S.F. _____ H.F. _____ Section 1. NEW SECTION . 522.1 Purpose and scope —— 1 legislative intent. 2 1. The purpose of this chapter is to require insurers 3 to maintain a risk management framework and complete an own 4 risk and solvency assessment and to provide guidance and 5 instructions for the filing of own risk and solvency assessment 6 reports with the commissioner. 7 2. The general assembly finds and declares that own risk and 8 solvency assessment summary reports will contain confidential 9 and sensitive information related to an insurer’s or insurance 10 group’s identification of risks material and relevant to the 11 insurer or insurance group filing the report. This information 12 will include proprietary and trade secret information that has 13 the potential for harm and competitive disadvantage to the 14 insurer or insurance group if the information is made public. 15 It is the intent of the general assembly that own risk and 16 solvency assessment summary reports filed with the commissioner 17 are confidential documents, shall be shared only as provided in 18 this chapter and to assist the commissioner in the performance 19 of the commissioner’s duties, and shall not be subject to 20 public disclosure. 21 Sec. 2. NEW SECTION . 522.2 Definitions. 22 1. “Affiliate” , or a person affiliated with a specific 23 person, means the same as defined in section 521A.1. 24 2. “Commissioner” means the Iowa commissioner of insurance. 25 3. “Insurance group” means the insurers and affiliates 26 included within an insurance holding company system as defined 27 in section 521A.1. 28 4. “Insurer” means the same as defined in section 521A.1. 29 5. “Own risk and solvency assessment” or “assessment” means 30 a confidential internal assessment, appropriate to the nature, 31 scale, and complexity of an insurer or insurance group, that is 32 conducted by that insurer or insurance group, of the material 33 and relevant risks associated with the insurer or insurance 34 group’s current business plan, and the sufficiency of capital 35 -1- LSB 1269DP (7) 85 av/nh 1/ 14

S.F. _____ H.F. _____ resources to support those risks. 1 6. “Own risk and solvency assessment guidance manual” or 2 “guidance manual” means the current version of the own risk 3 and solvency assessment guidance manual developed and adopted 4 by the national association of insurance commissioners and 5 amended from time to time. A change in the guidance manual is 6 effective and applicable to this chapter on January 1 following 7 the calendar year in which the change was adopted by the 8 national association of insurance commissioners. 9 7. “Own risk and solvency assessment summary report” or 10 “summary report” means a confidential high-level summary of the 11 own risk and solvency assessment conducted by an insurer or 12 insurance group. 13 8. “Supervisory college” means a temporary or permanent 14 forum for communication and cooperation between regulators 15 charged with supervision of an insurer or its affiliates. 16 Sec. 3. NEW SECTION . 522.3 Risk management framework. 17 An insurer shall maintain a risk management framework to 18 assist the insurer with identifying, assessing, monitoring, 19 managing, and reporting on the insurer’s material and relevant 20 risks. This requirement is satisfied if the insurance group 21 of which the insurer is a member maintains a risk management 22 framework applicable to the operations of the insurer. 23 Sec. 4. NEW SECTION . 522.4 Own risk and solvency assessment 24 requirement. 25 1. Subject to section 522.6, an insurer, or the insurance 26 group of which the insurer is a member, shall regularly conduct 27 an own risk and solvency assessment consistent and comparable 28 with the assessment process contained in the own risk and 29 solvency assessment guidance manual. 30 2. An own risk and solvency assessment shall be conducted at 31 least annually, but an assessment shall also be conducted at 32 any time when there are significant changes to the risk profile 33 of an insurer or the insurance group of which the insurer is a 34 member. 35 -2- LSB 1269DP (7) 85 av/nh 2/ 14

S.F. _____ H.F. _____ Sec. 5. NEW SECTION . 522.5 Own risk and solvency assessment 1 summary report. 2 1. a. Beginning in 2015, an insurer shall annually submit 3 to the commissioner an own risk and solvency assessment summary 4 report or any combination of reports that together contain the 5 information described in the own risk and solvency assessment 6 guidance manual that is applicable to the insurer or the 7 insurance group of which the insurer is a member. 8 b. If the insurer is a member of an insurance group, the 9 insurer shall submit the report or reports required by this 10 section to the state commissioner that is the lead state 11 commissioner of the insurance group of which the insurer is 12 a member, as determined by the procedures contained in the 13 financial analysis handbook adopted by the national association 14 of insurance commissioners. 15 c. The own risk and solvency assessment summary report shall 16 be filed after the insurer or the insurance group of which the 17 insurer is a member conducts the insurer’s or insurance group’s 18 strategic planning process. The insurer or insurance group 19 shall notify the commissioner as to the date that the summary 20 report will be filed. 21 2. The own risk and solvency assessment summary report shall 22 include the signature of the insurer’s or insurance group’s 23 chief risk officer or another executive having responsibility 24 for the oversight of the insurer’s enterprise risk management 25 process, attesting that to the best of that person’s belief and 26 knowledge the insurer applies the enterprise risk management 27 process described in the summary report and that a copy of the 28 summary report has been provided to the insurer’s or insurance 29 group’s board of directors or the appropriate committee of that 30 board. 31 3. An insurer may comply with subsection 1 by submitting 32 the most recent and substantially similar report provided by 33 the insurer or another member of the insurance group of which 34 the insurer is a member to the commissioner of insurance of 35 -3- LSB 1269DP (7) 85 av/nh 3/ 14

S.F. _____ H.F. _____ another state or to a supervisor or regulator of a foreign 1 jurisdiction, if that report provides information that is 2 comparable to the information described in the own risk and 3 solvency assessment guidance manual. Any such report that is 4 submitted in a language other than English must be accompanied 5 by a translation of that report into the English language. 6 Sec. 6. NEW SECTION . 522.6 Exemption. 7 1. An insurer is exempt from the requirements of this 8 chapter if both of the following apply: 9 a. The insurer has annual direct written and unaffiliated 10 assumed premium, including international direct and assumed 11 premium, but excluding premiums reinsured with the federal crop 12 insurance corporation and the federal flood program, of less 13 than five hundred million dollars. 14 b. The insurance group of which the insurer is a member 15 has annual direct written and unaffiliated assumed premium, 16 including international direct and assumed premium, but 17 excluding premiums reinsured with the federal crop insurance 18 corporation and the federal flood program, of less than one 19 billion dollars. 20 2. If an insurer qualifies for exemption from the 21 requirements of this chapter pursuant to paragraph “a” of 22 subsection 1, but the insurance group of which the insurer 23 is a member does not qualify for exemption pursuant to 24 paragraph “b” of subsection 1, then the own risk and solvency 25 assessment summary report that is required pursuant to section 26 521H.5 shall include information concerning every insurer 27 in the insurance group. This requirement may be satisfied 28 by the submission of more than one summary report for any 29 combination of insurers in the insurance group provided that 30 the combination of reports submitted includes every insurer in 31 the insurance group. 32 3. If an insurer does not qualify for exemption pursuant 33 to paragraph “a” of subsection 1, but the insurance group of 34 which the insurer is a member qualifies for exemption pursuant 35 -4- LSB 1269DP (7) 85 av/nh 4/ 14

S.F. _____ H.F. _____ to paragraph “b” of subsection 1, then the only own risk and 1 solvency assessment summary report that is required pursuant to 2 section 522.5 is the report applicable to that insurer. 3 4. An insurer that does not qualify for exemption pursuant 4 to subsection 1 may apply to the commissioner for a waiver 5 from the requirements of this chapter based upon unique 6 circumstances. In deciding whether to grant the insurer’s 7 request for a waiver, the commissioner may consider the type 8 and volume of business written, ownership and organizational 9 structure, and any other factors the commissioner considers 10 relevant to the insurer or the insurance group of which the 11 insurer is a member. If the insurer is part of an insurance 12 group with insurers domiciled in more than one state, the 13 commissioner shall coordinate with the state commissioner 14 that is the lead state commissioner of the insurance group, 15 as determined pursuant to section 522.5, and with the other 16 domiciliary commissioners in considering whether to grant the 17 insurer’s request for a waiver. 18 5. Notwithstanding the exemptions provided in this section, 19 the commissioner may do the following: 20 a. Require that an insurer maintain a risk management 21 framework, conduct an own risk and solvency assessment, and 22 file an own risk and solvency assessment summary report based 23 on unique circumstances including but not limited to the type 24 and volume of business written, ownership and organizational 25 structure, federal agency requests, and international 26 supervisor requests. 27 b. Require that an insurer maintain a risk management 28 framework, conduct an own risk and solvency assessment, 29 and file an own risk and solvency assessment summary report 30 if the insurer has a risk-based capital level that is a 31 company-action-level event as set forth in section 521E.3 for 32 insurers and section 521F.4 for health organizations or that 33 would cause the insurer to be in hazardous financial condition 34 as set forth in 191 IAC 110, or if the insurer otherwise 35 -5- LSB 1269DP (7) 85 av/nh 5/ 14

S.F. _____ H.F. _____ exhibits qualities of a troubled insurer as determined by the 1 commissioner. 2 6. If an insurer that qualifies for an exemption pursuant 3 to subsection 1 subsequently no longer qualifies for that 4 exemption due to changes in premium as reflected in the 5 insurer’s most recent annual statement or in the most recent 6 annual statements of the other insurers in the insurance group 7 of which the insurer is a member, the insurer shall have one 8 year following the year the threshold is exceeded to comply 9 with the requirements of this chapter. 10 Sec. 7. NEW SECTION . 522.7 Contents of own risk and 11 solvency assessment summary report. 12 1. The own risk and solvency assessment summary report 13 shall be prepared consistent with the own risk and solvency 14 assessment guidance manual, subject to the requirements of 15 subsection 2. Documentation and supporting information shall 16 be maintained and made available upon examination of an insurer 17 or upon request of the commissioner. 18 2. The review of an own risk and solvency assessment summary 19 report, and any additional requests for information, shall 20 be made using procedures similar to the procedures currently 21 used in the analysis and examination of multistate or global 22 insurers and insurance groups. 23 Sec. 8. NEW SECTION . 522.8 Confidentiality. 24 1. Documents, materials, or other information, including 25 an own risk and solvency assessment summary report, in 26 the possession or control of the insurance division of the 27 department of commerce, that are obtained by, created by, 28 or disclosed to the commissioner or to any other person 29 pursuant to this chapter, are recognized in this state as being 30 proprietary and containing trade secrets. All such documents, 31 materials, or other information, including the summary report, 32 shall be confidential and privileged, shall not be subject to 33 chapter 22, shall not be subject to subpoena, and shall not be 34 subject to discovery or admissible in evidence in any private 35 -6- LSB 1269DP (7) 85 av/nh 6/ 14

S.F. _____ H.F. _____ civil action. However, the commissioner is authorized to use 1 such documents, materials, or other information, including the 2 summary report, in the furtherance of any regulatory or legal 3 action brought as a part of the commissioner’s official duties. 4 The commissioner shall not otherwise make the documents, 5 materials, or other information, including the summary report, 6 public without the prior written consent of the insurer that 7 provided the documents, materials, or other information, 8 including the summary report. 9 2. The commissioner or any person who received documents, 10 materials, or other information related to own risk and 11 solvency assessments, through examination or otherwise, while 12 acting under the authority of the commissioner or with whom 13 such documents, materials, or other information are shared 14 pursuant to this chapter, shall not be permitted or required to 15 testify in any private civil action concerning any confidential 16 documents, materials, or information, including summary 17 reports, subject to subsection 1. 18 3. In order to assist in the performance of the 19 commissioner’s regulatory duties, the commissioner may do any 20 of the following: 21 a. Upon request, share documents, materials, or other own 22 risk and solvency assessment-related information, including 23 the confidential and privileged documents, materials, or 24 information subject to subsection 1, and including proprietary 25 and trade secret documents, materials, or information, with 26 other state, federal, or international financial regulatory 27 agencies, including members of any supervisory college, with 28 the national association of insurance commissioners, and with 29 any third-party consultants designated by the commissioner, 30 provided that the recipient agrees in writing to maintain 31 the confidentiality and privileged status of the documents, 32 materials, or other assessment-related information and verifies 33 in writing the legal authority to maintain such confidentiality 34 and privilege. 35 -7- LSB 1269DP (7) 85 av/nh 7/ 14

S.F. _____ H.F. _____ b. Receive documents, materials, or other own risk 1 and solvency assessment-related information, including 2 otherwise confidential and privileged documents, materials, 3 or information, and proprietary and trade secret documents, 4 materials, and information, from regulatory officials of other 5 foreign or domestic jurisdictions, including members of any 6 supervisory college, and from the national association of 7 insurance commissioners, and shall maintain as confidential or 8 privileged any documents, materials, or information received 9 with notice or the understanding that the documents, materials, 10 or other information received are confidential and privileged 11 under the laws of the jurisdiction that is the source of the 12 documents, materials, or information. 13 4. In order to assist in the performance of the 14 commissioner’s regulatory duties, the commissioner shall enter 15 into a written agreement with the national association of 16 insurance commissioners or with a third-party consultant that 17 is consistent with subsection 3, governing the sharing and use 18 of information provided pursuant to this chapter, and that does 19 all of the following: 20 a. Specifies procedures and protocols regarding the 21 confidentiality and security of information shared with the 22 national association of insurance commissioners or with a 23 third-party consultant pursuant to this chapter, including 24 procedures and protocols of the national association of 25 insurance commissioners for sharing information with other 26 state regulators from states in which an insurance group has 27 domiciled insurers. The agreement shall require that the 28 recipient of such information must agree in writing to maintain 29 the confidentiality and privileged status of the own risk and 30 solvency assessment-related documents, materials, or other 31 information and verify in writing the legal authority to 32 maintain confidentiality and privilege. 33 b. Specifies that ownership of information shared with 34 the national association of insurance commissioners or with 35 -8- LSB 1269DP (7) 85 av/nh 8/ 14

S.F. _____ H.F. _____ a third-party consultant pursuant to this chapter remains 1 with the commissioner and that use of the information by 2 the national association of insurance commissioners or by a 3 third-party consultant is subject to the direction of the 4 commissioner. 5 c. Prohibits the national association of insurance 6 commissioners or a third-party consultant from storing the 7 information shared pursuant to this chapter in a permanent 8 database after the underlying analysis is completed. 9 d. Requires that prompt notice be given to an insurer whose 10 confidential information is in the possession of the national 11 association of insurance commissioners or a third-party 12 consultant pursuant to this chapter, that the information is 13 subject to a request or subpoena to the national association 14 of insurance commissioners or the third-party consultant for 15 disclosure or production. 16 e. Requires the national association of insurance 17 commissioners or a third-party consultant to consent to 18 intervention by an insurer in any judicial or administrative 19 action in which the national association of insurance 20 commissioners or the third-party consultant may be required 21 to disclose confidential information about the insurer that 22 was shared with the association or consultant pursuant to this 23 chapter. 24 f. In the case of an agreement involving a third-party 25 consultant, provides for the insurer’s written consent to the 26 agreement. 27 5. The sharing of documents, materials, or information by 28 the commissioner pursuant to this chapter shall not constitute 29 a delegation of regulatory authority or rulemaking, and the 30 commissioner is solely responsible for the administration, 31 execution, and enforcement of the provisions of this chapter. 32 6. No waiver of any applicable privilege or claim of 33 confidentiality in the documents, proprietary and trade secret 34 materials, or other own risk and solvency assessment-related 35 -9- LSB 1269DP (7) 85 av/nh 9/ 14

S.F. _____ H.F. _____ information shall occur as a result of the disclosure of such 1 documents, materials, or information to the commissioner under 2 this section or as a result of the sharing of those documents, 3 materials, or information as authorized in this chapter. 4 7. Documents, materials, or other information in the 5 possession or control of the national association of insurance 6 commissioners or a third-party consultant pursuant to this 7 chapter shall be confidential and privileged, shall not be 8 subject to chapter 22, shall not be subject to subpoena, and 9 shall not be subject to discovery or admissible in evidence in 10 any private civil action. 11 Sec. 9. NEW SECTION . 522.9 Penalties. 12 1. If an insurer fails, without just cause, to file an 13 own risk and solvency assessment summary report by the filing 14 date stipulated to the commissioner pursuant to section 522.5, 15 subsection 1, the commissioner shall, after notice and hearing, 16 impose a penalty of five hundred dollars for each day after 17 the stipulated date that the summary report is not filed. The 18 penalties shall be collected by the commissioner and deposited 19 in the general fund of the state. The maximum penalty which 20 may be imposed under this section is fifty thousand dollars. 21 2. The commissioner may reduce the penalty to be imposed if 22 the insurer demonstrates to the commissioner that imposition 23 of the penalty would constitute a financial hardship to the 24 insurer. 25 Sec. 10. NEW SECTION . 522.10 Severability. 26 If any provision of this chapter, or the application of this 27 chapter to any person or circumstance, is held invalid, such 28 holding shall not affect the provisions or applications of this 29 chapter which can be given effect without the invalid provision 30 or application, and to that end the provisions of this chapter 31 are severable. 32 Sec. 11. APPLICABILITY DATE. The provisions of this Act are 33 applicable beginning on January 1, 2015. 34 EXPLANATION 35 -10- LSB 1269DP (7) 85 av/nh 10/ 14

S.F. _____ H.F. _____ This bill creates new Code chapter 522, which requires 1 certain insurers domiciled in the state to maintain a risk 2 management framework, complete an own risk and solvency 3 assessment, and file a summary report of the assessment with 4 the commissioner of insurance. Generally, the Code chapter 5 applies to insurers with annual premium of $500 million or 6 more and to insurance groups of which domiciled insurers are 7 members, with annual premium of $1 billion or more. 8 The bill requires an insurer or the insurance group of 9 which the insurer is a member, to regularly conduct an own 10 risk and solvency assessment consistent and comparable 11 with the assessment process contained in the own risk and 12 solvency assessment guidance manual developed and adopted by 13 the national association of insurance commissioners. The 14 assessment must be conducted at least annually and also at any 15 time there are significant changes to the risk profile of an 16 insurer or insurance group. 17 Beginning in 2015, an insurer is required to submit an 18 annual own risk and solvency assessment summary report to the 19 commissioner that contains the information described in the 20 guidance manual. The report shall be filed after the insurer 21 or insurance group of which the insurer is a member conducts 22 its strategic planning process. The insurer or insurance group 23 must notify the commissioner as to the date that the summary 24 report will be filed. The report must be attested to by the 25 insurer’s or insurance group’s chief risk officer or other 26 officer having responsibility for risk management and must be 27 written in English or accompanied by a translation written in 28 English. 29 An insurer is exempt from the new Code chapter’s 30 requirements if the insurer has annual premium of less than 31 $500 million and the insurance group of which the insurer is 32 a member has annual premium of less than $1 billion. If an 33 insurer is exempt but the insurance group is not exempt, the 34 own risk and solvency assessment summary report must include 35 -11- LSB 1269DP (7) 85 av/nh 11/ 14

S.F. _____ H.F. _____ information about every insurer in the insurance group. If 1 an insurer is not exempt but the insurance group of which the 2 insurer is a member is exempt, the assessment summary report 3 must only include that insurer. 4 An insurer that does not qualify for exemption may apply 5 to the commissioner for a waiver from the requirements, based 6 on unique circumstances. Even if an insurer is qualified 7 for exemption from the new Code chapter’s requirements, the 8 commissioner may require the insurer to meet those requirements 9 based on the unique circumstances of the insurer or based on 10 the insurer’s risk-based capital level or other reasons that 11 would cause the insurer to be in hazardous financial condition 12 or to exhibit qualities of a troubled insurer as determined by 13 the commissioner. 14 If an insurer that qualifies for an exemption subsequently 15 no longer qualifies due to changes in premium, the insurer has 16 one year following the increase in premium to comply with the 17 new Code chapter’s requirements. 18 The own risk and solvency assessment summary report shall be 19 prepared consistent with the own risk and solvency assessment 20 guidance manual. Documentation and supporting information 21 shall be maintained and available when an insurer is examined 22 or at the request of the commissioner. The summary report 23 shall be reviewed using procedures similar to those currently 24 used in the analysis and examination of multistate or global 25 insurers and insurance groups. 26 Documents, materials, or other information, including own 27 risk and solvency assessment summary reports, in the possession 28 or control of the insurance division of the department of 29 commerce or any other person pursuant to the bill that are 30 obtained by, created by, or disclosed to the commissioner 31 or to any other person pursuant to the bill, are recognized 32 in this state as being proprietary and containing trade 33 secrets. Such documents, materials, or other information is 34 confidential, is not subject to Code chapter 22 (open records), 35 -12- LSB 1269DP (7) 85 av/nh 12/ 14

S.F. _____ H.F. _____ shall not be subject to subpoena, and shall not be subject to 1 discovery or evidence in any private civil action. However, 2 the commissioner is authorized to use such information in the 3 furtherance of any regulatory or legal action brought as part 4 of the commissioner’s official duties. The commissioner shall 5 not otherwise make such information public without the prior 6 written consent of the insurer. The commissioner or any other 7 person with access to information obtained pursuant to the bill 8 shall not be permitted or required to testify in any private 9 civil action concerning confidential information. 10 In performing regulatory duties, the commissioner may 11 share confidential and privileged information with specified 12 regulatory and other entities including certain third-party 13 consultants, and receive confidential and privileged 14 information from other specified regulatory and other entities. 15 In performing regulatory duties, the commissioner is 16 required to enter into a written agreement with the national 17 association of insurance commissioners or with a third-party 18 consultant that governs the sharing and use of information 19 provided pursuant to the bill. The agreement must specify 20 procedures and protocols for the confidentiality and security 21 of information shared and require that the recipient of such 22 information agree in writing to maintain the confidential and 23 privileged status of the information; specify that ownership of 24 shared information remains with the commissioner, who directs 25 its use; prohibit storage of the information in a permanent 26 database after analysis is complete; require prompt notice 27 to an insurer if the insurer’s information is subject to a 28 request or subpoena for disclosure or production; require 29 that an insurer be allowed to intervene in any judicial or 30 administrative action in which the insurer’s confidential 31 information may be disclosed; and provide for the insurer’s 32 consent to retention of a third-party consultant. 33 The sharing of information pursuant to the bill does not 34 constitute a delegation of regulatory authority or rulemaking 35 -13- LSB 1269DP (7) 85 av/nh 13/ 14

S.F. _____ H.F. _____ by the commissioner, or a waiver of any applicable privilege 1 or claim of confidentiality, and such shared information is 2 confidential and privileged, not subject to Code chapter 22, 3 not subject to subpoena, and not subject to discovery or 4 admissible in evidence in any private civil action. 5 If an insurer, without just cause, fails to file an own 6 risk and solvency assessment summary report by the filing date 7 stipulated to the commissioner pursuant to new Code section 8 521H.5, the commissioner, after notice and hearing, shall 9 impose a penalty of $500 for each day after that date that 10 the summary report is not filed, up to a maximum penalty of 11 $50,000. The penalties collected by the commissioner are to be 12 deposited in the general fund of the state. The commissioner 13 may reduce the penalty if the insurer demonstrates that 14 imposition of the penalty would constitute a financial hardship 15 to the insurer. 16 The provisions of the new Code chapter are severable in the 17 event that the application of the Code chapter to any person or 18 circumstance is held to be invalid. 19 New Code chapter 522 is applicable beginning on January 1, 20 2015. 21 -14- LSB 1269DP (7) 85 av/nh 14/ 14