{"data":{"id":"us-ky/krs-304.37-030","jurisdiction":"us-ky","citation":"KRS 304.37-030","heading":"Standards for insurance holding company system -- Factors to be","body":"considered -- Prohibited transactions.\n(1) Material transactions by registered insurers with their affiliates shall be subject to\nthe following standards:\n(a) The terms shall be fair and reasonable;\n(b) Agreements for cost sharing services and management shall include\nprovisions as required by administrative regulations promulgated by the\ncommissioner;\n(c) Charges or fees for services performed shall be reasonable;\n(d) Expenses incurr ed and payment received shall be allocated to the insurer in\nconformity with consistently applied accounting practices;\n(e) The books, accounts, and records of each party shall be maintained to clearly\nand accurately disclose the precise nature and details of the transactions; and\n(f) The insurer's surplus as regards policyholders, following any dividends or\ndistributions to shareholder affiliates, shall be reasonable in relation to the\ninsurer's outstanding liabilities and adequate to its financial needs.\n(2) (a) The following transactions involving a domestic insurer and any person in its\ninsurance holding company system, including amendments or modifications\nof affiliate agreements previously filed pursuant to this subsection, which are\nsubject to any mat eriality standards contained in this subsection, shall not be\nentered into unless the insurer has notified the commissioner in writing of its\nintention to enter into the transaction at least thirty (30) days prior to the\ntransaction, or a shorter period as  the commissioner may permit, and the\ncommissioner has not disapproved it within that time. The notice for\namendments or modifications shall include the reasons for the change and the\nfinancial impact on the domestic insurer. Informal notice shall be repor ted,\nwithin thirty (30) days after a termination of a previously filed agreement, to\nthe commissioner for determination of the type of filing required, if any:\n1. Sales, purchases, exchanges, loans, or extensions of credit, guarantees,\nor investments, if the transactions are equal to or exceed, with respect to\nnon-life insurers, the lesser of three percent (3%) of the insurer's\nadmitted assets or twenty -five percent (25%) of surplus as regards\npolicyholders, or with respect to life insurers, three percent ( 3%) of the\ninsurer's admitted assets, each as of December 31 next preceding;\n2. Loans or extensions of credit to any person who is not an affiliate, if the\ninsurer makes the loans or extensions of credit with the agreement or\nunderstanding that the proceed s of the transactions, in whole or in\nsubstantial part, are to be used to make loans or extensions of credit to,\nto purchase assets of, or to make investments in, any affiliate of the\ninsurer making the loans or extensions of credit if the transactions are\nequal to or exceed, with respect to non -life insurers, the lesser of three\npercent (3%) of the insurer's admitted assets or twenty -five percent\n(25%) of surplus as regards policyholders, or, with respect to life\ninsurers, three percent (3%) of the insurer 's admitted assets, each as of\nDecember 31 next preceding;\n3. Reinsurance agreements or modifications including:\na. All reinsurance pooling agreements; and\nb. Agreements in which the reinsurance premium or a change in the\ninsurer's liabilities , or the projected reinsurance premium or a\nchange in the insurer's liability in any of the next three (3) years,\nequals or exceeds five percent (5%) of the insurer's surplus as\nregards policyholders, as of December 31 next preceding,\nincluding those agreements which may require as consideration the\ntransfer of assets from an insurer to a nonaffiliate, if an agreement\nor understanding exists between the insurer and nonaffiliate that\nany portion of the assets will be transferred to one (1) or more\naffiliates of the insurer;\n4. All management agreements, service contracts, and all cost sharing\narrangements;\n5. Guarantees when made by a domestic insurer; provided, however, that a\nguarantee which is quantifiable as to amount is not subject to the notice\nrequirements of this paragraph unless it exceeds the lesser of one -half of\none percent (0.5%) of the insurer's admitted assets or ten percent (10%)\nof surplus, regarding policyholders as of the thirty-first day of December\nof the preceding year. All guarantees whi ch are not quantifiable as to\namount shall be subject to the notice requirements of this paragraph;\n6. Direct or indirect acquisitions or investments in a person that controls\nthe insurer or in an affiliate of the insurer in an amount which, together\nwith its present holding in investments, exceeds two and one -half\npercent (2.5%) of the insurer's surplus to policyholders. Direct or\nindirect acquisitions or investments in subsidiaries acquired pursuant to\nKRS 304.37 -110, authorized under this subtitle, or in  nonsubsidiary\ninsurance affiliates that are subject to the provisions of this subtitle are\nexempt from this requirement; and\n7. Any material transactions, specified by regulation, which the\ncommissioner determines may adversely affect the interests of the\ninsurer's policyholders.\n(b) This subsection shall not authorize or permit any transactions which, in the\ncase of an insurer not a member of the same holding company system, would\nbe otherwise contrary to law.\n(c) A domestic insurer shall not enter into t ransactions which are part of a plan or\nseries of like transactions with persons within the holding company system if\nthe purpose of those separate transactions is to avoid the statutory threshold\namount and thus avoid the review that would otherwise occur . If the\ncommissioner determines that the separate transactions were entered into over\nany twelve (12) month period for avoidance purposes, the commissioner may\nexercise his or her authority under KRS 304.99-151.\n(d) The commissioner, in reviewing transactions pursuant to this subsection, shall\nconsider whether the transactions comply with the standards set forth in\nsubsection (1) of this section and whether they may adversely affect the\ninterests of policyholders.\n(e) The commissioner shall be notified wit hin thirty (30) days of any investment\nof the domestic insurer in any one (1) corporation if the total investment in the\ncorporation by the insurance holding company exceeds ten percent (10%) of\nthe corporation's voting securities.\n(3) (a) Notwithstanding the control of a domestic insurer by any person, the officers\nand directors of the insurer shall not be relieved of any obligation or liability\nto which they would otherwise be subject by law, and the insurer shall be\nmanaged so as to assure its separate o perating identity consistent with this\nchapter.\n(b) Nothing in this section precludes a domestic insurer from having or sharing a\ncommon management or cooperative or joint use of personnel, property, or\nservices with one (1) or more other persons under arr angements which meet\nthe standards of subsection (1) of this section.\n(4) The following factors, among others, shall be considered in determining whether an\ninsurer's surplus as regards policyholders is reasonable in relation to the insurer's\noutstanding liabilities and adequate to its financial needs:\n(a) The size of the insurer as measured by its assets, capital and surplus, reserves,\npremium writings, insurance in force, and other appropriate criteria;\n(b) The extent to which the insurer's business is di versified among the several\nlines of insurance;\n(c) The number and size of risks insured in each line of business;\n(d) The extent of the geographical dispersion of the insurer's insured risks;\n(e) The nature and extent of the insurer's reinsurance program;\n(f) The quality, diversification, and liquidity of the insurer's investment portfolio;\n(g) The recent past and projected future trend in the size of the insurer's surplus as\nregards policyholders;\n(h) The surplus as regards policyholders maintained by other comparable insurers;\n(i) The adequacy of the insurer's reserves; and\n(j) The quality and liquidity of investments in subsidiaries. The commissioner\nmay treat any investment as a disallowed asset for purposes of determining the\nadequacy of surplus as reg ards policyholders if in his or her judgment the\ninvestment warrants.\n(5) No insurer subject to registration under KRS 304.37 -020 shall pay any\nextraordinary dividend or make any other extraordinary distribution to its\nstockholders until thirty (30) days after the commissioner has received notice of the\ndeclaration thereof and has not within the period disapproved the payment, or the\ncommissioner shall have approved the payment within the thirty (30) day period.\nFor purposes of this section, an extraordinar y dividend or distribution is any\ndividend or distribution which, together with other dividends or distribution made\nwithin the preceding twelve (12) months, exceeds the lesser of (a) ten percent (10%)\nof the insurer's surplus as regards policyholders as o f December 31 next preceding,\nor (b) the net gain from operations of the insurer company, if the insurer is a life\ninsurer, or the net income, if the insurer is not a life insurer, for the twelve (12)\nmonth period ending December 31 next preceding, but sha ll not include pro rata\ndistribution of any class of the insurer's own securities. Notwithstanding any other\nprovision of law, an insurer may declare an extraordinary dividend or distribution\nwhich is conditional upon the commissioner's approval thereof, a nd the declaration\nshall confer no rights upon stockholders until the commissioner has approved the\npayment of the dividend or distribution or until the commissioner has not\ndisapproved the payment within the thirty (30) day period referred to in this section.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=40304","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:56Z","sha256":"cd98071b3a14ff0dfbef9be3c8232fff3e0437f53bd87427378d731e33534b23","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.37-020","next":"us-ky/krs-304.37-040"},"notice":"GroundRules: Original legal text. Not legal advice."}