CHAPTER 617
REGULATION OF INSURANCE HOLDING COMPANIES AND INTERCORPORATE TRANSACTIONS RELATING TO INSURERS
617.01 Construction and purpose.
617.11 Reports on affiliates.
617.21 Transactions with affiliates.
617.22 Dividends and other distributions.
617.225 Extraordinary dividends.
617.23 Liability of affiliates.
617.25 Officers and directors.
Ch. 617 Cross-reference
Cross-reference: See definitions in ss.
600.03,
610.01 and
628.02.
Ch. 617 Cross-reference
Cross Reference: See also chs.
Ins 40 and
41, Wis. adm. code.
617.01
617.01
Construction and purpose. 617.01(1)
(1)
Construction. This chapter shall be liberally construed to achieve the purpose of
sub. (2), which shall constitute an aid and guide to interpretation but not an independent source of power.
617.01(2)
(2) Purpose. The purpose of this chapter is to protect the interests of insureds, stockholders and of the public against intercorporate transactions among affiliates that may affect the solidity of insurers authorized to do business in this state or otherwise be detrimental to protected interests.
617.03
617.03
Exemptions. The commissioner may exempt any specified person or class of persons from this chapter or any provisions thereof, when the commissioner deems such exemption consistent with the purposes of this chapter and in the public interest.
617.03 History
History: 1979 c. 102 s.
236 (6).
617.11
617.11
Reports on affiliates. 617.11(1)
(1)
Information. Except as provided under
subs. (2) and
(2m), an insurer authorized to do business in this state, and a person attempting to acquire or having control of an insurer authorized to do business in this state, shall report to the commissioner the information concerning the insurer and its affiliates that the commissioner requires by rule. The commissioner may promulgate rules prescribing the timing of reports under this subsection, including, but not limited to, requiring periodic reporting and the form and procedure for filing reports.
617.11(2)
(2) Exemption for certain insurers. Neither
sub. (1) nor
s. 617.21 (1) applies to a foreign insurer or an alien insurer, nor to a person attempting to acquire or having control of either, if the foreign insurer or alien insurer is subject to all of the following:
617.11(2)(a)
(a) Laws, rules or regulations of the jurisdiction of its domicile that are substantially similar to or more stringent than
sub. (1) and rules promulgated under
sub. (1).
617.11(2)(b)
(b) Beginning January 1, 1989, laws, rules or regulations of its domicile that are substantially similar to or more stringent than
ss. 617.21 (1) and
(3r) and
617.225 and rules promulgated under those sections.
617.11(2)(c)
(c) Beginning January 1, 1989, laws, rules or regulations of the jurisdiction of its domicile that either:
617.11(2)(c)1.
1. Require it to report to that jurisdiction a material change in or addition to a report required under laws, rules or regulations under
par. (a) within 15 days after the last day of the month during which it learns of the change or addition; or
617.11(2m)
(2m) Exemption if the insurer reports. Subsection (1) does not apply to a person attempting to acquire or having control of an insurer, if the insurer reports as required under
sub. (1) on behalf of the person.
617.11(3)
(3) Report for affiliates. One insurer may report on behalf of all affiliated insurers if it provides all the information that would be required if each insurer reported separately.
617.11(5)
(5) Consent to jurisdiction. Every insurer authorized to do business in this state shall promptly submit to the commissioner a statement from each of its affiliates that owns stock in the insurer either directly or through intermediaries, that controls the insurer or that is a party to any transaction, dividend or distribution that the insurer is required to report under
s. 617.21, to the effect that the affiliate agrees to be subject to the jurisdiction of the commissioner and the courts of this state for the purposes of this chapter. The commissioner may by rule require that such statements be submitted for other classes of affiliates if he or she finds that the interests of policyholders or the public so require.
617.11(6)
(6) Information order. Notwithstanding
subs. (2) and
(2m), the commissioner may, by order, require any insurer authorized to do business in this state, or any person attempting to acquire or having control of the insurer, to report information under
sub. (1) or other information to the commissioner.
617.11 History
History: 1979 c. 102 s.
236 (2), (5);
1987 a. 167.
617.21
617.21
Transactions with affiliates. 617.21(1)
(1)
General requirements. Except as provided under
s. 617.11 (2), neither an insurer authorized to do business in this state nor an affiliate of the insurer may enter into a transaction between the insurer and affiliate unless all of the following apply:
617.21(1)(a)
(a) The transaction at the time it is entered into is reasonable and fair to the interests of the insurer.
617.21(1)(b)
(b) The books, accounts and records of each party to the transaction are kept in a manner that clearly and accurately discloses the nature and details of the transaction and in accordance with generally accepted accounting principles permits ascertainment of charges relating to the transaction.
617.21(1)(c)
(c) The insurer's surplus following any dividends or distributions to shareholders or a person having control of the insurer is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.
617.21(1)(d)
(d) The transaction complies with any other standard that the commissioner prescribes by rule.
617.21(2)
(2) Transactions of domestic insurers subject to disclosure. 617.21(2)(a)1.1. Except as provided under
sub. (3t), the commissioner may promulgate rules requiring a domestic insurer, a person attempting to acquire or having control of a domestic insurer and affiliates of a domestic insurer to report a transaction or a group or series of transactions, if all of the following are satisfied:
617.21(2)(a)1.a.
a. The transaction is between a domestic insurer and a person attempting to acquire or having control of the domestic insurer or an affiliate of the domestic insurer, or the transaction directly or indirectly benefits the person or affiliate.
617.21(2)(a)1.b.
b. The transaction is, or the group or series of transactions are, material to the domestic insurer.
617.21(2)(a)2.
2. Transactions which are material to a domestic insurer for the purposes of
subd. 1. include, but are not limited to, management contracts, service contracts and cost-sharing arrangements.
617.21(2)(b)
(b) Except as provided under
sub. (3t), no domestic insurer, person attempting to acquire or having control of a domestic insurer or affiliate of the domestic insurer may enter into a transaction required to be reported to the commissioner under this subsection unless the domestic insurer, person and affiliate report the transaction to the commissioner in the form and by the date before the effective date of the transaction that are prescribed by the commissioner by rule. The commissioner may not require the transaction to be reported earlier than at least 30 days before the effective date.
617.21(3)
(3) Disapproval. The commissioner may, within the period prescribed in
sub. (2), disapprove any transaction reported under
sub. (2) if the commissioner finds that it would violate the law or would be contrary to the interests of insureds, stockholders or the public.
617.21(3g)
(3g) Transactions prohibited. Except as provided under
sub. (3t), no domestic insurer, person attempting to acquire or having control of the insurer or affiliate of the insurer may enter into a transaction that is not reported as required under
sub. (2) or that is disapproved by the commissioner under
sub. (3).
617.21(3m)
(3m) Voidable transactions. If a domestic insurer, person attempting to acquire or having control of the insurer or affiliate enters into a transaction in violation of this section, the insurer may void the transaction and obtain an injunction and recovery from the person or affiliate of the amount necessary to restore the insurer to its condition had the transaction not occurred. The commissioner may order an insurer to void the transaction, to commence an action against the person or affiliate or to take other action.
617.21(3r)
(3r) Required surplus. The commissioner may promulgate rules for determining adequacy of surplus under this section.
617.21(3t)
(3t) Exemption if insurer reports. Section 617.21 (2) to
(3g) does not apply to a person attempting to acquire or having control of, or an affiliate of, an insurer, if the insurer reports as required under
sub. (2) on behalf of the person or on behalf of the affiliate, and the transaction is not disapproved by the commissioner under
sub. (3).
617.22
617.22
Dividends and other distributions. 617.22(1)
(1)
General. Any action by the board of a stock insurer authorized to do business in this state authorizing any distribution to shareholders other than a stock dividend shall be reported to the commissioner in writing. No payment may be made until at least 30 days after such report.
617.22(2)
(2) New corporations. For 5 years after the initial issuance of a certificate of authority, no payment may be made under
sub. (1) until at least 45 days after the report. The commissioner may extend the waiting period an additional 45 days by giving notice to the corporation not less than 5 days before expiration of the first 45-day period.
617.22(3)
(3) Exemptions. If
sub. (2) is inapplicable, no report need be made under
sub. (1) of a distribution that is no more than 15% larger than for the corresponding period in the previous year.
617.22(4)
(4) Special exemption for certain nondomestic insurers. A nondomestic insurer which does not have to report under
s. 617.11 is only required to report dividends if so directed by the commissioner.
617.22 History
History: 1979 c. 102 ss.
145,
236 (2).
617.225
617.225
Extraordinary dividends. 617.225(1)
(1) A domestic insurer may not pay an extraordinary dividend to its shareholders and an affiliate of the insurer may not accept an extraordinary dividend unless the insurer reports the extraordinary dividend to the commissioner at least 30 days before payment and the commissioner does not disapprove the extraordinary dividend within that period.
617.225(2)
(2) The commissioner may promulgate rules under this section including, but not limited to, rules prescribing the form and content of and procedure for filing reports under this section.
617.225(3)
(3) An insurer may declare an extraordinary dividend that is conditioned upon the insurer's compliance with
sub. (1). A declaration of an extraordinary dividend under this subsection does not confer rights on a shareholder or affiliate unless
sub. (1) is complied with and is void if the extraordinary dividend is disapproved by the commissioner.
617.225(4)
(4) In addition to any remedies available under
s. 617.23, an insurer may recover from an affiliate any extraordinary dividend paid in violation of this section.
617.225 History
History: 1987 a. 167;
2003 a. 261.
617.23
617.23
Liability of affiliates. 617.23(1)
(1)
Right of receiver to recover dividends paid. If an order for the liquidation, rehabilitation or conservation of an insurer authorized to do business in this state is entered under
ch. 645, the receiver appointed under the order shall have a right to recover on behalf of the insurer the amount of distributions other than stock dividends paid by the insurer on its capital stock at any time during the 5 years preceding the petition for liquidation, rehabilitation or conservation, subject to the limitations of
subs. (2) to
(4).
617.23(2)
(2) Dividend payments recoverable. No such dividend shall be recoverable if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill the obligations to claimants under its insurance contracts.
617.23(3)(a)(a)
Affiliates at time of payment. Any person who was an affiliate of the insurer at the time the distributions were paid shall be liable up to the amount of distributions he or she received.
617.23(3)(b)
(b)
Affiliates at time of declaration of distribution. Any person who was an affiliate of the insurer at the time the distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately.
617.23(3)(c)
(c)
Joint and several liability. If under
pars. (a) and
(b) 2 persons are liable with respect to the same distributions, they shall be jointly and severally liable.
617.23(4)
(4) Aggregate limitation. The maximum amount recoverable under this section is:
617.23(4)(a)
(a) The amount needed in excess of all other available assets to pay all claims under the receivership.
617.23(4)(b)
(b) Reduced by any amount already paid to receivers under similar laws of other states.
617.23(5)
(5) Secondary liability. If any person liable under
sub. (3) is insolvent, all its affiliates that controlled it at the time the dividend was paid are jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.
617.25
617.25
Officers and directors. 617.25(1)
(1) No director or officer of an insurer or of an affiliate of an insurer may permit, participate in or assent to a transaction or payment or acceptance of a dividend or distribution prohibited under this chapter.
