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


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.Complete
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

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.Complete
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.