PARRIS N. GLENDENING, Governor

Ch. 11

(B) FINANCIAL CONDITION.

IN DETERMINING WHETHER THE FINANCIAL CONDITION OF AN AUTHORIZED
INSURER WOULD CAUSE ITS CONTINUED OPERATION IN THE STATE TO BE
HAZARDOUS TO POLICYHOLDERS OR CREDITORS OF THE AUTHORIZED INSURER
OR THE GENERAL PUBLIC, THE COMMISSIONER MAY:

(1)      DISREGARD A CREDIT OR AMOUNT RECEIVABLE RESULTING FROM
TRANSACTIONS WITH A REINSURER THAT IS INSOLVENT, IMPAIRED, OR OTHERWISE
SUBJECT TO A DELINQUENCY PROCEEDING;

(2)      MAKE APPROPRIATE ADJUSTMENTS TO ASSET VALUES
ATTRIBUTABLE TO INVESTMENTS IN OR TRANSACTIONS WITH PARENTS,
SUBSIDIARIES, OR AFFILIATES OF THE AUTHORIZED INSURER;

(3)      REFUSE TO RECOGNIZE THE STATED VALUE OF ACCOUNTS
RECEIVABLE IF THE ABILITY TO COLLECT THE RECEIVABLES IS HIGHLY
SPECULATIVE BECAUSE OF THE AGE OF THE ACCOUNT OR FINANCIAL CONDITION
OF THE DEBTOR; OR

(4)      INCREASE THE LIABILITY OF THE AUTHORIZED INSURER IN AN
AMOUNT EQUAL TO ANY CONTINGENT LIABILITY, PLEDGE, OR GUARANTEE NOT
OTHERWISE INCLUDED IN THE STATEMENT OF LIABILITY IF THERE IS A
SUBSTANTIAL RISK THAT THE AUTHORIZED INSURER WILL HAVE TO DISCHARGE
THE LIABILITY, PLEDGE, OR GUARANTEE WITHIN THE NEXT 12-MONTH PERIOD.

REVISOR'S NOTE: This section is new language derived without substantive
change from former Art. 48A, § 131B.

The Insurance Article Review Committee notes, for consideration by the
General Assembly, that subsection (a)(3) of this section is revised to clarify
that the Commissioner may consider four ratios and that any one of those four
ratios could be considered to lead to an impairment of capital and surplus.
Those four ratios are: 1) commission expense to annual premium and net
investment income; 2) general insurance expense to annual premium and net
investment income; 3) benefits under policies to annual premium and net
investment income; and 4) reserve increases to annual premium and net
investment income. The absence of a comma in one instance and the
placement of an extraneous comma in another instance in former Art. 48A, §
131B(a)(3) created an ambiguity as to calculation of the ratios and
consideration of an impairment.

The Committee further notes, for consideration by the General Assembly,
that references in subsection (a)(9) and (11) to a "controlling person of the
authorized insurer" and a "person that has direct or indirect control over
operation", respectively, are vague because there is no definitive
determination of the identity of those persons.

Subsection (a)(12) of this section is revised to allow the Commissioner, in
determining whether a hazardous condition exists, to consider a response to
an inquiry that is either "false or misleading" rather than both "false and

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