Porter Chp 6

Question 1

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

Answer 1

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 2

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

Answer 2

1. Create jobs

2. Give regulator easier access

Question 3

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

Answer 3

• 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 4

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

Answer 4

• 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 5

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

Answer 5

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 6

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

Answer 6

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 7

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

Answer 7

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

Question 8

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

Answer 8

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

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
• Certificate of alien funds on deposit