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INSURERS: Certificate of Authority Application Section 1

Table of Contents
Certificate of Authority Application Review Process

Filing Your Application

Stage I Review Prequalification

Stage II Review Final Qualification


Certificate of Authority Application Review Process
The Certificate of Authority application process consists of a thorough, comprehensive legal and financial review of the applicant's business. The review evaluates the applicant's qualifications as an insurer with respect to:
  • Capital and surplus;
  • Lawfulness and quality of investments;
  • Financial stability;
  • Reinsurance arrangements;
  • Competency, character and integrity of management;
  • In the case of a capital stock insurer, ownership and control of issued and outstanding shares;
  • Whether claims and policies are promptly and fairly adjusted and are promptly and fully paid in accordance with the law and terms of the policies;
  • Fairness and honesty in methods of doing business;
  • Method by which the applicant was promoted if any of its promoters remain as stockholders or in management; and
  • Hazard to policyholders or others.

    [§717, 718 California Insurance Code; §2275 California Code of Regulations, Title 10, Chapter 5]

California Insurance Code Section 700(e) statutorily mandates the Commissioner to either issue or deny an application for a Certificate of Authority within 180 days from the date the application is filed with the department. However, the department's review process is designed to handle most applications within 90 days, rather than six months. The length of time it takes to process your application will depend solely upon how well you have prepared your application prior to submitting it for review. To this end, we encourage all applicants to contact the department with any questions before submitting their Certificate of Authority application.

For all applications, the review period is divided into two stages. In order for the department to review an application within a 90-day time frame, the applicant needs to submit a "perfected" application. The information on this Website is designed to assist applicants with perfecting their application prior to submitting it to the department. Included in this application are step-by-step procedures and requirements for admission to California, with samples of contract language -- in a pre-approved format -- that are needed to meet certain California admission requirements.

In addition to the information set forth on this Website, applicants are expected to be familiar with the insurance laws of this state. Therefore, it is recommended that each applicant thoroughly review the California Insurance Code, the California Code of Regulations, Title 10 Chapter 5, and all applicable Department Bulletins. See Section V, "Referrals to Other Agencies and Resources," for information about obtaining copies of the Code of Regulations, the Insurance Code and Department Bulletins.

Filing Your Application
Length of Time: 1 Week

When you file your application for a Certificate of Authority, the Department will immediately review the application to ensure that it has been submitted in the required format (see Section II).

Within one week from the date your application is submitted to the Department, you will be notified, in writing, whether or not the application has been accepted for filing. If the application is accepted for filing, it will be given an "official" filing date.

If the application is not accepted for filing due to a deficiency in the application's format, you will be notified, in writing, of the deficiency and given 10 business days to provide a complete application. If you are unable to complete your application in an acceptable format within 10 business days, the application will be returned. Due to the volume of applications we receive, we are unable to hold incomplete applications longer than 10 business days.

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Stage I Review - Prequalification
Length of Time: 30 Days

The first stage of review your application will receive is a prequalification review. During this time, the Department will conduct a preliminary operational and financial review of your insurance business to determine whether or not you meet minimum statutory requirements for transacting insurance in California such as seasoning, paid-in capital and surplus. The prequalification review takes 30 days from the date the application is accepted for filing to complete.

Outlined below are the various parts of your application the Department will review during Stage I of the admission review process. Please note, however, that all documents for the Stage I and Stage II reviews must be submitted by the applicant at the time of filing.

Stage I Operational Review

  • Application Form
  • Filing Fee
  • Profile
  • Seasoning
  • Rate Filing

Stage I Financial Review

  • Minimum Paid-In Capital & Surplus
  • Annual Statements with Attachments
  • Quarterly Statements
  • Independent CPA-Audited Report
  • Report of Examination

The first stage review will immediately identify any application which does not meet minimum statutory qualifications for admission to California. On or before the 30th day after your filing date, the Department will notify you, in writing, whether or not your application passed the Stage I review. Applications that successfully pass the Stage I prequalification review, will automatically proceed to the Stage II final qualification review. No action is required of the applicant for this to occur.

Applications which do not meet minimum admission requirements, and consequently fail the Stage I review, will be automatically withdrawn within 30 days from the date the application was accepted for filing. If your application fails to pass the first stage review, you will be provided with written notice of your failure to meet minimum admission requirements. The Department will also identify each deficient prequalification review item and provide written guidance intended to assist you with successfully meeting all prequalification criteria in the future. For example, if your application does not meet minimum capital and surplus requirements for the lines of business you are requesting to transact, this deficiency will be specifically identified.

Please be aware that applicants who fail the Stage I prequalification review, will need to re-file the entire Certificate of Authority application, including payment of the filing fee, to be reconsidered for admission to California.

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Stage II Review - Final Qualification
Length of Time: 60 Days

Applicants proceeding to the Stage II final qualification review will be notified in writing. The final qualification review involves the review and approval of additional financial information, statutorily mandated memberships and other corporate information and legal requirements necessary for a complete review of the insurer's qualifications to transact insurance business in California. The final qualification review period lasts 60 days, concluding within 90 days from the date your application was accepted for filing.

Outlined below are the various parts of your application that the Department will review during Stage II of the admission review process. Please note again that all documents for Stage I and Stage II reviews must be submitted by the applicant at the time of filing.

Stage II Operational Review

  • Articles of Incorporation
  • Bylaws
  • Affidavits and Fingerprint(s)
  • Government Ownership or Control
  • Advisory, Management and Service Contracts
  • Custody Agreements
  • Questionnaire
  • Retaliatory Statement or Certificate
  • Name Approval
  • Qualification with Secretary of State
  • Agent for Service of Process
  • Special Power of Attorney to Appoint Agents
  • Workers' Compensation Deposit
  • Holding Company Form "B" Registration
  • Authorization for Disclosure of Financial Records
  • Statutory Memberships
  • Alien Insurer Requirements
  • Variable Annuity, Modified Guaranteed Annuity or Variable Life

Stage II Financial Review

  • Certificate of Organization, Capital and Assets
  • SEC Filings or Consolidated GAAP Financial Statements
  • NAIC Management Discussion Analysis
  • Risk-Based Capital Report
  • Market Conduct Examination Report
  • Statutory Financial Projections
  • Debt-to-Equity Ratio Statement
  • Consolidated Annual Statements
  • Reinsurance Arrangements
  • Actuarial Certification

During this 60-day Stage II review period, Department staff will determine whether or not your application meets the remaining admission requirements. At the conclusion of the second stage review, you will receive either your Certificate of Authority, or written notification specifying each item of your application which fails to meet California's admission requirements.

If your application fails the Stage II final qualification review, you will be provided with a two-week window of time to perfect the application by correcting all outstanding deficiencies. If you are able to successfully correct each deficient item and present it to the Department for review within this two-week period, we will issue your Certificate of Authority within two weeks from the date your application is perfected. Thus, even if your application does not initially meet California's admission requirements, you can still obtain your Certificate of Authority within 120 days from the date your application was originally accepted for filing, assuming you are able to quickly correct all deficiencies.

However, if your application fails to meet California's admission requirements, and you are unable to perfect your application within two weeks from the date the Department notifies you of your application's deficiencies, you may take up to 45 additional days to perfect your application. In this manner, the Department notifies you of your application's deficiencies within 90 days from your filing date and you would have up to 150 days from your filing date to perfect your application. The Department would then review your application within 30 days from the date your amended application is submitted and either issue your Certificate of Authority or notify you of the application's failure to meet admission requirements.

The maximum amount of time it can take to review your Certificate of Authority application is 180 days from the application's filing date.

The Department's streamlined Certificate of Authority application review process allows applicants to control the length of time their application is under review. Each applicant has the opportunity to be admitted within 90 days, 120 days or 180 days. For a company that chooses to submit a perfected application at the time of filing, the Department can guarantee admission within 90 days, assuming all admission requirements are met. For the company that chooses a longer period of time, the full 180-day review period provided by California law is available. We believe you will find this streamlined review process places the California Department of Insurance at the forefront of regulatory review standards for admission of insurance companies.

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