G.1.5. Porter Chapter 6

Question 1

2 reasons that regulators would prefer that insurer maintain an office in the state:

Answer 1

1. Create jobs

2. Give regulator easier access

Question 2

2 criteria that DOIs look at when insurers are seeking a license:

Answer 2

1. Location of books and records - usually seeks assurance the insurer will retain books and records in the state
2. Principal office - many DOIs require insurer to maintain an office in the state

Question 3

Briefly describe a domestic insurer, foreign insurer, and alien insurer

Answer 3

Domestic - Incorporated in the state writing insurance business
Foreign - Licensed to operate in a state but incorporated in another state
Alien - Licensed in a U.S. state but incorporated in another country

Question 4

What do regulators examine during an organizational exam of an insurer applying for a license:

Answer 4

• Verify minimum capitalization is on deposit at an approved financial institution
• Verify that management team in place
• Corporate records are in good order
• Policy forms and rates have department approval
• Gives employees chance to review with the examiners the various DOI expectations for reporting

Question 5

List some differences in the licensing application between a foreign and domestic insurer:

Answer 5

Foreign also has to provide:

• Charter and bylaws - reviews to evaluate the terms of its operations as a legal entity
• Annual Statements - reviews for previous 2-3 years
• Examination report - most recent report of financial examination
• Financial statements - SAP and sometimes GAAP
• Certificates of compliance - evidence that in compliance with domiciliary state
• Holding insurer registration statement - if applicant is member of an insurer holding system

Question 6

2 advantages that foreign insurers have when applying for a license:

Answer 6

1. If a strong performer with solid financial record, more likely to receive approval
2. Already gone through rigors of the domiciliary jurisdiction’s review

Question 7

Some regulators require that the insurer be seasoned to obtain a license. List some exceptions to this requirement:

Answer 7

• insurer has substantial capital
• owned by an insurer with lengthy history
• department is satisfied with the application for other reasons

Question 8

List an additional requirement if seeking to be licensed in state where an affiliate already writing:

Answer 8

May require u/w guidelines to ensure parent insurer does not shift business back and forth between affiliated insurers

Question 9

What additional requirements does an alien insurer have when filing for a license:

Answer 9

• Appointment of U.S. manager
• Provide a Trust agreement - contract in which one party transfers ownership of property to another party that will administer the property for a third party’s benefit
• Certicate of alien funds on deposit

Question 10

Briefly describe a reciprocal insurer or insurance exchange

Answer 10

Groups similarly engaged in business that agree to indemnify one another for certain kinds of losses by way of the exchange of insurance contracts