ORS 732.574: Standards for transactions within holding company; notice; deposit or bond for protection of insurer; records and data of affiliate.

(1) A transaction within an insurance holding company system to which an insurer subject to registration is a party is subject to the following standards: (a) The terms must be fair and reasonable. (b) Charges or fees for services performed must be reasonable. (c) Expenses incurred and payment received must be allocated to the insurer in conformity with customary insurance accounting practices that are consistently applied. (d) The books, accounts and records of each party to the transaction must be maintained so as to disclose clearly and accurately the nature and details of the transaction, including accounting information that is necessary to support the reasonableness of the charges or fees to the respective parties. (e) The combined capital and surplus of the insurer following any transaction with an affiliate or any shareholder dividend must be reasonable in relation to the insurer’s outstanding liabilities and adequate to the insurer’s financial needs. (f) Agreements for cost-sharing services and management must include provisions that the Director of the Department of Consumer and Business Services requires by rule. (g)(A) If the director determines that the continued operation of an authorized insurer is hazardous to the insurer’s policyholders or to the insurance-buying public generally or that the insurer is in a condition that is grounds for supervision, conservation or a delinquency proceeding, in addition to the actions the director may order under ORS 731.385, the director may require the insurer, for the insurer’s protection, to secure and maintain with the director the insurer’s choice of a deposit or a bond for the duration of the hazard or condition or the duration of a specific contract or agreement. The director may, at the director’s sole discretion, determine the amount of the deposit or bond, which may not exceed the value during any one year of each contract or agreement for which the director requires a deposit or bond. The director may require the deposit or bond for a single contract, for more than one contract or for any or all contracts with a specific party. (B) In determining whether to require a deposit or bond, the director shall consider how the requirement will affect the insurer’s ability to perform a contract or agreement subject to, or affected by, the requirement for the deposit or bond and the ability of parties to the contract or agreement other than the insurer to perform the other parties’ duties under the contract or agreement. (h)(A) All records and data of an insurer that an affiliate holds remain the property of the insurer and must be subject to the insurer’s control, be identifiable and be segregated or readily capable of being segregated from the data and records of all other persons, all at no additional cost to the insurer. Records and data subject to the requirements of this subsection include, but are 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 and all other data or records that are otherwise the insurer’s property, in whatever form embodied or maintained. (B) At an insurer’s request, an affiliate that holds an insurer’s data and records shall provide to a receiver a complete set of the data and records, however embodied or maintained, that pertain to the insurer’s business and shall provide access, by assumption of any applicable licenses or agreements or by other lawful means, to all operating systems and software on which the data and records are maintained or that are necessary to view, retrieve, process, store, print, export or otherwise use the data and records. The affiliate shall otherwise restrict or discontinue the affiliate’s own use of the data and records if the affiliate is not operating the insurer’s business. (C) An affiliate shall provide evidence of satisfaction or a waiver of a lien or encumbrance if necessary to give a receiver access to data or records stored in a location that is subject to the lien or encumbrance because of the insurer’s default under a lease or other agreement. (D) Premiums or other funds of an insurer that an affiliate collects or holds remain the exclusive property of, and are subject to the control of, the insurer. Any right of offset that arises because an insurer is placed into receivership is subject to ORS 37.020 to 37.410. (2)(a) A domestic insurer and any person in the domestic insurer’s insurance holding company system may enter into a transaction described in this subsection, including an amendment to or modification of an affiliate agreement that is subject to standards set forth in this section, only if: (A) The domestic insurer has notified the director of the domestic insurer’s intention to enter into the transaction in writing and not later than the 30th day before the transaction, or within a shorter period the director allows; and (B) The director does not disapprove the transaction within the period. (b) A notice for a transaction that is an amendment to or modification of an affiliate agreement that was previously filed must include a statement of reasons for the change and an estimate of the financial impact the change would have on the domestic insurer. An insurer shall notify the director informally within 30 days after a previously filed agreement has terminated, and the director, after receiving the notice, shall determine the type of filing the insurer must submit, if any. (c) This subsection does not authorize or permit any transaction that, in the case of an insurer that is not a member of the same insurance holding company system, would be otherwise contrary to law. (d) This subsection applies to the following transactions: (A) Sales, purchases, exchanges, loans or extensions of credit, guarantees or investments, if the transactions equal or exceed the following: (i) With respect to insurers that are not authorized to transact life insurance, the lesser of three percent of the insurer’s allowed assets or 25 percent of the insurer’s combined capital and surplus, each as of the 31st day of December immediately preceding. (ii) With respect to insurers that are authorized to transact life insurance, three percent of the insurer’s allowed assets, as of the 31st day of December immediately preceding. (B) Loans or extensions of credit to any person that is not an affiliate, if the insurer makes the 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 that is making the loans or extending the credit. This subparagraph applies to transactions that equal or exceed the following: (i) With respect to insurers that are not authorized to transact life insurance, the lesser of three percent of the insurer’s allowed assets or 25 percent of the insurer’s combined capital and surplus, each as of the 31st day of December immediately preceding. (ii) With respect to insurers that are authorized to transact life insurance, three percent of the insurer’s allowed assets, as of the 31st day of December immediately preceding. (C) Reinsurance agreements or modifications to reinsurance agreements, reinsurance pooling agreements and agreements in which the reinsurance premium or a change in the insurer’s liabilities, the projected reinsurance premium or a projected change in the insurer’s liabilities in any of the next three years equals or exceeds five percent of the insurer’s combined capital and surplus, as of the 31st day of December immediately preceding, including agreements that 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 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) A guarantee that a domestic insurer makes if the guarantee is not quantifiable as to amount. If the guarantee is quantifiable as to amount, the domestic insurer is not required to notify the director under this section unless the guarantee exceeds the lesser of one-half of one percent of the insurer’s admitted assets or 10 percent of surplus with respect to policyholders as of the 31st day of December immediately preceding. (F) Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer, the amount of which, together with the insurer’s existing acquisitions or investments in the person or affiliate, exceeds two and one-half percent of the insurer’s surplus to policyholders. An insurer that acquires or invests directly or indirectly in a subsidiary, or in an insurance affiliate that is not a subsidiary, is not required to notify the director under this section if the insurer makes the acquisition or the investment otherwise in accordance with ORS 732.517 to 732.596. (G) Any material transactions specified by rule that the director determines may adversely affect the interests of the insurer’s policyholders. (3) A domestic insurer may not enter into one or more transactions during any 12-month period that are part of a plan or series of like transactions with persons that are within the insurance holding company system if the purpose of the separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. (4) In reviewing a transaction in accordance with subsection (2) of this section, the director shall consider whether the transaction complies with the standards set forth in subsection (1) of this section and whether the transaction may adversely affect the interests of policyholders. (5) A domestic insurer shall notify the director not later than the 30th day after any investment the domestic insurer makes in any one corporation if the total investment the insurance holding company system makes in the corporation exceeds 10 percent of the corporation’s voting securities. (6)(a) An affiliate that is a party with a domestic insurer to a contract or agreement that is described in subsection (2)(d)(D) of this section is subject to the jurisdiction of supervision, seizure, conservator, rehabilitator or liquidator proceedings against the insurer and to the authority of a supervisor, conservator, rehabilitator or liquidator appointed under ORS 37.020 to 37.410 for the purpose of interpreting, enforcing and overseeing the affiliate’s obligations under the contract or agreement to perform services for the insurer that are: (A) An integral part of the insurer’s operations including, but not limited to, management, administration, accounting, data processing, marketing, underwriting, claims handling, investment or any other similar functions; or (B) Essential to the insurer’s ability to perform the insurer’s obligations under insurance policies. (b) The director may require that a contract or agreement described in subsection (2)(d)(D) of this section for the performance of functions described in paragraph (a)(A) and (B) of this subsection provide that the affiliate consents to the jurisdiction and authority described in paragraph (a) of this subsection. [1993 c.447 §47; 2013 c.370 §26; 2025 c.174 §4]