Porter 6

Question 1

Briefly describe the rationale for using a “seasoning” criterion whereby only experienced insurers are acceptable candidates for licensing

Answer 1

The DOI does not want a newly formed insurer with little to no experience to enter its insurance market and possibly cause disruptions. May make them wait until they have had a few years of experience in another state first

Question 2

Describe an effect this seasoning requirement may have on a start-up insurer’s operations

Answer 2

This might force a start-up to opertate only in one state initially until they build up enough capital and/or experience to be able to expand to other states

Question 3

Briefly describe 2 criteria that, when not prohibited by law, would allow the DOI to waive a seasoning requirement

Answer 3

• adequate surplus with additional surplus requirement may allow unseasoned insurers to gain license
• financial strength of parent. If a parent company shows adequate strength, may allow an unseasoned affiliate/ subsidiary to be licensed.

Question 4

Briefly describe a Reciprocal insurer or insurance exhange

Answer 4

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

Question 5

Before issuing a domestic license, regulators may schedule an organizational examination. Briefly describe 4 items the regulators do in this examination

Answer 5

• verify minimum capital
• verify that management team in place
• corporate records are in good order
• policy forms and rates have department approval

Question 6

What additional items might a regulator look at when licensing a Foreign Insurer?

Answer 6

• Charter and bylaws: reviews to evaluate the terms of its operations as a legal entity
• Annual Statements: review for previous 2-3 years to get an idea of insurer’s performance
• 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 7

What additional items might a regulator look at when licensing an Alien insurer?

Answer 7

• appointment of US manager
• 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
• certificate of alien funds on deposit