§  991.1401.    Definitions            As  used  in  this  article,  and  for  the  purposes  of  this  article  only,  the  following  words  and  phrases  shall  have  the  meanings  given  to  them  in  this  section:            "AFFILIATE."  A  person  that  directly  or  indirectly  through  one  or  more  intermediaries  controls  or  is  controlled  by,  or  is  under  common  control  with,  the  person  specified.            "COMMISSIONER."  The  Insurance  Commissioner  of  the  Commonwealth.            "COMPANY  ACTION  LEVEL  EVENT."  AS  DEFINED  IN  SECTION  501-­‐A  OR  501-­‐B  OF  THE  ACT  OF  MAY  17,  1921  (P.L.  789,  NO.  285),  KNOWN  AS  "THE  INSURANCE  DEPARTMENT  ACT  OF  1921."            "CONTROL,"  "CONTROLLING,"  "CONTROLLED  BY"  and  "UNDER  COMMON  CONTROL  WITH."  THE  POSSESSION,  DIRECT  OR  INDIRECT,  OF  THE  POWER  TO  DIRECT  OR  CAUSE  THE  DIRECTION  OF  THE  MANAGEMENT  AND  POLICIES  OF  A  PERSON,  WHETHER  THROUGH  THE  OWNERSHIP  OF  VOTING  SECURITIES,  BY  CONTRACT  OTHER  THAN  A  COMMERCIAL  CONTRACT  FOR  GOODS  OR  NONMANAGEMENT  SERVICES  OR  OTHERWISE,  UNLESS  THE  POWER  IS  THE  RESULT  OF  AN  OFFICIAL  POSITION  WITH  OR  CORPORATE  OFFICE  HELD  BY  THE  PERSON.  CONTROL  SHALL  BE  PRESUMED  TO  EXIST  IF  ANY  PERSON,  DIRECTLY  OR  INDIRECTLY,  OWNS,  CONTROLS,  HOLDS  WITH  THE  POWER  TO  VOTE  OR  HOLDS  PROXIES  REPRESENTING  TEN  PER  CENTUM  (10%)  OR  MORE  OF  THE  VOTES  THAT  ALL  SHAREHOLDERS  WOULD  BE  ENTITLED  TO  CAST  IN  THE  ELECTION  OF  DIRECTORS.  THIS  PRESUMPTION  MAY  BE  REBUTTED  BY  A  SHOWING  THAT  CONTROL  DOES  NOT  EXIST  IN  FACT.  THE  INSURANCE  DEPARTMENT  MAY  DETERMINE,  AFTER  FURNISHING  ALL  PERSONS  IN  INTEREST  NOTICE  AND  OPPORTUNITY  TO  BE  HEARD  AND  MAKING  SPECIFIC  FINDINGS  OF  FACT  TO  SUPPORT  SUCH  DETERMINATION,  THAT  CONTROL  EXISTS  IN  FACT,  NOTWITHSTANDING  THE  ABSENCE  OF  A  PRESUMPTION  TO  THAT  EFFECT  OR  THAT  ANOTHER  PERSON  HAS  CONTROL.            "DEPARTMENT."  The  Insurance  Department  of  the  Commonwealth.            "ENTERPRISE  RISK."  AN  ACTIVITY,  CIRCUMSTANCE,  EVENT  OR  SERIES  OF  EVENTS  INVOLVING  ONE  OR  MORE  AFFILIATES  OF  AN  INSURER  THAT,  IF  NOT  REMEDIED  PROMPTLY,  WOULD  LIKELY  HAVE  A  MATERIAL  ADVERSE  EFFECT  ON  THE  FINANCIAL  CONDITION  OR  LIQUIDITY  OF  AN  INSURER  OR  ITS  INSURANCE  HOLDING  COMPANY  SYSTEM,  INCLUDING,  BUT  NOT  LIMITED  TO,  ANYTHING  THAT  WOULD:            (1)  trigger  a  company  action  level  event  for  the  insurer;  or      

     (2)  cause  the  insurer  to  be  deemed  to  be  in  hazardous  financial  condition  under:            (i)  Article  V  of  the  act  of  May  17,  1921  (P.L.  789,  No.  285),  known  as  "The  Insurance  Department  Act  of  1921."            (ii)  31  Pa.  Code  Ch.  160  (relating  to  standards  to  define  insurers  deemed  to  be  in  hazardous  financial  condition).            "IAIS."  THE  INTERNATIONAL  ASSOCIATION  OF  INSURANCE  SUPERVISORS  OR  SUCCESSOR  ORGANIZATION.            "INSURANCE  HOLDING  COMPANY  SYSTEM."  Two  or  more  affiliated  persons,  one  or  more  of  which  is  an  insurer.            "INSURER."  Any  health  maintenance  organization,  preferred  provider  organization,  company,  association,  exchange,  hospital  plan  corporation  as  defined  in  and  subject  to  40  Pa.C.S.  Ch.  61  (relating  to  hospital  plan  corporations)  or  professional  health  services  plan  corporation  subject  to  40  Pa.C.S.  Ch.  63  (relating  to  professional  health  services  plan  corporations),  authorized  by  the  Insurance  Commissioner  to  transact  the  business  of  insurance  in  this  Commonwealth  except  that  the  term  shall  not  include:            (1)  the  Commonwealth  or  any  agency  or  instrumentality  thereof;            (2)  agencies,  authorities  or  instrumentalities  of  the  United  States,  its  possessions  and  territories,  the  Commonwealth  of  Puerto  Rico,  the  District  of  Columbia  or  a  state  or  political  subdivision;  or            (3)  fraternal  benefit  societies.            "NAIC."  THE  NATIONAL  ASSOCIATION  OF  INSURANCE  COMMISSIONERS  OR  SUCCESSOR  ORGANIZATION.            "PERSON."  An  individual,  an  insurer,  a  corporation,  a  partnership,  a  limited  liability  company,  an  association,  a  joint  stock  company,  a  trust,  an  unincorporated  organization,  any  similar  entity  or  any  combination  of  the  foregoing  acting  in  concert.  The  term  shall  not  include  any  joint  venture  partnership  exclusively  engaged  in  owning,  managing,  leasing  or  developing  real  or  tangible  personal  property.            "SEC."  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OF  THE  UNITED  STATES.            "SECURITY  HOLDER."  One  who  owns  any  security  of  a  specified  person,  including  common  stock,  preferred  stock,  debt  obligations  and  any  other  security  convertible  into  or  evidencing  the  right  to  acquire  any  of  the  foregoing.      

     "SHAREHOLDER."  A  record  holder  or  record  owner  of  shares  of  an  insurer.            (1)  The  term  shall  include  all  of  the  following:            (i)  A  member  of  an  insurer  that  is  a  domestic  nonstock  corporation  under  15  Pa.C.S.  Ch.  21  (relating  to  nonstock  corporations)  or  a  prior  statute.            (ii)  A  member,  as  defined  in  15  Pa.C.S.  §  5103  (relating  to  definitions),  of  an  insurer  that  is  a  domestic  nonprofit  corporation  under  15  Pa.C.S.  Ch.  51  (relating  to  general  provisions)  or  a  prior  statute.            (iii)  A  subscriber  of  an  insurer  that  is  a  domestic  reciprocal  exchange  under  Article  X  or  a  prior  statute.            (2)  The  term  shall  not  include  any  subscriber,  insured  or  customer  of:            (i)  a  hospital  plan  corporation  subject  to  40  Pa.C.S.  Ch.  61  (relating  to  hospital  plan  corporations);  or            (ii)  a  professional  health  services  plan  corporation  subject  to  40  Pa.C.S.  Ch.  63  (relating  to  professional  health  services  plan  corporations).            "SUBSIDIARY."  An  affiliate  of  a  specified  person  controlled  by  another  person  directly  or  indirectly  through  one  or  more  intermediaries.            "VOTING  SECURITY."  Includes  any  security  convertible  into  or  evidencing  a  right  to  acquire  a  voting  security.  

§  991.1402.    Acquisition  of  control  of  or  merger  or  consolidation  with  domestic  insurer            (a)(1)  No  person  other  than  the  issuer  shall  make  a  tender  offer  for  or  a  request  or  invitation  for  tenders  of,  or  enter  into  any  agreement  to  exchange  securities  or  seek  to  acquire  or  acquire  in  the  open  market  or  otherwise,  any  voting  security  of  a  domestic  insurer  if,  after  the  consummation  thereof,  such  person  would  directly  or  indirectly  or  by  conversion  or  by  exercise  of  any  right  to  acquire,  be  in  control  of  such  insurer,  and  no  person  shall  enter  into  an  agreement  to  merge  or  consolidate  with  or  otherwise  to  acquire  control  of  a  domestic  insurer  or  any  person  controlling  a  domestic  insurer  unless,  at  the  time  any  such  offer,  request  or  invitation  is  made  or  any  such  agreement  is  entered  into  or  prior  to  the  acquisition  of  such  securities  if  no  offer  or  agreement  is  involved,  such  person  has  filed  with  the  department  and  has  sent  to  such  insurer  a  statement  containing  the  information  required  by  this  section  and  such  offer,  request,  invitation,  agreement  or  acquisition  has  been  approved  by  the  department  in  the  manner  hereinafter  prescribed.            (2)  For  purposes  of  this  section:            (i)  "Domestic  insurer"  includes  a  person  controlling  a  domestic  insurer  unless  the  department  determines  that  the  person  is  primarily  engaged  in  business  other  than  the  business  of  insurance  either  directly  or  through  its  affiliates.            (ii)  "Person"  does  not  include  a  securities  broker  who  holds,  in  the  usual  and  customary  manner,  less  than  twenty  per  centum  (20%)  of  the  voting  securities  of  an  insurer  or  of  a  person  that  controls  an  insurer.            (3)  A  controlling  person  of  a  domestic  insurer  seeking  to  divest  its  controlling  interest  in  the  insurer  in  any  manner  shall  file  with  the  department,  with  a  copy  to  the  insurer,  a  notice  of  the  proposed  divestiture  at  least  thirty  (30)  days  prior  to  the  cessation  of  control  except  that  notice  under  this  paragraph  is  not  required  if  a  statement  is  filed  under  paragraph  (1).  The  notice  must  contain  information  sufficient  for  the  department  to  determine  if  the  proposed  divestiture  requires  filing  and  approval  under  paragraph  (1).  Information  obtained  by  or  disclosed  to  the  department  under  this  paragraph  shall  be  given  confidential  treatment  as  provided  under  section  1407.            (4)  The  acquiring  person  for  transactions  subject  to  this  section  must  file  a  preacquisition  notification  as  required  under  section  1403(c)  or  be  subject  to  a  penalty  as  provided  under  section  1403(e)(3).            (5)  A  person  seeking  to  rebut  the  presumption  of  control  under  this  article  shall  file  with  the  department,  with  a  copy  to  the  insurer,  a  rebuttal  filing  containing  information  sufficient  for  the  department  to  determine  whether  control  exists  in  fact.  The  filing  is  not  effective  unless  the  department  finds  that  control  does  not  exist  

or  accepts  a  disclaimer  of  control.  Information  obtained  by  or  disclosed  to  the  department  under  this  subsection  must  be  given  confidential  treatment  as  provided  under  section  1407.            (b)  The  statement  to  be  filed  with  the  department  under  this  section  shall  be  made  under  oath  or  affirmation  and  shall  contain  the  following  information:            (1)  The  name  and  address  of  each  person  by  whom  or  on  whose  behalf  the  merger,  consolidation  or  other  acquisition  of  control  referred  to  in  subsection  (a)  is  to  be  effected,  hereinafter  called  "acquiring  party,"  and            (i)  if  such  person  is  an  individual,  his  principal  occupation  and  all  offices  and  positions  held  during  the  past  five  (5)  years,  and  any  conviction  of  crimes  other  than  minor  traffic  violations  during  the  past  ten  (10)  years;  or            (ii)  if  such  person  is  not  an  individual,  a  report  of  the  nature  of  its  business  operations  during  the  past  five  (5)  years  or  for  such  lesser  period  as  the  person  and  any  predecessors  thereof  shall  have  been  in  existence;  an  informative  description  of  the  business  intended  to  be  done  by  the  person  and  the  person's  subsidiaries;  and  a  list  of  all  individuals  who  are  or  who  have  been  selected  to  become  directors  or  executive  officers  of  the  person,  or  who  perform  or  will  perform  functions  appropriate  to  those  positions.  This  list  shall  include  for  each  individual  the  information  required  by  subparagraph  (i).            (2)  The  source,  nature  and  amount  of  the  consideration  used  or  to  be  used  in  effecting  the  merger,  consolidation  or  other  acquisition  of  control,  a  description  of  any  transaction  wherein  funds  were  or  are  to  be  obtained  for  any  such  purpose,  including  any  pledge  of  the  insurer's  stock  or  the  stock  of  any  of  its  subsidiaries  or  controlling  affiliates,  and  the  identity  of  persons  furnishing  such  consideration,  provided,  however,  that  where  a  source  of  such  consideration  is  a  loan  made  in  the  lender's  ordinary  course  of  business,  the  identity  of  the  lender  shall  remain  confidential  if  the  person  filing  such  statement  so  requests.            (3)  Fully  audited  financial  information  as  to  the  earnings  and  financial  condition  of  each  acquiring  party  for  the  preceding  five  (5)  fiscal  years  of  each  such  acquiring  party,  or  for  such  lesser  period  as  such  acquiring  party  and  any  predecessors  thereof  shall  have  been  in  existence,  and  similar  unaudited  information  as  of  a  date  not  earlier  than  ninety  (90)  days  prior  to  the  filing  of  the  statement.            (4)  Any  plans  or  proposals  which  each  acquiring  party  may  have  to  liquidate  such  insurer,  to  sell  its  assets  or  merge  or  consolidate  it  with  any  person  or  to  make  any  other  material  change  in  its  business  or  corporate  structure  or  management.            (5)  The  number  of  shares  of  any  security  referred  to  in  subsection  (a)  which  each  acquiring  party  proposes  to  acquire,  and  the  terms  of  the  offer,  request,  invitation,  agreement  or  acquisition  referred  to  in  subsection  (a),  and  a  statement  as  to  the  

method  by  which  the  fairness  of  the  proposal  was  arrived.            (6)  The  amount  of  each  class  of  any  security  referred  to  in  subsection  (a)  which  is  beneficially  owned  or  concerning  which  there  is  a  right  to  acquire  beneficial  ownership  by  each  acquiring  party.            (7)  A  full  description  of  any  contracts,  arrangements  or  understandings  with  respect  to  any  security  referred  to  in  subsection  (a)  in  which  any  acquiring  party  is  involved,  including,  but  not  limited  to,  transfer  of  any  of  the  securities,  joint  ventures,  loan  or  option  arrangements,  puts  or  calls,  guarantees  of  loans,  guarantees  against  loss  or  guarantees  of  profits,  division  of  losses  or  profits,  or  the  giving  or  withholding  of  proxies.  Such  description  shall  identify  the  persons  with  whom  such  contracts,  arrangements  or  understandings  have  been  entered  into.            (8)  A  description  of  the  purchase  of  any  security  referred  to  in  subsection  (a)  during  the  twelve  calendar  months  preceding  the  filing  of  the  statement,  by  any  acquiring  party,  including  the  dates  of  purchase,  names  of  the  purchasers  and  consideration  paid  or  agreed  to  be  paid  therefor.            (9)  A  description  of  any  recommendations  to  purchase  any  security  referred  to  in  subsection  (a)  made  during  the  twelve  calendar  months  preceding  the  filing  of  the  statement,  by  any  acquiring  party,  or  by  anyone  based  upon  interviews  or  at  the  suggestion  of  such  acquiring  party.            (10)  Copies  of  all  tender  offers  for,  requests  or  invitations  for  tenders  of,  exchange  offers  for  and  agreements  to  acquire  or  exchange  any  securities  referred  to  in  subsection  (a)  and,  if  distributed,  of  additional  soliciting  material  relating  thereto.            (11)  The  term  of  any  agreement,  contract  or  understanding  made  with  or  proposed  to  be  made  with  any  broker-­‐dealer  as  to  solicitation  of  securities  referred  to  in  subsection  (a)  for  tender  and  the  amount  of  any  fees,  commissions  or  other  compensation  to  be  paid  to  broker-­‐dealers  with  regard  thereto.            (11.1)  An  agreement  by  the  person  required  to  file  the  statement  referred  to  in  subsection  (a)  that  it  will  provide  the  annual  enterprise  risk  report  specified  in  section  1404(k.1)  as  long  as  control  exists.            (11.2)  An  acknowledgment  by  the  person  required  to  file  the  statement  referred  to  in  subsection  (a)  that  the  person  and  the  subsidiaries  within  its  control  in  the  insurance  holding  company  system  will  provide  information  to  the  commissioner  upon  request  as  necessary  to  evaluate  enterprise  risk  to  the  insurer.            (12)  Such  additional  information  as  the  department  may  by  regulation  prescribe  as  necessary  or  appropriate  for  the  protection  of  policyholders  of  the  insurer  or  in  the  public  interest.      

     (c)  If  the  person  required  to  file  the  statement  referred  to  in  subsection  (a)  is  a  partnership,  limited  partnership,  syndicate  or  other  group,  the  department  may  require  that  the  information  called  for  by  subsection  (b)(1)  through  (12)  shall  be  given  with  respect  to  each  partner  of  such  partnership  or  limited  partnership,  each  member  of  such  syndicate  or  group  and  each  person  who  controls  such  partner  or  member.  If  any  such  partner,  member  or  person  is  a  corporation  or  the  person  required  to  file  the  statement  referred  to  in  subsection  (a)  is  a  corporation,  the  department  may  require  that  the  information  called  for  by  subsection  (b)(1)  through  (12)  shall  be  given  with  respect  to  such  corporation,  each  officer  and  director  of  such  corporation  and  each  person  who  is  directly  or  indirectly  the  beneficial  owner  of  more  than  ten  per  centum  (10%)  of  the  outstanding  voting  securities  of  such  corporation.            (d)  If  any  material  change  occurs  in  the  facts  set  forth  in  the  statement  filed  with  the  department  and  sent  to  such  insurer  pursuant  to  this  section,  an  amendment  setting  forth  such  change,  together  with  copies  of  all  documents  and  other  material  relevant  to  such  change,  shall  be  filed  with  the  department  and  sent  to  such  insurer  within  two  (2)  business  days  after  the  person  learns  of  such  change.            (e)  If  any  offer,  request,  invitation,  agreement  or  acquisition  referred  to  in  subsection  (a)  is  proposed  to  be  made  by  means  of  a  registration  statement  under  the  Securities  Act  of  1933  (48  Stat.  74,  15  U.S.C.  §  77a  et  seq.),  or  in  circumstances  requiring  the  disclosure  of  similar  information  under  the  Securities  Exchange  Act  of  1934  (48  Stat.  881,  15  U.S.C.  §  78a  et  seq.),  or  under  a  State  law  requiring  similar  registration  or  disclosure,  the  person  required  to  file  the  statement  referred  to  in  subsection  (a)  may  utilize  such  documents  in  furnishing  the  information  called  for  by  that  statement.            (f)(1)  The  department  shall  approve  any  merger,  consolidation  or  other  acquisition  of  control  referred  to  in  subsection  (a)  unless  it  finds  any  of  the  following:            (i)  After  the  merger,  consolidation  or  other  acquisition  of  control,  the  domestic  insurer  referred  to  in  subsection  (a)  would  not  be  able  to  satisfy  the  requirements  for  the  issuance  of  a  license  to  write  the  line  or  lines  of  insurance  for  which  it  is  presently  licensed.            (ii)  The  effect  of  the  merger,  consolidation  or  other  acquisition  of  control  would  be  to  substantially  lessen  competition  in  insurance  in  this  Commonwealth  or  tend  to  create  a  monopoly  therein.  In  applying  the  competitive  standard  in  this  subparagraph:            (A)  the  informational  requirements  of  section  1403(c)(2)  and  the  standards  of  section  1403(d)(2)  shall  apply;            (B)  the  merger,  consolidation  or  other  acquisition  of  control  shall  not  be  

disapproved  if  the  department  finds  that  any  of  the  situations  meeting  the  criteria  provided  by  section  1403(d)(3)  exist;  and            (C)  the  department  may  condition  the  approval  of  the  merger,  consolidation  or  other  acquisition  of  control  on  the  removal  of  the  basis  of  disapproval  within  a  specified  period  of  time.            (iii)  The  financial  condition  of  any  acquiring  party  is  such  as  might  jeopardize  the  financial  stability  of  the  insurer  or  prejudice  the  interest  of  its  policyholders.            (iv)  The  plans  or  proposals  which  the  acquiring  party  has  to  liquidate  the  insurer,  sell  its  assets  or  consolidate  or  merge  it  with  any  person,  or  to  make  any  other  material  change  in  its  business  or  corporate  structure  or  management,  are  unfair  and  unreasonable  and  fail  to  confer  benefit  on  policyholders  of  the  insurer  and  are  not  in  the  public  interest.            (v)  The  competence,  experience  and  integrity  of  those  persons  who  would  control  the  operation  of  the  insurer  are  such  that  it  would  not  be  in  the  interest  of  policyholders  of  the  insurer  and  of  the  public  to  permit  the  merger,  consolidation  or  other  acquisition  of  control.            (vi)  The  merger,  consolidation  or  other  acquisition  of  control  is  likely  to  be  hazardous  or  prejudicial  to  the  insurance  buying  public.            (vii)  The  merger,  consolidation  or  other  acquisition  of  control  is  not  in  compliance  with  the  laws  of  this  Commonwealth,  including  Article  VIII-­‐A            (2)  If  the  merger,  consolidation  or  other  acquisition  of  control  is  approved,  the  department  shall  so  notify  the  person  filing  the  statement  and  the  insurer  that  is  proposed  to  be  acquired,  and  such  a  determination  is  hereafter  referred  to  as  an  approving  determination.  Notice  shall  also  be  given  by  the  department  of  any  determination  which  is  not  an  approving  determination.  If  an  approving  determination  is  made  by  the  department  and  not  otherwise,  the  proposed  offer  and  acquisition  may  thereafter  be  made  and  consummated  on  the  terms  and  conditions  and  in  the  manner  described  in  the  statement  and  subject  to  such  conditions  as  may  be  prescribed  by  the  department  as  hereinafter  provided.  An  approving  determination  by  the  department  shall  be  deemed  to  extend  to  offers  or  acquisitions  made  pursuant  thereto  within  one  year  following  the  date  of  determination.  The  department  may,  as  a  condition  of  its  approving  determination,  require  the  inclusion  in  any  offer  of  provisions  requiring  the  offer  to  remain  open  a  specified  minimum  length  of  time,  permitting  withdrawal  of  shares  deposited  prior  to  the  time  the  offeror  becomes  bound  to  consummate  the  acquisition  and  requiring  pro  rata  acceptance  of  any  shares  deposited  pursuant  to  the  offer.  The  department  shall  hold  a  hearing  before  making  the  determination  required  by  this  subsection  if,  within  ten  (10)  days  following  the  filing  with  the  department  of  the  statement,  written  request  for  the  holding  of  such  hearing  is  made  either  by  the  person  

proposing  to  make  the  acquisition,  by  the  insurer  that  is  proposed  to  be  acquired  or,  if  the  issuer  of  stock  proposed  to  be  acquired  is  not  an  insurer,  by  the  insurer  controlled  by  such  issuer.  Otherwise,  the  department  shall  determine  in  its  discretion  whether  such  a  hearing  shall  be  held.  Thirty  (30)  days'  notice  of  any  such  hearing  shall  be  given  to  the  person  proposing  to  make  the  acquisition,  to  the  issuer  whose  stock  is  proposed  to  be  acquired  and,  if  such  issuer  is  not  an  insurer,  to  the  insurance  company  controlled  by  such  issuer.  Notice  of  any  such  hearing  shall  also  be  given  to  such  other  persons,  if  any,  as  the  department  may  determine.            (2.1)  If  the  proposed  acquisition  of  control  requires  the  approval  of  more  than  one  chief  insurance  regulatory  official,  the  public  hearing  under  paragraph  (2)  may  be  held  on  a  consolidated  basis  upon  request  of  the  person  filing  the  statement  under  subsection  (a).  He  shall  file  the  statement  under  subsection  (a)  with  the  NAIC  within  five  (5)  days  of  making  the  request  for  a  public  hearing.  A  chief  insurance  regulatory  official  may  opt  out  of  a  consolidated  hearing  and  shall  provide  notice  to  the  applicant  of  the  decision  to  opt  out  within  ten  (10)  days  of  the  receipt  of  the  statement  under  subsection  (a).  A  hearing  conducted  on  a  consolidated  basis  must  be  public  and  held  in  the  United  States  before  the  chief  insurance  regulatory  officials  of  the  states  in  which  the  insurers  are  domiciled.  The  chief  insurance  regulatory  officials  shall  hear  and  receive  evidence.  A  chief  insurance  regulatory  official  may  attend  the  hearing  in  person  or  participate  using  telecommunication.            (3)  The  department  may  retain  at  the  acquiring  party's  expense  any  attorneys,  actuaries,  accountants  and  other  experts  not  otherwise  a  part  of  the  department's  staff  as  may  be  reasonably  necessary  to  assist  the  department  in  reviewing  the  proposed  acquisition  of  control.            (g)  The  provisions  of  this  section  shall  not  apply  to  any  offer,  request,  invitation,  agreement  or  acquisition  which  the  department  by  order  shall  exempt  therefrom  as:            (1)  not  having  been  made  or  entered  into  for  the  purpose  and  not  having  the  effect  of  changing  or  influencing  the  control  of  a  domestic  insurer;  or            (2)  as  otherwise  not  comprehended  within  the  purposes  of  this  section.            (h)  The  following  shall  constitute  a  violation  of  this  section:            (1)  the  failure  to  file  any  statement,  amendment  or  other  material  required  to  be  filed  pursuant  to  subsection  (a)  or  (b);            (2)  the  effectuation  or  any  attempt  to  effectuate  an  acquisition  of  control  of  or  divestiture  of  or  merger  or  consolidation  with  a  domestic  insurer  unless  the  department  has  given  its  approval  thereto;  or            (3)  a  violation  of  section  819-­‐A.      

     (i)  The  department  shall,  within  seventy-­‐two  (72)  hours  of  receiving  a  statement  filed  under  this  section,  provide  notification  to  the  Office  of  Attorney  General  that  the  filing  was  received.            (j)  (Reserved).  

§  991.1403.    Acquisitions  involving  insurers  not  otherwise  covered            (a)  As  used  in  this  section  the  following  words  and  phrases  shall  have  the  meanings  given  to  them  in  this  subsection:            "Acquisition."  Any  agreement,  arrangement  or  activity  the  consummation  of  which  results  in  a  person  acquiring,  directly  or  indirectly,  the  control  of  another  person  and  includes,  but  is  not  limited  to,  the  acquisition  of  voting  securities,  the  acquisition  of  assets,  bulk  reinsurance,  mergers  and  consolidations.            "Involved  insurer."  Includes  an  insurer  which  either  acquires  or  is  acquired,  is  affiliated  with  an  acquirer  or  acquired  or  is  the  result  of  a  merger  or  consolidation.            (b)(1)  Except  as  exempted  in  paragraph  (2),  this  section  applies  to  any  acquisition  in  which  there  is  a  change  in  control  of  an  insurer  authorized  to  do  business  in  this  Commonwealth.            (2)  This  section  shall  not  apply  to  any  of  the  following:            (i)  An  acquisition  subject  to  approval  or  disapproval  by  the  department  pursuant  to  section  1402            (ii)  A  purchase  of  securities  solely  for  investment  purposes  so  long  as  such  securities  are  not  used  by  voting  or  otherwise  to  cause  or  attempt  to  cause  the  substantial  lessening  of  competition  in  any  insurance  market  in  this  Commonwealth.  If  a  purchase  of  securities  results  in  a  presumption  of  control  as  described  in  the  definition  of  "control"  in  section  1401,  it  is  not  solely  for  investment  purposes  unless  the  chief  insurance  regulatory  official  in  the  jurisdiction  of  the  insurer's  domicile  accepts  a  disclaimer  of  control  or  affirmatively  finds  that  control  does  not  exist  and  such  disclaimer  action  or  affirmative  finding  is  communicated  by  the  domiciliary  insurance  regulator  to  the  department.            (iii)  The  acquisition  of  a  person  by  another  person  when  both  persons  are  neither  directly  nor  through  affiliates  primarily  engaged  in  the  business  of  insurance,  if  preacquisition  notification  is  filed  with  the  department  in  accordance  with  subsection  (c)(2)  thirty  (30)  days  prior  to  the  proposed  effective  date  of  the  acquisition.  However,  such  preacquisition  notification  is  not  required  for  exclusion  from  this  section  if  the  acquisition  would  otherwise  be  excluded  from  this  section  by  this  paragraph.            (iv)  The  acquisition  of  already  affiliated  persons.            (v)  An  acquisition  if,  as  an  immediate  result  of  the  acquisition:            (A)  in  no  market  would  the  combined  market  share  of  the  involved  insurers  

exceed  five  per  centum  (5%)  of  the  total  market;            (B)  there  would  be  no  increase  in  any  market  share;  or            (C)  in  no  market  would:            (I)  the  combined  market  share  of  the  involved  insurers  exceeds  twelve  per  centum  (12%)  of  the  total  market;  and            (II)  the  market  share  increases  by  more  than  two  per  centum  (2%)  of  the  total  market.      For  the  purpose  of  this  subparagraph,  a  market  means  direct  written  insurance  premium  in  this  Commonwealth  for  a  line  of  business  as  contained  in  the  annual  statement  required  to  be  filed  by  insurers  licensed  to  do  business  in  this  Commonwealth.            (vi)  An  acquisition  for  which  a  preacquisition  notification  would  be  required  pursuant  to  this  section  due  solely  to  the  resulting  effect  on  the  ocean  marine  insurance  line  of  business.            (vii)  An  acquisition  of  an  insurer  whose  domiciliary  insurance  regulator  affirmatively  finds  that  such  insurer  is  in  failing  condition;  there  is  a  lack  of  feasible  alternative  to  improving  such  condition;  the  public  benefits  of  improving  such  insurer's  condition  through  the  acquisition  exceed  the  public  benefits  that  would  arise  from  not  lessening  competition;  and  such  findings  are  communicated  by  the  domiciliary  insurance  regulator  to  the  department.            (3)  Sections  1409(b)  and  (c)  and  1411  shall  not  apply  to  acquisitions  provided  for  in  this  subsection.            (c)(1)  An  acquisition  covered  by  subsection  (b)  may  be  subject  to  an  order  pursuant  to  subsection  (e)  unless  the  acquiring  person  files  a  preacquisition  notification  and  the  waiting  period  has  expired.  The  acquired  person  may  file  a  preacquisition  notification.  The  department  shall  give  confidential  treatment  to  information  submitted  under  this  subsection  in  the  same  manner  provided  in  section  1407.            (2)  The  preacquisition  notification  shall  be  in  such  form  and  contain  such  information  as  prescribed  by  the  NAIC  relating  to  those  markets  which,  under  subsection  (b)(2)(v),  cause  the  acquisition  not  to  be  exempted  from  the  provisions  of  this  section.  The  department  may  require  such  additional  material  and  information  as  it  deems  necessary  to  determine  whether  the  proposed  acquisition,  if  consummated,  would  violate  the  competitive  standard  of  subsection  (d).  The  required  information  may  include  an  opinion  of  an  economist  as  to  the  competitive  impact  of  the  acquisition  in  this  Commonwealth  accompanied  by  a  summary  of  the  

education  and  experience  of  such  person  indicating  his  or  her  ability  to  render  an  informed  opinion.            (3)  The  waiting  period  required  shall  begin  on  the  date  of  receipt  by  the  department  of  a  preacquisition  notification  and  shall  end  on  the  earlier  of  the  thirtieth  day  after  the  date  of  such  receipt  or  termination  of  the  waiting  period  by  the  department.  Prior  to  the  end  of  the  waiting  period,  the  department  on  a  one-­‐time  basis  may  require  the  submission  of  additional  needed  information  relevant  to  the  proposed  acquisition,  in  which  event  the  waiting  period  shall  end  on  the  earlier  of  the  thirtieth  day  after  receipt  of  such  additional  information  by  the  department  or  termination  of  the  waiting  period  by  the  department.            (d)(1)  The  department  may  enter  an  order  under  subsection  (e)(1)  with  respect  to  an  acquisition  if  there  is  substantial  evidence  that  the  effect  of  the  acquisition  may  be  substantially  to  lessen  competition  in  any  line  of  insurance  in  this  Commonwealth  or  tend  to  create  a  monopoly  therein  or  if  the  insurer  fails  to  file  adequate  information  in  compliance  with  subsection  (c).            (2)  In  determining  whether  a  proposed  acquisition  would  violate  the  competitive  standard  of  paragraph  (1),  the  department  shall  consider  the  following:            (i)  Any  acquisition  covered  under  subsection  (b)  involving  two  or  more  insurers  competing  in  the  same  market  is  prima  facie  evidence  of  violation  of  the  competitive  standards  as  follows:            (A)  if  the  market  is  highly  concentrated  and  the  involved  insurers  possess  the  following  shares  of  the  market:  STBLN4  DTBLN  HN7ZInsurer  AZInsurer  B  DTBLN  BNZ  DTBLN  BN7Z  4%Z7Z4%  or  more  BNZ10%ZZ2%  or  more  BNZ15%ZZ1%  or  more;  6or  .            (B)  if  the  market  is  not  highly  concentrated  and  the  involved  insurers  possess  the  following  shares  of  the  market:  STBLN4  DTBLN  HN7ZInsurer  AZInsurer  B  DTBLN  BNZ  DTBLN  BN7Z  5%Z7Z5%  or  more  BNZ10%ZZ4%  or  more  BNZ15%ZZ3%  or  more  BNZ19%ZZ1%  or  more.  .      A  highly  concentrated  market  is  one  in  which  the  share  of  the  four  largest  insurers  is  seventy-­‐five  per  centum  (75%)  or  more  of  the  market.  Percentages  not  shown  in  the  tables  are  interpolated  proportionately  to  the  percentages  that  are  shown.  If  more  than  two  insurers  are  involved,  exceeding  the  total  of  the  two  columns  in  the  table  is  prima  facie  evidence  of  violation  of  the  competitive  standard  in  paragraph  (1).  For  the  purpose  of  this  subparagraph,  the  insurer  with  the  largest  share  of  the  market  shall  be  deemed  to  be  insurer  A.            (ii)  There  is  a  significant  trend  toward  increased  concentration  when  the  aggregate  market  share  of  any  grouping  of  the  largest  insurers  in  the  market,  from  the  two  largest  to  the  eight  largest,  has  increased  by  seven  per  centum  (7%)  or  more  

of  the  market  over  a  period  of  time  extending  from  any  base  year  five  (5)  to  ten  (10)  years  prior  to  the  acquisition  up  to  the  time  of  the  acquisition.  Any  acquisition,  merger  or  consolidation  covered  under  subsection  (b)  involving  two  or  more  insurers  competing  in  the  same  market  is  prima  facie  evidence  of  violation  of  the  competitive  standard  in  paragraph  (1)  if:            (A)  there  is  a  significant  trend  toward  increased  concentration  in  the  market;            (B)  one  of  the  insurers  involved  is  one  of  the  insurers  in  a  grouping  of  such  large  insurers  showing  the  requisite  increase  in  the  market  share;  and            (C)  another  involved  insurer's  market  is  two  per  centum  (2%)  or  more.            (iii)  For  the  purposes  of  this  paragraph:            (A)  The  term  "insurer"  includes  any  company  or  group  of  companies  under  common  management,  ownership  or  control.            (B)  The  term  "market"  means  the  relevant  product  and  geographical  markets.  In  determining  the  relevant  product  and  geographical  markets,  the  department  shall  give  due  consideration  to,  among  other  things,  the  definitions  or  guidelines,  if  any,  promulgated  by  the  NAIC  and  to  information,  if  any,  submitted  by  parties  to  the  acquisition.  In  the  absence  of  sufficient  information  to  the  contrary,  the  relevant  product  market  is  assumed  to  be  the  direct  written  insurance  premium  for  a  line  of  business,  such  line  being  that  used  in  the  annual  statement  required  to  be  filed  by  insurers  doing  business  in  this  Commonwealth  and  the  relevant  geographical  market  is  assumed  to  be  this  Commonwealth.            (C)  The  burden  of  showing  prima  facie  evidence  of  violation  of  the  competitive  standard  rests  upon  the  commissioner.            (iv)  Even  though  an  acquisition  is  not  prima  facie  violative  of  the  competitive  standard  under  subparagraphs  (i)  and  (ii),  the  department  may  establish  the  requisite  anticompetitive  effect  based  upon  other  substantial  evidence.  Even  though  an  acquisition  is  prima  facie  violative  of  the  competitive  standard  under  subparagraphs  (i)  and  (ii),  a  party  may  establish  the  absence  of  the  requisite  anticompetitive  effect  based  upon  other  substantial  evidence.  Relevant  factors  in  making  a  determination  under  this  paragraph  include,  but  are  not  limited  to,  the  following:  market  shares,  volatility  of  ranking  of  market  leaders,  number  of  competitors,  concentration,  trend  of  concentration  in  the  industry  and  ease  of  entry  and  exit  into  the  market.            (3)  An  order  may  not  be  entered  under  subsection  (e)(1)  if:            (i)  the  acquisition  will  yield  substantial  economies  of  scale  or  economies  in  resource  utilization  that  cannot  be  feasibly  achieved  in  any  other  way,  and  the  

public  benefits  which  would  arise  from  such  economies  exceed  the  public  benefits  which  would  arise  from  not  lessening  competition;  or            (ii)  the  acquisition  will  substantially  increase  the  availability  of  insurance,  and  the  public  benefits  of  such  increase  exceed  the  public  benefits  which  would  arise  from  not  lessening  competition.            (e)(1)(i)  If  an  acquisition  violates  the  standards  of  this  section,  the  department  may  enter  an  order:            (A)  requiring  an  involved  insurer  to  cease  and  desist  from  doing  business  in  this  Commonwealth  with  respect  to  the  line  or  lines  of  insurance  involved  in  the  violation;  or            (B)  denying  the  application  of  an  acquired  or  acquiring  insurer  for  a  license  to  do  business  in  this  Commonwealth.            (ii)  Such  an  order  shall  be  issued  in  compliance  with  2  Pa.C.S.  (relating  to  administrative  law  and  procedure).            (iii)  An  order  pursuant  to  this  paragraph  shall  not  apply  if  the  acquisition  is  not  consummated.            (2)  Any  person  who  violates  a  cease  and  desist  order  of  the  department  under  paragraph  (1)  and  while  such  order  is  in  effect,  may,  after  notice  and  hearing  and  upon  order  of  the  department,  be  subject  at  the  discretion  of  the  department  to  either  or  both  of  the  following:            (i)  A  civil  penalty  of  not  more  than  ten  thousand  dollars  ($  10,000)  for  every  day  of  violation.            (ii)  Suspension  or  revocation  of  such  person's  license.            (3)  Any  insurer  or  other  person  who  fails  to  make  any  filing  required  by  this  section  and  who  also  fails  to  demonstrate  a  good  faith  effort  to  comply  with  any  such  filing  requirement  shall  be  subject  to  a  civil  penalty  not  to  exceed  fifty  thousand  dollars  ($  50,000).  

§  991.1404.    Registration  of  insurers            (a)(1)  Every  insurer  which  is  authorized  to  do  business  in  this  Commonwealth  and  which  is  a  member  of  an  insurance  holding  company  system  shall  register  with  the  department,  except  a  foreign  insurer  subject  to  registration  requirements  and  standards  adopted  by  statute  or  regulation  in  the  jurisdiction  of  its  domicile  which  are  substantially  similar  to  those  contained  in  this  section  and  1405(a)(1)  and  (2),  (b)  and  (d).  Each  registered  insurer  shall  keep  current  the  information  required  to  be  disclosed  in  its  registration  statement  by  reporting  all  material  changes  or  additions  within  fifteen  (15)  days  after  the  end  of  the  month  in  which  it  learns  of  each  such  change  or  addition.            (2)  Any  insurer  which  is  subject  to  registration  under  this  section  shall  register  within  fifteen  (15)  days  after  it  becomes  subject  to  registration,  and  annually  thereafter  by  the  thirty-­‐first  day  of  March  of  each  year  for  the  previous  calendar  year,  unless  the  department  for  good  cause  shown  extends  the  time  for  registration,  and  then  within  such  extended  time.  The  department  may  require  any  insurer  authorized  to  do  business  in  this  Commonwealth  which  is  a  member  of  an  insurance  holding  company  system  and  which  is  not  subject  to  registration  under  this  section  to  furnish  a  copy  of  the  registration  statement,  the  summary  specified  in  subsection  (c)  or  other  information  filed  by  such  insurance  company  with  the  insurance  regulatory  authority  of  its  domiciliary  jurisdiction.            (b)  Every  insurer  subject  to  registration  shall  file  the  registration  statement  with  the  department  on  a  form  and  in  a  format  prescribed  by  the  NAIC,  which  shall  contain  all  of  the  following  current  information:            (1)  The  capital  structure,  general  financial  condition,  ownership  and  management  of  the  insurer  and  any  person  controlling  the  insurer.            (2)  The  identity  and  relationship  of  every  member  of  the  insurance  holding  company  system.            (3)  All  of  the  following  agreements  in  force  and  transactions  currently  outstanding  or  which  have  occurred  during  the  last  calendar  year  between  such  insurer  and  its  affiliates:            (i)  Loans  and  other  investments  and  the  purchase,  sale  or  exchange  of  securities  of  an  affiliate  by  the  insurer  or  of  the  insurer  by  an  affiliate.            (ii)  Purchases,  sales  or  exchange  of  assets.            (iii)  Transactions  not  in  the  ordinary  course  of  business.            (iv)  Guarantees  or  undertakings  for  the  benefit  of  an  affiliate  which  result  in  an  

actual  contingent  exposure  of  the  insurer's  assets  to  liability,  other  than  insurance  contracts  entered  into  in  the  ordinary  course  of  the  insurer's  business.            (v)  All  management  agreements,  service  contracts  and  all  cost-­‐sharing  arrangements.            (vi)  Reinsurance  agreements.            (vii)  Dividends  and  other  distributions  to  shareholders.            (viii)  Consolidated  tax  allocation  agreements.            (4)  Any  pledge  of  the  insurer's  stock,  including  stock  of  any  subsidiary  or  controlling  affiliate,  for  a  loan  made  to  any  member  of  the  insurance  holding  company  system.            (4.1)  If  requested  by  the  department,  the  insurer  shall  include  financial  statements  of  an  insurance  holding  company  system,  including  its  affiliates.  Financial  statements  may  include,  but  are  not  limited  to:            (i)  annual  audited  financial  statements  filed  with  the  SEC  under  the  Securities  Exchange  Act  of  1933  (48  Stat.  74,  15  U.S.C.  §  77a  et  seq.);  or            (ii)  the  Securities  Exchange  Act  of  1934  (48  Stat.  881,  15  U.S.C.  §  78a  et  seq.).      An  insurer  required  to  file  financial  statements  under  this  paragraph  may  satisfy  the  request  by  providing  the  department  with  the  most  recent  parent  corporation  financial  statements  filed  with  the  SEC.            (4.2)  Statements  that  the  insurer's  board  of  directors  oversees  corporate  governance  and  internal  controls  and  that  the  insurer's  officers  or  senior  management  have  approved,  implemented  and  continue  to  maintain  and  monitor  corporate  governance  and  internal  control  procedures.            (5)  Any  other  matters  concerning  transactions  between  registered  insurers  and  any  affiliates  as  may  be  included  from  time  to  time  in  any  registration  forms  adopted  or  approved  by  the  department.            (6)  Other  necessary  or  appropriate  information  as  required  by  the  department  by  regulation.            (c)  All  registration  statements  shall  contain  a  summary  outlining  all  items  in  the  current  registration  statement  representing  changes  from  the  prior  registration  statement.            (d)  No  information  need  be  disclosed  on  the  registration  statement  filed  pursuant  

to  subsection  (b)  if  such  information  is  not  material  for  the  purposes  of  this  section.  Unless  the  department  by  regulation  or  order  provides  otherwise,  sales,  purchases,  exchanges,  loans  or  extensions  of  credit,  investments  or  guarantees  involving  one-­‐half  of  one  per  centum  (0.5%)  or  less  of  an  insurer's  admitted  assets  as  of  the  thirty-­‐first  day  of  December  next  preceding  shall  not  be  deemed  material  for  purposes  of  this  section.            (e)  Subject  to  section  1405(b),  each  registered  insurer  shall  report  to  the  department  all  dividends  and  other  distributions  to  shareholders  within  five  (5)  business  days  following  the  declaration  thereof  and  at  least  ten  (10)  days,  commencing  from  the  date  of  receipt  by  the  department,  prior  to  payment  thereof.  The  report  shall  include  a  schedule  setting  forth  all  dividends  or  other  distributions  made  within  the  previous  twelve  (12)  months,  including  any  dividends  or  other  distributions  approved  by  the  department  to  be  paid  out  of  other  than  unassigned  surplus  pursuant  to  section  337.8.            (f)  Any  person  within  an  insurance  holding  company  system  subject  to  registration  shall  be  required  to  provide  complete  and  accurate  information  to  an  insurer,  where  such  information  is  reasonably  necessary  to  enable  the  insurer  to  comply  with  the  provisions  of  this  article.            (g)  The  department  shall  terminate  the  registration  of  any  insurer  which  demonstrates  that  it  no  longer  is  a  member  of  an  insurance  holding  company  system.            (h)  The  department  may  require  or  allow  two  or  more  affiliated  insurers  subject  to  registration  hereunder  to  file  a  consolidated  registration  statement.            (i)  The  department  may  allow  an  insurer  which  is  authorized  to  do  business  in  this  Commonwealth  and  which  is  part  of  an  insurance  holding  company  system  to  register  on  behalf  of  any  affiliated  insurer  which  is  required  to  register  under  subsection  (a)  and  to  file  all  information  and  material  required  to  be  filed  under  this  section.            (j)  The  provisions  of  this  section  shall  not  apply  to  any  insurer,  information  or  transaction  if  and  to  the  extent  that  the  department  by  regulation  or  order  shall  exempt  the  same  from  the  provisions  of  this  section.            (k)  Any  person  may  file  with  the  department  a  disclaimer  of  affiliation  with  any  authorized  insurer  or  such  a  disclaimer  may  be  filed  by  such  insurer  or  any  member  of  an  insurance  holding  company  system.  The  disclaimer  shall  fully  disclose  all  material  relationships  and  bases  for  affiliation  between  such  person  and  such  insurer  as  well  as  the  basis  for  disclaiming  such  affiliation.  A  disclaimer  of  affiliation  is  deemed  granted  unless  the  department  notifies  the  filing  party  the  disclaimer  is  disallowed  within  thirty  (30)  days  following  receipt  of  a  complete  disclaimer.  In  the  event  of  disallowance,  the  disclaiming  party  may  request  an  administrative  hearing  

under  the  provisions  of  2  Pa.C.S.  (relating  to  administrative  law  and  procedure),  which  must  be  granted.  If  the  commissioner  approves  the  disclaimer  or  if  the  disclaimer  is  deemed  approved,  the  disclaiming  party  is  relieved  of  the  duty  to  register  under  this  section.            (l)  The  failure  to  file  a  registration  statement,  any  summary  of  the  registration  statement  or  enterprise  risk  report  required  by  this  section  within  the  time  specified  for  such  filing  shall  be  a  violation  of  this  section.  

§  991.1405.    Standards  and  management  of  an  insurer  within  an  insurance  holding  company  system            (a)(1)  Transactions  within  an  insurance  holding  company  system  to  which  an  insurer  subject  to  registration  is  a  party  shall  be  subject  to  all  of  the  following  standards:            (i)  The  terms  shall  be  fair  and  reasonable.            (ii)  Charges  or  fees  for  services  performed  shall  be  reasonable.            (iii)  Expenses  incurred  and  payment  received  shall  be  allocated  to  the  insurer  in  conformity  with  customary  insurance  accounting  practices  consistently  applied  and  all  cost-­‐sharing  or  expense  allocation  arrangements  must  be  formalized  in  writing  and  authorized  by  the  board  of  directors  of  the  domestic  insurer.            (iv)  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.            (v)  The  insurer's  surplus  as  regards  policyholders  after  any  material  transaction  with  an  affiliate  and  after  any  dividends  or  distributions  to  shareholder  affiliates  shall  be  reasonable  in  relation  to  the  insurer's  outstanding  liabilities  and  adequate  to  its  financial  needs.            (2)  The  following  transactions  involving  a  domestic  insurer  and  any  person  in  its  insurance  holding  company  system,  including  an  amendment  or  modification  of  affiliate  agreements  previously  filed  under  this  section  that  are  subject  to  materiality  standards  contained  in  subparagraphs  (i),  (ii),  (iii),  (iv)  and  (v),  may  not  be  entered  into  unless  the  insurer  has  notified  the  department  in  writing  of  its  intention  to  enter  into  such  transaction  at  least  thirty  (30)  days  prior  thereto  or  such  shorter  period  as  the  department  may  permit  and  the  department  has  not  disapproved  it  within  such  period:            (i)  Sales,  purchases,  exchanges,  loans  or  extensions  of  credit,  guarantees,  investments,  pledges  of  assets  or  assets  to  be  received  by  the  domestic  insurer  as  contributions  to  its  surplus,  provided  that,  as  of  the  thirty-­‐first  day  of  December  next  preceding,  such  transactions  are  equal  to  or  exceed  the  lesser  of  three  per  centum  (3%)  of  the  insurer's  admitted  assets  or  twenty-­‐five  per  centum  (25%)  of  surplus  as  regards  policyholders.            (ii)  Loans  or  extensions  of  credit  to  any  person  who  is  not  an  affiliate,  where  the  insurer  makes  such  loans  or  extensions  of  credit  with  the  agreement  or  understanding  that  the  proceeds  of  such  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  such  loans  or  extensions  of  credit  provided  that,  as  of  the  thirty-­‐first  day  of  December  next  preceding,  such  transactions  are  equal  to  or  exceed  the  lesser  of  three  per  centum  (3%)  of  the  insurer's  admitted  assets  or  twenty-­‐five  per  centum  (25%)  of  surplus  as  regards  policyholders.            (iii)  Reinsurance  agreements  or  modifications  thereto,  including:            (A)  agreements  where  the  reinsurance  premium  or  the  projected  reinsurance  premium  in  any  of  the  next  three  twelve-­‐month  periods  equals  or  exceeds  five  per  centum  (5%)  of  the  insurer's  surplus  as  regards  policyholders  as  of  the  thirty-­‐first  day  of  December  next  preceding;            (B)  agreements  where  the  change  in  the  insurer's  liabilities  or  any  transfer  of  assets  required  to  fund  the  transaction  in  any  of  the  next  three  twelve-­‐month  periods  equals  or  exceeds  twenty-­‐five  per  centum  (25%)  of  the  insurer's  surplus  as  regards  policyholders  as  of  the  thirty-­‐first  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  such  assets  will  be  transferred  to  one  or  more  affiliates  of  the  insurer.  Nothing  in  this  paragraph  shall  affect  or  limit  the  requirements  and  applicability  of  section  3  of  the  act  of  July  31,  1968  (P.L.  941,  No.  288),  entitled  "An  act  providing  for  reporting  to  the  Insurance  Commissioner  by  domestic  insurance  companies,  associations,  or  exchanges,  of  certain  conveyances  of  interests  in  the  assets  of  such  companies,  associations,  or  exchanges";  or            (C)  reinsurance  pooling  agreements.            (iv)  Any  material  transactions,  specified  by  regulation,  which  the  department  determines  may  adversely  affect  the  interests  of  the  insurer's  policyholders.            (v)  Management  agreements,  service  contracts,  tax  allocation  agreements,  guarantees  and  cost-­‐sharing  arrangements.      The  notice  for  amendments  or  modifications  must  include  the  reasons  for  the  change  and  the  financial  impact  on  the  domestic  insurer.      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  holding  company  system,  would  be  otherwise  contrary  to  law.            (2.1)  Within  thirty  (30)  days  after  termination  of  an  agreement  previously  filed  in  accordance  with  paragraph  (2),  a  domestic  insurer  shall  provide  notice  of  the  termination  to  the  department.  

         (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  department  determines  that  such  separate  transactions  were  entered  into  over  any  twelve-­‐month  period  for  such  purpose,  it  may  exercise  its  authority  under  section  1410.            (4)  The  department,  in  reviewing  transactions  pursuant  to  paragraph  (2),  shall  consider  whether  the  transactions  comply  with  the  standards  set  forth  in  paragraph  (1)  and  whether  they  may  adversely  affect  the  interests  of  policyholders.  The  department  may  retain  at  the  insurer's  expense  any  attorneys,  actuaries,  accountants  and  other  experts  not  otherwise  a  part  of  the  department's  staff  as  may  be  reasonably  necessary  to  assist  the  department  in  reviewing  the  transaction.            (5)  The  department  shall  be  notified  within  thirty  (30)  days  of  any  investment  of  the  domestic  insurer  in  any  one  corporation  if  the  total  investment  in  such  corporation  by  the  insurance  holding  company  system  exceeds  ten  per  centum  (10%)  of  such  corporations'  voting  securities.            (b)(1)  No  domestic  insurer  shall  pay  any  extraordinary  dividend  to  its  shareholders  until:            (i)  thirty  (30)  days  after  the  commissioner  has  received  written  notice  from  the  insurer  of  the  declaration  of  the  dividend  and  has  not  within  such  period  disapproved  the  payment;  or            (ii)  the  commissioner  shall  have  approved  the  payment  within  such  thirty-­‐day  period.            (2)  For  purposes  of  this  subsection,  an  extraordinary  dividend  is  any  dividend  or  other  distribution  which,  together  with  other  dividends  and  distributions  made  within  the  preceding  twelve  (12)  months,  exceeds  the  greater  of:            (i)  Ten  per  centum  (10%)  of  such  insurer's  surplus  as  regards  policyholders  as  shown  on  its  last  annual  statement  on  file  with  the  commissioner;  or            (ii)  The  net  income  of  such  insurer  for  the  period  covered  by  such  statement,  but  shall  not  include  pro  rata  distributions  of  any  class  of  the  insurer's  own  securities.            (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  article.      

     (2)  Nothing  herein  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  subsection  (a)(1).            (3)(i)  Not  less  than  one-­‐third  of  the  directors  of  a  domestic  insurer  shall  be  persons  who  are  not  officers  or  employes  of  such  insurer  or  of  any  entity  controlling,  controlled  by  or  under  common  control  with  such  insurer  and  who  are  not  beneficial  owners  of  a  controlling  interest  in  the  voting  stock  of  such  insurer  or  any  such  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.            (ii)  Not  less  than  one-­‐third  of  the  members  of  each  committee  of  the  board  of  directors  of  any  domestic  insurer  shall  be  persons  who  are  not  officers  or  employes  of  such  insurer  or  of  any  entity  controlling,  controlled  by  or  under  common  control  with  such  insurer.  At  least  one  such  person  must  be  included  in  any  quorum  for  the  transaction  of  business  at  any  meeting  of  each  committee.            (4)  The  board  of  directors  of  a  domestic  insurer  shall  establish  a  committee  comprised  solely  of  directors  who  are  not  officers  or  employes  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  shall  have  responsibility  for  recommending  the  selection  of  independent  certified  public  accountants  and  reviewing  the  insurer's  financial  condition,  the  scope  and  results  of  the  independent  audit  and  any  internal  audit.  The  committee  may  also  have  the  responsibilities  described  in  paragraph  (4.1)  if  one  or  more  committees  described  in  paragraph  (4.1)  are  not  separately  established.            (4.1)  The  board  of  directors  of  a  domestic  insurer  shall  establish  one  or  more  committees  comprised  solely  of  directors  who  are  not  officers  or  employes  of  the  insurer  or  of  any  entity  controlling,  controlled  by  or  under  common  control  with  the  insurer.  The  committee  or  committees  shall  have  responsibility  for  recommending  candidates  to  be  nominated  by  the  board  of  directors,  in  addition  to  any  other  nominations  by  voting  shareholders  or  policyholders,  for  election  as  directors  by  voting  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.            (5)  The  provisions  of  paragraphs  (3),  (4)  and  (4.1)  shall  not  apply  to  a  domestic  insurer  if  the  person  controlling  such  insurer  is  an  insurer,  an  attorney  in  fact  for  a  reciprocal  exchange,  a  mutual  insurance  holding  company  or  a  publicly  held  corporation  having  a  board  of  directors  and  committees  thereof  which  already  meet  the  requirements  of  paragraphs  (3),  (4)  and  (4.1).            (d)  For  purposes  of  this  article,  in  determining  whether  an  insurer's  surplus  as  

regards  policyholders  is  reasonable  in  relation  to  the  insurer's  outstanding  liabilities  and  adequate  to  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  the  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  surplus  as  regards  policyholders.            (8)  The  surplus  as  regards  policyholders  maintained  by  other  comparable  insurers  considering  the  factors  set  forth  in  paragraphs  (1)  through  (7).            (9)  The  adequacy  of  the  insurer's  reserves.            (10)  The  quality  and  liquidity  of  investments  in  affiliates.  The  department  may  treat  any  such  investment  as  a  disallowed  asset  for  purposes  of  determining  the  adequacy  of  surplus  as  regards  policyholders  whenever  in  its  judgment  such  investment  so  warrants.            (11)  The  quality  of  the  insurer's  earnings  and  the  extent  to  which  the  reported  earnings  include  extraordinary  items.  

§  991.1406.    Examination            (a)  Subject  to  the  limitation  contained  in  this  section  and  in  addition  to  the  powers  which  the  department  has  under  law  relating  to  the  examination  of  insurers,  the  department  shall  also  have  the  power  to  examine  an  insurer  registered  under  section  1404  and  its  affiliates  to  ascertain  the  financial  condition  of  the  insurer,  including  the  enterprise  risk  to  the  insurer  by:            (1)  the  ultimate  controlling  person;            (2)  an  entity  or  combination  of  entities  within  the  insurance  holding  company  system;  or            (3)  the  insurance  holding  company  system  on  a  consolidated  basis.            (a.1)  The  department  may  order  an  insurer  registered  under  section  1404  to  produce  records,  books  or  other  information  papers  in  the  possession  of  the  insurer  or  its  affiliates  as  are  reasonably  necessary  to  ascertain  the  financial  condition  of  the  insurer  or  to  determine  compliance  with  this  article.            (a.2)  To  ascertain  the  financial  condition  of  the  insurer,  including  the  enterprise  risk  to  the  insurer  by:            (1)  the  ultimate  controlling  person;            (2)  an  entity  or  combination  of  entities  within  the  insurance  holding  company  system;  or            (3)  the  insurance  holding  company  system  on  a  consolidated  basis,      the  department  may  order  an  insurer  registered  under  section  1404  to  produce  information  not  in  the  possession  of  the  insurer  if  the  insurer  can  obtain  access  to  the  information  under  a  contractual  relationship,  a  statutory  obligation  or  other  method.  If  the  insurer  may  not  obtain  the  information  requested  by  the  department,  the  insurer  shall  provide  the  department  a  detailed  explanation  of  the  reason  the  insurer  may  not  obtain  the  information  and  the  identity  of  the  holder  of  information.  If  the  insurer  fails  to  comply  with  this  subsection  or  the  department  determines  that  the  detailed  explanation  is  without  merit,  the  department  may  suspend  or  revoke  the  insurer's  license  or  require  the  insurer  to  pay  an  administrative  penalty  of  one  thousand  dollars  ($  1,000)  per  day  until  the  information  is  produced.  The  proceeding  for  suspension,  revocation  or  imposition  of  a  penalty  shall  be  conducted  pursuant  to  2  Pa.C.S.  (relating  to  administrative  law  and  procedure).            (b)  The  department  may  retain  at  the  registered  insurer's  expense  such  attorneys,  actuaries,  accountants  and  other  experts  not  otherwise  a  part  of  the  department's  

staff  as  shall  be  reasonably  necessary  to  assist  in  the  conduct  of  the  examination  under  subsections  (a),  (a.1)  and  (a.2).  Any  persons  so  retained  shall  be  under  the  direction  and  control  of  the  department  and  shall  act  in  a  purely  advisory  capacity.            (c)  Each  registered  insurer  producing  for  examination  records,  books  and  papers  pursuant  to  subsections  (a),  (a.1)  and  (a.2)  shall  be  liable  for  and  shall  pay  the  expense  of  such  examination  as  provided  for  in  Article  IX  of  the  act  of  May  17,  1921  (P.L.  789,  No.  285),  known  as  "The  Insurance  Department  Act  of  one  thousand  nine  hundred  and  twenty-­‐one."            (d)  If  the  insurer  fails  to  comply  with  an  order  issued  under  this  section,  the  department  has  the  power  to  examine  the  insurer's  affiliates  to  obtain  the  information  necessary  to  determine  an  insurer's  compliance  with  this  section.  The  department  also  has  the  power  to:            (1)  issue  subpoenas;            (2)  administer  oaths;  and            (3)  examine  under  oath  any  person  as  to  any  matter  pertinent  to  determining  compliance  with  this  section.      Upon  the  failure  or  refusal  of  a  person  to  obey  a  subpoena,  the  department  may  petition  a  court  of  competent  jurisdiction  and,  upon  proper  showing,  the  court  may  enter  an  order  compelling  the  witness  to  appear  and  testify  or  produce  documentary  evidence.  Failure  to  obey  the  court  order  shall  be  punishable  as  contempt  of  court.  When  subpoenaed,  a  person  shall  attend  as  a  witness  at  the  place  specified  in  the  subpoena.  Witnesses  shall  be  paid  the  same  fees  and  mileage  as  are  paid  to  witnesses  in  the  courts  of  this  Commonwealth.  Fees,  mileage  and  expense  necessarily  incurred  in  securing  the  attendance  and  testimony  of  witnesses  shall  be  itemized,  charged  against  and  paid  by  the  person  being  examined.  

§  991.1406.    Examination            (a)  Subject  to  the  limitation  contained  in  this  section  and  in  addition  to  the  powers  which  the  department  has  under  law  relating  to  the  examination  of  insurers,  the  department  shall  also  have  the  power  to  examine  an  insurer  registered  under  section  1404  and  its  affiliates  to  ascertain  the  financial  condition  of  the  insurer,  including  the  enterprise  risk  to  the  insurer  by:            (1)  the  ultimate  controlling  person;            (2)  an  entity  or  combination  of  entities  within  the  insurance  holding  company  system;  or            (3)  the  insurance  holding  company  system  on  a  consolidated  basis.            (a.1)  The  department  may  order  an  insurer  registered  under  section  1404  to  produce  records,  books  or  other  information  papers  in  the  possession  of  the  insurer  or  its  affiliates  as  are  reasonably  necessary  to  ascertain  the  financial  condition  of  the  insurer  or  to  determine  compliance  with  this  article.            (a.2)  To  ascertain  the  financial  condition  of  the  insurer,  including  the  enterprise  risk  to  the  insurer  by:            (1)  the  ultimate  controlling  person;            (2)  an  entity  or  combination  of  entities  within  the  insurance  holding  company  system;  or            (3)  the  insurance  holding  company  system  on  a  consolidated  basis,      the  department  may  order  an  insurer  registered  under  section  1404  to  produce  information  not  in  the  possession  of  the  insurer  if  the  insurer  can  obtain  access  to  the  information  under  a  contractual  relationship,  a  statutory  obligation  or  other  method.  If  the  insurer  may  not  obtain  the  information  requested  by  the  department,  the  insurer  shall  provide  the  department  a  detailed  explanation  of  the  reason  the  insurer  may  not  obtain  the  information  and  the  identity  of  the  holder  of  information.  If  the  insurer  fails  to  comply  with  this  subsection  or  the  department  determines  that  the  detailed  explanation  is  without  merit,  the  department  may  suspend  or  revoke  the  insurer's  license  or  require  the  insurer  to  pay  an  administrative  penalty  of  one  thousand  dollars  ($  1,000)  per  day  until  the  information  is  produced.  The  proceeding  for  suspension,  revocation  or  imposition  of  a  penalty  shall  be  conducted  pursuant  to  2  Pa.C.S.  (relating  to  administrative  law  and  procedure).            (b)  The  department  may  retain  at  the  registered  insurer's  expense  such  attorneys,  actuaries,  accountants  and  other  experts  not  otherwise  a  part  of  the  department's  

staff  as  shall  be  reasonably  necessary  to  assist  in  the  conduct  of  the  examination  under  subsections  (a),  (a.1)  and  (a.2).  Any  persons  so  retained  shall  be  under  the  direction  and  control  of  the  department  and  shall  act  in  a  purely  advisory  capacity.            (c)  Each  registered  insurer  producing  for  examination  records,  books  and  papers  pursuant  to  subsections  (a),  (a.1)  and  (a.2)  shall  be  liable  for  and  shall  pay  the  expense  of  such  examination  as  provided  for  in  Article  IX  of  the  act  of  May  17,  1921  (P.L.  789,  No.  285),  known  as  "The  Insurance  Department  Act  of  one  thousand  nine  hundred  and  twenty-­‐one."            (d)  If  the  insurer  fails  to  comply  with  an  order  issued  under  this  section,  the  department  has  the  power  to  examine  the  insurer's  affiliates  to  obtain  the  information  necessary  to  determine  an  insurer's  compliance  with  this  section.  The  department  also  has  the  power  to:            (1)  issue  subpoenas;            (2)  administer  oaths;  and            (3)  examine  under  oath  any  person  as  to  any  matter  pertinent  to  determining  compliance  with  this  section.      Upon  the  failure  or  refusal  of  a  person  to  obey  a  subpoena,  the  department  may  petition  a  court  of  competent  jurisdiction  and,  upon  proper  showing,  the  court  may  enter  an  order  compelling  the  witness  to  appear  and  testify  or  produce  documentary  evidence.  Failure  to  obey  the  court  order  shall  be  punishable  as  contempt  of  court.  When  subpoenaed,  a  person  shall  attend  as  a  witness  at  the  place  specified  in  the  subpoena.  Witnesses  shall  be  paid  the  same  fees  and  mileage  as  are  paid  to  witnesses  in  the  courts  of  this  Commonwealth.  Fees,  mileage  and  expense  necessarily  incurred  in  securing  the  attendance  and  testimony  of  witnesses  shall  be  itemized,  charged  against  and  paid  by  the  person  being  examined.  

§  991.1409.    Injunctions  and  certain  prohibitions            (a)  Whenever  it  appears  to  the  department  that  any  insurer  or  any  director,  officer,  employe  or  agent  thereof  has  committed  or  is  about  to  commit  a  violation  of  this  article  or  of  any  regulation  or  order  issued  by  the  department  hereunder,  the  department  may  apply  to  the  Commonwealth  Court  for  an  order  enjoining  such  insurer  or  such  director,  officer,  employe  or  agent  thereof  from  violating  or  continuing  to  violate  this  article  or  any  such  regulation  or  order,  and  for  such  other  equitable  relief  as  the  nature  of  the  case  and  the  interest  of  the  insurer's  policyholders,  creditors  and  shareholders  or  the  public  may  require.            (b)  No  security  which  is  the  subject  of  any  agreement  or  arrangement  regarding  acquisition,  or  which  is  acquired  or  to  be  acquired,  in  contravention  of  the  provisions  of  this  article  or  of  any  regulation  or  order  issued  by  the  department  hereunder  may  be  voted  at  any  shareholder's  meeting,  or  may  be  counted  for  quorum  purposes,  and  any  action  of  shareholders  requiring  the  affirmative  vote  of  a  percentage  of  shares  may  be  taken  as  though  such  securities  were  not  issued  and  outstanding,  but  no  action  taken  at  any  such  meeting  shall  be  invalidated  by  the  voting  of  such  securities  unless  the  action  would  materially  affect  control  of  the  insurer  or  unless  the  courts  of  this  Commonwealth  have  so  ordered.  If  an  insurer  or  the  department  has  reason  to  believe  that  any  security  of  the  insurer  has  been  or  is  about  to  be  acquired  in  contravention  of  the  provisions  of  this  article  or  of  any  regulation  or  order  issued  by  the  department  hereunder,  the  insurer  or  the  department  may  apply  to  the  Commonwealth  Court  to  enjoin  any  offer,  request,  invitation,  agreement  or  acquisition  made  in  contravention  of  section  1402,  or  any  regulation  or  order  issued  by  the  department  thereunder  to  enjoin  the  voting  of  any  security  so  acquired,  to  void  any  vote  of  such  security  already  cast  at  any  meeting  of  shareholders  and  for  such  other  equitable  relief  as  the  nature  of  the  case  and  the  interest  of  the  insurer's  policyholders,  creditors  and  shareholders  or  the  public  may  require.            (c)  In  any  case  where  a  person  has  acquired  or  is  proposing  to  acquire  any  voting  securities  in  violation  of  this  article  or  any  regulation  or  order  issued  by  the  department  hereunder,  the  Commonwealth  Court  may,  on  such  notice  as  the  court  deems  appropriate,  upon  the  application  of  the  insurer  or  the  department  seize  or  sequester  any  voting  securities  of  the  insurer  owned  directly  or  indirectly  by  such  person  and  issue  such  order  with  respect  thereto  as  may  be  appropriate  to  effectuate  the  provisions  of  this  article.            (d)  Notwithstanding  any  other  provisions  of  law,  for  the  purposes  of  this  article,  the  situs  of  the  ownership  of  the  securities  of  domestic  insurers  shall  be  deemed  to  be  in  this  Commonwealth.  

§  991.1408.    Regulations            The  department  may,  in  the  manner  provided  by  law,  promulgate  the  regulations,  and  may  issue  such  orders  as  are  necessary  to  carry  out  this  article.  

§  991.1410.    Sanctions            (a)  A  person  failing  to  file  any  registration  statement  or  any  summary  of  the  registration  statement  or  enterprise  risk  report  as  required  by  this  article  or  by  regulation  shall  be  required  to  pay  a  penalty  not  to  exceed  two  hundred  ($  200)  dollars  for  each  day's  delay.  The  maximum  penalty  under  this  section  is  twenty-­‐five  thousand  ($  25,000)  dollars.            (b)  Every  director  or  officer  of  an  insurance  holding  company  system  who  knowingly  violates,  participates  in  or  assents  to  or  who  knowingly  shall  permit  any  of  the  officers  or  agents  of  the  insurer  to  engage  in  transactions  or  make  investments  which  have  not  been  properly  reported  or  submitted  pursuant  to  section  1404(a)  or  1405(a)(2)  and  (b)  or  which  violate  this  article  shall  pay,  in  their  individual  capacity,  a  civil  forfeiture  of  not  more  than  twenty-­‐five  thousand  ($  25,000)  dollars  per  violation,  after  notice  and  hearing  before  the  department.  In  determining  the  amount  of  the  civil  forfeiture,  the  department  shall  take  into  account  the  appropriateness  of  the  forfeiture  with  respect  to  the  gravity  of  the  violation,  the  history  of  previous  violations  and  such  other  matters  as  justice  may  require.            (c)  Whenever  it  appears  to  the  department  that  any  insurer  subject  to  this  article  or  any  director,  officer,  employe  or  agent  thereof  has  engaged  in  any  transaction  or  entered  into  a  contract  which  is  subject  to  section  1205  and  which  would  not  have  been  approved  had  such  approval  been  requested,  the  department  may  order  the  insurer  to  cease  and  desist  immediately  any  further  activity  under  the  transaction  or  contract.  After  notice  and  hearing  the  department  may  also  order  the  insurer  to  void  any  such  contracts  and  restore  the  status  quo  if  such  action  is  in  the  best  interest  of  the  policyholders,  creditors  or  the  public.            (d)  Whenever  it  appears  to  the  department  that  any  insurer  or  any  director,  officer,  employe  or  agent  thereof  has  committed  a  wilful  violation  of  this  article,  the  department  may  cause  criminal  proceedings  to  be  instituted  in  the  common  pleas  court  for  the  county  in  which  the  principal  office  of  the  insurer  is  located  or,  if  such  insurer  has  no  such  office  in  this  State,  then  in  any  other  court  having  jurisdiction  against  such  insurer  or  the  responsible  director,  officer,  employe  or  agent  thereof.  Any  insurer  which  wilfully  violates  this  article  may  be  fined  not  more  than  one  hundred  thousand  ($  100,000)  dollars.  Any  individual  who  wilfully  violates  this  article  may  be  fined  in  his  individual  capacity  not  more  than  fifty  thousand  ($  50,000)  dollars  or  be  imprisoned  for  not  more  than  one  (1)  to  three  (3)  years,  or  both.            (e)  Any  officer,  director  or  employe  of  an  insurance  holding  company  system  who  wilfully  and  knowingly  subscribes  to  or  makes  or  causes  to  be  made  any  false  statements  or  false  reports  or  false  filings  with  the  intent  to  deceive  the  department  in  the  performance  of  its  duties  under  this  article  shall,  upon  conviction,  be  

sentenced  to  pay  a  fine  of  one  hundred  thousand  ($  100,000)  dollars  or  to  imprisonment  for  not  more  than  three  (3)  years,  or  both.  Any  fines  imposed  shall  be  paid  by  the  officer,  director  or  employe  in  his  individual  capacity.            (f)  Whenever  it  appears  to  the  department  that  a  person  has  committed  a  violation  of  this  article  that  prevents  the  full  understanding  of  the  enterprise  risk  to  the  insurer  by  affiliates  or  by  the  insurance  holding  company  system,  the  violation  may  serve  as  an  independent  basis  for  disapproving  dividends  or  distributions  and  for  placing  the  insurer  under  an  order  of  supervision  in  accordance  with  section  511  of  the  act  of  May  17,  1921  (P.L.  789,  No.  285),  known  as  "The  Insurance  Department  Act  of  1921."  

§  991.1412.    Recovery            (a)  If  an  order  for  liquidation  or  rehabilitation  of  a  domestic  insurer  has  been  entered,  the  statutory  liquidator  appointed  under  such  order  shall  have  a  right  to  recover  on  behalf  of  the  insurer:            (i)  from  any  parent  corporation  or  holding  company  or  person  or  affiliate  who  otherwise  controlled  the  insurer,  the  amount  of  distributions,  other  than  the  distributions  of  shares  of  the  same  class  of  stock,  paid  by  the  insurer  on  its  capital  stock;  or            (ii)  any  payment  in  the  form  of  a  bonus,  termination  settlement  or  extraordinary  lump  sum  salary  adjustment  made  by  the  insurer  or  its  subsidiaries  to  a  director,  officer  or  employe,  where  the  distribution  or  payment  pursuant  to  this  subsection  is  made  at  any  time  during  the  one  year  preceding  the  petition  for  liquidation,  conservation  or  rehabilitation,  as  the  case  may  be,  subject  to  the  limitations  of  subsections  (b),  (c)  and  (d).            (b)  No  such  distribution  shall  be  recoverable  if  the  parent  or  affiliate  shows  that  when  paid  such  distribution  was  lawful  and  reasonable  and  that  the  insurer  did  not  know  and  could  not  reasonably  have  known  that  such  distribution  might  adversely  affect  the  ability  of  the  insurer  to  fulfill  its  contractual  obligations.            (c)  Any  person  who  was  a  parent  corporation  or  holding  company  or  a  person  who  otherwise  controlled  the  insurer  or  affiliate  at  the  time  such  distributions  were  paid  shall  be  liable  up  to  the  amount  of  distributions  or  payments  under  subsection  (a)  such  person  received.  Any  person  who  otherwise  controlled  the  insurer  at  the  time  such  distributions  were  declared  shall  be  liable  up  to  the  amount  of  distributions  he  would  have  received  if  they  had  been  paid  immediately.  If  two  or  more  persons  are  liable  with  respect  to  the  same  distributions,  they  shall  be  jointly  and  severally  liable.            (d)  The  maximum  amount  recoverable  under  this  section  shall  be  the  amount  needed  in  excess  of  all  other  available  assets  of  the  impaired  or  insolvent  insurer  to  pay  the  contractual  obligations  of  the  impaired  or  insolvent  insurer  and  to  reimburse  any  guaranty  funds.            (e)  To  the  extent  that  any  person  liable  under  subsection  (c)  of  this  section  is  insolvent  or  otherwise  fails  to  pay  claims  due  from  it  pursuant  to  that  subsection,  its  parent  corporation  or  holding  company  or  person  who  otherwise  controlled  it  at  the  time  the  distribution  was  paid  shall  be  jointly  and  severally  liable  for  any  resulting  deficiency  in  the  amount  recovered  from  such  parent  corporation  or  holding  company  or  person  who  otherwise  controlled  it.  

991.1411.    Receivership            Whenever  it  appears  to  the  department  that  any  person  has  committed  a  violation  of  this  article  which  so  impairs  the  financial  condition  of  a  domestic  insurer  as  to  threaten  insolvency  or  make  the  further  transaction  of  business  by  it  hazardous  to  its  policyholders,  creditors,  shareholders  or  the  public,  the  department  may  proceed,  in  the  manner  provided  by  law,  to  take  possession  of  the  property  of  such  domestic  insurer  and  to  conduct  the  business  thereof.  

§  991.1413.    Revocation,  suspension  or  nonrenewal  of  insurer's  license            Whenever  it  appears  to  the  department  that  any  person  has  committed  a  violation  of  this  article  which  makes  the  continued  operation  of  an  insurer  contrary  to  the  interests  of  policyholders  or  the  public,  the  department  may,  after  giving  notice  and  an  opportunity  to  be  heard,  determine  to  suspend,  revoke  or  refuse  to  renew  such  insurer's  license  or  authority  to  do  business  in  this  Commonwealth  for  such  period  as  it  finds  is  required  for  the  protection  of  policyholders  or  the  public.  Any  such  determination  shall  be  accompanied  by  specific  findings  of  fact  and  conclusions  of  law.  

CHAPTER 25. RULES AND PROCEDURAL REQUIREMENTS FORINSURANCE HOLDING COMPANY SYSTEMS

Sec.25.1. Definitions.25.2. [Reserved].25.3—25.7. [Reserved].25.8. Waivers.25.9. [Reserved].25.10. [Reserved].25.11. Expenses of experts and consultants.25.12. Forms—general requirements.25.13. Forms—incorporation by reference, summaries and omissions.25.14. Forms—information unknown or unavailable and extension of time

to furnish.25.15. Forms—additional information and exhibits.25.16. Acquisition of control—statement filings.25.17. Annual registration of insurers—statement filing.25.18. Summary of registration—statement filing.25.19. Alternative and consolidated registrations.25.20. Disclaimers and termination of registration.25.21. Transactions subject to prior notice—notice filing.25.22. All dividends and other distributions.25.23. Adequacy of surplus.

Authority

The provisions of this Chapter 25 issued under sections 214 and 216 of The Insurance DepartmentAct of 1921 (40 P. S. §§ 52 and 54), unless otherwise noted.

Source

The provisions of this Chapter 25 adopted June 12, 1968, unless otherwise noted.

Cross References

This section cited in 31 Pa. Code § 21.29 (relating to qualified or restricted stock options; accep-tance of general tender offers).

§ 25.1. Definitions.

(a) The following words and terms, when used in this chapter, have the fol-lowing meanings, unless the context clearly indicates otherwise:

Act—The Insurance Company Law of 1921 (40 P. S. §§ 341—991.1718).Commissioner—The Insurance Commissioner of the Commonwealth.Corporation—A corporation organized under a law of the Commonwealth or

under the laws of another state, or having an office or transacting business inthis Commonwealth.

Department—The Insurance Department of the Commonwealth.

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Executive officer—A chief executive officer, chief operating officer, chieffinancial officer, president, treasurer, secretary, controller and other individualperforming functions corresponding to those performed by the foregoing offic-ers under whatever title.

NAIC—The National Association of Insurance Commissioners.Surplus—Total assets less total liabilities as calculated and reported in accor-

dance with the annual statement instructions and accounting practices and pro-cedures manual prescribed by the NAIC or as otherwise required by the Com-missioner for annual financial statements filed with the Department.

Ultimate controlling person—A person which is not controlled by anotherperson. An ultimate controlling person may be one or more of the following:individual, corporation, limited liability company, partnership, association, jointstock company, trust, unincorporated organization, or any similar entity orcombination of the foregoing who controls another person.(b) Unless the context otherwise requires, other terms found in this chapter

are used as defined in Article XIV of the act (40 P. S. §§ 991.1401—991.1413).

Authority

The provisions of this § 25.1 amended under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8)

Source

The provisions of this § 25.1 amended September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial pages (245443) to (245444).

§ 25.2. [Reserved].

Source

The provisions of this § 25.2 amended September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; reserved August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial page (245444).

§ 25.3—25.7. [Reserved].

Source

The provisions of these §§ 25.3—25.7 reserved September 3, 1993, effective September 4, 1993,23 Pa.B. 4216. Immediately preceding text appears at serial pages (7603) to (7605) and (72763).

§ 25.8. Waivers.This chapter does not constitute a waiver by the Department of its authority, for

the purpose of examining into the affairs of a corporation proposing to acquire oroffering to acquire voting securities of an insurer or a person which controls aninsurer, to have free access to its books and papers which relate to its business,

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and to the books and papers kept by any of its agents. The Department may sum-mon, and administer the oath to, and examine as witnesses, the directors, officersand agents of the person and other persons, relative to its affairs, transactions andcondition.

Authority

The provisions of this § 25.8 amended under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413).

Source

The provisions of this § 25.8 amended September 3, 1993, effective September 4, 1993, 23 Pa.B.4216. Immediately preceding text appears at serial page (72763).

§ 25.9. [Reserved].

Source

The provisions of this § 25.9 adopted February 27, 1969; reserved September 3, 1993, effectiveSeptember 4, 1993, 23 Pa.B. 4216. Immediately preceding text appears at serial pages (72763) to(72764).

§ 25.10. [Reserved].

Source

The provisions of this § 25.10 adopted October 1, 1971, effective October 2, 1971, 1 Pa.B. 1925;reserved September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216. Immediately preceding textappears at serial pages (72764), (7608) to (7611) and (72765).

§ 25.11. Expenses of experts and consultants.(a) Under sections 1402(f)(3) and 1405(a)(4) of the act (40 P. S.

§§ 991.1402(f)(3) and 991.1405(a)(4)), the Department may retain attorneys,actuaries, accountants and other experts not otherwise a part of the Department’sstaff as may be reasonably necessary to assist the Department in the evaluationof a filing under this chapter. The Department will provide the person filing withwritten notice of the engagement of an outside expert, including the expert’sname, the terms of engagement and a cost estimate, and will consider any pos-sible cost-saving alternatives suggested by the person filing.

(b) The cost of experts retained by the Department will be charged to andpaid by the person filing the statements or a designee of the person acceptable tothe Department.

(c) The Department will require hourly charges for experts retained by theDepartment be comparable to prevailing rates for the services.

(d) In addition to hourly charges, the Department will require that charges fortravel, lodging and food expenses of experts retained by the Department be com-parable to prevailing rates for similar services and made in accordance with pro-visions set forth in letters of engagement.

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Authority

The provisions of this § 25.11 amended under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.11 adopted July 30, 1982, effective July 31, 1982, 12 Pa.B. 2382;amended September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001,effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages(245445) to (245446).

§ 25.12. Forms—general requirements.

(a) Forms A—E located in Appendix A are intended to be guides in thepreparation of the statements required by sections 1402—1405 of the act (40 P. S.§§ 991.1402—991.1405). They are not intended to be blank forms which are tobe filled in. The forms filed shall contain the numbers and captions of all items,but the text of the items may be omitted if the answers are prepared in a mannerthat indicates clearly the scope and coverage of the items. Instructions, whetherappearing under the items of the form or elsewhere therein, shall be omitted.Unless expressly provided otherwise, if an item is inapplicable or the answerthereto is in the negative, an appropriate statement to that effect shall be made.

(b) Two copies of Forms A and E and one copy of Forms B—D, includingexhibits and other papers and documents filed as a part thereof, shall be filed withthe Commissioner by personal delivery, mail, facsimile or other form of elec-tronic transmission acceptable to the Department. At least one copy shall besigned in the manner prescribed on the form. Unsigned copies shall be con-formed. If the signature of a person is affixed under a power of attorney or othersimilar authority, a copy of the power of attorney or other authority shall also befiled with the form.

(c) One of the filed copies of Form A shall be available for public inspectionas of the date the initial filing is made; except that copies of personal financialstatements of nonpublicly held ultimate controlling persons shall be given confi-dential treatment. Form A filings also may contain or reference other materialsthat are confidential, proprietary or privileged under statute, regulation, case law,administrative or court order, or other authority. If a person filing a Form Awishes to assert that materials included or referenced within the filing are confi-dential, proprietary or privileged and should not be available for public inspec-tion, the person shall notify the Department at the time the initial filing is madeas follows:

(1) Identify the specific information, document, report or other materialthat is asserted to be confidential, proprietary or privileged.

(2) State the basis upon which the assertion of confidentiality, proprietaryor privilege is premised.

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(3) Identify the person to whom inquiries regarding the issue of confiden-tial treatment should be directed.

(4) Submit one copy of the filing with the materials asserted to be confi-dential, proprietary or privileged physically separate from the remainder of thefiling, or as otherwise instructed by the Department.(d) Forms shall be prepared on 8 1/2 inches x 11 inches paper and preferably

bound at the top or the top left-hand corner. Exhibits and financial statements,unless specifically prepared for the filing, may be submitted in their original size.Copies of forms, financial statements or exhibits shall be clear, easily readableand suitable for photocopying. Debits in credit categories and credits in debit cat-egories shall be designated so that they are clearly distinguishable on photo-copies.

(e) Forms shall be completed in the English language and monetary valuesshall be stated in United States currency. If a financial statement, exhibit or otherpaper or document filed with the form is in a foreign language, it shall be accom-panied by a translation into the English language and monetary value shown in aforeign currency normally shall be converted into United States currency utiliz-ing the conversion rate in effect as of the financial statement date.

Authority

The provisions of this § 25.12 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.12 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial pages (245446) to (245447).

§ 25.13. Forms—incorporation by reference, summaries and omissions.

(a) Information required in Form A, B, D or E located in Appendix A may beincorporated by reference as provided in this subsection if the incorporationwould not make the information provided in the form incomplete, unclear orconfusing. Information required by an item in Form A, B, D or E may be incor-porated by reference in answer or partial answer to another item. Informationcontained in a financial statement, annual report, proxy statement, statement filedwith a governmental authority or another document may be incorporated by ref-erence in answer or partial answer to an item in Form A, B, D or E if the docu-ment or paper is filed as an exhibit to the form. Excerpts of documents may befiled as exhibits if the documents are extensive. Documents currently on file withthe Commissioner which were filed within the immediately preceding 3 yearsneed not be attached as exhibits if there has been no change in the informationalready on file. References to information contained in exhibits or in documents

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already on file shall clearly identify the material and shall specifically indicatethat the material is to be incorporated by reference in answer to the item.

(b) If an item requires a summary or outline of the provisions of a document,only a brief statement shall be made as to the pertinent provisions of the docu-ment. In addition to the brief statement, the summary or outline may incorporateby reference particular parts of an exhibit or document currently on file with theCommissioner which was filed within the immediately preceding 3 years andmay be qualified in its entirety by that reference. When two or more documentsrequired to be filed as exhibits are substantially identical in all material respects,except as to the parties thereto, the dates of execution or other details, a copy ofonly one of the documents needs be filed with a schedule identifying the omitteddocuments and setting forth the material details in which the omitted documentsdiffer from the document which is filed.

Authority

The provisions of this § 25.13 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of the Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.13 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial page (245447).

§ 25.14. Forms—information unknown or unavailable and extension oftime to furnish.

(a) Information required need be given only insofar as it is known or reason-ably available to the person filing the form. If required information is unknownand not reasonably available to the person filing, either because the obtainingthereof would involve unreasonable effort or expense, or because it rests pecu-liarly within the knowledge of another person not affiliated with the person fil-ing, the information may be omitted, subject to the following conditions. Theperson filing shall:

(1) Give information on the subject as it possesses or can acquire withoutunreasonable effort or expense, together with the sources thereof.

(2) Include a statement either showing that unreasonable effort or expensewould be involved or indicating the absence of an affiliation with the personwithin whose knowledge the information rests and stating the result of arequest made to that person for the information.(b) If it is impractical to furnish required information, document or report at

the time it is required to be filed, there may be filed with the Commissioner aseparate document:

(1) Identifying the information, document or report in question.(2) Stating why the filing thereof at the time required is impractical.

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(3) Requesting an extension of time for filing the information, document orreport to a specified date. The request for extension shall be deemed grantedunless the Commissioner within 30 days after receipt thereof denies therequest.

Authority

The provisions of this § 25.14 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law (40 P. S.§ 459.8).

Source

The provisions of this § 25.14 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial page (245448).

§ 25.15. Forms—additional information and exhibits.(a) In addition to the information expressly required to be included in Forms

A—E located in Appendix A, the person filing shall provide further materialinformation, if any, as necessary for the completion or clarity of the informationexpressly required in the form. The person filing may also file exhibits as desiredin addition to those expressly required by the form. The exhibits shall be markedto indicate clearly the subject matters to which they refer. The Commissioner mayrequire the person filing the form to provide additional information as may benecessary to determine compliance with the act.

(b) Changes to Form A, B, C, D or E shall include on the top of the first pagethe phrase: ‘‘Change No. (insert number) to’’ and shall indicate the date of thechange and not the date of the original filing.

Authority

The provisions of this § 25.15 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law (40 P. S.§ 459.8).

Source

The provisions of this § 25.15 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial pages (245448) to (245449).

§ 25.16. Acquisition of control—statement filings.(a) A person required to file a statement under section 1402 of the act (40

P. S. § 991.1402) shall furnish the required information on Form A located inAppendix A as prescribed by this chapter. If the information requirements in sec-tion 1403(c)(2) and the criteria in section 1403(d)(2) of the act (40 P. S.§§ 991.1403(c)(2) and 991.1403(d)(2)) (relating to the competitive impact of an

Ch. 25 INSURANCE HOLDING COMPANY SYSTEMS 31 § 25.15

25-7(281685) No. 323 Oct. 01

acquisition in this Commonwealth) apply to a Form A filing, the person shall alsofurnish the required information on Form E located in Appendix A as prescribedby this chapter.

(b) A person filing a request under section 1402(g) of the act for an exemp-tion from section 1402 of the act is not required to file a Form A as prescribedby this chapter but shall provide information deemed by the Commissioner asnecessary to determine that an offer, request, invitation, agreement or acquisitiondoes either of the following:

(1) Has not been made or entered into for the purpose and will not havethe effect of changing or influencing the control of a domestic insurer.

(2) Otherwise is not comprehended within the purposes of section 1402 ofthe act.(c) A person required to file a preacquisition notification under section

1403(b) of the act for an acquisition not subject to a Form A filing under section1402 of the act shall file Form E as prescribed by this chapter.

(d) Under section 1403(c)(2) of the act the Department may require materialand information in addition to the information required by Form E as reasonablynecessary to determine whether the proposed acquisition, if consummated, wouldexceed the competitive standard of section 1403(d) of the act. The additionalinformation required may include an opinion of an economist as to the competi-tive impact in this Commonwealth of an acquisition that would exceed the com-petitive standard of section 1403(d) of the act. The opinion shall be obtained bythe person filing the form and shall be accompanied by a summary of the econo-mist’s education and experience indicating the economist’s ability to render aninformed opinion.

(e) Under section 1402(d) of the act, a person shall file with the Departmentand send to the insurer an amendment disclosing a material change in the infor-mation furnished on Forms A and E within 2 business days after the person learnsof the change. If the acquiring person is not an individual, a material changeincludes changes in directors, executive officers or owners of 10% or more of thevoting securities of the acquiring person. In addition, the person shall file with theDepartment and send to the insurer within 5 business days an amendment disclos-ing a change other than a material change in the information furnished on FormsA and E arising after the date on which the form was filed but before a determi-nation is made on the filing.

(f) If the person being acquired is deemed to be a ‘‘domestic insurer’’ undersection 1402(a)(2) of the act, the name of the domestic insurer on the first pageof Forms A and E shall be indicated as follows: ‘‘ABC Insurance Company, asubsidiary of XYZ Holding Company.’’

(g) If a person deemed to be a ‘‘domestic insurer’’ under section 1402(a)(2)of the act is being acquired, references to ‘‘the insurer’’ in Forms A and E shallrefer to both the domestic subsidiary insurer and the person being acquired.

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Authority

The provisions of this § 25.16 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law (40 P. S.§ 459.8).

Source

The provisions of this § 25.16 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial page (245449)

§ 25.17. Annual registration of insurers—statement filing.

(a) An insurer required to file an annual registration statement under section1404 of the act (40 P. S. § 991.1404) shall furnish the required information onForm B as prescribed by this chapter.

(b) Under section 1404(a) of the act, an insurer shall file a Form B located inAppendix A within 15 days after becoming subject to registration and annuallythereafter by March 31 of each year. If the Commissioner approves a merger oracquisition of control, the domestic insurer being acquired shall file a properlycompleted Form B within 15 days of the end of the month in which the mergeror acquisition is consummated.

(c) An amendment to Form B shall be filed within 15 days after the end ofa month in which there is a material change to the information provided in theannual registration statement, including changes in officers or directors listed inItem 4 of Form B. An amendment to Form B is not required if a material changehas been reported as a dividend, other distribution to shareholders, or other trans-action under §§ 25.21 and 25.22 (relating to transactions subject to prior notice—notice filing; and all dividends and other distributions), and there has been nochange in the reported information.

(d) Amendments shall be filed in the Form B format with only items whichare being amended reported. Each amendment shall include at the top of the firstpage ‘‘Amendment No. (insert number) to Form B for (insert year of most recentfiling)’’ and shall indicate the date of the amendment and not the date of theoriginal filing.

Authority

The provisions of this § 25.17 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.17 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial pages (245449) to (245450).

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§ 25.18. Summary of registration—statement filing.

An annual registration statement filed under section 1404 of the act (40 P. S.§ 991.1404) shall include the information required on Form C located in Appen-dix A as prescribed by this chapter. A copy of Form C shall be filed in any juris-diction in which an insurer is authorized to do business, if requested by the chiefinsurance regulatory official of the jurisdiction.

Authority

The provisions of this § 25.18 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.18 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial page (245450).

§ 25.19. Alternative and consolidated registrations.

(a) Under section 1404(i) of the act (40 P. S. § 991.1404(i)) an insurer autho-rized to do business in this Commonwealth may file a registration statement onbehalf of an affiliated insurer which is required to register under section 1404 ofthe act. A registration statement may include information regarding an insurer inthe insurance holding company system even if the insurer is not authorized to dobusiness in this Commonwealth. In lieu of filing a registration statement on FormB located in Appendix A, an insurer authorized to do business in this Common-wealth may file a copy of the registration statement or similar report which it isrequired to file in its state of domicile, if:

(1) The statement or report contains substantially similar informationrequired to be furnished on Form B.

(2) The filing insurer is the principal insurance company in the insuranceholding company system.(b) The question of whether the filing insurer is the principal insurance com-

pany in the insurance holding company system is a question of fact. An insurerfiling a registration statement or report in lieu of Form B on behalf of an affili-ated insurer shall set forth a brief statement of facts to substantiate the filinginsurer’s claim that it, in fact, is the principal insurer in the insurance holdingcompany system.

(c) With the prior approval of the Commissioner, an unauthorized insurermay follow any of the procedures which could be done by an authorized insurerunder subsection (a).

(d) An insurer may take advantage of the provisions of section 1404(h) or (i)of the act without obtaining the prior approval of the Commissioner. The Com-

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missioner reserves the right to require individual filings if the Commissionerdeems that the filings are necessary in the interest of clarity, ease of administra-tion or the public good.

Authority

The provisions of this § 25.19 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.19 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial pages (245450) to (245451).

§ 25.20. Disclaimers and termination of registration.(a) A disclaimer of affiliation or a request for termination of registration

under section 1404(g) and (k) of the act (40 P. S. § 991.1404(g) and (k)) claim-ing that a person does not, or will not upon the taking of some proposed action,control another person, referred to as the ‘‘subject,’’ within this chapter, shallcontain the following information:

(1) The number of authorized, issued and outstanding voting securities ofthe subject.

(2) With respect to the person whose control is denied and the affiliates ofthat person, the number and percentage of shares of the subject’s voting secu-rities which are held of record or known to be beneficially owned, and thenumber of the shares concerning which there is a right to acquire, directly orindirectly.

(3) The material relationships and bases for affiliation between the subjectand the person whose control is denied and the affiliates of that person.

(4) A statement explaining why the person should not be considered tocontrol the subject.(b) A request for termination of registration shall be deemed to have been

granted unless the Department, within 30 days after receipt of the request, noti-fies the registrant otherwise.

Authority

The provisions of this § 25.20 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.20 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial pages (245451) to (245452).

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25-11(281689) No. 323 Oct. 01

§ 25.21. Transactions subject to prior notice—notice filing.(a) An insurer required to give notice of a proposed transaction under section

1405(a)(2) of the act (40 P. S. § 991.1405(a)(2)) shall furnish the required infor-mation on Form D located in Appendix A as prescribed by this chapter.

(b) The insurer shall file an amendment to Form B reporting changes in theinformation furnished on Form D, including a change in the effective date of thetransaction, within 15 days after the end of a month in which the transaction iseffectuated.

(c) An insurer may not enter into a proposed transaction if a material changeoccurs in the information furnished on Form D unless the insurer has filed anamended Form D with the Department at least 30 days prior to entering into thetransaction, or a shorter period the Department may permit, and the Departmenthas not disapproved the amended transaction within that time period.

Authority

The provisions of this § 25.21 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.21 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial page (245452).

Cross References

This section cited in 31 Pa. Code § 25.17 (relating to annual registration of insurers—statement ofpolicy).

§ 25.22. All dividends and other distributions.(a) Under section 1404(e) of the act (40 P. S. § 991.1404(e)) a registered

insurer is required to report to the Department all dividends and other distribu-tions to shareholders within 5 business days following the declaration thereof andat least 10 days, commencing from the date of receipt by the Department, priorto payment thereof. The report shall include the information set forth in section1404(e) of the act and subsection (c)(1)—(5). The information set forth in sub-section (c)(5) is not required for dividends other than dividends reported undersection 1405(b) of the act (40 P. S. § 991.1405(b)) and dividends and other dis-tributions filed under section 337.8 of the act (40 P. S. § 459.8).

(b) Under section 337.8 of the act a domestic insurance company, associationor exchange may pay dividends and other distributions to shareholders only outof unassigned funds as defined in section 337.8(e) of the act or upon approval ofthe Commissioner. Information filed with the Commissioner under section 337.8of the act shall include the information set forth in subsection (c)(1)—(5).

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(c) Requests for approval of extraordinary dividends or another extraordinarydistribution to shareholders under section 1405(b) of the act shall include the fol-lowing:

(1) The amount of the proposed dividend or other distribution.(2) The date established for payment of the dividend or other distribution.(3) A statement as to whether the dividend or other distribution is to be in

cash or other property and, if in property, a description thereof, its cost and itsfair market value together with an explanation of the basis for valuation.

(4) A copy of the calculations determining that the proposed dividend orother distribution is or is not extraordinary. The work paper shall include thefollowing information with respect to the domestic insurer:

(i) The amounts, dates and form of payment of all dividends and otherdistributions made within the previous 12 consecutive months ending on thedate fixed for payment of the proposed dividend and commencing on the dayafter the same day of the same month in the last preceding year.

(ii) Surplus, total capital and surplus, as of the 31st day of Decembernext preceding.

(iii) The net income for the 12-month period ending the 31st of Decem-ber next preceding.(5) A balance sheet and statement of income for the period intervening

from the last annual statement filed with the Commissioner and the end of themonth preceding the month in which the request for dividend or other distribu-tion approval is submitted.

(6) A statement demonstrating the transaction’s compliance with section1405(d) of the act by describing the effect of the proposed dividend or otherdistribution upon the insurer’s surplus and the reasonableness of surplus inrelation to the insurer’s outstanding liabilities and the adequacy of surplus rela-tive to the insurer’s financial needs.(d) Reports of dividends and other distributions under this section shall

include on the top of the first page the phrase: ‘‘Notice of Dividend or Other Dis-tribution’’ and the name of the insurer.

(e) The insurer shall report changes in information furnished under subsec-tion (c) within 15 days after the end of a month in which the dividend or otherdistribution is paid. If the dividend or other distribution is required to be reportedon Form B located in Appendix A, the insurer shall report the changes as anamendment to Form B. If the dividend or other distribution is not subject to aForm B filing, the report of changes shall state on the top of the first page thephrase: ‘‘Change No. (insert number) to,’’ and shall include the date of thechange, date of declaration, amount paid, payment date, form of payment and thenature of and reason for the change.

(f) An insurer may not pay a dividend or other distribution under sections337.8 or 1405(b) of the act (40 P. S. §§ 459.8 and 991.1405(b)) if a materialchange occurs in the information reported under this section unless the insurer

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has filed an amended report with the Department at least 30 days prior to payingthe dividend or other distribution, or a shorter period the Department may permit,and the Department has not disapproved the amended report within that timeperiod.

Authority

The provisions of this § 25.22 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.22 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial pages (245452) to (245453).

Cross References

This section cited in Pa. Code § 25.17 (relating to annual registration of insurers—statement ofpolicy).

§ 25.23. Adequacy of surplus.The factors in section 1405(d) of the act (40 P. S. § 991.1405(d)) to be consid-

ered in determining whether an insurer’s surplus is reasonable in relation to theinsurer’s outstanding liabilities and adequate to its financial needs are notintended to be an exhaustive list. In determining the adequacy and reasonablenessof an insurer’s surplus, no single factor is necessarily controlling. The Commis-sioner will consider the net effect of these factors plus other factors bearing onthe financial condition of the insurer. In comparing the surplus maintained byother insurers, the Commissioner will consider the extent to which each of thesefactors varies from company to company. In determining the quality and liquidityof investments in subsidiaries, the Commissioner will consider the individualsubsidiary and may discount or disallow its valuation to the extent that the indi-vidual investments so warrant.

Authority

The provisions of this § 25.23 issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this § 25.23 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B.4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately precedingtext appears at serial page (245453).

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APPENDIX A

FORM A

STATEMENT REGARDING THE ACQUISITION OF CONTROL OF ORMERGER WITH A DOMESTIC INSURER

(Name of Domestic Insurer)BY: (Name of Acquiring Person (Applicant))Filed with the Insurance Department of the Commonwealth of PennsylvaniaDated:Name, title, address and telephone number of individual to whom notices andcorrespondence concerning this form should be addressed:

Item 1. Insurer and Method of Acquisition

State the name, NAIC code number and address of the domestic insurer towhich this application relates and a brief description of how control is to beacquired.

Item 2. Identity and Background of the Applicant

A. State the name and address of the applicant seeking to acquire control overthe insurer.

B. If the applicant is not an individual, state the nature of its business opera-tions for the past five (5) years or for such lesser period as the person and anypredecessors thereof shall have been in existence. Briefly describe the businessintended to be done by the applicant and the applicant’s subsidiaries.

C. Furnish a chart or listing clearly presenting the identities and the interrela-tionships among the applicant and all affiliates of the applicant. No affiliate needbe identified if its total assets are equal to less than 1/2 of 1% of the total assetsof an ultimate controlling person affiliated with the applicant. Indicate in the chartor listing the percentage of voting securities of each person which is owned orcontrolled by the applicant or by any other person. If control of any person ismaintained other than by the ownership or control of voting securities, indicatethe basis of control. As to each person specified in the chart or listing indicatethe type of organization (e.g. corporation, trust, partnership) and the state or otherjurisdiction of domicile. If court proceedings involving a reorganization or liqui-dation are pending with respect to any such person, indicate which person, andset forth the title of the court, nature of proceedings and the date when com-menced.

Item 3. Identity and Background of Individuals Associated with the Applicant

Furnish a biographical affidavit for (1) the applicant if the applicant is an indi-vidual or (2) all persons who are directors, executive officers or owners of 10%or more of the voting securities of the applicant if the applicant is not an indi-

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25-15(281693) No. 323 Oct. 01

vidual. Biographical affidavits filed with the Department within the immediatelypreceding 3 years need not be included if there has been no change in the infor-mation already on file.

Biographical affidavits shall be signed in the original and shall include the fol-lowing:

A. Name and business address.

B. Present principal business activity, occupation or employment includingposition and office held and the name, principal business and address of any cor-poration or other organization in which employment is carried on.

C. Material occupations, positions, offices or employment during the last five(5) years, giving the starting and ending date of each and the name, principalbusiness and address of any business corporation or other organization in whicheach occupation, position, office or employment was carried on. If any occupa-tion, position, office or employment required licensing by or registration with anyFederal, state or municipal governmental agency, indicate that fact, the currentstatus of the licensing or registration, and an explanation of any surrender, revo-cation, suspension or disciplinary proceedings in connection therewith.

D. Whether or not the person has ever been convicted in a criminal proceed-ing (excluding minor traffic violations) during the last ten (10) years and, if so,give the date, nature of conviction, name and location of court, and penaltyimposed or other disposition of the case.

The Department will accept copies of original, signed biographical affidavitsfiled with the chief insurance regulatory official of another jurisdiction if the fol-lowing conditions are met:

(1) The identity of the chief insurance regulatory official holding the origi-nal affidavit and the date of the original filing are provided in this statement.

(2) The original affidavit was filed within the immediately preceding threeyears.

(3) There has been no change in the information required in the affidavit.

Item 4. Nature, Source and Amount of Consideration

A. Describe the nature, source and amount of funds or other considerationsused or to be used in effecting the merger or other acquisition of control. If anypart of the same is represented or is to be represented by funds or other consid-eration borrowed or otherwise obtained for the purpose of acquiring, holding ortrading securities, furnish a description of the transaction, the names of the par-ties thereto, the relationship, if any, between the borrower, and the lender, theamounts borrowed or to be borrowed, and copies of all agreements, promissorynotes and security arrangements relating thereto.

B. Explain the criteria used in determining the nature and amount of the con-sideration.

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C. If the source of the consideration is a loan made in the lender’s ordinarycourse of business and if the applicant wishes the identity of the lender to remainconfidential, the applicant must specifically request that the identity be kept con-fidential.

Item 5. Future Plans of Insurer

Describe any plans or proposals which the applicant may have to declare anextraordinary dividend, to liquidate the insurer, to sell its assets to or merge itwith any person or persons or to make any other material change in its businessoperations or corporate structure or management.

Item 6. Voting Securities to be Acquired

State the number of shares of the insurer’s voting securities which the appli-cant, its affiliates and any person listed in Item 3 plan to acquire, and the termsof the offer, request, invitation, agreement or acquisition, and a statement as tothe method by which the fairness of the proposal was arrived at.

Item 7. Ownership of Voting Securities

State the amount of each class of any voting security of the insurer which isbeneficially owned or concerning which there is a right to acquire beneficialownership by the applicant, its affiliates or any person listed in Item 3.

Item 8. Contracts, Arrangements, or Understandings with Respect to VotingSecurities of the Insurer

Give a full description of any contracts, arrangements or understandings withrespect to any voting security of the insurer in which the applicant, its affiliatesor any person listed in Item 3 is involved, including, but not limited to, transferof any of the securities, joint ventures, loan or option arrangements, puts or calls,guarantees of loans, guarantees against loss or guarantees of profits, division oflosses or profits, or the giving or withholding of proxies. The description shallidentify the person with whom such contracts, arrangements or understandingshave been entered into.

Item 9. Recent Purchases of Voting Securities

Describe any purchases of any voting securities of the insurer by the applicant,its affiliates or any person listed in Item 3 during the twelve (12) calendar monthspreceding the filing of this statement.

Include in the description the dates of purchase, the name of the purchasers,and the consideration paid or agreed to be paid therefor.

State whether any shares so purchased are hypothecated.

Item 10. Recent Recommendations to Purchase

Describe any recommendations to purchase any voting security of the insurermade by the applicant, its affiliates or any person listed in Item 3, or by anyone

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based upon interviews or at the suggestion of the applicant, its affiliates or anyperson listed in Item 3 during the twelve (12) calendar months preceding the fil-ing of this statement.

Item 11. Agreements with Broker-Dealers

Describe the terms of any agreement, contract or understanding made with anybroker-dealer as to solicitation of voting securities of the insurer for tender andthe amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.

Item 12. Financial Statements and ExhibitsA. Financial statements and exhibits shall be attached to this statement as an

appendix, but list under this item the financial statements and exhibits soattached.

B. The financial statements shall include the annual financial statements of thepersons identified in Item 2(c) for the preceding five (5) fiscal years (or for suchlesser period as the applicant and its affiliates and any predecessors thereof shallhave been in existence), and similar information covering the period from the endof the person’s last fiscal year, if that information is available. Statements maybe prepared on either an individual basis, or, unless the Commissioner otherwiserequires, on a consolidated basis if consolidated statements are prepared in theusual course of business.

The annual financial statements of the applicant shall be accompanied by thecertificate of an independent public accountant to the effect that the statementspresent fairly the financial position of the applicant and the results of its opera-tions for the year then ended, in conformity with generally accepted accountingprinciples or with requirements of insurance or other accounting principles orpermitted under law. If the applicant is an insurer which is actively engaged inthe business of insurance, the financial statements need not be certified, providedthey are based on the Annual Statement of that person filed with the insurancedepartment of the person’s domiciliary state and are in accordance with therequirements of insurance or other accounting principles prescribed or permittedunder the law and regulations of that state.

C. If the acquiring person is an individual, the Department may require the fil-ing of Federal income tax returns in lieu of audited financial statements. Anyreturns filed shall be given confidential treatment and shall not be subject to sub-poena and shall not be made public by the Department or any other person.

D. File as exhibits copies of all tender offers for, requests or invitations for,tenders of, exchange offers for, and agreements to acquire or exchange any vot-ing securities of the insurer and (if distributed) of additional soliciting materialrelating thereto, any proposed employment, consultation, advisory or manage-ment contracts concerning the insurer, annual reports to the stockholders of theinsurer and the applicant for the last two fiscal years, and any additional docu-ments or papers required by this chapter.

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Item 13. Signature and CertificationSignature and certification required as follows:

SIGNATURE

Pursuant to the requirements of Section 1402 of the act hascaused this application to be duly signed on its behalf in the City of

and State of on the day of , .(SEAL)

Name of ApplicantBY (Name) (Title)

Attest:(Signature of Officer)

(Title)CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attachedapplication dated , , for and on behalf of

; that (s)he is the of such(Name of Applicant) (Title of Officer)

company and that (s)he is authorized to execute and file such instrument. Depo-nent further says that (s)he is familiar with such instrument and the contentsthereof, and that the facts therein set forth are true to the best of his/her knowl-edge, information and belief.(Signature)

(Type or print name beneath)

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25-19(281697) No. 323 Oct. 01

FORM B

INSURANCE HOLDING COMPANY SYSTEM ANNUAL REGISTRATIONSTATEMENT

Filed with the Insurance Department of the Commonwealth of Pennsylvania by(Name of Registrant) on behalf of the following insurance companies:

Name Address

NAIC Code Number State of DomicileDate: ,Name, title, address and telephone number of individual to whom notices andcorrespondence concerning this statement should be addressed:

Item 1. Identity and Control of Registrant

Furnish the exact name of each insurer registering or being registered (herein-after called ‘‘the Registrant’’), the home office address and principal executiveoffices of each; the date on which each Registrant became part of the insuranceholding company system; and the method(s) by which control of each Registrantwas acquired and is maintained.

Item 2. Organizational Chart

Furnish a chart or listing clearly presenting the identities of and interrelation-ships among all affiliated persons within the insurance holding company system.No affiliate need be shown if its total assets are equal to less than 1/2 of 1% ofthe total assets of an ultimate controlling person within the insurance holdingcompany system unless it has assets valued at or exceeding $5,000,000. The chartor listing should show the percentage of each class of voting securities of eachaffiliate which is owned, directly or indirectly, by another affiliate.

If control of any person within the system is maintained other than by theownership or control of voting securities, indicate the basis of such control. As toeach person specified in the chart or listing indicate the type of organization (e.g.,corporation, trust, partnership) and the state or other jurisdiction of domicile.

Item 3. Ultimate Controlling Person

As to an ultimate controlling person in the insurance holding company systemfurnish the following information:

A. Name.

B. Home office address.

C. Principal executive office address.

D. The organizational structure of the person, i.e., corporation, partnership,individual, trust, etc.

E. The principal business of the person.

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F. The name and address of any person who holds or owns 10% or more ofany class of voting security, the class of the security, the number of shares heldof record or known to be beneficially owned, and the percentage of class so heldor owned.

G. If court proceedings involving a reorganization or liquidation are pending,indicate the title and location of the court, the nature of proceedings and the datewhen commenced.

Item 4. Biographical Information

Furnish the following information for the directors and executive officers of anultimate controlling person in the form of biographical affidavits signed in theoriginal: the individual’s name and address, his or her principal occupation andall offices and positions held during the past five (5) years, and any conviction ofcrimes other than minor traffic violations during the past ten years. Biographicalaffidavits filed with the Department within the immediately preceding 3 yearsneed not be included if there has been no change in the information already onfile. The Department will accept copies of original, signed biographical affidavitsfiled with the chief insurance regulatory official of another jurisdiction if the fol-lowing conditions are met:

(1) The identity of the chief insurance regulatory official holding the origi-nal affidavit and the date of the original filing are provided in this statement.

(2) The original affidavit was filed within the immediately preceding 3years.

(3) There has been no change in the information required in the affidavit.

Item 5. Transactions and Agreements

Briefly describe the following agreements in force, and transactions currentlyoutstanding or which have occurred during the last calendar year, includingextraordinary dividends and other material transactions reported under §§ 25.21and 25.22 of this chapter, between the Registrant and its affiliates:

A. Loans, other investments, or purchases, sales or exchanges of securities ofthe affiliates by the Registrant or of the Registrant by its affiliates;

B. Purchases, sales or exchanges of assets;C. Transactions not in the ordinary course of business, including contributions

of assets to Registrant;D. Guarantees or undertakings for the benefit of an affiliate which result in an

actual contingent exposure of the Registrant’s assets to liability, other than insur-ance contracts entered into in the ordinary course of the Registrant’s business;

E. All management agreements, service contracts and all cost-sharing arrange-ments;

F. Reinsurance agreements;G. Dividends and other distributions to shareholders;H. Consolidated tax allocation agreements; and

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25-21(281699) No. 323 Oct. 01

I. Any pledge of the Registrant’s stock and/or of the stock of any subsidiary orcontrolling affiliate, for a loan made to any member of the insurance holdingcompany system.

Sales, purchases, exchanges, loans or extensions of credit, investments or guar-antees involving one-half of 1% or less of the Registrant’s admitted assets as ofthe 31st day of December next preceding shall not be deemed material and neednot be disclosed.

The description shall be in a manner as to permit the proper evaluation thereofby the Commissioner, and shall include at least the following: the effective date,nature and purpose of the transaction, the nature and amounts of any payments ortransfers of assets between the parties, the identity of all parties to the transac-tion, and relationship of the affiliated parties to the Registrant.

Item 6. Litigation or Administrative Proceedings

A brief description of any litigation or administrative proceedings of the fol-lowing types, either then pending or concluded within the preceding fiscal year,to which an ultimate controlling person or any of its directors or executive offic-ers was a party or of which the property of an ultimate controlling person or anyof its directors or executive officers is or was the subject; give the names of theparties and the court or agency in which the litigation or proceeding is or waspending:

A. Criminal prosecutions or administrative proceedings by any governmentagency or authority which may be relevant to the trustworthiness of any partythereto; and

B. Proceedings which may have a material effect upon the solvency or capitalstructure of an ultimate controlling person including, but not necessarily limitedto, bankruptcy, receivership or other corporate reorganizations.

Item 7. Statement Regarding Plan or Series of Transactions

The insurer shall furnish a statement that transactions entered into since the fil-ing of the prior year’s annual registration statement are not part of a plan or seriesof like transactions, the purpose of which is to avoid statutory threshold amountsand the review that might otherwise occur.

Item 8. Financial Statements and Exhibits

A. Financial statements and exhibits should be attached to this statement as anappendix, but list under this item the financial statements and exhibits soattached.

B. The financial statements shall include the annual financial statements of anyultimate controlling person in the insurance holding company system as of theend of the person’s latest fiscal year. Financial statements are required for anultimate controlling person who is an individual as well as for a corporation orother type of business organization.

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25-22(281700) No. 323 Oct. 01 Copyright � 2001 Commonwealth of Pennsylvania

If a holding company system includes more than one ultimate controlling per-son, annual financial statements are required for each ultimate controlling personunless the Commissioner, in the Commissioner’s discretion, finds that annualfinancial statements for one or more of the ultimate controlling persons are notnecessary to carry out the act.

If at the time of the initial registration, the annual financial statements for thelatest fiscal year are not available, annual statements for the previous fiscal yearmay be filed and similar financial information shall be filed for any subsequentperiod to the extent that information is available. Financial statements may beprepared on either an individual basis, or unless the Commissioner otherwiserequires, on a consolidated basis if the consolidated statements are prepared in theusual course of business.

Unless the Commissioner otherwise permits, the annual financial statementsshall be accompanied by the certificate of an independent public accountant to theeffect that the statements present fairly the financial position of an ultimate con-trolling person and the results of its operations for the year then ended, in con-formity with generally accepted accounting principles or with requirements ofinsurance or other accounting principles prescribed or permitted under law. If anultimate controlling person is an insurer which is actively engaged in the businessof insurance, the annual financial statements need not be certified, provided theyare based on the Annual Statement of the insurer filed with the chief insuranceregulatory official of the insurer’s domiciliary jurisdiction and are in accordancewith requirements of insurance or other accounting principles prescribed or per-mitted under the law and regulations of that jurisdiction. Any ultimate controllingperson who is an individual may file personal financial statements that arereviewed rather than audited by an independent public accountant. The reviewshall be conducted in accordance with standards for review of personal financialstatements published in the Personal Financial Statements Guide by the Ameri-can Institute of Certified Public Accountants. Personal financial statements shallbe accompanied by the independent public accountant’s Standard Review Reportstating that the accountant is not aware of any material modifications that shouldbe made to the financial statements in order for the statements to be in confor-mity with generally accepted accounting principles.

C. Exhibits shall include copies of the latest annual reports to shareholders ofan ultimate controlling person and proxy material used by an ultimate controllingperson; and any additional documents or papers required by this chapter.

Item 9. Form C Required

A Form C, Summary of Registration Statement, must be prepared and filedwith this Form B.

Item 10. Signature and Certification

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25-23(281701) No. 323 Oct. 01

Signature and certification required as follows:

SIGNATUREPursuant to the requirements of Section 1404 of the act, the Registrant has

caused this annual registration statement to be duly signed on its behalf in theCity of and State of on the day of ,

.(SEAL)

Name of RegistrantBY (Name) (Title)

Attest:(Signature of Officer)

(Title)CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attachedannual registration statement dated , , for and on behalf of

; that (s)he is the of such com(Name of Company) (Title of Officer)

pany and that (s)he is authorized to execute and file such instrument. Deponentfurther says that (s)he is familiar with such instrument and the contents thereof,and that the facts therein set forth are true to the best of his/her knowledge, infor-mation and belief.

(Signature)

(Type or print name beneath)

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25-24(281702) No. 323 Oct. 01 Copyright � 2001 Commonwealth of Pennsylvania

FORM C

SUMMARY OF REGISTRATION STATEMENT

Filed with the Insurance Department of the Commonwealth of Pennsylvania by(Name of Registrant) on behalf of the following insurance companies:

Name Address

NAIC Code Number State of Domicile

Date: ,Name, title, address and telephone number of individual to whom notices and

correspondence concerning this statement should be addressed:Furnish a brief description, including a reference to any amendments filed in

the intervening year, of all items in the current annual registration statementwhich represent changes from the prior year’s annual registration statement. Thedescription shall include the date and dollar amount of each change, identify anyprevious filings as a result of the change by amendment number or by type anddate of filing, be in a manner as to permit the proper evaluation thereof by theCommissioner, and shall include specific references to Item numbers in theannual registration statement and to the terms contained therein.

Changes occurring under Item 2 of Form B, insofar as changes in the percent-age of each class of voting securities held by each affiliate is concerned, needonly be included where the changes are ones which result in ownership or hold-ings of ten (10) percent or more of voting securities, loss or transfer of control,or acquisition or loss of partnership interest.

Changes occurring under Item 4 of Form B need only be included where: anindividual is, for the first time, made a director or executive officer of an ultimatecontrolling person; a director or executive officer terminates his or her responsi-bilities with an ultimate controlling person; or in the event an individual is namedpresident of an ultimate controlling person.

If a transaction disclosed on the prior year’s annual registration statement hasbeen changed, the nature of the change shall be included.

If a transaction disclosed on the prior year’s annual registration statement hasbeen effectuated, furnish the mode of completion and any flow of funds betweenaffiliates resulting from the transaction.

The insurer shall furnish a statement that transactions entered into since the fil-ing of the prior year’s annual registration statement are not part of a plan or seriesof like transactions whose purpose it is to avoid statutory threshold amounts andthe review that might otherwise occur.

SIGNATURE AND CERTIFICATIONSignature and certification required as follows:

SIGNATURE

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25-25(281703) No. 323 Oct. 01

Pursuant to the requirements of Section 1404 of the act, the Registrant hascaused this summary of registration statement to be duly signed on its behalf inthe City of and State of on the day of

, .(SEAL)

Name of Registrant

By (Name) (Title)

Attest:

(Signature of Officer)

(Title)CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attachedsummary of registration statement dated , , for and on behalf of

; that (s)he is the of such company(Name of Company) (Title of Officer)

and that (s)he is authorized to execute and file such instrument. Deponent furthersays that (s)he is familiar with such instrument and the contents thereof, and thatthe facts therein set forth are true to the best of his/her knowledge, informationand belief.

(Signature)

(Type or print name beneath)

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25-26(281704) No. 323 Oct. 01 Copyright � 2001 Commonwealth of Pennsylvania

FORM D

PRIOR NOTICE OF A TRANSACTION

Filed with the Insurance Department of the Commonwealth of Pennsylvania by(Name of Registrant) on behalf of the following insurance companies:

Name Address

NAIC Code Number State of Domicile Date: ,Name, title, address and telephone number of individual to whom notices andcorrespondence concerning this statement should be addressed:

Item 1. Identity of Parties to Transaction

Furnish the following information for each of the parties to the transaction:A. Name.B. Home office address.C. Principal executive office address.D. The organizational structure, i.e. corporation, partnership, individual, trust,

etc.E. A description of the nature of the parties’ business operations.F. Relationship, if any, of other parties to the transaction to the insurer filing

the notice, including any ownership or debtor/creditor interest by any other par-ties to the transaction in the insurer seeking approval, or by the insurer filing thenotice in the affiliated parties.

G. If the transaction is with a non-affiliate, the name(s) of the affiliate(s) whichwill receive, in whole or in substantial part, the proceeds of the transaction.

Item 2. Description of the Transaction

Furnish the following information for each transaction for which notice isbeing given:

A. A statement as to whether notice is being given under Section 1405(a)(2)(i),(ii), (iii), or (iv) of the act.

B. A description of the nature and purpose of the transaction, including theanticipated immediate and long-term effect of the transaction on the financialcondition of the insurer.

C. The proposed effective date of the transaction.

Item 3. Sales, Purchases, Exchanges, Loans, Extensions of Credit, Guarantees,Investments, Pledges of Assets or Contributions to Surplus

Furnish a brief description of the amount and source of funds, securities, prop-erty or other consideration for the sale, purchase, exchange, loan, extension ofcredit, guarantee, investment, or pledge of assets, including assets to be receivedby the domestic insurer as a contribution to its surplus; whether any provisionexists for purchase by the insurer filing notice, by any party to the transaction, orby any affiliate of the insurer filing notice; a description of the terms of any

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25-27(281705) No. 323 Oct. 01

securities being received, if any; and a description of any other agreements relat-ing to the transaction such as contracts or agreements for services, consultingagreements and the like. If the transaction involves other than cash, furnish adescription of the consideration, its cost and its fair market value, together withan explanation and supporting documentation of the basis for valuation.

If the transaction involves a loan, extension of credit or a guarantee, furnish adescription of the maximum amount which the insurer will be obligated to makeavailable under the loan, extension of credit or guarantee, the date on which thecredit or guarantee will terminate, and any provisions for the accrual of or defer-ral of interest.

If the transaction involves an investment, guarantee or other arrangement, statethe time period during which the investment, guarantee or other arrangement willremain in effect, together with any provisions for extensions or renewals of theinvestments, guarantees or arrangements. Furnish a brief statement as to the effectof the transaction upon the insurer’s surplus and the insurer’s accounting treat-ment.

No notice need be given if the maximum amount which can at any time beoutstanding or for which the insurer can be legally obligated under the loan,extension of credit or guarantee is less than 5% of the insurer’s admitted assetsor 25% of its surplus as of the 31st day of December next preceding.

Item 4. Loans or Extensions of Credit to a Non-Affiliate

If the transaction involves a loan or extension of credit to any person who isnot an affiliate, furnish a brief description of the agreement or understandingwhereby the proceeds of the proposed transaction, in whole or in substantial part,are to be used to make loans or extensions of credit to, to purchase the assets of,or to make investments in, any affiliate of the insurer making the loans or exten-sions of credit, and specify in what manner the proceeds are to be used to loanto, extend credit to, purchase assets of or make investments in any affiliate.Describe the amount and source of funds, securities, property or other consider-ation for the loan or extension of credit and, if the transaction is one involvingconsideration other than cash, a description of its cost and its fair market valuetogether with an explanation of and supporting documentation for the basis ofvaluation. Furnish a brief statement as to the effect of the transaction upon theinsurer’s surplus.

No notice need be given if the loan or extension of credit is one which equalsless than 5% of the insurer’s admitted assets or 25% of its surplus as of the 31stday of December next preceding.

Item 5. Reinsurance

If the transaction is a reinsurance agreement or modification thereto, asdescribed by Section 1405(a)(2)(iii) of the act, furnish a description of the knownand/or estimated amount of liability to be ceded and/or assumed in each calendar

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25-28(281706) No. 323 Oct. 01 Copyright � 2001 Commonwealth of Pennsylvania

year, the period of time during which the agreement will be in effect, and a state-ment whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the considerationfor the agreement will be transferred to one or more of the insurer’s affiliates.Furnish a brief description of the consideration involved in the transaction, and abrief statement as to the effect of the transaction upon the insurer’s surplus.

No notice need be given for reinsurance agreements or modifications thereto ifthe reinsurance premium is less than 5% of the insurer’s surplus as of the 31stday of December next preceding; or the change in the insurer’s liabilities or anytransfer of assets required to fund the transaction equals or exceeds 25% of theinsurer’s surplus as of the 31st day of December next preceding, including thoseagreements which may require as consideration the transfer of assets from aninsurer to a nonaffiliate, if an agreement or understanding exists between theinsurer and nonaffiliate that any portion of the assets will be transferred to one ormore affiliates of the insurer.

Item 6. Signature and Certification

Signature and certification required as follows:

SIGNATUREPursuant to the requirements of Section 1405 of the act, has

caused this notice to be duly signed on its behalf in the City ofand State of on the day

of , .

(SEAL)

Name of Applicant

By (Name) (Title)

Attest:

(Signature of Officer)

(Title)

CERTIFICATIONThe undersigned deposes and says that (s)he has duly executed the attached

notice dated , , for and on behalf of; that (s)he is the of such

(Name of Applicant) (Title of Officer)

company and that (s)he is authorized to execute and file such instrument. Depo-nent further says that (s)he is familiar with such instrument and the contentsthereof, and that the facts therein set forth are true to the best of his/her knowl-edge, information and belief.

(Signature)

(Type or print name beneath)

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25-29(281707) No. 323 Oct. 01

FORM E

PRE-ACQUISITION NOTIFICATION STATEMENT OF THE POTENTIALCOMPETITIVE IMPACT OF A PROPOSED MERGER OR ACQUISITION

(Name of Insurer)BY: (Name of Acquiring Persons)

Filed with the Insurance Department of the Commonwealth of PennsylvaniaDate:Name, title, address and telephone number of person completing this statement:

Item 1. Name and Address

State the names and addresses of acquiring persons.

Item 2. Name and Addresses of Affiliated Persons

State the names and addresses of the persons affiliated with those listed in Item1. Describe their affiliations.

Item 3. Nature and Purpose of Proposed Merger or Acquisition

State the nature and purpose of the proposed merger or acquisition.

Item 4. Nature of Business

State the nature of the business performed by each of the persons identified inresponse to Item 1 and Item 2.

Item 5. Market and Market Share

State specifically what market and market share the persons identified in Item1 and Item 2 currently enjoy in this Commonwealth in each insurance marketwhich, under section 1403(b)(2)(v) of the act (40 P. S. § 1403(b)(2)(v)), causesthe proposed merger or acquisition not to be exempted from Article XIV of theact. Provide historical market and market share data for each person identified inItem 1 and Item 2 for the past 5 years, or for the number of years the person andany predecessors thereof have been transacting business if less than 5 years, andidentify the source of the data.

For purposes of this item, market means direct written insurance premium inthis Commonwealth for a line of business as contained in the annual statementrequired to be filed by insurers licensed to do business in this Commonwealth.

Item 6. Signature and Certification

Signature and certification required as follows:

SIGNATUREPursuant to the requirements of Section 1402 of the act has

caused this application to be duly signed on its behalf in the City ofand State of on the day of , .

(SEAL)

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25-30(281708) No. 323 Oct. 01 Copyright � 2001 Commonwealth of Pennsylvania

Name of ApplicantBY (Name) (Title)

Attest:

(Signature of Officer)

(Title)CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attachedapplication dated , , for and on behalf of

; that (s)he is the of such company(Name of Applicant) (Title of Officer)

and that (s)he is authorized to execute and file such instrument. Deponent furthersays that (s)he is familiar with such instrument and the contents thereof, and thatthe facts therein set forth are true to the best of his/her knowledge, informationand belief.

(Signature)

(Type or print name beneath)

Authority

The provisions of this Appendix A issued under The Insurance Company Law of 1921 (40 P. S.§§ 991.1401—991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40P. S. § 459.8).

Source

The provisions of this Appendix A adopted September 3, 1993, effective September 4, 1993, 23Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately pre-ceding text appears at serial pages (245454) to (245468).

Cross References

This appendix cited in 31 Pa. Code § 25.12 (relating to forms—general requirements); 31 Pa. Code§ 25.13 (relating to forms—incorporation by reference, summaries and omissions); 31 Pa. Code§ 25.15 (relating to forms—additional information and exhibits); 31 Pa. Code § 25.16 (relating toacquisition of control—statement filings); 31 Pa. Code § 25.17 (relating to annual registration ofinsurers—statement filing); 31 Pa. Code § 25.18 (relating to summary of registration—statement fil-ing); 31 Pa. Code § 25.19 (relating to alternative and consolidated registrations); 31 Pa. Code § 25.21(relating to transactions subject to prior notice—notice filing); and 31 Pa. Code § 25.22 (relating toall dividends and other distributions).

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