892

LAWS OF MARYLAND

Ch. 199

[(j)] (L) Any such material transaction which, after notice
and an opportunity to be heard, is found to be not in conformity
with this section shall constitute a violation of this subtitle,
and in addition to the penalties contained in § 500, may be set
aside and rescinded at the initiative of the Commissioner or
otherwise under applicable law; provided, however, that notice of
any proposed action by the Commissioner to set aside or rescind a
material transaction shall be given to the insurer within ninety
days of the date such material transaction is communicated to the
Commissioner.

496.

(a)  Transactions [by insurers with their affiliates] WITHIN
A HOLDING COMPANY SYSTEM TO WHICH AN INSURER SUBJECT TO
REGISTRATION IS A PARTY are subject to the following standards:

(1)  The terms shall be fair and reasonable in
consideration of the purposes of this subtitle;

(2)  The books, accounts, and records of each party
shall be so maintained as to clearly and accurately disclose the
precise nature and details of the transactions, INCLUDING SUCH
ACCOUNTING INFORMATION AS IS NECESSARY TO SUPPORT THE
REASONABLENESS OF THE CHARGES OR FEES TO THE RESPECTIVE PARTIES;
[and]

(3)  The insurer's assets and surplus as regards
policyholders following any such transactions including dividends
or distributions to shareholder affiliates shall be reasonable in
relation to the insurer's outstanding liabilities and adequate to
its financial needs;

(4)  CHARGES OR FEES FOR SERVICES PERFORMED SHALL BE
REASONABLE; AND

(5)  EXPENSES INCURRED AND PAYMENT RECEIVED SHALL BE
ALLOCATED TO THE INSURER IN CONFORMITY WITH CUSTOMARY INSURANCE
ACCOUNTING PRACTICES CONSISTENTLY APPLIED.

(b)  For purposes of this subtitle, in determining whether
an insurer's assets and surplus as regards policyholders are
reasonable in relation to the insurer's outstanding liabilities
and adequate to its financial needs, the following factors, among
others, shall be considered:

(1)  The size of the insurer as measured by its
assets, capital and surplus, reserves, premium writings,
insurance in force and other appropriate criteria;

(2)  The extent to which the insurer's business is
diversified among the several lines of insurance;

(3)  The number and size of risks insured in each line
of business;