SENATE BILL 97104
BY SENATOR Matsunaka;
also REPRESENTATIVE McElhany.
CONCERNING THE CREATION OF A MARKET CONDUCT EXAMINATIONS
PROGRAM WITHIN THE DIVISION OF INSURANCE, AND, IN CONNECTION THEREWITH,
MAKING AN APPROPRIATION.
Be it enacted by the General Assembly of the State
of Colorado:
SECTION 1. 101202
(1) and (3), Colorado Revised Statutes, 1994 Repl. Vol., are amended
to read:
101202. Definitions.
As used in this part 2, unless the context otherwise requires:
(1) "Company" means any person
or group of persons engaging in or proposing or attempting to
engage in any transaction or kind of insurance or surety business
and any person or group of persons who may otherwise be subject
to any administrative, regulatory, or taxing authority of the
commissioner AS WELL AS ANY ADVISORY ORGANIZATION OR RATING ORGANIZATION
AS DEFINED IN SECTION 104402.
(3) "Examination" means a formal
financial examination or market conduct examination, as well as
informal investigations conducted by the commissioner for the
purpose of determining compliance with the law. MARKET CONDUCT
EXAMINATIONS MAY INCLUDE ROUTINE, TARGETED, FOLLOWUP, MULTISTATE,
OR DESK EXAMINATIONS.
SECTION 2. 101203
(1) and the introductory portion to 101203 (3), Colorado
Revised Statutes, 1994 Repl. Vol., are amended to read:
101203. Authority, scope,
and scheduling of examinations. (1) The
commissioner or the commissioner's designee may conduct an examination
or investigation of any company as often as the commissioner in
the commissioner's sole discretion deems appropriate but shall,
at a minimum, conduct a formal financial examination of every
insurer licensed in this state not less frequently than once every
five years; EXCEPT THAT THIS DOES NOT INCLUDE APPROVED NONADMITTED
INSURERS REGULATED IN ACCORDANCE WITH ARTICLE 5 OF THIS TITLE.
In scheduling FINANCIAL OR MARKET CONDUCT examinations and in
determining their nature, scope, and frequency, the commissioner
shall consider such matters as the results of financial statement
analyses and ratios, changes in management or ownership, actuarial
opinions, reports of independent certified public accountants,
COMPLAINT ANALYSES, UNDERWRITING AND CLAIMS PRACTICES, PRICING,
PRODUCT SOLICITATION, POLICY FORM COMPLIANCE, MARKET SHARE ANALYSES,
and other criteria as set forth in the most recent available edition
of the examiners' handbook adopted by the national association
of insurance commissioners.
(3) In lieu of an
A FINANCIAL examination under this part 2 of any foreign or alien
insurer licensed in this state, the commissioner may accept until
and including December 31, 1993,
an examination report on the company as prepared by the insurance
department for the company's state of domicile or portofentry
state; On and after January 1, 1994,
EXCEPT THAT such reports may only be accepted if:
SECTION 3. 101204
(1), (2), (6), and (9), Colorado Revised Statutes, 1994 Repl.
Vol., are amended to read:
101204. Conduct of examinations.
(1) (a) In conducting the examination, the examiners
shall observe those guidelines and procedures set forth in the
MOST RECENT AVAILABLE EDITION OF THE examiners' handbook adopted
by the national association of insurance commissioners and the
Colorado insurance examiners handbook. The commissioner may also
employ such other guidelines or procedures as the commissioner
may deem appropriate.
(b) An examination under this article
shall not be limited to an examination of the financial condition
of a company but may, in the discretion of the commissioner, also
include all other activities and affairs of the company.
(2) (a) Every company or person from
whom information is sought and all officers, directors, and agents
thereof shall provide to the examiners appointed
under subsection (1) of this section
timely, convenient, and free access at reasonable hours at its
offices to all books, records, accounts, papers, tapes, computer
records, and other documents relating to the property, assets,
business, and affairs of the company being examined. IF THE EXAMINATION
IS AN EXAMINATION AS DEFINED IN SECTION 101202 (3),
SUCH COMPANY OR PERSON SHALL MAKE SUCH BOOKS, RECORDS, AND DOCUMENTS
AVAILABLE FOR EXAMINATION OR INSPECTION AT THE OFFICE LOCATION
OF THE DIVISION WHEN THE COMMISSIONER DETERMINES THAT IT IS REASONABLY
COSTEFFECTIVE TO DO SO. The officers, directors, employees,
and agents of the company or person must facilitate the examination
and aid in the examination so far as it is in their power to do
so.
(b) (I) The refusal of any company
or any of its officers, directors, employees, or agents to submit
to examination or to comply with any reasonable written request
of the examiners shall be grounds for suspension, revocation,
denial, or nonrenewal of any license or authority held by the
company and subject to the commissioner's jurisdiction.
(II) Proceedings for any suspension or
revocation pursuant to this subsection (2) shall be conducted
in accordance with section 101111.
(6) (a) In addition to any other
powers granted to the commissioner in this section or in any other
provision of law, the commissioner may require any company, entity,
or new applicant to be examined by independent examiners certified
by the society of financial examiners OR THE INSURANCE REGULATORY
EXAMINERS SOCIETY, actuaries who are members of the American academy
of actuaries, or by any other qualified and competent loss reserve
specialists, independent risk managers, independent certified
public accountants, AUDITORS, other examiners of insurance companies,
or combination of such persons; and any domestic company may make
a request to the commissioner to be so examined.
(b) The commissioner may accept, as part
of any such examination, reports made by any person qualified
and competent to conduct the examination as set forth in this
subsection (6). No such person nor any member of such person's
immediate family shall be officers of, connected with, or financially
interested in the company, entity, or applicant being examined
other than as policyholders, nor shall they be financially interested
in any other corporation or person affected by the examination
or by any related investigation or hearing. Such persons shall
keep strictly confidential all information, regardless of its
source, obtained through any examination or about any examinee
and shall disclose such information only to the commissioner or
the examinee upon the specific request of either. The commissioner
shall establish guidelines for assuring the neutrality of those
persons to be authorized to supplement the examination procedures
authorized in this section. The reasonable expenses and charges
of persons so retained or designated shall be paid directly by
the examinee to such persons. The examinee may contest the amount
of fees, costs, and expenses charged to it by such persons by
filing an objection with the commissioner which sets forth the
charges which the examinee considers to be unreasonable and the
basis for the claim that the charges are unreasonable. No amounts
which are so disputed will be due to the examiner unless and until
the commissioner has reviewed the objection and made a written
finding that the disputed charges were reasonable in relation
to the examination performed.
(9) (a) The costs of FINANCIAL examinations
of foreign companies made outside the borders of this state and
of executive or branch offices of domestic companies located outside
the borders of this state shall be paid by the company examined
and shall include the expenses of the commissioner and the commissioner's
assistants, who shall be paid the same compensation as other examiners
on such examinations.
(b) THE REASONABLE EXPENSES OF MARKET CONDUCT EXAMINATIONS
SHALL BE PAID BY THE COMPANY EXAMINED BUT SHALL NOT INCLUDE THE
COMPENSATION OF THE COMMISSIONER AND THE COMMISSIONER=S
ASSISTANTS.
(c) (I) THERE IS A PRESUMPTION THAT
A MARKET CONDUCT EXAMINATION OF A DOMESTIC COMPANY SHALL BE CONDUCTED
BY THE COMMISSIONER OR THE COMMISSIONER'S ASSISTANTS, UNLESS THE
COMMISSIONER DETERMINES THAT GOOD CAUSE EXISTS TO HAVE THE EXAMINATION
CONDUCTED BY A CONTRACT EXAMINER.
(II) THE COMMISSIONER SHALL DEVELOP RULES
FOR DETERMINING WHEN CONTRACT MARKET CONDUCT EXAMINERS CAN BE
USED. SUCH RULES SHALL INCLUDE, BUT SHALL NOT BE LIMITED TO, SUCH
FACTORS AS OUTOFSTATE TRAVEL REQUIREMENTS, WORKLOAD
NEEDS, SPECIAL EXPERTISE REQUIRED FOR THE EXAMINATION, AND MARKET
ISSUES REQUIRING AN UNANTICIPATED EXAMINATION.
(d) When insurance companies not admitted
AUTHORIZED to do business in this state, companies adjudged insolvent,
or companies for any cause withdrawing from the state neglect,
fail, or refuse to pay the REASONABLE charges for examination
as approved by the commissioner, such charges shall be paid by
the state treasurer from the general fund upon the order of the
commissioner, and the amount so paid shall be a first lien upon
all assets and property of such company and may be recovered by
suit by the attorney general on behalf of the state of Colorado
and restored to the general fund.
SECTION 4. 101205
(1) and (8), Colorado Revised Statutes, 1994 Repl. Vol., are amended
to read:
101205. Examination reports
and records. (1) The provisions
of this section shall apply to financial examinations AND MARKET
CONDUCT EXAMINATIONS, BUT SHALL NOT APPLY TO INFORMAL INVESTIGATIONS
OF CONSUMER COMPLAINTS EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH
(b) OF SUBSECTION (8) OF THIS SECTION. Examination reports shall
comprise only facts appearing upon the books, records, or other
documents of the company, its agents or other persons examined,
or as ascertained from the testimony of its officers or agents
or other persons examined concerning its affairs, and such conclusions
and recommendations as the examiners find reasonably warranted
based upon the facts.
(8) Confidentiality of ancillary information.
(a) All working papers, recorded information, documents,
and copies thereof which are produced or obtained by or disclosed
to the commissioner or any other person in the course of an
A FINANCIAL OR MARKET CONDUCT examination made under this part
2 shall be given confidential treatment, are not subject to subpoena,
and may not be made public by the commissioner or any other person
except to the extent provided in subsection (5) of this section;
except that access to such materials may be granted to the national
association of insurance commissioners. Disclosure of the said
materials shall be made only upon the prior written agreement
of the recipient to hold such information confidential as required
by this section or upon the prior written consent of the company
to which it pertains.
(b) WHEN AN INFORMAL INVESTIGATION OF
A CONSUMER COMPLAINT IS CONDUCTED BY THE COMMISSIONER, ALL WORKING
PAPERS, CLAIM FILES, RECORDED INFORMATION, AND DOCUMENTS, AND
ALL COPIES THEREOF, THAT ARE PRODUCED OR OBTAINED BY OR DISCLOSED
TO THE COMMISSIONER OR ANY OTHER PERSON IN THE COURSE OF AN INFORMAL
INVESTIGATION SHALL BE GIVEN CONFIDENTIAL TREATMENT UNTIL THE
INFORMAL INVESTIGATION IS CONCLUDED BY THE COMMISSIONER. AFTER
AN INFORMAL INVESTIGATION IS CONCLUDED, THE RECORDS SHALL NO LONGER
BE CONSIDERED CONFIDENTIAL EXCEPT AS OTHERWISE PROVIDED IN ARTICLE
72 OF TITLE 24, C.R.S., RELATING TO PUBLIC RECORDS.
SECTION 5. 103207
(1) (b), Colorado Revised Statutes, 1994 Repl. Vol., as amended,
is amended to read:
103207. Fees paid by insurance
companies. (1) There shall be paid
to the division of insurance by every entity regulated by the
division of insurance in this state the following:
(b) In each year subsequent to 1992, in
addition to any fee collected under paragraph (a) of this subsection
(1), every insurance company, interinsurance company, fraternal
benefit society, health maintenance organization, and nonprofit
hospital, medicalsurgical, and health service corporation
licensed or authorized in this state which
THAT is regulated by the division of insurance shall make an annual
nonrefundable payment on or before March 1 of each year based
on the schedule specified in this paragraph (b) at the time of
authorization and each subsequent renewal year. For nonadmitted
insurers and accredited reinsurers, the fee specified in this
paragraph (b) shall be considered to include the fee pursuant
to paragraph (a) of this subsection (1):
(I) For insurance companies, interinsurance
companies, fraternal benefit societies, health maintenance organizations,
and nonprofit hospital, medicalsurgical, and health service
corporations which
THAT have prior year's direct written premiums, gross contract
funds, or charges received in Colorado not exceeding one million
dollars, a fee of five
SIX hundred SEVENTY dollars;
(II) For insurance companies, interinsurance
companies, fraternal benefit societies, health maintenance organizations,
and nonprofit hospital, medicalsurgical, and health service
corporations which
THAT have prior year's direct written premiums, gross contract
funds, or charges received in Colorado in excess of one million
dollars but not exceeding ten million dollars, a fee of one
TWO thousand five hundred
TEN dollars. Any insurance company which
THAT did not write at least eighty thousand dollars of taxable
premiums in the previous year in Colorado shall not exceed the
fee as otherwise would have been payable pursuant to subparagraph
(I) of this paragraph (b).
(III) For insurance companies, interinsurance
companies, fraternal benefit societies, health maintenance organizations,
and nonprofit hospital, medicalsurgical, and health service
corporations which
THAT have prior year's direct written premiums, gross contract
funds, or charges received in Colorado in excess of ten million
dollars, a fee of two
THREE thousand five
THREE hundred FORTYFIVE dollars. Any insurance company which
THAT did not write at least one hundred twenty thousand dollars
of taxable premium in Colorado shall not exceed the fee as otherwise
would have been payable pursuant to subparagraph (II) of this
paragraph (b).
SECTION 6. Appropriation.
(1) In addition to any other appropriation, there is hereby appropriated,
out of any moneys in the division of insurance cash fund not otherwise
appropriated, to the department of regulatory agencies, for the
fiscal year beginning July 1, 1997, the sum of five hundred three
thousand two hundred sixtytwo dollars ($503,262) and 7.0
FTE, or so much thereof as may be necessary, for the implementation
of this act.
(2) In addition to any other appropriation, there
is hereby appropriated to the department of law, for the fiscal
year beginning July 1, 1997, the sum of one hundred thousand eight
hundred thirtyone dollars ($100,831) and 1.4 FTE, or so
much thereof as may be necessary, for the provision of legal services
to the department of regulatory agencies related to the implementation
of this act. Said sum shall be from cash funds exempt received
from the department of regulatory agencies out of the appropriation
made in subsection (1) of this section.
(3) In addition to any other appropriation, there
is hereby appropriated to the department of personnel, division
of administrative hearings, for the fiscal year beginning July
1, 1997, the sum of seventeen thousand one hundred eightytwo
dollars ($17,182) and 0.1 FTE, or so much thereof as may be necessary,
for the provision of administrative law judge services to the
department of regulatory agencies related to the implementation
of this act. Said sum shall be from cash funds exempt received
from the department of regulatory agencies out of the appropriation
made in subsection (1) of this section.
SECTION 7. Safety
clause. The general assembly hereby finds, determines, and
declares that this act is necessary for the immediate preservation
of the public peace, health, and safety.
____________________________ ____________________________
Tom Norton Charles E. Berry
PRESIDENT OF SPEAKER OF THE HOUSE
THE SENATE OF REPRESENTATIVES
____________________________ ____________________________
Joan M. Albi Judith M. Rodrigue
SECRETARY OF CHIEF CLERK OF THE HOUSE
THE SENATE OF REPRESENTATIVES
APPROVED________________________________________
_________________________________________
Roy Romer
GOVERNOR OF THE STATE OF COLORADO