# Title 45 — Insurance, Commissioner of

## Article 45-03 — Regulation of Insurance Companies

## Chapter 45-03-13 — Regulation of and Standards for Companies Deemed to be in Hazardous Financial Condition

### § 45-03-13-01. Standards.

The following standards, either singly or a combination of two or more, may be considered by the
commissioner to determine whether the continued operation of any insurer transacting an insurance
business in this state might be deemed to be hazardous to the policyholders, creditors, or the general
public. The commissioner may consider:
1. Adverse findings reported in financial condition and market conduct examination reports, audit
reports, actuarial opinions, reports, or summaries.
2. The national association of insurance commissioners insurance regulatory information system
and its other financial analysis solvency tools and reports.
3. Whether the insurer has made adequate provision according to presently accepted actuarial
standards of practice for the anticipated cashflows required by the contractual obligations and
related expenses of the insurer when considered in light of the assets held by the insurer with
respect to the reserves and related actuarial items, including the investment earnings on the
assets, and considerations anticipated to be received and retained under the policies and
contracts.
4. The ability of an assuming reinsurer to perform and whether the insurer's reinsurance program
provides sufficient protection for the insurer's remaining surplus after taking into account the
insurer's cashflow and the classes of business written as well as the financial condition of the
assuming reinsurer.
5. The insurer's operating loss in the last twelve-month period or any shorter period of time,
including, net capital gain or loss, change in nonadmitted assets, and cash dividends paid to
shareholders, is greater than fifty percent of such insurer's remaining surplus as regards
policyholders in excess of the minimum required.
6. Whether the insurer’s operating loss in the last twelve-month period or any shorter period of
time, excluding net capital gains, is greater than twenty percent of the insurer’s remaining
surplus as regards policyholders in excess of the minimum required.
7. Whether a reinsurer, obligor, or any entity within the insurer's insurance holding company
system is insolvent, threatened with insolvency, or delinquent in payment of its monetary or
other obligation and which may affect the solvency of the insurer.
8. Contingent liabilities, pledges, or guaranties which either individually or collectively involve a
total amount which in the opinion of the commissioner may affect the solvency of the insurer.
9. Whether any "controlling person" of an insurer is delinquent in the transmitting to, or payment
of, net premiums to such insurer.
10. The age and collectibility of receivables.
11. Whether the management of an insurer, including officers, directors, or any other person who
directly or indirectly controls the operation of such insurer, fails to possess and demonstrate

the competence, fitness, and reputation deemed necessary to serve the insurer in such
position.
12. Whether management of an insurer has failed to respond to inquiries relative to the condition
of the insurer or has furnished false and misleading information concerning an inquiry.
13. Whether the insurer has failed to meet financial and holding company filing requirements in
the absence of a reason satisfactory to the commissioner.
14. Whether management of an insurer either has filed any false or misleading sworn financial
statement, or has released a false or misleading financial statement to lending institutions or
to the general public, or has made a false or misleading entry, or has omitted an entry of
material amount in the books of the insurer.
15. Whether the insurer has grown so rapidly and to such an extent that it lacks adequate
financial and administrative capacity to meet its obligations in a timely manner.
16. Whether the insurer has experienced or will experience in the foreseeable future cashflow or
liquidity problems, or both.
17. Whether management has established reserves that do not comply with minimum standards
established by state insurance laws, rules, statutory accounting standards, sound actuarial
principles, and standards of practice.
18. Whether management persistently engages in material under reserving that results in adverse
development.
19. Whether transactions among affiliates, subsidiaries, or controlling persons for which the
insurer receives assets or capital gains or both do not provide sufficient value, liquidity, or
diversity to assure the insurer’s ability to meet its outstanding obligations as they mature.
20. Any other finding determined by the commissioner to be hazardous to the insurer’s
policyholders, creditors, or the general public.
History: Effective January 1, 1992; amended effective April 1, 2010.
General Authority: NDCC 28-32
Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11
### § 45-03-13-02. Commissioner's authority.

1. For the purposes of making a determination of an insurer's financial condition under this
chapter, the commissioner may:
a. Disregard any credit or amount receivable resulting from transactions with a reinsurer
which is insolvent, impaired, or otherwise subject to a delinquency proceeding.
b. Make appropriate adjustments, including disallowance, to asset values attributable to
investments in or transactions with parents, subsidiaries, or affiliates consistent with the
national association of insurance commissioners accounting policies and procedures
manual, state laws, and rules.
c. Refuse to recognize the stated value of accounts receivable if the ability to collect
receivables is highly speculative in view of the age of the account or the financial
condition of the debtor.
d. Increase the insurer's liability in an amount equal to any contingent liability, pledge, or
guarantee not otherwise included if there is a substantial risk that the insurer will be
called upon to meet the obligation undertaken within the next twelve-month period.

2. If the commissioner determines that the continued operation of the insurer licensed to transact
business in this state may be hazardous to its policyholders, creditors, or the general public,
then the commissioner may issue an order requiring the insurer to:
a. Reduce the total amount of present and potential liability for policy benefits by
reinsurance.
b. Reduce, suspend, or limit the volume of business being accepted or renewed.
c. Reduce general insurance and commission expenses by specified methods.
d. Increase the insurer's capital and surplus.
e. Suspend or limit the declaration and payment of dividend by an insurer to its
stockholders or to its policyholders.
f. File reports in a form acceptable to the commissioner concerning the market value of an
insurer's assets.
g. Limit or withdraw from certain investments or discontinue certain investment practices to
the extent the commissioner deems necessary.
h. Document the adequacy of premium rates in relation to the risks insured.
i. File, in addition to regular annual statements, interim financial reports on the form
adopted by the national association of insurance commissioners or on such format as
promulgated by the commissioner.
j. Correct corporate governance practice deficiencies and adopt and use governance
practices acceptable to the commissioner.
k. Provide a business plan to the commissioner in order to continue to transact business in
the state.
l. Notwithstanding any other provision of law limiting the frequency or amount of premium
rate adjustment, adjust rates for any non-life insurance product written by the insurer that
the commissioner considers necessary to improve the financial condition of the insurer.
If the insurer is a foreign insurer, the commissioner's order may be limited to the extent
provided by statute.
3. Any insurer subject to an order under subsection 2 may request a hearing to review that order.
The notice of hearing must be served upon the insurer pursuant to North Dakota Century
Code chapter 28-32. The notice of hearing must state the time and place of hearing, and the
conduct, condition, or ground upon which the commissioner based the order. Unless mutually
agreed between the commissioner and the insurer, the hearing must occur not less than ten
days nor more than forty-five days after notice is served and must be in the place to be
designated by the commissioner. The commissioner shall hold all hearings under this
subsection privately, unless the insurer requests a public hearing, in which case the hearing
must be public.
History: Effective January 1, 1992; amended effective April 1, 2010.
General Authority: NDCC 28-32-02
Law Implemented: NDCC 26.1-01-03.1, 26.1-05-04, 26.1-05-32, 26.1-06.1-01(3)(a), 26.1-06.1-11(1)
