Pennsylvania Enacts Changes to Insurance Holding Company and Credit for Reinsurance Laws
On July 5, 2012, Governor Tom Corbett signed into law Act 136 of 2012 making a number of significant changes to Pennsylvania's Insurance Holding Company Act (HCA), as well as an update to its credit for reinsurance law. With respect to the latter, effective immediately, insurers are now permitted to take credit on their balance sheets for risks ceded to certified reinsurers.
The HCA amendments broaden the scope of the Insurance Department's regulatory authority over insurance holding company systems through expanded reporting requirements and examination authority over controlling persons and non-insurance affiliates. Among other things, the law requires:
- Prior notice filings by controlling persons of a domestic insurer that seek to divest their control of the insurer;
- An acknowledgement from persons assuming control of a domestic insurer that the persons and the subsidiaries within their control will provide information relative to enterprise risk to the Insurance Commissioner upon his request;
- Insurers to include financial statements of all entities and affiliates in the insurance holding company system with its Form B — Annual Registration Statement, if requested by the Department;
- A statement in the Form B that the board of directors maintains oversight of the corporate governance and internal controls of the insurer and that its officers and senior management have implemented and monitor corporate governance and internal control procedures; and
- The filing of an annual enterprise risk report from the ultimate controlling person of the domestic insurer, which identifies the material risks within the holding company system that could pose enterprise risk to the insurer (the new Form F report).
In addition, Act 136 increases the types of transactions subject to the Form D — Prior Notice of a Transaction filing, to include, among other things, prior notice of intercompany service, management, tax allocation and cost-sharing agreements. It also expands the Department's examination authority to include all entities within an insurer’s holding company system, and permits the Department to participate in supervisory colleges and to serve as a group-wide supervisor of a domestic insurer that is part of an international insurance group.
Many of the changes to the HCA go into effect in 60 days. Pennsylvania insurers will need to update their regulatory checklists to ensure that they remain compliant with the HCA requirements.
Fran Roggenbaum and Laura Gargiulo, members of Saul Ewing's Insurance Practice, will be discussing the HCA changes and practical considerations for implementation in a webinar on August 3, 2012. Watch for an upcoming email announcement.