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The 190th General Court of the Commonwealth of Massachusetts

AN ACT RELATIVE TO RISK MANAGEMENT AND OWN RISK AND SOLVENCY ASSESSMENT.

     Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same as follows:
      SECTION 1.  Chapter 40M of the General Laws is hereby amended by adding the following section:-
      Section 17.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to groups governed by this chapter.
      SECTION 2.  Section 25E of chapter 152 of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by striking out the words “twenty-five U”, in lines 1, 15 to 16 and 17 and inserting in place thereof, in each instance, the following words:- “25V”.
      SECTION 3.  Said chapter 152 of the General Laws is hereby further amended by inserting after section 25U the following section:-
      Section 25V.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to groups governed by sections 25E to 25U of this chapter.
      SECTION 4.  Chapter 175 of the General Laws is hereby amended by adding the following section:-
      Section 229.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to insurers governed by this chapter.
      SECTION 5.  Chapter 176 of the General Laws is hereby amended by inserting after section 1 the following section:-
      Section 1A.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to fraternal benefit societies governed by this chapter.
      SECTION 6.  Section 18 of chapter 176A of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by adding the following paragraph:-
      Notwithstanding any general or special law to the contrary, chapter 176V shall apply to every corporation subject to this chapter.
      SECTION 7.  Chapter 176B of the General Laws is hereby amended by inserting after section 8A the following section:-
      Section 8B.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to a medical service corporation governed by this chapter.
      SECTION 8.  Chapter 176E of the General Laws is hereby amended by inserting after section 8A the following section:-
      Section 8B.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to a dental service corporation governed by this chapter.
      SECTION 9.  Chapter 176F of the General Laws is hereby amended by inserting after section 8 the following section:-
      Section 8A.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to an optometric service corporation governed by this chapter.
      SECTION 10.  Chapter 176G of the General Laws is hereby amended by inserting after section 10 the following section:-
      Section 10A.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to a health maintenance organization governed by this chapter.
      SECTION 11.  Chapter 176H of the General Laws is hereby amended by inserting after section 13 the following section:- 
      Section 13A.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to legal services plans governed by this chapter.
      SECTION 12.  Chapter 176P of the General Laws is hereby amended by inserting after section 38 the following section:-
      Section 38A.  Notwithstanding any general or special law to the contrary, chapter 176V shall apply to a limited society governed by this chapter.
      SECTION 13.  The General Laws are hereby amended by inserting after chapter 176U the following chapter:-

CHAPTER 176V
OWN RISK AND SOLVENCY ASSESSMENT

      Section 1.  As used in this chapter, the following words shall, unless the context clearly requires otherwise, have the following meanings:-
      “Commissioner”, the commissioner of insurance.
      “Insurance group”, for the purpose of conducting an own risk and solvency assesment, insurers and affiliates included within an insurance holding company system as defined in section 206 of chapter 175; health maintenance organizations and affiliates included within a health maintenance organization holding company system, as defined in section 1 of chapter 176G; public employer self-insurance groups and their affiliates organized pursuant to chapter 40M; workers compensation self-insurance groups and their affiliates organized pursuant to sections 25E to 25U, inclusive, of chapter 152; fraternal benefit societies and their affiliates organized pursuant to chapter 176; non-profit hospital service corporations and their affiliates organized pursuant to chapter 176A; medical service corporations and their affiliates organized pursuant to chapter 176B; dental service corporations and their affiliates organized pursuant to chapter 176E; optometric service corporations and their affiliates organized pursuant to chapter 176F; insured legal services plans and their affiliates organized pursuant to chapter 176H; and limited societies and their affiliates organized pursuant to chapter 176P.
      “Insurer”, shall have the same meaning as in section 1 of chapter 175 and, as used in this chapter, shall also include public employer self-insurance groups organized pursuant to chapter 40M; workers compensation self-insurance groups organized pursuant to sections 25E to 25U, inclusive, of chapter 152; fraternal benefit societies organized pursuant to chapter 176; non-profit hospital service corporations organized pursuant to chapter 176A; medical service corporations organized pursuant to chapter 176B; dental services corporations organized pursuant to chapter 176E; optometric service corporations organized pursuant to chapter 176F; health maintenance organizations organized pursuant to chapter 176G; insured legal services plans organized pursuant to chapter 176H; and limited societies organized pursuant to chapter 176P; except that “insurer” shall not include 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 of a state. 
      “NAIC”, the National Association of Insurance Commissioners.
      “Own risk and solvency assessment” or “ORSA”, a confidential internal assessment, appropriate to the nature, scale and complexity of an insurer or insurance group, conducted by the insurer or insurance group of the material and relevant risks associated with the insurer or insurance group’s current business plan and the sufficiency of capital resources to support those risks.
      “Own risk and solvency assessment guidance manual” or “ORSA guidance manual”, the current version of the own risk and solvency assessment guidance manual developed and adopted by the NAIC and as amended. A change in the ORSA guidance manual shall be effective on January 1, following the calendar year in which the changes are adopted by the NAIC.
      “ORSA summary report”, a confidential high-level summary of an insurer or insurance group’s ORSA.
      “Supervisory college”, a forum for cooperation and communication between the regulators or supervisors of the insurer or insurance group, established to facilitate the effective supervision of entities that belong to an insurance group as a whole, on a group-wide basis and by improving supervision of the entities within the insurance group.
      Section 2.  An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing and reporting on its material and relevant risks.  This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer. 
      Section 3.  Subject to section 5, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an ORSA consistent with a process comparable to the ORSA guidance manual. The ORSA shall be conducted annually and at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member.
      Section 4.  (a) Upon the request of the commissioner, and no more than annually, an insurer shall submit to the commissioner an ORSA summary report or any combination of reports that together contain the information described in the ORSA guidance manual, applicable to the insurer or the insurance group of which it is a member.  Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report required by this subsection if the commissioner is the lead state commissioner of the insurance group as determined by the procedures within the financial analysis handbook adopted by the NAIC. 
      (b)  The report required by subsection (a) shall include the attestation of the insurer or insurance group’s chief risk officer or other executive with responsibility for the oversight of the insurer’s enterprise risk management process that, to the best of their belief and knowledge, the insurer applies the enterprise risk management process described in the ORSA summary report and that a copy of the report has been provided to the insurer’s board of directors or to the appropriate committee thereof.  
      (c)  An insurer may comply with subsection (a) by providing the commissioner the most recent and substantially similar report provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction if that report provides information that is comparable to the information described in the ORSA guidance manual. A report in a language other than English shall be accompanied by a translation of that report into English.
      Section 5.  (a) An insurer shall be exempt from the requirements of this chapter, if: (i) the insurer has an annual direct written and unaffiliated assumed premium, including an international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, that is less than $500,000,000; and (ii) the insurance group of which the insurer is a member has an annual direct written and unaffiliated assumed premium, including an international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, that is less than $1,000,000,000.
      (b)  If an insurer qualifies for exemption pursuant to clause (i) of subsection (a), but the insurance group of which the insurer is a member does not qualify for an exemption pursuant to clause (ii) of subsection (a), then any ORSA summary report required pursuant to section 4 shall include every insurer within the insurance group.  This requirement may be satisfied by the submission of more than 1 ORSA summary report for any combination of insurers; provided, that the combination of reports includes every insurer within the insurance group. 
      (c)  If an insurer does not qualify for an exemption pursuant to clause (i) of subsection (a), but the insurance group of which it is a member qualifies for an exemption pursuant to clause (ii) of subsection (a), then the only ORSA summary report required pursuant to section 4 shall be the report applicable to that insurer.   
      (d)  An insurer that does not qualify for an exemption pursuant to subsection (a) may apply to the commissioner for a waiver from the requirements of this chapter based upon unique circumstances. In deciding whether to grant the insurer’s request for a waiver, the commissioner may consider the type and volume of business written, ownership and organizational structure and any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than 1 state, the commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer’s request for a waiver.
      (e)  Notwithstanding the exemptions in this section, the commissioner may require: (i) that an insurer maintains a risk management framework, conducts an ORSA and files an ORSA summary report based on unique circumstances including, but not limited to, the type and volume of business written, ownership and organizational structure, federal agency requests and international supervisor requests; or (ii) that an insurer maintains a risk management framework, conducts an ORSA and files an ORSA summary report if the insurer has risk-based capital for a company action level event as set forth through regulation, meets 1 or more of the standards of an insurer in hazardous financial condition pursuant to subsection (c) of section 3 of  chapter 175J or otherwise exhibits qualities of a troubled insurer as determined by the commissioner.
      (f)  If an insurer that qualifies for an exemption pursuant to this section no longer qualifies for that exemption due to changes in the premium, as reflected in the insurer’s most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall comply with the requirements of this chapter not later than 1 year immediately following the calendar year during which the threshold is exceeded. 
      Section 6.  (a) An ORSA summary report shall be prepared consistent with the ORSA guidance manual, subject to the requirements of this chapter.  Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.
      (b)  The review of an ORSA summary report and any additional requests for information shall be made using procedures consistent with the analysis and examination of multi-state or global insurers and insurance groups.
      Section 7.  (a) Documents, materials or other information, including the ORSA summary report, in the possession or control of the commissioner that are obtained by, created by or disclosed to the commissioner or any other person pursuant to this chapter, shall be proprietary and recognized to contain trade secrets.  Such documents, materials or other information shall be confidential and privileged, shall not be subject to chapter 66, or clause Twenty-sixth of section 7 of chapter 4 and shall not be subject to subpoena, discovery or introduction into evidence in any private civil action.  However, the commissioner may use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties.  The commissioner shall not otherwise make the documents, materials or other information public without the prior written consent of the insurer.
      (b)  Neither the commissioner nor any person who receives documents, materials or other ORSA-related information, through examination or otherwise, while acting under the authority of the commissioner or with whom such documents, materials or other information are shared pursuant to this chapter shall be permitted or required to testify in any private civil action concerning confidential documents, materials or information subject to subsection (a).
      (c)  To assist in the performance of the commissioner’s regulatory duties, the commissioner may:
            (i)  if requested, share documents, materials or other ORSA-related information including, but not limited to, confidential and privileged documents, materials or information subject to subsection (a) which may include proprietary and trade secret materials, with other state, federal and international financial regulatory agencies, including, but not limited to, members of a supervisory college, as defined in this chapter, NAIC and third-party consultants designated by the commissioner; provided, however, that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials or other information and provides written verification of the recipient’s legal authority to maintain confidentiality;
            (ii)  receive documents, materials or other ORSA-related information, including otherwise confidential and privileged documents, materials or information which may include proprietary and trade-secret information or documents from regulatory officials of other foreign or domestic jurisdictions including, but not limited to, members of a supervisory college as defined in this chapter and NAIC; provided, however, that the commissioner shall maintain as confidential or privileged any documents, materials or information received that are considered confidential or privileged pursuant to the laws of the jurisdiction that is the source of the document, material or information; and
            (iii)  enter into a written agreement with NAIC or a third-party consultant which shall govern the sharing and use of information provided pursuant to this chapter, consistent with this subsection, and shall: (A) specify procedures and protocols for maintaining the confidentiality and security of information shared with NAIC or a third-party consultant pursuant to this chapter, including, but not limited to, procedures and protocols for NAIC to share information with other state regulators from states in which the insurance group has domiciled insurers; provided, however, that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials or other information and verifies in writing the recipient’s legal authority to maintain confidentiality; (B) specify that ownership of information shared with NAIC or a third-party consultant pursuant to this chapter remains with the commissioner and the NAIC’s or a third-party consultant’s use of the information is subject to the direction of the commissioner; (C) prohibit NAIC or a third-party consultant from storing the information shared pursuant to this chapter in a permanent database after the underlying analysis is completed; (D) require prompt notice to be given to an insurer whose confidential information, in the possession of NAIC or a third-party consultant pursuant to this chapter, is subject to a request or subpoena issued to the NAIC or a third-party consultant for disclosure or production of the confidential information; (E) require NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to this chapter; and (F) provide for the insurer’s written consent, in the case of an agreement involving a third-party consultant.
      (d)  The sharing of information and documents by the commissioner pursuant to this chapter shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution and enforcement of this chapter. 
      (e)  No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the commissioner pursuant to this section or as a result of sharing authorized in this chapter.
      (f)  Documents, materials or other information in the possession or control of NAIC or a third-party consultant pursuant to this chapter shall be confidential by law and privileged, shall not be subject to chapter 66 or clause Twenty-sixth of section 7 of chapter 4 and shall not be subject to subpoena, discovery or introduction into evidence in any private civil action.
      Section 8.  Any insurer failing, without just cause, to timely file the ORSA summary report as required in this chapter shall be required, after notice and hearing, to pay a penalty of $500 for each day the report is delayed, to be recovered by the commissioner. The maximum penalty pursuant to this section shall be $10,000. The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.
      Section 9.  The commissioner may, pursuant to chapter 30A, upon notice and opportunity for all interested parties to be heard, promulgate such rules, regulations and orders as shall be necessary to carry out this chapter.
      SECTION 14.  Section 13 shall take effect on April 15, 2017. 

Approved, January 11, 2017