7/30/2019 36 40 PA. CONS. STAT. 991.1405(a)(3)

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991.1405.Standardsandmanagementofaninsurerwithinaninsuranceholding

companysystem

(a)(1)Transactionswithinaninsuranceholdingcompanysystemtowhichan

insurersubjecttoregistrationisapartyshallbesubjecttoallofthefollowingstandards:

(i)Thetermsshallbefairandreasonable.

(ii)Chargesorfeesforservicesperformedshallbereasonable.

(iii)Expensesincurredandpaymentreceivedshallbeallocatedtotheinsurerin

conformitywithcustomaryinsuranceaccountingpracticesconsistentlyappliedand

allcost-sharingorexpenseallocationarrangementsmustbeformalizedinwriting

andauthorizedbytheboardofdirectorsofthedomesticinsurer.

(iv)Thebooks,accountsandrecordsofeachpartytoallsuchtransactionsshallbesomaintainedastoclearlyandaccuratelydisclosethenatureanddetailsofthe

transactions,includingsuchaccountinginformationasisnecessarytosupportthe

reasonablenessofthechargesorfeestotherespectiveparties.

(v)Theinsurer'ssurplusasregardspolicyholdersafteranymaterialtransactionwithanaffiliateandafteranydividendsordistributionstoshareholderaffiliates

shallbereasonableinrelationtotheinsurer'soutstandingliabilitiesandadequatetoitsfinancialneeds.

(2)Thefollowingtransactionsinvolvingadomesticinsurerandanypersoninitsinsuranceholdingcompanysystem,includinganamendmentormodificationof

affiliateagreementspreviouslyfiledunderthissectionthataresubjectto

materialitystandardscontainedinsubparagraphs(i),(ii),(iii),(iv)and(v),maynot

beenteredintounlesstheinsurerhasnotifiedthedepartmentinwritingofits

intentiontoenterintosuchtransactionatleastthirty(30)dayspriortheretoor

suchshorterperiodasthedepartmentmaypermitandthedepartmenthasnot

disapproveditwithinsuchperiod:

(i)Sales,purchases,exchanges,loansorextensionsofcredit,guarantees,

investments,pledgesofassetsorassetstobereceivedbythedomesticinsureras

contributionstoitssurplus,providedthat,asofthethirty-firstdayofDecembernextpreceding,suchtransactionsareequaltoorexceedthelesserofthreeper

centum(3%)oftheinsurer'sadmittedassetsortwenty-fivepercentum(25%)ofsurplusasregardspolicyholders.

(ii)Loansorextensionsofcredittoanypersonwhoisnotanaffiliate,wheretheinsurermakessuchloansorextensionsofcreditwiththeagreementor

understandingthattheproceedsofsuchtransactions,inwholeorinsubstantial