in selecting a third-party service provider and, by July 1, 2023, require that each third-party service provider implement appropriate administrative, technical, and physical measures to protect and secure the information systems and nonpublic information accessible to, or held by, the third-party service provider;
    7. (7) The licensee shall monitor, evaluate, and adjust, as appropriate, its information security program, consistent with relevant changes in technology, the sensitivity of its nonpublic information, internal or external threats to its information, and its changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to information systems;
    8. (8)
      1. (A) As part of a licensee's information security program, a licensee must establish a written incident response plan designed to promptly respond to, and recover from, a cybersecurity event that compromises the confidentiality, integrity, or availability of the licensee's nonpublic information or information systems or the continuing functionality of the licensee's operations;
      2. (B) The incident response plan must address:
        1. (i) The licensee's internal process for responding to a cybersecurity event;
        2. (ii) The goals of the licensee's incident response plan;
        3. (iii) The definition of roles, responsibilities, and levels of decision-making authority relating to a cybersecurity event;
        4. (iv) External and internal communications and information sharing;
        5. (v) The requirements for remediating identified weaknesses in information systems and associated controls;
        6. (vi) Documentation and reporting regarding cybersecurity events and related incident response activities; and
        7. (vii) The evaluation and revision, as necessary, of the incident response plan following a cybersecurity event; and
    9. (9)
      1. (A) Each insurer domiciled in this state shall submit to the commissioner by April 15 of each year written certification that the insurer is in compliance with this section. Each insurer shall maintain for examination by the department all records, schedules, and data supporting the certification for a period of five (5) years from the date of the corresponding certification.
      2. (B) If an insurer identifies areas, systems, or processes requiring material improvement, updating, or redesign, then the insurer must document planned and ongoing remedial efforts to address those areas, systems, or processes, and the documentation must be made available for inspection by the commissioner upon request.
§ 56-2-1005. Investigation of a cybersecurity event.
  1. (a) If a licensee learns that a cybersecurity event has or may have occurred, then the licensee or an outside vendor or service provider designated to act on behalf of the licensee shall conduct a prompt investigation.
  2. (b) During the investigation, the licensee or outside vendor or service provider shall, at a minimum:
    1. (1) Determine whether a cybersecurity event has occurred;
    2. (2) Assess the nature and scope of the cybersecurity event;
    3. (3) Identify nonpublic information that may have been involved in the cybersecurity event; and
    4. (4) Take or oversee reasonable measures to restore the security of the information systems compromised in the cybersecurity event in order to prevent further unauthorized acquisition, release, or use of nonpublic information in the licensee's possession, custody, or control.
  3. (c) If the licensee learns that a cybersecurity event has or may have occurred in a system maintained by a third-party service provider, then the licensee shall complete, or confirm and document that the third-party service provider has completed, the actions required by subsection (b).
  4. (d) The licensee shall maintain records concerning all cybersecurity events for a period of at least five (5) years from the date of discovery of the cybersecurity event and shall provide those records to the commissioner upon request.
  5. (e) If the licensee conducts an investigation or review of a potential or suspected cybersecurity event and determines that an event is not a cybersecurity event, then the licensee must reduce that determination to writing and maintain that writing for a period of at least five (5) years from the date of discovery of the event. The licensee shall provide the writing to the commissioner upon request.
§ 56-2-1006. Notification of a cybersecurity event.
  1. (a) A licensee shall notify the commissioner as soon as practicable, and in no event more than three (3) business days, following a determination that a cybersecurity event has occurred if:
    1. (1)
      1. (A) The licensee is domiciled in this state, in the case of an insurer, as defined in § 56-6-102, or this state is the licensee's home state, in the case of an insurance producer, as defined in § 56-6-102; and
      2. (B) The cybersecurity event has a reasonable likelihood of materially harming a consumer residing in this state or a material part of the licensee's normal operations; or
    2. (2) The licensee reasonably believes that the nonpublic information of two hundred fifty (250) or more consumers residing in this state is involved in the cybersecurity event and that the cybersecurity event is:
      1. (A) A cybersecurity event of which notice must be provided to a government body, self-regulatory agency, or other supervisory body pursuant to state or federal law; or
      2. (B) A cybersecurity event with a reasonable likelihood of materially harming a consumer residing in this state or a material part of the licensee's normal operations.
  2. (b)
    1. (1) A licensee that must notify the commissioner under subsection (a) shall provide to the commissioner, in a format directed by the commissioner, as much of the following information as is available:
      1. (A) The date of the cybersecurity event;
      2. (B) A description of how the nonpublic information was exposed, lost, stolen, or breached, including the specific roles and responsibilities of third-party service providers with respect to the nonpublic information, if any;
      3. (C) How the cybersecurity event was discovered;
      4. (D) Whether lost, stolen, or breached nonpublic information has been recovered and, if so, how recovery was accomplished;
      5. (E) The identity of the source of the cybersecurity event;