§ 8301. Definitions
As used in this chapter:
(1) “Adjusted risk-based capital report” means a risk-based capital report that has been
adjusted by the Commissioner in accordance with subsection 8302(e) of this title.
(2) “Commissioner” means the Commissioner of Financial Regulation.
(3) “Corrective order” means an order issued by the Commissioner specifying corrective
actions that the Commissioner has determined are required under this chapter.
(4) “Domestic insurer” means any insurance company organized in this State under chapter
101, subchapter 1 of this title, any fraternal benefit society organized in this State
under chapter 121 of this title, any health maintenance organization organized in
this State under chapter 139 of this title, and any entity organized in this State
under chapter 123 or 125 of this title.
(5) “Fraternal benefit society” means any insurance company licensed under chapter 121
of this title.
(6) “Foreign insurer” means any entity licensed to transact business in this State that
is required to file a risk-based capital statement in the state where the entity is
domiciled.
(7) “Health maintenance organization” means any entity organized in the State under chapter
139 of this title.
(8) “Life or health insurer” means an insurance company that insures lives or health as
defined in subdivisions 3301(a)(1) and (2) of this title, an entity organized in this
State under chapter 123 or 125 of this title, or a licensed property and casualty
insurer writing only accident and health insurance.
(9) “NAIC” means the National Association of Insurance Commissioners.
(10) “Negative trend” means, with respect to a life or health insurer or fraternal benefit
society, negative trend over a period of time as determined in accordance with the
trend test calculation included in the life or fraternal risk-based capital instructions.
(11) “Property and casualty insurer” means any insurance company that insures property
or casualty as defined in subdivisions 3301(a)(3) and (7) of this title, but shall
not include monoline mortgage guaranty insurers, financial guaranty insurers, or title
insurers.
(12) “Risk-based capital instructions” means the risk-based capital report form and the
related instructions adopted by the NAIC and approved by the Commissioner.
(13) “Risk-based capital level” means one of the following four levels: company action
level risk-based capital, regulatory action level risk-based capital, authorized control
level risk-based capital, or mandatory control level risk-based capital.
(A) “Company action level risk-based capital” means, with respect to any insurer, the
product of 2.0 and its authorized control level risk-based capital.
(B) “Regulatory action level risk-based capital” means, with respect to any insurer, the
product of 1.5 and its authorized control level risk-based capital.
(C) “Authorized control level risk-based capital” means the number determined under the
risk-based capital formula in accordance with the risk-based capital instructions.
(D) “Mandatory control level risk-based capital” means, with respect to any insurer, the
product of 0.70 and its authorized control level risk-based capital.
(14) “Risk-based capital plan” means a comprehensive financial plan containing the elements
specified in subsection 8303(b) of this title. If the Commissioner rejects the risk-based capital plan and it is revised by the
insurer, with or without the Commissioner’s recommendation, the plan shall be called
the “revised risk-based capital plan.”
(15) “Risk-based capital report” means the report required in section 8302 of this title.
(16) “Total adjusted capital” means the sum of:
(A) the insurer’s statutory capital and surplus reported in the insurer’s annual statement
under section 3561 of this title; and
(B) such other items, if any, as the risk-based capital instructions may provide. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994; amended 1995, No. 180 (Adj. Sess.), § 38(a); 2009, No. 137 (Adj. Sess.), § 14; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 29, § 36, eff. May 13, 2013; 2021, No. 25, § 11, eff. May 12, 2021.)
§ 8302. Risk-based capital report
(a) Each domestic insurer shall annually prepare and submit to the Commissioner a report
of its risk-based capital level for the calendar year just ended. The report shall
be filed prior to March 1 each year and shall be in the form and contain such information
as is required by the risk-based capital instructions.
(b) Each domestic insurer shall file its risk-based capital report:
(1) with the NAIC in accordance with the risk-based capital instructions; and
(2) with the insurance commissioner of any state in which the insurer is authorized to
do business, if the insurance commissioner of that state has notified the insurer
of its request in writing. Any report required under this subdivision shall be filed
not later than the later of 15 days from the receipt of notice to file the report
with that state or the filing date provided in subsection (a) of this section.
(c) A life or health insurer’s or fraternal benefit society’s risk-based capital shall
be determined in accordance with the formula set forth in the risk-based capital instructions.
The formula shall take into account and may adjust for the covariance between the
following factors determined in each case by applying the factors in the manner set
forth in the risk-based capital instructions:
(1) the risk with respect to the insurer’s assets;
(2) the risk of adverse insurance experience with respect to the insurer’s liabilities
and obligations;
(3) the interest rate risk with respect to the insurer’s business; and
(4) all other business risks and such other relevant risks as are set forth in the risk-based
capital instructions.
(d) A property and casualty insurer’s or health maintenance organization’s risk-based
capital shall be determined in accordance with the formula set forth in the risk-based
capital instructions. The formula shall take into account and may adjust for the covariance
between the following factors determined in each case by applying the factors in the
manner set forth in the risk-based capital instructions:
(1) asset risk;
(2) credit risk;
(3) underwriting risk; and
(4) all other business risks and such other relevant risks as are set forth in the risk-based
capital instructions.
(e) If a domestic insurer files a risk-based capital report that in the judgment of the
Commissioner is inaccurate, then the Commissioner shall adjust the risk-based capital
report to correct the inaccuracy and shall notify the insurer of the adjustment. The
notice shall contain a statement of the reason for the adjustment. A risk-based capital
report adjusted by the Commissioner under this subsection shall be referred to as
an “adjusted risk-based capital report.” (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994; amended 2013, No. 29, § 37, eff. May 13, 2013; 2021, No. 25, § 12, eff. May 12, 2021.)
§ 8303. Company action level event
(a) “Company action level event” means any of the following events:
(1) The filing of a risk-based capital report by an insurer that indicates that:
(A) the insurer’s total adjusted capital is greater than or equal to its regulatory action
level risk-based capital but less than its company action level risk-based capital;
(B) in the case of a life or health insurer or a fraternal benefit society, the insurer
or society has total adjusted capital that is greater than or equal to its company
action level risk-based capital but less than the product of its authorized control
level risk-based capital and 3.0 and has a negative trend;
(C) in the case of a property and casualty insurer, the insurer has total adjusted capital
that is greater than or equal to its company action level risk-based capital but less
than the product of its authorized control level risk-based capital and 3.0 and triggers
the trend test determined in accordance with the trend test calculation included in
the property and casualty risk-based capital instructions; or
(D) in the case of a health maintenance organization, the insurer has total adjusted capital
that is greater than or equal to its company action level risk-based capital but less
than the product of its authorized control level risk-based capital and 3.0 and triggers
the trend test determined in accordance with the trend test calculation included in
the health risk-based capital instructions.
(2) The notification by the Commissioner to the insurer of an adjusted risk-based capital
report that indicates an event in subdivision (1) of this subsection, provided the
insurer does not challenge the adjusted risk-based capital report under section 8307 of this title.
(3) If, under section 8307 of this title, an insurer challenges an adjusted risk-based capital report that indicates the event
in subdivision (1) of this subsection, the notification by the Commissioner to the
insurer that the Commissioner has, after a hearing, rejected the insurer’s challenge.
(b) An insurer shall prepare and submit to the Commissioner a risk-based capital plan
within 45 days of filing a risk-based capital report or within 45 days of a final
adjusted risk-based capital report showing a company action level event. The risk-based
capital plan shall be a comprehensive financial plan and shall:
(1) Identify the conditions in the insurer that contribute to the company action level
event.
(2) Contain proposals of corrective actions that the insurer intends to take that would
result in the elimination of the company action level event.
(3) Provide projections of the insurer’s financial results in the current year and at
least the four succeeding years, both in the absence of proposed corrective actions
and giving effect to the proposed corrective actions, including projections of statutory
operating income, net income, capital, and surplus. The projections for both new and
renewal business should include separate projections for each major line of business
and separately identify each significant income, expense, and benefit component.
(4) Identify the key assumptions impacting the insurer’s projections and the sensitivity
of the projections to the assumptions.
(5) Identify the quality of, and problems associated with, the insurer’s business, including
its assets, anticipated business growth and associated surplus strain, extraordinary
exposure to risk, mix of business, and use of reinsurance.
(c) The Commissioner shall notify the insurer whether the proposed risk-based capital
plan is approved within 60 days of its submission. If the Commissioner disapproves
the plan, the notice shall set forth the reasons for the disapproval and may notify
the insurer of revisions that will render the risk-based capital plan satisfactory
to the Commissioner. Upon notice that a proposed plan is disapproved, the insurer
shall prepare and submit a revised risk-based capital plan within 45 days of the Commissioner’s
notice of disapproval or, if the Commissioner’s notice of disapproval is appealed
under section 8307 of this title, within 45 days of a Commissioner’s determination adverse to the insurer.
(d) In the event of a notification by the Commissioner to an insurer that the insurer’s
risk-based capital plan or revised risk-based capital plan is unsatisfactory, the
Commissioner may at the Commissioner’s discretion, subject to the insurer’s right
to a hearing under section 8307 of this title, specify in the notification that the notification constitutes a regulatory action
level event.
(e) Each domestic insurer required to file a risk-based capital plan or revised risk-based
capital plan under this section shall file a copy of the plan with the insurance commissioner
in any state in which the insurer is authorized to do business if:
(1) such state has a provision that is substantially similar to section 8308 of this title; or
(2) the insurance commissioner of that state has notified the insurer of its request for
the filing in writing. Plans required to be filed under this subdivision shall be
filed not later than the later of:
(A) 15 days after notice to file a copy of its risk-based capital plan or revised risk-based
capital plan with the state; or
(B) the date on which the risk-based capital plan or revised risk-based capital plan is
required to be filed under section 8304 of this title. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994; amended 2009, No. 137 (Adj. Sess.), § 15; 2013, No. 29, § 38, eff. May 13, 2013; 2021, No. 25, § 13, eff. May 12, 2021.)
§ 8304. Regulatory action level event
(a) The following are deemed to be regulatory action level events and subject to the requirements
of this section:
(1) A risk-based capital report or final adjusted risk-based capital report that indicates
that the insurer’s total adjusted capital is greater than or equal to its authorized
control level risk-based capital, but less than its regulatory action level risk-based
capital.
(2) Late filing of a risk-based capital report that is not excused by the Commissioner
and cured within 10 days of the filing date.
(3) Failure to file a risk-based capital plan within the time provided in section 8303 of this title.
(4) Notice by the Commissioner that a plan submitted by the insurer under section 8303 of this title is disapproved and that the disapproval has been deemed by the Commissioner as constituting
a regulatory action level event.
(5) Notice by the Commissioner of a failure to adhere to its risk-based capital plan or
revised risk-based capital plan where the failure has a substantial adverse effect
on the ability of the insurer to eliminate the regulatory action level event in accordance
with its plan.
(b) An insurer shall prepare and submit to the Commissioner a risk-based capital plan
within 45 days of filing a risk-based capital report or within 45 days of notice of
a final adjusted risk-based capital report showing a regulatory action level event.
(c) The Commissioner shall order such examination and analysis as the Commissioner deems
necessary of the assets, liabilities, and operations of the insurer, including a review
of its risk-based capital plan or revised risk-based capital plan. Subsequent to the
examination or analysis, the Commissioner shall issue an order specifying such corrective
actions as the Commissioner shall determine are required. In determining corrective
actions, the Commissioner may take into account the results of any examination and
analysis of the insurer’s assets, liabilities, and operations, including any sensitivity
test undertaken pursuant to the risk-based capital instructions.
(d) The Commissioner may retain actuaries, investment experts, and other consultants as
the Commissioner deems necessary to review the insurer’s risk-based capital plan or
revised risk-based capital plan; examine or analyze the assets, liabilities, and operations
of the insurer; and formulate the corrective order with respect to the insurer. The
fees, costs, and expenses relating to consultants shall be borne by the affected insurer
or such other party as directed by the Commissioner. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994.)
§ 8305. Authorized control level event
(a) The following are deemed to be authorized control level events and subject to the
requirements of this section:
(1) A risk-based capital report or final adjusted risk-based capital report that indicates
that the insurer’s total adjusted capital is greater than or equal to its mandatory
control level risk-based capital but less than its authorized control level risk-based
capital.
(2) The failure of the insurer to comply with a corrective order after it is no longer
subject to appeal under section 8307 of this title.
(b) Upon the occurrence of an event described in subsection (a) of this section, the Commissioner
shall take such actions as he or she deems necessary to protect policyholders and
creditors of the insurer, including those actions permitted under section 8304 and
chapter 145 of this title. In the event the Commissioner seeks an order under chapter
145 of this title, the authorized control level event shall be deemed sufficient grounds
for the Commissioner’s order, and the Commissioner shall have the rights, powers,
and duties with respect to the insurer as are set forth in that chapter. In the event
the Commissioner takes actions under this subsection pursuant to an adjusted risk-based
capital report, the insurer shall be entitled to such protections as are afforded
to insurers under the provisions of section 7041 of this title pertaining to summary proceedings. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994.)
§ 8306. Mandatory control level event
(a) A risk-based capital report or final adjusted risk-based capital report that indicates
that the insurer’s total adjusted capital is less than its mandatory control level
risk-based capital shall be a mandatory control level event and subject to the requirements
of this section.
(b) Upon the occurrence of an event described in subsection (a) of this section, the Commissioner
shall take such actions as are necessary to place the insurer under regulatory control
under chapter 145 of this title. In the event the Commissioner seeks an order under
chapter 145 of this title, the mandatory control level event shall be deemed sufficient
grounds for issuance of an order, and the Commissioner shall have the rights, powers,
and duties with respect to the insurer as are set forth in chapter 145 of this title.
In the event the Commissioner takes actions under this subsection pursuant to an adjusted
risk-based capital report, the insurer shall be entitled to such protections as are
afforded to insurers under the provisions of section 7041 of this title pertaining to summary proceedings. Notwithstanding any of the foregoing, the Commissioner
may forego action for up to 90 days after the mandatory control level event if he
or she finds there is a reasonable expectation that the mandatory control level event
will be eliminated within the 90-day period. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994.)
§ 8307. Hearings
Upon receipt of any notice required under subsection 8302(e), 8303(c) or (d), subdivision
8304(a)(4) or (5), or subsection 8304(c) of this title, any insurer aggrieved by any action taken under those sections may appeal to the
Commissioner within five days of receipt of notice of the action. The hearing shall
be subject to 3 V.S.A. chapter 25. Upon receipt of the insurer’s request for a hearing, the Commissioner shall set
a date for the hearing, which date shall be not less than 10 nor more than 30 days
after the date of the insurer’s request. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994; amended 2013, No. 29, § 39, eff. May 13, 2013; 2021, No. 25, § 14, eff. May 12, 2021.)
§ 8308. Confidentiality and prohibition on announcements
(a) All risk-based capital reports, to the extent the information in the report is not
required to be set forth in a publicly available annual statement schedule, and risk-based
capital plans, including the results or report of any examination or analysis of an
insurer performed pursuant to this chapter and any corrective order issued by the
Commissioner pursuant to examination or analysis, with respect to any domestic insurer
or foreign insurer that are filed with the Commissioner, constitute information that
might be damaging to the insurer if made available to its competitors and therefore
shall be kept confidential and privileged by the Commissioner. This information shall
not be made available for public inspection and copying under the Public Records Act,
shall not be subject to subpoena, shall not be subject to discovery, and shall not
be admissible in evidence in any private civil action. However, the Commissioner is
authorized to use the documents, materials, or other information for the purpose of
enforcement actions taken by the Commissioner under this chapter or any other provision
of the insurance laws of this State.
(b) Neither the Commissioner nor any person who received documents, materials, or other
information while acting under the authority of the Commissioner shall be permitted
or required to testify in any private civil action concerning any confidential documents,
materials, or information subject to subsection (a) of this section.
(c) In furtherance of his or her duties under this chapter, the Commissioner may:
(1) share documents, materials, or other information, including the confidential and privileged
documents, materials, or information subject to subsection (a) of this section, with
other state, federal, and international regulatory agencies; with the NAIC and its
affiliates and subsidiaries; and with state, federal, and international law enforcement
authorities, provided the recipient agrees to maintain the confidentiality and privileged
status of the document, material, or other information;
(2) receive documents, materials, or information, including otherwise confidential and
privileged documents, materials, or information, from the NAIC and its affiliates
and subsidiaries, and from regulatory and law enforcement officials of other foreign
or domestic jurisdictions, and shall maintain as confidential or privileged any document,
material, or information received with notice or the understanding that it is confidential
or privileged under the laws of the jurisdiction that is the source of the document,
material, or information; and
(3) enter into agreements governing sharing and use of information consistent with this
subsection.
(d) No waiver of any applicable privilege or claim of confidentiality in the documents,
materials, or information shall occur as a result of disclosure to the Commissioner
under this section or as a result of sharing as authorized in subsection (c) of this
section.
(e) Except as otherwise required under this chapter, the making, publishing, disseminating,
circulating, or placing before the public, directly or indirectly in any manner, the
risk-based capital levels of any insurer, or of any component derived in the calculation,
by any insurer, agent, broker, or other person engaged in any manner in the insurance
business is prohibited. Any person violating this section shall be subject to an administrative
penalty of up to $500.00.
(f) The Commissioner may, in his or her discretion, permit the correction of any material
misstatement published by a party unrelated to the insurer concerning any aspect of
the insurer’s risk-based capital level or any component thereof. A correction permitted
under this section may be used solely to rebut the material misstatement. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994; amended 1995, No. 167 (Adj. Sess.), § 26; 2013, No. 29, § 40, eff. May 13, 2013; 2021, No. 25, § 15, eff. May 12, 2021; 2021, No. 105 (Adj. Sess.), § 271, eff. July 1, 2022.)
§ 8309. Supplemental provisions
(a) The provisions of this chapter are in addition to any other provisions of the laws
of this State and shall not preclude or limit any other powers or duties of the Commissioner
under such laws, including chapter 145 of this title.
(b) The Commissioner may adopt rules necessary for the implementation of this chapter.
(c) The Commissioner may exempt from the application of this chapter any domestic property
and casualty insurer that:
(1) writes direct business only in this State;
(2) writes direct annual premiums of $2,000,000.00 or less; and
(3) assumes no reinsurance in excess of five percent of direct premium written. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994; amended 2013, No. 29, § 41, eff. May 13, 2013.)
§ 8310. Foreign insurers
(a) A foreign insurer shall, upon the written request of the Commissioner, submit to the
Commissioner a risk-based capital report for the calendar year just ended. The requested
report shall be filed not later than the later of 15 days from the receipt of notice
to file the report with this State or the filing date provided in subsection 8302(a) of this title.
(b) A foreign insurer shall, at the written request of the Commissioner, promptly submit
to the Commissioner a copy of any risk-based capital plan that is filed with the insurance
commissioner of any other state.
(c) Upon the occurrence of an event under section 8303 (company action level event), 8304
(regulatory action level event), or 8305 (authorized control level event) of this
title with respect to any foreign insurer as determined under the risk-based capital
statute applicable in the state of domicile of the insurer or, if no risk-based capital
statute is in force in that state, under the provisions of this chapter, if the insurance
commissioner of the state of domicile of the foreign insurer fails to require the
foreign insurer to file a risk-based capital plan in the manner specified under that
state’s risk-based capital statute or, if no risk-based capital statute is in force
in that state, then under section 8303 of this title, the Commissioner may require the foreign insurer to file a risk-based capital plan
with the Commissioner. The failure of the foreign insurer to file a risk-based capital
plan shall be grounds to order the insurer to cease and desist from writing new insurance
business in this State.
(d) The Commissioner may make application to the Washington Superior Court for an order
under chapter 145 of this title for the liquidation of property of the insurer found
in this State in the event the insurer has not been placed under such an order in
its state of domicile after reporting an event under section 8305 or 8306 of this title. The occurrence of an event under sections 8305 and 8306 of this title shall be considered adequate grounds for the application. The Commissioner may order
an insurer reporting an event under section 8305 or 8306 to cease and desist from
writing new business in this State. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994; amended 2013, No. 29, § 42, eff. May 13, 2013.)
§ 8311. Notices
All notices by the Commissioner to an insurer under this chapter shall be effective
upon mailing if sent by registered or certified mail or, in the case of any other
type of transmission, shall be effective upon the insurer’s receipt of such notice. (Added 1993, No. 235 (Adj. Sess.), § 8, eff. June 21, 1994.)
§ 8312. Confidentiality of risk-based capital reports
All risk-based capital reports concerning insurance companies that are not included
in section 8308 of this title that are submitted to the Department by the NAIC or other states are confidential
and shall not be disclosed by the Department. (Added 1993, No. 235 (Adj. Sess.), § 9, eff. June 21, 1994; amended 2021, No. 25, § 16, eff. May 12, 2021.)
§ 8313. Immunity
There shall be no liability on the part of and no cause of action shall arise against
the Commissioner or the Department of Financial Regulation or its employees or agents
for any action taken by them in the performance of their powers and duties under this
chapter. (Added 2013, No. 29, § 43, eff. May 13, 2013.)