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H.B. 340 Enrolled

             1     

INSURER RECEIVERSHIP ACT

             2     
2007 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: James A. Dunnigan

             5     
Senate Sponsor: Curtis S. Bramble

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Insurance Code by repealing existing insurer rehabilitation and
             10      liquidation provisions and enacting the Insurer Receivership Act.
             11      Highlighted Provisions:
             12          This bill:
             13          .    repeals most provisions of Title 31A, Chapter 27, Insurers Rehabilitation and
             14      Liquidation, and enacts Title 31A, Chapter 27a, Insurer Receivership Act;
             15          .    renumbers and amends provisions in Title 31A, Chapter 27, related to
             16      administrative actions;
             17          .    provides general provisions relating to:
             18              .    construction and commissioner's powers;
             19              .    definitions;
             20              .    insurer receivership laws;
             21              .    persons covered;
             22              .    court proceedings including jurisdiction, venue, notice and hearings,
             23      injunctions, orders, and statutes of limitations;
             24              .    exemptions from fees;
             25              .    cooperation of officers, owners, and employees;
             26              .    actions by and against a receiver, providing immunity and indemnification, and
             27      the possession and control of an insurer's records by a receiver;
             28              .    affiliates;
             29     


             30              .    executory contracts;
             31              .    financial obligations, including approval and payment of expenses and financial
             32      reporting;
             33              .    reporting;
             34              .    records;
             35              .    the affect of delinquency proceedings commenced before April 30, 2007; and
             36              .    severability;
             37          .    provides procedures governing delinquency proceedings, including:
             38              .    commencing delinquency proceedings, expedited trials, decisions, and appeals;
             39              .    preserving the confidentiality of the proceedings; and
             40              .    finding grounds for rehabilitation or liquidation, and the entry and effect of an
             41      order of rehabilitation or liquidation;
             42          .    provides provisions governing the rehabilitation of an insurer, including:
             43              .    issuing rehabilitation orders;
             44              .    establishing the powers and duties of the rehabilitator;
             45              .    filing of rehabilitation plans;
             46              .    terminating rehabilitation; and
             47              .    requiring coordination with guaranty associations to assist in the orderly
             48      transition to rehabilitation or liquidation;
             49          .    establishes provisions for liquidation of an insurer, including:
             50              .    addressing liquidation orders;
             51              .    addressing continuance of coverage;
             52              .    providing for the sale or dissolution of the corporate entity;
             53              .    establishing the power of the liquidator;
             54              .    providing notice requirements; and
             55              .    duties of agents;
             56          .    addresses asset recovery, including:
             57              .    turning over assets;


             58              .    recovering from affiliates;
             59              .    addressing unauthorized postpetition transfers;
             60              .    addressing voidable preferences and liens;
             61              .    addressing avoidance of property title transfers;
             62              .    addressing fraudulent transfers and obligations;
             63              .    addressing receiver as lien creditor;
             64              .    addressing liability of transferees;
             65              .    providing for setoffs;
             66              .    providing for assessments;
             67              .    addressing a reinsurer's liability;
             68              .    reinsurance;
             69              .    recovering of premiums owed;
             70              .    commutation and release agreements; and
             71              .    requiring in certain circumstances reinsurance recoverable trust;
             72          .    establishes claim procedures relating to:
             73              .    filing, proof, and allowance of claims;
             74              .    claims under occurrence policies, surety bonds, and surety undertakings;
             75              .    allowance of contingent and unliquidated claims;
             76              .    provisions for third party claims, disputed claims, codebtors, and secured
             77      creditors' claims;
             78              .    qualified financial contracts; and
             79              .    provides for the administration of deductive policies and insured collateral;
             80          .    provides for distribution of assets, including priority for distribution, early
             81      distribution, and partial and final distribution;
             82          .    establishes discharge and termination of delinquency proceedings;
             83          .    establishes provisions relating to interstate relations; and
             84          .    makes technical and conforming changes.
             85      Monies Appropriated in this Bill:


             86          None
             87      Other Special Clauses:
             88          None
             89      Utah Code Sections Affected:
             90      AMENDS:
             91          31A-1-106, as last amended by Chapter 95, Laws of Utah 1987
             92          31A-2-108, as last amended by Chapter 344, Laws of Utah 1995
             93          31A-2-203, as last amended by Chapter 177, Laws of Utah 2006
             94          31A-2-204, as last amended by Chapter 177, Laws of Utah 2006
             95          31A-2-206, as last amended by Chapters 79 and 204, Laws of Utah 1996
             96          31A-2-207, as last amended by Chapter 2, Laws of Utah 2004
             97          31A-2-212, as last amended by Chapter 177, Laws of Utah 2006
             98          31A-2-308, as last amended by Chapter 58, Laws of Utah 2005
             99          31A-5-212, as enacted by Chapter 242, Laws of Utah 1985
             100          31A-5-217, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
             101          31A-5-305, as last amended by Chapter 316, Laws of Utah 1994
             102          31A-5-416, as last amended by Chapter 277, Laws of Utah 1992
             103          31A-5-504, as last amended by Chapter 320, Laws of Utah 2006
             104          31A-5-506, as last amended by Chapter 204, Laws of Utah 1986
             105          31A-8-213, as last amended by Chapter 116, Laws of Utah 2001
             106          31A-9-502, as last amended by Chapter 300, Laws of Utah 2000
             107          31A-9-504, as enacted by Chapter 242, Laws of Utah 1985
             108          31A-11-104, as last amended by Chapter 90, Laws of Utah 2004
             109          31A-11-109, as enacted by Chapter 242, Laws of Utah 1985
             110          31A-13-107, as last amended by Chapter 204, Laws of Utah 1986
             111          31A-14-206, as last amended by Chapter 90, Laws of Utah 2004
             112          31A-14-215, as last amended by Chapter 204, Laws of Utah 1986
             113          31A-14-217, as last amended by Chapter 230, Laws of Utah 1992


             114          31A-15-105, as last amended by Chapter 204, Laws of Utah 1986
             115          31A-17-605, as last amended by Chapter 116, Laws of Utah 2001
             116          31A-17-606, as last amended by Chapter 116, Laws of Utah 2001
             117          31A-17-609, as last amended by Chapter 116, Laws of Utah 2001
             118          31A-17-610, as last amended by Chapter 116, Laws of Utah 2001
             119          31A-18-106, as last amended by Chapter 176, Laws of Utah 2006
             120          31A-22-617, as last amended by Chapter 3, Laws of Utah 2005, First Special Session
             121          31A-23a-704, as renumbered and amended by Chapter 298, Laws of Utah 2003
             122          31A-28-108, as last amended by Chapters 116 and 161, Laws of Utah 2001
             123          31A-28-114, as last amended by Chapter 161, Laws of Utah 2001
             124          31A-28-207, as last amended by Chapter 308, Laws of Utah 2002
             125          31A-28-213, as last amended by Chapter 363, Laws of Utah 2001
             126          31A-35-103, as enacted by Chapter 293, Laws of Utah 1998
             127          31A-37-504, as last amended by Chapter 312, Laws of Utah 2004
             128      ENACTS:
             129          31A-27-502, Utah Code Annotated 1953
             130          31A-27a-101, Utah Code Annotated 1953
             131          31A-27a-102, Utah Code Annotated 1953
             132          31A-27a-103, Utah Code Annotated 1953
             133          31A-27a-104, Utah Code Annotated 1953
             134          31A-27a-105, Utah Code Annotated 1953
             135          31A-27a-106, Utah Code Annotated 1953
             136          31A-27a-107, Utah Code Annotated 1953
             137          31A-27a-108, Utah Code Annotated 1953
             138          31A-27a-109, Utah Code Annotated 1953
             139          31A-27a-110, Utah Code Annotated 1953
             140          31A-27a-111, Utah Code Annotated 1953
             141          31A-27a-112, Utah Code Annotated 1953


             142          31A-27a-113, Utah Code Annotated 1953
             143          31A-27a-114, Utah Code Annotated 1953
             144          31A-27a-115, Utah Code Annotated 1953
             145          31A-27a-116, Utah Code Annotated 1953
             146          31A-27a-117, Utah Code Annotated 1953
             147          31A-27a-119, Utah Code Annotated 1953
             148          31A-27a-120, Utah Code Annotated 1953
             149          31A-27a-201, Utah Code Annotated 1953
             150          31A-27a-202, Utah Code Annotated 1953
             151          31A-27a-203, Utah Code Annotated 1953
             152          31A-27a-204, Utah Code Annotated 1953
             153          31A-27a-205, Utah Code Annotated 1953
             154          31A-27a-206, Utah Code Annotated 1953
             155          31A-27a-207, Utah Code Annotated 1953
             156          31A-27a-208, Utah Code Annotated 1953
             157          31A-27a-209, Utah Code Annotated 1953
             158          31A-27a-301, Utah Code Annotated 1953
             159          31A-27a-302, Utah Code Annotated 1953
             160          31A-27a-303, Utah Code Annotated 1953
             161          31A-27a-304, Utah Code Annotated 1953
             162          31A-27a-305, Utah Code Annotated 1953
             163          31A-27a-401, Utah Code Annotated 1953
             164          31A-27a-402, Utah Code Annotated 1953
             165          31A-27a-403, Utah Code Annotated 1953
             166          31A-27a-404, Utah Code Annotated 1953
             167          31A-27a-405, Utah Code Annotated 1953
             168          31A-27a-406, Utah Code Annotated 1953
             169          31A-27a-407, Utah Code Annotated 1953


             170          31A-27a-501, Utah Code Annotated 1953
             171          31A-27a-502, Utah Code Annotated 1953
             172          31A-27a-503, Utah Code Annotated 1953
             173          31A-27a-504, Utah Code Annotated 1953
             174          31A-27a-505, Utah Code Annotated 1953
             175          31A-27a-506, Utah Code Annotated 1953
             176          31A-27a-507, Utah Code Annotated 1953
             177          31A-27a-508, Utah Code Annotated 1953
             178          31A-27a-509, Utah Code Annotated 1953
             179          31A-27a-510, Utah Code Annotated 1953
             180          31A-27a-511, Utah Code Annotated 1953
             181          31A-27a-512, Utah Code Annotated 1953
             182          31A-27a-513, Utah Code Annotated 1953
             183          31A-27a-514, Utah Code Annotated 1953
             184          31A-27a-515, Utah Code Annotated 1953
             185          31A-27a-516, Utah Code Annotated 1953
             186          31A-27a-601, Utah Code Annotated 1953
             187          31A-27a-602, Utah Code Annotated 1953
             188          31A-27a-603, Utah Code Annotated 1953
             189          31A-27a-604, Utah Code Annotated 1953
             190          31A-27a-605, Utah Code Annotated 1953
             191          31A-27a-606, Utah Code Annotated 1953
             192          31A-27a-607, Utah Code Annotated 1953
             193          31A-27a-608, Utah Code Annotated 1953
             194          31A-27a-609, Utah Code Annotated 1953
             195          31A-27a-610, Utah Code Annotated 1953
             196          31A-27a-611, Utah Code Annotated 1953
             197          31A-27a-612, Utah Code Annotated 1953


             198          31A-27a-701, Utah Code Annotated 1953
             199          31A-27a-702, Utah Code Annotated 1953
             200          31A-27a-703, Utah Code Annotated 1953
             201          31A-27a-704, Utah Code Annotated 1953
             202          31A-27a-705, Utah Code Annotated 1953
             203          31A-27a-801, Utah Code Annotated 1953
             204          31A-27a-802, Utah Code Annotated 1953
             205          31A-27a-803, Utah Code Annotated 1953
             206          31A-27a-804, Utah Code Annotated 1953
             207          31A-27a-805, Utah Code Annotated 1953
             208          31A-27a-901, Utah Code Annotated 1953
             209          31A-27a-902, Utah Code Annotated 1953
             210      RENUMBERS AND AMENDS:
             211          31A-27-501, (Renumbered from 31A-27-101, as last amended by Chapter 204, Laws of
             212      Utah 1986)
             213          31A-27-503, (Renumbered from 31A-27-201, as last amended by Chapter 161, Laws of
             214      Utah 1987)
             215          31A-27-504, (Renumbered from 31A-27-203, as last amended by Chapter 204, Laws of
             216      Utah 1986)
             217          31A-27a-118, (Renumbered from 31A-27-107, as enacted by Chapter 242, Laws of
             218      Utah 1985)
             219      REPEALS:
             220          31A-27-102, as last amended by Chapter 308, Laws of Utah 2002
             221          31A-27-103, as last amended by Chapter 298, Laws of Utah 2003
             222          31A-27-104, as last amended by Chapter 131, Laws of Utah 1999
             223          31A-27-105, as enacted by Chapter 242, Laws of Utah 1985
             224          31A-27-106, as last amended by Chapter 204, Laws of Utah 1986
             225          31A-27-108, as enacted by Chapter 242, Laws of Utah 1985


             226          31A-27-109, as enacted by Chapter 204, Laws of Utah 1986
             227          31A-27-110, as enacted by Chapter 131, Laws of Utah 1999
             228          31A-27-202, as last amended by Chapter 204, Laws of Utah 1986
             229          31A-27-301, as last amended by Chapter 204, Laws of Utah 1986
             230          31A-27-302, as last amended by Chapter 252, Laws of Utah 2003
             231          31A-27-303, as last amended by Chapter 204, Laws of Utah 1986
             232          31A-27-304, as last amended by Chapter 344, Laws of Utah 1995
             233          31A-27-305, as last amended by Chapter 308, Laws of Utah 2002
             234          31A-27-306, as enacted by Chapter 242, Laws of Utah 1985
             235          31A-27-307, as last amended by Chapter 131, Laws of Utah 1999
             236          31A-27-308, as last amended by Chapter 185, Laws of Utah 1997
             237          31A-27-309, as enacted by Chapter 242, Laws of Utah 1985
             238          31A-27-310, as last amended by Chapter 131, Laws of Utah 1999
             239          31A-27-311, as last amended by Chapter 13, Laws of Utah 1998
             240          31A-27-311.5, as last amended by Chapter 252, Laws of Utah 2003
             241          31A-27-312, as last amended by Chapter 230, Laws of Utah 1992
             242          31A-27-313, as enacted by Chapter 242, Laws of Utah 1985
             243          31A-27-314, as last amended by Chapter 105, Laws of Utah 2004
             244          31A-27-315, as last amended by Chapter 177, Laws of Utah 2006
             245          31A-27-316, as last amended by Chapter 298, Laws of Utah 2003
             246          31A-27-317, as last amended by Chapter 308, Laws of Utah 2002
             247          31A-27-318, as enacted by Chapter 242, Laws of Utah 1985
             248          31A-27-319, as last amended by Chapter 204, Laws of Utah 1986
             249          31A-27-320, as last amended by Chapter 204, Laws of Utah 1986
             250          31A-27-321, as last amended by Chapter 277, Laws of Utah 1992
             251          31A-27-322, as enacted by Chapter 204, Laws of Utah 1986
             252          31A-27-323, as last amended by Chapter 131, Laws of Utah 1999
             253          31A-27-324, as last amended by Chapter 298, Laws of Utah 2003


             254          31A-27-325, as last amended by Chapter 204, Laws of Utah 1986
             255          31A-27-326, as last amended by Chapter 105, Laws of Utah 2004
             256          31A-27-327, as last amended by Chapter 105, Laws of Utah 2004
             257          31A-27-328, as last amended by Chapter 131, Laws of Utah 1999
             258          31A-27-329, as enacted by Chapter 242, Laws of Utah 1985
             259          31A-27-330, as last amended by Chapter 9, Laws of Utah 1996, Second Special Session
             260          31A-27-330.5, as last amended by Chapter 185, Laws of Utah 1997
             261          31A-27-330.6, as last amended by Chapter 105, Laws of Utah 2004
             262          31A-27-331, as enacted by Chapter 242, Laws of Utah 1985
             263          31A-27-332, as last amended by Chapter 308, Laws of Utah 2002
             264          31A-27-333, as last amended by Chapter 204, Laws of Utah 1986
             265          31A-27-334, as last amended by Chapter 204, Laws of Utah 1986
             266          31A-27-335, as last amended by Chapter 300, Laws of Utah 2000
             267          31A-27-335.5, as last amended by Chapter 344, Laws of Utah 1995
             268          31A-27-336, as enacted by Chapter 242, Laws of Utah 1985
             269          31A-27-337, as last amended by Chapter 308, Laws of Utah 2002
             270          31A-27-338, as enacted by Chapter 242, Laws of Utah 1985
             271          31A-27-339, as last amended by Chapter 204, Laws of Utah 1986
             272          31A-27-340, as last amended by Chapter 308, Laws of Utah 2002
             273          31A-27-341, as last amended by Chapter 308, Laws of Utah 2002
             274          31A-27-342, as enacted by Chapter 242, Laws of Utah 1985
             275          31A-27-401, as last amended by Chapter 204, Laws of Utah 1986
             276          31A-27-402, as enacted by Chapter 242, Laws of Utah 1985
             277          31A-27-403, as enacted by Chapter 242, Laws of Utah 1985
             278          31A-27-404, as enacted by Chapter 242, Laws of Utah 1985
             279          31A-27-405, as enacted by Chapter 242, Laws of Utah 1985
             280          31A-27-406, as enacted by Chapter 242, Laws of Utah 1985
             281          31A-27-407, as last amended by Chapter 204, Laws of Utah 1986


             282          31A-27-408, as enacted by Chapter 242, Laws of Utah 1985
             283          31A-27-409, as last amended by Chapter 204, Laws of Utah 1986
             284          31A-27-410, as last amended by Chapter 344, Laws of Utah 1995
             285          31A-27-411, as last amended by Chapter 204, Laws of Utah 1986
             286     
             287      Be it enacted by the Legislature of the state of Utah:
             288          Section 1. Section 31A-1-106 is amended to read:
             289           31A-1-106. Residual unlicensed domestic insurers.
             290          (1) Every person doing an insurance business in Utah not covered under another
             291      section of this title, that does not hold a valid certificate of authority or license under [the
             292      Insurance Code,] this title shall, by July 1, 1987, complete one of the actions prescribed in
             293      Subsections (2) through (5). This section does not apply to an unauthorized foreign insurer
             294      doing an insurance business in Utah in full compliance with Section 31A-15-103 .
             295          (2) An insurer under Subsection (1) may incorporate and apply, or if already
             296      incorporated, may apply for a certificate of authority under Chapter 5, 6, 7, 8, or 9. If the
             297      commissioner is satisfied that the insurer substantially complies with the requirements of the
             298      appropriate chapter necessary for the protection of insureds and the public, the commissioner
             299      shall issue a certificate of authority.
             300          (3) An insurer under Subsection (1) may transfer all its obligations to a corporation
             301      authorized under this title to assume them, according to a plan approved by the commissioner.
             302      The commissioner may disapprove the plan on a finding, after a hearing, that it is contrary to
             303      the interests of insureds, the public, or the law.
             304          (4) An insurer under Subsection (1) may adopt a plan to run off existing obligations
             305      without accepting any new policyholders or new obligations. The commissioner may
             306      disapprove the plan on a finding, after a hearing, that it is contrary to the interests of insureds,
             307      the public, or the law.
             308          (5) The commissioner may, by order, exempt an insurer from the requirements of
             309      Subsection (1) or extend the deadline under Subsection (1) on a finding that:


             310          (a) incorporation, licensing, reinsurance, or run off would cause disproportionate
             311      expense, loss, or substantial hardship; and
             312          (b) the nature of the existing and prospective business, the assets, or the business plan
             313      of the insurer can be reasonably expected to continue to operate in a sound manner and can be
             314      subjected to adequate regulatory controls.
             315          (6) Whenever the commissioner grants an exemption under Subsection (5), the
             316      commissioner shall issue to the insurer a certificate of authority. The commissioner may
             317      amend the certificate at any time, specifying the business that the insurer may transact and
             318      specifying in detail the controls to which the insurer shall be subject. These controls shall
             319      correspond as nearly as practicable to the controls applicable to corporations transacting a like
             320      business.
             321          (7) It is a ground for liquidation under Section [ 31A-27-307 ] 31A-27a-207 if an insurer
             322      has not completed action under one of Subsections (2) through (4) and has not applied for and
             323      been granted exemption under Subsection (5) before July 1, 1987.
             324          Section 2. Section 31A-2-108 is amended to read:
             325           31A-2-108. Legal services.
             326          (1) Except as provided in Subsection (4), the commissioner shall call upon the attorney
             327      general for the legal counsel and assistance necessary to enforce [the provisions of] this title.
             328      Upon the commissioner's request, or upon the attorney general's own initiative, the attorney
             329      general may hire special legal counsel under Section 67-5-5 to represent the [Insurance]
             330      department.
             331          (2) Upon the commissioner's request, or upon the commissioner's own initiative, the
             332      attorney general may aid in any investigation, hearing, or other procedure under this title and
             333      may institute, prosecute, and defend proceedings relating to the enforcement or interpretation
             334      of this title, including any proceeding to which the state, or the commissioner or any employee
             335      of the department in an official capacity, is a party or is interested.
             336          (3) The commissioner may refer such evidence as is available concerning violations of
             337      this title or of any rule or order under this title to the proper county attorney or district attorney,


             338      who may, with or without this reference, institute the appropriate criminal proceedings.
             339          (4) For proceedings authorized by [Title 31A, Chapter 27, Insurers Rehabilitation and
             340      Liquidation] Chapter 27a, Insurer Receivership Act, the commissioner may employ on a
             341      contract basis legal counsel other than the attorney general, with the fees, costs, and expenses
             342      of the counsel and the attorney general being a class one administrative expense under Section
             343      [31A-27-335 ] 31A-27a-701 .
             344          Section 3. Section 31A-2-203 is amended to read:
             345           31A-2-203. Examinations and alternatives.
             346          (1) (a) Whenever the commissioner considers it necessary in order to inform the
             347      commissioner about any matter related to the enforcement of this title, the commissioner may
             348      examine the affairs and condition of:
             349          (i) a licensee under this title;
             350          (ii) an applicant for a license under this title;
             351          (iii) a person or organization of persons doing or in process of organizing to do an
             352      insurance business in this state; or
             353          (iv) a person who is not, but should be, licensed under this title.
             354          (b) When reasonably necessary for an examination under Subsection (1)(a), the
             355      commissioner may examine:
             356          (i) so far as they relate to the examinee, the accounts, records, documents, or evidences
             357      of transactions of:
             358          (A) the insurer or other licensee;
             359          (B) any officer or other person who has executive authority over or is in charge of any
             360      segment of the examinee's affairs; or
             361          (C) any affiliate of the examinee; or
             362          (ii) any third party model or product used by the examinee.
             363          (c) (i) On demand, each examinee under Subsection (1)(a) shall make available to the
             364      commissioner for examination:
             365          (A) any of the examinee's own accounts, records, files, documents, or evidences of


             366      transactions; and
             367          (B) to the extent reasonably necessary for an examination, the accounts, records, files,
             368      documents, or evidences of transactions of any persons under Subsection (1)(b).
             369          (ii) Except as provided in Subsection (1)(c)(iii), failure to make the documents
             370      described in Subsection (1)(c)(i) available is concealment of records under Subsection
             371      [ 31A-27-307 (7)] 31A-27a-207 (1)(e).
             372          (iii) If the examinee is unable to obtain accounts, records, files, documents, or
             373      evidences of transactions from persons under Subsection (1)(b), that failure is not concealment
             374      of records if the examinee immediately terminates the relationship with the other person.
             375          (d) (i) Neither the commissioner nor an examiner may remove any account, record, file,
             376      document, evidence of transaction, or other property of the examinee from the examinee's
             377      offices unless:
             378          (A) the examinee consents in writing; or
             379          (B) a court grants permission.
             380          (ii) The commissioner may make and remove copies or abstracts of the following
             381      described in Subsection (1)(d)(i):
             382          (A) an account;
             383          (B) a record;
             384          (C) a file;
             385          (D) a document;
             386          (E) evidence of transaction; or
             387          (F) other property.
             388          (2) (a) Subject to the other provisions of this section, the commissioner shall examine
             389      as needed and as otherwise provided by law:
             390          (i) every insurer, both domestic and nondomestic;
             391          (ii) every licensed rate service organization; and
             392          (iii) any other licensee.
             393          (b) The commissioner shall examine insurers, both domestic and nondomestic, no less


             394      frequently than once every five years, but the commissioner may use in lieu examinations
             395      under Subsection (4) to satisfy this requirement.
             396          (c) The commissioner shall revoke the certificate of authority of an insurer or the
             397      license of a rate service organization that has not been examined, or submitted an acceptable in
             398      lieu report under Subsection (4), within the past five years.
             399          (d) (i) Any 25 persons who are policyholders, shareholders, or creditors of a domestic
             400      insurer may by verified petition demand a hearing under Section 31A-2-301 to determine
             401      whether the commissioner should conduct an unscheduled examination of the insurer.
             402          (ii) Persons demanding the hearing under this Subsection (2)(d) shall be given an
             403      opportunity in the hearing to present evidence that an examination of the insurer is necessary.
             404          (iii) If the evidence justifies an examination, the commissioner shall order an
             405      examination.
             406          (e) (i) When the board of directors of a domestic insurer requests that the
             407      commissioner examine the insurer, the commissioner shall examine the insurer as soon as
             408      reasonably possible.
             409          (ii) If the examination requested under this Subsection (2)(e) is conducted within two
             410      years after completion of a comprehensive examination by the commissioner, costs of the
             411      requested examination may not be deducted from premium taxes under Section 59-9-102
             412      unless the commissioner's order specifically provides for the deduction.
             413          (f) Bail bond surety companies as defined in Section 31A-35-102 are exempted from:
             414          (i) the five-year examination requirement in Subsection (2)(b);
             415          (ii) the revocation under Subsection (2)(c); and
             416          (iii) Subsections (2)(d) and (2)(e).
             417          (3) (a) The commissioner may order an independent audit or examination by technical
             418      experts, including certified public accountants and actuaries:
             419          (i) in lieu of all or part of an examination under Subsection (1) or (2); or
             420          (ii) in addition to an examination under Subsection (1) or (2).
             421          (b) Any audit or evaluation under this Subsection (3) is subject to Subsection (5),


             422      Section 31A-2-204 , and Subsection 31A-2-205 (4).
             423          (4) (a) In lieu of all or any part of an examination under this section, the commissioner
             424      may accept the report of an examination made by:
             425          (i) the insurance department of another state; or
             426          (ii) another government agency in:
             427          (A) this state;
             428          (B) the federal government; or
             429          (C) another state.
             430          (b) An examination by the commissioner under Subsection (1) or (2) or accepted by the
             431      commissioner under this Subsection (4) may use:
             432          (i) an audit already made by a certified public accountant; or
             433          (ii) an actuarial evaluation made by an actuary approved by the commissioner.
             434          (5) (a) An examination may be comprehensive or limited with respect to the
             435      examinee's affairs and condition. The commissioner shall determine the nature and scope of
             436      each examination, taking into account all relevant factors, including:
             437          (i) the length of time the examinee has been licensed in this state;
             438          (ii) the nature of the business being examined;
             439          (iii) the nature of the accounting or other records available;
             440          (iv) reports from:
             441          (A) independent auditors; and
             442          (B) self-certification entities; and
             443          (v) the nature of examinations performed elsewhere.
             444          (b) The examination of an alien insurer shall be limited to insurance transactions and
             445      assets in the United States, unless the commissioner orders otherwise after finding that
             446      extraordinary circumstances necessitate a broader examination.
             447          (6) To effectively administer this section, the commissioner:
             448          (a) shall:
             449          (i) maintain effective financial condition and market regulation surveillance systems


             450      including:
             451          (A) financial and market analysis; and
             452          (B) review of insurance regulatory information system reports;
             453          (ii) employ a priority scheduling method that focuses on insurers and other licensees
             454      most in need of examination; and
             455          (iii) use examination management techniques similar to those outlined in the Financial
             456      Condition Examination Handbook of the National Association of Insurance Commissioners;
             457      and
             458          (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             459      may make rules pertaining to the financial condition and market regulation surveillance
             460      systems.
             461          Section 4. Section 31A-2-204 is amended to read:
             462           31A-2-204. Conducting examinations.
             463          (1) (a) For each examination under Section 31A-2-203 , the commissioner shall issue an
             464      order:
             465          (i) stating the scope of the examination; and
             466          (ii) designating the examiner in charge.
             467          (b) The commissioner need not give advance notice of an examination to an examinee.
             468          (c) The examiner in charge shall give the examinee a copy of the order issued under
             469      this Subsection (1).
             470          (d) (i) The commissioner may alter the scope or nature of an examination at any time
             471      without advance notice to the examinee.
             472          (ii) If the commissioner amends an order described in this Subsection (1), the
             473      commissioner shall provide a copy of any amended order to the examinee.
             474          (e) Statements in the commissioner's examination order concerning examination scope
             475      are for the examiner's guidance only.
             476          (f) Examining relevant matters not mentioned in an order issued under this Subsection
             477      (1) is not a violation of this title.


             478          (2) The commissioner shall, whenever practicable, cooperate with the insurance
             479      regulators of other states by conducting joint examinations of:
             480          (a) multistate insurers doing business in this state; or
             481          (b) other multistate licensees doing business in this state.
             482          (3) An examiner authorized by the commissioner shall, when necessary to the purposes
             483      of the examination, have access at all reasonable hours to the premises and to any books,
             484      records, files, securities, documents, or property of:
             485          (a) the examinee; and
             486          (b) any of the following if the premises, books, records, files, securities, documents, or
             487      property relate to the affairs of the examinee:
             488          (i) an officer of the examinee;
             489          (ii) any other person who:
             490          (A) has executive authority over the examinee; or
             491          (B) is in charge of any segment of the examinee's affairs; or
             492          (iii) any affiliate of the examinee under Subsection 31A-2-203 (1)(b).
             493          (4) (a) The officers, employees, and agents of the examinee and of persons under
             494      Subsection 31A-2-203 (1)(b) shall comply with every reasonable request of the examiners for
             495      assistance in any matter relating to the examination.
             496          (b) A person may not obstruct or interfere with the examination except by legal
             497      process.
             498          (5) If the commissioner finds the accounts or records to be inadequate for proper
             499      examination of the condition and affairs of the examinee or improperly kept or posted, the
             500      commissioner may employ experts to rewrite, post, or balance the accounts or records at the
             501      expense of the examinee.
             502          (6) (a) The examiner in charge of an examination shall make a report of the
             503      examination no later than 60 days after the completion of the examination that shall include:
             504          (i) the information and analysis ordered under Subsection (1); and
             505          (ii) the examiner's recommendations.


             506          (b) At the option of the examiner in charge, preparation of the report may include
             507      conferences with the examinee or representatives of the examinee.
             508          (c) The report is confidential until the report becomes a public document under
             509      Subsection (7), except the commissioner may use information from the report as a basis for
             510      action under Chapter [27, Insurers Rehabilitation and Liquidation] 27a, Insurer Receivership
             511      Act.
             512          (7) (a) The commissioner shall serve a copy of the examination report described in
             513      Subsection (6) upon the examinee.
             514          (b) Within 20 days after service, the examinee shall:
             515          (i) accept the examination report as written; or
             516          (ii) request agency action to modify the examination report.
             517          (c) The report is considered accepted under this Subsection (7) if the examinee does
             518      not file a request for agency action to modify the report within 20 days after service of the
             519      report.
             520          (d) If the examination report is accepted:
             521          (i) the examination report immediately becomes a public document; and
             522          (ii) the commissioner shall distribute the examination report to all jurisdictions in
             523      which the examinee is authorized to do business.
             524          (e) (i) Any adjudicative proceeding held as a result of the examinee's request for
             525      agency action shall, upon the examinee's demand, be closed to the public, except that the
             526      commissioner need not exclude any participating examiner from this closed hearing.
             527          (ii) Within 20 days after the hearing held under this Subsection (7)(e), the
             528      commissioner shall:
             529          (A) adopt the examination report with any necessary modifications; and
             530          (B) serve a copy of the adopted report upon the examinee.
             531          (iii) Unless the examinee seeks judicial relief, the adopted examination report:
             532          (A) shall become a public document ten days after service; and
             533          (B) may be distributed as described in this section.


             534          (f) Notwithstanding Title 63, Chapter 46b, Administrative Procedures Act, to the
             535      extent that this section is in conflict with Title 63, Chapter 46b, this section governs:
             536          (i) a request for agency action under this section; or
             537          (ii) adjudicative proceeding under this section.
             538          (8) The examinee shall promptly furnish copies of the adopted examination report
             539      described in Subsection (7) to each member of the examinee's board.
             540          (9) After an examination report becomes a public document under Subsection (7), the
             541      commissioner may furnish, without cost or at a reasonable price set under Section 31A-3-103 ,
             542      a copy of the examination report to interested persons, including:
             543          (a) a member of the board of the examinee; or
             544          (b) one or more newspapers in this state.
             545          (10) (a) In a proceeding by or against the examinee, or any officer or agent of the
             546      examinee, the examination report as adopted by the commissioner is admissible as evidence of
             547      the facts stated in the report.
             548          (b) In any proceeding commenced under Chapter [27, Insurers Rehabilitation and
             549      Liquidation] 27a, Insurer Receivership Act, the examination report, whether adopted by the
             550      commissioner or not, is admissible as evidence of the facts stated in the examination report.
             551          Section 5. Section 31A-2-206 is amended to read:
             552           31A-2-206. Receipt and handling of deposits.
             553          (1) As used in this chapter:
             554          (a) "Custodian institution" means [any] a financial institution in this state as defined
             555      under Section 7-1-103 that:
             556          (i) has authority under Title 7, Chapter 5, Trust Business, to engage in a trust business;
             557      and
             558          (ii) is approved by the commissioner to have custody of deposited securities, whether
             559      physically, through the Federal Reserve book-entry system, or through a clearing corporation as
             560      defined under Subsection 70A-8-101 (1).
             561          (b) "Federal Reserve book-entry system" means the computerized system sponsored by


             562      the United States Department of the Treasury and certain other agencies and instrumentalities
             563      of the United States for holding and transferring securities of the United States government and
             564      other agencies and instrumentalities.
             565          (2) Subject to the commissioner's approval and to the requirements of this section, the
             566      state treasurer shall accept, and a custodian institution qualified under Subsection (1)(a) may
             567      accept:
             568          (a) deposits required or permitted under this title or rules adopted under this title;
             569          (b) deposits of domestic insurers or of alien insurers domiciled in this state if required
             570      by the laws of other states as a prerequisite to authority to do an insurance business in other
             571      states; and
             572          (c) deposits resulting from application of any retaliatory provisions of this title.
             573          (3) Deposits authorized under Subsection (2) shall be of securities described in
             574      Subsection (7).
             575          (4) Unless otherwise provided by the law requiring or permitting the deposit, each
             576      deposit shall be held in trust:
             577          (a) first, for administrative costs under Subsection [ 31A-27-335 ] 31A-27a-701 (2)(a);
             578          (b) second, for the claimants under Subsection [ 31A-27-335 ] 31A-27a-701 (2)(c);
             579          (c) third, for the claimants under Subsection [ 31A-27-335 ] 31A-27a-701 (2)(d); and
             580          (d) fourth, for all other creditors in the order of priority established under Section
             581      [ 31A-27-335 ] 31A-27a-701 .
             582          (5) A claim may be made against the deposit of an alien insurer only if it arises out of a
             583      transaction in the United States.
             584          (6) Deposits may be made by:
             585          (a) delivering physical custody and control of the deposited security to the state
             586      treasurer or a custodian institution, accompanied by a statement signed by the depositor
             587      indicating that the deposit shall be held in trust under the terms of this section and subject to
             588      the commissioner's exclusive direction until control is released by the commissioner; or
             589          (b) delivering to the commissioner, on a form adopted by rule, a signed certificate of a


             590      custodian institution, describing securities qualifying for deposit under Subsection (7) that are
             591      on deposit with a clearing corporation or held in the Federal Reserve book-entry system in the
             592      name of the custodian institution, in trust for the purposes stated under this section, and that
             593      these securities are subject to the exclusive direction of the commissioner and may not be
             594      withdrawn or transferred by any person, including the insurer owning the securities, without the
             595      commissioner's written approval.
             596          (7) (a) Deposits may consist of any securities authorized in Subsection (7) (b) for
             597      which there is a ready market if they:
             598          (i) are expressly approved by the commissioner;
             599          (ii) are subject to disposition by the state treasurer or custodian institution only with the
             600      concurrence of the commissioner; and
             601          (iii) are not available to any other person except as expressly provided by law.
             602          (b) The authorized securities are:
             603          (i) deposits or certificates of deposit insured by the Federal Deposit Insurance
             604      Corporation;
             605          (ii) bonds or other evidences of indebtedness that are guaranteed as to principal and
             606      interest by the United States;
             607          (iii) tax anticipation bonds or notes, general obligation bonds, or revenue bonds of this
             608      state or of any county, incorporated city or town, school district, or other political subdivision
             609      of this state, if the bonds or notes are rated AAA by Standard and Poor's or an equivalent
             610      nationally recognized rating agency;
             611          (iv) bonds or other evidences of indebtedness issued or guaranteed by an agency or
             612      instrumentality of the United States; and
             613          (v) any other security approved by the commissioner that [he] the commissioner
             614      considers an equivalent grade investment to those enumerated under Subsections (7)(b)(i)
             615      through (iv) based on tests of the safety of principal and liquidity.
             616          (8) Securities held on deposit shall be valued under Section 31A-17-401 as those
             617      investments are valued for life insurers, or at market, whichever is lower. The securities shall


             618      be revalued whenever the commissioner requests to ensure continued compliance with the
             619      requirements of this title.
             620          (9) (a) The state treasurer or custodian institution shall:
             621          (i) deliver to the depositor a receipt for all securities deposited or held;
             622          (ii) issue a duplicate copy of the receipt to the commissioner; and
             623          (iii) permit the depositor to inspect its physically held securities at any reasonable time.
             624          (b) On application of the depositor or when required by the law of any state or country
             625      or by the order of any court of competent jurisdiction, the state treasurer or custodian institution
             626      shall certify that the deposit was made and what is on deposit.
             627          (c) Depositors, the state treasurer, any custodian institution, and the commissioner shall
             628      each keep a permanent record of securities deposited or held under this section and of any
             629      substitutions or withdrawals. They shall compare records at least annually.
             630          (10) A transfer of a deposited security, whether voluntary or by operation of law, is
             631      valid only if approved in writing by the commissioner and countersigned by the state treasurer
             632      or custodian institution.
             633          (11) Neither a judgment creditor nor other person may levy upon any deposit held
             634      under this section.
             635          (12) A depositor that has complied with all provisions of this title intended to preserve
             636      its financial solidity is, while solvent and complying with the laws of this state, entitled to:
             637          (a) receive interest and cash dividends accruing on the securities held for its account;
             638      and
             639          (b) substitute for deposited securities other eligible securities, as expressly approved by
             640      the commissioner.
             641          (13) Within 45 days after the commissioner gives notice to a depositor that a deposit is
             642      not an acceptable deposit under Subsection (7), the depositor shall substitute other eligible
             643      securities expressly approved by the commissioner and allowed under Subsection (7).
             644          (14) A depositor may voluntarily deposit or transfer control of eligible securities in
             645      excess of requirements to absorb fluctuations in value and to facilitate substitution of


             646      securities.
             647          (15) Upon the depositor's request and upon approval of the commissioner, any deposit
             648      or part of a deposit shall be released to, or on order of, the depositor to the extent not needed to
             649      satisfy requirements of this title. On the order of a court of competent jurisdiction, the deposit
             650      or appropriate part of the deposit shall be released to the person for whom it is held.
             651          (16) Each depositor shall pay the cost of custody of securities by a custodian institution
             652      or by the state treasurer.
             653          (17) The commissioner shall adopt rules to implement this section.
             654          Section 6. Section 31A-2-207 is amended to read:
             655           31A-2-207. Commissioner's records and reports -- Protection from disclosure of
             656      certain records.
             657          (1) The commissioner shall maintain all department records that are:
             658          (a) required by law;
             659          (b) necessary for the effective operation of the department; or
             660          (c) necessary to maintain a full record of department activities.
             661          (2) The records of the department may be preserved, managed, stored, and made
             662      available for review consistent with:
             663          (a) another Utah statute;
             664          (b) the rules made under Section 63-2-904 ;
             665          (c) the decisions of the State Records Committee made under Title 63, Chapter 2,
             666      Government Records Access and Management Act; or
             667          (d) the needs of the public.
             668          (3) A department record may not be destroyed, damaged, or disposed of without:
             669          (a) authorization of the commissioner; and
             670          (b) compliance with all other applicable laws.
             671          (4) The commissioner shall maintain a permanent record of the commissioner's
             672      proceedings and important activities, including:
             673          (a) a concise statement of the condition of each insurer examined by the commissioner;


             674      and
             675          (b) a record of all certificates of authority and licenses issued by the commissioner.
             676          (5) (a) Prior to October 1 of each year, the commissioner shall prepare an annual report
             677      to the governor which shall include, for the preceding calendar year, the information
             678      concerning the department and the insurance industry which the commissioner believes will be
             679      useful to the governor and the public.
             680          (b) The report required by this Subsection (5) shall include the information required
             681      under Chapter [27] 27a, Insurer Receivership Act, and Subsections 31A-2-106 (2),
             682      31A-2-205 (3), and 31A-2-208 (3).
             683          (c) The commissioner shall make the report required by this Subsection (5) available to
             684      the public and industry in electronic format.
             685          (6) All department records and reports are open to public inspection unless specifically
             686      provided otherwise by statute or by Title 63, Chapter 2, Government Records Access and
             687      Management Act.
             688          (7) On request, the commissioner shall provide to any person certified or uncertified
             689      copies of any record in the department that is open to public inspection.
             690          (8) Notwithstanding Subsection (6) and Title 63, Chapter 2, Government Records
             691      Access and Management Act, the commissioner shall protect from disclosure any record, as
             692      defined in Section 63-2-103 , or other document received from an insurance regulator of
             693      another jurisdiction:
             694          (a) at least to the same extent the record or document is protected from disclosure
             695      under the laws applicable to the insurance regulator providing the record or document; or
             696          (b) under the same terms and conditions of confidentiality as the National Association
             697      of Insurance Commissioners requires as a condition of participating in any of the National
             698      Association of Insurance Commissioners' programs.
             699          Section 7. Section 31A-2-212 is amended to read:
             700           31A-2-212. Miscellaneous duties.
             701          (1) Upon issuance of any order limiting, suspending, or revoking an insurer's authority


             702      to do business in Utah, and on institution of any proceedings against the insurer under Chapter
             703      [27, Insurers Rehabilitation and Liquidation] 27a, Insurer Receivership Act, the commissioner:
             704          (a) shall notify by mail all agents of the insurer of whom the commissioner has record;
             705      and
             706          (b) may publish notice of the order or proceeding in any manner the commissioner
             707      considers necessary to protect the rights of the public.
             708          (2) When required for evidence in any legal proceeding, the commissioner shall furnish
             709      a certificate of the authority of any licensee to transact insurance business in Utah on any
             710      particular date. The court or other officer shall receive the certificate of authority in lieu of the
             711      commissioner's testimony.
             712          (3) (a) On the request of any insurer authorized to do a surety business, the
             713      commissioner shall furnish a copy of the insurer's certificate of authority to any designated
             714      public officer in this state who requires that certificate of authority before accepting a bond.
             715          (b) The public officer described in Subsection (3)(a) shall file the certificate of
             716      authority furnished under Subsection (3)(a).
             717          (c) After a certified copy of a certificate of authority has been furnished to a public
             718      officer, it is not necessary, while the certificate of authority remains effective, to attach a copy
             719      of it to any instrument of suretyship filed with that public officer.
             720          (d) Whenever the commissioner revokes the certificate of authority or starts
             721      proceedings under Chapter [27, Insurers Rehabilitation and Liquidation] 27a, Insurer
             722      Receivership Act, against any insurer authorized to do a surety business, the commissioner
             723      shall immediately give notice of that action to each public officer who was sent a certified copy
             724      under this Subsection (3).
             725          (4) (a) The commissioner shall immediately notify every judge and clerk of all courts
             726      of record in the state when:
             727          (i) an authorized insurer doing a surety business:
             728          (A) files a petition for receivership; or
             729          (B) is in receivership; or


             730          (ii) the commissioner has reason to believe that the authorized insurer doing surety
             731      business:
             732          (A) is in financial difficulty; or
             733          (B) has unreasonably failed to carry out any of its contracts.
             734          (b) Upon the receipt of the notice required by this Subsection (4) it is the duty of the
             735      judges and clerks to notify and require every person that has filed with the court a bond on
             736      which the authorized insurer doing surety business is surety, to immediately file a new bond
             737      with a new surety.
             738          (5) The commissioner shall require an insurer that issues, sells, renews, or offers health
             739      insurance coverage in this state to comply with the Health Insurance Portability and
             740      Accountability Act, P.L. 104-191, pursuant to 110 Stat. 1968, Sec. 2722.
             741          Section 8. Section 31A-2-308 is amended to read:
             742           31A-2-308. Enforcement penalties and procedures.
             743          (1) (a) A person who violates any insurance statute or rule or any order issued under
             744      Subsection 31A-2-201 (4) shall forfeit to the state twice the amount of any profit gained from
             745      the violation, in addition to any other forfeiture or penalty imposed.
             746          (b) (i) The commissioner may order an individual producer, limited line producer,
             747      customer service representative, managing general agent, reinsurance intermediary, adjuster, or
             748      insurance consultant who violates an insurance statute or rule to forfeit to the state not more
             749      than $2,500 for each violation.
             750          (ii) The commissioner may order any other person who violates an insurance statute or
             751      rule to forfeit to the state not more than $5,000 for each violation.
             752          (c) (i) The commissioner may order an individual producer, limited line producer,
             753      customer service representative, managing general agent, reinsurance intermediary, adjuster, or
             754      insurance consultant who violates an order issued under Subsection 31A-2-201 (4) to forfeit to
             755      the state not more than $2,500 for each violation. Each day the violation continues is a
             756      separate violation.
             757          (ii) The commissioner may order any other person who violates an order issued under


             758      Subsection 31A-2-201 (4) to forfeit to the state not more than $5,000 for each violation. Each
             759      day the violation continues is a separate violation.
             760          (d) The commissioner may accept or compromise any forfeiture under this Subsection
             761      (1) until after a complaint is filed under Subsection (2). After the filing of the complaint, only
             762      the attorney general may compromise the forfeiture.
             763          (2) When a person fails to comply with an order issued under Subsection
             764      31A-2-201 (4), including a forfeiture order, the commissioner may file an action in any court of
             765      competent jurisdiction or obtain a court order or judgment:
             766          (a) enforcing the commissioner's order;
             767          (b) (i) directing compliance with the commissioner's order and restraining further
             768      violation of the order; and
             769          (ii) subjecting the person ordered to the procedures and sanctions available to the court
             770      for punishing contempt if the failure to comply continues; or
             771          (c) imposing a forfeiture in an amount the court considers just, up to $10,000 for each
             772      day the failure to comply continues after the filing of the complaint until judgment is rendered.
             773          (3) The Utah Rules of Civil Procedure govern actions brought under Subsection (2),
             774      except that the commissioner may file a complaint seeking a court-ordered forfeiture under
             775      Subsection (2)(c) no sooner than two weeks after giving written notice of the commissioner's
             776      intention to proceed under Subsection (2)(c). The commissioner's order issued under
             777      Subsection 31A-2-201 (4) may contain a notice of intention to seek a court-ordered forfeiture if
             778      the commissioner's order is disobeyed.
             779          (4) If, after a court order is issued under Subsection (2), the person fails to comply with
             780      the commissioner's order or judgment:
             781          (a) the commissioner may certify the fact of the failure to the court by affidavit; and
             782          (b) the court may, after a hearing following at least five days written notice to the
             783      parties subject to the order or judgment, amend the order or judgment to add the forfeiture or
             784      forfeitures, as prescribed in Subsection (2)(c), until the person complies.
             785          (5) (a) The proceeds of all forfeitures under this section, including collection expenses,


             786      shall be paid into the General Fund.
             787          (b) The expenses of collection shall be credited to the [Insurance] department's budget.
             788          (c) The attorney general's budget shall be credited to the extent the [Insurance]
             789      department reimburses the attorney general's office for its collection expenses under this
             790      section.
             791          (6) (a) Forfeitures and judgments under this section bear interest at the rate charged by
             792      the United States Internal Revenue Service for past due taxes on the:
             793          (i) date of entry of the commissioner's order under Subsection (1); or
             794          (ii) date of judgment under Subsection (2).
             795          (b) Interest accrues from the later of the dates described in Subsection (6)(a) until the
             796      forfeiture and accrued interest are fully paid.
             797          (7) A forfeiture may not be imposed under Subsection (2)(c) if:
             798          (a) at the time the forfeiture action is commenced, the person was in compliance with
             799      the commissioner's order; or
             800          (b) the violation of the order occurred during the order's suspension.
             801          (8) The commissioner may seek an injunction as an alternative to issuing an order
             802      under Subsection 31A-2-201 (4).
             803          (9) (a) A person is guilty of a class B misdemeanor if that person:
             804          (i) intentionally violates:
             805          (A) an insurance statute or rule of this state; or
             806          (B) an order issued under Subsection 31A-2-201 (4);
             807          (ii) intentionally permits a person over whom that person has authority to violate:
             808          (A) an insurance statute or rule of this state; or
             809          (B) an order issued under Subsection 31A-2-201 (4); or
             810          (iii) intentionally aids any person in violating:
             811          (A) an insurance statute or rule of this state; or
             812          (B) an order issued under Subsection 31A-2-201 (4).
             813          (b) Unless a specific criminal penalty is provided elsewhere in this title, the person may


             814      be fined not more than:
             815          (i) $10,000 if a corporation; or
             816          (ii) $5,000 if a person other than a corporation.
             817          (c) If the person is an individual, the person may, in addition, be imprisoned for up to
             818      one year.
             819          (d) As used in this Subsection (9), "intentionally" has the same meaning as under
             820      Subsection 76-2-103 (1).
             821          (10) (a) A person who knowingly and intentionally violates Section 31A-4-102 ,
             822      31A-8a-208 , 31A-15-105 , 31A-23a-116 , or 31A-31-111 is guilty of a felony as provided in this
             823      Subsection (10).
             824          (b) When the value of the property, money, or other things obtained or sought to be
             825      obtained in violation of Subsection (10)(a):
             826          (i) is less than $5,000, a person is guilty of a third degree felony; or
             827          (ii) is or exceeds $5,000, a person is guilty of a second degree felony.
             828          (11) (a) After a hearing, the commissioner may, in whole or in part, revoke, suspend,
             829      place on probation, limit, or refuse to renew the licensee's license or certificate of authority:
             830          (i) when a licensee of the department, other than a domestic insurer:
             831          (A) persistently or substantially violates the insurance law; or
             832          (B) violates an order of the commissioner under Subsection 31A-2-201 (4);
             833          (ii) if there are grounds for delinquency proceedings against the licensee under Section
             834      [ 31A-27-301 or Section 31A-27-307 ] 31A-27a-207 ; or
             835          (iii) if the licensee's methods and practices in the conduct of the licensee's business
             836      endanger, or the licensee's financial resources are inadequate to safeguard, the legitimate
             837      interests of the licensee's customers and the public.
             838          (b) Additional license termination or probation provisions for licensees other than
             839      insurers are set forth in Sections 31A-19a-303 , 31A-19a-304 , 31A-23a-111 , 31A-23a-112 ,
             840      31A-25-208 , 31A-25-209 , 31A-26-213 , 31A-26-214 , 31A-35-501 , and 31A-35-503 .
             841          (12) The enforcement penalties and procedures set forth in this section are not


             842      exclusive, but are cumulative of other rights and remedies the commissioner has pursuant to
             843      applicable law.
             844          Section 9. Section 31A-5-212 is amended to read:
             845           31A-5-212. Certificate of authority.
             846          (1) The corporation may apply for a certificate of authority at any time prior to the
             847      expiration of its organization permit. The application shall include a detailed statement by a
             848      principal officer about any material changes that have taken place or are likely to take place in
             849      the facts on which the issuance of the organization permit was based, and if any material
             850      changes are proposed in the business plan, the information about the changes that would be
             851      required if an organization permit were being applied for.
             852          (2) (a) The commissioner shall issue a certificate of authority if [he] the commissioner
             853      finds:
             854          (i) enough cash or property authorized under Subsection 31A-5-207 (1)(a) or (2)(a) has
             855      been received to satisfy the requirements of Section 31A-5-211 ;
             856          (ii) there is no basis for revoking the organization permit under Subsection
             857      31A-5-209 (2); and
             858          (iii) all other applicable requirements of the law have been met.
             859          (b) The certificate of authority shall specify any limits placed on the insurance business
             860      the corporation may carry on and may, within the powers given the commissioner under this
             861      title, specify limits on the corporation's methods of operation.
             862          (3) After the issuance of the certificate of authority the following action shall take
             863      place:
             864          (a) The board shall authorize and direct the issuance of certificates for shares, bonds, or
             865      notes subscribed to under the organization permit, and of insurance policies upon qualifying
             866      applications obtained under the organization permit.
             867          (b) The commissioner shall authorize the release to the corporation of all funds held in
             868      escrow under Section 31A-5-208 .
             869          (4) (a) A corporation may apply to the commissioner for a new or amended certificate


             870      of authority altering limits on its business or methods of operation. The application shall
             871      contain or be accompanied by information in Subsection 31A-5-204 (2) as the commissioner
             872      reasonably requires. The commissioner shall issue the new certificate if [he] the commissioner
             873      finds:
             874          (i) the corporation's capital and surplus satisfy the requirements of Section 31A-5-211
             875      as to the operations proposed under the new certificate of authority; and
             876          (ii) the proposed business would not be contrary to law or to the interests of insureds or
             877      the public.
             878          (b) If the commissioner issues [a summary] an order under [Section 31A-27-201 ]
             879      Chapter 27, Part 5, Administrative Actions, against a corporation, [he] the commissioner may
             880      also revoke the corporation's certificate and issue a new one with any limitation [he] the
             881      commissioner considers necessary.
             882          (5) Except as to Subsection (4), this section does not apply to stock or mutual
             883      insurance corporations already in existence on July 1, 1986.
             884          Section 10. Section 31A-5-217 is amended to read:
             885           31A-5-217. Separate accounts for variable contracts.
             886          (1) Separate accounts under this section may be designated by any appropriate name
             887      the corporation wishes to use, except that the commissioner may by rule provide guidelines for
             888      the naming of separate accounts.
             889          (2) With the approval of the commissioner, any corporation may establish, or at the
             890      direction of the commissioner shall establish, one or more separate accounts and allocate to
             891      them any amounts paid or remitted to, or held by, the corporation under designated contracts or
             892      classes of contracts. These amounts are to be applied to provide benefits payable partly or
             893      wholly in variable dollar amounts, and to provide benefits in fixed and guaranteed dollar
             894      amounts and other incidental benefits.
             895          (3) To the extent necessary to comply with the federal Investment Company Act of
             896      1940, 15 U.S.C. Sec. 80a-1 et seq., or its interpretive rules, the corporation may:
             897          (a) adopt special procedures for the conduct of the business and affairs of a separate


             898      account; and
             899          (b) for persons having beneficial interests in a separate account, provide special voting
             900      and other rights, including special rights and procedures relating to investment policy,
             901      investment advisory services, selection of certified public accountants, and selection of a
             902      committee, the members of which need not be otherwise affiliated with the corporation, to
             903      manage the business and affairs of the account.
             904          (4) The commissioner may specify in the certificate of authority of a newly organized
             905      corporation the minimum required capital or the minimum required permanent surplus to be
             906      provided for each separate account. If a separate account is established after a certificate of
             907      authority has been issued, the commissioner shall require the corporation to allocate an
             908      adequate amount of capital and surplus to the separate account. An insurer may not be required
             909      to allocate more capital and surplus to a separate account than would be required of a separate
             910      insurer under Section 31A-5-211 and Chapter 17, Part 6, Risk-Based Capital.
             911          (5) The income and assets attributable to a separate account shall always remain
             912      identified with the particular account, but unless the commissioner so orders, the assets need
             913      not be kept physically separate from other assets of the corporation. The income and gains and
             914      losses, whether or not realized, from assets attributable to a separate account shall be credited
             915      to or charged against the account without regard to other income, gains, or losses of the
             916      corporation.
             917          (6) Except as provided in Subsection (7), liabilities arising out of any other business of
             918      the corporation are not to be allocated to a separate account, nor are any liabilities arising out of
             919      a separate account to be allocated to any other account of the corporation, except as provided in
             920      Subsection (11).
             921          (7) (a) Each separate account shall be considered as an insurer within the meaning of
             922      Subsection [ 31A-27-102 (1)(m)] 31A-27a-102 (23).
             923          (b) A liquidation order under Section [ 31A-27-310 ] 31A-27a-401 for the general
             924      account or for any separate account shall have effect as a rehabilitation order under Section
             925      [ 31A-27-303 ] 31A-27a-301 for all other accounts of the corporation. Claims remaining unpaid


             926      after completion of the liquidation under Chapter [27] 27a, Insurer Receivership Act, shall be
             927      liens on the interests of shareholders, if any, but not on any other interests, in all of the
             928      corporation's assets that are not liquidated. The rehabilitator may transform these liens into
             929      ownership interests under [Subsection 31A-27-304 (5)] Section 31A-27a-302 .
             930          (8) Assets in excess of the liabilities allocated to separate accounts are the property of
             931      the corporation.
             932          (9) A corporation may own a particular asset in determinate proportions for separate
             933      accounts, for its general account, or as a trustee when acting as such within its legal powers.
             934          (10) The corporation may by an identifiable act transfer assets among the separate
             935      accounts, the general account, and any trust accounts of the corporation, for fair consideration
             936      as defined in [Subsection 31A-27-102 (1)(h)] Section 31A-27a-102.
             937          (11) The general account of the corporation, or any separate account, may, for a fair
             938      consideration as defined in [Subsection 31A-27-102 (1)(h)] Section 31A-27a-102, provide
             939      guarantees in connection with, perform services for, or reinsure other accounts, subject to rules
             940      adopted by the commissioner. The determination of a fair consideration shall be made by
             941      applying generally accepted accounting principles and realistic actuarial tables.
             942          (12) Section 31A-18-102 deals with separate account investments. Section
             943      31A-20-106 requires the commissioner's approval before delivery of certain variable contracts.
             944      Section 31A-22-411 and Subsection 31A-21-301 (1)(d) deal with policy provisions in separate
             945      account contracts.
             946          Section 11. Section 31A-5-305 is amended to read:
             947           31A-5-305. Authorized securities.
             948          (1) (a) The articles of incorporation of a stock corporation may authorize the kind of
             949      shares permitted by Sections 16-10a-601 and 16-10a-602 , and stock rights and options, except
             950      that:
             951          (i) [no] nonvoting common stock may not be issued;
             952          (ii) all classes of common stock must have equal voting rights;
             953          (iii) all common stock must have a stated par value; and


             954          (iv) except with the commissioner's approval, for two years after the initial issuance of
             955      a certificate of authority, the corporation may issue no shares and no other securities
             956      convertible into shares except a single class of common stock.
             957          (b) Section 16-10a-604 applies to the issuance of certificates for fractional shares or
             958      scrip.
             959          (c) The consideration and payment for shares and certificates representing shares is
             960      governed by [Section] Subsection 31A-5-207 (1)(a).
             961          (d) The liability of subscribers and shareholders for unpaid subscriptions and the status
             962      of stock is governed by Section 16-10a-622 .
             963          (e) A shareholder's preemptive rights is governed by Section 16-10a-630 .
             964          (f) Stock corporations may issue bonds and contribution notes on the same basis as
             965      mutuals under Subsections (2)(a) and (b).
             966          (2) (a) The articles of incorporation of a nonassessable mutual may authorize bonds of
             967      one or more classes. The articles of incorporation shall specify the amount of each class of
             968      bonds the corporation is authorized to issue, their designations, preferences, limitations, rates
             969      of interest, relative rights, and other terms, subject to all of the following provisions:
             970          (i) During the first year after the initial issuance of a certificate of authority, the
             971      corporation may issue only a single class of bonds with identical rights.
             972          (ii) After the first year, but within five years after the initial issuance of a certificate of
             973      authority, additional classes of bonds may be authorized after receiving the approval of the
             974      commissioner. The commissioner shall approve the issuance if [he] the commissioner finds
             975      that policyholders and prior bondholders will not be prejudiced.
             976          (iii) The rate of interest shall be fair.
             977          (iv) The bonds shall bear a maturity date not later than ten years from the date of
             978      issuance, when principal and accrued interest shall be due and payable, subject to Subsection
             979      (2)(d).
             980          (b) A mutual may issue contribution notes with the commissioner's approval. The
             981      contribution notes may be denominated by any name that is not misleading. The contribution


             982      notes are subject to this subsection. The commissioner may approve the issuance only if [he]
             983      the commissioner finds that:
             984          (i) the notes will not be issued in denominations of less than $2,500, and no single
             985      issue will be sold to more than 15 persons;
             986          (ii) no discount, commission, or other fee will be paid or allowed;
             987          (iii) the notes will not be the subject of a public offering;
             988          (iv) the terms of the notes are not prejudicial to policyholders, holders of mutual bonds,
             989      or prior contribution notes; and
             990          (v) the mutual's articles or bylaws do not forbid their issuance.
             991          (c) [No] A mutual may not:
             992          (i) if it has any outstanding obligations on bonds or contribution notes, borrow on
             993      contribution notes from, or sell bonds to, any other insurer without the approval of the
             994      commissioner; or
             995          (ii) make a loan to another insurer except a fully secured loan at usual market rates of
             996      interest.
             997          (d) Payment of the principal or interest on bonds or contribution notes may be made in
             998      whole or in part only after approval by the commissioner. The commissioner's approval shall
             999      be given if all the financial requirements of the issuer to do the insurance business it is then
             1000      doing will continue to be satisfied after that payment, and if the interests of its insureds and the
             1001      public are not endangered by the payment. In the event of liquidation under Chapter [27] 27a,
             1002      Insurer Receivership Act, unpaid amounts of principal and interest on contribution notes are
             1003      subordinate to the payment of principal and interest on any bonds issued by the corporation.
             1004          (e) This section does not prevent a mutual from borrowing money on notes which are
             1005      its general obligations, nor from pledging any part of its disposable assets.
             1006          (3) This section does not apply to securities issued prior to July 1, 1986.
             1007          Section 12. Section 31A-5-416 is amended to read:
             1008           31A-5-416. Executive compensation.
             1009          (1) Subject to this section, Section 16-10a-302 , except Subsection 16-10a-302 (13),


             1010      applies to stock and mutual corporations.
             1011          (2) Shareholders' approval is required of any benefit or payment to a director or officer
             1012      for services rendered to a stock corporation more than 90 days before the agreement or decision
             1013      to give the benefit or make the payment, unless the benefit or payment is made under a plan
             1014      approved by the shareholders. Shareholder approval is also required for a new pension plan,
             1015      profit-sharing plan, stock option plan, or an amendment to an existing plan which, so far as it
             1016      pertains to any director or officer, substantially increases the financial burden on the
             1017      corporation.
             1018          (3) An action taken by the board of a mutual on the compensation of officers, directors,
             1019      or employees, other than setting individual salaries or standards for salaries of classes of
             1020      employees, shall be reported to the commissioner within 30 days.
             1021          (4) The annual report to the commissioner shall include the amount of all direct and
             1022      indirect remuneration for services, including retirement and other deferred compensation
             1023      benefits and stock options, paid or accrued each year:
             1024          (a) for the benefit of each director, each officer, and employee whose remuneration
             1025      exceeds an amount established by the commissioner by rule;
             1026          (b) for all directors and officers as a group; and
             1027          (c) for the five most highly compensated officers, directors, and employees.
             1028          (5) [No] An arrangement for compensation or other employment benefits for any
             1029      director, officer, or employee with decision-making power may not be made if it would:
             1030          (a) measure the compensation or other benefits in whole or in part by any criteria that
             1031      would create a financial inducement to act contrary to the best interests of the corporation; or
             1032          (b) have a tendency to make the corporation depend for continuance or soundness of
             1033      operation upon the continuation of any director, officer, or employee in [his] the person's
             1034      position.
             1035          (6) Except for the insurer, no person having any authority in the investment or
             1036      disposition of the funds of a domestic insurer may accept any fee, brokerage, gift, or other
             1037      emolument because of any investment, loan, deposit, purchase, sale, payment, or exchange


             1038      made by or for the insurer, nor may that person be financially interested in the investment or
             1039      disposition of funds in any capacity.
             1040          (7) Unless the commissioner, acting in the corporation's best interests, orders
             1041      otherwise, if an order of rehabilitation or liquidation is issued under Section [ 31A-27-303 ]
             1042      31A-27a-301 or [Section 31A-27-310 ] 31A-27a-401 , the contractual obligations of the insurer
             1043      for unperformed services of any director, principal officer, or person performing similar
             1044      functions or having similar powers are terminated. This Subsection (7) does not apply to
             1045      obligations vested before July 1, 1986.
             1046          Section 13. Section 31A-5-504 is amended to read:
             1047           31A-5-504. Voluntary dissolution of domestic insurance corporations.
             1048          (1) (a) Except as otherwise modified by this section, a domestic stock insurance
             1049      corporation may dissolve under Sections 16-10a-1401 through 16-10a-1409 and Section
             1050      16-10a-1440 .
             1051          (b) Except as otherwise modified by this section, a domestic mutual insurance
             1052      corporation may dissolve under Sections 16-6a-1401 through 16-6a-1409 and Section
             1053      16-6a-1419 .
             1054          (2) (a) At least 60 days prior to the submission to shareholders or policyholders of any
             1055      proposed voluntary dissolution of an insurance corporation, the plan of dissolution shall be
             1056      filed with the commissioner.
             1057          (b) The commissioner may require the submission of any information in addition to the
             1058      plan of dissolution that will establish:
             1059          (i) the financial condition of the corporation; or
             1060          (ii) other facts relevant to the proposed dissolution.
             1061          (c) If the shareholders or policyholders adopt the resolution to dissolve, the
             1062      commissioner shall, within 30 days after the adoption of the resolution, begin an examination
             1063      of the corporation.
             1064          (d) The commissioner shall approve the dissolution unless the commissioner finds,
             1065      after a hearing, that the corporation:


             1066          (i) is insolvent; or
             1067          (ii) may become insolvent in the process of dissolution.
             1068          (e) Upon approval, the corporation may:
             1069          (i) transfer all of its obligations under insurance policies to other insurers approved by
             1070      the commissioner; and
             1071          (ii) after the transfers described in Subsection (2)(e)(i), dissolve under Subsection (1).
             1072          (f) If the commissioner disapproves the dissolution, the commissioner shall petition the
             1073      court for a liquidation under Section [ 31A-27-307 ] 31A-27a-207 .
             1074          (3) During the dissolution under Subsection (1), the corporation may apply to the
             1075      commissioner to have the dissolution continued under the commissioner's supervision. After
             1076      receiving this application, the commissioner shall apply to the court for a liquidation under
             1077      Section [ 31A-27-307 ] 31A-27a-207 .
             1078          (4) If the corporation revokes the voluntary dissolution proceedings under Section
             1079      16-6a-1404 or 16-10a-1404 , the corporation shall file a copy of the revocation of voluntary
             1080      dissolution proceedings with the commissioner.
             1081          (5) In distributing the assets in the dissolution of a nonlife mutual, [Subsection
             1082      31A-27-337 (4)] Section 31A-27a-705 applies.
             1083          (6) (a) No remedy available to or against the corporation, its directors, officers, or
             1084      shareholders is taken away or impaired if an action or other proceeding is brought within two
             1085      years after dissolution for any right or claim existing, or any liability incurred, prior to the
             1086      voluntary dissolution under this section.
             1087          (b) The action or proceeding described in Subsection (6)(a) may be prosecuted or
             1088      defended by the corporation in its corporate name. The shareholders, directors, and officers
             1089      may take appropriate corporate or other action to protect the remedy, right, or claim.
             1090          (c) A corporation which is dissolved by the expiration of its period of duration may
             1091      amend its articles of incorporation during the two years to provide for perpetual existence.
             1092          (7) During the voluntary dissolution of a domestic insurance corporation under this
             1093      section, its corporate existence continues to allow the winding up of the corporation's affairs


             1094      regarding any property and assets not distributed or otherwise disposed of prior to dissolution.
             1095      To effect that purpose, the corporation may:
             1096          (a) sell or otherwise dispose of the property and assets;
             1097          (b) sue and be sued;
             1098          (c) contract; and
             1099          (d) exercise all other necessary powers.
             1100          Section 14. Section 31A-5-506 is amended to read:
             1101           31A-5-506. Conversion of a domestic mutual into a stock corporation.
             1102          (1) (a) Except as provided in Subsection (1) (b), a domestic mutual may be converted
             1103      into a domestic stock corporation under Subsections (2) through (11).
             1104          (b) [No] A domestic mutual that is affiliated with other mutuals may not be converted
             1105      into a stock corporation, unless all the affiliated mutuals are converted at the same time, or the
             1106      commissioner finds that the interests of the policyholders of the remaining mutuals can be
             1107      permanently protected by limitations on the corporate powers of the new stock corporation or
             1108      on its authority to do business, or otherwise.
             1109          (2) The board shall pass a resolution stating that the conversion is in the best interests
             1110      of the policyholders. The resolution shall specify the reasons for and the purposes of the
             1111      proposed conversion, and how the conversion is expected to benefit policyholders.
             1112          (3) (a) [The provisions of] Chapter 16 [apply], Insurance Holding Companies, applies
             1113      to the conversion of a domestic mutual into a stock corporation. In addition, the commissioner
             1114      shall order the examination and appraisal of the corporation, unless [he] the commissioner
             1115      finds that:
             1116          (i) the resolution is defective upon its face; or
             1117          (ii) the basis or the purposes of the proposed conversion are contrary to law, to the
             1118      interests of the policyholders, or to the public.
             1119          (b) The commissioner shall examine the company and all of its controlled affiliates
             1120      under Section 31A-2-203 to determine their financial condition and whether they are operating
             1121      in accordance with law.


             1122          (c) The commissioner shall appoint an appraisal committee, consisting of at least three
             1123      qualified and disinterested persons with differing expertise, to determine the value of the
             1124      corporation on the date of the resolution required by Subsection (2). Members of the appraisal
             1125      committee shall receive reasonable compensation and shall be reimbursed for reasonable
             1126      expenses in discharging their duties. They may employ consultants to advise them on technical
             1127      problems of the appraisal, if necessary. The appraisal committee shall consider the assets and
             1128      liabilities of the corporation, adjusting liabilities to take account of:
             1129          (i) the amounts of any reserves in excess of or below realistic estimates;
             1130          (ii) the value of the marketing organization;
             1131          (iii) the value of goodwill;
             1132          (iv) the going-concern value; and
             1133          (v) any other factor having an influence on the value of the corporation.
             1134          (4) When the examination and appraisal reports have been made to the commissioner,
             1135      [he] the commissioner shall make copies available to the board. The board shall then prepare
             1136      and adopt by resolution a plan of conversion. The plan shall be consistent with Subsections
             1137      (4)(a) through (e) and shall state how the requirements of those subsections are satisfied.
             1138          (a) The plan of conversion shall state the number of shares proposed to be authorized
             1139      for the new stock corporation, their par value, if any, and the price per share at which they will
             1140      be offered to policyholders. The price per share may not exceed 1/2 of the median equitable
             1141      share of all policyholders under Subsection (4)(b).
             1142          (b) (i) When an insurer has the type of policies with no investment value to the
             1143      policyholders, each person who has been a policyholder and has paid premiums within five
             1144      years prior to the resolution under Subsection (2) is entitled, without additional payment, to as
             1145      much common stock of the new stock corporation as [his] that person's equitable share of the
             1146      value of the converting corporation will purchase. The equitable share is determined by the
             1147      ratio which the net premium [he] that person has paid to the corporation during the five years
             1148      immediately preceding the resolution required by Subsection (2) bears to the total net
             1149      premiums received by the corporation during the same period. The net premium is the gross


             1150      premium less the return premium and dividends paid. If the equitable share would only
             1151      purchase a fraction of a share of stock, the policyholder has the option of either receiving the
             1152      value of the fractional share in cash or purchasing a full share by paying the balance in cash.
             1153          (ii) When an insurer has the type of policies with specifically attributable investment
             1154      value to the policyholders, each policyholder is entitled, without additional payment, to as
             1155      much common stock of the new stock corporation as [his] the policyholder's investment value
             1156      in the converting corporation will purchase, determined by the proportion of [his] the
             1157      policyholder's investment value to the aggregate investment values of all policyholders. If the
             1158      policyholder's share would only purchase a fraction of a share of stock, the policyholder has the
             1159      option of either receiving the value of the fractional share in cash or purchasing a full share by
             1160      paying the balance in cash.
             1161          (c) A written offer shall be sent to each policyholder indicating [his] the policyholder's
             1162      individual equitable share and the terms upon which the policyholder may subscribe for stock.
             1163          (d) [No common] Common shares may not be subscribed by or issued to persons other
             1164      than policyholders, until all subscriptions by the policyholders have been filled. After those
             1165      subscriptions have been filled, any new issue of stock for five years after the conversion shall
             1166      first be offered to the persons who have become shareholders under Subsection (4)(b) in
             1167      proportion to their interests under Subsection (4)(b).
             1168          (e) [No] A policyholder in a nonlife mutual may not receive a distribution of shares
             1169      valued under Subsection (4)(b)(i), which distribution is greater than the amount [he] the
             1170      policyholder is entitled to under [Subsection 31A-27-337 (4)] Section 31A-27a-701 . Any
             1171      excess over the policyholder's entitlement under [Subsection 31A-27-337 (4)] Section
             1172      31A-27a-701 shall be distributed [in shares to the state treasury for the benefit of the Uniform
             1173      School Fund. After five years, the shares may be sold by the state treasurer and the proceeds
             1174      credited to the Uniform School Fund] in accordance with Section 31A-27a-705 .
             1175          (5) The plan of conversion shall be submitted to the commissioner for approval,
             1176      together with:
             1177          (a) the proposed articles and bylaws of the new stock corporation which comply with


             1178      Section 31A-5-203 ;
             1179          (b) any information specified under Subsection 31A-5-204 (2), which the commissioner
             1180      reasonably requires; and
             1181          (c) a projection of the planned or anticipated financial situation of the new corporation
             1182      for five years after the conversion.
             1183          (6) The commissioner shall then hold a hearing. The notice of the hearing shall be
             1184      mailed to each person who was a policyholder of the corporation on the date of the resolution
             1185      required by Subsection (2). This notice shall include a copy of the plan of conversion and any
             1186      comments the commissioner considers necessary to adequately inform the policyholders.
             1187          (7) The commissioner shall approve the plan of conversion unless [he] the
             1188      commissioner finds that the plan violates the law or is contrary to the interests of policyholders
             1189      or the public.
             1190          (8) After approval under Subsection (7), the conversion plan shall be submitted to a
             1191      vote of:
             1192          (a) for mutuals subject to Subsection (4)(b)(i), those persons who were policyholders
             1193      of the mutual on the date of the resolution required by Subsection (2); or
             1194          (b) for mutuals subject to Subsection (4)(b)(ii), those persons who had investment
             1195      values in their policies as of the date of the resolution required by Subsection (2).
             1196          (9) If the policyholders approve the conversion under Subsection (8), the commissioner
             1197      shall issue a new certificate of authority. The issuance of the certificate is the conversion of the
             1198      mutual to a stock corporation. This stock corporation is considered as being organized at the
             1199      time the converted mutual was organized. Subject to the plan of conversion, the directors,
             1200      officers, agents, and employees of the mutual shall continue in their same positions with the
             1201      stock corporation.
             1202          (10) In the proposed conversion, the corporation may not pay any person compensation
             1203      other than regular salaries to existing personnel and compensation for clerical and mailing
             1204      expenses. With the commissioner's approval, the corporation may pay, at reasonable rates, for
             1205      printing costs and for legal and other professional fees for services actually rendered. All


             1206      expenses of the conversion, including the expenses incurred by the commissioner and the
             1207      prorated salaries of any [Insurance] department staff members involved, shall be paid by the
             1208      corporation being converted.
             1209          (11) The commissioner's approval of the plan of conversion satisfies the registration
             1210      requirement of Section 31A-5-302 .
             1211          Section 15. Section 31A-8-213 is amended to read:
             1212           31A-8-213. Certificate of authority.
             1213          (1) An organization may apply for a certificate of authority at any time prior to the
             1214      expiration of its organization permit. The application shall include:
             1215          (a) a detailed statement by a principal officer about any material changes that have
             1216      taken place or are likely to take place in the facts on which the issuance of the organization
             1217      permit was based; and
             1218          (b) if any material changes are proposed in the business plan, the information about the
             1219      changes that would be required if an organization permit were then being applied for.
             1220          (2) The commissioner shall issue a certificate of authority, if the commissioner finds
             1221      that:
             1222          (a) the organization's capital and surplus complies with the requirements of Section
             1223      31A-8-209 as to the operations proposed under the new certificate of authority;
             1224          (b) there is no basis for revoking the organization permit under Section 31A-8-207 ;
             1225          (c) the deposit required by Section 31A-8-211 has been made;
             1226          (d) the organization satisfies the requirements of Section 31A-8-104 ; and
             1227          (e) all other applicable requirements of the law have been met.
             1228          (3) The certificate of authority shall specify any limits imposed by the commissioner
             1229      upon the organization's business or methods of operation, including the general types of health
             1230      care services the organization is authorized to provide.
             1231          (4) Upon the issuance of the certificate of authority:
             1232          (a) the board shall authorize and direct the issuance of certificates for shares, bonds, or
             1233      notes subscribed to under the organization permit, and of insurance policies upon qualifying


             1234      applications obtained under the organization permit; and
             1235          (b) the commissioner shall authorize the release to the organization of all funds held in
             1236      escrow under Section 31A-5-208 , as adopted by Section 31A-8-206 .
             1237          (5) (a) An organization may at any time apply to the commissioner for a new or
             1238      amended certificate of authority altering the limits on its business or methods of operation.
             1239      The application shall contain or be accompanied by that information reasonably required by the
             1240      commissioner under Subsections 31A-5-204 (2) and 31A-8-205 (2). The commissioner shall
             1241      issue the new certificate as requested if the commissioner finds that the organization continues
             1242      to satisfy the requirements specified under Subsection (2).
             1243          (b) If the commissioner issues [a summary] an order under [Section 31A-27-201 ]
             1244      Chapter 27, Part 5, Administration Actions, against an organization, the commissioner may
             1245      also revoke the organization's certificate and issue a new one with any limitation [he] the
             1246      commissioner considers necessary.
             1247          Section 16. Section 31A-9-502 is amended to read:
             1248           31A-9-502. Voluntary dissolution of solvent domestic fraternals.
             1249          (1) Subject to this section, a domestic fraternal may voluntarily dissolve under Sections
             1250      16-6a-1401 through 16-6a-1405 .
             1251          (2) The proposal for voluntary dissolution shall be filed with the commissioner at least
             1252      60 days prior to the submission of that proposal to the supreme governing body or the
             1253      members. The commissioner may require the submission of additional information necessary
             1254      to establish the financial condition of the fraternal or other facts relevant to the proposed
             1255      dissolution. If the supreme governing body or the members adopt the resolution to dissolve, by
             1256      a majority of those voting or a larger number as required by the laws of the fraternal, the
             1257      commissioner shall, within 30 days after the adoption of the resolution, begin to examine the
             1258      fraternal. The commissioner shall approve the dissolution unless [he] the commissioner finds,
             1259      after the examination and a hearing, that it is insolvent or may become insolvent in the process
             1260      of dissolution. Upon approval, the fraternal may provide for a transfer to other fraternals
             1261      approved by the commissioner of all its obligations under insurance policies and then may


             1262      dissolve under Subsection (1). If the commissioner disapproves, [he] the commissioner shall
             1263      petition the court for liquidation under Section [ 31A-27-307 ] 31A-27a-207 .
             1264          (3) During the liquidation under Sections 16-6a-1401 through 16-6a-1408 , the fraternal
             1265      may apply to the commissioner to have the liquidation continued under the commissioner's
             1266      supervision. Upon receiving this request, the commissioner shall apply to the court for
             1267      liquidation under Section [ 31A-27-307 ] 31A-27a-207 .
             1268          (4) If the fraternal revokes the voluntary dissolution proceedings under Section
             1269      16-6a-1404 , a copy of the revocation of voluntary dissolution proceedings shall be filed with
             1270      the commissioner.
             1271          (5) Subsections 31A-5-504 (6) and (7) apply to the survival of remedies and
             1272      continuance of corporate existence of a voluntarily dissolved fraternal.
             1273          Section 17. Section 31A-9-504 is amended to read:
             1274           31A-9-504. Rehabilitation or involuntary conversion.
             1275          (1) (a) If the commissioner believes that a fraternal does not satisfy the requirements of
             1276      this chapter, [he] the commissioner shall call a hearing. If [he] the commissioner then finds
             1277      that the fraternal does not satisfy the requirements:
             1278          [(a) If] (i) if the fraternal is domestic, the commissioner shall petition for rehabilitation
             1279      under Section [ 31A-27-301 ] 31A-27a-207 to rehabilitate the fraternal or, if that is not possible,
             1280      convert the fraternal to a mutual[.]; or
             1281          [(b) If] (ii) if the fraternal is nondomestic, the commissioner shall order it to comply as
             1282      soon as practicable with the requirements of this chapter or lose its tax exemption. [The]
             1283          (b) An order issued under Subsection (1)(a)(ii) shall specify the ways the nondomestic
             1284      fraternal does not comply with this chapter.
             1285          (2) If the fraternal does not promptly comply with the requirements of this chapter,
             1286      after notice of the adverse results of a hearing under Subsection (1), it is subject to taxation as a
             1287      mutual life insurance company. This tax is retroactive to the date on which the commissioner
             1288      gave the fraternal notice of the hearing under Subsection (1).
             1289          Section 18. Section 31A-11-104 is amended to read:


             1290           31A-11-104. Applicability of other portions of this title.
             1291          (1) In addition to this chapter, motor clubs are subject to the applicable sections of:
             1292          (a) Chapters 1, 2, 4, 16, 21, 22, 26, [and] 27, and 27a;
             1293          (b) Chapter 3, Part 1;
             1294          (c) Chapter 23a, Parts 1, 4, and 5; and
             1295          (d) Section 31A-23a-207 .
             1296          (2) Sections 31A-14-204 and 31A-14-216 apply to nondomestic motor clubs.
             1297          (3) Section 31A-5-401 applies to domestic motor clubs.
             1298          (4) Sections 31A-5-105 , 31A-5-106 , and 31A-5-216 apply to both domestic and
             1299      nondomestic motor clubs.
             1300          (5) Both domestic and nondomestic motor clubs are subject to the [Insurance]
             1301      department fees under Section 31A-3-103 . Other provisions of [the Insurance Code] this title
             1302      apply to motor clubs only as specifically provided in this chapter.
             1303          Section 19. Section 31A-11-109 is amended to read:
             1304           31A-11-109. Alteration or revocation of certificate of authority.
             1305          If the commissioner issues [a summary] an order under [Section 31A-27-201 ] Chapter
             1306      27, Part 5, Administrative Actions, against a motor club, [he] the commissioner may revoke its
             1307      certificate of authority or issue a new one with the limits [he] the commissioner considers
             1308      necessary.
             1309          Section 20. Section 31A-13-107 is amended to read:
             1310           31A-13-107. Commissioner's remedies.
             1311          If the trustees of any employee welfare fund have failed to register the fund in
             1312      accordance with Section 31A-13-103 , or otherwise fail to comply with [any provision of] this
             1313      chapter, the commissioner shall notify the employers of the failure. In addition to ordering
             1314      compliance under Subsection 31A-2-201 (4), the commissioner may:
             1315          (1) order the employers to stop making payments to the trustees until the employers are
             1316      notified by the commissioner that the trustees are in compliance with this chapter; or
             1317          (2) rehabilitate or liquidate the employee welfare fund under Chapter [27] 27a, Insurer


             1318      Receivership Act.
             1319          Section 21. Section 31A-14-206 is amended to read:
             1320           31A-14-206. Commercially domiciled insurers.
             1321          (1) As used in this section, and except as to title insurers, the commissioner may
             1322      consider a foreign insurer to be "commercially domiciled" in this state if:
             1323          (a) during the three immediately preceding calendar years, the foreign insurer wrote
             1324      more insurance premiums in this state than it wrote in its state of domicile during the same
             1325      period; or
             1326          (b) during the same three-year period, the foreign insurer's gross premiums written in
             1327      this state constituted 15% or more of the insurer's total gross premiums written in the United
             1328      States.
             1329          (2) Subject to Subsection (3), an insurer determined by the commissioner to be
             1330      commercially domiciled in this state may be subjected to Chapters 16, 17, 18, 27, and 27a, and
             1331      Chapter 5, Parts 4, 5, and 6 in the same manner and to the same extent as domestic insurers.
             1332      The commissioner shall, by order, notify any commercially domiciled insurer not exempt under
             1333      Subsection (3) of the extent to which the insurer is subject to the provisions listed under this
             1334      Subsection (2).
             1335          (3) The commissioner may exempt from the provisions of this section any
             1336      commercially domiciled insurer if [he] the commissioner determines that the insurer has assets
             1337      physically located in this state or an asset to liability ratio sufficient to justify the conclusion
             1338      that there is no reasonable danger that the operations or conduct of the business of the insurer
             1339      could present a danger of loss to Utah policyholders.
             1340          (4) Subsection 31A-14-205 (4) applies to the conflict of the laws of this state with the
             1341      laws of the insurer's domicile for foreign insurers, including commercially domiciled insurers,
             1342      under this section.
             1343          (5) This section does not excuse or exempt any foreign insurer from complying with
             1344      the provisions under this title which are otherwise applicable to a foreign insurer.
             1345          Section 22. Section 31A-14-215 is amended to read:


             1346           31A-14-215. Assessment by foreign company.
             1347          Every foreign mutual insurer authorized in this state shall notify the commissioner
             1348      immediately after making an assessment upon any of its members in this state. The insurer
             1349      shall attach to the notice a statement of the condition of the insurer, giving the facts showing
             1350      the necessity for the assessment. Unless the commissioner orders otherwise under a Chapter
             1351      27, Part 5, Administrative Actions, proceeding, a foreign mutual insurer authorized in this state
             1352      may not make or increase any assessment because of its inability to collect assessments from its
             1353      members in other states.
             1354          Section 23. Section 31A-14-217 is amended to read:
             1355           31A-14-217. Revocation of certificate of authority.
             1356          Whenever there would be grounds for delinquency proceedings under Chapter [27] 27a,
             1357      Insurer Receivership Act, against a foreign insurer, if the foreign insurer were a domestic
             1358      insurer, the commissioner may, after any proceeding authorized by Title 63, Chapter 46b,
             1359      Administrative Procedures Act, revoke, suspend, or limit the foreign insurer's certificate of
             1360      authority. This action does not affect insurance which has already been issued. The insurer
             1361      remains subject to regulation until released under Section 31A-14-216 .
             1362          Section 24. Section 31A-15-105 is amended to read:
             1363           31A-15-105. Effect of contracts illegal because insurer was unauthorized.
             1364          (1) An insurance contract entered into in violation of this chapter is unenforceable by,
             1365      but enforceable against, the insurer. In an action against the insurer on the contract, the insured
             1366      is bound by the terms of the contract as affected by this title and rules adopted under this title.
             1367          (2) An insurance policy entered into in violation of this chapter is voidable by the
             1368      policyholder who entered into the transaction without knowing it was illegal. The policyholder
             1369      may avoid the contract by notice to the insurer, if no insured has enforced the contract by an
             1370      action under Subsection (1), and may recover any consideration paid under the contract.
             1371          (3) Any person who assisted in the procurement of an illegal contract under this
             1372      chapter, and who knew or should have known the transaction was illegal, is liable to the
             1373      insured for the full amount of a claim or loss payable under the contract, if the insurer does not


             1374      pay it. The receiver appointed under Chapter [27] 27a, Insurer Receivership Act, may assert the
             1375      claims of insureds if the insurer is the subject of a proceeding under Chapter [27] 27a.
             1376          Section 25. Section 31A-17-605 is amended to read:
             1377           31A-17-605. Authorized control level event.
             1378          (1) "Authorized control level event" means any of the following events:
             1379          (a) the filing of an RBC report by the insurer or health organization that indicates that
             1380      the insurer's or health organization's total adjusted capital is greater than or equal to its
             1381      mandatory control level RBC but less than its authorized control level RBC;
             1382          (b) the notification by the commissioner to the insurer or health organization of an
             1383      adjusted RBC report that indicates the event in Subsection (1)(a), provided the insurer or health
             1384      organization does not challenge the adjusted RBC report under Section 31A-17-607 ;
             1385          (c) if, pursuant to Section 31A-17-607 , the insurer or health organization challenges an
             1386      adjusted RBC report that indicates the event in Subsection (1)(a), notification by the
             1387      commissioner to the insurer or health organization that after a hearing the commissioner rejects
             1388      the insurer's or health organization's challenge;
             1389          (d) the failure of the insurer or health organization to respond, in a manner satisfactory
             1390      to the commissioner, to a corrective order, provided the insurer or health organization has not
             1391      challenged the corrective order under Section 31A-17-607 ; or
             1392          (e) if the insurer or health organization has challenged a corrective order under Section
             1393      31A-17-607 and the commissioner after a hearing rejects the challenge or modifies the
             1394      corrective order, the failure of the insurer or health organization to respond, in a manner
             1395      satisfactory to the commissioner, to the corrective order subsequent to rejection or modification
             1396      by the commissioner.
             1397          (2) (a) In the event of an authorized control level event with respect to an insurer or
             1398      health organization, the commissioner shall:
             1399          (i) take any action required under Section 31A-17-604 regarding an insurer or health
             1400      organization with respect to which a regulatory action level event has occurred; or
             1401          (ii) take any action as is necessary to cause the insurer or health organization to be


             1402      placed under regulatory control under [Section 31A-27-201 ] Chapter 27, Part 5, Administrative
             1403      Actions, if the commissioner considers it to be in the best interests of:
             1404          (A) the policyholders or members;
             1405          (B) creditors of the insurer or health organization; and
             1406          (C) the public.
             1407          (b) [In the event] If the commissioner takes an action described in Subsection (2)(a),
             1408      the authorized control level event is sufficient grounds for the commissioner to take action
             1409      under [Section 31A-27-201 ] Chapter 27, Part 5, Administrative Actions, and the commissioner
             1410      shall have the rights, powers, and duties with respect to the insurer or health organization set
             1411      forth in [Section 31A-27-201 ] Chapter 27, Part 5, Administrative Actions.
             1412          (c) If the commissioner takes an action under Subsection (2)(a) pursuant to an adjusted
             1413      RBC report, the insurer or health organization is entitled to the protections afforded to an
             1414      insurer or health organization under Section [ 31A-27-203 ] 31A-27-504 pertaining to [summary
             1415      proceedings] an action by the commissioner.
             1416          Section 26. Section 31A-17-606 is amended to read:
             1417           31A-17-606. Mandatory control level event.
             1418          (1) "Mandatory control level event" means any of the following events:
             1419          (a) the filing of an RBC report that indicates that the insurer's or health organization's
             1420      total adjusted capital is less than its mandatory control level RBC;
             1421          (b) notification by the commissioner to the insurer or health organization of an adjusted
             1422      RBC report that indicates the event in Subsection (1)(a), provided the insurer or health
             1423      organization does not challenge the adjusted RBC report under Section 31A-17-607 ; or
             1424          (c) if, pursuant to Section 31A-17-607 , the insurer or health organization challenges an
             1425      adjusted RBC report that indicates the event in Subsection (1)(a), notification by the
             1426      commissioner to the insurer or health organization that after a hearing the commissioner rejects
             1427      the insurer's or health organization's challenge.
             1428          (2) (a) In the event of a mandatory control level event with respect to an insurer or
             1429      health organization, the commissioner shall take any actions necessary to place the insurer


             1430      under regulatory control under [Section 31A-27-201 ] Chapter 27, Part 5, Administrative
             1431      Actions.
             1432          (b) The mandatory control level event is sufficient grounds for the commissioner to
             1433      take action under [Section 31A-27-201 ] Chapter 27, Part 5, Administrative Actions, and the
             1434      commissioner shall have the rights, powers, and duties with respect to the insurer or health
             1435      organization as are set forth in [Section 31A-27-201 ] Chapter 27, Part 5, Administrative
             1436      Actions.
             1437          (c) If the commissioner takes an action pursuant to an adjusted RBC report, the insurer
             1438      or health organization is entitled to the protections of Section [ 31A-27-203 ] 31A-27-504
             1439      pertaining to summary proceedings.
             1440          (d) Notwithstanding the other provisions of Subsection (2), the commissioner may
             1441      forego action for up to 90 days after the mandatory control level event if the commissioner
             1442      finds there is a reasonable expectation that the mandatory control level event may be eliminated
             1443      within the 90-day period.
             1444          Section 27. Section 31A-17-609 is amended to read:
             1445           31A-17-609. Alternate adjusted capital.
             1446          (1) Except as provided in Section 31A-17-602 , an insurer or health organization
             1447      licensed under Chapters 5, 7, 8, 9, and 14 shall maintain total adjusted capital as defined in
             1448      Section 31A-1-301 in an amount equal to the greater of:
             1449          (a) 175% of the minimum required capital, or of the minimum permanent surplus in the
             1450      case of nonassessable mutuals, required by Section 31A-5-211 , 31A-7-201 , 31A-8-209 ,
             1451      31A-9-209 , or 31A-14-205 ; or
             1452          (b) the net total of:
             1453          (i) 10% of net insurance premiums earned during the year; plus
             1454          (ii) 5% of the admitted value of common stocks and real estate; plus
             1455          (iii) 2% of the admitted value of all other invested assets, exclusive of cash deposits,
             1456      short-term investments, policy loans, and premium notes; less
             1457          (iv) the amount of any asset valuation reserve being maintained by the insurer or health


             1458      organization, but not to exceed the sum of Subsections (1)(b)(ii) and (iii).
             1459          (2) As used in Subsection (1)(b), "premiums earned" means premiums and other
             1460      consideration earned for insurance in the 12-month period ending on the date the calculation is
             1461      made.
             1462          (3) The commissioner may consider an insurer or health organization to be financially
             1463      hazardous under Subsection [ 31A-27-307 (3)] 31A-27a-207 (1)(i), if the insurer or health
             1464      organization does not have qualified assets in an aggregate value exceeding the sum of the
             1465      insurer's or health organization's liabilities and the total adjusted capital required by Subsection
             1466      (1).
             1467          (4) The commissioner shall consider an insurer or health organization to be financially
             1468      hazardous under Subsection [ 31A-27-307 (3)] 31A-27a-207 (1)(i) if the insurer or health
             1469      organization does not have qualified assets in an aggregate value exceeding the sum of the
             1470      insurer's or health organization's liabilities and 70% of the total adjusted capital required by
             1471      Subsection (1).
             1472          Section 28. Section 31A-17-610 is amended to read:
             1473           31A-17-610. Foreign insurers or health organizations.
             1474          (1) (a) Any foreign insurer or health organization shall, upon the written request of the
             1475      commissioner, submit to the commissioner an RBC report as of the end of the most recent
             1476      calendar year by the later of:
             1477          (i) the date an RBC report would be required to be filed by a domestic insurer or health
             1478      organization under this part; or
             1479          (ii) 15 days after the request is received by the foreign insurer or health organization.
             1480          (b) Any foreign insurer or health organization shall, at the written request of the
             1481      commissioner, promptly submit to the commissioner a copy of any RBC plan that is filed with
             1482      the insurance commissioner of any other state.
             1483          (2) (a) The commissioner may require a foreign insurer or health organization to file an
             1484      RBC plan with the commissioner if:
             1485          (i) there is a company action level event, regulatory action level event, or authorized


             1486      control level event with respect to the foreign insurer or health organization as determined
             1487      under:
             1488          (A) the RBC statute applicable in the state of domicile of the insurer or health
             1489      organization; or
             1490          (B) if no RBC statute is in force in that state, under this part; and
             1491          (ii) the insurance commissioner of the state of domicile of the foreign insurer or health
             1492      organization fails to require the foreign insurer or health organization to file an RBC plan in the
             1493      manner specified under:
             1494          (A) that state's RBC statute; or
             1495          (B) if no RBC statute is in force in that state, under Section 31A-17-603 .
             1496          (b) If the commissioner requires a foreign insurer or health organization to file an RBC
             1497      plan, the failure of the foreign insurer or health organization to file the RBC plan with the
             1498      commissioner is grounds to order the insurer or health organization to cease and desist from
             1499      writing new insurance business in this state.
             1500          (3) The commissioner may make application to the Third District Court for Salt Lake
             1501