Loading
The Oregon Administrative Rules contain OARs filed through November 15, 2014
 
QUESTIONS ABOUT THE CONTENT OR MEANING OF THIS AGENCY'S RULES?
CLICK HERE TO ACCESS RULES COORDINATOR CONTACT INFORMATION

 

DEPARTMENT OF CONSUMER AND BUSINESS SERVICES,
INSURANCE DIVISION

 

DIVISION 11

ANNUAL STATEMENTS AND REPORTS BY INSURERS

Annual Statements

836-011-0000

Annual Statement Blank and Instructions

(1) For the purpose of complying with ORS 731.574, every authorized insurer, including every health care service contractor and multiple employer welfare arrangement, shall file its financial statement required by 731.574 for the 2013 reporting year on the annual statement blank approved for the 2013 reporting year by the National Association of Insurance Commissioners, for the type or types of insurance transacted by the insurer.

(2) Every authorized insurer, including every health care service contractor, shall complete its annual statement blank under section (1) of this rule for the 2013 reporting year, according to the applicable instructions published for that year by the National Association of Insurance Commissioners, for completing the blank, as required by ORS 731.574.

(3) Every authorized insurer, including every health care service contractor, shall file each annual statement supplement for the 2013 reporting year, as required by the applicable instructions published for that year by the National Association of Insurance Commissioners, and shall complete the supplement according to those instructions.

(4) The applicable instructions published by the National Association of Insurance Commissioners referred to in this rules are available for inspection at the Insurance Division of the Department of Consumer and Business Services. Any person interested in inspecting those instructions should contact the Insurance Division at web.inscomp@state.or.us.

(5) This rule is adopted under the authority of ORS 731.244, 731.574 and 733.210 for the purpose of implementing 731.574 and 733.210.

Stat. Auth.: ORS 731.244, 731.574 & 733.210
Stats. Implemented: ORS 731.574 & 733.210
Hist.: ID 8-1993, f. & cert. ef. 9-23-93; ID 10-1994, f. & cert. ef. 12-14-94; ID 7-1995, f. & cert. ef. 11-15-95; Renumbered from 836-013-0000; ID 4-1996, f. 2-28-96, cert. ef. 3-1-96; ID 16 -1996, f. & cert. ef. 12-16-96; ID 11-1997, f. & cert. ef. 10-9-97; ID 16-1998, f. & cert. ef. 11-10-98; ID 5-1999, f. & cert. ef. 11-18-99; ID 1-2001, f. & cert. ef. 2-7-01; ID 4-2002, f. & cert. ef. 1-30-02; ID 6-2003, f. & cert. ef. 12-3-03; ID 1-2006, f. & cert. ef. 1-23-06; ID 9-2007, f. & cert. ef. 11-8-07; ID 1-2009, f. & cert. ef. 1-29-09; ID 11-2009, f. & cert. ef. 12-9-09; ID 22-2010, f. 12-30-10, cert. ef. 1-1-11; ID 2-2012, f. & cert. ef. 2-7-12; ID 2-2013, f. & cert. ef. 2-6-13; ID 3-2014, f. & cert. ef. 2-14-14

836-011-0015

Property and Casualty Actuarial Opinion of Reserves and Supporting Documentation

(1) Each authorized insurer transacting property or casualty insurance in this state, unless otherwise exempted by the domiciliary commissioner, shall submit annually to the Director of the Department of Consumer and Business Services the opinion of an appointed actuary as provided in this section. The opinion shall be entitled “Statement of Actuarial Opinion” and shall be filed in accordance with the annual statement instructions adopted pursuant to OAR 836-011-0000.

(2)(a) Every property and casualty insurer domiciled in this state that is required to submit a Statement of Actuarial Opinion under section (1) of this rule shall annually submit an actuarial opinion summary, written by the insurer’s appointed actuary. The actuarial opinion summary shall be filed in accordance with the annual statement instructions adopted pursuant to OAR 836-011-0000 and shall be considered as a document supporting the actuarial opinion required under section (1) of this rule.

(b) An insurer authorized to transact insurance in this state but not domiciled in this state shall provide the actuarial opinion summary upon request.

(3)(a) Every property and casualty insurer domiciled in this state that is required to submit a Statement of Actuarial Opinion under section (1) of this rule shall prepare an actuarial report and underlying work papers. The actuarial report and underlying work papers shall be prepared to support each actuarial opinion and shall be in accordance with the annual statement instructions adopted pursuant to OAR 836-011-0000.

(b) If an insurer fails to provide a supporting actuarial report or work papers at the request of the director or if the director determines that the supporting actuarial report or work papers provided by the insurer is otherwise unacceptable to the director, the director may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and prepare any supporting actuarial report or work papers required by the director. Before the director engages a qualified actuary under this subsection, the director shall first identify the supporting actuarial report or work papers the insurer has failed to provide or the reason the report or work papers are unacceptable and allow the insurer a reasonable time to remedy the deficiency.

(4) Except in cases of fraud or willful misconduct, an appointed actuary shall not be liable for damages to any person other than the insurer or the director for any act, error, omission, decision or conduct with respect to the actuary’s opinion.

(5) The Statement of Actuarial Opinion shall be provided with the annual statement in accordance with the appropriate property and casualty annual statement instructions adopted pursuant to OAR 836-011-0000 and shall be treated as a public document.

(6) Documents, material or other information in the possession or control of the department that are considered an actuarial report, work papers or an actuarial opinion summary provided in support of a Statement of Actuarial Opinion, and any other material provided by the insurer to the director in connection with an actuarial report, work papers or actuarial opinion summary, is confidential as provided in ORS 705.137.

Stat. Auth.: ORS 731.244, 731.574 & 733.210
Stats. Implemented: ORS 731.574 & 733.210
Hist.: ID 17-2010, f. & cert. ef. 9-14-10

Health Insurer Segregation of Premium Accounting

836-011-0050

Requirements for Segregation of Premium Received for Coverage Not Eligible for Federal Subsidies

(1) As used in this rule, "health insurer" means any insurer, fraternal benefit society, health maintenance organization or health care service contractor authorized to transact health insurance in Oregon and offering health benefit plans through the Oregon Health Insurance Exchange.

(2) All domestic, foreign or alien health insurers must:

(a) Submit an annual assurance statement attesting that the insurer complies with the requirement of section 1303 of the Affordable Care Act; and

(b) If the health benefit plan provides coverage of services that are not eligible for federal funds furnished in the form of premium tax credits or cost-sharing reductions, the health insurer also must comply with sections (3) to (11) of this rule.

(3) In addition to submitting an annual assurance statement, a health insurer that offers a health benefit plan that provides coverage of services that are not eligible for federal funds furnished in the form of premium tax credits or cost-sharing reductions must obtain the prior written approval of the Director of the Department of Consumer and Business Services of the health insurer’s accounting practice methodology for segregating premium allocated to a termination of pregnancy benefit. This requirement applies only to qualified insurers certified through the Oregon Health Insurance Exchange Corporation, for qualified health plans issued on the Oregon Health Insurance Exchange.

(4) The accounting methodology required under section (3) of this rule must:

(a) Describe the accounting practices the insurer will use to ensure segregation of federal funds for premium and claims for nonexcepted termination of pregnancy benefits from other premium received from an enrollee who receives a premium tax benefit or cost-sharing subsidy pursuant to enrollment through the Oregon Health Insurance Exchange;

(b) Allocate the two types of premium to separate accounts (allocation accounts);

(c) Ensure that claims for the nonexcepted termination of pregnancy benefit are not paid from an allocation account into which federal funds are placed; and

(d) Ensure strict separation of funds between the allocation accounts, and include at least one allocation account solely for the deposit of private premium dollars used to pay for abortion coverage, and a second allocation account to process premium dollars paid for all other covered benefits.

(5) This rule does not require an insurer to conduct two separate premium transactions with enrollees. For purposes of approval by the director, the segregation of premium may occur solely as an accounting transaction.

(6) A health insurer must submit its proposed methodology to the director in writing more than thirty days before the proposed effective date for implementing the methodology. The insurer may not implement the methodology until the director approves the plan in writing. For good cause, the director may reduce the time period.

(7) A health insurer may not implement any changes or amendments to its accounting methodology prior to receiving the director's written approval.

(8) Instructions as to how and where an insurer must send its request for approval of its segregation of premium accounting plan may be found on the Oregon Insurance Division web site at www.insurance.or.gov.

(9) An insurer submitting a proposed accounting methodology under this rule must include the following information:

(a) The proposed effective date and the date of the first filed financial statement in which the proposed segregated account will be reported;

(b) A description of accounting systems for processing premium payments for products on the Oregon Health Insurance Exchange that includes termination of pregnancy benefits, including:

(A) The financial accounting systems, including documentation and internal controls, to ensure the appropriate segregation of payments received for coverage of nonexcepted termination of pregnancy benefits from those received for coverage of all other services, which may be supported by federal premium tax credits and cost-sharing reduction payments;

(B) The financial accounting systems, including accounting documentation and internal controls, that ensure that all expenditures for nonexcepted termination of pregnancy benefits are reimbursed from the appropriate allocation account; and

(C) An explanation of how the insurer's systems, including accounting documentation and internal controls meet the requirements for segregation accounts under the law.

(10) After an accounting methodology for segregating premium has been approved, an insurer must file with its annual statement filed with the director on or before March 1st of each year all of the following:

(a) Certification that the insurer is certified as a qualified insurer through the exchange.

(b) An annual supplemental information schedule containing a reconciliation of all segregated account activity (beginning balance + receipts - disbursements = ending balance) for the year. The annual supplemental information schedule shall be electronically filed with the director in PDF format in compliance with the form and instructions contained on the Oregon Insurance Division web site.

(c) The annual supplemental information schedule shall contain an affirmation of the insurer's chief executive officer and chief financial officer (or equivalent position and title) that the financial accounting systems, including accounting documentation and internal controls, of the segregated account covered by the annual supplemental information schedule meet the requirements for segregated accounts under the P.L. 111-148 (111th Congress, 2010).

(d) In addition to all other requirements of opinions, the annual audit of insurers conducted by independent certified public accountants and filed in accordance with OAR 836-011-0120 shall include an opinion on whether the supplementary information contained in the annual supplemental information schedule is fairly stated, and, if the segregated accounts financial accounting systems, including documentation and internal controls, comply with the requirements of the P.L. 111-148 (111th Congress, 2010). The certified public accountant’s report must be filed with the insurer’s annual audited financial statement filed with the director.

(e) A statement of the amount of premium segregated for each product offered on the Oregon Health Insurance Exchange, calculated as if the coverage were included for the entire population of enrollees. The amount of premium must not be less than one dollar per enrollee, per month.

(f) The number of enrollees, by plan for the benefit year, for whom premium was segregated pursuant to this rule, P.L. 111-148 (111th Congress, 2010), at Section 1303 (b)(2)(B) and (C), and 45 C.F.R. Sec. 156.280.

(11) The director may periodically audit insurers and each product subject to this rule to verify compliance. The director will retain working papers and periodic audit reports for a period of not less than three years, and may make the reports available to the Oregon Health Insurance Exchange Corporation or the U.S. Department of Health and Human Services upon request.

Stat. Auth.: ORS 731.244 & 743.758
Stats. Implemented: ORS 743.758
Hist.: ID 5-2013(Temp), f. & cert ef. 11-5-13 thru 4-30-14; ID 4-2014, f. & cert. ef. 2-14-14

Annual Audited Financial Reports

836-011-0100

Authority; Purpose; Scope

(1) OAR 836-011-0100 to 836-011-0230 are adopted by the Director pursuant to ORS 731.488. The purpose of OAR 836-011-0100 to 836-011-0230 is to improve the Director's surveillance of the financial condition of insurers by requiring the following:

(a) An annual audit of financial statements reporting the financial position and the results of operations of insurers by independent certified public accountants;

(b) Communication of Internal Control Related Matters Noted in an Audit; and

(c) Management’s Report of Internal Control over Financial Reporting.

(2) OAR 836-011-0100 to 836-011-0230 apply to every authorized insurer, subject to exemptions in OAR 836-011-0130.

(3) OAR 836-011-0100 to 836-011-0230 do not limit the Director's authority to order, conduct or perform examinations of insurers under the Insurance Code.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0110

Definitions

As used in OAR 836-011-0100 to 836-011-0230:

(1) "Accountant" or "independent certified public accountant" means an independent certified public accountant or accounting firm in good standing with the American Institute of Certified Public Accountants and in each state in which the accountant or accounting firm is licensed to practice. For a Canadian or British insurer, the term means a Canadian-chartered or British-chartered accountant.

(2) An “affiliate” of, or a person “affiliated” with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(3) “Audit committee” means a committee or equivalent body established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting processes of an insurer or group of insurers, and audits of financial statements of the insurer or group of insurers. The audit committee of an entity that controls a group of insurers may be considered to be the audit committee for one or more of the controlled insurers solely for the purposes of OAR 836-011-0100 to 836-011-0230 at the election of the controlling person. 836-011-0223(6) governs the exercise of this election. If an audit committee is not designated by the insurer, the insurer’s entire board of directors constitutes the audit committee.

(4) "Audited financial report" means a report that includes the items specified in OAR 836-011-0140.

(5) “Group of insurers” means those authorized insurers included in the reporting requirements of ORS 732.517 to 732.592, or a set of insurers as identified by management, for the purpose of assessing the effectiveness of internal control over financial reporting.

(6) “Indemnification” means an agreement of indemnity or a release from liability when the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing of other misrepresentations made by the insurer or its representatives.

(7) “Independent board member” has the same meaning given the term in OAR 836-011-0223(4)

(8) “Internal control over financial reporting” means a process effected by an entity’s board of directors, management and other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, i.e., those items specified in OAR 836-011-0140(2) and (3), except for 836-011-0140(2)(a), and includes those policies and procedures that:

(a) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

(b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., those items specified in OAR 836-011-0140(2) and (3), except for 836-011-0140(2)(a), and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements, i.e., those items specified in OAR 836-011-0140(2) and (3), except for 836-011-0140(2)(a).

(9) “SEC” means the United States Securities and Exchange Commission.

(10) “Section 404” means Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s rules and regulations promulgated thereunder.

(11) “Section 404 Report” means management’s report on “internal control over financial reporting” as defined by the SEC and the related attestation report of the independent certified public accountant as described in section (1) of this rule.

(12) “SOX Compliant Entity” means an entity that either is required to be compliant with, or voluntarily is compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002: (i) the preapproval requirements of Section 201 (Section 10A(i) of the Securities Exchange Act of 1934); (ii) the Audit committee independence requirements of Section 301 (Section 10A(m)(3) of the Securities Exchange Act of 1934); and (iii) the Internal control over financial reporting requirements of Section 404 (Item 308 of SEC Regulation S-K).

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0120

Filing and Extensions for Filing of Annual Audited Financial Reports

(1) All insurers shall have an annual audit by an independent certified public accountant and shall file an audited financial report with the Director on or before June 1 for the year ended December 31 immediately preceding. The Director may require an insurer to file an audited financial report earlier than June 1 with advance notice of 90 days to the insurer.

(2) Extensions of the June 1 filing date may be granted by the Director for 30-day periods upon a showing by the insurer and its independent certified public accountant of the reasons for requesting an extension and determination by the Director of good cause for an extension. The request for extension must be submitted in writing not less than 10 days prior to the due date in sufficient detail to permit the Director to make an informed decision with respect to the requested extension.

(3) If an extension is granted in accordance with section (2) of this rule, a similar extension of 30 days is granted to the filing of Management’s Report of Internal Control over Financial Reporting.

(4) Every insurer required to file an annual audited financial report pursuant to OAR 836-011-0100 to 836-011-0230 shall designate a group of individuals as constituting its audit committee, as defined in 836-011-0110. The audit committee of an entity that controls an insurer may be designated as the insurer’s audit committee for purposes of 836-011-0100 to 836-011-0230 at the election of the controlling person.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0130

Exemptions

(1) The following authorized insurers are exempt from the requirements of OAR 836-011-0100 to 836-011-0230:

(a) An insurer having direct premiums written in this state of less than $1,000,000 in any calendar year and having fewer than 1,000 policyholders or certificate holders of directly written policies nationwide at the end of the same calendar year is exempt from OAR 836-011-0100 to 836-011-0230 for the year unless the Director determines with respect to the insurer that compliance is necessary for the Director to carry out statutory responsibilities. The exemption under this subsection does not apply to any insurer that has assumed premiums pursuant to contracts or treaties of reinsurance, or both, of $1,000,000 or more.

(b) A foreign or alien insurer that has filed the audited financial report in another state pursuant to the other State's requirement of audited financial reports, if the Director determines that the other state's requirements are substantially similar to the requirements of OAR 836-011-0100 to 836-011-0230 and if the foreign or alien insurer does both of the following:

(A) Files with the Director a copy of the Audited Financial Report, the Communication of Internal Control Related Matters Noted in an Audit and the Accountant's Letter of Qualifications that are filed with the other state, in accordance with the filing dates specified in OAR 836-011-0120, 836-011-0200, and 836-011-0210. In lieu of the requirements of this paragraph, a Canadian insurer may file accountants' reports as filed with the Office of the Superintendent of Financial Institutions, Canada.

(B) Files with the Director a copy of any Notification of Adverse Financial Condition Report filed with the other state. The copy must be filed with the Director within the time specified in OAR 836-011-0190.

(c) An insurer to whom the Director has granted an exemption under section (2) of this rule, during the period in which the exemption is effective.

(d) A foreign or alien insurer required to file Management’s Report of Internal Control over Financial Reporting in another state is exempt from filing the Report in this state if the other state has substantially similar reporting requirements and the Report is filed with the insurance commissioner of the other state within the time specified.

(2) Upon written application of any insurer, the Director may grant an exemption from compliance with one or more provisions of OAR 836-011-0100 to 836-011-0230 if the Director finds upon review of the application that compliance would constitute a financial or organizational hardship upon the insurer. An exemption may be granted at any time and from time to time for a specified period or periods. Not later than the 10th day after denial of an insurer's written request for an exemption under this section, the insurer may request in writing a hearing on its application for an exemption.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0140

Contents of Annual Audited Financial Report

(1) An annual audited financial report required under OAR 836-011-0120 must report the financial position of the insurer as of the end of the most recent calendar year and the results of its operations, cash flows and changes in capital and surplus for the year then ended in conformity with statutory accounting practices prescribed or otherwise permitted by the Department of Insurance of the state of domicile.

(2) The annual audited financial report shall include the following:

(a) A report of an independent certified public accountant;

(b) A balance sheet reporting admitted assets, liabilities and capital and surplus;

(c) A statement of operations;

(d) A statement of cash flow;

(e) A statement of changes in capital and surplus; and

(f) Notes to financial statements. The notes shall be those required by the appropriate National Association of Insurance Commissioners (NAIC) Annual Statement Instructions and the NAIC Accounting Practices and Procedures Manual. The notes shall include a reconciliation of differences, if any, between the audited statutory financial statements and the annual statement filed pursuant to ORS 731.574, with a written description of the nature of the differences.

(3) The financial statements included in the audited financial report shall be prepared in a form and using language and groupings substantially the same as the relevant sections of the annual statement of the insurer filed with the Director. The financial statement shall be comparative, presenting the amounts as of December 31 of the current year and the amounts as of the immediately preceding December 31. However, in the first year in which an insurer is required to file an audited financial report, the comparative data may be omitted.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0150

Designation of Independent Certified Public Accountant

(1) Each insurer required by OAR 836-011-0120 to file an annual audited financial report, within 60 days after becoming subject to the requirement, must register with the Director in writing the name and address of the independent certified public accountant or accounting firm retained to conduct the annual audit set forth in OAR 836-011-0120 and 836-011-0150. An insurer not retaining an independent certified public accountant on July 1, 2008 shall register the name and address of its retained independent certified public accountant not less than six months before the date on which the first audited financial report is to be filed.

(2) An insurer shall obtain a letter from the accountant retained by the insurer stating that the accountant is aware of the provisions of the Insurance Code and the rules of the Insurance Department of the state of domicile that relate to accounting and financial matters and affirming that the accountant will express the opinion of the accountant on the financial statements in terms of their conformity with the statutory accounting practices prescribed or otherwise permitted by that Department, specifying exceptions that the accountant believes appropriate. The insurer shall file a copy of the letter with the Director.

(3) If the accountant who was the certified public accountant for the immediately preceding filed audited financial report is dismissed or resigns, the insurer shall so notify the Director not later than the fifth business day after the dismissal or resignation. The insurer shall also do the following:

(a) Notify the Director in a separate letter, not later than the 10th business day after the date of the notice of dismissal or resignation, whether in the 24 months preceding the engagement there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure that, if not resolved to the satisfaction of the former accountant, would have caused the former accountant to make reference to the subject matter of the disagreement in connection with the accountant's opinion. The disagreements required to be reported in response to this subsection include both those resolved to the former accountant's satisfaction and those not resolved to the former accountant's satisfaction, and are those disagreements that occur at the decision making level, between personnel of the insurer responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering its report.

(b) Request the former accountant, in writing, to furnish a letter addressed to the insurer stating whether the accountant agrees with the statements contained in the insurer's letter and, if not, stating the reasons for which the accountant does not agree.

(c) Furnish the Director the letter received from the former accountant under subsection (b) of this section together with a response by the insurer to that letter.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0160

Qualifications of Independent Certified Public Accountant

(1) The Director shall not recognize any person as a qualified independent certified public accountant for the purposes of OAR 836-011-0100 to 836-011-0230 if the person:

(a) Is not in good standing with the American Institute of Certified Public Accountants (AICPA) and in all states in which the person is licensed to practice as a certified public accountant or, if the insurer is a Canadian or British insurer, the person is not a chartered accountant; or

(b) Has either directly or indirectly entered into an agreement of indemnity or a release from liability (collectively referred to as indemnification) with respect to the audit of the insurer.

(2) Except as otherwise provided in this rule, the Director shall recognize an independent certified public accountant as qualified as long as the certified public accountant conforms to the standards of the certified public accountant profession, as contained in the Code of Professional Ethics of the American Institute of Certified Public Accountants and the rules and the Code of Professional Conduct of the Oregon State Board of Accountancy, or a similar code of conduct of the state board regulating the practice of accountancy in the state in which the accountant is licensed to practice.

(3) A qualified independent certified public accountant may enter into an agreement with an insurer to have disputes relating to an audit resolved by mediation or arbitration. In the event of a delinquency proceeding commenced against the insurer under ORS 734.130, however, the mediation or arbitration provisions shall operate at the option of the statutory successor.

(4) The lead or coordinating audit partner having primary responsibility for the audit may not act in that capacity for more than five consecutive years. The partner or other person is disqualified from acting in that or a similar capacity for the same insurer or its insurance subsidiaries or affiliates for a period of five consecutive years. An insurer may apply to the Director for relief from the rotation requirement of this section on the basis of unusual circumstances. An insurer must apply for relief at least 30 days before the end of the calendar year. The Director may consider the following factors in determining whether the relief should be granted:

(a) The number of partners, the expertise of the partners or the number of insurance clients in the currently registered firm;

(b) The premium volume of the insurer;

(c) The number of jurisdictions in which the insurer transacts insurance.

(5) An insurer to which relief from the rotation requirements under section (4) of this rule has been granted shall file with its annual statement filing the Director’s approval for relief with the states that it is licensed in or doing business in, and with the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

(6) The Director shall not recognize an individual as an independent certified public accountant, or accept an annual audited financial report required by OAR 836-011-0100 to 836-011-0230 that is prepared in whole or part by an individual, if the individual:

(a) Has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sections 1961-1968, or any dishonest conduct or practices under federal or state law;

(b) Has been found to have violated the insurance laws of this state with respect to any previous reports submitted under OAR 836-011-0100 to 836-011-0230; or

(c) Has demonstrated a pattern or practice of failing to detect or disclose material information in any report filed under OAR 836-011-0100 to 836-011-0230.

(7) The Director may hold a hearing to determine whether an independent certified public accountant is qualified and, considering the evidence presented, may rule that the accountant is not qualified for purposes of expressing the accountant's opinion on the financial statements in the annual audited financial report made pursuant to OAR 836-011-0100 to 836-011-0230 and require the insurer to replace the accountant with another accountant who is qualified with respect to the insurer as provided in 836-011-0100 to 836-011-0230.

(8) The Director may not recognize an accountant as a qualified independent certified public accountant or accept an annual audited financial report prepared in whole or in part by the accountant if the accountant provides to an insurer, contemporaneously with the audit, the following non-audit services:

(a) Bookkeeping or other services related to the accounting records or financial statements of the insurer;

(b) Financial information systems design and implementation;

(c) Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

(d) Actuarially-oriented advisory services involving the determination of amounts recorded in the financial statements. The accountant may assist an insurer in understanding the methods, assumptions and inputs used in the determination of amounts recorded in the financial statement only if it is reasonable to conclude that the services provided will not be subject to audit procedures during an audit of the insurer’s financial statements. An accountant’s actuary may also issue an actuarial opinion or certification (“opinion”) on an insurer’s reserves if the following conditions have been met:

(A) Neither the accountant nor the accountant’s actuary has performed any management functions or made any management decisions;

(B) The insurer has competent personnel (or engages a third party actuary) to estimate the reserves for which management takes responsibility; and

(C) The accountant’s actuary tests the reasonableness of the reserves after the insurer’s management has determined the amount of the reserves;

(e) Internal audit outsourcing services;

(f) Management functions or human resources;

(g) Broker or dealer, investment adviser or investment banking services;

(h) Legal services or expert services unrelated to the audit; or

(i) Any other services that the Director has determined by rule to be impermissible.

(9) In general, the principles of independence with respect to services provided by a qualified independent certified public accountant are largely predicated on three basic principles, violations of which would impair the accountant’s independence. The principles are that the accountant cannot function in the role of management, cannot audit the accountant’s own work, and cannot serve in an advocacy role for the insurer.

(10) An insurer having direct written and assumed premiums of less than $100,000,000 in any calendar year may request an exemption from section (8) of this rule. The insurer shall file with the Director a written statement discussing the reasons why the insurer should be exempt from these provisions. If the Director finds, upon review of this statement, that compliance with section (8) of this rule would constitute a financial or organizational hardship upon the insurer, the Director may grant an exemption.

(11) A qualified independent certified public accountant who performs the audit may engage in other non-audit services, including tax services, that are not described in section (8) of this rule and that do not conflict with section (9) of this rule only if the activity is approved in advance by the audit committee in accordance with section (12) of this rule.

(12) All auditing services and non-audit services provided to an insurer by a qualified independent certified public accountant of the insurer shall be preapproved by the audit committee. The preapproval requirement is waived with respect to non-audit services if the insurer is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity or:

(a) The aggregate amount of all such non-audit services provided to the insurer constitutes not more than five percent of the total amount of fees paid by the insurer to its qualified independent certified public accountant during the fiscal year in which the non-audit services are provided;

(b) The services were not recognized by the insurer at the time of the engagement to be non-audit services; and

(c) The services are promptly brought to the attention of the audit committee and approved prior to the completion of the audit by the audit committee or by one or more members of the audit committee who are the members of the board of directors to whom authority to grant such approvals has been delegated by the audit committee.

(13) The audit committee may delegate to one or more designated members of the Audit committee the authority to grant the preapprovals required by section (12) of this rule. The decisions of any member to whom this authority is delegated shall be presented to the full audit committee at each of its scheduled meetings.

(14)(a) The Director may not recognize an independent certified public accountant as qualified for a particular insurer if a member of the board, president, chief executive officer, controller, chief financial officer, chief accounting officer or any person serving in an equivalent position for that insurer was employed by the independent certified public accountant and participated in the audit of that insurer during the one-year period preceding the date that the most current statutory opinion is due. This section applies only to partners and senior managers involved in the audit. An insurer may apply to the Director for relief from the requirement of this subsection on the basis of unusual circumstances.

(b) The insurer shall file with its annual statement filing the approval for relief from subsection (a) of this section with the states that it is licensed in or doing business in and with the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 2-2002(Temp), f. & cert. ef. 1-15-01 thru 7-5-02; ID 17-2002, f. & cert. ef. 7-11-02; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0170

Consolidated or Combined Audits

An insurer may apply in writing to the Director for approval to file audited consolidated or combined financial statements in lieu of separate annual audited financial statements if the insurer is part of a group of insurers that uses a pooling or one hundred percent reinsurance agreement affecting the solvency and integrity of the insurer's reserves and if the insurer cedes all of its direct and assumed business to the pool. In such a case, a columnar consolidating or combining worksheet shall be filed with the report as follows:

(1) Amounts shown on the consolidated or combined audited financial report shall be shown on the worksheet.

(2) Amounts for each insurer subject to this rule shall be stated separately.

(3) Noninsurance operations may be shown on the worksheet on a combined or individual basis.

(4) Explanations of consolidating and eliminating entries shall be included.

(5) A reconciliation shall be included of any differences between the amounts shown in the individual insurer columns of the worksheet and comparable amounts shown on the annual statements of the insurers.

Stat. Auth.: ORS 731.244 & ORS 731.488
Stats. Implemented: ORS 731.488(2)(a)
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02

836-011-0180

Scope of Audit and Report of Independent Certified Public Accountant

Financial statements furnished pursuant to OAR 836-011-0140 shall be audited by an independent certified public accountant. The audit of the insurer's financial statements must be conducted in accordance with generally accepted auditing standards. In accordance with AU Section 319 of the Professional Standards of the AICPA, Consideration of Internal Control in a Financial Statement Audit, the independent certified public accountant shall obtain an understanding of internal control sufficient to plan the audit. To the extent required by AU 319, for those insurers required to file a Management’s Report of Internal Control over Financial Reporting pursuant to 836-011-0227, the independent certified public accountant shall consider (as that term is defined in Statement on Auditing Standards (SAS) No. 102, Defining Professional Requirements in Statements on Auditing Standards or its replacement) the most recently available report in planning and performing the audit of the statutory financial statements. Consideration shall also be given to other procedures illustrated in the Financial Condition Examiner's Handbook promulgated by the National Association of Insurance Commissioners as the certified public accountant determines to be necessary.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0190

Notification of Adverse Financial Condition

(1) An insurer required to furnish the annual audited financial report shall require the independent certified public accountant to report in writing to the board of directors or its audit committee any determination by the independent certified public accountant that the insurer has materially misstated its financial condition as reported to the Director as of the date of the balance sheet currently under audit or that the insurer does not meet the minimum capital and surplus requirement of the Oregon Insurance Code as of that date. The insurer shall require the independent certified public accountant to submit the report not later than the fifth business day after the independent certified public accountant makes such a determination. An insurer that has received a report under this section shall forward a copy of the report to the Director not later than the fifth business day after receiving the report and shall provide the independent certified public accountant with evidence that the report was furnished to the Director. If the independent certified public accountant does not receive the evidence within the required period, the independent certified public accountant shall furnish to the Director a copy of its report not later than the fifth business day after the end of the period within which the insurer was required to submit the report.

(2) An independent certified public accountant shall not be liable to any person for any statement made in connection with the requirements of section (1) of this rule if the statement is made in good faith and in compliance with section (1) of this rule.

(3) If the accountant, after the date of the audited financial report filed pursuant to OAR 836-011-0100 to 836-011-0230, becomes aware of facts that might have affected the report, the Director notes the obligation of the accountant to act as prescribed in Volume 1, Section AU 561 of the Professional Standards of the American Institute of Certified Public Accountants (AICPA).

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0200

Communication of Internal Control Related Matters Noted in an Audit

(1) In addition to the annual audited financial report, each insurer shall furnish the Director with a written communication as to any unremediated material weaknesses in its internal control over financial reporting noted during the audit. The communication must be prepared by the accountant not later than the 60th day after the filing of the annual audited financial report and shall contain a description of any unremediated material weakness (as the term material weakness is defined by Statement on Auditing Standard 60, Communication of Internal Control Related Matters Noted in an Audit, or its replacement) as of December 31 immediately preceding (so as to coincide with the audited financial report required by OAR 836-011-0120(1)) in the insurer’s internal control over financial reporting noted by the accountant during the course of their audit of the financial statements. If no unremediated material weaknesses were noted, the communication must so state.

(2) The insurer shall submit with the report required under section (1) of this rule a description of remedial actions taken or proposed to correct unremediated material weaknesses, if the actions are not described in the accountant's report.

(3) The insurer shall maintain information about significant deficiencies communicated by the independent certified public accountant. The information must be made available to the examiner conducting a financial condition examination for review and kept in such a manner as to remain confidential.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0210

Accountant's Letter of Qualifications

(1) An accountant shall furnish the insurer, in connection with and for inclusion in the filing of the annual audited financial report, a letter stating:

(a) That the accountant is independent with respect to the insurer and conforms to the standards of the accounting profession as contained in the Code of Professional Ethics and pronouncements of the American Institute of Certified Public Accountants (AICPA) and the Rules of Professional Conduct of the Oregon State Board of Accountancy, or a similar code of conduct of the state board regulating the practice of accountancy in the state in which the accountant is licensed to practice.

(b) The background and experience in general, and the experience in audits of insurers, of the staff assigned to the engagement and whether each is an independent certified public accountant.

(c) That the accountant understands that the annual audited financial report and the opinion of the accountant thereon must be filed in compliance with OAR 836-011-0100 to 836-011-0230 and that the Director will rely on the information contained in the report and opinion in the monitoring and regulation of the financial position of insurers.

(d) That the accountant consents to the requirements of OAR 836-011-220 and that the accountant agrees to make the workpapers described in 836-011-0220 available for review by the Director, or the Director's designee or appointed agent.

(e) A representation that the accountant is currently licensed by an appropriate state licensing authority and is a member in good standing in the American Institute of Certified Public Accountants.

(f) A representation that the accountant is in compliance with OAR 836-011-0160.

(2) This rule does not prohibit an independent certified public accountant from using such staff as the accountant determines appropriate when use of the staff is consistent with the standards prescribed by generally accepted auditing standards.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0220

Definition, Availability and Maintenance of Independent Certified Public Accountants Workpapers

(1) For the purpose of this rule, workpapers are the records kept by an independent certified public accountant of the procedures followed, the tests performed, the information obtained and the conclusions reached pertinent to the accountant’s audit of the financial statements of an insurer. Accordingly, workpapers may include audit planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents and schedules or commentaries prepared or obtained by the independent certified public accountant in the course of the accountant’s audit of the financial statements of an insurer and which support the accountant’s opinion.

(2) An insurer that is required to file an audited financial report pursuant to OAR 836-011-0100 to 836-011-0230 shall require the accountant to make available for review by Department of Consumer and Business Service examiners, all workpapers prepared in the conduct of the accountant’s audit and any communications related to the audit between the accountant and the insurer, at the offices of the insurer, at the Department or at any other reasonable place designated by the Director. The insurer shall require that the accountant retain the audit workpapers and communications until the Department has filed a report on examination covering the period of the audit but no longer than seven years from the date of the audit report.

(3) In the conduct of a periodic review by the Department examiners, it shall be agreed that photocopies of pertinent audit workpapers may be made and retained by the Department. Any such review by the Department examiners is an investigation and all working papers and communications obtained during the course of such an investigation must be given the same confidentiality as other examination workpapers generated by the Department.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02; ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0223

Requirements for Audit Committees

(1) This rule does not apply to an authorized foreign or alien insurer or to an insurer that is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity.

(2) The audit committee shall be directly responsible for the appointment, compensation and oversight of the work of an accountant, including resolution of disagreements between management and the accountant regarding financial reporting, for the purpose of preparing or issuing the audited financial report or related work pursuant to OAR 836-011-0100 to 836-011-0230. Each accountant shall report directly to the audit committee.

(3) Each member of the audit committee must be a member of the board of directors of the insurer or a member of the board of directors of an entity elected pursuant to section (6) of this rule.

(4) To be considered independent for purposes of this rule, a member of the audit committee may not accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof, other than in the member’s capacity as a member of the audit committee, the board of directors or any other board committee. However, if a law requires board participation by an otherwise non-independent member, that law prevails and the member may participate in the audit committee and be designated as independent for audit committee purposes, unless the member is an officer or employee of the insurer or one of its affiliates.

(5) If a member of the audit committee ceases to be independent for a reason outside the member’s reasonable control, that person, with notice by the responsible entity to the Director, may remain an audit committee member of the responsible entity until the earlier of the date of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent.

(6) To exercise the election of the controlling person to designate the audit committee for purposes of OAR 836-011-0100 to 836-011-0230, the ultimate controlling person shall provide written notice to the Director. The notice must be provided in a timely manner prior to the issuance of the statutory audit report and must include a description of the basis for the election. The insurer may change the election by notifying the Director. The notice to the Director must include a description of the basis for the change. The election remains in effect for perpetuity, until rescinded.

(7) The audit committee shall require the accountant that performs for an insurer any audit required by OAR 836-011-0100 to 836-011-0230 to timely report to the Audit committee in accordance with the requirements of SAS 61, Communication with Audit Committees, or its replacement, including:

(a) All significant accounting policies and material permitted practices;

(b) All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and

(c) Other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.

(8) If an insurer is a member of an insurance holding company system, the reports required by section (7) of this rule may be provided to the audit committee on an aggregate basis for insurers in the holding company system, but only if any substantial differences among insurers in the system are identified to the Audit committee.

(9) The proportion of independent audit committee members shall meet or exceed the following criteria:

Prior Calendar Year Direct Written and Assumed Premiums

$0 - $300,000,000 -- No minimum requirements. See also Note A and B.

Over $300,000,000 -$500,000,000 -- Majority (50% or more) of members shall be independent. See also Note A and B.

Over $500,000,000 -- Supermajority of members (75% or more) shall be independent. See also Note A.

(10) (Note A) The Director is authorized by state law to require an entity’s board to enact improvements to the independence of the audit committee membership if the insurer is in a RBC action level event, meets one or more of the standards of an insurer determined to be in hazardous financial condition or otherwise exhibits qualities of a troubled insurer.

(11) (Note B) All insurers with less than $500,000,000 in prior year direct written and assumed premiums are encouraged to structure their audit committees with at least a supermajority of independent Audit committee members.

(12) (Note C) Prior calendar year direct written and assumed premiums shall be the combined total of direct premiums and assumed premiums from non-affiliates for the reporting entities.

(13) An insurer with direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of less than $500,000,000 may apply to the Director for a waiver from the requirements of this rule on the basis of hardship. The insurer shall file, with its annual statement filing, the approval for relief from this rule with the states that it is licensed or authorized in or doing business in and with the NAIC. If a nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0225

Conduct of Insurer in Connection with the Preparation of Required Reports and Documents

(1) A director or officer of an insurer may not directly or indirectly:

(a) Make or cause to be made a materially false or misleading statement to an accountant in connection with any audit, review or communication required under OAR 836-011-0100 to 836-011-0230; or

(b) Omit to state, or cause another person to omit to state, any material fact necessary in order to make statements made, in light of the circumstances under which the statements were made, not misleading to an accountant in connection with any audit, review or communication required under OAR 836-011-0100 to 836-011-0230.

(2) An officer or director of an insurer, or any other person acting under the direction thereof, may not directly or indirectly take any action to coerce, manipulate, mislead or fraudulently influence any accountant engaged in the performance of an audit pursuant to OAR 836-011-0100 to 836-011-0230 if that person knew or should have known that the action, if successful, could result in rendering the insurer’s financial statements materially misleading.

(3) For purposes of section (2) of this rule, actions that, “if successful, could result in rendering the insurer’s financial statements materially misleading” include, but are not limited to, actions taken at any time with respect to the professional engagement period to coerce, manipulate, mislead or fraudulently influence an accountant:

(a) To issue or reissue a report on an insurer’s financial statements that is not warranted in the circumstances, due to material violations of statutory accounting principles prescribed by the Director, generally accepted auditing standards, or other professional or regulatory standards;

(b) Not to perform audit, review or other procedures required by generally accepted auditing standards or other professional standards;

(c) Not to withdraw an issued report; or

(d) Not to communicate matters to an insurer’s audit committee.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0227

Management’s Report of Internal Control over Financial Reporting

(1) Each insurer required to file an audited financial report pursuant to OAR 836-011-0100 to 836-011-0230 that has annual direct written and assumed premiums of $500,000,000 or more, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, shall prepare a report of the insurer’s or group of insurers’ internal control over financial reporting. The insurer shall file the report with the Director, along with the Communication of Internal Control Related Matters Noted in an Audit, as described in 836-011-0200. The Management’s Report of Internal Control over Financial Reporting shall be as of December 31 immediately preceding.

(2) Notwithstanding the premium threshold in section (1) of this rule, the Director may require an insurer to file a Management’s Report of Internal Control over Financial Reporting if the insurer is in any RBC level event or meets any one or more of the standards of an insurer determined to be in hazardous financial condition as defined in ORS 731.385.

(3) An insurer or a group of insurers described in this section may file its or its parent’s Section 404 Report and an addendum in satisfaction of this rule, but only if the internal controls of the insurer or group of insurers having a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements (those items included in OAR 836-011-0140(2) and (3), except for 836-011-0140(2)(a), were included in the scope of the Section 404 Report. This section applies to an insurer or a group of insurers that is:

(a) Directly subject to Section 404;

(b) Part of a holding company system whose parent is directly subject to Section 404;

(c) Not directly subject to Section 404 but is a SOX Compliant Entity; or

(d) A member of a holding company system whose parent is not directly subject to Section 404 but is a SOX Compliant Entity.

(4) An addendum provided by an insurer or group of insurers under section (3) of this rule must be a positive statement by management that there are no material processes with respect to the preparation of the insurer’s or group of insurers’ audited statutory financial statements (those items included in OAR 836-011-0140(2) and (3), except for 836-011-0140(2)(a)) excluded from the Section 404 Report. If there are internal controls of the insurer or group of insurers that have a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements and those internal controls were not included in the scope of the Section 404 Report, the insurer or group of insurers may file either (i) a report under this rule, or (ii) the Section 404 Report and a report under this rule for those internal controls that have a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements not covered by the Section 404 Report.

(5) A Management’s Report of Internal Control over Financial Reporting must include:

(a) A statement that management is responsible for establishing and maintaining adequate internal control over financial reporting;

(b) A statement that management has established internal control over financial reporting and an assertion, to the best of management’s knowledge and belief, after diligent inquiry, as to whether its internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles;

(c) A statement that briefly describes the approach or processes by which management evaluated the effectiveness of its internal control over financial reporting;

(d) A statement that briefly describes the scope of work that is included and whether any internal controls were excluded;

(e) Disclosure of any unremediated material weaknesses in the internal control over financial reporting identified by management as of December 31 immediately preceding;

(f) A statement regarding the inherent limitations of internal control systems; and

(g) Signatures of the chief executive officer and the chief financial officer (or equivalent position and title).

(6) For a Management’s Report of Internal Control over Financial Reporting under section (5) of this rule, management may not conclude that the internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles if there is one or more unremediated material weaknesses in its Internal control over financial reporting

(7) Management shall document and make available upon financial condition examination the basis upon which its assertions, required in section (5) of this rule, are made. Management may base its assertions, in part, upon its review, monitoring and testing of internal controls undertaken in the normal course of its activities. In addition:

(a) Management shall have discretion as to the nature of the internal control framework used, and the nature and extent of documentation, in order to make its assertion in a cost effective manner and, as such, may include assembly of or reference to existing documentation.

(b) Management’s Report on Internal Control over Financial Reporting, required by section (1) of this rule, and any documentation provided in support thereof during the course of a financial condition examination, shall be kept confidential by the Department.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

836-011-0230

Canadian and British Companies

In the case of Canadian and British insurers, the annual audited financial report is the annual statement of total business on the form filed by such companies with their domiciliary supervision authority and audited by an independent chartered accountant. For such insurers, the letter required under OAR 836-011-0150 shall state that the accountant is aware of the requirements relating to the annual audited statement filed with the Director under 836-011-0120 and shall affirm that the opinion expressed conforms to those requirements.

Stat. Auth.: ORS 731.244 & ORS 731.488
Stats. Implemented: ORS 731.488(2)(b)-ORS 731.488(2)(c)
Hist.: ID 4-1992, f. & cert. ef. 3-26-92; ID 22-2002, f. & cert. ef. 11-27-02

836-011-0235

Effective Dates

(1) The requirements of OAR 836-011-0160(4) as amended effective July 1, 2008 apply to audits of the year beginning January 1, 2010 and thereafter.

(2) The requirements of OAR 836-011-0223 first apply beginning January 1, 2010. An insurer or group of insurers that is not required to have independent audit committee members or only a majority of independent audit committee members, as opposed to a supermajority, because the total written and assumed premium is below the threshold and subsequently becomes subject to one of the independence requirements due to changes in premium has one year following the year the threshold is exceeded, but not earlier than January 1, 2010, to comply with the independence requirements. Likewise, an insurer that becomes subject to one of the independence requirements as a result of a business combination shall have one calendar year following the date of acquisition or combination to comply with the independence requirements.

(3) The requirements of OAR 836-011-0100 to 836-011-0230 as amended effective July 1, 2008, except for 836-011-0223, are effective beginning with the reporting period ending December 31, 2010 and each year thereafter. An insurer or group of insurers that is not required to file a report because the total written premium is below the threshold and subsequently becomes subject to the reporting requirements shall have two years following the year the threshold is exceeded, but not earlier than December 31, 2010, to file a report. Likewise, an insurer acquired in a business combination shall have two calendar years following the date of acquisition or combination to comply with the reporting requirements.

Stat. Auth.: ORS 731.244 & 731.488
Stats. Implemented: ORS 731.488
Hist.: ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08

Annual Financial Statement for Self-Insured Groups Established by Three or More Public Bodies

836-011-0250

Authority; Purpose; Scope

(1) OAR 836-011-0250 to 836-011-0260 are adopted by the Director of the Department of Consumer and Business Services pursuant to ORS 731.244. The purpose of OAR 836-011-0250 to 836-011-0260 is to improve the Director's ability to determine whether a self-insurance program satisfies the financial requirements of ORS 30.282 and 731.036 to be exempt from the Insurance Code and to clarify the components of the annual financial statement required under ORS 30.282 and 731.036, including the timeline for providing the annual financial statement to the program participants and to the director.

(2) OAR 836-011-0250 to 836-011-0260 apply to every public body that establishes a self-insurance program that is exempt from the Insurance Code under ORS 30.282 and 731.036.

(3) OAR 836-011-0250 to 836-011-0260 do not limit the Director's authority to order, conduct or perform examinations of self insurance programs to determine whether the program complies with applicable criteria for exemption from the Insurance Code.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 30.282, 731.036
Hist.: ID 1-2011, f. & cert. ef. 2-4-11

836-011-0253

Definitions

As used in OAR 836-011-0250 to 836-011-0260:

(1) “Annual contributions” means total contributions paid by program participants less any premium collected from participants to procure insurance of any kind.

(2) “Annual financial statement” means the financial report required under ORS 731.036 or the annual independently audited financial statement provided to program participants under ORS 30.282. The report described in this rule must comply with all applicable Government Accounting Standards Board requirements.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 30.282, 731.036
Hist.: ID 1-2011, f. & cert. ef. 2-4-11

836-011-0255

Reserve Adequacy

In order to demonstrate that a self-insurance program complies with the reserve adequacy provisions contained in ORS 30.282(6)(d) or 731.036(4), (5) or (6), the demonstration of compliance must be accompanied and supported by the written actuarial report issued by a qualified actuary. As used in this rule, “qualified actuary” means:

(1) For property or casualty insurance, a person who is either:

(a) A member in good standing of the Casualty Actuarial Society; or

(b) A member in good standing of the American Academy of Actuaries who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries.

(2) For health insurance, a person who is a member in good standing of the American Academy of Actuaries, or a person recognized by the American Academy of Actuaries as qualified for such actuarial valuation.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 30.282, 731.036
Hist.: ID 1-2011, f. & cert. ef. 2-4-11; ID 13-2011, f. & cert. ef. 9-21-11

836-011-0258

Unallocated Reserve Account

In order to demonstrate compliance with the requirement to maintain an unallocated reserve account as set forth in ORS 30.282(6)(e)in which total assets exceed total liabilities by the greater of 25 percent of annual contributions or $250,000, total liabilities must include all liabilities identified by a qualified actuary including but not necessarily limited to the items listed in ORS 30.282(6)(d).

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 30.282, 731.036
Hist.: ID 1-2011, f. & cert. ef. 2-4-11

836-011-0260

Distribution of Annual Financial Statement

A public body or the administrator of a self-insurance program must make the annual financial statement available to program participants and to the director not later than six months after the close of the program’s fiscal year.

Stat. Auth.: ORS 731.244
Stats. Implemented: ORS 30.282, 731.036
Hist.: ID 1-2011, f. & cert. ef. 2-4-11

Risk-Based Capital Reporting

836-011-0300

Statutory Authority; Statutes Implemented

(1) OAR 836-011-0300 to 836-011-0390 apply to insurers that are subject to the capital and surplus requirements of ORS 731.554 and insurers that are subject to the capital and surplus requirements of 731.566.

(2) OAR 836-011-0300 to 836-011-0390 are adopted pursuant to the authority of ORS 731.244, 731.554, 731.574 and 733.210 for the purpose of implementing 731.554 and 731.574.

Stat. Auth.: ORS 731.244, 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0305

Definitions

As used in OAR 836-011-0300 to 836-011-0390:

(1) "Adjusted RBC report" means a risk-based capital (RBC) report that has been adjusted by the Director in accordance with OAR 836-011-0310(5).

(2) "Corrective order" means an order issued by the Director specifying corrective actions that the Director has determined are required.

(3) "NAIC" means the National Association of Insurance Commissioners.

(4) "Life or health insurer" means an insurer transacting life insurance or health insurance or both or an insurer authorized to transact property and casualty insurance but writing only health insurance.

(5) "Property and casualty insurer" means an insurer transacting property and casualty insurance, or either, but does not include an insurer transacting only monoline mortgage guaranty insurance, financial guaranty insurance or title insurance, or an insurer authorized to transact property and casualty insurance but writing only health insurance.

(6) "Negative trend" means, with respect to a life or health insurer, negative trend over a period of time, as determined in accordance with the "trend test calculation" included in the RBC instructions.

(7) "RBC instructions" means the RBC report, including risk-based capital instructions adopted by the NAIC, as such RBC instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC and identified by the Department of Consumer and Business Services to be applicable to the RBC report period. RBC instructions may be obtained by contacting the Insurance Division of the Department of Consumer and Business Services using the contact information provided on the Insurance Division website at: http://insurance.oregon.gov/Contactus.html .

(8) "RBC level" means an insurer's company action level RBC, regulatory action level RBC, authorized control level RBC, or mandatory control level RBC, defined as follows:

(a) "Company action level RBC" means, with respect to any insurer, the product of 2.0 and its authorized control level RBC;

(b) "Regulatory action level RBC" means the product of 1.5 and its authorized control level RBC;

(c) "Authorized control level RBC" means the number determined under the risk-based capital formula in accordance with the RBC instructions; and

(d) "Mandatory control level RBC" means the product of .70 and the authorized control level RBC.

(9) "RBC plan" means a comprehensive financial plan containing the elements specified in OAR 836-011-0320(2). If the Director rejects the RBC plan and it is revised by the insurer with or without the Director's recommendation, the plan shall be called the "revised RBC plan."

(10) "RBC report" means the report required in OAR 836-011-0310.

(11) "Total adjusted capital" means the sum of:

(a) An insurer's statutory capital and surplus as determined in accordance with the statutory accounting applicable to the annual financial statements required to be filed under ORS 731.574; and

(b) Such other items, if any, as the RBC instructions may provide.

Stat. Auth.: ORS 731.244, 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0310

RBC Reports

(1) Each domestic insurer shall, on or prior to each March 1 (the "filing date"), prepare and submit to the Director a report of its RBC levels as of the end of the calendar year just ended, in a form and containing such information as is required by the RBC instructions. In addition, each domestic insurer shall file its RBC report:

(a) With the NAIC in accordance with the RBC instructions; and

(b) With the insurance commissioner in any state in which the insurer is authorized to do business, if the insurance commissioner has notified the insurer of its request in writing, in which case the insurer shall file its RBC report not later than the later of:

(A) 15 days from the receipt of notice to file its RBC report with that state; or

(B) The filing date.

(2) A life or health insurer's RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account (and may adjust for the covariance between) the following, determined in each case by applying the factors in the manner set forth in the RBC instructions:

(a) The risk with respect to the insurer's assets;

(b) The risk of adverse insurance experience with respect to the insurer's liabilities and obligations;

(c) The interest rate risk with respect to the insurer's business; and

(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.

(3) A property and casualty insurer's RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account (and may adjust for the covariance between) the following, determined in each case by applying the factors in the manner set forth in the RBC instructions:

(a) Asset risk;

(b) Credit risk;

(c) Underwriting risk; and

(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.

(4) An excess of capital over the amount produced by the risk-based capital requirements contained in OAR 836-011-0300 to 836-011-0390 and the formulas, schedules and instructions referenced in 836-011-0300 to 836-011-0390 is desirable in the business of insurance. Accordingly, insurers should seek to maintain capital above the RBC levels required by 836-011-0300 to 836-011-0390. additional capital is used and useful in the insurance business and helps to secure an insurer against various risks inherent in, or affecting, the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in 836-011-0300 to 836-011-0390.

(5) If a domestic insurer files an RBC report that in the judgment of the Director is inaccurate, the Director shall adjust the RBC report to correct the inaccuracy and shall notify the insurer of the adjustment. The notice shall contain a statement of the reason for the adjustment. An RBC report as so adjusted is an "adjusted RBC report" for purposes of OAR 836-011-0300 to 836-011-0390.

Stat. Auth.: ORS 731.244, 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0320

Company Action Level Event

(1) "Company action level event" means any of the following events:

(a) The filing of an RBC report by an insurer indicating that:

(A) The insurer's total adjusted capital is greater than or equal to its regulatory action level RBC but less than its company action level RBC;

(B) If a life or health insurer, the insurer has total adjusted capital that is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 2.5 and has a negative trend; or

(C) If a property and casualty insurer, the insurer has total adjusted capital that is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty RBC instructions.

(b) The notification by the Director to the insurer of an adjusted RBC report that indicates an event in subsection (a) of this section, if the insurer does not challenge the adjusted RBC report under OAR 836-011-0360; or

(c) If, pursuant to OAR 836-011-0360, an insurer challenges an adjusted RBC report that indicates the event in subsection (a) of this section, the notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge.

(2) In the event of a company action level event, the insurer shall prepare and submit to the Director an RBC plan that shall:

(a) Identify the conditions contributing to the company action level event;

(b) Contain proposals of corrective actions that the insurer intends to take and would be expected to result in the elimination of the company action level event;

(c) Provide projections of the insurer's financial results in the current year and at least the four succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital and surplus. The projections for both new and renewal business must include separate projections for each major line of business and separately identify each significant income, expense and benefit component, if the Director so requires;

(d) Identify the key assumptions affecting the insurer's projections and the sensitivity of the projections to the assumptions; and

(e) Identify the quality of and problems associated with the insurer's business, including but not limited to its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business and use of reinsurance, if any, in each case.

(3) The insurer shall submit the RBC Plan:

(a) Not later than the 45th day after the company action level event; or

(b) If the insurer challenges an adjusted RBC report pursuant to OAR 836-011-0360, not later than the 45th day after the Director's notification to the insurer that the Director has, after a hearing, rejected the insurer's challenge.

(4) Not later than the 60th day after an insurer has submitted an RBC plan to the Director, the Director shall notify the insurer whether the RBC plan shall be implemented or is unsatisfactory, in the judgment of the Director. If the Director determines the RBC plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination and may set forth proposed revisions that will render the RBC plan satisfactory, in the judgment of the Director. Upon notification from the Director, the insurer shall prepare a revised RBC plan, which may incorporate by reference any revisions proposed by the Director, and shall submit the revised RBC plan to the Director:

(a) Not later than the 45th day after the notification from the Director; or

(b) If the insurer challenges the notification from the Director under OAR 836-011-0360, not later than the 45th day after a notification to the insurer that the Director has, after a hearing, rejected the insurer's challenge.

(5) In the event of a notification by the Director to an insurer that the insurer's RBC plan or revised RBC plan is unsatisfactory, the Director at the Director's discretion, subject to the insurer's right to a hearing under OAR 836-011-0360, may specify in the notification that the notification constitutes a regulatory action level event.

(6) A domestic insurer that files an RBC plan or revised RBC plan with the Director shall file a copy of the RBC plan or revised RBC plan with the insurance commissioner in any state in which the insurer is authorized to transact insurance if such a state has an RBC provision substantially similar to ORS 731.752, and the insurance commissioner of that state has notified the insurer of its request for the filing in writing. The insurer shall file the copy in that state not later than the later of the following:

(a) The 15th day after receipt of the notice to file a copy of its RBC plan or revised RBC plan with the state; or

(b) The date on which the RBC plan or revised RBC plan is filed under section (3) or (4) of this rule, as applicable.

Stat. Auth.: ORS 731.244, 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0330

Regulatory Action Level Event

(1) "Regulatory action level event" means, with respect to an insurer, any of the following events:

(a) The filing of an RBC report by the insurer that indicates the insurer's total adjusted capital is greater than or equal to its authorized control level RBC but less than its regulatory action level RBC;

(b) Notification by the Director to the insurer of an adjusted RBC report that indicates the event in subsection (a) of this section (1), if the insurer does not challenge the adjusted RBC report under OAR 836-011-0360;

(c) If, pursuant to OAR 836-011-0360, the insurer challenges an adjusted RBC report that indicates the event in subsection (a) of this section (1), notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge;

(d) Failure of the insurer to file an RBC report by the filing date, unless the insurer has provided an explanation for the failure that is satisfactory to the Director and has cured the failure not later than the 10th day after the filing date;

(e) Failure of the insurer to submit an RBC plan to the Director within the time period established in OAR 836-011-0320(3);

(f) Notification by the Director to the insurer that:

(A) The RBC plan or revised RBC plan submitted by the insurer is unsatisfactory, in the judgment of the Director; and

(B) Such notification constitutes a regulatory action level event with respect to the insurer, if the insurer has not challenged the determination under OAR 836-011-0360;

(g) If, pursuant to OAR 836-011-0360, the insurer challenges a determination by the Director under subsection (f) of this section, the notification by the Director to the insurer that the Director has, after a hearing, rejected the challenge;

(h) Notification by the Director to the insurer that the insurer has failed to adhere to its RBC plan or revised RBC plan, but only if the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event in accordance with its RBC plan or revised RBC plan and the Director has so stated in the notification, and if the insurer has not challenged the determination under OAR 836-011-0360; or

(i) If, pursuant to OAR 836-011-0360, the insurer challenges a determination by the Director under subsection (h) of this section (1), the notification by the Director to the insurer that the Director has, after a hearing, rejected the challenge.

(2) In the event of a regulatory action level event, the Director shall:

(a) Require the insurer to prepare and submit an RBC plan or, if applicable, a revised RBC plan;

(b) Perform such examination or analysis of the assets, liabilities and operations of the insurer as the Director determines to be necessary, including a review of its RBC plan or revised RBC plan; and

(c) Subsequent to the examination or analysis, issue a corrective order specifying the corrective actions that the Director determines to be required.

(3) In determining corrective actions, the Director may take into account the factors that the Director determines to be relevant with respect to the insurer, based upon the Director's examination or analysis of the assets, liabilities and operations of the insurer, including, but not limited to, the results of any sensitivity tests undertaken pursuant to the RBC instructions. The RBC plan or revised RBC plan shall be submitted:

(a) Not later than the 45th day after the occurrence of the regulatory action level event;

(b) If the insurer challenges an adjusted RBC report pursuant to OAR 836-011-0360 and the challenge is not frivolous in the judgment of the Director, not later than the 45th day after the notification to the insurer that the Director has, after a hearing, rejected the insurer's challenge; or

(c) If the insurer challenges a revised RBC plan pursuant to OAR 836-011-0360 and the challenge is not frivolous in the judgment of the Director, not later than the 45th day after the notification to the insurer that the Director has, after a hearing, rejected the insurer's challenge.

Stat. Auth.: ORS 731.244, ORS 731.554 & ORS 733.210
Stats. Implemented: ORS 731.216, ORS 731.554 & ORS 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

836-011-0340

Authorized Control Level Event

"Authorized control level event" means any of the following events:

(a) The filing of an RBC report by the insurer indicating that the insurer's total adjusted capital is greater than or equal to its mandatory control level RBC but less than its authorized control level RBC;

(b) Notification by the Director to the insurer of an adjusted RBC report indicating the event in subsection (a) of this section, if the insurer does not challenge the adjusted RBC report under OAR 836-011-0360;

(c) If, pursuant to OAR 836-011-0360, the insurer challenges an adjusted RBC report that indicates the event in subsection (a) of this section, notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge;

(d) The failure of the insurer to respond to a corrective order, in a manner satisfactory to the Director, if the insurer has not challenged the corrective order under OAR 836-011-0360; or

(e) If the insurer has challenged a corrective order under OAR 836-011-0360 and the Director has, after a hearing, rejected the challenge or modified the corrective order, the failure of the insurer to respond to the corrective order in a manner satisfactory to the Director subsequent to rejection or modification by the Director.

(2) In the event of an authorized control level event with respect to an insurer, the Director shall:

(a) Take such actions as are required under OAR 836-011-0330 regarding an insurer with respect to which an regulatory action level event has occurred; or

(b) If the Director determines it to be in the best interests of the policyholders and creditors of the insurer and of the public, take actions necessary to cause the insurer to be placed under regulatory control under ORS 734.059 to 734.440. If the Director takes such actions, the authorized control level event is sufficient grounds for the Director to take action under 734.150(1) or (4) or 734.170, and the Director shall have the rights, powers and duties with respect to the insurer as are set forth in 734.059 to 734.440.

Stat. Auth.:ORS 731.244, ORS 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

836-011-0350

Mandatory Control Level Event

(1) "Mandatory control level event" means any of the following events:

(a) The filing of an RBC report indicating that the insurer's total adjusted capital is less than its mandatory control level RBC;

(b) Notification by the Director to the insurer of an adjusted RBC report that indicates the event in subsection (a) of this section, if the insurer does not challenge the adjusted RBC report under OAR 836-011-0360; or

(c) If, pursuant to OAR 836-011-0360, the insurer challenges an adjusted RBC report that indicates the event in subsection (a) of this section, notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge.

(2) In the event of a mandatory control level event:

(a) With respect to an insurer transacting life insurance, the Director shall take actions necessary to place the insurer under regulatory control under ORS 734.059 to 734.440. In that event, the mandatory control level event is sufficient grounds for the Director to take action under 734.150(1) or (4) or 734.170, and the Director shall have the rights, powers and duties with respect to the insurer as are set forth in 734.059 to 734.440. Notwithstanding the provisions of this subsection, the Director may forego action for not more than 90 days after the mandatory control level event if the Director finds there is a reasonable expectation that the mandatory control level event may be eliminated within the 90-day period.

(b) With respect to an insurer transacting property and casualty insurance, the Director shall take actions necessary to place the insurer under regulatory control under ORS 734.059 to 734.440, or, in the case of an insurer that is writing no business and that is running off its existing business, may allow the insurer to continue its run-off under the supervision of the Director. In either event, the mandatory control level event is sufficient grounds for the Director to take action under 734.150(1) or (4) or 734.170, and the Director shall have the rights, powers and duties with respect to the insurer as are set forth in 734.059 to 734.440. Notwithstanding the provisions of this subsection, the Director, may forego action for not more than 90 days after the mandatory control level event if the Director finds there is a reasonable expectation that the mandatory control level event may be eliminated within the 90 day period.

Stat. Auth.: ORS 731.244, ORS 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

836-011-0360

Hearings

An insurer may request a hearing, as provided in ORS 731.240, for the purpose of challenging any determination or action by the Director in connection with any event described in this rule. The insurer shall notify the Director of its request for a hearing not later than the fifth day after notification by the Director under any of the events described in this rule. Upon receipt of the insurer's request for a hearing, the Director shall set a date for the hearing. The date shall be not less than 10 nor more than 30 days after the date of the insurer's request. The events to which the opportunity for a hearing under this rule relates are as follows:

(1) Notification to an insurer by the Director of an adjusted RBC report;

(2) Notification to an insurer by the Director that the insurer's RBC plan or revised RBC plan is unsatisfactory, and such notification constitutes a regulatory action level event with respect to the insurer;

(3) Notification to any insurer by the Director that the insurer has failed to adhere to its RBC plan or revised RBC plan and that the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event with respect to the insurer in accordance with its RBC plan or revised RBC plan; or

(4) Notification to an insurer by the Director of a corrective order with respect to the insurer.

Stat. Auth.: ORS 731.244, ORS 731.554 & ORS 733.210
Stats. Implemented: ORS 731.240, ORS 731.554 & ORS 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

836-011-0380

Supplemental Provisions; Exemption

(1) 836-011-0300 to 836-011-0390 are supplemental to any other provisions of the laws of this state, and do not preclude or limit any other powers or duties of the Director under such laws, including, but not limited to, OAR 836-011-0100 to 836-011-0120.

(2) OAR 836-011-0300 to 836-011-0390 do not apply to any domestic insurer transacting property and casualty insurance that:

(a) Writes direct business only in this state;

(b) Writes direct annual premiums of $2 million or less; and

(c) Assumes no reinsurance in excess of five percent of direct premium written.

Stat. Auth.: ORS 731.244, 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0390

Foreign Insurers

(1) A foreign insurer shall, upon the written request of the Director, submit to the Director an RBC report as of the end of the calendar year just ended on the later of:

(a) The date by which an RBC report would be required to be filed by a domestic insurer under OAR 836-011-0300 to 836-011-0390; or

(b) The 15th day after the request is received by the foreign insurer.

(2) A foreign insurer shall, at the written request of the Director, promptly submit to the Director a copy of any RBC plan that is filed with the insurance commissioner of any other state.

(3) In the event of a company action level event, regulatory action level event or authorized control level event with respect to any foreign insurer as determined under the statute or rule governing risk based capital reporting applicable in the state of domicile of the insurer (or, if no such statute or rule is in force in that state, under the provisions of OAR 836-011-0300 to 836-011-0390), if the insurance commissioner of the state of domicile of the foreign insurer fails to require the foreign insurer to file an RBC plan in the manner specified under that state's statute or rule governing risk-based capital reporting (or, if no such statute or rule is in force in that state, under 836-011-0320), the Director may require the foreign insurer to file an RBC plan with the Director. In such event, the failure of the foreign insurer to file an RBC plan with the Director shall be grounds to order the insurer to cease and desist from writing new insurance business in this state.

(4) In the event of a mandatory control level event with respect to any foreign insurer, if a domiciliary receiver has not been appointed with respect to the foreign insurer under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign insurer, the Director may apply for an order under ORS 734.190 with respect to the conservation of property of foreign insurers found in this state, and the occurrence of the mandatory control level event shall be considered adequate grounds for the application under 734.150(1) or (4).

Stat. Auth.: ORS 731.244, 731.554 & 733.210
Stats. Implemented: ORS 731.554 & 731.574
Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

Disclosure of Material Transactions

836-011-0430

Scope and Authority

(1) OAR 836-011-0430 to 836-011-0460 apply to all domestic insurers and to all domestic health care service contractors under ORS 750.055 and multiple employer welfare arrangements under 750.333. For purposes of OAR 836-011-0430 to 836-011-0460, "insurer" includes health care service contractors and multiple employer welfare arrangements.

(2) OAR 836-011-0430 to 836-011-0460 are adopted under the authority of ORS 731.244, 731.574 and 733.210.

Stat. Auth.: ORS 731.244 & ORS 731.574
Stats. Implemented: ORS 731.574 & ORS 733.210
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

836-011-0440

Report

(1) Every domestic insurer shall file a report with the Director of the Department of Consumer and Business Services disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements unless the acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements have been submitted to the Director for review, approval or information purposes pursuant to other provisions of the Insurance Code, laws, rules or other requirements.

(2) The report required in section (1) of this rule is due not later than the 15th day after the end of the calendar month in which any of the transactions described in section (1) of this rule occurs.

(3) One complete copy of the report, including any exhibits or other attachments, shall be filed with:

(a) The insurance department of the insurer's state of domicile; and

(b) The National Association of Insurance Commissioners.

Stat. Auth.: ORS 731.244 & ORS 731.574
Stats. Implemented: ORS 731.574 & ORS 733.210
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

836-011-0450

Acquisitions and Dispositions of Assets

(1) Materiality. No acquisitions or dispositions of assets need be reported pursuant to OAR 836-011-0440 if the acquisitions or dispositions are not material. For purposes of 836-011-0430 to 836-011-0460, a material acquisition (or the aggregate of any series of related acquisitions during any 30-day period) or disposition (or the aggregate of any series of related dispositions during any 30-day period) is one that is non-recurring and not in the ordinary course of business and involves more than five percent of the reporting insurer's total allowed assets as reported in its most recent statutory statement filed with the insurance department of the insurer's state of domicile.

(2) Scope. OAR 836-011-0430 to 836-011-0460 apply to the following asset acquisitions and asset dispositions:

(a) Asset acquisitions subject to OAR 836-011-0430 to 836-011-0460 include every purchase, lease, exchange, merger, consolidation, succession or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for such purpose.

(b) Asset dispositions subject to OAR 836-011-0430 to 836-011-0460 include every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment (whether for the benefit of creditors or otherwise), abandonment, destruction or other disposition.

(3) Information to be reported:

(a) The following information is required to be disclosed in any report of a material acquisition or disposition of assets:

(A) Date of the transaction;

(B) Manner of acquisition or disposition;

(C) Description of the assets involved;

(D) Nature and amount of the consideration given or received;

(E) Purpose of, or reason for, the transaction;

(F) Manner by which the amount of consideration was determined;

(G) Gain or loss recognized or realized as a result of the transaction; and

(H) Name or names of the person or persons from whom the assets were acquired or to whom they were disposed.

(b) An insurer is required to report material acquisitions and dispositions on a non-consolidated basis unless the insurer is part of a consolidated group of insurers that utilizes a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than $1,000,000 total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer's capital and surplus.

Stat. Auth.: ORS 731.244 & ORS 731.574
Stats. Implemented: ORS 731.574 & ORS 733.210
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

836-011-0460

Nonrenewals, Cancellations or Revisions of Ceded Reinsurance Agreements

(1) Materiality and scope:

(a) No nonrenewals, cancellations or revisions of ceded reinsurance agreements need be reported pursuant to OAR 836-011-0440 if the nonrenewals, cancellations or revisions are not material. For purposes of 836-011-0430 to 836-011-0460, a material nonrenewal, cancellation or revision is one that affects:

(A) As respects property and casualty business, including accident and health business written by a property and casualty insurer:

(i) More than fifty percent of the insurer's total ceded written premium; or

(ii) More than fifty percent of the insurer's total ceded indemnity and loss adjustment reserves.

(B) As respects life, annuity, and accident and health business: more than fifty percent of the total reserve credit taken for business ceded, on an annualized basis, as indicated in the insurer's most recent annual statement;

(C) As respects either property and casualty business or life, annuity, and accident and health business, either of the following events shall constitute a material revision that must be reported:

(i) An authorized reinsurer representing more than ten percent of a total cession is replaced by one or more unauthorized reinsurers; or

(ii) Previously established collateral requirements have been reduced or waived as respects one or more unauthorized reinsurers representing collectively more than ten percent of a total cession.

(b) However, no filing shall be required if:

(A) As respects property and casualty business, including accident and health business written by a property and casualty insurer: the insurer's total ceded written premium represents, on an annualized basis, less than ten percent of its total written premium for direct and assumed business; or

(B) As respects life, annuity, and accident and health business: the total reserve credit taken for business ceded represents, on an annualized basis, less than ten percent of the statutory reserve requirement prior to any cession.

(2) Information to be reported:

(a) The following information is required to be disclosed in any report of a material nonrenewal, cancellation or revision of a ceded reinsurance agreement:

(A) Effective date of the nonrenewal, cancellation or revision;

(B) The description of the transaction with an identification of the initiator thereof;

(C) Purpose of, or reason for, the transaction; and

(D) If applicable, the identity of the replacement reinsurers.

(b) Insurers are required to report all material nonrenewals, cancellations or revisions of ceded reinsurance agreements on a non-consolidated basis unless the insurer is part of a consolidated group of insurers that utilizes a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than $1,000,000 total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer's capital and surplus.

Stat. Auth.: ORS 731.244 & ORS 731.574
Stats. Implemented: ORS 731.574 & ORS 733.210
Hist.: ID 7-1995, f. & cert. ef. 11-15-95

Risk-Based Capital Reporting for Health Care Service Contractors

836-011-0500

Application; Statutory Authority; Statutes Implemented

(1) OAR 836-011-0500 to 836-011-0550 apply to health care service contractors.

(2) OAR 836-011-0500 to 836-011-0550 are adopted pursuant to the authority of ORS 731.244 and 750.045 for the purpose of implementing ORS 731.574, 733.210 and 750.045.

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0505

Definitions

As used in OAR 836-011-0500 to 836-011-05:

(1) "Adjusted RBC report" means an RBC report that has been adjusted by the Director in accordance with OAR 836-011-0510(4).

(2) "Corrective order" means an order issued by the Director specifying corrective actions that the Director has determined are required.

(3) "Domestic health care service contractor" means a health care service contractor domiciled in this state.

(4) "Foreign health care service contractor" means a health care service contractor that is authorized to transact business in this state as a health care service contractor but is not domiciled in this state.

(5) "NAIC" means the National Association of Insurance Commissioners.

(6) "RBC instructions" means the RBC report including risk-based capital instructions adopted by the NAIC, as the RBC instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.

(7) "RBC level" means a health care service contractor's Company Action Level RBC, Regulatory Action Level RBC, Authorized Control Level RBC or Mandatory Control Level RBC, defined as follows:

(a) "Company Action Level RBC" means, with respect to any health care service contractor, the product of 2.0 and its Authorized Control Level RBC;

(b) "Regulatory Action Level RBC" means the product of 1.5 and its Authorized Control Level RBC;

(c) "Authorized Control Level RBC" means the number determined under the risk-based capital formula in accordance with the RBC Instructions;

(d) "Mandatory Control Level RBC" means the product of .70 and the Authorized Control Level RBC.

(8) "RBC plan" means a comprehensive financial plan containing the elements specified in OAR 836-011-0515(2). If the Director rejects the RBC plan and it is revised by the health care service contractor with or without the Director's recommendation, the plan shall be called the "revised RBC plan."

(9) "RBC report" means the report required in OAR 836-011-0510.

(10) "Total adjusted capital" means the sum of:

(a) A health care service contractor's statutory capital and surplus (i.e. net worth) as determined in accordance with the statutory accounting applicable to the annual financial statements required to be filed under ORS 731.574; and

(b) Such other items, if any, as the RBC instructions may provide.

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0510

RBC Reports

(1) A domestic health care service contractor shall, on or prior to each March 1 (the "filing date"), prepare and submit to the Director a report of its RBC levels as of the end of the calendar year just ended, in a form and containing such information as is required by the RBC instructions. In addition, a domestic health care service contractor shall file its RBC report:

(a) With the NAIC in accordance with the RBC instructions; and

(b) With the insurance commissioner in any state in which the health care service contractor is authorized to do business, if the insurance commissioner has notified the health care service contractor of its request in writing, in which case the health care service contractor shall file its RBC report not later than the later of:

(A) 15 days from the receipt of notice to file its RBC report with that state; or

(B) The filing date.

(2) A health care service contractor's RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take the following into account (and may adjust for the covariance between) determined in each case by applying the factors in the manner set forth in the RBC instructions:

(a) Asset risk;

(b) Credit risk;

(c) Underwriting risk; and

(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.

(3) An excess of capital (i.e. net worth) over the amount produced by the risk-based capital requirements contained in OAR 836-011-0500 to 836-011-0550 and the formulas, schedules and instructions referenced in 836-011-0500 to 836-011-0550 is desirable in the business of a health care service contractor. Accordingly, health care service contractors should seek to maintain capital above the RBC levels required by 836-011-0500 to 836-011-0550. Additional capital is used and useful in the insurance business and helps to secure a health care service contractor against various risks inherent in, or affecting, the business of a health care service contractor and not accounted for or only partially measured by the risk-based capital requirements contained in 836-011-0500 to 836-011-0550.

(4) If a domestic health care service contractor files an RBC report that in the judgment of the Director is inaccurate, then the Director shall adjust the RBC report to correct the inaccuracy and shall notify the health care service contractor of the adjustment. The notice shall contain a statement of the reason for the adjustment. An RBC report as so adjusted is referred to as an "adjusted RBC report."

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0515

Company Action Level Event

(1) "Company Action Level Event" means any of the following events:

(a)(A) The filing of an RBC report by a health care service contractor that indicates that the health care service contractor's total adjusted capital is greater than or equal to its Regulatory Action Level RBC but less than its Company Action Level RBC; or

(B) If a health care service contractor has total adjusted capital that is greater than or equal to its Company Action Level RBC but less than the product of its Authorized Control Level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the Health RBC instructions;

(b) Notification by the Director to the health care service contractor of an adjusted RBC report that indicates an event in subsection (a) of this subsection, if the health care service contractor does not challenge the adjusted RBC report under OAR 836-011-0535; or

(c) If, pursuant to OAR 836-011-0535, a health care service contractor challenges an adjusted RBC report that indicates the event in subsection (a) of this section, the notification by the Director to the health care service contractor that the Director has, after a hearing, rejected the health care service contractor's challenge.

(2) In the event of a Company Action Level Event, the health care service contractor shall prepare and submit to the Director an RBC plan that shall:

(a) Identify the conditions that contribute to the Company Action Level Event;

(b) Contain proposals of corrective actions that the health care service contractor intends to take and that would be expected to result in the elimination of the Company Action Level Event;

(c) Provide projections of the health care service contractor's financial results in the current year and at least the two succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory balance sheets, operating income, net income, capital and surplus, and RBC levels. The projections for both new and renewal business might include separate projections for each major line of business and separately identify each significant income, expense and benefit component;

(d) Identify the key assumptions impacting the health care service contractor's projections and the sensitivity of the projections to the assumptions; and

(e) Identify the quality of, and problems associated with, the health care service contractor's business, including but not limited to its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business and use of reinsurance, if any, in each case.

(3) The RBC plan shall be submitted

(a) Within 45 days of the Company Action Level Event; or

(b) If the health care service contractor challenges an adjusted RBC report pursuant to OAR 836-011-0535, within 45 days after notification to the health care service contractor that the Director has, after a hearing, rejected the health care service contractor's challenge.

(4) Within 60 days after the submission by a health care service contractor of an RBC plan to the Director, the Director shall notify the health care service contractor whether the RBC plan shall be implemented or is, in the judgment of the Director, unsatisfactory. If the Director determines the RBC plan is unsatisfactory, the notification to the health care service contractor shall set forth the reasons for the determination and may set forth proposed revisions that will render the RBC plan satisfactory, in the judgment of the Director. Upon notification from the Director, the health care service contractor shall prepare a revised RBC plan, which may incorporate by reference any revisions proposed by the Director, and shall submit the revised RBC plan to the Director:

(a) Within 45 days after the notification from the Director; or

(b) If the health care service contractor challenges the notification from the Director under OAR 836-011-0535, within 45 days after a notification to the health care service contractor that the Director has, after a hearing, rejected the health care service contractor's challenge.

(5) In the event of a notification by the Director to a health care service contractor that the health care service contractor's RBC plan or revised RBC plan is unsatisfactory, the Director may at the Director's discretion, subject to the health care service contractor's right to a hearing under OAR 836-011-0535, specify in the notification that the notification constitutes a Regulatory Action Level Event.

(6) Every domestic health care service contractor that files an RBC plan or revised RBC plan with the Director shall file a copy of the RBC plan or revised RBC plan with the insurance commissioner in any state in which the health care service contractor is authorized to do business if:

(a) The state has an RBC provision substantially similar to ORS 731.752; and

(b) The insurance commissioner of that state has notified the health care service contractor of its request for the filing in writing, in which case the health care service contractor shall file a copy of the RBC plan or revised RBC plan in that state no later than the later of:

(A) Fifteen days after the receipt of notice to file a copy of its RBC plan or revised RBC plan with the state; or

(B) The date on which the RBC plan or revised RBC plan is filed under sections (3) and (4) of this rule.

Stat. Auth.: ORS 731.244 & 750.045
Stats. Implemented: ORS 731.574, 733.210 & 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02; ID 21-2010, f. & cert. ef. 12-15-10

836-011-0520

Regulatory Action Level Event

(1) "Regulatory Action Level Event" means, with respect to a health care service contractor, any of the following events:

(a) The filing of an RBC report by the health care service contractor that indicates that the health care service contractor's total adjusted capital is greater than or equal to its Authorized Control Level RBC but less than its Regulatory Action Level RBC;

(b) Notification by the Director to a health care service contractor of an adjusted RBC report that indicates the event in subsection (a) of this section, if the health care service contractor does not challenge the adjusted RBC report under OAR 836-011-0535;

(c) If, pursuant to OAR 836-011-0535, the health care service contractor challenges an adjusted RBC report that indicates the event in subsection (a) of this section, the notification by the Director to the health care service contractor that the Director has, after a hearing, rejected the health care service contractor's challenge;

(d) The failure of the health care service contractor to file an RBC report by the filing date, unless the health care service contractor has provided an explanation for the failure that is satisfactory to the Director and has cured the failure within ten days after the filing date;

(e) The failure of the health care service contractor to submit an RBC plan to the Director within the time period set forth in OAR 836-011-0515;

(f) Notification by the Director to the health care service contractor that:

(A) The RBC plan or revised RBC plan submitted by the health care service contractor is, in the judgment of the Director, unsatisfactory; and

(B) Notification constitutes a Regulatory Action Level Event with respect to the health care service contractor, if the health care service contractor has not challenged the determination under OAR 836-011-0535;

(g) If, pursuant to OAR 836-011-0535, the health care service contractor challenges a determination by the Director under subsection (f) of this section, the notification by the Director to the health care service contractor that the Director has, after a hearing, rejected the challenge;

(h) Notification by the Director to the health care service contractor that the health care service contractor has failed to adhere to its RBC plan or revised RBC plan, but only if the failure has a substantial adverse effect on the ability of the health care service contractor to eliminate the Company Action Level Event in accordance with its RBC plan or revised RBC plan and the Director has so stated in the notification, if the health care service contractor has not challenged the determination under OAR 836-011-0535; or

(i) If, pursuant to OAR 836-011-0535, the health care service contractor challenges a determination by the Director under subsection (h) of this section, the notification by the Director to the health care service contractor that the Director has, after a hearing, rejected the challenge.

(2) In the event of a Regulatory Action Level Event the Director shall:

(a) Require the health care service contractor to prepare and submit an RBC plan or, if applicable, a revised RBC plan;

(b) Perform such examination or analysis as the Director deems necessary of the assets, liabilities and operations of the health care service contractor including a review of its RBC plan or revised RBC plan; and

(c) Subsequent to the examination or analysis, issue an order specifying such corrective actions as the Director shall determine are required (a "corrective order").

(3) In determining corrective actions, the Director may take into account factors the Director deems relevant with respect to the health care service contractor based upon the Director's examination or analysis of the assets, liabilities and operations of the health care service contractor, including, but not limited to, the results of any sensitivity tests undertaken pursuant to the RBC instructions. The RBC plan or revised RBC plan shall be submitted:

(a) Within 45 days after the occurrence of the Regulatory Action Level Event;

(b) If the health care service contractor challenges an adjusted RBC report pursuant to OAR 836-011-0535 and the challenge is not frivolous in the judgment of the Director within 45 days after the notification to the health care service contractor that the Director has, after a hearing, rejected the health care service contractor's challenge; or

(c) If the health care service contractor challenges a revised RBC plan pursuant to OAR 836-011-0535 and the challenge is not frivolous in the judgment of the Director, within 45 days after the notification to the health care service contractor that the care service contractor has, after a hearing, rejected the health care service contractor's challenge.

(4) The Director may retain actuaries and investment experts and other consultants as may be necessary in the judgment of the Director to review the health care service contractor's RBC plan or revised RBC plan, examine or analyze the assets, liabilities and operations (including contractual relationships) of the health care service contractor and formulate the corrective order with respect to the health care service contractor. The fees, costs and expenses relating to consultants shall be borne by the affected health care service contractor or such other party as directed by the Director.

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0525

Authorized Control Level Event

(1) "Authorized Control Level Event" means any of the following events:

(a) The filing of an RBC report by the health care service contractor that indicates that the health care service contractor's total adjusted capital is greater than or equal to its Mandatory Control Level RBC but less than its Authorized Control Level RBC;

(b) The notification by the Director to the health care service contractor of an adjusted RBC report that indicates the event in subsection (a) of this section, if the health care service contractor does not challenge the adjusted RBC report under OAR 836-011-0535;

(c) If, pursuant to OAR 836-011-0535, the health care service contractor challenges an adjusted RBC report that indicates the event in subsection (a) of this section, notification by the Director to the health care service contractor that the Director has, after a hearing, rejected the health care service contractor's challenge;

(d) The failure of the health care service contractor to respond, in a manner satisfactory to the Director, to a corrective order (if the health care service contractor has not challenged the corrective order under OAR 836-011-0535); or

(e) If the health care service contractor has challenged a corrective order under OAR 836-011-0535 and the Director has, after a hearing, rejected the challenge or modified the corrective order, the failure of the health care service contractor to respond, in a manner satisfactory to the Director, to the corrective order subsequent to rejection or modification by the Director.

(2) In the event of an Authorized Control Level Event with respect to a health care service contractor, the Director shall:

(a) Take such actions as are required under OAR 836-011-0520 regarding a health care service contractor with respect to which an Regulatory Action Level Event has occurred; or

(b) If the Director deems it to be in the best interests of the policyholders and creditors of the health care service contractor and of the public, take such actions as are necessary to cause the health care service contractor to be placed under regulatory control under ORS 734.059 to 734.440. In the event the Director takes such actions, the Authorized Control Level Event shall be deemed sufficient grounds for the Director to take action under 734.059 to 734.440, and the Director shall have the rights, powers and duties with respect to the health care service contractor as are set forth in 734.059 to 744.440. In the event the Director takes actions under this subsection pursuant to an adjusted RBC report, the health care service contractor shall be entitled to such protections as are afforded to health care service contractors under the provisions of 734.059 to 734.440.

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0530

Mandatory Control Level Event

(1) "Mandatory Control Level Event" means any of the following events:

(a) The filing of an RBC report that indicates that the health care service contractor's total adjusted capital is less than its Mandatory Control Level RBC;

(b) Notification by the Director to the health care service contractor of an adjusted RBC report that indicates the event in subsection (a) of this section, if the health care service contractor does not challenge the adjusted RBC report under OAR 836-011-0535; or

(c) If, pursuant to OAR 836-011-0535, the health care service contractor challenges an adjusted RBC report that indicates the event in subsection (a) of this section, notification by the Director to the health care service contractor that the Director has, after a hearing, rejected the health care service contractor's challenge.

(2) In the event of a Mandatory Control Level Event, the Director shall take such actions as are necessary to place the health care service contractor under regulatory control under ORS 734.059 to 734.440. In that event, the Mandatory Control Level Event shall be deemed sufficient grounds for the Director to take action under 734.059 to 734.440, and the Director shall have the rights, powers and duties with respect to the health care service contractor as are set forth in 734.059 to 734.440. If the Director takes actions pursuant to an adjusted RBC report, the health care service contractor shall be entitled to the protections of 734.059 to 734.440. Notwithstanding the provisions of this rule, the Director may forego action for up to 90 days after the Mandatory Control Level Event if the Director finds there is a reasonable expectation that the Mandatory Control Level Event may be eliminated within the 90 day period.

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0535

Hearings

Upon the occurrence of any of the following events, a health care service contractor may request a hearing, as provided in ORS 731.240, for the purpose of challenging any determination or action by the Director in connection with any event described in this rule. The health care service contractor shall notify the Director of its request for a hearing not later than the fifth day after notification by the Director under any of the events described in this rule. Upon receipt of the health care service contractor's request for a hearing, the Director shall set a date for the hearing. The date shall be not less than 10 nor more than 30 days after the date of the health care service contractor's request. The events to which the opportunity for a hearing under this rule relates are as follows:

(1) Notification to a health care service contractor by the Director of an adjusted RBC report;

(2) Notification to a health care service contractor by the Director that:

(a) The health care service contractor's RBC plan or revised RBC plan is unsatisfactory; and

(b) Notification constitutes a Regulatory Action Level Event with respect to the health care service contractor;

(3) Notification to a health care service contractor by the Director that the health care service contractor has failed to adhere to its RBC plan or revised RBC plan and that the failure has a substantial adverse effect on the ability of the health care service contractor to eliminate the Company Action Level Event with respect to the health care service contractor in accordance with its RBC plan or revised RBC plan; or

(4) Notification to a health care service contractor by the Director of a corrective order with respect to the health care service contractor.

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0540

Supplemental Provisions; Rules; Exemption

(1) OAR 836-011-0500 to 836-011-0550 are supplemental to any other provisions of the laws of this state, and shall not preclude or limit any other powers or duties of the Director under such laws, including, but not limited to, ORS 734.059 to 734.440 and OAR 836-011-0100 to 836-011-0120.

(2) The Director may exempt from the application of OAR 836-011-0500 to 836-011-0550 a domestic health care service contractor that:

(a) Writes direct business only in this state;

(b) Assumes no reinsurance in excess of five percent of direct premium written; and

(c) Writes direct annual premiums for comprehensive medical business of $2 million or less; or

(d) Is a limited health care service contractor that covers less than 500 lives.

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0545

Foreign Health Care Service Contractors

(1) A foreign health care service contractor shall, upon the written request of the Director, submit to the Director an RBC report as of the end of the calendar year just ended the later of:

(a) The date an RBC report would be required to be filed by a domestic health care service contractor under OAR 836-011-0500 to 836-011-0550; or

(b) The 15th day after the request is received by the foreign health care service contractor.

(2) A foreign health care service contractor shall, at the written request of the Director, promptly submit to the Director a copy of any RBC plan that is filed with the insurance commissioner of any other state.

(3) In the event of a Company Action Level Event, Regulatory Action Level Event or Authorized Control Level Event with respect to a foreign health care service contractor as determined under the RBC statute or other law applicable in the state of domicile of the health care service contractor (or, if no RBC statute or other law is in force in that state, under the provisions of OAR 836-011-0500 to 836-011-0550), if the insurance commissioner of the state of domicile of the foreign health care service contractor fails to require the foreign health care service contractor to file an RBC plan in the manner specified under that state's RBC statute or other law (or, if no RBC statute or other law is in force in that state, under 836-011-0515), the Director may require the foreign health care service contractor to file an RBC plan with the Director. In such event, the failure of the foreign health care service contractor to file an RBC plan with the Director shall be grounds to order the health care service contractor to cease and desist from writing new insurance business in this state.

(4) In the event of a Mandatory Control Level Event with respect to a foreign health care service contractor, if no domiciliary receiver has been appointed with respect to the foreign health care service contractor under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign health organization, the Director may apply for an order under ORS 734.190 with respect to the liquidation of property of foreign health care service contractors found in this state, and the occurrence of the Mandatory Control Level Event shall be considered adequate grounds for the application under ORS 734.150 (1) or (4).

Stat. Auth.: ORS 731.244, ORS 750.045
Stats. Implemented: ORS 731.574, ORS 733.210, ORS 750.045
Hist.: ID 22-2002, f. & cert. ef. 11-27-02

836-011-0600

Report on Services Provided by Expanded Practice Dental Hygienists

(1) As used in this rule:

(a) “Expanded practice dental hygienist” has the meaning given in ORS 679.010.

(b) “Health insurer” includes:

(A) An insurer authorized to transact health insurance in Oregon;

(B) A health care service contractor as defined in ORS 750.005;

(C) A multiple employer welfare arrangement as defined in ORS 750.301;

(D) A coordinated care organization as defined in ORS 414.025, or a dental care organization or governed by the Oregon Health Authority;

(E) A third party administrator licensed under ORS 744.702; and

(F) Federally qualified health centers governed by the United States Department of Health and Human Services.

(2) A health insurer authorized to transact health insurance that provides coverage for dental services in Oregon shall, by August 1 of every even-numbered year, report to the Department of Consumer and Business Services information pertaining to reimbursement for those dental services provided by Expanded Practice Dental Hygienists (EPDH) to Oregon residents for the 24-month period ending June 30 of the reporting year. For each dental service provided during the period under review the information shall include:

(a) The Current Dental Terminology code denoting the type of service provided;

(b) The provider’s National Provider Identifier number; and

(c) The following information, which the department will aggregate prior to providing the information to the Board of Dentistry:

(A) The amount billed by the EPDH to the insurer for the service provided;

(B) The amount allowed for the service under the insurance plan;

(C) The amount of benefit paid by the insurer for the dental service (i.e. the amount of the benefit subtracting any deductible, copay, coinsurance or other cost-sharing);

(D) The amount owed by the insured for the service (i.e. deductible, copay, coinsurance or other cost-sharing);

(E) The amount of excluded charges owed by the insured; and

(F) The amount of excluded charges, if any, that the provider is not allowed to collect from the insured due to their provider agreement with the insurer.

(3) A health insurer subject to this rule shall provide the report required in section (2) of this rule electronically, as requested by the Director.

Stat. Auth.: ORS 731.244, 680.210
Stats. Implemented: ORS 680.210 (Sec. 11 & 12, Ch.716, OL 2011)
Hist.: ID 5-2012, f. & cert. ef. 2-16-12

The official copy of an Oregon Administrative Rule is contained in the Administrative Order filed at the Archives Division, 800 Summer St. NE, Salem, Oregon 97310. Any discrepancies with the published version are satisfied in favor of the Administrative Order. The Oregon Administrative Rules and the Oregon Bulletin are copyrighted by the Oregon Secretary of State. Terms and Conditions of Use

Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722
Phone: (503) 986-1523 • Fax: (503) 986-1616 • oregon.sos@state.or.us

© 2013 State of Oregon All Rights Reserved​