Certificate of Authority Section IV - Item #4
Seasoning Requirements
Section 716 of the California Insurance Code states that:
"No Certificate of Authority shall be granted to a foreign or alien applicant that has not actively transacted for three years the classes of insurance for which it seeks to be admitted.
This section shall not apply to any of the following:
(a) An applicant 51 percent or more of whose voting shares are owned by a reputable insurer admitted to this State for at least three years.
(b) An applicant which is the successor in interest, by merger, transformation, consolidation, purchase, or other transaction, of substantially all the insurance business and going concern value of a reputable insurer which was, and still is, the dominant factor in such transaction, and could itself have been admitted.
(c) An applicant 51 percent or more of whose voting shares are owned by a non-insurance corporation, or a corporation authorized as an insurer but not actively engaged in the insurance business, which corporation, directly or indirectly, owns 51 percent or more of the voting shares of one or more insurers all of which, except the applicant and those which are alien insurers, are reputable insurers admitted to this state for at least three years.
(d) An applicant which meets the conditions established by the Commissioner for exemption from this section."
To qualify for an exemption from seasoning requirements, as permitted by CIC §716(d), an applicant must meet the following criteria:
- The applicant must have actively transacted business for at least one year as evidenced by an Annual Statement and/or Quarterly Statements. There must be a continuity as to ownership, management and block of business.
- In the case of an independent applicant, the property and casualty applicant must possess a minimum capital and surplus of at least $5 million or more. A life and disability applicant must have a minimum capital and surplus of $5 million. "Independent" means the applicant is owned by an individual or public shareholders and is not part of a larger holding company system. Affiliated assets are considered not admitted for purposes of determining an exemption to seasoning requirements.
- In the case of a property and casualty applicant which is owned by a financially strong and reputable parent, the applicant must provide evidence, in the form of the parent company's Board of Directors' Resolution, that the parent will maintain the applicant's surplus at the statutory capital and surplus minimum until the normal three-year seasoning requirement is fulfilled. The commitment of a life and disability applicant must be to maintain capital and surplus at $5 million.
- The applicant must agree that no dividends will be paid to shareholders during the normal seasoning period and that all profits will be retained as surplus, subject to any restrictions of taxing authorities.
- The applicant shall agree to department approval of its reinsurance agreements for the normal three-year seasoning period.
- If the applicant uses a manager and is a party to a management agreement, the applicant shall not modify, amend or negotiate any new management agreement without prior approval of the department during the normal three-year seasoning period. To facilitate the department's approval, proposed changes must be submitted 30 days in advance of the proposed effective date of the changes.
