Okla. Stat. tit. 36, § 36-1636

Standards.

A. 1. Transactions within an insurance holding company system

to which an insurer subject to registration is a party shall be

subject to the following standards:

a. the terms shall be fair and reasonable,

Oklahoma Statutes - Title 36. Insurance Page 471

b. agreements for cost-sharing services and management

shall include such provisions as required by rule and

regulation issued by the Commissioner,

c. charges or fees for services performed shall be

reasonable,

d. expenses incurred and payment received shall be

allocated to the insurer in conformity with customary

insurance accounting practices consistently applied,

e. the books, accounts and records of each party to all

such transactions shall be so maintained as to clearly

and accurately disclose the nature and details of the

transactions including such accounting information as

is necessary to support the reasonableness of the

charges or fees to the respective parties,

f. the insurer's surplus as regards policyholders

following any dividends or distributions to

shareholder affiliates shall be reasonable in relation

to the insurer's outstanding liabilities and adequate

to meet its financial needs,

g. if an insurer subject to this act is deemed by the

Commissioner to be in a hazardous financial condition

as defined by Section 1905 of this title and

applicable regulations in Title 365 of the Oklahoma

Administrative Code or a condition that would be

grounds for supervision, conservation, or a

delinquency proceeding, then the Commissioner may

require the insurer to secure and maintain from any

affiliate with whom the insurer has services or

management agreements either a deposit, held by the

Commissioner, or a bond, as determined by the insurer

at the insurer's discretion, for the protection of the

insurer for the duration of the contract(s) or

agreement(s), or the existence of the condition for

which the Commissioner required the deposit or the

bond. In determining whether a deposit or a bond is

required, the Commissioner should consider whether

concerns exist with respect to the affiliated person's

ability to fulfill the contract(s) or agreement(s) if

the insurer were to be put into liquidation. Once the

insurer is deemed to be in a hazardous financial

condition or a condition that would be grounds for

supervision, conservation, or a delinquency

proceeding, and a deposit or bond is necessary, the

Commissioner has discretion to determine the amount of

the deposit or bond, not to exceed the value of the

contract(s) or agreement(s) in any one (1) year, and

whether such deposit or bond should be required for a

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single contract, multiple contracts, or a contract

only with a specific person(s),

h. all records and data of the insurer held by an

affiliate are and remain the property of the insurer,

are subject to control of the insurer, are

identifiable, and are segregated or readily capable of

segregation, at no additional cost to the insurer,

from all other persons' records and data. This

includes all records and data that are otherwise the

property of the insurer, in whatever form maintained,

including, but not limited to, claims and claim files,

policyholder lists, application files, litigation

files, premium records, rate books, underwriting

manuals, personnel records, financial records, or

similar records within the possession, custody, or

control of the affiliate. At the request of the

insurer, the affiliate shall provide that the receiver

can obtain a complete set of all records of any type

that pertain to the insurer's business; obtain access

to the operating systems on which the data is

maintained; obtain the software that runs those

systems either through assumption of licensing

agreements or otherwise; and restrict the use of the

data by the affiliate if it is not operating the

insurer's business. The affiliate shall provide a
tain a complete set of all records of any type

that pertain to the insurer's business; obtain access

to the operating systems on which the data is

maintained; obtain the software that runs those

systems either through assumption of licensing

agreements or otherwise; and restrict the use of the

data by the affiliate if it is not operating the

insurer's business. The affiliate shall provide a

waiver of any landlord lien or other encumbrance to

give the insurer access to all records and data in the

event of the affiliate's default under a lease or

other agreement, and

i. premiums or other funds belonging to the insurer that

are collected by or held by an affiliate are the

exclusive property of the insurer and are subject to

the control of the insurer. Any right of offset in

the event an insurer is placed into receivership shall

be subject to Article 19 of this title regarding

rehabilitation and liquidation of insurers.

2. The following transactions involving a domestic insurer and

any person in its insurance holding company system, including

amendments or modifications of affiliate agreements previously filed

pursuant to this section, which are subject to any materiality

standards contained in subparagraphs a through g of this paragraph,

shall not be entered into unless the insurer has notified the

Commissioner in writing of its intention to enter into the

transaction at least thirty (30) days prior thereto, or such shorter

period as the Commissioner may permit, and the Commissioner has not

disapproved it within that period. The notice for amendments or

modifications shall include the reasons for the change and the

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financial impact on the domestic insurer. Informal notice shall be

reported, within thirty (30) days after a termination of a

previously filed agreement, to the Commissioner for determination of

the type of filing required, if any:

a. sales, purchases, exchanges, loans, extensions of

credit, or investments, provided the transactions are

equal to or exceed:

(1) with respect to nonlife insurers, the lesser of

three percent (3%) of the insurer's admitted

assets or twenty-five percent (25%) of surplus as

regards policyholders as of the 31st day of

December next preceding, and

(2) with respect to life insurers, three percent (3%)

of the insurer's admitted assets as of the 31st

day of December next preceding,

b. loans or extensions of credit to any person who is not

an affiliate, where the insurer makes loans or

extensions of credit with the agreement or

understanding that the proceeds of the transactions,

in whole or in substantial part, are to be used to

make loans or extensions of credit to, to purchase

assets of, or to make investments in, any affiliate of

the insurer making the loans or extensions of credit

provided the transactions are equal to or exceed:

(1) with respect to nonlife insurers, the lesser of

three percent (3%) of the insurer's admitted

assets or twenty-five percent (25%) of surplus as

regards policyholders as of the 31st day of

December next preceding, and

(2) with respect to life insurers, three percent (3%)

of the insurer's admitted assets as of the 31st

day of December next preceding,

c. reinsurance agreements or modifications thereto,

including:

(1) all reinsurance pooling agreements, and

(2) agreements in which the reinsurance premium or a

change in the insurer's liabilities, or the

projected reinsurance premium or a change in the

insurer's liabilities in any of the next three
ercent (3%)

of the insurer's admitted assets as of the 31st

day of December next preceding,

c. reinsurance agreements or modifications thereto,

including:

(1) all reinsurance pooling agreements, and

(2) agreements in which the reinsurance premium or a

change in the insurer's liabilities, or the

projected reinsurance premium or a change in the

insurer's liabilities in any of the next three

(3) years, equals or exceeds five percent (5%) of

the insurer's surplus as regards policyholders,

as of the 31st day of December next preceding,

including those agreements which may require as

consideration the transfer of assets from an

insurer to a nonaffiliate, if an agreement or

understanding exists between the insurer and

nonaffiliate that any portion of the assets will

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be transferred to one or more affiliates of the

insurer,

d. all management agreements, service contracts, tax

allocation agreements, guarantees and all cost-sharing

arrangements,

e. guarantees when made by a domestic insurer; provided,

however, that a guarantee which is quantifiable as to

amount is not subject to the notice requirements of

this paragraph unless it exceeds the lesser of one-

half of one percent (.5%) of the insurer's admitted

assets or ten percent (10%) of surplus as regards

policyholders as of the 31st day of December next

preceding. Further, all guarantees which are not

quantifiable as to amount are subject to the notice

requirements of this paragraph,

f. direct or indirect acquisitions or investments in a

person that controls the insurer or in an affiliate of

the insurer in an amount which, together with its

present holdings in such investments, exceeds two and

one-half percent (2.5%) of the insurer's surplus to

policyholders. Direct or indirect acquisitions or

investments in subsidiaries acquired pursuant to

Section 1632 of this title (or authorized under any

other section of this title), or in nonsubsidiary

insurance affiliates that are subject to the

provisions of this act, are exempt from this

requirement, and

g. any material transactions, specified by regulation,

which the Commissioner determines may adversely affect

the interests of the insurer's policyholders.

Nothing in this paragraph shall be deemed to authorize or permit

any transactions which, in the case of an insurer not a member of

the same insurance holding company system, would be otherwise

contrary to law.

3. A domestic insurer may not enter into transactions which are

part of a plan or series of like transactions with persons within

the insurance holding company system if the purpose of those

separate transactions is to avoid the statutory threshold amount and

thus avoid the review that would occur otherwise. If the

Commissioner determines that separate transactions were entered into

over any twelve-month period for that purpose, the Commissioner may

exercise his or her authority under Section 1641 of this title.

4. The Commissioner, in reviewing transactions pursuant to

paragraph 2 of this subsection, shall consider whether the

transactions comply with the standards set forth in paragraph 1 of

this subsection and whether they may adversely affect the interests

of policyholders.

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5. The Commissioner shall be notified within thirty (30) days

of any investment of the domestic insurer in any one corporation if

the total investment in the corporation by the insurance holding

company system exceeds ten percent (10%) of the corporation's voting

securities.

6. a. Any affiliate that is party to an agreement or

contract with a domestic insurer that is subject to

subparagraph d of paragraph 2 of this subsection shall

be subject to the jurisdiction of any supervision,

seizure, conservatorship, or receivership proceedings

against the insurer and to the authority of any

supervisor, conservator, rehabilitator, or liquidator
tion's voting

securities.

6. a. Any affiliate that is party to an agreement or

contract with a domestic insurer that is subject to

subparagraph d of paragraph 2 of this subsection shall

be subject to the jurisdiction of any supervision,

seizure, conservatorship, or receivership proceedings

against the insurer and to the authority of any

supervisor, conservator, rehabilitator, or liquidator

for the insurer appointed pursuant to Article 18 or 19

of this title regarding rehabilitation and liquidation

of insurers for the purpose of interpreting,

enforcing, and overseeing the affiliate's obligations

under the agreement or contract to perform services

for the insurer that are:

(1) an integral part of the insurer's operations,

including, but not limited to, management,

administrative, accounting, data processing,

marketing, underwriting, claims handling,

investment, or any other similar functions, or

(2) essential to the insurer's ability to fulfill its

obligations under insurance policies.

b. The Commissioner may require that an agreement or

contract pursuant to subparagraph d of paragraph 2 of

this subsection for the provision of services

described in divisions (1) and (2) of subparagraph a

of this paragraph specify the affiliate consents to

the jurisdiction as set forth in this paragraph.

B. No domestic insurer shall pay any extraordinary dividend or

make any other extraordinary distribution to its shareholders until

thirty (30) days after the Commissioner has received notice of the

declaration thereof and has not within that period disapproved the

payment, or until the Commissioner has approved the payment within

the thirty-day period. For purposes of this section, an

extraordinary dividend or distribution includes any dividend or

distribution of cash or other property whose fair market value

together with that of other dividends or distributions made within

the preceding twelve (12) months exceeds the greater of:

1. Ten percent (10%) of the insurer's surplus as regards

policyholders as of the 31st day of December next preceding; or

2. The net gain from operations of the insurer, if the insurer

is a life insurer, or the net income, if the insurer is not a life

insurer, not including realized capital gains, for the twelve-month

period ending the 31st day of December next preceding, but shall not

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include pro rata distributions of any class of the insurer's own

securities.

In determining whether a dividend or distribution is

extraordinary, an insurer other than a life insurer may carry

forward net income from the previous two (2) calendar years that has

not already been paid out as dividends. This carry-forward shall be

computed by taking the net income from the second and third

preceding calendar years, not including realized capital gains, less

dividends paid in the second and immediate preceding calendar years.

Notwithstanding any other provision of law, an insurer may

declare an extraordinary dividend or distribution which is

conditional upon the Commissioner's approval, and the declaration

shall confer no rights upon shareholders until (1) the Commissioner

has approved the payment of the dividend or distribution or (2) the

Commissioner has not disapproved payment within the thirty-day

period.

C. 1. Notwithstanding the control of a domestic insurer by any

person, the officers and directors of the insurer shall not thereby

be relieved of any obligation or liability to which they would

otherwise be subject by law, and the insurer shall be managed so as

to assure its separate operating identity consistent with this act.

2. Nothing in this section shall preclude a domestic insurer

from having or sharing a common management or cooperative or joint

use of personnel, property or services with one or more other

persons under arrangements meeting the standards of paragraph 1 of

subsection A of this section.
and the insurer shall be managed so as

to assure its separate operating identity consistent with this act.

2. Nothing in this section shall preclude a domestic insurer

from having or sharing a common management or cooperative or joint

use of personnel, property or services with one or more other

persons under arrangements meeting the standards of paragraph 1 of

subsection A of this section.

3. Not less than one-third (1/3) of the directors of a domestic

insurer, and not less than one-third (1/3) of the members of each

committee of the board of directors of any domestic insurer, shall

be persons who are not officers or employees of the insurer or of

any entity controlling, controlled by, or under common control with

the insurer and who are not beneficial owners of a controlling

interest in the voting stock of the insurer or entity. At least one

such person must be included in any quorum for the transaction of

business at any meeting of the board of directors or any committee

thereof.

4. The board of directors of a domestic insurer shall establish

one or more committees comprised solely of directors who are not

officers or employees of the insurer or of any entity controlling,

controlled by, or under common control with the insurer and who are

not beneficial owners of a controlling interest in the voting stock

of the insurer or any such entity. The committee or committees

shall have responsibility for nominating candidates for director for

election by shareholders or policyholders, evaluating the

performance of officers deemed to be principal officers of the

insurer and recommending to the board of directors the selection and

compensation of the principal officers.

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5. The provisions of paragraphs 3 and 4 of this subsection

shall not apply to a domestic insurer if the person controlling the

insurer, such as an insurer, a mutual insurance holding company, or

a publicly held corporation, has a board of directors and committees

thereof that meet the requirements of paragraphs 3 and 4 of this

subsection with respect to such controlling entity.

6. An insurer may make application to the Commissioner for a

waiver from the requirements of this subsection, if the insurer's

annual direct written and assumed premium, excluding premiums

reinsured with the Federal Crop Insurance Corporation and Federal

Flood Program, is less than Three Hundred Million Dollars

($300,000,000.00). An insurer may also make application to the

Commissioner for a waiver from the requirements of this subsection

based upon unique circumstances. The Commissioner may consider

various factors including, but not limited to, the type of business

entity, volume of business written, availability of qualified board

members, or the ownership or organizational structure of the entity.

D. For purposes of this act, in determining whether an

insurer's surplus as regards policyholders is reasonable in relation

to the insurer's outstanding liabilities and adequate to meet its

financial needs, the following factors, among others, shall be

considered:

1. The size of the insurer as measured by its assets, capital

and surplus, reserves, premium writings, insurance in force and

other appropriate criteria;

2. The extent to which the insurer's business is diversified

among several lines of insurance;

3. The number and size of risks insured in each line of

business;

4. The extent of the geographical dispersion of the insurer's

insured risks;

5. The nature and extent of the insurer's reinsurance program;

6. The quality, diversification and liquidity of the insurer's

investment portfolio;

7. The recent past and projected future trend in the size of

the insurer's investment portfolio;

8. The surplus as regards policyholders maintained by other

comparable insurers;

9. The adequacy of the insurer's reserves; and

10. The quality and liquidity of investments in affiliates.
s reinsurance program;

6. The quality, diversification and liquidity of the insurer's

investment portfolio;

7. The recent past and projected future trend in the size of

the insurer's investment portfolio;

8. The surplus as regards policyholders maintained by other

comparable insurers;

9. The adequacy of the insurer's reserves; and

10. The quality and liquidity of investments in affiliates.

The Commissioner may treat any such investment as a disallowed asset

for purposes of determining the adequacy of surplus as regards

policyholders whenever in the judgment of the Commissioner the

investment so warrants.