11 ncac 14 .0505             WAIVERS OF THREE-YEAR NET INCOME REQUIREMENT

(a) The Commissioner shall waive the three‑year net income requirement for a foreign insurance company of any type listed in G.S. 58-7-75 applying for admission to do business in North Carolina if the company meets all other requirements for admission and it is a subsidiary of, or affiliated under a holding company system, as defined in G.S. 58‑19‑5, with a licensed insurance company:

(1)           that has been licensed in North Carolina for a minimum of 10 years;

(2)           that has reflected net income three of the most recent five years;

(3)           that enjoys a satisfactory reputation in its dealings with its North Carolina policyholders, demonstrated by a volume of consumer complaints that are not material and market conduct examination findings which are not harmful to its policyholders; and

(4)           whose management has control as defined in G.S. 58-19-5 over the operations of the applicant company.

To be eligible for the waiver, the affiliated company shall guarantee to maintain the capital and surplus of the applicant company at or above the admission requirements in North Carolina for a minimum of three years or until the applicant company can provide a report on examination that certifies three consecutive years of net income, whichever last occurs.  The affiliated company shall use the forms prescribed in 11 NCAC 14 .0421 and 14 .0422 to make such guaranty.  Any guaranty provided by the affiliated company, that if exercised would place the guarantor in a hazardous financial condition as defined in G.S. 58-47-60, is ineffective in providing eligibility for the waiver.  Any applicant company that is granted a waiver of this requirement shall place on deposit with the Commissioner, in addition to any other minimum required deposit for admission, qualified securities in the amount of two hundred thousand dollars ($200,000) of the kind and nature set forth under G.S. 58‑5‑20.

(b)  On an individual case basis, a foreign life insurance company of the type listed in G.S. 58-7-75(1), (2) and (6) shall be eligible for a waiver of the net income requirement if it has net income for the current or immediately preceding year and can provide a certified financial projection, prepared by a qualified actuary, pursuant to and as defined in the most current NAIC Annual Statement Instructions, or a certified financial forecast prepared by an independent certified public accountant that has experience in audits of insurers, pursuant to G.S. 58-2-205, reflecting continuing net income for at least the next three years.  This financial projection or forecast shall be in a format similar to the Annual Statement for evaluation by the Commissioner.  All assumptions used in the preparation of such a projection or forecast shall be included with the filing.  Any applicant company that is granted a waiver under this Rule shall place on deposit with the Commissioner, in addition to any other required deposit for admission, eligible securities in the amount of two hundred thousand dollars ($200,000) of the kind and nature set forth under G.S. 58-5-20.

(c)  A foreign fire, casualty, or fire and casualty insurance company of the type listed in G.S. 58-7-75(3), (4), (5), (7) and (8) shall be eligible for the waiver of the three‑year net income requirement under the following conditions:

(1)           the applicant company reflects verifiable total statutory capital and surplus in excess of ten million dollars ($10,000,000) on its most recent reporting period whether annually or quarterly;

(2)           the applicant company has been in business for at least five years under the same ultimate ownership and writing the same or similar lines of business;

(3)           the applicant company reflects net income for at least three of the most recent five years; or reflects verifiable total statutory capital and surplus in excess of twenty-five million dollars ($25,000,000) in its most recent reporting period whether annually or quarterly; and

(4)           the applicant company certifies the adequacy of its loss and loss adjustment expense reserves, pursuant to and as defined in the most current NAIC Annual Statement Instructions as they pertain to its most recent annual statement.

Any company that is granted a waiver under this provision shall place on deposit with the Commissioner, in addition to any other required deposit for admission, eligible securities in the amount of five hundred thousand dollars ($500,000) of the kind and nature set forth under G.S. 58‑5‑20.

(d)  On an individual case basis, a foreign insurance company of any type listed in G.S. 58-7-75 shall be eligible for a waiver of the net income requirement under the following conditions:

(1)           the applicant company is owned by, or will within 12 months be owned by, a North Carolina licensed insurance company without restriction or an insurance company holding company system as defined in G.S. 58, Article 19, that has been or had been in existence for any three of the most recent five years.  The North Carolina licensed insurance company must have reflected net income for any three of the most recent five years; or the largest insurer, whether or not licensed in North Carolina, based on its equity within the insurance holding company system must have reflected net income for any three of the most recent five years. 

(2)           the applicant company is purchasing, or has had transferred to it, an existing block of insurance business and the existing management personnel;

(3)           the applicant company can demonstrate that the block of insurance business being purchased, or transferred to it, has net income for at least any three of the most recent five years and is projected by an actuary, or forecasted by a certified public accountant, to reflect net income for at least the next three years; and

(4)           the total capital and surplus of the applicant company is at least six times the authorized control level risk based capital pursuant to G.S. 58, Article 12, after the purchase of the block of business.

Any company that is granted a waiver under this provision shall deposit with the Commissioner, in addition to any other required deposit for admission, eligible securities in the amount of two hundred thousand dollars ($200,000) of the kind and nature set forth under G.S. 58‑5‑20.

History Note:        Authority G.S. 58-2-40; 58-5-20; 58‑5‑40; 58-2-165; 58-7-75; 58‑16‑5(2);

Eff. April 1, 1990;

Amended Eff. July 1, 2004; April 1, 1993.