Article 2. Alien Insurers of California Insurance Code >> Division 1. >> Part 2. >> Chapter 4. >> Article 2.

As used in this article, the term "alien insurer" means a foreign insurer organized under the laws of any jurisdiction other than a State of the United States.

Except as otherwise expressly provided for particular insurers, an alien insurer shall not transact any insurance in this State without first making the deposit required by this article nor, subject to the exception specified in Section 1582, without first complying with all other provisions of this article.

The amount of such deposit shall be equal to the minimum amount of the paid-in capital required for admission of incorporated insurers issuing policies on a reserve basis and transacting the same classes of insurance which such alien insurer is transacting in the United States, but the commissioner may accept such deposit in excess of such amount. Such deposit may be treated as a part of the assets of the depositing insurer. For the purpose of computing the amount of the deposit, the value of the securities shall not be estimated in excess of the par value nor of the market value thereof.

The deposit required by Section 1581
  (a) Shall be continuously maintained so long as any obligation arising out of any insurance transacted by such alien insurer in the United States remains in existence for any purpose whatever;
  (b) Shall consist of securities authorized for investment of the assets of domestic incorporated insurers;
  (c) Shall be in addition to any deposits required by law for purposes other than those specified in Section 1586;
  (d) May be made with the insurance authority, or with the auditor, controller or general fiscal officer of any State of the United States in which such alien insurer is authorized to transact insurance, or otherwise held in trust as provided by the laws of the State of deposit, for the purposes specified in Section 1586.

If such deposit is not so maintained in this State, it shall be deemed to be in existence as required by this article only when a certificate, issued by the proper authority of the State of deposit and showing in detail the constituent securities thereof and the purpose thereof, is delivered to the commissioner at least annually and at such other times as may be required by the commissioner.

Such deposit, if maintained in this State, shall be for the benefit and security of all the policyholders and creditors of such alien insurer in the United States, and if maintained in another State, for the benefit and security of all the policyholders, or of all the policyholders and creditors, of such alien insurer in the United States.

Securities deposited with the commissioner pursuant to this article shall be specially deposited by him in the State Treasury, in packages marked with the name of the insurer from whom the securities were received.

As long as the depositing insurer is solvent and the deposited securities are sufficient under this article, it may collect the income on the deposited securities. From time to time it may withdraw such securities if it deposits other securities, of the character and value specified in this article in the stead of those to be withdrawn, but deposited securities shall not be withdrawn from the State Treasury except upon the written order of the depositing insurer, indorsed by the commissioner or, if such indorsement is refused, under the authority of some court of competent jurisdiction.

Whenever such a deposit is made with the commissioner, he shall issue to the depositing insurer a certificate under his official seal stating the items and amount of securities so deposited, and their value, to the best of his knowledge. In case of withdrawal and substitution, he shall issue a supplemental certificate of similar nature. The commissioner shall require the payment of fifty dollars ($50) in lawful money of the United States in advance as a fee for issuing the first such certificate provided for in this article to each insurer, and twenty-five dollars ($25) for each additional certificate or each supplemental certificate evidencing any withdrawal, substitution, or other change in the securities deposited. There shall be no other or additional fee for attaching the commissioner's seal to a securities deposit schedule in such instances. The fees prescribed herein are separate from and not cumulative upon those prescribed by Article 11 (commencing with Section 939), Chapter 1, Part 2, Division 1 of this code.

The commissioner shall require the payment of twenty-nine dollars ($29) in lawful money of the United States, in advance, as a fee for filing a certificate of deposit of securities under this article.

In addition to complying with all other applicable requirements of this code, every admitted alien insurer shall on or before the first day of March in each year after the year 1941, file with the commissioner a statement on a form prescribed by him, showing as of the 31st day of December then next preceding, the following information:
  (a) All of its assets within the United States on deposit with officers of any state thereof for the benefit and security of all the policyholders, or of all the policyholders and creditors, of such alien insurer within the United States. Such assets so deposited are designated "general state deposits."
  (b) All of its assets within the United States, other than general state deposits, on deposit with officers of any state thereof for the benefit and security of all the policyholders, or policyholders and creditors, of such alien insurer within the state of deposit or of certain classes of policyholders, or policyholders and creditors, either within the state of deposit or within the United States. Such assets so deposited are designated "special state deposits." The value to be allowed in such statement for any special state deposit shall not exceed the liability secured thereby.
  (c) All of its assets within the United States, other than general state deposits and special state deposits, held by any trustee for the benefit and security of all the policyholders or of all the policyholders and creditors, of such alien insurer within the United States. Such assets so held are designated "trusteed assets."
  (d) The amount of interest receivable, accrued at the date of such statement on the general state deposits, the special state deposits, and the trusteed assets of such alien insurer, if such interest is collectible by the State or trustee.
  (e) All of the reserves and other liabilities arising out of policies or obligations issued, assumed or incurred by such alien insurer in the United States. Said reserves and other liabilities are designated as "liabilities in the United States." For the purpose of determining the liabilities in the United States of such alien insurer there may be deducted:
  (1) From the amount of such liabilities for unpaid losses, the amount, included therein, of reinsurance recoverable thereon from insurers authorized to do business in any state of the United States, subject to the same limitations as are contained in Sections 922.2 to 922.4, inclusive, and in Sections 922.6 and 922.8.
  (2) From the amount of such liabilities for unearned premiums, first, the unearned portion, included in such amount, of premiums receivable by such alien insurer from its agents or policyholders under policies issued by it in the United States and not more than 90 days past due on the date of such statement, and second, subject to the same limitations as are contained in Section 922.4, the unearned portion, included in such amount of reinsurance premiums receivable by such alien insurer from other insurers authorized to do business in any state of the United States.
  (3) The ratable portion, included in such liabilities, of the gross liabilities and reserves on risks reinsured, in whole or in part, by an alien insurer which complies with this article and includes in the statements required thereby all reserves and liabilities arising out of such reinsurance, or, subject to the same limitations as are contained in Sections 922.2 to 922.8, inclusive, by another insurer which is authorized to transact insurance in any state of the United States, except in the case of excess loss and catastrophe reinsurance where the deduction shall be on the basis of the actual reinsurance premiums and the actual reinsurance terms.
  (4) Those liabilities in the United States, pertaining to any asset in the United States of such alien insurer, other than the assets described in subdivisions (a), (b), (c), and (d), but such deduction shall in no case exceed that portion of the value of such asset which is applicable to the liability pertaining thereto.
  (5) If such alien insurer is a life insurer, the amount of the unpaid principal and interest of any loan made by it to the holder of, and solely on the security of, any policy of life insurance or annuity contract issued or assumed by it, on the life of or to any person in the United States. Such amount shall in no case exceed the amount of the reserve required to be maintained on such policy or annuity contract by such insurer. Such amount is designated as "policy loans in the United States."
  (f) Such further information required by the commissioner, as he deems necessary to apply the provisions of this article.

The statement required by Section 1591 shall be verified in the manner prescribed in Sections 903 and 903.5 and there shall be filed therewith the certificate of each trustee in the United States holding trusteed assets of the alien insurer, showing the description and amount of the trusteed assets, and the purpose for which they are held. The statement shall be filed in quadruplicate by the alien insurer with the office of the department in Los Angeles. Upon receipt of the four copies, the commissioner shall ensure that one copy is maintained at the department's office in Los Angeles, one copy at the department's office in San Francisco, and one copy at the department's office in Sacramento. The commissioner may at other times require any admitted alien insurer to file with him or her similar statements, showing the information specified in Section 1591 with respect to such other date as he or she may prescribe.

The excess of the sum of those items in such statement, which are described in subdivision (a), (b), (c) and (d) of Section 1591, over the liabilities in the United States of such alien insurer is designated the "trusteed surplus in the United States" of such alien insurer.

Whenever it appears to the commissioner that the trusteed surplus in the United States of an alien insurer is less than an amount equal to the minimum amount of the capital paid in or available cash assets required by this code for the classes of insurance transacted by such alien insurer in the United States, he shall determine the amount of such deficiency and make requisition upon such alien insurer in writing, addressed to its attorney in the United States or to its United States manager, to repair such deficiency within such time, not less than 60 nor more than 90 days from the service of such requisition, as he may therein designate. The commissioner may revoke or suspend the certificate of authority of such alien insurer or order it to cease issuing new policies in the United States, while such deficiency exists. If at the expiration of the period designated in such requisition such alien insurer has failed to repair such deficiency, the commissioner may proceed against it under the provisions of Article 14, Chapter 1, Part 2, Division 1 as against an insurer whose condition is such that its further transaction of business will be hazardous to its policyholders, or creditors, or to the public.

Whenever an admitted alien insurer is required or permitted to deposit assets with a trustee for the benefit and security of its policyholders, or of its policyholders and creditors, in the United States, the trustee of any such trust hereafter created shall be a solvent bank or trust company in the United States acceptable to the commissioner and authorized to act as such trustee by the laws of any State or of the United States. All trusteed assets shall be continuously kept within the United States. Any such trust heretofore created and now existing and any such trust hereafter created and existing when such alien insurer seeks to be admitted, shall be continued in accordance with the terms of the instrument creating it, unless inconsistent with the provisions of this article, in which case said instrument shall, after reasonable notice to and hearing of the alien insurer by the commissioner, be amended to conform to the requirements of this article. No amendment of any deed of trust, whether heretofore or hereafter created, shall be effective unless approved in writing by the commissioner. If the trustees of any such trust heretofore created are natural persons, and if the number of such trustees is reduced, by death, resignation, or from any other cause, to less than three, then the commissioner shall require the substitution for such trustees of a solvent bank or trust company in the United States acceptable to him and authorized to act as such trustee by the laws of any State or of the United States. The commissioner may from time to time approve modifications of, or variations in, any deed of trust, which in his judgment are not prejudicial to the interests of the people of this State.

To satisfy the purposes of this article, any alien insurer admitted or seeking to be admitted is hereby authorized to make and execute a deed of trust by virtue of which any assets of an alien admitted insurer are held by a trustee as trusteed assets within the meaning of subdivision (c) of Section 1591. Such deed of trust shall:
  (a) Vest the legal title to the trusteed assets in the trustee and its successors lawfully appointed, in trust for the benefit and security of all the policyholders, or of all the policyholders and creditors, of such alien insurer within the United States;
  (b) Provide for the substitution of a new trustee in the event of a vacancy by death, resignation or from any other cause, subject to the approval of the commissioner;
  (c) Require that the trusteed assets shall at all times be maintained within the United States as a trust fund separate and distinct from all other assets, and that the trustee shall continuously maintain a record at all times sufficient to identify such fund;
  (d) Prescribe the conditions, satisfactory to the commissioner and not inconsistent with the purposes of this article, under which any or all income, earnings, dividends or interest accumulations of such fund may be paid over to the United States manager of such alien insurer;
  (e) Prohibit the withdrawal, other than as provided in accordance with subdivision (d), of any trusteed assets from such fund without the written approval of the commissioner, except as follows: 1. For the purpose of making general State deposits required by law in any State. 2. For the purpose of paying obligations due from such alien insurer to policyholders and creditors in the United States, and for the purpose of making special State deposits required by law in any State, if such payments and deposits do not impair the trusteed surplus in the United States of such alien insurer to an amount less than the minimum amount specified in Section 1594, and such fact is certified to the trustee by the insurer or its United States manager duly authorized for that purpose. 3. For the purpose of substituting other assets permitted by law and at least equal in value to those to be withdrawn, upon the specific written direction of the United States manager or an assistant United States manager or other representative in the United States of such alien insurer when duly empowered and acting pursuant to either general or specific written authority previously given or delegated by the board of directors thereof, except as provided in the paragraph numbered 5 of this subdivision. 4. For the purpose of transferring such assets to an official conservator, rehabilitator, or liquidator pursuant to an order of a court of competent jurisdiction. 5. In the case of an alien life insurer organized under the laws of the Dominion of Canada or of any province thereof, the provisions of this section applicable to the United States manager or an assistant United States manager or other representative in the United States of such alien insurer shall be deemed to refer to the president, vice president, secretary or treasurer of such insurer at its principal place of business in said Dominion or province thereof, when duly authorized for such purpose.

Trusteed assets may be held by a trustee in the name of a nominee of the trustee, when permitted by and in accordance with the law authorizing the trustee to act as trustee. For the purposes of this article, the trustee is deemed to have legal title to trusteed assets so held.

In respect of the appointment or substitution of a trustee in another state in which an admitted alien insurer is authorized to transact insurance, in respect of withdrawal of trusteed assets held in the other state (except withdrawals as provided in Section 1596), and in respect of the amendment of such deed of trust not affecting the interests or security of the beneficiaries thereof, written approval under any provision in the deed of trust which requires such written approval by the official of such other state, supervising insurance therein, shall be deemed compliance with any applicable approval requirements of Sections 1595 and 1596. Where an alien insurer organized under the laws of the Dominion of Canada or of any province thereof maintains trusteed assets in another state and under the deed of trust written approval is required by an official supervising insurance in any state in which such insurer is authorized to transact insurance and in which it heretofore maintained and hereafter continues to maintain a general state deposit at least equal in amount to the deposit required by Section 1582, written approval by such official in respect of the appointment or substitution of a trustee thereunder, in respect of withdrawal of such trusteed assets (except withdrawals as provided in Section 1596), and in respect of the amendment of such deed of trust not affecting the interests or security of the beneficiaries thereof, shall also be deemed compliance with any applicable approval requirements of Sections 1595 and 1596. The alien insurer shall furnish proof of approvals authorized by this section to and notify the commissioner in writing of such appointment or substitution, of the nature and extent of such withdrawal, and of the text of such amendment.

The commissioner may from time to time examine the trusteed assets of any alien admitted insurer pursuant to Section 736, and may from time to time require the trustee holding trusteed assets of an alien admitted insurer to file with the commissioner a statement, in such form as he may prescribe, certifying such trusteed assets and the amounts thereof. Refusal or neglect on the part of such trustee to comply with such requirement shall be ground for the revocation of such alien insurer's certificate of authority or for proceedings against it under the provisions of Article 14, Chapter 1, Part 2, Division 1.

The commissioner shall require the payment of twelve dollars ($12) in lawful money of the United States, in advance, as a fee for filing each certificate of a trustee required to be filed by Section 1592.