February 7, 2014 - Introduced by Representative Petersen, cosponsored by
Senator Lasee. Referred to Committee on Insurance.
AB735,1,9 1An Act to renumber 611.72 (3) and 611.73 (3); to amend 611.42 (1), 611.42 (2)
2(a), 611.73 (4), 611.76 (1) (c), 644.10 (1) (a) and 644.10 (1) (b); and to create
3601.415 (11), 601.465 (1m) (c) 7., 601.465 (1n), 601.465 (3), 611.425, 611.72 (3)
4(bm), 611.73 (3) (b), 617.12, 617.21 (1) (cm), 617.215 and chapter 622 of the
5statutes; relating to: own risk and solvency assessments, supervisory colleges,
6consolidated hearings for mergers of insurance companies, proxy voting by
7mutual policyholders, a presumption and exceptions with respect to the
8disclosure of insurance-related information, granting rule-making authority,
9and providing a penalty.
Analysis by the Legislative Reference Bureau
This bill makes various miscellaneous changes to the insurance laws, including
the following:
1. The bill requires every insurer, or insurance holding company system of
which the insurer is a member, to: a) maintain a risk management framework to
assist the insurer or insurance holding company system in identifying and managing

its material and relevant risks; and b) whenever there are significant changes to the
insurer's or insurance holding company system's risk profile, but at least annually,
conduct an "own risk and solvency assessment" (ORSA) consistent with the ORSA
Guidance Manual (guidance manual) developed and adopted by the National
Association of Insurance Commissioners. The bill defines an insurance holding
company system as two or more persons that are affiliates, at least one of which is
an insurer, and an ORSA as a confidential internal assessment of the insurer's or
insurance holding company system's material and relevant risks associated with the
insurer's or insurance holding company system's current business plan and of the
sufficiency of the capital resources to support those risks. Under the bill, the insurer
must file with the commissioner of insurance (commissioner) a report that is
prepared consistently with the guidance manual summarizing the insurer's ORSA
(summary report). In general, the report must be filed with the commissioner within
45 days after the insurer submits the summary report to its board of directors but
no more than once per year or within 45 days after the insurer submits the summary
report to the commissioner of the insurer's lead state.
An insurer is exempt from the requirements of maintaining a risk management
framework, conducting an ORSA, and filing a summary report if the insurer's annual
direct written premium and assumed premium from unaffiliated insurers is less
than $500,000,000 and, if the insurer is a member of an insurance holding company
system, the insurance holding company system of which the insurer is a member has
annual direct written premium and assumed premium from unaffiliated insurers of
less than $1,000,000,000. If the insurer's premium qualifies the insurer for
exemption but the premium of the insurance holding company system of which the
insurer is a member does not qualify the insurance holding company system for
exemption, the summary report must include every insurer in the insurance holding
company system. If the insurer does not qualify for exemption but the insurance
holding company system of which it is a member qualifies for exemption, only the
summary report applicable to the insurer is required.
The bill sets out detailed confidentiality requirements with respect to
documents, materials, and other information, including summary reports, that are
obtained or created by, or disclosed to, the commissioner as a result of the new risk
assessment requirements. Generally, the documents, materials, and other
information, including summary reports, are confidential and privileged and are not
subject to inspection, copying, subpoena, or discovery and are not admissible in
evidence in any private civil action. The bill sets out the circumstances under which
and to whom the documents, materials, and other information, including summary
reports, may be disclosed, as well as procedures that must be used for the disclosure.
2. Under current law, the Office of the Commissioner of Insurance (OCI) may
refuse to disclose testimony, reports, records, and information obtained, produced,
or created in the course of examinations, investigations, and other inquiries with
respect to persons regulated under the insurance statutes. The statutes specify how
this privilege of nondisclosure may be waived. The bill creates a rebuttable
presumption that documents and information provided to OCI by an insurer in
response to an OCI request or in the course of an examination of the affairs or

condition of the insurer are proprietary and confidential and that the potential for
harm and competitive disadvantage to the insurer outweighs the public interest in
the disclosure of the documents and information. The presumption may be rebutted
by presenting clear and convincing evidence to a court that the public interest in the
disclosure substantially outweighs the potential for harm or competitive
disadvantage to the insurer. The bill also excludes from the statute related to
nondisclosure of insurance information certain types of information or reports,
including ORSA reports and information, enterprise risk filing and related
information, and reports of internal control over financial reporting and related
information, and provides that the information or reports are subject to
confidentiality provisions that are specific to that information or those reports.
3. The bill authorizes the commissioner to participate in a supervisory college
for any domestic insurer that is part of an insurance holding company system with
international operations. A supervisory college is defined in the bill as a forum for
communication and cooperation between regulators charged with the supervision of
an insurer that is part of an insurance holding company system with international
operations. The purpose for the commissioner's participation is to assess the
business strategy, financial position, legal and regulatory position, risk exposure,
risk management, and governance processes of the domestic insurer. The
commissioner's participation may include initiating the establishment of a
supervisory college, coordinating the ongoing activities of the supervisory college,
establishing a crisis management plan, and entering into agreements for keeping
information confidential. The commissioner may impose a regular assessment on
affected insurers to pay the reasonable expenses of the commissioner's participation.
4. Under current law, the proxy voting provisions that apply to members of
general nonstock corporations apply to policyholders of mutual insurance
corporations (mutuals). The bill removes that applicability and sets out proxy voting
rights that are specific to the policyholders of mutuals. Under the bill, a policyholder
or the policyholder's authorized officer, director, employee, agent, or
attorney-in-fact may appoint a proxy to vote or otherwise act for the policyholder at
a meeting of policyholders or to consent or dissent in writing to any corporate action
without a meeting. The appointment may be accomplished by affixing the
policyholder's signature to an appointment form by any reasonable means or by
transmitting an electric transmission, including by Internet, telephone, electronic
mail, telegram, cablegram, or datagram, of the appointment to the person who will
be appointed as proxy. An appointment of a proxy is effective when a signed
appointment form or electronic transmission of the appointment is received by the
officer or agent of the mutual authorized to tabulate votes and lasts 11 months unless
a different period is expressly provided in the appointment. Unless the appointment
form or electronic transmission states otherwise, appointment of a proxy may be
revoked, which occurs if the policyholder appointing the proxy: a) attends a meeting
and votes; or b) signs and delivers to the officer or agent of the mutual authorized to
tabulate votes either a written statement that the proxy appointment is revoked or
a subsequent proxy appointment form. The death or incapacity of the policyholder
appointing the proxy does not affect the right of the mutual to accept the proxy's

authority unless the officer or agent of the mutual authorized to tabulate votes
receives notice of the death or incapacity before the proxy exercises his or her
authority under the appointment.
5. Under current law, a plan of merger or for acquisition of control of a domestic
stock insurance corporation, or a plan of merger between two or more mutuals, may
not be executed unless it is approved by the commissioner after a hearing. Such
plans are approved unless the commissioner finds that they would violate the law or
be contrary to the interests of the insureds of a participating insurance corporation
or mutual. The bill provides that, if a plan requires the approval of more than one
commissioner because the insurance corporations involved are domiciled in different
states, the hearing for approval may be held on a consolidated basis, if so requested
by the person filing the plan, although the commissioner may opt out of a
consolidated hearing. Any consolidated hearing must be public and held within the
United States before the commissioners of the states in which the insurers involved
in the merger or other acquisition of control are domiciled. The commissioners may
hear and receive evidence and may attend the consolidated hearing in person or by
telecommunication.
6. The bill requires the commissioner to promulgate rules requiring insurers
to report their enterprise risk, including the form of the report and the manner and
process for filing. Enterprise risk is defined in the bill as any activity, circumstance,
or event involving one or more affiliates of the insurer that, if not remedied, is likely
to have a material adverse effect on the financial condition or liquidity of the insurer
or its insurance holding company system.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB735,1 1Section 1. 601.415 (11) of the statutes is created to read:
AB735,5,52 601.415 (11) Amendments to Own Risk and Solvency Assessment Guidance
3Manual.
The commissioner shall, in his or her discretion, adopt amendments made
4after the effective date of this subsection .... [LRB inserts date], by the National
5Association of Insurance Commissioners to the guidance manual, as defined in s.
6622.03 (1). Any such amendments made by the National Association of Insurance
7Commissioners become effective in this state if adopted by the commissioner by order
8after giving 30 days' notice to insurers of the changes proposed by the National

1Association of Insurance Commissioners. If one or more insurers request a hearing
2on the proposed changes during the 30-day period, the commissioner shall hold a
3hearing to determine whether the commissioner will, in his or her discretion, adopt
4one or more of the changes made by the National Association of Insurance
5Commissioners.
AB735,2 6Section 2. 601.465 (1m) (c) 7. of the statutes is created to read:
AB735,5,77 601.465 (1m) (c) 7. Members of a supervisory college described in s. 617.215.
AB735,3 8Section 3. 601.465 (1n) of the statutes is created to read:
AB735,5,149 601.465 (1n) Presumption of confidentiality. (a) Notwithstanding sub. (1m)
10and subch. II of ch. 19, it is presumed that nonpublic documents and information
11provided by an insurer to the office under s. 601.42 or 601.43 are proprietary and
12confidential and that the potential for harm and competitive disadvantage to the
13insurer if the documents and information are made public by the office outweighs the
14public interest in the disclosure of the documents and information.
AB735,5,2315 (b) With notice to the insurer, the presumption under par. (a) may be rebutted
16by the requesting party presenting clear and convincing evidence to a court of
17competent jurisdiction that the public interest in the disclosure of the documents and
18information substantially outweighs the potential for harm or competitive
19disadvantage to the insurer if the documents and information are disclosed and that
20the public interest concerns cannot be addressed without the disclosure of the
21documents and information. If the presumption under par. (a) is successfully
22rebutted, disclosure of the documents and information shall be made only to the
23extent necessary to protect the public interest.
AB735,6,224 (c) Paragraph (a) does not apply to the commissioner's discretion to disclose
25documents and information provided by an insurer to the office under s. 601.42 or

1601.43 as a part of an enforcement proceeding the commissioner brings under s.
2601.64.
AB735,4 3Section 4. 601.465 (3) of the statutes is created to read:
AB735,6,44 601.465 (3) Exceptions. This section does not apply to any of the following:
AB735,6,75 (a) Own risk and solvency assessment reports and related information
6provided by an insurer under ch. 622, which are subject only to the confidentiality
7provisions in ch. 622.
AB735,6,118 (b) Enterprise risk filing and any related information provided by an insurer
9under rules promulgated under s. 617.12, which are not subject to subch. II of ch. 19
10and are subject only to any confidentiality provisions of rules promulgated under s.
11617.12.
AB735,6,1512 (c) Reports of internal control over financial reporting and any related
13information provided by an insurer under s. Ins 50.17, Wis. Adm. Code, which are
14not subject to subch. II of ch. 19 and are subject only to the confidentiality provisions
15of s. Ins 50.17 (6) (b), Wis. Adm. Code.
AB735,5 16Section 5. 611.42 (1) of the statutes is amended to read:
AB735,6,1917 611.42 (1) General. Subject to this section and s. 611.53, ss. 181.0701,
18181.0702, 181.0705 (1) to (4), 181.0722 (1) to (3), 181.0723, 181.0724 and 181.0727
19apply to mutuals.
AB735,6 20Section 6. 611.42 (2) (a) of the statutes is amended to read:
AB735,7,221 611.42 (2) (a) Mandatory voting rights. Policyholders in all mutuals have the
22right to vote on conversion, voluntary dissolution, amendment of the articles, and the
23election of all directors except public directors appointed under s. 611.53 (1). Voting
24may be conducted by mail, by electronic means, or by any other method or
25combination of methods prescribed by the articles or bylaws.
Directors may be

1divided into classes, and in that case one class shall be elected at least every 4 years
2for terms not exceeding 6 years.
AB735,7 3Section 7. 611.425 of the statutes is created to read:
AB735,7,8 4611.425 Mutual policyholders' proxy voting. (1) Definition. In this
5section, "electronic transmission" means transmission by the Internet, telephone,
6electronic mail, telegram, cablegram, datagram, or any other form or process of
7communication that does not directly involve the physical transfer of paper and that
8is capable of retention, retrieval, and reproduction of information by the recipient.
AB735,7,12 9(2) Generally. (a) Unless the articles of incorporation or bylaws prohibit or
10limit proxy voting, a policyholder may appoint another person as proxy to vote or
11otherwise act for the policyholder at a meeting of policyholders or to express consent
12or dissent in writing to any corporate action without a meeting of policyholders.
AB735,7,1613 (b) A policyholder or the policyholder's authorized officer, director, employee,
14agent, or attorney-in-fact may validly appoint a proxy by signing or causing the
15policyholder's signature to be affixed to an appointment form by any reasonable
16means, including by facsimile signature.
AB735,8,317 (c) To the extent authorized by the mutual's bylaws, a policyholder or the
18policyholder's authorized officer, director, employee, agent, or attorney-in-fact may
19validly appoint a proxy by transmitting or authorizing the transmission of an
20electronic transmission of the appointment to the person who will be appointed as
21proxy or to a proxy solicitation firm, proxy support service organization, or like agent
22authorized to receive the transmission by the person who will be appointed as proxy.
23Every electronic transmission shall contain, or be accompanied by, information that
24can be used to reasonably determine that the policyholder transmitted or authorized
25the transmission of the electronic transmission. Any person charged with

1determining whether a policyholder transmitted or authorized the transmission of
2the electronic transmission shall specify the information upon which the
3determination is made.
AB735,8,104 (d) Any copy, facsimile telecommunication, or other reliable reproduction of the
5information in the appointment form under par. (b) or the electronic transmission
6under par. (c) may be substituted or used in lieu of the original appointment form or
7electronic transmission for any purpose for which the original appointment form or
8electronic transmission may be used, but only if the copy, facsimile
9telecommunication, or other reliable reproduction is a complete reproduction of the
10information in the original appointment form or electronic transmission.
AB735,8,15 11(3) When effective. An appointment of a proxy is effective when a signed
12appointment form or, if authorized, an electronic transmission of the appointment
13is received by the inspector of election or the officer or agent of the mutual authorized
14to tabulate votes. An appointment is valid for 11 months unless a different period
15is expressly provided in the appointment.
AB735,8,18 16(4) Revocability. (a) An appointment of a proxy is revocable unless the
17appointment form or, if authorized, electronic transmission states that it is
18irrevocable.
AB735,8,2019 (b) The appointment of a proxy is revoked if the policyholder appointing the
20proxy does any of the following:
AB735,8,2121 1. Attends any meeting and votes in person.
AB735,8,2422 2.   Signs and delivers to the secretary or other officer or agent authorized to
23tabulate proxy votes either a written statement that the appointment of the proxy
24is revoked or a subsequent appointment form.
AB735,9,5
1(5) Effect of death or incapacity. The death or incapacity of the policyholder
2appointing a proxy does not affect the right of the mutual to accept the proxy's
3authority unless the secretary or other officer or agent of the mutual authorized to
4tabulate votes receives notice of the death or incapacity before the proxy exercises
5his or her authority under the appointment.
AB735,9,9 6(6) Acceptance by mutual. Subject to s. 181.0727 and to any express limitation
7on the proxy's authority stated in the appointment form or, if authorized, electronic
8transmission, a mutual may accept the proxy's vote or other action as that of the
9policyholder making the appointment.
AB735,8 10Section 8. 611.72 (3) of the statutes is renumbered 611.72 (3) (am).
AB735,9 11Section 9. 611.72 (3) (bm) of the statutes is created to read:
AB735,9,2312 611.72 (3) (bm) 1. If the proposed merger or other acquisition of control will
13require the approval of more than one commissioner, the hearing under par. (am)
14may be held on a consolidated basis upon the request of a person filing a statement
15with the commissioner of insurance of this state under s. Ins 40.02 (2), Wis. Adm.
16Code, which request must be made when the statement is filed. That person shall
17file a copy of the statement under s. Ins 40.02 (2), Wis. Adm. Code, with the National
18Association of Insurance Commissioners within 5 days after making the request for
19a consolidated hearing. A hearing conducted on a consolidated basis shall be public
20and held within the United States before the commissioners of the states in which
21the insurers involved in the merger or other acquisition of control are domiciled. The
22commissioners may hear and receive evidence. A commissioner may attend the
23hearing in person or by telecommunication.
AB735,9,2524 2. The commissioner of insurance of this state may opt out of a consolidated
25hearing, and shall provide notice to the person requesting the consolidated hearing

1of the opt out within 10 days after the commissioner receives the statement under
2s. Ins 40.02 (2), Wis. Adm. Code.
AB735,10 3Section 10. 611.73 (3) of the statutes is renumbered 611.73 (3) (a).
AB735,11 4Section 11. 611.73 (3) (b) of the statutes is created to read:
AB735,10,175 611.73 (3) (b) 1. If the proposed merger of 2 or more domestic and foreign
6mutuals will require the approval of more than one commissioner, the hearing under
7par. (a) may be held on a consolidated basis upon the request of a person filing with
8the commissioner of insurance of this state the plan of merger under par. (a) and the
9statement under s. Ins 40.02 (2), Wis. Adm. Code. The person must request a
10consolidated hearing when the plan of merger and statement are filed. That person
11shall file copies of the plan of merger and the statement under s. Ins 40.02 (2), Wis.
12Adm. Code, with the National Association of Insurance Commissioners within 5 days
13after making the request for a consolidated hearing. A hearing conducted on a
14consolidated basis shall be public and held within the United States before the
15commissioners of the states in which the insurers involved in the merger are
16domiciled. The commissioners may hear and receive evidence. A commissioner may
17attend the hearing in person or by telecommunication.
AB735,10,2118 2. The commissioner of insurance of this state may opt out of a consolidated
19hearing, and shall provide notice to the person requesting the consolidated hearing
20of the opt out within 10 days after the commissioner receives the plan of merger
21under par. (a) and the statement under s. Ins 40.02 (2), Wis. Adm. Code.
AB735,12 22Section 12. 611.73 (4) of the statutes is amended to read:
AB735,10,2523 611.73 (4) Voting by policyholders. The commissioner may order that the
24plan submitted to him or her under sub. (3) (a) be amended to provide for voting by
25policyholders of any mutual involved.
AB735,13
1Section 13. 611.76 (1) (c) of the statutes is amended to read:
AB735,11,52 611.76 (1) (c) Conversion and merger. A domestic mutual may adopt a plan of
3acquisition or merger as part of a plan of conversion under this section. The
4commissioner shall approve the plan of acquisition or merger as part of the plan of
5conversion unless grounds for disapproval exist under s. 611.72 (3) (am).
AB735,14 6Section 14. 617.12 of the statutes is created to read:
AB735,11,15 7617.12 Rules requiring enterprise risk reports. (1) In this section,
8"enterprise risk" means any activity, circumstance, event, or series of events
9involving one or more affiliates of an insurer that, if not remedied, is likely to have
10a material adverse effect on the financial condition or liquidity of the insurer or its
11insurance holding company system, as defined in s. 622.03 (2), as a whole, including
12anything that would cause the insurer's risk-based capital to fall into company
13action level as set forth in s. Ins 51.01 (4), Wis. Adm. Code, or that would cause the
14insurer to be in a hazardous financial condition as described in s. 623.11, 645.31, or
15645.41.
AB735,11,18 16(2) The commissioner shall promulgate rules requiring insurers to report their
17enterprise risk, including the form of the report and the manner and process for filing
18the report.
AB735,15 19Section 15. 617.21 (1) (cm) of the statutes is created to read:
AB735,11,2220 617.21 (1) (cm) Any cost-sharing services or management agreements
21involved in the transaction include such provisions as the commissioner requires by
22rule.
AB735,16 23Section 16. 617.215 of the statutes is created to read:
AB735,11,24 24617.215 Supervisory colleges. (1) Definitions. In this section:
AB735,11,2525 (a) "Insurance holding company system" has the meaning given in s. 622.03 (2).
AB735,12,4
1(b) "Supervisory college" means a temporary or permanent forum for
2communication and cooperation between the regulators charged with the
3supervision of an insurer that is part of an insurance holding company system with
4international operations.
AB735,12,9 5(2) Powers of commissioner. (a) In accordance with par. (b), the commissioner
6may participate in a supervisory college for any domestic insurer that is part of an
7insurance holding company system with international operations to determine the
8insurer's compliance with this chapter. The powers of the commissioner with respect
9to supervisory colleges include all of the following:
AB735,12,1010 1. Initiating the establishment of a supervisory college.
AB735,12,1211 2. Clarifying the membership and participation of other supervisors in the
12supervisory college.
AB735,12,1413 3. Clarifying the functions of the supervisory college and the role of other
14regulators, including the establishment of a group-wide supervisor.
AB735,12,1615 4. Coordinating the ongoing activities of the supervisory college, including
16planning meetings, supervisory activities, and processes for information sharing.
AB735,12,1717 5. Establishing a crisis management plan.
AB735,12,2318 (b) In order to assess the business strategy, financial position, legal and
19regulatory position, risk exposure, risk management, and governance processes of
20an insurer specified in par. (a), and as part of an examination of such an insurer
21under s. 601.43, the commissioner may participate in a supervisory college with
22other regulators charged with the supervision of the insurer or its affiliates,
23including other state, federal, and international regulatory agencies.
AB735,13,224 (c) The commissioner may enter into agreements for keeping information
25confidential in accordance with s. 601.465, providing the basis for cooperation

1between the commissioner and the other regulatory agencies and the activities of the
2supervisory college.
AB735,13,6 3(3) Payment of expenses. All insurers to which this section applies are liable
4for and shall pay the reasonable expenses related to the commissioner's participation
5in supervisory colleges, including reasonable travel expenses. The commissioner
6may impose a regular assessment on insurers to cover the expenses.
AB735,13,9 7(4) Not delegation of authority. Nothing in this section delegates to a
8supervisory college the authority of the commissioner to regulate or supervise an
9insurer or its affiliates within the commissioner's jurisdiction.
AB735,17 10Section 17. Chapter 622 of the statutes is created to read:
AB735,13,1211 CHAPTER 622
12 OWN RISK AND SOLVENCY ASSESSMENT
AB735,13,13 13622.03 Definitions. In this chapter, unless the context indicates otherwise:
AB735,13,18 14(1) "Guidance manual" means the most current version of the Own Risk and
15Solvency Assessment Guidance Manual developed and adopted by the National
16Association of Insurance Commissioners as of the effective date of this subsection ....
17[LRB inserts date], subject to the adoption of any amendments by the commissioner
18under s. 601.415 (11).
AB735,13,20 19(2) "Insurance holding company system" means 2 or more persons that are
20affiliates, at least one of which is an insurer.
AB735,13,24 21(3) "Insurer" means an insurer domiciled in this state, except that "insurer"
22does not include agencies, authorities, or instrumentalities of the United States, its
23possessions and territories, the Commonwealth of Puerto Rico, the District of
24Columbia, or a state or political subdivision of a state.
AB735,14,4
1(4) "Lead state" means the state in which an insurer member of an insurance
2holding company system is domiciled and that is determined to be the lead state
3under the procedures in the financial analysis handbook most recently adopted by
4the National Association of Insurance Commissioners.
AB735,14,10 5(5) "Own risk and solvency assessment" means a confidential internal
6assessment, appropriate to the nature, scale, and complexity of an insurer or
7insurance holding company system, conducted by that insurer or insurance holding
8company system, of the material and relevant risks associated with the insurer's or
9insurance holding company system's current business plan and of the sufficiency of
10capital resources to support those risks.
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