ACT NO, 796



BILL NO. 31-0442

THIRTY-FIRST LEGISLATURE OF THE VIRGIN ISLANDS



Regular Session



2016



An Act amending the Virgin Islands Code titles 3, 9, and 22 to update the Insurance Laws of the

Territory and to adopt the core standards and Model Laws and Regulations as established by the

National Association of Insurance Commissioners (NAIC) for purposes of obtaining accreditation

with the NAIC, placing the Territory on par with other United States jurisdictions and attaining

greater and more effective protection to the policyholders of the Territory and for other related

purposes



WHEREAS. the laws governing the insurance industry in the Territory are outdated as

many of the laws were enacted in 1968 and have not been updated; and



WHEREAS, the Division of Banking and Insurance (Division) has been given additional

legislative mandates over the years which have expanded immensely the Division’s scope of

responsibilities beyond primarily banking and insurance matters. The Division now regulates

securities, debt management services, money transmitters, mortgage lenders and brokers and

mortgage loan originators. Accordingly. section | of this act seeks to change the Division’s name

to “Division of Banking, Insurance and Financial Regulation” which is a true representation of the

Division's legislative responsibilities: and



WHEREAS, while the Lieutenant Governor serves as “Commissioner of Insurance”, title

22 Virgin Islands Code does not grant the Lieutenant Governor explicit authority to serve in this

capacity. Therefore, the purpose of section 3 of this act is to grant this authority; and



WHEREAS, the laws governing the insurance industry in the Territory do not grant to the

Commissioner of Insurance of the Virgin Islands all the necessary authority to effectively regulate

the solvency of the multi-state domestic insurance industry in the Territory; and



WHEREAS. all other United States jurisdictions have periodically updated their insurance

laws commensurate with the ever-evolving insurance industry; and



WHEREAS. the NAIC has established core accreditation standards and a comprehensive

set of laws known as the Model Laws and Regulations, to assist United States jurisdictions in their

regulation of the solvency of their multi-state domestic insurance industry thereby affording

greater protection to the policyholders in the United States: and



WHEREAS, all 50 United States and the Commonwealth of Puerto Rico have adopted the

NAIC Model Laws and Regulations and the accreditation requirements and are now in substantial

compliance with the NAIC accreditation standards: and



WHEREAS, the Territory has not adopted most of the NAIC Model Laws and Regulations

that are necessary to obtain substantial compliance with the NAIC accreditation standards and is

therefore not in compliance with the NAIC accreditation standards: Now, Therefore,



Be it enacted by the Legislature of the Virgin Islands:



SECTION 1. Virgin Islands Code title 3 is amended by adding sections 35, 36, and 37 to

read as follows:



Ҥ35. Division of Banking, Insurance and Financial Regulation established.

(a) As used in this chapter:

(1) “Commissioner” means the Commissioner of Insurance.



(2) “Division” means the Division of Banking, Insurance and Financial

Regulation.



(b) The Division of Banking, Insurance, and Financial Regulation is established in the

Office of the Licutenant Governor of the Virgin Islands. The Division has general authority and

Jurisdiction to regulate and supervise banks, financial institutions, licensed lenders, mortgage

lenders, mortgage brokers, insurance companies, insurance agents, insurance brokers, insurance

adjusters, broker-dealers, agents. investment advisers, investment adviser representatives,

federally covered investment advisers and other similar persons doing business in this Territory

subject to titles 9, 12A and 22 of the Virgin Islands Code.



(c) The Division is headed by a Director whose duties are prescribed by the Lieutenant

Governor.



(d) In accordance with the general powers and duties conferred by 22 V.L.C. $53, the

Lieutenant Governor, as Commissioner of Insurance. may employ and fix the compensation of

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personnel and incur expenses for the proper administration of the Division.



§36. Entities required to comply with banking, consumer and insurance codes; record.



(a) The following entities, in addition to satisfying the requirements of the Division of

Corporations and Trademarks under title 13 of the Virgin Islands Code, shall comply with the

applicable licensure requirements set forth in titles 9, 12A, and 22 of the Virgin Islands Code, and

with any regulations promulgated by the Division:

(1) banks;



(2) financial institutions;



(3) licensed lenders;



(4) mortgage lenders;



(5) mortgage brokers;



(6) insurance companies;



(7) insurance agents, brokers, adjusters;



(8) broker-dealers:



(9) agents;



(10) investment advisers;



(11) investment adviser representatives:



(12) — tederally covered investment advisers; and

(13) — other similar persons doing business in this Territory.



(b) — The Director shall keep on file for a reasonable period such instruments, papers and

documents required by law to be filed with the Commissioner



§37. Conflicts of interest of Division officers and employees prohibited.



(a) It is unlawful during the term of office or while employed by the Division for the

Commissioner, Director or any employee of the Division to be an officer, director, organizer.

employee of or attorney for or otherwise be directly or indirectly interested in any institution

subject to the supervision of, or regulation by the Division.



(b) It is unlawful for the Commissioner, Director and employees of the Division during

their terms of office or employment to receive directly or indirectly any payment or gratuity from

any institution subject to the supervision of, or regulation by the Division or be engaged in the

negotiation of loans for others with any such institution. The prohibitions contained in this

subsection may not be construed as prohibiting a person from being a depositor. equity interest

owner, or member in any financial institution or an insurance policyholder or equity interest owner

on the same terms as are available to the public generally.

(c) If the Commissioner, Director, or any employee of the Division, or the spouse of

any of them, or the son or daughter of any of them residing at their respective homes obtains a loan

from or holds an equity interest in any financial institution subject to supervision of, or regulation

by the Division, the fact of the loan or of the holding of the equity interest and the appropriate

terms and conditions, must be disclosed immediately to the Commissioner in writing by the person

obtaining the loan or holding an equity interest.



(d) A record of the indebtedness or holding of an equity interest described in subsection

(c) must be kept on file in the Division and must be open to inspection by the public.



(e) The Commissioner or the Director shall investigate any loan or equity interest of a

Division employee to ensure that no preferential treatment was given to the Division employee in

the process of granting the loan or issuing the interest and that the loan or interest will not

compromise the employee's effectiveness in carrying out the employee's employment duties. If

the loan has been obtained by. or if the interest is held by the Commissioner. the Office of the

Inspector General shall conduct the investigation.”



SECTION 2. Title 22 Virgin Islands Code, chapter 1 is amended at the beginning of

section 7 by inserting “In addition to any other penalty provided in this title’, striking “$10" and

inserting “S500” and striking “$1000” and inserting “$2,000”, and by striking the language after

“imprisonment”.



SECTION 3. Title 22 Virgin Islands Code, chapter 3 is amended in the following

instances:



(a) Section 51 is amended:



(1) after “means” by inserting “the Lieutenant Governor of the Virgin Islands

serving as”;



(2) after “Insurance” by adding “and ‘Division’ means the Division of Banking,

Insurance and Financial Regulation”; and



(3) adding subsection (b) to read as follows: “(b) Commissioner of Insurance.

The Division as established in chapter 3, section 32 of title 3 of the Virgin Islands Code. is

administered by the Lieutenant Governor of the Virgin Islands as the Commissioner of

Insurance.”



(b) Section 53 is amended in the following instances:

(1) Subsection (c) is amended in:

(A) paragraph (1) by striking all the language in the paragraph and



inserting new language that reads: “adopt regulations and increase fees necessary

to carry out the administration of this title.”

(B) Paragraphs (5) and (6) are added and read as follows: “(5) issue

subpoenas, examine persons, administer oaths and require production of papers and

records; (6) issue orders as authorized by or necessary to administer and carry out

the purpose of this title.”



(2) Subsection (d) ts amended by striking all the language tn the subsection and

inserting new language that reads as follows: “It is unlawful during the term in office or

while employed with the Division for the Commissioner, Director or any employee of the

Division to be an officer, director organizer, employee of or attorney for, or otherwise be

directly or indirectly interested in any insurance company or insurance business in the

Territory, except as a policyholder.”



SECTION 4. Title 22 Virgin Islands Code. chapter 9 is amended in the following

instances:



(a) Section 222 is amended in



(1) subsection (a) by adding the following sentence at the end of the

subsection:



“All annual and quarterly statements filed pursuant to this section must be prepared

in accordance with the National Association of Insurance Commissioners’ (NAIC) Annual

Statement Instructions and follow those accounting procedures and practices that are

prescribed in the NAIC's Accounting Practices and Procedures Manual and any subsequent

revisions thereto that are adopted for use by the Commissioner by rule, administrative order

or bulletin.”



(2) by adding a new subsection (b) that reads as follows: “(b) All authorized

insurers reporting to the Commissioner in accordance with the requirements of this

section shall file with the Division the appropriate NAIC Annual Statement Blank, which

must be prepared in accordance with the NAIC Annual Statement Instructions and follow

those accounting procedures and practices prescribed by the NAIC Accounting Practices

and Procedures Manual.”



(3) by re-designating the affected subsections appropriately.



(b) = Section 230 (a) is amended by striking all the language in the subsection and

inserting new language that reads as follows:



“Each domestic, foreign and alien insurer who is authorized to transact insurance in the

Territory shall on or before March | of each year, file with the NAIC, a copy of its annual statement

convention blank, along with such additional filings, including any quarterly statement filings, as

prescribed by the Commissioner for the preceding year. The information filed with the NAIC

must be in the same format and scope as that required by the Commissioner and must include the

signed jurat page and the actuarial certification. Any amendments and addenda to the annual

statement or quarterly statement filings subsequently filed with the Commissioner must also be

filed with the NAIC. Each insurer shall concurrently provide the NAIC with a copy of the

electronic filing containing its annual and quarterly statements.”



SECTION 5. Title 22 Virgin Islands Code, chapter 19 is amended in the following

instance:



(a) Section 451. subsection (c) is redesignated as subsection (d) and a new subsection

(c) is inserted and reads as follows: “(c) In accordance with chapter 20 of this title, the

Commissioner may require additional capital and surplus above the minimum capital and surplus

requirements set forth in this section, or any other section of this Code based upon the type, volume

and nature of the insurance business transacted.”



(b) Section 464 (a) is amended by striking all the language after “No insurer” and

inserting new language that reads as follows: “, other than a title insurer, may retain any risk on

any one subject of insurance. regardless of where located or to be performed. in an amount

exceeding 10 percent of its surplus to policyholders.



(c) Subsection (¢) is stricken.



SECTION 6. Title 22 Virgin Islands Code, chapter 21 is amended by adding sections 519,

520, and 521 to read as follows:



“$519. Standards for determining whether insurer is in hazardous financial condition.



The Commissioner may consider the following standards. either singly or as a combination

of two or more, to determine whether the continued operation of any insurer transacting an

insurance business in this Territory may be hazardous to its policyholders, creditors or the public:



(1) Adverse findings reported in financial condition and market conduct examination

reports, audit reports, and actuarial opinions, reports or summaries;



(2) NAIC Insurance Regulatory Information System and its other financial analysis

solvency tools and reports:



(3) Whether the insurer has made adequate provision. according to presently accepted

actuarial standards of practice, for the anticipated cash flows required by the contractual

obligations and related expenses of the insurer, when considered in light of the assets held by the

insurer with respect to such reserves and related actuarial items including, but not limited to, the

investment earnings on such assets, and the considerations anticipated to be received and retained

under such policies and contracts;



(4) The ability of an assuming reinsurer to perform and whether the insurer's

reinsurance program provides sufficient protection for the insurer's remaining surplus after

considering the insurer's cash flow and the classes of business written as well as the financial

condition of the assuming reinsurer;

(5) | Whether the insurer's operating loss in the last twelve-month period or any shorter

period, including but not limited to net capital gain or loss. change in non-admitted assets. and

cash dividends paid to shareholders, is greater than 50 percent of the insurer's remaining surplus

as regards policyholders in excess of the minimum required;



(6) Whether the insurer's operating loss in the last twelve-month period or any shorter

period, excluding net capital gains, is greater than 20 percent of the insurer's remaining surplus in

regards policyholders in excess of the minimum required;



(7) Whether a reinsurer, obligor or any entity within the insurer's insurance holding

company system, is insolvent, threatened with insolvency or delinquent in payment of its monetary

or other obligations, and which in the opinion of the Commissioner may affect the solvency of the

insurer:



(8) Contingent liabilities, pledges or guaranties that either individually or collectively

involve a total amount which in the opinion of the Commissioner may affect the solvency of the

insurer:



(9) Whether any “controlling person” of an insurer is delinquent in the transmitting to,

or payment of. net premiums to the insurer:



(10) The age and collectability of receivables;



(11) Whether the management of an insurer, including officers, directors, or any other

person who directly or indirectly controls the operation of the insurer, fails to possess and

demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in such

position;



(12) Whether management of an insurer has failed to respond to inquiries relative to the

condition of the insurer or has furnished false and misleading information concerning an inquiry:



(13) Whether the insurer has failed to meet financial and holding company filing

requirements in the absence of a reason satisfactory to the Commissioner:



(14) Whether management of an insurer either has filed any false or misleading sworn

financial statement, or has released false or misleading financial statement to lending institutions

or to the public, or has made a false or misleading entry, or has omitted an entry of material amount

in the books of the insurer:



(15) Whether the insurer has grown so rapidly and to such an extent that it lacks adequate

financial and administrative capacity to meet its obligations in a timely manner:



(16) Whether the insurer has experienced or will experience in the foreseeable future

cash flow or liquidity problems:

(17) Whether management has established reserves that do not comply with minimum

standards established by territorial insurance laws, regulations, statutory accounting standards,

sound actuarial principles and standards of practice:



(18) Whether management persistently engages in material under reserving that results

in adverse development: and



(19) Whether transactions among affiliates. subsidiaries or controlling persons for which

the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity or

diversity to assure the insurer's ability to meet its outstanding obligations as they mature.



§520. Commissioner's additional authority to take corrective action.



(a) For the purposes of making a determination of an insurer's financial condition

under section 519, the Commissioner may:



(1) disregard any credit or amount receivable resulting from transactions with

a reinsurer that is insolvent, impaired or otherwise subject to a delinquency proceeding:



(2) muke appropriate adjustments including disallowance to asset values

attributable to investments in or transactions with parents. subsidiaries or affiliates

consistent with the NAIC Accounting Practices and Procedures Manual. and Virgin Islands

law and regulations:



(3) refuse to recognize the stated value of accounts receivable if the ability to



collect receivables is highly speculative in view of the age of the account or the financial

condition of the debtor; and



(4) increase the insurer's liability in an amount equal to any contingent liability,

pledge. or guarantee not otherwise included if there is a substantial risk that the insurer will

be called upon to meet the obligation undertaken within the next twelve-month period.

(b) If the Commissioner determines that the continued operation of the insurer licensed



to transact business in this Territory may be hazardous to its policyholders, creditors or the public,

then the Commissioner may. upon a determination, issue an order requiring the insurer to:



(1) reduce the total amount of present and potential liability for policy benefits

by reinsurance:



(2) reduce, suspend or limit the volume of business being accepted or renewed;

(3) reduce general insurance and commission expenses by specified methods;



(4) increase the insurer's capital and surplus:

(5) suspend or limit the declaration and payment of dividend by an insurer to

its stockholders or to its policyholders;



(6) file reports in a form acceptable to the Commissioner concerning the market

value of an insurer's assets:



(7) limit or withdraw from certain investments or discontinue certain

investment practices to the extent the Commissioner deems necessary;



(8) document the adequacy of premium rates in relation to the risks insured:



(9) file, in addition to regular annual statements, interim financial reports on the

form adopted by the National Association of Insurance Commissioners or in such format

us promulgated by the Commissioner:



(10) correct corporate governance practice deficiencies, and adopt and utilize

governance practices acceptable to the Commissioner;



(1!) provide a business plan to the Commissioner to continue to transact

business in the Territory: and



(12) notwithstanding any other provision of law limiting the frequency or

amount of premium rate adjustments, adjust rates for any non-life insurance product written

by the insurer that the Commissioner considers necessary to improve the financial

condition of the insurer. If the insurer is a foreign insurer, the Commissioner's order may

be limited to the extent provided by statute.



§521. Review and appeal of Commissioner’s order. An insurer subject to an order issued under

subsection 520(b) may request a hearing to review the order in accordance with the procedures set

forth in chapter 7 of this title.



SECTION 7. Title 22 Virgin Islands Code, chapter 25, section 601 is amended by striking

the language within subsection (a) and inserting new language that reads:



“The Commissioner may establish by regulation such reasonable filing fees, initial and

renewal application licensing fees, examination fees. and other administrative fees necessary for

the implementation, administration and enforcement of all programs under the jurisdiction of the

Commissioner.”



SECTION 8. The following sections of the Virgin Islands Code are amended by striking

“Division of Banking and Insurance” and inserting “Division of Banking, Insurance and Financial



Regulation”:



(1) title 9 V.LC.. §§$1 definition of “Director”, 132(d). 262. 502 (7) and 716 (g);

10



(2)



title 13 V.LC., §853(a) (3);



(3)



title 22, §§102 (a) and (c). 787 (b). 1671 (c), 6601 (a) (11) and (23), 6654 (c) (5)



(D), and 6655 (h); and



(4)



title 33 V.ILC., $3101 (b)



SECTION 9. Section 7 takes effect 30 days after the Commissioner, in accordance with



title 3, chapter 35, promulgates regulations establishing the fees authorized in section 7 of this act



Thus passed by the Legislature of the Virgin Islands on December 20, 2016



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Witness our Hands and Seal of the Legislature of the Virgin Islands this S Day of



January, A.D.. 2017



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Bill No. 31-0442 is hereby approved



Witness my hand and the Seal of the



Government of the United States



Virgin Islands at



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ay of January, 2017 A.D



Kenneth E. Mapp»



Governor