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Section .0100 ‑ General Provisions


Published: 2015

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SUBCHAPTER 11C ‑ ANALYSIS AND EXAMINATIONS

 

SECTION .0100 ‑ GENERAL PROVISIONS

 

 

11 NCAC 11C .0101          GENERAL PROVISIONS

 

History Note:        Authority G.S. 58‑9;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. July 1, 1988.

 

 

11 NCAC 11C .0102          FORM OF REPORT

ON EXAMINATION

The reports on examination prepared by the department as a

result of a triennial examination, special examination or any other type

examination of an insurance company licensed to do business in North Carolina

will be in the form adopted and prescribed by the National Association of

Insurance Commissioners to the extent possible, but subject to the discretion

of the Commissioner of Insurance as deemed appropriate under the circumstances

of an examination.

 

History Note:        Authority G.S. 58-2-40; 58-2-131;

58-2-140; 58-65-105;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978.

 

11 NCAC 11C .0103          REPRODUCTION OF REPORTS ON EXAMINATION

Reports on examination shall be reproduced by the company in

sufficient quantity to accommodate the Department's needs, as well as the needs

of the company.  The report shall be reproduced within 45 days from the date

the report on examination becomes a public document; such report to be void of

any type of advertisements.

 

History Note:        Authority G.S. 58‑2‑40; 58‑2‑131;

58‑65‑105;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Amended Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0104          RECORD OF BUSINESS TO BE KEPT BY

COMPANY

Every insurance company licensed to transact business in the

State of North Carolina must make and keep a full and correct record of the

business done by it including, the policy number, date of issue, term, amount

insured, premiums, full name and complete address of policyholder and other

pertinent information as may be required by the Commissioner of Insurance.

 

History Note:        Authority G.S. 58-2-40; 58-2-185;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978.

 

11 NCAC 11C .0105          RETENTION OF RECORDS OF DOMESTIC

INSURANCE COMPANIES

(a)  All records of domestic insurance companies shall be

maintained by the company for the years for which a statutory examination has

not yet been completed.  All books of original entry and corporate records

shall be retained by the company or its successor for a period of 25 years

after the company ceases to exist.

(b)  Any claim file wherein a minor is involved shall be

maintained until that minor has attained the age of majority for third‑party

liability coverage.  All tax and tax related questions or litigation shall be

resolved or finally adjudicated before the destruction of any records related

thereto.

(c)  All records that are required to be maintained by this

Rule shall be either original or duplicate records, as defined in this Rule.

(d)  For the purpose of this Rule, an "original

record" is the writing or recording itself or any counterpart intended to

have the same effect by a person executing or issuing it.  An

"original" of a photograph includes the negative or any print

therefrom.  If data are, in the normal and ordinary course of business, stored

in a computer or similar device, any printout or other output readable by

sight, shown to reflect the data accurately, is an "original record".

(e)  For the purpose of this Rule, a "duplicate

record" is a counterpart produced by the same impression as the original

record, or from the same matrix, or by mechanical or electronic re‑recording

or by chemical reproduction, or by equivalent techniques, such as imaging or

image processing, that accurately reproduce the original record.

(f)  If only duplicate records are maintained, the following

requirements must be met:

(1)           The data must be easily accessible to the

Department in readable form; and readable, reproduced copies must be

obtainable;

(2)           Before the destruction of any original

records, the company in possession of the original records shall:

(A)          Verify that the records stored consist of all

information contained in the original records and that the original records can

be reconstructed therefrom in a form acceptable to the Department; and

(B)          Implement disaster preparedness or disaster recovery

procedures that include provisions for the maintenance of duplicate records at

another location; and

(3)           Adequate controls must be established with

respect to the transfer and maintenance of data.

(g)  Every foreign insurer licensed in North Carolina shall

be in substantial compliance with this Rule.

 

History Note:        Authority G.S. 58‑2‑40(1); 58‑2‑50;

58‑2‑131; 58‑2‑132; 58‑2‑133; 58‑2‑145;

58‑2‑155; 58‑19‑35;

58‑20‑30; 58‑22‑20(6); 58‑23‑25;

58‑24‑135; 58‑27‑10; 58‑39‑70; 58‑48‑65;

58‑49‑55; 58‑62‑66;

58‑63‑20; 58‑64‑55; 58‑65‑105;

58‑67‑100;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Amended Eff. September 1, 1993; March 1, 1993.

 

11 NCAC 11C .0106          UNEARNED PREMIUM RESERVE: IN FORCE

PREMIUMS

 

History Note:        Authority G.S. 58‑35;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. March 1, 1993.

 

 

 

11 NCAC 11C .0107          REINSURANCE: WHEN PERMITTED

 

History Note:        Authority G.S. 58‑59.3;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0108          DIVIDENDS TO POLICYHOLDERS: DEPARTMENT

INTERPRETATION

11 NCAC 11C .0109          DIVIDENDS TO STOCKHOLDERS: DEPARTMENT

INTERPRETATION

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑130;

58‑8‑25;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Amended Eff. April 1, 1993;

Repealed Eff. August 1, 1998.

 

 

 

11 NCAC 11C .0110          INVESTMENT IN GOLD OR GOLD FUTURES BY

INSURANCE COMPANIES

 

History Note:        Authority G.S. 58-9(I); 58-79; 58-79.1;

Eff. February 1, 1976;

Repealed Eff. March 1, 2004.

 

11 NCAC 11C .0111          INVESTMENT IN THE INTERNATIONAL BANK

FOR RECONST AND DEV

 

History Note:        Authority G.S. 58‑9(1); 58‑79;

58‑79.1;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0112          MODEL CUSTODIAL AGREEMENT

 

History Note:        Authority G.S. 58‑79; 58‑79.1;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. April 1, 1996.

 

 

 

11 NCAC 11C .0113          MODEL CUSTODIAL AND FISCAL AGENCY

AGREEMENT

 

History Note:        Authority G.S. 58‑79; 58‑79.1;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. February 1, 1996.

 

 

 

11 NCAC 11C .0114          CERTIFICATES OF CONTRIBUTION

Every domestic insurance company may, upon petition to the

Commissioner and upon receipt of his approval thereof, issue certificates of

contribution of surplus for the reasons and purposes set forth in the petition

to the Commissioner.

Approval of the issuance of certificates of contributions

may be granted only upon the following conditions and will be effective only as

to transactions performed in conformity therewith:

(1)           No certificate evidencing the contribution under

authorization hereof shall be issued except substantially in the form and text

as may be approved by the Commissioner.

(2)           No commission, selling or other expense is to be

paid or incurred in respect to any transaction authorized, except that regular

salaried employees of the petitioner may perform any and all acts necessary,

convenient or advisable in connection with the transactions authorized, fees

may be paid for legal counsel, accounting and related services, and petitioner

may incur and pay other normal expense incurred in connection with the issuance

of the certificates of contribution.

(3)           No advertisement, prospectus, or other writing

relating to the certificates of contribution, except regular business

correspondence relating to specific problems peculiar to the parties thereto,

shall be issued, circulated or published until after the same has been filed

with and authorized in writing by the Commissioner.

(4)           At any time upon the request of the Commissioner

and in any event within 30 days from and after the issuance of any certificate

of contribution and after the completion of the transactions authorized,

petitioner shall make and file with said commissioner its verified report

setting forth the transactions accomplished pursuant to the authority granted,

and setting forth the date of issuance of the certificate of contribution, the

proceeds derived therefrom and the disposition of such proceeds, and petitioner

shall attach to such report a conformed copy of the contribution certificates

issued pursuant to said authorization.

(5)           In any financial statement required by law to be

filed by petitioner with the Commissioner, or which may be published or

distributed by petitioner, the principal sum of and accrued interest of these

and any other outstanding certificates of contribution, which has not become a

liability in accordance with the terms thereof and is not reported in such

financial statement as a liability, shall be reported according to the

instructions for completing the appropriate NAIC financial statement blank. 

Such amount shall be reported on the appropriate line on page 3 of the

financial statement as "certificates of contribution".  Other

descriptions, such as "debentures", "surplus notes", "guaranty

fund", or "guaranteed certificates", are deemed misleading and

are not permitted.

(6)           The Commissioner may, from time to time, for cause

amend, continue or alter his approval or temporarily suspend the rights of the

petitioner hereunder or may revoke this authority.

(7)           Unless revoked, suspended, or amended or continued

upon due petition therefor filed before the expiration date hereof the

authority granted hereunder is valid for a period of five years and such

authority shall automatically terminate on the close of business on the last

day of the month in which this authority was originally granted.

Certificates of contribution issued hereunder are not to be

construed as guaranty fund certificates as specifically provided for under G.S.

58‑12‑1 and 58‑8‑20.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑163;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Amended Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0115          VALUATION OF BONDS AND OTHER EVIDENCES

OF DEBT

11 NCAC 11C .0116          AMORTIZED VALUES OF BONDS OR OTHER

EVIDENCES OF DEBT

 

History Note:        Authority G.S. 58‑80;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0117          CONFLICT OF INTEREST STATEMENTS MUST

BE EXECUTED ANNUALLY

Conflict of interest statements shall be executed annually

by the officers, directors, trustees, attorneys‑in‑fact, and

administrative personnel of every domestic insurer subject to G.S. 58, Articles

1 through 67.

Any conflicts of interest disclosed thereon shall be

presented to the board of directors or trustees of the company for a

determination of its acceptability or the remedial disposition thereof.

 

History Note:        Authority G.S. 58‑2‑40;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Amended Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0118          COLLECTION PROCEDURES FOR EXAMINATION

EXPENSE

 

History Note:        Authority G.S. 58‑2‑40; 58‑2‑133(c);

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Amended Eff. April 1, 1993; January 14, 1980;

Repealed Eff. February 1, 1996.

 

 

 

11 NCAC 11C .0119          MORTGAGE LOANS TO BE SOLD WITHOUT

RECOURSE

First mortgage loans on unencumbered fee simple real estate,

whether permanent term loans or construction loans, may not be sold to a third

party unless the evidence of debt and the mortgage or deed of trust is

physically endorsed to reflect that said mortgage loan is being sold without

recourse to the insurer.

 

History Note:        Authority G.S. 58-2-40(1); 58-7-85;

58-7-90;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978.

 

11 NCAC 11C .0120          VALUATION OF INVESTMENTS: VALUATIONS

OF SECURITIES MANUAL

 

History Note:        Authority G.S. 58‑9; 58‑79;

58‑79.1;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. April 1, 1994.

 

 

 

11 NCAC 11C .0121          STOCK OPTIONS: GENERAL

 

History Note:        Authority G.S. 58‑79; 58‑79.1;

Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0122          SALE OF EXCHANGE: TRADED CALL OPTIONS

 

History Note:        Authority G.S. 58-79; 58-79.1;

Eff. February 28, 1978;

Repealed Eff. March 1, 2004.

 

11 NCAC 11C .0123          PURCHASE OF EXCHANGE: TRADED CALL

OPTIONS

 

History Note:        Authority G.S. 58‑79; 58‑79.1;

Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0124          ACCOUNTING PROCEDURES

11 NCAC 11C .0125          VALUATION

11 NCAC 11C .0126          PROHIBITION AGAINST SPECULATING IN

OPTIONS

 

History Note:        Authority G.S. 58-79; 58-79.1;

Eff. February 28, 1978;

Repealed Eff. March 1, 2004.

 

11 NCAC 11C .0127          SEVERABILITY

11 NCAC 11C .0128          DEFINITIONS

 

History Note:        Authority G.S. 58‑79; 58‑79.1;

Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0129          FORM OF REPORTS OF EXAMINATION:

FOREIGN COMPANIES

The reports on examination prepared by the domiciliary

insurance department of a foreign company as a result of a triennial

examination, special examination or any other type of examination of a foreign

insurance company licensed to do business in North Carolina shall be certified.

 

History Note:        Authority G.S. 58‑2‑40; 58‑2‑132;

Eff. February 28, 1978;

Amended Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0130          CREDIT FOR REINSURANCE

 

History Note:        Filed as a Temporary Adoption Eff.

September 12, 1991, for a period of 180 days to expire on

March 10, 1992;

Authority G.S. 58‑2‑40(1); 58‑7‑1;

Expired March 10, 1992.

 

 

 

11 NCAC 11C .0131          VALUATION OF DEBT SECURITIES

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑190;

Temporary Adoption Eff. January 1, 1992 for a period of 180 days to expire on

June 29, 1992;

Eff. May 1, 1992;

Repealed Eff. March 1, 2004.

 

11 NCAC 11C .0132          ACCOUNTING FOR SALVAGE AND SUBROGATION

Whenever any insurance company is operating in a manner that

is hazardous to its policyholders, creditors, or the general public considering

the standards set out in G.S. 58-30-60(b), or whenever any insurance company is

"impaired", as defined in G.S. 58-30-12(a)(2), or

"insolvent", as defined in G.S. 58-30-10(13), the Commissioner shall

disregard any credit taken by the company in any annual or interim financial

statement filed with the Department for salvage or subrogation recoveries until

the recoveries have been reduced to cash or its equivalent.  Salvage or

subrogation recoveries reduced to cash or its equivalent shall be accounted for

as an offset to losses paid.  This Rule does not apply to title or mortgage

guaranty insurers.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑162;

Eff. April 1, 1993;

Amended Eff. February 1, 1996.

 

 

 

11 NCAC 11C .0133          ACCOUNTING FOR LIFE AND HEALTH

REINSURANCE AGREEMENTS

When an insurer cedes business applicable to G.S. 58‑7‑31(d)(1),

the insurer must account for the transaction in accordance with G.S. 58‑7‑31(d)(2). 

For the purpose of this Rule, any increase in surplus shall be accounted for as

illustrated in the following examples:

(1)           on the last day of calendar year N, company XYZ

pays a twenty million dollar ($20,000,000) initial commission and expense

allowance to company ABC for reinsuring an existing block of business. 

Assuming a 34 percent tax rate, the next increase in surplus at inception is

thirteen million two hundred thousand dollars ($13,200,000) [twenty million

minus six million eight hundred thousand dollars ($20 million ‑ $6.8

million)] which is reported on the "Aggregate write‑ins for gains

and losses in surplus" line in the Capital and Surplus account.  Six

million eight hundred thousand dollars ($6,800,000) [34 percent of twenty

million dollars ($20,000,000)] is reported as income on the "Commissions

and expense allowances on reinsurance ceded" line of the Summary of

Operations.

(2)           At the end of year N+l the business has earned four

million dollars ($4,000,000), ABC has paid five hundred thousand dollars

($500,000) in profit and risk charges in arrears for the year and has received

a one million dollar ($1,000,000) experience refund.  Company ABC's annual

statement would report one million six hundred and fifty thousand dollars

($1,650,000) [(66% of four million dollars ($4,000,000) ‑ one million

dollars ($1,000,000) ‑ five hundred thousand dollars ($500,000) up to a

maximum of thirteen million two hundred thousand dollars ($13,200,000)] on the

"Commissions and expense allowance on reinsurance ceded" line of the

Summary of Operations, and ‑ one million six hundred and fifty thousand

dollars ($1,650,000) on the "Aggregate write‑ins for gains and

losses in surplus" line of the Capital and Surplus account.  The

experience refund would be reported separately as a miscellaneous income item

in the Summary of Operations.

 

History Note:        Filed as a Temporary Adoption Eff.

January 21, 1994 for a period of 180 days or until the

permanent rule becomes effective, whichever is sooner;

Authority G.S. 58‑2‑40; 58‑7‑31;

Eff. April 1, 1994.

 

 

 

 

 

SECTION .0200 ‑ INVESTMENTS

 

11 NCAC 11C .0201          GENERAL NATURE

 

History Note:        Authority G.S. 58‑9;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. July 1, 1988.

 

 

 

11 NCAC 11C .0202          INVENTORY OF CAPITAL SURPLUS AND

RESERVE INVESTMENTS

11 NCAC 11C .0203          FOREIGN FIRE: CASUALTY AND MISC

COMPANIES: COMPLIANCE

11 NCAC 11C .0204          INVESTMENTS IN ELECTRONIC DATA

PROCESSING EQUIPMENT

 

History Note:        Authority G.S. 58‑9(1); 58‑79.1;

58‑79(d)(1);

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0205          ACCOUNTING FOR SALVAGE AND SUBROGATION

 

History Note:        Authority G.S. 58‑16; 58‑9;

Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0206          ACCOUNTING FOR PREMIUM OVER 90 DAYS

PAST DUE

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑162(5);

Eff. April 1, 1993;

Repealed Eff. March 1, 2004.

 

SECTION .0300 ‑ HEALTH MAINTENANCE ORGANIZATIONS

 

11 NCAC 11C .0301          GENERAL NATURE

 

History Note:        Authority G.S. 58‑9;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. July 1, 1988.

 

 

 

11 NCAC 11C .0302          INVENTORY OF RESERVE: CAPITAL AND

SURPLUS INVESTMENTS

11 NCAC 11C .0303          EXPLANATION OF BASKET CLAUSE N.C.G.S.

58‑79(A)(14)

11 NCAC 11C .0304          INVENTORY OF BASKET CLAUSE INVESTMENT

11 NCAC 11C .0305          CALCULATION OF LIMITATIONS ON BASKET CLAUSE

INVESTMENTS

11 NCAC 11C .0306          LIMITATIONS UNDER BASKET CLAUSE TO

PREVIOUS INVESTMENTS

 

History Note:        Authority G.S. 58‑79; 58‑79(a)(14);

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0307          FINANCIAL CERTIFICATION: HMO

After the

applicant has performed, or caused to be performed, a feasibility study on the

proposed operations of the HMO and has developed a specific plan of operation,

this information shall be submitted to the applicant's staff actuary, a

recognized actuarial consultant, or a recognized health care consultant for

completion of an actuarial projection of the anticipated operational results

for a three‑year period based on the initial working capital of the applicant,

any additional sources of funds to be provided, the proposed rate schedules,

the expected number of enrollees during the period, and the applicant's plan of

operation.  This projection shall include the following:

(1)        Certification

that the amount of money actually available for working capital is sufficient

to carry all acquisition costs and operating expenses for at least the three‑year

period and that the applicant is financially responsible and may reasonably be

expected to meet its obligations to enrollees and prospective enrollees on a

continuing basis;

(2)        Certification

that the rates to be charged by the applicant for prepaid health services are

neither excessive, inadequate nor unfairly discriminatory;

(3)        Determination

of an adequate reinsurance program to amply protect the applicant against large

claims arising in cases of major health care needs of enrollees, if the

financial condition of the applicant requires such a program; and

(4)        Consideration

be given in the three year projection to the possible effects of adverse

selection and over‑utilization of services by enrollees of the applicant.

 

History Note:        Authority G.S. 58‑2‑40; 58‑67‑10;

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0308          FOREIGN HMO:  SUCCESSFUL OPERATION

 

History Note:        Authority G.S. 58-2-40; 58-67-10;

Eff. April 1, 1993;

Amended Eff. April 1, 1994;

Repealed Eff. February 1, 2010.

 

11 NCAC 11C .0309          ADMITTED ASSETS: HMO

 

History Note:        Authority G.S. 58‑2‑40; 58‑2‑40(1);

58‑67‑20; 58‑67‑110(b);

Eff. April 1, 1993;

Repealed Eff. March 1, 2004.

 

11 NCAC 11C .0310          REINSURANCE AGREEMENTS: HMO

Reinsurance

Agreements entered into in accordance with G.S. 58‑67‑110(e) shall

be issued by insurance carriers licensed to do business in North Carolina.

 

History Note:        Authority G.S. 58‑2‑40; 58‑67‑110(e);

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0311          EXPANSION OF SERVICE AREA: HMO

(a) 

Applications for expansion of service area shall provide current data stated in

G.S. 58‑67‑10(c)(1) along with a feasibility study and market

survey of the proposed area as stated in 11 NCAC 11C .0307.

(b) 

Applications for expansion of service area must demonstrate at least a minimum

of one year of net operational gains by the applicant in the current approved

service area.

(c)  The

requirement of Paragraph (b) may be waived by the Commissioner if additional

capital as determined by the Commissioner is placed in the HMO, or if a

guaranty agreement approved in writing by the Commissioner, to pay for any loss

to enrollees claiming reimbursement due to the insolvency of the HMO is made. 

In order to qualify, the guaranteeing organization shall:

(1)        submit

to the jurisdiction of this State for actions arising under the guarantee;

(2)        submit

certified, audited annual financial statements to the Commissioner; and

(3)        appoint

the Commissioner to receive service of process in this State.

 

History Note:        Authority G.S. 58‑2‑40; 58‑67‑10;

Eff. April 1, 1993;

Amended Eff. April 1, 1994.

 

 

 

11 NCAC 11C .0312          FINANCIAL STATEMENTS: HMO

The annual and

quarterly financial reports to be filed by HMOs shall be on the HMO Blank as

adopted by the National Association of Insurance Commissioners and shall use

such instructions for the HMO Blank as may be adopted by the National

Association of Insurance Commissioners.

 

History Note:        Authority G.S. 58‑2‑40; 58‑67‑55;

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0313          NET EARNED INCOME DEFINITION: HMO

As used in G.S.

58-67-5(i), "net earned income" means the sum of net income or loss

and interest on surplus notes for the calendar year.

 

History Note:        Authority G.S. 58-2-40; 58-67-5(i);

Eff. February 1, 1996.

 

 

 

SECTION .0400 ‑ MORTGAGE GUARANTY INSURANCE

 

11 NCAC 11C .0401          GENERAL NATURE

11 NCAC 11C .0402          MORTGAGE GUARANTY INSURANCE: PURPOSE

 

History Note:        Authority G.S. 58‑9; 58‑9(1);

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. July 1, 1988.

 

 

 

11 NCAC 11C .0403          ACCOUNTING FOR MORTGAGE GUARANTY

INSURANCE

 

History Note:        Authority G.S. 58‑2‑40; 58‑2‑165;

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Amended Eff. April 1, 1993;

Repealed Eff. June 1, 2007.

 

11 NCAC 11C .0404          CONTINGENCY RESERVE: MORTGAGE GUARANTY

INSURANCE

 

History Note:        Authority G.S. 58-2-40(1);

Eff. February 1, 1976;

Readopted Eff. February 28, 1978;

Repealed Eff. June 1, 2007.

 

11 NCAC 11C .0405          POLICY FORMS: MORTGAGE GUARANTY

INSURANCE

All policy forms and endorsements of mortgage guaranty

insurance companies shall be filed with and be subject to approval of the

Commissioner of Insurance.

 

History Note:        Authority G.S. 58-2-40(1);

Eff. February 1, 1976;

Readopted Eff. February 28, 1978.

 

11 NCAC 11C .0406          APPRAISAL REVIEW FEES ARE PART OF

PREMIUM CHARGE

Appraisal review fees, as charged by mortgage guaranty

insurance companies, are considered to be a part of the premium charge for all

purposes, including unearned premium reserve, and are to be included as part of

the gross premiums as defined in North Carolina General Statute 105‑228.5.

 

History Note:        Authority G.S. 58-2-40(1);

Eff. February 1, 1976;

Readopted Eff. February 28, 1978.

 

11 NCAC 11C .0407          REPORT OF POLICYHOLDERS POSITION –

MORTGAGE GUARANTY INSURERS

Each mortgage guaranty insurance company doing business in

this State shall file with the Commissioner a Mortgage Guaranty Insurers Report

of Policyholders Position form, which is available at www.ncdoi.com.

 

History Note:        Authority G.S. 58-2-40; 58-10-120;

58-10-125;

Eff. July 1, 2004;

Amended Eff. June 1, 2007.

 

SECTION .0500 ‑ REINSURANCE

 

11 NCAC 11C .0501          ACCREDITED REINSURER ‑

APPLICATION

(a)  Each

insurance company desiring a status of accredited reinsurer in this

jurisdiction must file an Application for Accredited Reinsurer in the form as

prescribed by the Commissioner, or Form AR‑1, Certificate of Assuming

Insurer, as adopted by the NAIC, and must satisfy the requirements of G.S. 58‑7‑21(b)(2).

(b)  Each

applicant must reflect verifiable policyholders' surplus of at least twenty

million dollars ($20,000,000) in its most recent annual financial statement

that presents the applicant's assets, liabilities, policyholders' surplus,

income, and expenses in substantial compliance with appropriate NAIC Annual

Statement Instructions, G.S. 58, and this Title.  However, an insurance company

may be considered for accredited reinsurer status with policyholders' surplus

of less than twenty million dollars ($20,000,000) if the application includes

proper support that adequate protection to ceding insurers will be provided by

the lesser amount of policyholders' surplus.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑21(b)(2);

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0502          ACCREDITED REINSURER ‑ FILING

REQUIREMENTS

(a)  Each

initial application for accredited reinsurer shall be accompanied by the

following financial and general information so that verification of the

applicant's qualifications may be accomplished:

(1)        Annual

statements for the preceding two years in the form required under G.S. 58‑2‑165;

(2)        A

certified copy of the applicant's latest Report on Examination;

(3)        A

copy of the applicant's CPA report for the most recent year;

(4)        Actuarial

certification of the applicant's loss reserves and loss adjustment expense

reserves for the most recent year; and

(5)        A

certificate of compliance from the home state verifying that the applicant is

licensed in at least one state.

(b)  Each

insurance company accepted as an accredited reinsurer must file on or before

March 1 of each year the following information for review and determination of

continued acceptability for such status:

(1)        An

Application for Accredited Reinsurer for the next fiscal year beginning July 1;

(2)        The

applicant's annual statement for the preceding year ended December 31 in the

form required under G.S. 58‑2‑165;

(3)        The

applicant's CPA report for the preceding year ended December 31;

(4)        Certification

of the applicant's loss reserves and loss adjustment expense reserves in such

form as required by the NAIC Annual Statement Instructions except as amended by

the Commissioner by rule or directive for the preceding year ended December 31;

and

(5)        A

current certificate of compliance.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑21(b)(2);

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0503          ACCREDITED REINSURER ‑

REVOCATION OF ACCREDITATION

The

Commissioner may revoke the accreditation of a reinsurer if its policyholders'

surplus falls below twenty million dollars ($20,000,000) or its continued

status as an accredited reinsurer is deemed to present a condition that is

hazardous to the insurance public of North Carolina.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑21(b)(2);

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0504          TRUST AGREEMENTS QUALIFIED UNDER G.S.

58-7-26

(a)  As used in

this Rule:

(1)        "Beneficiary"

means the entity for whose sole benefit the trust has been established and any

successor of the beneficiary by operation of law.  If a court of law appoints a

receiver as successor  in interest to the named beneficiary, then the named

beneficiary  is  the court -appointed domiciliary  conservator, rehabilitator,

or liquidator.

(2)        "Financial

institution" means a qualified United States financial institution as

defined in G.S. 58-7-26(c).

(3)        "Grantor"

means the entity that has established a trust for the sole benefit of the

beneficiary.  When established in conjunction with a reinsurance agreement, the

grantor is the unlicensed, unaccredited assuming insurer.

(4)        "Obligations"

means:

(A)       Reinsured

losses and allocated loss expenses paid by the ceding company, but not

recovered from the assuming insurer;

(B)       Reserves

for reinsured losses reported and outstanding;

(C)       Reserves

for reinsured losses incurred but not reported; and

(D)       Reserves

for allocated reinsured loss expenses and unearned premiums.

(b)  Required

conditions for trust agreements pursuant to G.S. 58-7-26.

(1)        The

trust agreement shall be entered into between the beneficiary, the grantor, and

a trustee, which  trustee shall be a qualified financial institution.

(2)        The

trust agreement shall create a trust account into which assets shall be

deposited.

(3)        All

assets in the trust account shall be held by the trustee at the trustee's

office in the United States.

(4)        The

trust agreement shall provide that:

(A)       The

beneficiary may withdraw assets from the trust account at any time, without

notice to the grantor, subject only to written notice from the beneficiary to

the trustee;

(B)       No other

statement or document is required to be presented in order to withdraw assets,

except that the beneficiary may be required to acknowledge receipt of withdrawn

assets;

(C)       It is not

subject to any conditions or qualifications outside of the trust agreement; and

(D)       It shall

not contain references to any other agreements or documents except as provided

for under Subparagraph (11) of this Paragraph.

(5)        The

trust agreement shall be established for the sole benefit of the beneficiary.

(6)        The

trust agreement shall require the trustee to:

(A)       Receive

assets and hold all assets in a safe place;

(B)       Determine

that all assets are in such form that the beneficiary, or the trustee upon

direction by the beneficiary, may whenever necessary negotiate any such assets,

without consent or signature from the grantor or any other person;

(C)       Furnish

to the grantor and the beneficiary a statement of all assets in the trust

account upon its inception and at intervals no less frequent than the end of

each calendar quarter;

(D)       Notify

the grantor and the beneficiary within 10 days after the making of any deposits

to or withdrawals from the trust account;

(E)       Upon

written demand of the beneficiary, immediately take  all steps to transfer  all

right, title, and interest in the assets held in the trust account to the

beneficiary and deliver physical custody of the assets to the beneficiary; and

(F)        Allow no

substitutions or withdrawals of assets from the trust account, except on

written instructions from the beneficiary; except that the trustee may, without

the consent of, but with notice to, the beneficiary and upon the call or

maturity of any trust asset, withdraw the asset upon the condition that the

proceeds are paid into the trust account.

(7)        The

trust agreement shall provide that at least 30 days, but not more 45 days,

before termination of the trust account, that written notification of

termination shall be delivered by the trustee to the beneficiary.

(8)        The

trust agreement shall be made subject to and governed by the laws of the state

in which the trust is established.

(9)        The

trust agreement shall prohibit invasion of the trust corpus for the purpose of

paying compensation to, or reimbursing the expense of, the trustee.

(10)      The

trust agreement shall provide that the trustee shall be liable for its own

negligence, willful misconduct or lack of good faith.

(11)      When

a trust agreement is established in conjunction with a reinsurance agreement

covering risks other than life, annuities, or accident and health, where it is

customary practice to provide a trust agreement for a specific purpose, such a

trust agreement may provide that the ceding insurer shall undertake to use and

apply amounts drawn upon the trust account, without diminution because of the

insolvency of the ceding insurer or the assuming insurer, for the following

purposes:

(A)       To pay or

reimburse the ceding insurer for the assuming insurer=s share under the

specific reinsurance agreement regarding any losses and allocated loss expenses

paid by the ceding insurer, but not recovered from the assuming insurer, or for

unearned premiums due to the ceding insurer if not otherwise paid by the

assuming insurer;

(B)       To make

payment to the assuming insurer of any amounts held in the trust account that

exceed 102 percent of the actual amount required to fund the assuming insurer=s

obligations under the specific reinsurance agreement; or

(C)       Where the

ceding insurer has received  notification of termination of the trust account

and where the assuming insurer=s entire obligations under the specific

reinsurance agreement remain unliquidated and undischarged 10 days before 

termination date, to withdraw amounts equal to the obligations and deposit

those amounts in a separate account, in the name of the ceding insurer in any

qualified United States financial institution as defined in G.S. 58-7-26(c)

apart from its general assets, in trust for such uses and purposes specified in

Parts (b)(11)(A) and (B) of this Rule as may remain executory after such

withdrawal and for any period after the termination date.

(12)      The

reinsurance agreement entered into in conjunction with the trust agreement may,

but need not, contain the provisions required by Part (d)(1)(B) of this Rule,

as long as these required conditions are included in the trust agreement.

(c)  Permitted

conditions for trust agreements.

(1)        The

trust agreement may provide that the trustee may resign upon delivery of a

written notice of resignation, effective not less than 90 days after receipt by

the beneficiary and grantor of the notice; and that the trustee may be removed

by the grantor by delivery to the trustee and the beneficiary of a written

notice of removal, effective not less than 90 days after receipt by the trustee

and the beneficiary of the notice;  provided that no such resignation or

removal shall be effective until a successor trustee has been duly appointed

and approved by the beneficiary and the grantor and all assets in the trust

have been duly transferred to the new trustee.

(2)        The

grantor may have the unqualified right to vote any shares of stock in the trust

account and to receive from time to time payments of any dividends or interest

upon any shares of stock or obligations included in the trust account.  Any

such interest or dividends shall be either forwarded promptly upon receipt to

the grantor or deposited in a separate account established in the grantor's

name.

(3)        The

trustee may be given authority to invest, and accept substitutions of, any

funds in the account; provided that no investment or substitution shall be made

without prior approval of the beneficiary, unless the trust agreement specifies

categories of investments acceptable to the beneficiary and authorizes the

trustee to invest funds and to accept substitutions which the trustee

determines are at least equal in market value to the assets withdrawn and that

are consistent with the restrictions in Part (d)(1)(B) of this Rule.

(4)        The

trust agreement may provide that the beneficiary may at any time designate a

party to which all or part of the trust assets are to be transferred. Such

transfer may be conditioned upon the trustee receiving, prior to or

simultaneously, other specified assets.

(5)        The

trust agreement may provide that, upon termination of the trust account, all

assets not previously withdrawn by the beneficiary shall, with written approval

by the beneficiary, be delivered over to the grantor.

(d)  Additional

conditions applicable to reinsurance agreements.

(1)        A

reinsurance agreement that is entered into in conjunction with a trust

agreement and the establishment of a trust account, may contain provisions

that:

(A)       Require

the assuming insurer to enter into a trust agreement and to establish a trust

account for the benefit of the ceding insurer, and specifying what the

agreement is to cover;

(B)       Stipulate

that assets deposited in the trust account shall be valued according to their

current fair market value and shall consist only of cash (United States legal

tender), certificates of deposit (issued by a United States bank and payable in

United States legal tender), or investments of the types permitted by G.S. 58,

Article 7 or any combination of the above;  provided that such investments are

issued by an entity  that is not the parent, subsidiary, or affiliate of either

the grantor or the beneficiary.  The reinsurance agreement may further specify

the types of investments to be deposited.  Where a trust agreement is entered

into in conjunction with a reinsurance agreement covering risks other than

life, annuities, and accident and health,  the trust agreement may contain the

provisions required by this paragraph in lieu of including such provisions in

the reinsurance agreement;

(C)       Require

the assuming insurer, prior to depositing assets  with the trustee, to execute

assignments or endorsements in blank; or to transfer legal title to the trustee

of all shares, obligations, or any other assets requiring assignments, in order

that the ceding insurer, or the trustee upon the direction of the ceding

insurer, may whenever necessary negotiate these assets without consent or

signature from the assuming insurer or any other entity;

(D)       Require

that all settlements of account between the ceding insurer and the assuming

insurer be made in cash or its equivalent; and

(E)       Stipulate

that the assuming insurer and the ceding insurer agree that the assets in the

trust account, established pursuant to the provisions of the reinsurance

agreement, may be withdrawn by the ceding insurer at any time, notwithstanding

any other provisions in the reinsurance agreement; and shall be utilized and

applied by the ceding insurer or its successors in interest by operation of

law, including any liquidator, rehabilitator, receiver, or conservator of such

company, without diminution because of insolvency on the part of the ceding

insurer or the assuming insurer, only for the following purposes:

(i)         To

reimburse the ceding insurer for the assuming insurer=s share of premiums

returned to the owners of policies reinsured under the reinsurance agreement

because of cancellations of such policies;

(ii)        To

reimburse the ceding insurer for the assuming insurer's share of surrenders and

benefits or losses paid by the ceding insurer pursuant to the provisions of the

policies reinsured under the reinsurance agreement;

(iii)       To

fund an account with the ceding insurer in an amount at least equal to the

deduction, for reinsurance ceded, from the ceding insurer liabilities for

policies ceded under the agreement.  The account shall include, but not be

limited to, amounts for policy reserves, claims and losses incurred (including

losses incurred but not reported), loss adjustment expenses, and unearned

premium reserves; and

(iv)       To

pay any other amounts the ceding insurer claims are due under the reinsurance

agreement.

(2)        The

reinsurance agreement may also contain provisions that:

(A)       Give the

assuming insurer the right to seek  approval from the ceding insurer to

withdraw from the trust account all or any part of the trust assets and

transfer those assets to the assuming insurer, provided:

(i)         The

assuming insurer shall, at the time of withdrawal, replace the withdrawn assets

with other qualified assets having a market value equal to the market value of

the assets withdrawn so as to maintain at all times the deposit in the required

amount, or

(ii)        After

withdrawal and transfer, the market value of the trust account is no less than

102 percent of the required amount.

The ceding

insurer shall not unreasonably or arbitrarily withhold its approval.

(B)       Provide

for:

(i)         The

return of any amount withdrawn in excess of the actual amounts required for

Subparts (d)(1)(E)(i), (ii) and (iii), or in the case of Subpart (d)(1)(E)(iv)

of this Rule, any amounts that are subsequently determined not to be due; and

(ii)        Interest

payments, at a rate not in excess of the prime rate of interest, on the amounts

held pursuant to Subpart (d)(1)(E)(iii) of this Rule.

(C)       Permit

the award by any arbitration panel or court of competent jurisdiction of:

(i)         Interest

at a rate different from that provided in Subpart (d)(2)(B)(ii) of this Rule,

(ii)        Court

of arbitration costs,

(iii)       Attorney's

fees, and

(iv)       Any

other reasonable expenses.

(3)        Financial

reporting. A trust agreement may be used to reduce any liability for

reinsurance ceded to an unauthorized assuming insurer in financial statements

required to be filed with the Department in compliance with the provisions of

this Rule when established on or before the date of filing of the financial

statement of the ceding insurer.  Further, the reduction for the existence of

an acceptable trust account may be up to the current fair market value of

acceptable assets available to be withdrawn from the trust account at that

time, but such reduction shall be no greater than the specific obligations

under the reinsurance agreement that the trust account was established to

secure.

(4)        Existing

agreements.  Notwithstanding the effective date of this Rule, any trust

agreement in existence before January 1, 1996, will continue to be acceptable

until June 30, 1996, at which time the agreements will have to be in full

compliance with this Rule for the trust agreement to be acceptable.

(5)        The

failure of any trust agreement to specifically identify the beneficiary as

defined in Paragraph (a) of this Rule shall not be construed to affect any

actions or rights that the Commissioner may take or possess pursuant to the

provisions of the laws of this State.

 

History Note:        Authority G.S. 58-2-40; 58-7-21; 58-7-26;

Eff. February 1, 1996.

 

 

 

11 NCAC 11C .0505          LETTERS OF CREDIT

(a)  As used in

this Rule:

(1)        "Beneficiary"

means the entity for whose benefit the letter of credit has been established

and any successor of the beneficiary by operation of law.  If a court of law

appoints a receiver as successor in interest to the named beneficiary, then the

named beneficiary is the court-appointed domiciliary conservator,

rehabilitator, or liquidator.

(2)        "Financial

Institution" means a qualified United States financial institution as

defined in G.S. 58-7-26(b).

(b)  In order

to qualify under G.S. 58-7-26(a)(3), a letter of credit must be clean,

irrevocable, unconditional and issued or confirmed by a qualified United States

financial institution as defined in G.S. 58-7-26(b).  The letter of credit shall

contain an issue date and date of expiration and shall stipulate that the

beneficiary need only draw a sight draft under the letter of credit and present

it to obtain funds and that no other document need be presented.  The letter of

credit shall indicate that it is not subject to any condition or qualifications

outside of the letter of credit.  The letter of credit itself shall not contain

reference to any other agreements, documents, or entities, except as provided

in Subparagraph (i)(1) of this Rule.

(c)  The

heading of the letter of credit may include a boxed section that contains the

name of the applicant and other appropriate notations to provide a reference

for the letter of credit.  The boxed section shall be clearly marked to

indicate that such information is for internal identification purposes only.

(d)  The letter

of credit shall contain a statement to the effect that the obligation of the

qualified United States financial institution under the letter of credit is in

no way contingent upon reimbursement with respect thereto.

(e)  The term

of the letter of credit shall be for at least one year and shall contain an

"evergreen clause" which prevents the expiration of the letter of

credit without due notice from the issuer.  The "evergreen clause" shall

provide for a period of not less than thirty 30 days' notice before the

expiration or non-renewal date.

(f)  The letter

of credit shall state whether it is subject to and governed by the laws of this

State or the Uniform Customs and Practice for Documentary Credits of the

International Chamber of Commerce (Publication 400), and all drafts drawn

thereunder shall be presentable at an office in the United States of a

qualified United States financial institution.

(g)  If the

letter of credit is made subject to the Uniform Customs and Practice for

Documentary Credits of the International Chamber of Commerce (Publication 400);

then the letter of credit shall specifically address and make provision for an

extension of time to draw against the letter of credit in the event that one or

more of the occurrences specified in Article 19 of Publication 400 occur.

(h)  The letter

of credit shall be issued or confirmed by a qualified United States financial

institution authorized to issue letters of credit, pursuant to G.S. 58-7-26(b).

(i)         Reinsurance

agreement provisions:

(1)        The

reinsurance agreement in conjunction with which the letter of credit is

obtained may contain provisions that:

(A)       Require

the assuming insurer to provide letters of credit to the ceding insurer and

specify what they are to cover.

(B)       Stipulate

that the assuming insurer and ceding insurer agree that the letter of credit

provided by the assuming insurer pursuant to the provisions of the reinsurance

agreement may be drawn upon at any time, notwithstanding any other provisions

in the agreement, and shall be utilized by the ceding insurer or its successors

in interest only for one or more of the following reasons:

(i)         To

reimburse the ceding insurer for the assuming insurer's share of premiums

returned to the owners of policies reinsured under the reinsurance agreement on

account of cancellations of such policies;

(ii)        To

reimburse the ceding insurer for the assuming insurer's share of surrenders and

benefits or losses paid by the ceding insurer under the terms and provisions of

the policies reinsured under the reinsurance agreement;

(iii)       To

fund an account with the ceding insurer in an amount at least equal to the

deduction, for reinsurance ceded, from the ceding insurer's liabilities for

policies ceded under the agreement (such amount shall include, but not be

limited to, amounts for policy reserves, claims and losses incurred and

unearned premium reserves); and

(iv)       To

pay any other amounts the ceding insurer claims are due under the reinsurance

agreement.

(C)       All of

the provisions of Subparagraph (1) of this Paragraph shall be applied without

diminution because of insolvency on the part of the ceding insurer or assuming

insurer.

(2)        Nothing

contained in Subparagraph (1) of this Paragraph shall preclude the ceding

insurer and assuming insurer from providing for:

(A)       An

interest payment, at a rate not in excess of the prime rate of interest, on the

amounts held pursuant to Subaragraph (1)(B)(iii) of this Paragraph; or

(B)       The

return of any amounts drawn down on the letters of credit in excess of the

actual amounts required for the above or, in the case of Subpart (1)(B)(iv) of

this Paragraph, any amounts that are subsequently determined not to be due.

(3)        When

a letter of credit is obtained in conjunction with a reinsurance agreement

covering risks other than life, annuities, and accident and health, where it is

customary practice to provide a letter of credit for a specific purpose, then

the reinsurance agreement may, in lieu of Part (1)(B) of this Paragraph,

require that the parties enter into a "Trust Agreement", which may be

incorporated into the reinsurance agreement or be a separate document.

(j)  A letter

of credit may not be used to reduce any liability for reinsurance ceded to an

unauthorized assuming insurer in financial statements filed with the Department

unless an acceptable letter of credit with the filing ceding insurer as

beneficiary has been issued on or before the date of filing of the financial

statement.  The reduction for the letter of credit may be up to the amount

available under the letter of credit but no greater than the specified

obligation under the reinsurance agreement that the letter of credit was

intended to secure.

 

History Note:        Authority G.S. 58-2-40; 58-7-26;

Eff. February 1, 1996.

 

 

 

SECTION .0600 ‑ PREMIUMS IN THE COURSE OF COLLECTION

 

11 NCAC 11C .0601          DEFINITIONS

The definitions contained in G.S. 58‑19‑5 are

incorporated into this Section by reference.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑162;

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0602          APPLICABILITY

G.S. 58‑7‑162(6) applies when a person solely or

in combination with the person's affiliates owes, in any two of three

consecutive months, an insurer an amount that exceeds five percent of the

insurer's total premiums in course of collection.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑162;

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0603          COMPLIANCE‑TRUST ACCOUNT

(a)  When G.S. 58‑7‑162(6) applies under 11 NCAC

11C .0602, the premiums collected by the person or the person and its

affiliates and not remitted to the insurer may be held in a trust account with

a bank so that those premiums will qualify as allowable or admitted assets.

(b)  The trust account shall be an account held in the trust

department of a bank and evidenced by a written trust agreement that is in

substantial compliance with the Department's Model Trust Agreement.

(c)  The trustee bank shall be a national bank or a state

chartered bank that is a member of the Federal Deposit Insurance Corporation

and be independent from control of either the person, the person's affiliates,

or the insurer.

(d)  The trust account must be established within 60 days

after the end of the month in which the insurer becomes subject to G.S. 58‑7‑162(6)

under 11 NCAC 11C .0602.  The trust agreement must be submitted to and approved

by the Commissioner before becoming effective, and within that 60‑day

period.

(e)  The person and its affiliates must maintain separate

trust accounts, evidenced by written trust agreements, for each insurer subject

to G.S. 58‑7‑162(6).

(f)  Once a trust account is established, it shall be

maintained:

(1)           for as long as the person or its affiliates

produce business for the insurer, regardless of whether the person or its

affiliates continue to owe the insurer at least five percent of the insurer's

total premiums in course of collection; or

(2)           until the insurer requests and receives

authority from the Commissioner to cease using the trust account for the person

or its affiliates.  Such request shall not be made before 12 months after

establishing the trust account.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑162;

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0604          COMPLIANCE: LETTER OF CREDIT

(a)  When G.S. 58‑7‑162(6) applies under 11 NCAC

11C .0602, the premiums collected by the person or the person and its

affiliates and not remitted to the insurer may be secured by an unexpired,

clean, irrevocable letter of credit, payable to the insurer, so that those

premiums will qualify as allowable or admitted assets.

(b)  The amount of the letter of credit shall at all times

equal or exceed 125 percent of the liability of the person or the person and

its affiliates to the insurer for the premiums collected.

(c)  The letter of credit must be issued within 30 days

after the end of the month in which the insurer becomes subject to G.S. 58‑7‑162(6)

under 11 NCAC 11C .0602.  A certified copy of the executed letter of credit

shall be provided to the Commissioner.

(d)  The letter of credit shall be issued by a banking

institution whose financial condition has been determined by either the

Commissioner or the Securities Valuation Office of the NAIC to be acceptable to

issue such a letter of credit.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑162;

Eff. April 1, 1993.

 

 

 

11 NCAC 11C .0605          COMPLIANCE: FINANCIAL GUARANTY BOND

(a)  When G.S. 58‑7‑162(6) applies under 11 NCAC

11C .0602, the premiums collected by the person or the person and its

affiliates and not remitted to the insurer may be secured by a financial

guaranty bond acceptable to the Department, payable to the insurer, so that

those premiums will qualify as allowable or admitted assets.

(b)  The amount of the financial guaranty bond shall at all

times equal or exceed 125 percent of the liability of the person or the person

and its affiliates to the insurer for the premiums collected.

(c)  The financial guaranty bond must be issued within 30

days after the end of the month in which the insurer becomes subject to G.S. 58‑7‑162(6)

under 11 NCAC 11C .0602.  A certified copy of the executed financial guaranty

bond shall be provided to the Commissioner.

 

History Note:        Authority G.S. 58‑2‑40; 58‑7‑162;

Eff. April 1, 1993.