A preliminary hearing was held on May 24, 2021, with the comment period ending June 7, 2021. The office received only one comment from the Reinsurance Association of America in support of the proposed rule.
Comparison with rules in adjacent states:
Illinois: Public Act 102-0578 amended Ill. Admin. Code 215 §5/173.1 relating the NAIC holding company model regulation and law effective 12/31/2022.
Iowa: NA
Michigan: NA
Minnesota: NA
A summary of the factual data and analytical methodologies that OCI used in support of the proposed rule:
The OCI participated in the NAIC committee process that led to the adoption of these group capital standards.
Analysis and supporting documentation that OCI used in support of OCI’s determination of the rule’s effect on small business or in preparation of an economic impact analysis:
OCI identified some insurers that qualify as small businesses however, OCI does not believe that any of the insurance holding company systems that will be required to file a group capital calculation will meet the definition of a small business. No effect on small business is anticipated by this rule.
Description of the Effect on Small Business:
No effect on small business is anticipated by this rule. The rule is not expected to have any effect on insurers that qualify as small businesses. OCI does not believe that any of the insurance holding company systems that will be required to file a group capital calculation will meet the definition of a small business.
Agency contact person:
A copy of the full text of the proposed rule changes, analysis and fiscal estimate may be obtained from the website at:
or by contacting Karyn Culver, Paralegal, at:
Phone: (608) 267-9586
Address: 125 South Webster St – 2nd Floor, Madison WI 53703-3474
Mail: PO Box 7873, Madison, WI 53707-7873
Place where comments are to be submitted and deadline for submission:
Persons wishing to testify or provide oral or written comments regarding the proposed administrative rule may appear during the hearing. A public hearing will be held compliance with s. 227.14 (4m), Stats., on January 13, 2022, via teleconference at the Office of the Commissioner of Insurance. Deadline for submitting comments is January 21, 2022, at 4:00 pm.
Julie Walsh
Legal Unit - OCI Rule Comment for Rule Ins 40
Office of the Commissioner of Insurance
125 South Webster St – 2nd Floor
Madison WI 53703-3474
Email address:
The proposed rule changes are:
SECTION 1. Ins 40.01 (5g), (7p), (7s), (7w), (7y), and (8m) are created to read:
Ins 40.01 (5g) “Group capital calculation instructions" means the group capital calculation instructions as adopted by the NAIC and as amended by the NAIC in accordance with the procedures adopted by the NAIC.
(7p) “Lead state” means the state as determined by state insurance regulators pursuant to the procedures within the Financial Analysis Handbook adopted by the NAIC.
(7s) “NAIC" means the national association of insurance commissioners.
(7w) “NAIC liquidity stress test framework” or “framework” means a NAIC publication which includes a history of the NAIC’s development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions and reporting templates for a specific data year, such scope criteria, instructions, and reporting template as adopted by the NAIC and as amended by the NAIC in accordance with the procedures adopted by the NAIC.
(7y) “Person” means an individual, a corporation, a limited liability company, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity, or any combination of the foregoing acting in concert, but does not include any joint venture partnership exclusively engaged in owning, managing, leasing, or developing real or tangible personal property.
(8m) “Scope criteria” means the designated exposure bases along with minimum magnitudes thereof for the specified data year that is used to establish a preliminary list of insurers that are considered scoped into the NAIC liquidity stress test framework for that data year, as detailed in the NAIC liquidity stress test framework.
SECTION 2. Ins 40.03 (5) is amended to read:
Ins 40.03 (5) MATERIALITY. No information need be disclosed on the registration statement required under this section if the information is not material for the purposes of this section. Any transaction related to a management, exclusive agency or similar agreement or which is a service contract or cost-sharing arrangement is a material transaction. Any other transaction subject to sub. (3) is a material transaction if it involves or exposes to risk in a single transaction or group or series of related transactions an amount which is more than .5% of the insurer's admitted assets as of the 31st day of December of the immediately preceding calendar year, unless the commissioner by order provides otherwise. The definition of materiality provided in this subsection does not apply for purposes of the group capital calculation or the liquidity stress test framework.
SECTION 3. Ins 40.03 (9) (title) is amended to read:
Ins 40.03 (9) ENTERPRISE RISK FILING FILINGS.
SECTION 4. Ins 40.03 (9) (a) (title) is created to read:
Ins 40.03 (9) (a) Enterprise risk reports.
SECTION 5. Ins 40.03 (9) (a) is amended to read:
(a) Enterprise risk reports. Except as provided in par. (c), the ultimate controlling person of every insurer subject to registration shall file an annual enterprise risk report on form F in the appendix of this chapter. The report shall, to the best of the ultimate controlling person’s knowledge and belief, identify the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners. The time for filing the first enterprise risk report shall be June 1, 2015, or 30 days after the effective date of this rule, whichever date is later. Thereafter, the enterprise risk report shall be filed annually by June 1 for the immediately preceding calendar year. An applicant for an acquisition of control of an insurer under s. Ins 40.02 shall file an enterprise risk report within 15 days after the end of the month in which the acquisition of control occurs. SECTION 6. Ins 40.03 (9) (b) (title) is created to read:
Ins 40.03 (9) (b) Confidentiality.
SECTION 7. Ins 40.03 (9) (b) is amended to read:
Ins 40.03 (9) (b) Sections 19.31 to 19.37, Stats., do not apply to an insurer’s annual enterprise risk report or to any information submitted to the commissioner in connection with an insurer’s annual enterprise risk report and the report shall not be subject to subpoena, discovery or be admissible in evidence in any private civil action. The commissioner shall only share an insurer’s annual enterprise risk report, and any information requested by the commissioner in connection with an insurer’s annual enterprise risk report, with commissioners of states having statutes or regulations substantially similar to this subsection and who have agreed in writing not to disclose such information. For purposes of the information reported and provided to the commissioner pursuant to this paragraph and s. 617.13 (1), Stats., the information is confidential under s. 617.13 (2), Stats. The commissioner shall maintain the confidentiality of the group capital calculation and group capital ratio produced within the calculation and any group capital information received from an insurance holding company supervised by the Federal Reserve Board or any U.S. group wide supervisor pursuant to s. 617.13 (2), Stats. SECTION 8. Ins 40.03 (9) (c) (title) is created to read:
Ins 40.03 (9) (c) Waiver of filing enterprise risk report.
SECTION 9. Ins 40.03 (9) (d) to (f) are created to read:
(9) (d) Group capital calculation filing. Except as otherwise provided in this paragraph, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. The report shall be completed in accordance with the NAIC group capital calculation instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system. Insurance holding company systems described below are exempt from filing the group capital calculation:
1. An insurance holding company system that has only one insurer within its holding company structure, that only writes business and is only licensed in its domestic state and assumes no business from any other insurer.
2. An insurance holding company system that is required to perform a group capital calculation specified by the United States Federal Reserve Board. The lead state commissioner shall request the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system is not exempt from the group capital calculation filing.
3. An insurance holding company system whose non-U.S. group-wide supervisor is located within a reciprocal jurisdiction as described in s. Ins 52.01 (4), that recognizes the U.S. state regulatory approach to group supervision and group capital. 4. An insurance holding company system:
a. That provides information to the lead state that meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the group-wide supervisor, who has determined such information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook.
b. Whose non-U.S. group-wide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified in s. Ins 40.21, the group capital calculation as the world-wide group capital assessment for U.S. insurance groups who operate in that jurisdiction. 5. Notwithstanding the provisions of subds. 3. and 4., a lead state commissioner shall require the group capital calculation for U.S. operations of any non-U.S. based insurance holding company system where, after any necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state commissioner for prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the insurance marketplace.
6. Notwithstanding the exemptions from filing the group capital calculation stated in subds. 1. to 4., the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified in s. Ins 40.21. 7. If the lead state commissioner determines that an insurance holding company system no longer meets one or more of the requirements for an exemption from filing the group capital calculation under this paragraph, the insurance holding company system shall file the group capital calculation at the next annual filing date unless given an extension by the lead state commissioner based on reasonable grounds shown.
(9) (e) Liquidity stress test. The ultimate controlling person of every insurer subject to registration and scoped into the NAIC liquidity stress test framework shall file the results of a specific year’s liquidity stress test with the lead state insurance commissioner in accordance with the following requirements:
1. The NAIC liquidity stress test framework includes scope criteria applicable to a specific data year. These scope criteria are reviewed at least annually by the financial stability task force or its successor. Any change to the NAIC liquidity stress test framework or to the data year for which the scope criteria are to be measured shall be effective on January 1 of the year following the calendar year when such changes are adopted. All of the following apply with regard to the liquidity stress test:
a. Insurers meeting at least one threshold of the scope criteria are considered scoped into the NAIC liquidity stress test framework for the specified data year unless the lead state commissioner, in consultation with the NAIC financial stability task force or its successor, determines the insurer should not be scoped into the framework for that data year.
b. Insurers that do not trigger at least one threshold of the scope criteria are considered scoped out of the NAIC liquidity stress test framework for the specified data year, unless the lead state commissioner, in consultation with the NAIC financial stability task force or its successor, determines the insurer should be scoped into the framework for that data year.
c. Regulators wish to avoid having insurers scoped in and out of the NAIC liquidity stress test framework on a frequent basis. The lead state commissioner, in consultation with the NAIC financial stability task force or its successor, will assess this concern as part of the determination for an insurer.
2. The performance of, and filing of the results from, a specific year’s liquidity stress test shall comply with the NAIC liquidity stress test framework’s instructions and reporting templates for that year and any lead state commissioner determinations, in conjunction with the NAIC financial stability task force or its successor, provided within the framework.
3. For purposes of the information reported and provided to the lead state commissioner pursuant to par. (e), the information is confidential under s. 617.13 (2), Stats. The lead state commissioner shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company supervised by the Federal Reserve Board and non-U.S. group wide supervisors in accordance with s. 617.13 (2), Stats. (9) (f) Prohibition from publication of results. The group capital calculation and resulting group capital ratio required under par. (d) and the liquidity stress test along with its results and supporting disclosures required under par. (e) are regulatory tools for assessing group risks and capital adequacy and group liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding company systems generally. Therefore, except as otherwise permitted by law, the making, publishing, disseminating, circulating or placing before the public, or causing directly or indirectly to be made, published, disseminated, circulated or placed before the public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station or any electronic means of communication available to the public, or in any other way as an advertisement, announcement or statement containing a representation or statement with regard to the group capital calculation, group capital ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any insurer or any insurer group, or of any component derived in the calculation by any insurer, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited; provided, however, that if any materially false statement with respect to the group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount to an insurer’s or insurance group’s group capital calculation or resulting group capital ratio, liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate comparison of any amount to an insurer’s or insurance group’s liquidity stress test result or supporting disclosures is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of such statement or its inappropriateness, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false statement.
SECTION 10. Ins 40.21 is created to read:
Ins 40.21 Group Capital Calculation. (1) Discretionary annual filing exemption. Where an insurance holding company system has previously filed the annual group capital calculation at least once, the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation if the lead state commissioner makes a determination based upon that filing that the insurance holding company system meets all of the following criteria:
(a) The insurance holding company system has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of less than $1,000,000,000.
(b) The insurance holding company system has no insurers within its holding company structure that are domiciled outside of the United States or one of its territories.
(c) The insurance holding company system has no banking, depository or other financial entity that is subject to an identified regulatory capital framework within its holding company structure.
(d) The insurance holding company system attests that there are no material changes in the transactions between insurers and non-insurers in the group that have occurred since the last filing of the annual group capital.
(e) The non-insurers within the insurance holding company system do not pose a material financial risk to the insurer’s ability to honor policyholder obligations.
(2) Discretionary limited filing. Where an insurance holding company system has previously filed the annual group capital calculation at least once, the lead state commissioner has the discretion to accept a limited group capital filing in lieu of the group capital calculation if the insurance holding company system has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of less than $1,000,000,000; and all of the following additional criteria are met:
(a) The insurance holding company system has no insurers within its holding company structure that are domiciled outside of the United States or one of its territories.
(b) The insurance holding company system does not include a banking, depository or other financial entity that is subject to an identified regulatory capital framework.
(c) The insurance holding company system attests that there are no material changes in transactions between insurers and non-insurers in the group that have occurred since the last filing of the report to the lead state commissioner and the non-insurers within the insurance holding company system do not pose a material financial risk to the insurers ability to honor policyholder obligations.
