Article 10.6. Own Risk And Solvency Assessment of California Insurance Code >> Division 1. >> Part 2. >> Chapter 1. >> Article 10.6.
(a) The purpose of this article is to provide the
requirements for maintaining a risk management framework, completing
an Own Risk and Solvency Assessment (ORSA), and provide guidance and
instructions for filing an ORSA Summary Report with the commissioner.
The requirements of this article shall apply to all insurers
domiciled in this state unless exempt pursuant to Section 935.6.
(b) The Legislature finds and declares that the ORSA Summary
Report will contain confidential and sensitive information related to
an insurer's or insurance group's identification of risks that are
material and relevant to the insurer or insurance group filing the
report. This information will include proprietary and trade secret
information that has the potential for harm and competitive
disadvantage to the insurer or insurance group if the information is
made public. It is the intent of the Legislature that the ORSA
Summary Report shall be a confidential document filed with the
commissioner, that the ORSA Summary Report shall be shared only as
stated in this article to assist the commissioner in the performance
of his or her duties, and that in no event shall the ORSA Summary
Report be subject to public disclosure.
For purposes of this article, the following definitions
apply:
(a) For the purpose of conducting an ORSA, the term "insurance
group" shall mean those insurers and affiliates included within an
insurance holding company system as defined in subdivision (e) of
Section 1215.
(b) The term "insurer" shall have the same meaning as set forth in
subdivision (f) of Section 1215, except that it shall 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.
(c) An "Own Risk and Solvency Assessment" or "ORSA" means a
confidential internal assessment that is appropriate to the nature,
scale, and complexity of an insurer or insurance group, conducted by
that insurer or insurance group, of the material and relevant risks
associated with the insurer's or insurance group's current business
plan and the sufficiency of capital resources to support those risks.
(d) The term "ORSA Guidance Manual" means the current version of
the Own Risk and Solvency Assessment Guidance Manual developed and
adopted by the National Association of Insurance Commissioners (NAIC)
and as amended from time to time. A change in the ORSA Guidance
Manual shall be effective on the January 1 following the calendar
year in which the changes have been adopted by the NAIC.
(e) An "ORSA Summary Report" means a confidential high-level
summary of an insurer's or insurance group's ORSA.
An insurer shall maintain a risk management framework to
assist the insurer with identifying, assessing, monitoring, managing,
and reporting on its material and relevant risks. This requirement
may be satisfied if the insurance group of which the insurer is a
member maintains a risk management framework applicable to the
operations of the insurer.
Subject to Section 935.6, an insurer, or the insurance group
of which the insurer is a member, shall regularly conduct an ORSA
consistent with a process comparable to the ORSA Guidance Manual. The
ORSA shall be conducted no less than annually but also at any time
when there are significant changes to the risk profile of the insurer
or the insurance group of which the insurer is a member.
(a) Upon the commissioner's request, and no more than once
each year, an insurer shall submit to the commissioner an ORSA
Summary Report or any combination of reports that together contain
the information described in the ORSA Guidance Manual, applicable to
the insurer or the insurance group of which it is a member.
Notwithstanding any request from the commissioner, if the insurer is
a member of an insurance group, the insurer shall submit the report
or reports required by this subdivision only if the commissioner is
the lead state commissioner of the insurance group as determined by
the procedures within the Financial Analysis Handbook adopted by the
NAIC.
(b) The report shall include a signature of the insurer's or
insurance group's chief risk officer or other executive having
responsibility for the oversight of the insurer's enterprise risk
management process, attesting to the best of his or her belief and
knowledge that the insurer applies the enterprise risk management
process described in the ORSA Summary Report and that a copy of the
report has been provided to the insurer's board of directors or the
appropriate committee thereof.
(c) An insurer may comply with subdivision (a) by providing the
most recent and substantially similar report provided by the insurer,
or by another member of an insurance group of which the insurer is a
member, to the commissioner of another state, or to a supervisor or
regulator of a foreign jurisdiction, provided that the report
provides information that is comparable to the information described
in the ORSA Guidance Manual. A report in a language other than
English shall be accompanied by a translation of that report into the
English language.
(a) An insurer shall be exempt from the requirements of this
article if both of the following apply:
(1) The insurer has annual direct written and unaffiliated assumed
premiums, including international direct and assumed premiums, but
excluding premiums reinsured with the Federal Crop Insurance
Corporation and Federal Flood Program, less than five hundred million
dollars ($500,000,000).
(2) The insurance group of which the insurer is a member has
annual direct written and unaffiliated assumed premiums, including
international direct and assumed premiums, but excluding premiums
reinsured with the Federal Crop Insurance Corporation and Federal
Flood Program, less than one billion dollars ($1,000,000,000).
(b) If an insurer qualifies for exemption pursuant to paragraph
(1) of subdivision (a), but the insurance group of which the insurer
is a member does not qualify for exemption pursuant to paragraph (2)
of subdivision (a), then the ORSA Summary Report that may be required
pursuant to Section 935.5 shall include every insurer within the
insurance group. This requirement may be satisfied by the submission
of more than one ORSA Summary Report for any combination of insurers
provided any combination of reports includes every insurer within the
insurance group.
(c) If an insurer does not qualify for exemption pursuant to
paragraph (1) of subdivision (a), but the insurance group of which it
is a member qualifies for exemption pursuant to paragraph (2) of
subdivision (a), the only ORSA Summary Report that may be required
pursuant to Section 935.5 shall be the report applicable to that
insurer.
(d) An insurer that does not qualify for exemption pursuant to
subdivision (a) may apply to the commissioner for a waiver from the
requirements of this article based upon unique circumstances. In
deciding whether to grant the insurer's request for waiver, the
commissioner may consider the type and volume of business written,
ownership and organizational structure of the insurer or insurance
group, and any other factor the commissioner considers relevant to
the insurer or insurance group of which the insurer is a member. If
the insurer is part of an insurance group with insurers domiciled in
more than one state, the commissioner shall coordinate with the lead
state commissioner and with the other domiciliary commissioners in
considering whether to grant the insurer's request for a waiver.
(e) Notwithstanding the exemptions stated in this section, the
commissioner may do either one or both of the following:
(1) The commissioner may require that an insurer maintain a risk
management framework, conduct an ORSA, and file an ORSA Summary
Report based on unique circumstances, which include, but are not
limited to, the type and volume of business written, ownership and
organizational structure, federal agency requests, and international
supervisor requests.
(2) The commissioner may require that an insurer maintain a risk
management framework, conduct an ORSA, and file an ORSA Summary
Report if the insurer (A) has Risk-Based Capital for a Company Action
Level Event as described in Section 739.3, (B) meets one or more of
the standards of an insurer that may be determined to be in hazardous
financial condition as provided in Article 14.5 (commencing with
Section 1065.1), and in regulations, or (C) otherwise exhibits
qualities of a troubled insurer as determined by the commissioner.
(f) If an insurer that qualifies for an exemption pursuant to
subdivision (a) subsequently no longer qualifies for that exemption
due to changes in premiums as reflected in the insurer's most recent
annual statement or in the most recent annual statements of the
insurers within the insurance group of which the insurer is a member,
the insurer shall have one year following the year the threshold in
subdivision (a) is exceeded to comply with the requirements of this
article.
(a) The ORSA Summary Report shall be prepared consistent
with the ORSA Guidance Manual, subject to the requirements of this
section. Documentation and supporting information shall be maintained
and made available upon examination or upon request of the
commissioner.
(b) The commissioner shall review the ORSA Summary Report
submitted pursuant to Section 935.5 and any additional requests for
information, using procedures similar to those currently used in the
analysis and examination of multistate or global insurers and
insurance groups.
(a) Documents, materials, or other information, including
the ORSA Summary Report, in the possession of or control of the
Department of Insurance that are obtained by, created by, or
disclosed to the commissioner or any other person under this article,
are recognized by this state as being proprietary and contain trade
secrets. These documents, materials, or other information shall be
confidential by law and privileged, shall not be subject to
disclosure pursuant to the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code), and shall not be subject to subpoena or discovery,
or admissible in evidence, in any private civil action. However, the
commissioner is authorized to use those documents, materials, or
other information in the furtherance of any regulatory or legal
action brought as a part of the commissioner's official duties. The
commissioner shall not otherwise make those documents, materials, or
other information public without the prior written consent of the
insurer.
(b) Neither the commissioner nor any other person who received
documents, materials, or other ORSA-related information, including
the ORSA Summary Report, through examination or otherwise, while
acting under the authority of the commissioner, or with whom those
documents, materials, or other information are shared pursuant to
this article, shall be permitted or required to testify in any
private civil action concerning those confidential documents,
materials, or information, subject to subdivision (a).
(c) In order to assist in the performance of the commissioner's
regulatory duties, the commissioner:
(1) May, upon request, share documents, materials, or other
ORSA-related information, including the confidential and privileged
documents, materials, or information subject to subdivision (a),
including proprietary and trade secret documents and materials, with
other state, federal, and international financial regulatory
agencies, including members of any supervisory college as described
in Section 1215.7, with the NAIC, and with any third-party
consultants designated by the commissioner, provided that the
recipient agrees in writing to maintain the confidentiality and
privileged status of the ORSA-related documents, materials, or other
information and has verified in writing the legal authority to
maintain confidentiality.
(2) May receive documents, materials, or other ORSA-related
information, including otherwise confidential and privileged
documents, materials, or information, including proprietary and trade
secret information or documents, from regulatory officials of other
foreign or domestic jurisdictions, including members of any
supervisory college as described in Section 1215.7, and from the
NAIC, and shall maintain as confidential or privileged any documents,
materials, 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.
(3) Shall enter into a written agreement with the NAIC or a
third-party consultant governing the sharing and the use of
information provided pursuant to this article, consistent with this
subdivision that shall do all of the following:
(A) Specify procedures and protocols regarding the confidentiality
and security of information shared with the NAIC or a third-party
consultant pursuant to this article, including procedures and
protocols for sharing by the NAIC with other state regulators from
states in which the insurance group has domiciled insurers. The
agreement shall provide that the recipient agrees in writing to
maintain the confidentiality and privileged status of the
ORSA-related documents, materials, or other information and has
verified in writing the legal authority to maintain confidentiality.
(B) Specify that ownership of information shared with the NAIC or
a third-party consultant pursuant to this article remains with the
commissioner and that the NAIC's or a third-party consultant's use of
the information is subject to the direction of the commissioner.
(C) Prohibit the NAIC or third-party consultant from storing the
information shared pursuant to this article in a permanent database
after the underlying analysis is completed.
(D) Require prompt notice to be given to an insurer whose
confidential information in the possession of the NAIC or a
third-party consultant pursuant to this article when that information
is subject to a request or subpoena to the NAIC or a third-party
consultant for disclosure or production.
(E) Require the NAIC or a third-party consultant to 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 article.
(F) In the case of an agreement involving a third-party
consultant, provide for the insurer's written consent.
(d) The sharing of information and documents by the commissioner
pursuant to this article shall not constitute a delegation of
regulatory authority or rulemaking, and the commissioner is solely
responsible for the administration, execution, and enforcement of the
provisions of this article.
(e) A waiver of any applicable privilege or claim of
confidentiality in the documents, proprietary and trade secret
materials, or other ORSA-related information shall not occur as a
result of disclosure of the ORSA-related information or documents to
the commissioner under this section or as a result of sharing as
authorized in this article.
(f) Documents, materials, or other information in the possession
or control of the NAIC or a third-party consultant pursuant to this
article shall be confidential by law and privileged, shall not be
subject to disclosure pursuant to the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1
of the Government Code), and shall not be subject to subpoena or
discovery, or admissible in evidence, in any private civil action.
Any insurer failing, without just cause, to timely file the
ORSA Summary Report as required in this article shall be subject to
the late filing fees set forth in Section 924. The commissioner may
reduce the penalty if the insurer demonstrates to the commissioner
that the imposition of the penalty would constitute a financial
hardship to the insurer.
If any provision of this article, or the application
thereof to any person or circumstance, is held invalid, that
determination shall not affect the provisions or applications of this
article that can be given effect without the invalid provision or
application, and to that end the provisions of this article are
severable.
This article shall become operative on January 1, 2015.