4 - Financial Surveillance & Company Licensing

4.1 Mission

The primary mission of the Financial Surveillance and Company Licensing Section is to monitor the financial solvency of insurers participating in the Massachusetts domestic insurance marketplace in order to provide a healthy and competitive insurance market.

4.2 Goals

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Monitor the solvency of all insurance companies domiciled in the Commonwealth of Massachusetts. Complete quarterly and annual analysis of all files within the deadlines delineated in the NAIC Accreditation Guidelines. Hold annual meetings with senior company management, Audit Committees, and Boards of Directors.

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Maintain Accreditation by the National Association of Insurance Commissioners (NAIC). The NAIC Accreditation program provides a process whereby solvency regulation of multi-state insurance companies can be enhanced and adequately monitored with an emphasis on: adequate solvency laws and regulations in place to protect consumers as well as guarantee funds; effective and efficient financial analysis and examination processes; and, appropriate organizational and personnel practices.

Complete

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Process license applications - including license amendment applications - from insurance companies seeking to transact insurance business in the Commonwealth to provide for a solvent and competitive insurance market.

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Oversee transactions such as mutualizations, demutualizations, issuance of surplus contribution notes, issuance of capital, mergers & acquisitions, quasi-reorganizations, additional reserving requirements, good corporate governance practices, and prudent conservative accounting standards.

Complete

4.3 Primary Activities

The Financial Surveillance and Company Licensing staff processes license certifications, analyzes annual statement filings and manages other revenue collections that resulted in approximately $600,000 in revenue in 2008.

Financial Surveillance

The Financial Surveillance Unit monitors the solvency of domestic and foreign (domiciled in another state) insurance companies. There are currently 1,448 insurance companies licensed or authorized to transact insurance business in the Commonwealth. Included in this number are life insurers, accident & health insurers, property & casualty insurers, health maintenance organizations, fraternal benefit societies, title insurers, risk retention groups, self-insurance groups, surplus lines insurers, reinsurers, home warranty contract providers and viatical settlement companies. Financial Surveillance also monitors transactions entered into by Massachusetts' domestic insurers.

As of December 31, 2008, there were 91 insurance companies domiciled in Massachusetts. A comprehensive "desk audit" of each of these companies was completed by an analyst and reviewed by a manager. These desk audits consist of over 20 detailed analyses for each company. They include an in-depth review of the Annual Statement including the investment portfolios, the reinsurance portfolios, reserving analyses, income statement, cash flow statements and balance sheets. Additionally, the Statement of Actuarial Opinion, the Management's Discussion & Analysis, Holding Company filings and independent CPA Audit are reviewed in great detail. Lastly, each domestic insurer files a quarterly statement similar to the Annual Statement that is reviewed in detail. These various tasks help the Division closely monitor the solvency of the company. The national ratings of each domestic insurer are monitored and tracked as well. During the fourth quarter of 2008, an additional emphasis was placed on troubled securities and the performance of the investment portfolios.

Company Licensing

The Company Licensing staff reviews and processes all applications from insurers seeking to obtain or amend licenses to transact insurance business in the Commonwealth.

The Section evaluated license and amended license applications for companies desiring to establish or expand an insurance business in Massachusetts in accordance with Massachusetts law and regulations. The Division participates in the NAIC Uniform Certificate of Authority application process. The UCAA application consists of fourteen parts that allow the Division to review the applicant's solvency, management team, and experience in the insurance industry. Information compiled by the NAIC, as well as input from the domestic regulators, is included in the review process.

During 2008, the Financial Surveillance Unit issued twenty-five new insurance company licenses, twenty-seven amended insurance company licenses, approved nine companies as authorized surplus lines insurers, approved two companies as accredited reinsurers, and issued a Certificate of Authority to one home warranty company.

New Licenses
Property & Casualty Insurers	Life, Accident & Health Insurers	Surplus Lines
Accident Fund General Insurance Company	Accendo Insurance Company	Acceptance Indemnity Insurance Company
Accident Fund National Insurance Co.	Brokers National Life Assurance Co.	Alamance Insurance Company
AIG Advantage Insurance Company	Envision Insurance Company	Century Surety Company
Allied World National Assurance Co.	Security Life Ins. Co. of America	Cincinnati Specialty Underwriters Ins Co.
AutoOne Insurance Company	SilverScript Insurance Company	CUMIS Specialty Insurance Company
Berkshire Hathaway Assurance Corp.	United Security Assurance Company of PA	Guilford Insurance Company
Employers Security Insurance Company	Unity Financial Life Insurance Co.	Omega US Insurance Inc.
Generali US Branch		Prime Insurance Company
Guarantee Co. of North America USA	Health Insurers	Protective Specialty Insurance Company
Homesite Insurance Co. of the Midwest	Boston Medical Center Health Plan, Inc.
Hospitality Mutual Insurance Company		Home Warranty Companies
PACO Assurance Company, Inc.	Title Insurers	AMT Warranty Corporation (Home Warranty)
Premier Group Insurance Company	Guardian National Title Insurance Company
Progressive Commercial Casualty Company		Accredited Reinsurers
Progressive Direct Insurance Company		Congress Life Insurance Co.
Tri-State Insurance Company of Minnesota		Starr Indemnity & Liability Co. (fka Republic)
Union Standard Insurance Co.
Utica First Insurance Company
Amended Licenses
Property & Casualty Insurers		Life, Accident & Health Insurers
American Pet Insurance Company, Inc.	Massachusetts Homeland Insurance Company	New York Life Insurance Company
Bay State Insurance Company	Merrimack Mutual Fire Insurance Company
Berkley Regional Insurance Company	Midwest Employers Casualty Company
Sparta Insurance Company	National Casualty Company
Cambridge Mutual Fire Insurance Co.	ProCentury Insurance Company
Fidelity National Insurance Company	Sompo Japan Insurance Co. of America
General Fidelity Insurance Company	State National Insurance Company
Great Divide Insurance Co.	Technology Insurance Company
Heritage Casualty Insurance Co.	Vermont Mutual Insurance Company
Hiscox Ins. Co. (fka American Livestock Ins. Co.)	Wesco Insurance Company
Hudson Insurance Company	Westport Ins Corp (Employers Reins Corp)
Jefferson Insurance Company	Western Diversified Casualty Insurance Company
Main Street America Assurance Company	Zale Indemnity Company

4.4 Special Activities

There were several new Massachusetts domestic insurers created and licensed during 2008. These included the following:

· Employers Security Assurance Company

Employers Security Assurance Company received their Certificate of Authority on January 17, 2008

· Hospitality Mutual Insurance Company

Hospitality Mutual Insurance Company received their Certificate of Authority on June 30, 2008.

· Boston Medical Center Health Plan

Boston Medical Center Health Plan received a conditional Certificate of Authority on October 31, 2008.

· John Hancock Life & Health Insurance Company

John Hancock Life & Health Insurance Company applied to redomesticate from Delaware to Massachusetts. This transaction was approved and the company redomesticated to Massachusetts effective January 1, 2009.

There were several Massachusetts domestic insurers involved in significant transactions during 2008. These included the following:

· Great-West Healthcare of Massachusetts, Inc.

Great-West Healthcare of Massachusetts, Inc., surrendered their Certificate of Authority effective January 11, 2008.

· Berkshire Mutual Insurance Company

Berkshire Mutual Insurance Company surrendered their Certificate of Authority effective October 20, 2008.

· First Allmerica Financial Life Insurance Company

First Allmerica Financial Life Insurance Company was acquired by Commonwealth Annuity and Life Insurance Company in a transaction that was approved by the Division on December 30, 2008. The transaction closed January 2, 2009.