OCI is unaware of any proposed or existing federal regulation that is intended to address the activities to be regulated by this proposed rule.
7. Comparison of similar rules in adjacent states as found by OCI:
a) With respect to a minimum annual assessment for insurer examinations:
Illinois: 215 ILCS 5/Sec 3, 6, 7 and 9. Illinois does not have a set minimum assessment based on actual minimum cost of an examination in the way Wisconsin does. Illinois assesses all insurers, domestic and non-domestic, licensed to do business in the state. The assessment funds the cost of financial examinations and financial condition analyses and funds the costs and expenses of the Interstate Receivership Commission.
For domestic insurers, annual assessment amounts are variable and based on the amount of an insurer’s nationwide direct premiums or admitted assets (whichever is greater) and, in some cases, reinsurance assumed premiums. For example, on the low end, if the premium is less than $500,000 and there is no reinsurance assumed premium, the annual assessment equals $150. On the high end, if the premium is $100,000,000 or more, the annual assessment equals $37,500.
For non-domestic insurers, annual assessment amounts are also variable, and are based on the amount of an insurer’s Illinois direct premiums and nationwide reinsurance assumed premiums. Again, the minimum assessment is $150 on the low end of direct premium amount and $37,500 on the high end. Also, assessments billed to non-domestic insurers within the same affiliated group cannot exceed $250,000.
In addition to annual assessments, Illinois bills insurers for the following additional examination-related expenses:
1. Electronic data processing costs;
2. Lodging and travel expenses;
3. Outside consultants/contractors used in examinations; and
4. Performance examination costs (e.g. market regulation exams).
Iowa: Chptr 507.8, Iowa Code. Iowa does not use an annual assessment, so has no minimum assessment. Rather, upon completing an examination, the Iowa commissioner prepares a bill of all costs incurred in performing the examination and in preparing the subsequent report. The examined insurer is then responsible for paying the charged amount. Iowa uses outside contractors to conduct some of its out of state examinations.
Michigan: 500.224, mcl. Michigan assesses all insurers, domestic and non-domestic, licensed to do business in the state. The assessments fund the state’s insurance department operations, with two-thirds of every assessment going toward solvency regulation.
Annual assessment amounts are variable and based on a formula that accounts for all in-state annuity considerations written and all in-state direct premiums underwritten. Regardless of the formula output, the assessment cannot exceed 80% of the gross appropriations for the insurance bureau. Also, the minimum fee is $250, regardless of the formula output.
Furthermore, Michigan bills out-of-state insurers for the expenses and reasonable costs incurred in conducting an examination, for which Michigan often uses outside consultants/contractors.
Minnesota: 60A.03 subd 5, Minnesota Statutes. Minnesota does not use an annual assessment and so has no minimum annual assessment. Minnesota uses all outside contractors to conduct its examinations. All examined insurers are required to pay the “necessary expenses” of the persons engaged in the examination, including the per diem salaries of those persons.
b) With respect to proposed rule adopting NAIC model law section requiring large insurance companies to have internal audit function:
Illinois: Has not yet taken action to adopt the NAIC internal audit function requirement for larger insurers.
Iowa: Has not yet taken action to adopt the internal audit function requirement.
Michigan: Has not yet taken action to adopt the internal audit function requirement.
Minnesota: Has not yet taken action to adopt the internal audit function requirement.
8. A summary of the factual data and analytical methodologies that OCI used in support of the proposed rule and how any related findings support the regulatory approach chosen for the proposed rule:
With regard to increasing the minimum assessment amount for insurer examinations, there has been no increase in the minimum assessment amount since 1999 for domestic insurers primarily located out of state, and no increase since 1977 for all other domestic insurers. OCI made calculations resulting in a determination that its minimum cost to do an examination of a domestic company primarily located out of state is $10,000 per year and its minimum cost to do an examination of an in-state company is $3,000 per year.
OCI has determined that 14 of a total of 119 in-state companies were billed the current minimum assessment amount of $300 for 2016’s examinations program. Also, 19 of a total of 61 domestic insurers located primarily out-of-state were billed the current minimum of $1,000 for 2016’s assessment. The new minimum assessment amounts will more fairly and equitably distribute the costs of the examinations program among insurers.
9. Any analysis and supporting documentation that OCI used in support of OCI’s determination of the rule’s effect on small businesses under s. 227.114: The proposed increase in minimum assessment amounts would have an impact on some domestic insurers. However, based on revenue and ownership structure, very few, if any, domestic insurers meet the definition of small businesses. Furthermore, OCI has delayed the applicability date of the rule changes increasing the minimum assessment amounts and the internal audit function requirement to February 1, 2018 and January 1, 2018, respectively, to allow insurers to make adjustments to comply with these two rule changes. Finally, a possible exemption may be available for a small business insurer under s. 601.45 (4), Stats., which provides that upon insurer request (or on commissioner’s own motion) the commissioner may pay all or a part of an examination from the appropriation under s. 20.145 (1) (g) 1., Stats., when “the commissioner finds that imposition of the costs would place an unreasonable burden on the examinee.” 10. See the attached Private Sector Fiscal Analysis.
The rule changes will have no significant effect on the private sector regulated by OCI.
11. A description of the Effect on Small Business:
This rule will have little or no effect on small businesses since few, if any, domestic insurers meet the definition of a small business. Furthermore, OCI has delayed the applicability date of the rule changes increasing the minimum assessment amounts and the internal audit function requirement to February 1, 2018 and January 1, 2018, respectively, to allow insurers to make adjustments to comply with these two rule changes, particularly the increase in minimum assessment amount. Finally, as stated earlier, a possible exemption may be available under s. 20.145 (1) (g) 1., Stats., if a small business insurer demonstrates to the commissioner’s satisfaction that imposition of the minimum assessment costs places “an unreasonable burden on the examinee.” 12. Agency contact person:
or by contacting Karyn Culver, OCI Legal Unit, at:
Phone: (608) 267-9586
Address: 125 South Webster St – 2nd Floor, Madison WI 53703-3474
Mail: PO Box 7873, Madison, WI 53707-7873
13. Place where comments are to be submitted and deadline for submission:
The deadline for submitting comments is 4:00 p.m. on May 10, 2017.
Mailing address:
Alice M. Shuman-Johnson
Legal Unit - OCI Rule Comment for Rule Ins 3.651
Office of the Commissioner of Insurance
PO Box 7873
Madison WI 53707-7873
Street address:
Alice M. Shuman-Johnson
Legal Unit - OCI Rule Comment for Rule Ins 3.651
Office of the Commissioner of Insurance
125 South Webster St – 2nd Floor
Madison WI 53703-3474
Email address:
Alice M. Shuman-Johnson
The proposed rule changes are:
Section 1.
Section 2.
Section 3.
Section 4.
Ins 3.75 (6) Portability; HIRSP. For an individual who elects continuation of coverage under this section, the period, if any, from the date of the termination of the individual's group policy coverage to the commencement of continuation of coverage under this section shall be disregarded for the purpose of determining the 63-day period under s. 632.746 (3) (b) Stats., and determining eligibility as an eligible individual under ch. 149, Stats. Section 5.
SECTION 4. Ins 5.45 (1) (b) is repealed.
Section 6.
Ins 6.52 (5) Reporting with respect to new officers and directors
subsequent to organization or admission. A report shall be provided by each domestic insurer to which this rule applies with respect to the appointment or election of any new director, trustee or officer elected or appointed within 15 days after such appointment or election. Such report shall be prepared by the company in form and substance substantially in accordance with Form B A, shown at the end of this rule.
Section 7.
Section 8.
SECTION 7. Ins 6 Appendix 1 is amended to read:
Ins 6 Appendix 1
APPENDIX I
KEEP THIS NOTICE WITH YOUR INSURANCE PAPERS
PROBLEMS WITH YOUR INSURANCE?—If you are having problems with your insurance company or agent, do not hesitate to contact the insurance company or agent to resolve your problem.
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