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Form a Business

Authorization of Insurers and General Requirements

KRS tit. XXV, ch. 304, subtit. 3
in effect

KRS 304.3-010 "Stock" insurer defined

304.3-010. "Stock" insurer defined A "stock" insurer is an incorporated insurer with its capital divided into shares and owned by its shareholders. Any company chartered by special act of the legislature of its state of domicile prior to June 18, 1970, as a company without capital stock but doing business exclusively on the stock plan, and so stated on its policies, and maintaining at all times surpluses as required by this code, shall in the administration of this code be considered as a "stock" insurer. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 1, effective June 18, 1970.

KRS 304.3-020 "Mutual" insurer defined

304.3-020. "Mutual" insurer defined A "mutual" insurer is an incorporated insurer without permanent capital stock, and the governing body of which is elected by its policyholders or those policyholders specified in its charter, or by any other reasonable method. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 2, effective June 18, 1970.

KRS 304.3-025 "Combined stock and mutual life" insurer defined

304.3-025. "Combined stock and mutual life" insurer defined A "combined stock and mutual life" insurer is an incorporated insurer with capital divided into shares owned by its shareholders, but which is controlled by the votes both of its stockholders and of its participating policyholder members to the extent any such rights of membership are granted and specified in the insurer's policies or its articles of incorporation. Effective: July 13, 1984 History: Created 1984 Ky. Acts ch. 343, subtit. 1, effective July 13, 1984, effective June 18, 1970.

KRS 304.3-030 "Reciprocal" insurer defined

304.3-030. "Reciprocal" insurer defined A "reciprocal" insurer is an unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact common to all such persons to provide reciprocal insurance among themselves. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 3, effective June 18, 1970.

KRS 304.3-040 "Lloyd's Plan" insurer defined

304.3-040. "Lloyd's Plan" insurer defined A "Lloyd's Plan" insurer is an unincorporated association of persons or associations of persons, designated as "underwriters" who transact an insurance business as insurers in this state through an attorney-in-fact under the name "Lloyd's" or under a "Lloyd's Plan" of operation. Effective: July 15, 1994 History: Amended 1994 Ky. Acts ch. 93, sec. 15, effective July 15, 1994. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 4, effective June 18, 1970.

KRS 304.3-050 "Charter" defined

304.3-050. "Charter" defined "Charter" means articles of incorporation, articles of agreement, articles of association, charter granted by legislative act, or other basic constituent document of a corporation, or the power of attorney of the attorney-in-fact of a reciprocal insurer, or underwriter's agreement and power of attorney of a Lloyd's plan insurer. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 5, effective June 18, 1970.

KRS 304.3-060 Exceptions to certificate of authority requirement

304.3-060. Exceptions to certificate of authority requirement A certificate of authority shall not be required of an insurer with respect to any of the following: (1) Transactions exempt under Subtitle 11. (2) Investigation, settlement, or litigation of claims under its policies lawfully written, or liquidation of assets and liabilities of the insurer. (3) Transactions relative to its investments in this state. (4) Prosecution or defense of legal actions; but no insurer unlawfully transacting insurance in this state without a certificate of authority shall be permitted to institute or maintain (other than defend) any action at law or in equity in any court of this state, either directly or through an assignee or successor in interest, to enforce any right, claim or demand arising out of such an insurance transaction until such insurer or assignee or successor has obtained a certificate of authority. This provision does not apply to any suit or action by the duly constituted receiver, rehabilitator or liquidator of such an insurer, assignee or successor under laws similar to those contained in Subtitle 33. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 6, effective June 18, 1970.

KRS 304.3-070 Eligibility for certificate of authority

304.3-070. Eligibility for certificate of authority (1) To qualify for and hold authority to transact insurance in this state, an insurer must be otherwise in compliance with this code and with its charter powers, and must be an incorporated stock or mutual insurer, or a combined stock and mutual life insurer, or a reciprocal insurer, or Lloyd's plan insurer, of the same general type as may be formed as a domestic insurer under this code, or an association, including incorporated and individual unincorporated underwriters, meeting the requirements of subsection (3) of this section, except that: (a) No foreign insurer shall be authorized to transact insurance in this state which does not maintain reserves as required by Subtitle 6 as applicable to the kind or kinds of insurance transacted by such insurer, wherever transacted in the United States; or which transacts business anywhere in the United States on the assessment plan, or stipulated premium plan, or any similar plan; (b) No insurer shall be authorized to transact a kind of insurance in this state unless duly authorized or qualified to transact such insurance in the state or country of its domicile; (c) No insurer shall be authorized to transact in this state any kind of insurance which is not within the definition as set forth in Subtitle 5; (d) No such authority shall be granted or continued as to any insurer while in arrears to the state for fees, licenses, taxes, assessments, fines or penalties accrued on business previously transacted in this state; (e) A combined stock and mutual life insurer must maintain separate accounting for income, expenses, assets, liabilities and surplus funds allocated between the "mutual" branch and the "stock" branch, in a manner as provided by a regulation to be promulgated by the commissioner. The "mutual" branch shall not invest any moneys in equity securities of the "stock" branch, nor shall it loan any moneys to the "stock" branch. The "stock" branch shall not loan any moneys to the "mutual" branch; and (f) A life insurer in forming the "stock" branch or the "mutual" branch of a combined stock and mutual life insurer, must possess the capital funds required pursuant to KRS 304.3-120 for the stock branch, and must possess the surplus funds required under KRS 304.24-100 for the mutual branch. The commissioner shall not grant a certificate of authority to any life insurer to conduct its business as a combination stock and mutual life insurer, unless the aforesaid capitalization requirements are fulfilled. (2) In determining the solvency of or impairment to any foreign or alien insurer which is requesting the issuance or continuance of any certificate of authority to do business in this state, the commissioner may admit as assets only those items which would qualify as admitted assets for a domestic insurer similarly situated. (3) To qualify for and hold authority to transact insurance in this state, an association, including incorporated and individual unincorporated underwriters, in addition to meeting the requirements of subsection (1) of this section, shall have: (a) Collective minimum capital and surplus equivalents, net of liabilities, on a several, not joint, basis of at least two hundred fifty million dollars ($250,000,000) and a central fund containing a balance of at least two hundred fifty million dollars ($250,000,000); (b) The incorporated members of the association: 1. Shall not be engaged in any business, other than underwriting; and 2. Shall be subject to the same level of regulation and solvency control by the association's domiciliary regulator as are the unincorporated members; (c) An association, including incorporated and individual unincorporated underwriters that meet the requirements of this subsection, shall not be deemed a Lloyd's plan insurer as defined in KRS 304.3-040, and shall not be subject to the requirements of Subtitle 28 of this chapter; and (d) The underwriting members of an association, including incorporated and individual unincorporated underwriters, that qualify for and hold authority to transact insurance in this state pursuant to this section, may also qualify as eligible surplus lines insurers pursuant to KRS 304.10-070. Effective: July 15, 2014 History: Amended 2014 Ky. Acts ch. 36, sec. 1, effective July 15, 2014. -- Amended 2010 Ky. Acts ch. 24, sec. 958, effective July 15, 2010. -- Amended 1984 Ky. Acts ch. 343, sec. 3, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 7, effective June 18, 1970.

KRS 304.3-080 General eligibility for certificate of authority -- Ownership -- Management

304.3-080. General eligibility for certificate of authority -- Ownership -- Management (1) No certificate of authority or license to transact any kind of insurance business in this state shall be issued, renewed or continued in effect to any domestic, foreign, or alien insurance company or other insurance entity which is owned, or financially controlled in whole or in part by any state of the United States, or by a foreign government or by any political subdivision of either, or which is an agency of such state, government or political subdivision, unless such company or entity was so owned, controlled or constituted prior to January 1, 1957, and was authorized to do business in this state on or prior to January 1, 1957. (2) The commissioner shall not grant or continue authority to transact insurance in this state to any insurer or proposed insurer after a hearing held thereon, if it appears that: (a) Any director, officer or other individual materially part of the management is found by the commissioner after investigation or upon reliable information to be incompetent, or dishonest, or untrustworthy, or of unfavorable business repute; or (b) The managers are so lacking in insurance company managerial experience in operations of the kind proposed in this state as to make such operation, currently or prospectively, hazardous to or contrary to the best interests of the insurance-buying or investing public of this state; or (c) The commissioner has good reason to believe it is affiliated directly or indirectly through ownership, control, management, reinsurance transactions or other business relations with any person or persons of unfavorable business repute; or (d) Its business operations are or have been marked, to the injury of insurers, stockholders, policyholders, creditors or the public, by illegality, or by manipulation of assets, or of accounts, or of reinsurance, or by bad faith. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 959, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 8, effective June 18, 1970.

KRS 304.3-090 General eligibility for certificate of authority -- Prior operation

304.3-090. General eligibility for certificate of authority -- Prior operation No foreign insurer shall be authorized to transact insurance in Kentucky, which has not been issuing its own policies as an authorized insurer for at least three (3) years in its state or country of domicile, unless the insurer is otherwise qualified for a certificate of authority under this code and is: (1) The wholly owned subsidiary as defined in KRS 304.37-010 of an insurer which is already an authorized insurer in Kentucky; or (2) The successor in interest through statutory merger or statutory consolidation, or through bulk reinsurance of substantially all of the insurance risks in this state, of an authorized insurer; or (3) An insurer organized solely for the purpose of insuring against earthquake, flood, nuclear radiation, war or other special hazards to property or liability for which, in the opinion of the commissioner, adequate provision is not made by insurers already authorized in this state. Effective: June 27, 2019 History: Amended 2019 Ky. Acts ch. 156, sec. 5, effective June 27, 2019. -- Amended 2010 Ky. Acts ch. 24, sec. 960, effective July 15, 2010. -- Amended 1984 Ky. Acts ch. 322, sec. 2, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 9, effective June 18, 1970.

KRS 304.3-100 Name of insurer

304.3-100. Name of insurer (1) No insurer shall be formed or authorized to transact insurance in this state which has or uses a name which is the same as or deceptively similar to that of another insurer already so authorized, without the written consent of such other insurer. (2) No life insurer shall be so authorized which has or uses a name deceptively similar to that of another insurer authorized to transact insurance in this state within the preceding ten (10) years if life insurance policies originally issued by such other insurer are still outstanding in this state, without the written consent of such insurer. (3) No insurer shall be formed or authorized to transact insurance in this state which has or uses a name the same as or deceptively similar to the name of any foreign insurer not so authorized if such foreign insurer has within the next preceding twelve (12) months signified its intention to secure an incorporation in this state under such name, or to do business as a foreign insurer in this state under such name, by filing notice of such intention with the commissioner, unless the written consent to the use of such name or deceptively similar name has been given by such foreign insurer. (4) No foreign insurer seeking admission to this state shall be authorized to transact insurance in this state which has or uses a name the same as or deceptively similar to that of a domestic corporation which has been incorporated as an insurer but has not yet secured a certificate of authority, until the expiration of three (3) years from the date of incorporation of such domestic corporation. (5) No insurer shall be so authorized which has or uses a name which tends to deceive or mislead as to the type of organization of the insurer. (6) In case of conflict of names between two (2) insurers, or a conflict otherwise prohibited under this section, the commissioner may, after notice to the other insurer, permit (or may require as a condition to the issuance of an original certificate of authority to an applicant insurer) the insurer to use in this state such supplementation or modification of its name or such business name as may reasonably be necessary to avoid the conflict. (7) Except as provided in subsection (6) of this section, an insurer shall conduct its business in the name under which the certificate of authority was issued. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 961, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 10, effective June 18, 1970.

KRS 304.3-110 Combinations of insuring powers, one insurer

304.3-110. Combinations of insuring powers, one insurer An insurer which otherwise qualifies therefor may be authorized to transact any one (1) kind or any combination of kinds of insurance as defined in Subtitle 5 of this chapter, except: (1) A life insurer may transact life insurance and grant annuities, but shall not be authorized to transact any other kind of insurance except: (a) Health insurance, including disability income insurance and paid family leave insurance; and (b) The commissioner may, if the insurer otherwise qualifies therefor, continue any authorization to transact in this state a kind or kinds of insurance not authorized under this subsection if the life insurer was, immediately prior to June 18, 1970, lawfully authorized to transact the insurance and has continuously transacted the insurance since that date; (2) Only an insurer with a certificate of authority to sell life insurance may grant and issue annuity contracts; (3) A reciprocal or Lloyd's insurer shall not transact life insurance; (4) A title insurer: (a) Shall be a stock insurer; and (b) May transact title insurance, but shall not be authorized to transact any other kind of insurance; (5) A mortgage guaranty insurer: (a) Shall be a stock insurer; and (b) May transact mortgage guaranty insurance, but shall not transact any other kind of insurance; and (6) Only an insurer with a certificate of authority to sell life insurance or health insurance may transact disability income insurance or paid family leave insurance. Effective: April 5, 2024 History: Amended 2024 Ky. Acts ch. 99, sec. 1, effective April 5, 2024. -- Amended 2010 Ky. Acts ch. 24, sec. 962, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 5, effective July 13, 2004. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 11, effective June 18, 1970.

KRS 304.3-120 Capital funds required -- Amount of surplus required

304.3-120. Capital funds required -- Amount of surplus required (1) Except as provided in subsection (2) of this section, to qualify for authority to transact insurance (as defined in Subtitle 5), an insurer shall possess and thereafter maintain unimpaired paid-in capital stock (if a stock insurer) or unimpaired basic surplus (if a foreign mutual, reciprocal, or Lloyd's insurer), and when first so authorized shall possess initial free surplus, all in amounts not less than as determined from the following table: Foreign Mutual, Reciprocal, and Stock Insurers Lloyd's Insurers Minimum Minimum Required Initial Required Initial Capital Free Basic Free Stock Surplus Surplus Surplus $1,000,000 $2,000,000 $1,000,000 $2,000,000 (2) An insurer holding a valid certificate of authority to transact insurance in this state immediately prior to July 15, 1982, may, if otherwise qualified therefor, continue to be so authorized while possessing paid-in capital stock (if a stock insurer) or surplus (if a mutual, reciprocal, or Lloyd's insurer) as required for such authority immediately prior to July 15, 1982. The commissioner shall not authorize such an insurer to transact any other kinds of insurance unless it then complies with the requirements as to capital and surplus. Notwithstanding the other provisions hereof, the exception provided in this subsection (2) shall cease to apply to any such insurer from and after the date upon which it has accumulated surplus in an amount equal to two hundred percent (200%) of the initial free surplus (if a stock or foreign mutual, reciprocal, or Lloyd's insurer) or the surplus (if a domestic mutual insurer) required under other provisions of this code to qualify for authority to transact the kind or kinds of insurance being transacted by it. (3) Each insurer shall at all times maintain bona fide additional surplus in the amount of two hundred fifty thousand dollars ($250,000). Insurers holding a valid certificate of authority to transact insurance in this state immediately prior to July 13, 1984, may, if otherwise qualified therefor, continue to be so authorized while possessing additional surplus as required for such authority immediately prior to July 13, 1984. The commissioner shall not authorize such an insurer to transact any other kinds of insurance unless it complies with this subsection. The exception provided in this subsection shall cease to apply to any insurer from and after the date upon which it has accumulated additional surplus equal to or in excess of the additional surplus required by this subsection. This subsection shall not apply to an association qualifying pursuant to KRS 304.3-070(3). (4) As to surplus required for authority to transact one (1) or more kinds of insurance and thereafter to be maintained, domestic mutual legal reserve insurers hereafter formed shall be governed by Subtitle 24 of this chapter. Effective: July 15, 2014 History: Amended 2014 Ky. Acts ch. 36, sec. 2, effective July 15, 2014. -- Amended 2010 Ky. Acts ch. 24, sec. 963, effective July 15, 2010. -- Amended 1984 Ky. Acts ch. 322, sec. 3, effective July 13, 1984. -- Amended 1982 Ky. Acts ch. 128, sec. 2, effective July 15, 1982. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 12, effective June 18, 1970.

KRS 304.3-125 Authority for commissioner to require additional capital and surplus

304.3-125. Authority for commissioner to require additional capital and surplus The commissioner is hereby granted authority to adopt administrative regulations, up to the standards prescribed by the National Association of Insurance Commissioners, covering requirements for additional capital and surplus based on the kind, type, volume, and nature of insurance business transacted, if and when any regulations are promulgated and adopted by the National Association of Insurance Commissioners as its model regulation on the subject and as a requirement for departmental certification by the association. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 964, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 386, sec. 4, effective July 14, 1992.

KRS 304.3-130 Repealed, 1982

304.3-130. Repealed, 1982 Catchline at repeal: Insuring combinations without additional capital funds. History: Repealed 1982 Ky. Acts ch. 128, sec. 8, effective July 15, 1982. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 13, effective June 18, 1970.

KRS 304.3-140 Deposit requirement in general

304.3-140. Deposit requirement in general (1) The commissioner shall not authorize an insurer to transact insurance in this state, other than an alien insurer or a title insurer, unless it makes and thereafter continuously maintains on deposit in this state, through the commissioner, cash or securities eligible for such deposit under the laws of this state, of a fair market value not less than its minimum required capital stock (if a stock insurer) or minimum required basic surplus (if a mutual, reciprocal, or Lloyd's plan insurer), for the protection of the insurer's policyholders or its policyholders and creditors. (2) The commissioner shall not so authorize a title insurer unless it so deposits and maintains such cash or securities of a fair market value not less than its minimum required capital stock as a guaranty fund which shall be held as security for the faithful performance by the insurer of all its undertakings and liabilities under its title policies or other guarantees of title to property. (3) The commissioner shall not authorize an alien insurer unless it so makes and thereafter continuously maintains such a deposit, representing funds in excess of all the insurer's liabilities under insurance contracts in force in the United States of a fair market value of not less than that required under subsection (1) of this section, as to a like foreign insurer. The deposit shall be held in trust for the protection of the insurer's policyholders, or its policyholders and creditors, in the United States. (4) In lieu of such a deposit made or maintained in this state, the commissioner may, in his or her discretion, accept the certificate in proper form of the public officer having general supervision of insurers in any other state to the effect that a deposit of like quality and amount, or part thereof, by such insurer is being maintained for like purposes in public custody or control pursuant to the laws of such state. (5) All such deposits in this state are subject to the applicable provisions of Subtitle 8. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 965, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 14, effective June 18, 1970.

KRS 304.3-150 Application for certificate of authority

304.3-150. Application for certificate of authority To apply for an original certificate of authority an insurer shall file with the commissioner its written application therefor on forms as prescribed and furnished by the commissioner, accompanied by the applicable fees specified in Subtitle 4, stating under the oath of the president or vice-president or other chief officer and the secretary of the insurer, or of the attorney-in-fact (if a reciprocal insurer or Lloyd's plan insurer), the insurer's name, location of its principal office, the kinds of insurance to be transacted, date of organization or incorporation, form of organization, its domicile, and any additional information as the commissioner may reasonably require, together with the following documents, as applicable: (1) If a corporation, a copy of its charter, together with all amendments thereto, or as restated and amended under the laws of its state or country of incorporation, currently certified by the public official with whom the originals are on file in a state or country. (2) A copy of its bylaws, certified by the insurer's secretary. (3) If a reciprocal insurer, a copy of the power of attorney of its attorney-in-fact, and copy of its subscribers agreement, if any, both certified by the attorney-in-fact; and if a domestic reciprocal insurer, the declaration provided for in KRS 304.27-060. (4) If a Lloyd's plan insurer, the names and addresses of all of the underwriters proposing to engage in the business, along with the number of underwriters which shall not be less than twenty-five (25), and that each underwriter is worth in his or her own right not less than twenty thousand dollars ($20,000) over and above all his or her liabilities, along with a statement showing a list of all cash and invested assets owned by the associated underwriters and their value, certified and sworn to by their duly authorized attorney-in-fact. (5) A complete copy of its financial statement as of not earlier than the December 31 next preceding in form as customarily used in the United States by like insurers, sworn to by at least two (2) executive officers of the insurer or certified by the public insurance supervisory official of the insurer's state or country of domicile. (6) A copy of the report of last examination of the insurer prior to the filing of the application, certified by the public insurance supervisory official of the insurer's state or country of domicile. (7) If a foreign or alien insurer, the name and address of the person to whom the Secretary of State shall forward lawful process served upon him or her. If a domestic reciprocal insurer, the name and address of the attorney designated pursuant to paragraph (e) of subsection (2) of KRS 304.27-060 shall be deemed to be the person to whom the Secretary of State shall forward lawful process served upon him or her. Any judgment against a domestic reciprocal so served shall be binding upon each of the insurer's subscribers as their respective contingent liabilities. (8) If a foreign or alien insurer, a certificate of the public insurance supervisory official of its state or country of domicile showing that it is authorized or qualified for authority to transact in a state or country the kinds of insurance proposed to be transacted in this state. (9) If an alien insurer, a certificate as to deposit, if to be tendered pursuant to subsection (4) of KRS 304.3-140, and a copy of the trust deed, if any, pertaining to a deposit, certified by the trustee. (10) If a foreign insurer, a certificate as to deposit, if to be tendered pursuant to subsection (4) of KRS 304.3-140. (11) If an alien insurer, a copy of the appointment and authority of its United States manager, certified by its officer having custody of its records. (12) Designation by the insurer of its officers or representatives authorized to appoint and remove its agents in this state. (13) If to transact surety insurance, the names and addresses of all its attorneys in fact within this state together with the scope of authority of each attorney-in-fact. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 966, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 6, effective July 13, 2004. -- Amended 1998 Ky. Acts ch. 483, sec. 7, effective July 15, 1998. -- Amended 1982 Ky. Acts ch. 319, sec. 10, effective July 15, 1982. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 15, effective June 18, 1970.

KRS 304.3-160 Issuance -- Refusal of authority -- Ownership of certificate

304.3-160. Issuance -- Refusal of authority -- Ownership of certificate (1) If upon completion of its application the commissioner finds that the insurer has met the requirements therefor under this code, including KRS 304.3-080, the commissioner may, if he or she deems it advisable, issue to the insurer a certificate of authority; otherwise, the commissioner shall issue an order refusing such certificate. (2) The certificate of authority, if issued, shall state the insurer's name, the address of its principal office, the state or country of its organization, and the kinds of insurance the insurer is authorized to transact in this state. At the insurer's request, the commissioner may issue a certificate of authority limited to particular types of insurance or coverages within a kind of insurance as defined in Subtitle 5. (3) Although issued and delivered to the insurer, the certificate of authority at all times shall be the property of the State of Kentucky. Upon any expiration, suspension, or termination thereof the insurer shall promptly deliver the certificate to the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 967, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 16, effective June 18, 1970.

KRS 304.3-170 Amended certificate of authority

304.3-170. Amended certificate of authority Upon written application therefor by the insurer and due cause shown, the commissioner may amend the certificate of authority of an insurer as required by change of name or to show any change in the kinds of insurance the insurer may thereafter transact and is qualified to transact in this state. The insurer shall accompany such request with the fee for amendment as specified in Subtitle 4. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 968, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 17, effective June 18, 1970.

KRS 304.3-180 Continuance, expiration, and reinstatement of certificate of authority -- Preparation of audited financial statements

304.3-180. Continuance, expiration, and reinstatement of certificate of authority -- Preparation of audited financial statements (1) A certificate of authority shall continue in force as long as the insurer is entitled thereto under this code, and until suspended or revoked by the commissioner or terminated at the insurer's request; subject, however, to continuance of the certificate by the insurer each year by: (a) Payment of the continuation fee provided in Subtitle 4 by March 1, or, if paid by mail, postmarked no later than March 1; (b) Due filing by the insurer of its annual statement for the next preceding calendar year as required by KRS 304.3-240; (c) Payment by the insurer of premium taxes with respect to the preceding calendar year; and (d) Due filing by domestic companies of quarterly statements as ordered by the commissioner. (2) If not so continued by the insurer, its certificate of authority shall expire at midnight on the April 30 next following the failure of the insurer to continue it in force, unless earlier revoked for failure to pay taxes as provided in KRS 304.4-040. The commissioner shall promptly notify the insurer of the occurrence of any failure resulting in impending expiration of its certificate of authority. (3) The commissioner may, in his or her discretion, upon the insurer's request made within three (3) months after expiration, reinstate a certificate of authority which the insurer has inadvertently permitted to expire, after the insurer has fully cured all its failures which resulted in the expiration and paid the fine as set forth in KRS 304.99-154. Otherwise the insurer shall be granted another certificate of authority only after filing application therefor and meeting all other requirements as for an original certificate of authority in this state. (4) Beginning with the statutory audits for the year 2010, an insurer shall not use the same lead or coordinating partner of an accounting firm responsible for preparing the audited financial statement for more than five (5) consecutive years. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 74, sec. 1, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 969, effective July 15, 2010; and ch. 25, sec. 3, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 7, effective July 13, 2004. -- Amended 1994 Ky. Acts ch. 496, sec. 5, effective July 15, 1994. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 18, effective June 18, 1970. Legislative Research Commission Note (7/15/2010). A reference to the "executive director" of insurance in subsection (1)(d) of this section, as amended by 2010 Ky. Acts ch. 25, sec. 3, has been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938.

KRS 304.3-190 Suspension or revocation of certificate of authority -- Mandatory grounds

304.3-190. Suspension or revocation of certificate of authority -- Mandatory grounds (1) The commissioner shall refuse to continue or shall suspend or revoke an insurer's certificate of authority: (a) If the action is required by any provision of this code; or (b) If a foreign or alien insurer and it no longer meets the requirements for a certificate of authority, as required for domestic insurers, on account of deficiency of capital or surplus or otherwise; or (c) If a domestic insurer and it has failed to cure an impairment of capital, if a stock insurer, or minimum required surplus, if other than a stock insurer, within the time allowed therefor by the commissioner under this code or is otherwise no longer qualified for the certificate of authority; or (d) If the insurer's certificate of authority to transact insurance therein is suspended or revoked by its state or country of domicile. (2) Except in case of insolvency or impairment of required capital or surplus, or suspension or revocation by another state or country as referred to in paragraph (d) of subsection (1) of this section, the commissioner shall give the insurer at least twenty (20) days notice in advance of any refusal, suspension, or revocation under this section, and of the particulars of the reasons therefor. If the insurer requests a hearing thereon within the twenty (20) days, a hearing shall be conducted in accordance with KRS Chapter 13B, and the request shall automatically stay the commissioner's proposed action until his or her final order is made on the hearing. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 970, effective July 15, 2010. -- Amended 1996 Ky. Acts ch. 318, sec. 231, effective July 15, 1996. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 19, effective June 18, 1970.

KRS 304.3-200 Suspension or revocation of certificate of authority -- Discretionary and special grounds

304.3-200. Suspension or revocation of certificate of authority -- Discretionary and special grounds (1) The commissioner may, in his or her discretion, refuse to continue or may suspend or revoke an insurer's certificate of authority if he or she finds after a hearing thereon, or upon waiver of hearing by the insurer, that the insurer has: (a) Willfully violated or willfully failed to comply with any lawful order of the commissioner; or (b) Willfully violated or willfully failed to comply with any lawful regulation of the commissioner; or (c) Willfully violated any provision of this code other than those for violation of which suspension or revocation is mandatory; or (d) Failed to pay taxes on its premiums as required by law; or (e) Has committed any unfair claims settlement practice as defined in Subtitle 12 or regulations promulgated thereunder. In lieu of or in addition to such suspension or revocation, the commissioner may, in his or her discretion, reprimand the insurer, which shall be made a part of the insurer's record, or may levy upon the insurer, and the insurer shall pay forthwith, an administrative fine as specified in KRS 304.99-020. (2) The commissioner shall suspend or revoke an insurer's certificate of authority on any of the following grounds, if he or she finds after a hearing thereon that the insurer: (a) Is in unsound condition, or is being fraudulently conducted, or is in such condition or using such methods and practices in the conduct of its business as to render its further transaction of insurance in this state currently or prospectively hazardous or injurious to policyholders or to the public; (b) With such frequency as to indicate its general business practice in this state: 1. Has without just cause failed to pay, or delayed payment of, claims arising under its policies, whether the claim is in favor of an insured or is in favor of a third person with respect to the liability of an insured to such third person; or 2. Without just cause compels insureds or claimants to accept less than the amount due them or to employ attorneys or to bring suit against the insurer or such an insured to secure full payment or settlement of such claims; (c) Refuses to be examined, or if its directors, officers, employees or representatives refuse to submit to examination relative to its affairs, or to produce its accounts, records and files for examination by the commissioner when required, or refuse to perform any legal obligation relative to the examination; (d) Has failed to pay any final judgment rendered against it in this state upon any policy, bond, recognizance or undertaking as issued or guaranteed by it, within thirty (30) days after the judgment became final or within thirty (30) days after dismissal of an appeal before final determination, whichever date is the later; (e) Has actual knowledge by the chief executive officer or person in charge of Kentucky operations that an agent employed by the insurer has engaged or is engaging in conduct in violation of this code and the insurer has failed to report such conduct to the department; or (f) No insurer, its agents, servants, or employees shall incur any liability in connection with or as a result of any disclosure made to the commissioner of insurance pursuant to the provisions of this section. (3) The commissioner may, in his or her discretion and without advance notice or a hearing thereon, immediately suspend the certificate of authority of any insurer as to which proceedings for receivership, conservatorship, rehabilitation or other delinquency proceedings have been commenced in any state by the public insurance supervisory officer of such state. (4) The commissioner may, in his or her discretion, refuse to continue or may suspend or revoke an insurer's certificate of authority if he or she finds after a hearing thereon, or upon waiver of hearing by the insurer, that the insurer has contracted with the Department for Medicaid Services to act as a managed care organization providing Medicaid benefits pursuant to KRS Chapter 205 and has exhibited willful or frequent and repeated failure to comply with KRS 304.17A-700 to 304.17A-730, 205.593, and 304.14-135 and KRS 205.522, 205.532 to 205.536, and 304.17A-515. Effective: July 14, 2018 History: Amended 2018 Ky. Acts ch. 106, sec. 11, effective July 14, 2018. -- Amended 2010 Ky. Acts ch. 24, sec. 971, effective July 15, 2010. -- Amended 1988 Ky. Acts ch. 225, sec. 18, effective July 15, 1988. -- Amended 1984 Ky. Acts ch. 171, sec. 4, effective July 13, 1984. -- Amended 1982 Ky. Acts ch. 320, sec. 8, effective July 15, 1982. -- Amended 1978 Ky. Acts ch. 341, sec. 2, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 20, effective June 18, 1970.

KRS 304.3-210 Order -- Notice of suspension or revocation -- Publication -- Effect upon agents' authority

304.3-210. Order -- Notice of suspension or revocation -- Publication -- Effect upon agents' authority (1) All suspensions or revocations of, or refusal to continue, an insurer's certificate of authority shall be by the commissioner's order given to the insurer. (2) Upon issuance of the order, the commissioner shall forthwith give notice thereof to the insurer's agents in this state of record in the department, and shall likewise suspend or revoke the authority of such agents to represent the insurer. (3) In his or her discretion, the commissioner may likewise publish notice of such suspension, revocation or refusal in one (1) or more newspapers of general circulation in the state. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 972, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 21, effective June 18, 1970.

KRS 304.3-220 Duration of suspension -- Insurer's obligation during suspension period - - Reinstatement

304.3-220. Duration of suspension -- Insurer's obligation during suspension period - - Reinstatement (1) Suspension of an insurer's certificate of authority shall be for such period as the commissioner specifies in the order of suspension, but not to exceed one (1) year. During the suspension the commissioner may rescind or shorten the suspension by his or her further order. (2) During the suspension period the insurer shall not solicit or write any new business in this state, but shall file its annual statement, pay fees, licenses, and taxes as required, and may service its business already in force in this state, as if the certificate of authority had continued in full force. (3) Upon expiration of the suspension period, if within such period the certificate of authority has not terminated, the insurer's certificate of authority shall be automatically reinstated unless the commissioner finds that the causes of the suspension have not terminated, or that the insurer is otherwise not in compliance with the requirements of this code, and of which the commissioner shall give the insurer notice not less than thirty (30) days in advance of the expiration of the suspension period. If not so automatically reinstated the certificate of authority shall be deemed to have terminated as of the end of the suspension period. (4) Upon reinstatement of the insurer's certificate of authority, the authority of its agents in this state to represent the insurer shall likewise be reinstated. The commissioner shall promptly notify the insurer and its agents in this state of record in the department, of such reinstatement. If pursuant to subsection (3) of KRS 304.3-210, the commissioner has published notice of such suspension he or she shall in like manner publish notice of the reinstatement. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 973, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 22, effective June 18, 1970.

KRS 304.3-230 Service of process on insurers -- Secretary of State as attorney for service of process

304.3-230. Service of process on insurers -- Secretary of State as attorney for service of process (1) Upon issuance of a certificate of authority to do business in this state, the following shall be deemed to have appointed the Secretary of State as their attorney to receive service of lawful process issued against them in this state: (a) Foreign or alien insurers; (b) Domestic reciprocal insurers; (c) Domestic Lloyd's insurers; (d) Qualified self-insurers. (2) Such appointment shall be irrevocable, shall bind any successor in interest or to the assets or liabilities of the insurer, and shall remain in effect as long as there is in force in this state or elsewhere a contract that would give rise to a cause of action in this state, made by the insurer, or liabilities or duties arising therefrom. (3) Service of lawful process against unauthorized insurers, except in contracts issued by insurers or underwriters to those insureds specified in KRS 304.11-020, shall be made upon the Secretary of State, as provided in KRS 304.11-040. (4) Service of lawful process against authorized domestic insurers shall be had pursuant to KRS 14A.4-040. (5) If the Secretary of State is by law the lawful attorney for service of process, the clerk of the court in which action is brought shall issue a summons against the defendant named in the complaint and shall serve by certified mail, return receipt requested, two (2) true copies of the summons with two (2) attested copies of plaintiff's complaint to the Secretary of State. The Secretary of State shall immediately mail a copy of the summons and complaint to the defendant; if an authorized insurer, to the person designated pursuant to subsection (7) of KRS 304.3-150, and if an unauthorized insurer to the last known principal place of business. The letter shall be posted by prepaid certified mail, return receipt requested, and shall bear the return address of the Secretary of State. The Secretary of State shall make a return to the court showing that the acts contemplated by this statute have been performed, and shall attach to his return the registry receipt, if any. Summons shall be deemed to be served on the return of the Secretary of State and the action shall proceed as provided in the Kentucky Rules of Civil Procedure. (6) The Secretary of State shall keep a record of the date and hour of receipt of such lawful process, as well as the date it is forwarded to the defendant. (7) For the purpose of this section, "lawful process" shall include only the summons which initiates and commences a cause of action, and such other initial notices, rules, or orders which would be required by the Kentucky Rules of Civil Procedure to be by personal service. (8) The sheriff serving the summons upon the Secretary of State shall pay to him at the time of service a fee in the amount set forth in KRS 454.210, which shall be taxed as costs in the action. Effective: January 1, 2011 History: Amended 2010 Ky. Acts ch. 151, sec. 133, effective January 1, 2011. -- Amended 2000 Ky. Acts ch. 145, sec. 3, effective July 14, 2000. -- Repealed and reenacted Ky. Acts ch. 1990 Ky. Acts ch. 425, sec. 2, effective July 13, 1990. -- Amended 1988 Ky. Acts ch. 185, sec. 2, effective July 15, 1988. -- Amended 1982 Ky. Acts ch. 319, sec. 1, effective July 15, 1982. -- Amended 1972 Ky. Acts ch. 274, sec. 160, effective July 1, 1972. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 23, effective June 18, 1970.

KRS 304.3-235 Corporate Governance Annual Disclosure -- Submission to department or lead state regulator -- Required information and support -- Annual filing of amended version -- Confidentiality -- Use and sharing of filings and information -- Parties retained to assist commissioner

304.3-235. Corporate Governance Annual Disclosure -- Submission to department or lead state regulator -- Required information and support -- Annual filing of amended version -- Confidentiality -- Use and sharing of filings and information -- Parties retained to assist commissioner (1) As used in this section: (a) "Insurance group" means those insurers and affiliates included within an insurance holding company system as defined in KRS 304.37-010; (b) "Lead state regulator" means the state insurance regulator of the state that is the lead state for an insurance group, as determined by procedures outlined in the National Association of Insurance Commissioner's Financial Analysis Handbook, as amended; and (c) "CGAD" means Corporate Governance Annual Disclosure. (2) This section shall not be construed to: (a) Prescribe or impose corporate governance standards or internal procedures beyond those required under applicable state corporate law; or (b) Limit the authority of the commissioner or the department, or the rights or obligations of third parties, under this chapter. (3) (a) By June 1 of each calendar year, an insurer shall submit a CGAD to the department, unless the insurer is a member of an insurance group, in which case either the insurer, or the insurance group of which the insurer is a member, shall submit a CGAD to the lead state regulator for the insurance group. (b) 1. An insurer or insurance group not required to submit a CGAD under paragraph (a) of this subsection shall submit a CGAD to the department if requested by the commissioner, but not more than once per calendar year. 2. The insurer or insurance group required to provide a CGAD under this paragraph shall notify the department of the CGAD's proposed submission date within thirty (30) days of the commissioner's request. (4) (a) Subject to paragraph (b) of this subsection, an insurer or insurance group shall have discretion in: 1. Determining the appropriate format of the CGAD; and 2. Communicating the information required by this section in the CGAD. (b) Notwithstanding paragraph (a) of this subsection, an insurer or insurance group shall: 1. Provide sufficient material and relevant information in the CGAD to enable the commissioner to understand the corporate governance structure, policies, and practices used by the insurer or insurance group; 2. Provide any additional information requested by the commissioner that the commissioner deems necessary to comply with the requirements of this section; and 3. Ensure that the CGAD is prepared in compliance with all requirements of this section. (5) (a) Each CGAD submitted to the department shall: 1. Contain the signature of the insurer's or insurance group's chief executive officer or corporate secretary attesting that, to the best of his or her belief and knowledge, the insurer or insurance group has: a. Implemented the corporate governance practices disclosed in the CGAD; and b. Provided a copy of the CGAD to the insurer's or insurance group's board of directors or to the appropriate committee of the board; 2. Be as descriptive as possible; 3. Include any attachments or example documents used in the governance process; and 4. Describe the following: a. The corporate governance framework and structure of the insurer or insurance group; b. The policies and practices: i. Of the insurer's or insurance group's most senior governing entity and its significant committees; and ii. For directing the insurer's or insurance group's senior management; and c. The processes by which the insurer's or insurance group's board, its committees, and senior management ensure an appropriate amount of oversight to the critical risk areas that have an impact on the insurer's business activities. (b) 1. An insurer or insurance group may comply with this subsection by cross-referencing other existing relevant and applicable documents, if the documents contain information substantially similar to the information required by this subsection. 2. For purposes of this paragraph, "other existing relevant and applicable documents" include but are not limited to: a. The ORSA Summary Report as defined in KRS 304.3-600; b. The filings required under KRS 304.37-020; c. Securities and Exchange Commission proxy statements; and d. Documents filed in compliance with other state, federal, or international reporting requirements. 3. An insurer or insurance group that cross-references documents under this paragraph shall: a. Clearly identify and reference the specific location of the documents; and b. Include the referenced documents as an attachment to the CGAD, unless the documents have already been filed with, or made available to, the department. (6) For purposes of completing the CGAD: (a) An insurer or insurance group may: 1. Report information at one (1) of the following levels, depending upon the structure of its corporate governance system: a. The ultimate controlling parent level; b. An intermediate holding company level; or c. The individual legal entity level; and 2. Make disclosures at the level: a. Used to determine the risk appetite of the insurer or insurance group; b. At which the earnings, capital, liquidity, operations, and reputation of the insurer are collectively overseen and the supervision of those factors is coordinated and exercised; or c. At which legal liability for failure of general corporate governance duties is placed; and (b) An insurer or insurance group shall: 1. Indicate the reporting level used; 2. If the reporting level was based on the criteria set forth in paragraph (a)2. of this subsection, indicate the criteria used to determine the reporting level; and 3. Explain any subsequent changes in reporting level. (7) An insurer or insurance group shall maintain documentation and support for all information provided in the CGAD, which shall be made available to the commissioner upon examination or upon request. (8) For each year following the initial filing of a CGAD with the department, the insurer or insurance group shall comply with this section by filing an amended version of the CGAD previously filed. The amended CGAD shall indicate any changes that have been made from the previously filed CGAD. If no changes were made in the information or activities reported by the insurer or insurance group since the previous filing, the insurer or insurance group shall so indicate. (9) Subject to subsection (10) of this section: (a) Filings, documents, and information in the possession or control of the department that are obtained by, created by, or disclosed to the commissioner or any other person under this section are recognized as being proprietary and containing trade secrets, and shall be confidential by law and privileged. The filings, documents, and information shall not be subject to: 1. Disclosure or production by the department under: a. The Kentucky Open Records Act, KRS 61.870 to 61.884; or b. A subpoena; or 2. Discovery or admission into evidence in any private civil action; and (b) The following persons shall not be permitted or required to testify in any private civil action regarding the filings, documents, or information referenced in paragraph (a) of this subsection: 1. The commissioner or any person who received filings, documents, or information while acting under the authority of the commissioner; and 2. Any person with whom filings, documents, or information are shared under subsection (10) of this section. (10) The filings, documents, and information subject to subsection (9) of this section may be: (a) Used by the commissioner in furtherance of any regulatory or legal action brought against an insurer as part of the commissioner's official duties; and (b) Shared, upon request, by the commissioner with the following, if the recipient agrees in writing to maintain the confidential and privileged status of the filings, documents, or information and has verified in writing the recipient's legal authority to do so: 1. Other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in KRS 304.37-010; 2. The National Association of Insurance Commissioners; and 3. Third-party consultants retained under subsection (14) of this section. (11) (a) The commissioner may receive CGAD filings, related documents, or governance-related information from the following: 1. Other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in KRS 304.37-010; and 2. The National Association of Insurance Commissioners. (b) Any filing, document, or information received under this subsection, with notice that the filing, document, or information is confidential or privileged under the laws of the jurisdiction that is the source of the filing, document, or information, shall be confidential by law and privileged in accordance with subsection (9) of this section. (12) The sharing of documents or information by the commissioner under this section shall not constitute a delegation of regulatory authority or rulemaking. The commissioner is solely responsible for the administration, execution, and enforcement of this subtitle. (13) A waiver of any applicable privilege or claim of confidentiality in the filings, documents, or information received or provided under this section shall not occur as a result of: (a) Disclosure to the commissioner or any person acting under authority of the commissioner; or (b) Sharing as authorized in this section. (14) (a) The commissioner may retain, at the insurer's or insurance group's expense, third-party consultants and the National Association of Insurance Commissioners for the purpose of assisting the commissioner in the performance of his or her regulatory duties under this section, including but not limited to understanding the insurer's or insurance group's: 1. Risk management framework; 2. Own Risk and Solvency Assessment (ORSA) and ORSA Summary Report, as those terms are defined in KRS 304.3-600; and 3. CGAD filing. (b) As part of the retention process, each party retained by the commissioner shall agree, in writing, to the following: 1. Adhere to the same confidentiality standards and requirements as the commissioner; 2. Comply with specific procedures and protocols for maintaining the confidentiality and security of information shared with the retained party; 3. Comply with specific procedures and protocols for sharing by the National Association of Insurance Commissioners only with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall: a. Specify that the recipient state agrees to maintain the confidentiality and privileged status of the information received; and b. Provide verification that the recipient state has legal authority to maintain confidentiality; 4. Recognize that: a. Ownership of information shared with the retained party shall remain with the department; and b. The retained party's use of shared information is subject to the direction of the commissioner; 5. Verify and give notice to the insurer that the retained party is free of any conflict of interest; 6. Monitor compliance with applicable confidentiality and conflict of interest standards in accordance with a system of internal procedures; 7. Not store information shared with the retained party in a permanent database after the underlying analysis is completed; 8. Provide prompt notice to the commissioner and the insurer or insurance group of any subpoena or request received by the retained party for the insurer's or insurance group's filings, documents, or information; and 9. Consent to intervention by an insurer in any judicial or administrative action in which the retained party may be required to disclose confidential information about the insurer that was shared with the retained party under this section. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 156, sec. 1, effective June 27, 2019.

KRS 304.3-240 Annual and quarterly financial statement -- Penalty for noncompliance - - Publication of financial statement prepared on a different basis

304.3-240. Annual and quarterly financial statement -- Penalty for noncompliance - - Publication of financial statement prepared on a different basis (1) (a) Each authorized insurer shall annually file with the commissioner a true statement of its financial condition, transactions, and affairs as of December 31 preceding. (b) The statement shall be: 1. Filed electronically on forms prescribed by the National Association of Insurance Commissioners; 2. Completed according to the instructions of the National Association of Insurance Commissioners; and 3. Verified by the oaths of at least two (2) of the insurer's principal officers. The annual statement of a reciprocal insurer shall be made and verified by its attorney-in-fact. (c) The annual statement shall be filed by March 1 of each year. (d) The annual statement of a foreign or alien insurer may be executed or verified by facsimile or reproduced signature; however, the annual statement of a domestic insurer shall contain original signatures. (2) The statement forms shall be in general form and context as approved by the National Association of Insurance Commissioners for the kinds of insurance to be reported upon, and as supplemented for additional information required by the commissioner. (3) The annual statement of an alien insurer shall: (a) Relate only to its assets, transactions, and affairs in the United States unless the commissioner requires otherwise; and (b) Be verified by the insurer's United States manager or by its officers duly authorized. (4) The commissioner may suspend or revoke the authority of any insurer failing to file its annual and quarterly statement when due or failing so to file during any extension of time therefor, which the commissioner, for good cause, may grant. (5) Notwithstanding the provisions of this section or any other law of this Commonwealth: (a) An authorized insurer may, subject to the requirements of administrative regulations adopted by the commissioner, publish financial statements or information based on financial statements prepared on a basis which: 1. Is in accordance with requirements of a competent authority; and 2. Differs from the basis of the statements which have been filed with the commissioner in compliance with this section; and (b) The differing financial statements, or information based on the financial statements, shall not be made the basis for the application of any provision of this chapter not relating solely to the publication of financial information unless the provision specifically so requires. Effective: July 14, 2022 History: Amended 2022 Ky. Acts ch. 133, sec. 3, effective July 14, 2022. -- Amended 2010 Ky. Acts ch. 24, sec. 974, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 8, effective July 13, 2004. -- Amended 1994 Ky. Acts ch. 92, sec. 3, effective July 15, 1994; and ch. 496, sec. 6, effective July 15, 1994. -- Amended 1976 Ky. Acts ch. 87, sec. 1, effective March 29, 1976. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 24, effective June 18, 1970.

KRS 304.3-241 Accounting practices and procedures for annual and quarterly statements

304.3-241. Accounting practices and procedures for annual and quarterly statements The annual statement and quarterly statements required by KRS 304.3-240 shall be completed in accordance with accounting practices and procedures which meet or exceed the accounting practices and procedures established by the National Association of Insurance Commissioners. Effective: July 15, 1994 History: Amended 1994 Ky. Acts ch. 496, sec. 7, effective July 15, 1994. – Created 1992 Ky. Acts ch. 386, sec. 1, effective July 14, 1992.

KRS 304.3-242 Property and casualty insurers to annually submit statement of actuarial opinion and supporting documentation -- Opinion to be available for public inspection -- Confidentiality of supporting documentation -- Exemptions to filing requirement

304.3-242. Property and casualty insurers to annually submit statement of actuarial opinion and supporting documentation -- Opinion to be available for public inspection -- Confidentiality of supporting documentation -- Exemptions to filing requirement (1) Every insurer authorized to transact property or casualty insurance, unless otherwise exempt in accordance with subsection (7) of this section, shall annually submit the opinion of an appointed actuary entitled "Statement of Actuarial Opinion," which shall be provided with the annual statement required by KRS 304.3-240 and 304.3- 241. (2) Every insurer authorized to transact property or casualty insurance that is required to submit a statement of actuarial opinion shall annually submit an actuarial opinion summary written by the company's appointed actuary, which shall be provided with the annual statement required by KRS 304.3-240 and 304.3-241 and considered as a document supporting the statement of actuarial opinion. (3) An actuarial report and underlying workpapers shall be prepared to support each statement of actuarial opinion. (4) The commissioner may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and prepare the supporting actuarial report or workpapers if: (a) The insurer fails to provide a supporting actuarial report or workpapers at the request of the commissioner; or (b) The commissioner determines that the supporting actuarial report or workpapers provided by the insurer are otherwise unacceptable to the commissioner. (5) The appointed actuary shall not be liable for damages to any person other than the insurer and the commissioner for any act, error, omission, decision, or conduct with respect to the actuary's opinion, except in cases of gross negligence, fraud, or willful misconduct on the part of the appointed actuary. (6) (a) The statement of actuarial opinion shall be provided with the annual statement prepared in accordance with KRS 304.3-240 and 304.3-241 and shall be available for public inspection. (b) Documents, materials, or other information in the possession or control of the department that are considered an actuarial report, workpapers, or actuarial opinion summary provided in support of the opinion, and any other material provided by the insurer to the commissioner in connection with the actuarial report, workpapers, or actuarial opinion summary, shall be confidential and privileged. The confidentiality and privilege protections contained in this paragraph shall not extend to any nonregulatory person or entity holding the documents, materials, or other information. (c) Paragraph (b) of this subsection shall not be construed to limit the commissioner's authority to: 1. Release the documents to the Actuarial Board for Counseling and Discipline if the material is required for the purpose of professional disciplinary proceedings and the Actuarial Board for Counseling and Discipline establishes procedures satisfactory to the commissioner for preserving the confidentiality of the documents; or 2. Use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the commissioner's official duties. (d) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to this subsection. (e) In order to assist in the performance of his or her duties as set forth in KRS 304.2-100, the commissioner may: 1. Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to this subsection, with other state, federal, and international regulatory agencies and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information and has the legal authority to maintain confidentiality; 2. Receive documents, materials, or other information, including otherwise confidential and privileged documents, materials, or information, from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and 3. Enter into agreements governing the sharing and use of information consistent with this subsection. (f) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or other information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in paragraph (e) of this subsection. (7) It shall not be necessary to file the actuarial report required by this section in the following instances: (a) An insurer that has less than one million dollars ($1,000,000) total direct plus assumed written premiums during a calendar year, or that has less than one thousand (1,000) policyholders or certificate holders at the end of a calendar year. An insurer which intends to utilize this exemption shall submit a letter of intent to the insurance regulatory official in its domiciliary state no later than December 1 of the calendar year for which the exemption is to be claimed; (b) An insurer which is under rehabilitation, liquidation, or any other delinquency proceeding ordered pursuant to a statutory provision, unless ordered to make the report by the insurance regulatory official in its domiciliary state; (c) An insurer writing property insurance only if the exemption is agreed to by the insurance regulatory official in the insurer's domiciliary state; or (d) Filing the report would constitute financial hardship, which is presumed to exist if the projected reasonable cost of the report would exceed the lesser of: 1. One percent (1%) of the insurer's capital and surplus reflected in the insurer's annual statement for the calendar year for which the exemption is sought; or 2. Three percent (3%) of the insurer's net direct plus assumed premiums written during the calendar year for which the exemption is sought as reflected in the insurer's annual statement filed with the insurance regulator official in its domiciliary state. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 975, effective July 15, 2010; and ch. 25, sec. 4, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 386, sec. 2, effective July 14, 1992. Legislative Research Commission Note (7/15/2010). References to the "executive director" and "office" of insurance in this section, as amended by 2010 Ky. Acts ch. 25, sec. 4, have been changed in codification to the "commissioner" and "department" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. These changes were made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 25, which are in conflict. Under KRS 446.250, Acts ch. 25, which was last enacted by the General Assembly, prevails.

KRS 304.3-245 Repealed, 1998

304.3-245. Repealed, 1998 Catchline at repeal: Closed claim information -- Reporting of information -- Report of commissioner. History: Repealed 1998 Ky. Acts ch. 473, sec. 1, effective July 15, 1998; and ch. 483, sec. 35, effective July 15, 1998. -- Created 1988 Ky. Acts ch. 225, sec. 11, effective July 15, 1988. Legislative Research Commission Note (7/15/98). This section was repealed by 1998 Ky. Acts chs. 473 and 483.

KRS 304.3-250 Repealed, 1998

304.3-250. Repealed, 1998 Catchline at repeal: Resident agent -- Countersignature law. History: Repealed 1998 Ky. Acts ch. 103, sec. 3, effective July 15, 1998. -- Amended 1982 Ky. Acts ch. 400, sec. 1, effective July 15, 1982. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 25, effective June 18, 1970.

KRS 304.3-260 Repealed, 1998

304.3-260. Repealed, 1998 Catchline at repeal: Exceptions to resident agent countersignature law. History: Repealed 1998 Ky. Acts ch. 103, sec. 3, effective July 15, 1998. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 26, effective June 18, 1970.

KRS 304.3-270 Retaliatory provision

304.3-270. Retaliatory provision (1) The purpose of this section is to aid in the protection of insurers formed under the laws of Kentucky and transacting insurance in other states or countries against discriminatory or onerous requirements under the laws of such states or countries or the administration thereof. (2) When by or pursuant to the laws of any other state or foreign country or province any taxes, licenses and other fees, in the aggregate, and any fines, penalties, deposit requirements or other material obligations, prohibitions or restrictions are or would be imposed upon Kentucky insurers, or upon the agents or representatives of such insurers, which are in excess of such taxes, licenses and other fees, in the aggregate, or which are in excess of the fines, penalties, deposit requirements or other obligations, prohibitions, or restrictions directly imposed upon similar insurers, or upon the agents or representatives of such insurers, of such other state or country under the statutes of this state, so long as such laws of such other state or country continue in force or are so applied, the same taxes, licenses and other fees, in the aggregate, or fines, penalties, or deposit requirements or other material obligations, prohibitions, or restrictions of whatever kind shall be imposed by the commissioner upon the insurers, or upon the agents or representatives of such insurers, of such other state or country doing business or seeking to do business in Kentucky. Any tax, license or other fee or other obligation imposed by any city, county, or other political subdivision or agency of such other state or country on Kentucky insurers or their agents or representatives shall be deemed to be imposed by such state or country within the meaning of this section. (3) This section shall not apply as to personal income taxes, nor as to ad valorem taxes on real or personal property, nor as to special purpose obligations or assessments imposed by another state in connection with particular kinds of insurance other than property insurance; except that deductions, from premium taxes or other taxes otherwise payable, allowed on account of real estate or personal property taxes paid shall be taken into consideration by the commissioner in determining the propriety and extent of retaliatory action under this section. (4) For the purposes of this section the domicile of an alien insurer, other than insurers formed under the laws of Canada, or a province thereof, shall be that state designated by the insurer in writing filed with the commissioner at time of admission to this state or within six (6) months after the effective date of this code, whichever date is the later, and may be any one (1) of the following states: (a) That in which the insurer was first authorized to transact insurance; (b) That in which is located the insurer's principal office; or (c) That in which is held the largest deposit of trusteed assets of the insurer for the protection of its policyholders in the United States. If the insurer makes no such designation its domicile shall be deemed to be that state in which is located its principal office. (5) For the purpose of this section assessments by insurance guaranty associations or similar organizations in any other state shall not be considered or used in determining retaliatory taxation to be imposed by the commissioner upon insurers doing business in this state that are incorporated or organized under the laws of such other state, or upon their agents. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 976, effective July 15, 2010. -- Amended 1972 Ky. Acts ch. 137, sec. 18, effective June 16, 1972. -- Created 1970 Ky. Acts ch. 301, subtit. 3, sec. 27, effective June 18, 1970.

KRS 304.3-280 Effect of provision limiting or excluding insurer's obligation to pay claim of insured eligible for medical assistance

304.3-280. Effect of provision limiting or excluding insurer's obligation to pay claim of insured eligible for medical assistance A certificate of authority shall not be issued to an insurer who has a provision in its insurance contract which has the effect of limiting or excluding its obligation to pay on a claim because the insured is eligible for or is provided medical assistance under the provisions of Title XIX of the Social Security Act. Any certificate of authority issued to an insurer shall be revoked if such insurer has a provision in any insurance contract which has the effect of limiting or excluding its obligation to pay on a claim because the insured is eligible for or is provided medical assistance under the provisions of Title XIX of the Social Security Act. General exclusion or reduction provisions relating to benefits paid by or eligibility under governmental programs, whether state or federal, shall not be construed to apply to Medicaid. Effective: July 15, 1980 History: Created 1980 Ky. Acts ch. 252, sec. 5, effective July 15, 1980.

KRS 304.3-310 Repealed, 1988

304.3-310. Repealed, 1988 Catchline at repeal: Annual report on workmen's compensation experience by insurers - Departmental summary of information - Review of rates - Order for new rate schedule filings. History: Repealed 1988 Ky. Acts ch. 114, sec. 2, effective January 15, 1988. -- Created 1980 Ky. Acts ch. 13, sec. 1, effective July 15, 1980.

KRS 304.3-315 Repealed, 1992

304.3-315. Repealed, 1992 Catchline at repeal: Annual report of liability and health insurance experience by insurers. History: Repealed 1992 Ky. Acts ch. 386, sec. 5, effective July 14, 1992. -- Amended 1990 Ky. Acts ch. 464, sec. 1, effective July 13, 1990. -- Created 1988 Ky. Acts ch. 118, sec. 1, effective July 15, 1988.

KRS 304.3-320 Guaranty fund deposit by foreign insurers may be required by commissioner

304.3-320. Guaranty fund deposit by foreign insurers may be required by commissioner (1) Foreign insurers currently admitted to do the business of life and health insurance in Kentucky and foreign insurers hereafter admitted to do the business of life and health insurance in Kentucky which are domiciled in states which have no life and health insurance guaranty association or similar guaranty fund in operation may be required by the commissioner, in order to protect Kentucky policyholders, to furnish to the commissioner a deposit of cash or publicly-traded securities having a market value of not less than one hundred thousand dollars ($100,000) nor more than one million dollars ($1,000,000). (2) In establishing the amount of the deposit required by subsection (1) of this section for a particular insurer, the commissioner shall consider the following factors: (a) The amount of Kentucky writings; (b) The amount of policy reserves and claim reserves pertaining to Kentucky risks; (c) The kind of insurance written in Kentucky; (d) The current financial and operating test results of the insurer provided by the National Association of Insurance Commissioners under its insurance regulatory information system; and (e) Any other relevant financial data. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 977, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 9, effective July 13, 2004. -- Created 1982 Ky. Acts ch. 128, sec. 1, effective July 15, 1982.

KRS 304.3-330 Reports of past-due loans and loans in foreclosure to early warning analyst

304.3-330. Reports of past-due loans and loans in foreclosure to early warning analyst (1) Loans that are more than ninety (90) days past due shall be reported in writing by a domestic insurer to the early warning analyst created in KRS 304.2-065. (2) Loans in foreclosure shall be reported to the early warning analyst in writing by a domestic insurer when the foreclosure action is initiated. Effective: July 15, 1994 History: Created 1994 Ky. Acts ch. 496, sec. 10, effective July 15, 1994.

KRS 304.3-400 Definitions for KRS 304.3-400 to 304.3-430

304.3-400. Definitions for KRS 304.3-400 to 304.3-430 As used in KRS 304.3-400 to 304.3-430, unless the context requires otherwise: (1) "Accredited state" means a state in which the insurance regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the National Association of Insurance Commissioners; (2) "Control" or "controlled" has the meaning set forth in KRS 304.37-010; (3) "Controlled insurer" means an authorized insurer which is controlled, directly or indirectly, by a producer; (4) "Controlling producer" means a producer who directly or indirectly, controls an insurer; (5) "Authorized insurer" or "insurer" means an insurer holding a certificate of authority from the commissioner to transact property or casualty insurance business in Kentucky. The following, among others, are not authorized insurers for the purposes of KRS 304.3-400 to 304.3-430: (a) All residual market mechanisms and joint underwriting authorities or associations; and (b) All captive insurers, other than risk retention groups as defined in 15 U.S.C. secs. 3901 et seq. and 42 U.S.C. sec. 9671, including insurers owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, insurance organizations owned by the insureds whose exclusive purpose is to insure risks to member organizations or group members and their affiliates; and (6) "Producer" means a person, firm, association, or corporation, when, for any compensation, commission, or other thing of value, the person, firm, association, or corporation acts or aids in any manner in soliciting, negotiating, or procuring the making of any insurance contract on behalf of an insured other than the person, firm, association, or corporation. Effective: June 27, 2019 History: Amended 2019 Ky. Acts ch. 156, sec. 6, effective June 27, 2019. -- Amended 2015 Ky. Acts ch. 57, sec. 1, effective June 24, 2015. -- Amended 2010 Ky. Acts ch. 24, sec. 978, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 157, sec. 1, effective July 14, 1992.

KRS 304.3-405 Parties subject to KRS 304.3-400 to 304.3-430

304.3-405. Parties subject to KRS 304.3-400 to 304.3-430 KRS 304.3-400 to 304.3-430 shall apply to authorized insurers as defined in KRS 304.3- 400, either domiciled in this Commonwealth or domiciled in a state that is not an accredited state having in effect a substantially similar law. All provisions of Subtitle 37 of this chapter, relating to insurance holding company systems, to the extent they are not superseded by KRS 304.3-400 to 304.3-430, shall continue to apply to all parties within the holding company systems subject to KRS 304.3-400 to 304.3-430. Effective: July 14, 1992 History: Created 1992 Ky. Acts ch. 157, sec. 2, effective July 14, 1992.

KRS 304.3-410 Applicability -- Contract between insurer and controlling producer -- Audit committees -- Reporting requirements

304.3-410. Applicability -- Contract between insurer and controlling producer -- Audit committees -- Reporting requirements (1) The applicability of this section is as follows: (a) The provisions of this section shall only apply if in any calendar year, the aggregate amount of gross written premium on business placed with a controlled insurer by a controlling producer is equal to or greater than five percent (5%) of the admitted assets of the controlled insurer, as reported in the controlled insurer's quarterly statement filed as of September 30 of the immediate preceding year; and (b) Notwithstanding paragraph (a) of this subsection, the provisions of this section shall not apply if: 1. The controlling producer: a. Places insurance only with the controlled insurer, or only with the controlled insurer and a member or members of the controlled insurer's holding company system, or the controlled insurer's parent, affiliate, or subsidiary and receives no compensation based upon the amount of premiums written in connection with the insurance; and b. Accepts insurance placements only from nonaffiliated subproducers, and not directly from insureds; and 2. The controlled insurer, except for insurance business written through a residual market mechanism, accepts insurance business only from a controlling producer, a producer controlled by the controlled insurer, or a producer that is a subsidiary of the controlled insurer. (2) A controlled insurer shall not accept business from a controlling producer and a controlling producer shall not place business with a controlled insurer unless there is a written contract between the controlling producer and the insurer specifying the responsibilities of each party, and the contract has been approved by the board of directors of the insurer and contains the following minimum provisions: (a) The controlled insurer may terminate the contract for cause, upon written notice to the controlling producer. The controlled insurer shall suspend the authority of the controlling producer to write business during the pendency of any dispute regarding the cause for termination; (b) The controlling producer shall render accounts to the controlled insurer detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to, the controlling producer; (c) The controlling producer shall remit all funds due under the terms of the contract to the controlled insurer on at least a monthly basis. The due date shall be fixed so that premiums or installments collected shall be remitted no later than ninety (90) days after the effective date of any policy placed with the controlled insurer under this contract; (d) All funds collected for the controlled insurer's account shall be held by the controlling producer in a fiduciary capacity, in one (1) or more appropriately identified bank accounts in banks that are members of the federal reserve system, in accordance with the provisions of the insurance code, as applicable. Funds of a controlling producer not required to be licensed in this state shall be maintained in compliance with the requirements of the controlling producer's domiciliary jurisdiction; (e) The controlling producer shall maintain separately identifiable records of business written for the controlled insurer; (f) The contract shall not be assigned in whole or in part by the controlling producer; (g) The controlled insurer shall provide the controlling producer with its underwriting standards, rules and procedures, and with manuals stating the rates to be charged and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to the standards, rules, procedures, rates, and conditions. The standards, rules, procedures, rates, and conditions shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer; (h) The rates and terms of the controlling producer's commissions, charges, or other fees and the purposes for those charges or fees. The rates of commissions, charges, and other fees shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than the controlling producers. For purposes of this paragraph and paragraph (g) of this subsection, examples of "comparable business" include the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits, and similar quality of business. This paragraph does not authorize controlling producers to charge fees which the controlling producer is not otherwise permitted to charge under the provisions of the insurance code; (i) If the contract provides that the controlling producer, on insurance business placed with the insurer, is to be compensated contingent upon the insurer's profits on that business, then such compensation shall not be determined and paid until at least five (5) years after the premiums on liability insurance are earned and at least one (1) year after the premiums are earned on any other insurance. In no event shall the commissions be paid until the adequacy of the controlled insurer's reserves on remaining claims has been independently verified pursuant to subsection (3) of this section; (j) A limit on the controlling producer's writings in relation to the controlled insurer's surplus and total writings. The insurer may establish a different limit for each line or subline of business. The controlled insurer shall notify the controlling producer when the applicable limit is approached and shall not accept business from the controlling producer if the limit is reached. The controlling producer shall not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached; and (k) The controlling producer may negotiate, but shall not bind, reinsurance on behalf of the controlled insurer on business the controlling producer places with the controlled insurer, except that the controlling producer may bind facultative reinsurance contracts pursuant to obligatory facultative agreements, if the contract with the controlled insurer contains underwriting guidelines, for both reinsurance assumed and ceded, which include a list of reinsurers with automatic agreements that are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules. (3) Every controlled insurer shall have an audit committee of the board of directors composed of independent directors. The audit committee shall annually meet with the management, the insurer's independent certified public accountants, and an independent casualty actuary or other independent loss reserve specialist acceptable to the commissioner to review the adequacy of the insurer's loss reserves. (4) Reporting requirements are as follows: (a) In addition to any other required loss reserve certification, the controlled insurer shall annually, on April 1 of each year, file with the commissioner an opinion of an independent casualty actuary, or other independent loss reserve specialist acceptable to the commissioner, reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of the end of the year, including incurred but not reported losses, on business placed by the producer; and (b) The controlled insurer shall annually report to the commissioner the amount of commissions paid to the producer, the percentage that amount represents of the net premiums written, and comparable amounts and percentage paid to noncontrolling producers for placements of the same kinds of insurance. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 979, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 157, sec. 3, effective July 14, 1992.

KRS 304.3-415 Notice to prospective insured disclosing relationship between producer and controlled insurer -- Exceptions

304.3-415. Notice to prospective insured disclosing relationship between producer and controlled insurer -- Exceptions The producer, prior to the effective date of the policy, shall deliver written notice to the prospective insured disclosing the relationship between the producer and the controlled insurer, except that, if the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain in his records a signed commitment from the subproducer that the subproducer is aware of the relationship between the insurer and the producer and that the subproducer has or will notify the insured. Effective: July 14, 1992 History: Created 1992 Ky. Acts ch. 157, sec. 4, effective July 14, 1992.

KRS 304.3-420 Authority of commissioner -- Actions

304.3-420. Authority of commissioner -- Actions (1) If the commissioner believes that the controlling producer or any other person has not materially complied with KRS 304.3-400 to 304.3-430, or any administrative regulation or order promulgated under KRS 304.3-400 to 304.3-430, the commissioner may: (a) Order the controlling producer to cease placing business with the controlled insurer; or (b) If it was found that because of the material noncompliance that the controlled insurer or any policyholder has suffered any loss or damage, the commissioner may maintain a civil action, intervene in an action brought by or on behalf of the insurer or a policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder, or seek other appropriate relief. (2) Appeals from orders issued under subsection (1) of this section shall be taken as provided in Subtitle 2 of this chapter. (3) If an order for liquidation or rehabilitation of the controlled insurer has been entered pursuant to Subtitle 33 of this chapter, and the receiver appointed under that order believes that the controlling producer or any other person has not materially complied with KRS 304.3-400 to 304.3-430, or any administrative regulation or order promulgated under KRS 304.3-400 to 304.3-430, and the insurer suffered any loss or damage, the receiver may maintain a civil action for recovery of the damages or seek other appropriate sanctions for the benefit of the insurer. (4) Nothing contained in this section shall affect the right of the commissioner to exercise any other authority granted to him or her by law. (5) Nothing contained in this section is intended to or shall in any manner alter or affect the rights of policyholders, claimants, creditors, or other third parties. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 980, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 157, sec. 5, effective July 14, 1992.

KRS 304.3-425 Compliance date

304.3-425. Compliance date Controlled insurers and controlling producers which are not in compliance with KRS 304.3-410 on July 14, 1992, shall have sixty (60) days after July 14, 1992, to comply, and shall comply with KRS 304.3-415 beginning with all policies written or renewed on or after sixty (60) days after July 14, 1992. Effective: July 14, 1992 History: Created 1992 Ky. Acts ch. 157, sec. 6, effective July 14, 1992.

KRS 304.3-430 Short title for KRS 304.3-400 to 304.3-430

304.3-430. Short title for KRS 304.3-400 to 304.3-430 KRS 304.3-400 to 304.3-430 may be cited as the Business Transacted with a Producer- Controlled Property or Casualty Insurer Act. Effective: July 14, 1992 History: Created 1992 Ky. Acts ch. 157, sec. 7, effective July 14, 1992.

KRS 304.3-500 Definitions for KRS 304.3-500 to 304.3-570

304.3-500. Definitions for KRS 304.3-500 to 304.3-570 As used in KRS 304.3-500 to 304.3-570, unless the context requires otherwise: (1) "Actuary" means a person who is a member in good standing of the American Academy of Actuaries; (2) "Insurer" means any person duly authorized as an insurer by the commissioner; (3) "Controlling agent" means any person who negotiates and binds ceding reinsurance contracts on behalf of an insurer or manages all or part of the insurance business of an insurer, including the management of a separate division, department, or underwriting office, and acts as an agent for the insurer whether known as a controlling agent or other name, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium equal to more than five percent (5%) of the policyholder surplus as reported in the last annual statement of the insurer in any one (1) quarter or year, and who also adjusts or pays claims in excess of an amount determined by the commissioner, or negotiates reinsurance on behalf of the insurer. The following persons shall not be considered controlling agents: (a) An employee of the insurer; (b) A United States manager of the United States branch of an alien insurer; (c) An underwriting manager which, pursuant to contract, manages all the insurance operations of the insurer, is under common control with the insurer, subject to Subtitle 37 of this chapter, and whose compensation is not based on the volume of premiums written; and (d) The attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer, Lloyd's plan insurer, or interinsurance exchange under powers of attorney; and (4) "Underwrite" means the authority to accept or reject risks on behalf of the insurer. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 981, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 139, sec. 1, effective July 14, 1992.

KRS 304.3-510 Licensing of controlling agent -- Evidence of financial responsibility

304.3-510. Licensing of controlling agent -- Evidence of financial responsibility (1) A person shall not be, act as, or hold himself or herself out as a controlling agent with respect to risks located in Kentucky for an insurer authorized in Kentucky unless the person is licensed as agent by Kentucky. (2) A person shall not be, act as, or hold himself or herself out as a controlling agent representing an insurer domiciled in Kentucky with respect to risks located outside Kentucky unless the person is licensed as an agent by Kentucky. (3) The commissioner may require a controlling agent to provide evidence of financial responsibility in the form and amount acceptable to the commissioner for the protection of the insurer, policyholders, and claimants. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 982, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 139, sec. 2, effective July 14, 1992.

KRS 304.3-520 Contract between insurer and controlling agent -- Minimum provisions - - Prohibited activities

304.3-520. Contract between insurer and controlling agent -- Minimum provisions - - Prohibited activities A person acting in the capacity of controlling agent shall not place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party and, where both parties share responsibility for a particular function, specifies the division of these responsibilities, and which contains the following minimum provisions: (1) The insurer may terminate the contract for cause upon written notice to the controlling agent. The insurer may suspend the underwriting authority of the controlling agent during the pendency of any dispute regarding the termination; (2) The controlling agent shall render account to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis; (3) All funds collected for the account of the insurer shall be held by the controlling agent in a fiduciary capacity in a bank which is a member of the federal reserve system. This account shall be used for all payments on behalf of the insurer. The controlling agent may retain no more than three (3) months estimated claims payments and allocated loss adjustment expenses; (4) Separate records of business written by the controlling agent shall be maintained. The insurer shall have access to and the right to copy all accounts and records related to its business in a form usable by the insurer, and the commissioner shall have access to all books, bank accounts, and records of the controlling agent in a form usable to the commissioner. These records shall be retained according to KRS 304.2-220 and the commissioner's administrative regulations; (5) The contract shall not be assigned in whole or in part by the controlling agent; (6) Appropriate underwriting guidelines, including: (a) The maximum annual premium volume; (b) The basis of the rates to be charged; (c) The types of risks which may be written; (d) Maximum limits of liability; (e) Applicable exclusions; (f) Territorial limitations; (g) Policy cancellation provisions, including a statement that the insurer shall have the right to cancel or nonrenew any policy of insurance subject to applicable laws concerning the cancellation and nonrenewal of insurance policies; and (h) The maximum policy period; (7) If the contract permits the controlling agent to settle claims on behalf of the insurer: (a) All claims shall be reported to the insurer in a timely manner; (b) A copy of the claim file shall be sent to the insurer at its request or as soon as it becomes known that the claim: 1. Has the potential to exceed an amount determined by the commissioner or exceeds the limit set by the insurer, whichever is less; 2. Involves a coverage dispute; 3. May exceed the controlling agent's claims settlement authority; 4. Is open for more than six (6) months; or 5. Is closed by payment of an amount set by the commissioner or an amount set by the insurer, whichever is less; (c) All claim files shall be the joint property of the insurer and the controlling agent. However, upon an order of liquidation of the insurer the claim files shall become the sole property of the insurer or its estate. The controlling agent shall have reasonable access to and the right to copy the files; and (d) Any settlement authority granted to the controlling agent may be terminated for cause upon the insurer's written notice to the controlling agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination; (8) Where electronic claims files are in existence, the contract shall address the timely transmission of the data; (9) If the contract provides for a sharing of interim profits by the controlling agent, and the controlling agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments, or in any other manner, interim profits shall not be paid to the controlling agent until one (1) year after they are earned for property insurance business and five (5) years after they are earned on casualty business, and not until the profits have been verified pursuant to KRS 304.3-530; and (10) The controlling agent shall not: (a) Bind reinsurance or retrocessions on behalf of the insurer, except that the controlling agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines, including, for both reinsurance assumed and ceded, a list of reinsurers with which the automatic agreements are in effect the coverages and amounts or percentages that may be reinsured, and commission schedules; (b) Commit the insurer to participate in insurance or reinsurance syndicates; (c) Appoint any person producing business without assuring that the person is lawfully licensed to transact the type of insurance for which the person is appointed; (d) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one percent (1%) of the insurer's policyholder surplus as of December 31 of the last completed calendar year; (e) Collect any payment for a reinsurer or commit the insurer to any claim settlement with a reinsurer without prior approval of the insurer. If prior approval is given, a report shall be promptly forwarded to the insurer; (f) Permit its subproducer to serve on the insurer's board of directors; (g) Jointly employ an individual who is employed with the insurer; or (h) Appoint a subcontrolling agent. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 983, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 139, sec. 3 effective July 14, 1992.

KRS 304.3-530 Duties and responsibilities of insured and controlling agent

304.3-530. Duties and responsibilities of insured and controlling agent (1) The insurer shall have on file an independent financial examination, in a form acceptable to the commissioner, of each controlling agent with which it has done business. (2) If a controlling agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the controlling agent. This is in addition to any other required loss reserve certification. (3) The insurer shall at least semiannually conduct an on-site review of underwriting and claims processing operations of the controlling agent. (4) Binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates shall rest with an officer of the insurer, who shall not be affiliated with the controlling agent. (5) Within thirty (30) days of entering into or termination of a contract with a controlling agent, the insurer shall provide written notification of the appointment or termination to the commissioner. Notices of appointment of a controlling agent shall include a statement of the duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is authorized to act, and any other information the commissioner may request. (6) An insurer shall review its books and records each quarter to determine if any person producing business has become a controlling agent as defined in KRS 304.3- 500(3). If the insurer determines that a person producing business has become a controlling agent, the insurer shall promptly notify the person producing business and the commissioner of this determination and the insurer and the person producing business must fully comply with the provisions of KRS 304.3-500 to 304.3-570 within thirty (30) days. (7) An insurer shall not appoint to its board of directors an officer, director, employee, subproducer, or controlling shareholder of any of its controlling agents. This subsection shall not apply to relationships governed by Subtitle 37 of this chapter or any provisions of this subtitle pertaining to business transacted with a producer controlled property or casualty insurer. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 984, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 139, sec. 4, effective July 14, 1992.

KRS 304.3-540 Acts of controlling agent -- Examination by commissioner

304.3-540. Acts of controlling agent -- Examination by commissioner The acts of controlling agents are considered to be the acts of the insurer on whose behalf the controlling agents are acting. A controlling agent may be examined by the commissioner as if it were the insurer. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 985, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 139, sec. 5, effective July, 14, 1992.

KRS 304.3-550 Penalties

304.3-550. Penalties (1) If the commissioner finds that any person has violated any provision of KRS 304.3- 500 to 304.3-570 or KRS 304.9-440, the commissioner may order: (a) For each separate violation, a civil penalty in the amounts set forth in KRS 304.99-020; (b) Conditions upon, or revocation, or suspension of a license; (c) The controlling agent to reimburse the insurer, the rehabilitator, or the liquidator of the insurer for any losses incurred by the insurer caused by a violation of KRS 304.3-500 to 304.3-570 or KRS 304.9-440 committed by the controlling agent; or (d) Any combination of paragraphs (a), (b), or (c) of this subsection. (2) Appeals from orders issued under subsection (1) of this section shall be taken as provided in Subtitle 2 of this chapter. (3) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties or corrective action provided for under laws administered by the commissioner. (4) Nothing contained in KRS 304.3-500 to 304.3-570 is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, and auditors. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 986, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 139, sec. 6, effective July 14, 1992.

KRS 304.3-560 Administrative regulations

304.3-560. Administrative regulations (1) The commissioner may promulgate administrative regulations for the implementation and administration of the provisions of KRS 304.3-500 to 304.3- 570. (2) An insurer shall not continue to utilize the services of a controlling agent on and after the effective date of KRS 304.3-500 to 304.3-570 unless utilization is in compliance with KRS 304.3-500 to 304.3-570. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 987, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 139, sec. 7, effective July 14, 1992.

KRS 304.3-570 Short title for KRS 304.3-500 to 304.3-570

304.3-570. Short title for KRS 304.3-500 to 304.3-570 KRS 304.3-500 to 304.3-570 may be cited as the Controlling Agents Act. Effective: July 14, 1992 History: Created 1992 Ky. Acts ch. 139, sec. 8, effective July 14, 1992.

KRS 304.3-600 Definitions for KRS 304.3-600 to 304.3-635 and 304.99-055

304.3-600. Definitions for KRS 304.3-600 to 304.3-635 and 304.99-055 As used in KRS 304.3-600 to 304.3-635 and 304.99-055: (1) "Insurance group" means, for the purpose of conducting an ORSA, those insurers and affiliates included within an insurance holding company system as defined in KRS 304.37-010; (2) "Insurer" has the same meaning as in KRS 304.37-010; (3) "Own Risk and Solvency Assessment" (ORSA) means a confidential internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer's or insurance group's current business plan, and the sufficiency of capital resources to support those risks; (4) "ORSA Guidance Manual" means the current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the National Association of Insurance Commissioners (NAIC) and as may be amended from time to time. A change in the ORSA Guidance Manual shall be effective on January 1 following the calendar year in which the changes have been adopted by the NAIC; and (5) "ORSA Summary Report" means a confidential high-level summary of an insurer's or insurance group's ORSA. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 1, effective January 1, 2015.

KRS 304.3-605 Application of KRS 304.3-600 to 304.3-635 and 304.99-055

304.3-605. Application of KRS 304.3-600 to 304.3-635 and 304.99-055 The requirements of KRS 304.3-600 to 304.3-635 and 304.99-055 shall apply to all insurers domiciled in this state, unless exempt pursuant to KRS 304.3-625. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 2, effective January 1, 2015.

KRS 304.3-610 Maintenance of risk management framework

304.3-610. Maintenance of risk management framework (1) An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. (2) The requirement of subsection (1) of this section may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 3, effective January 1, 2015.

KRS 304.3-615 Regular Own Risk and Solvency Assessments required -- Exception -- Frequency

304.3-615. Regular Own Risk and Solvency Assessments required -- Exception -- Frequency (1) Except as provided in KRS 304.3-625, an insurer or the insurance group of which the insurer is a member shall regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual. (2) The ORSA shall be conducted no less often than annually, but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 4, effective January 1, 2015.

KRS 304.3-620 Own Risk and Solvency Assessment Summary Report or combination of reports -- When required -- Contents -- Signature

304.3-620. Own Risk and Solvency Assessment Summary Report or combination of reports -- When required -- Contents -- Signature (1) (a) Upon the commissioner's request, and no more than once each year, an insurer shall submit to the commissioner an ORSA Summary Report or any combination of reports that together contain the information described in the ORSA Guidance Manual applicable to the insurer or the insurance group of which the insurer is a member. (b) Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report required by paragraph (a) of this subsection if the commissioner is the lead state commissioner of the insurance group, as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC. (2) The report shall include the signature of the insurer's or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process, attesting to the best of his or her belief and knowledge that the insurer applies the enterprise risk management process described in the ORSA Summary Report and that a copy of the report has been provided to the insurer's board of directors or the appropriate committee thereof. (3) An insurer may comply with subsection (1) of this section by providing the most recent and substantially similar report, provided by the insurer or another member of an insurance group of which the insurer is a member, to the commissioner of insurance of another state or to a supervisor or regulator of a foreign jurisdiction, if the report provides information that is comparable to the information described in the ORSA Guidance Manual. Any such report in a language other than English shall be accompanied by a translation of the report into the English language. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 5, effective January 1, 2015.

KRS 304.3-625 Exemption from requirements of KRS 304.3-600 to 304.3-635 and 304.99-055 -- Conditions

304.3-625. Exemption from requirements of KRS 304.3-600 to 304.3-635 and 304.99-055 -- Conditions (1) An insurer shall be exempt from the requirements of KRS 304.3-600 to 304.3-635 and 304.99-055 if: (a) The insurer has annual direct written and unaffiliated assumed premium in an amount less than five hundred million dollars ($500,000,000), including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation or the Federal Flood Program; and (b) The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium in an amount less than one billion dollars ($1,000,000,000), including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation or the Federal Flood Program. (2) If an insurer qualifies for exemption pursuant to subsection (1)(a) of this section, but the insurance group of which the insurer is a member does not qualify for the exemption pursuant to subsection (1)(b) of this section, the ORSA Summary Report that may be required pursuant to KRS 304.3-620 shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one (1) ORSA Summary Report for any combination of insurers, provided any combination of reports includes every insurer within the insurance group. (3) If an insurer does not qualify for exemption pursuant to subsection (1)(a) of this section, but the insurance group of which it is a member qualifies for exemption pursuant to subsection (1)(b) of this section, the only ORSA Summary Report that may be required pursuant to KRS 304.3-620 shall be the report applicable to the insurer that does not qualify for the exemption. (4) An insurer that does not qualify for exemption pursuant to subsection (1) of this section may apply to the commissioner for a waiver from the requirements of KRS 304.3-600 to 304.3-635 and 304.99-055, based upon unique circumstances. In deciding whether to grant the insurer's request for waiver, the commissioner may consider the type and volume of business written, ownership and organizational structure of the insurer, and any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group, with insurers domiciled in more than one (1) state, the commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer's request for a waiver. (5) Notwithstanding the exemptions stated in this section: (a) The commissioner may require that an insurer maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report based on unique circumstances, including but not limited to the type and volume of business written, ownership and organizational structure, federal agency requests, and international supervisor requests; and (b) The commissioner may require that an insurer maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report if the insurer: 1. Has risk-based capital for a company action level event as set forth in KRS 304.3-120, 304.3-190, and 304.38-070, and any applicable administrative regulations; 2. Meets one (1) or more of the standards of an insurer deemed to be in hazardous financial condition as described in KRS 304.2-065 and any applicable administrative regulations; or 3. Otherwise exhibits qualities of a troubled insurer as determined by the commissioner. (6) If an insurer that qualifies for an exemption pursuant to subsection (1) of this section then subsequently does not qualify for that exemption due to changes in premium as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one (1) year, following the year the threshold is exceeded, to comply with the requirements of KRS 304.3-600 to 304.3- 635 and 304.99-055. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 6, effective January 1, 2015. Legislative Research Commission Note (1/1/2015). In 2014 Ky. Acts ch. 119, sec. 6 (this statute), the phrase "standards of an insurer deemed to be in hazardous financial condition as defined in KRS 304.2-065 and any applicable administrative regulations" was used in subsection (5)(b)2. Standards to be used by the Commissioner of Insurance in determining whether an insurer is in hazardous financial condition are contained in KRS 304.2-065 and 806 KAR 2:150, but are not technically defined in either. In codification, the Reviser of Statutes has changed the word "defined" to "described" for the sake of clarity and accuracy to avoid confusion.

KRS 304.3-630 Reporting to comply with ORSA Guidance Manual

304.3-630. Reporting to comply with ORSA Guidance Manual (1) The ORSA Summary Report shall be prepared in accordance with the ORSA Guidance Manual, subject to the requirements of subsection (2) of this section. Documentation and supporting information shall be maintained and made available upon examination or request by the commissioner. (2) The review of the ORSA Summary Report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multistate or global insurers and insurance groups. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 7, effective January 1, 2015.

KRS 304.3-635 ORSA Summary Report and other information confidential, privileged, and exempt from Open Records Act and private civil action subpoena, discovery, and testimony -- Powers of commissioner

304.3-635. ORSA Summary Report and other information confidential, privileged, and exempt from Open Records Act and private civil action subpoena, discovery, and testimony -- Powers of commissioner (1) Documents, materials, or other information, including the ORSA Summary Report, in the possession of or control of the department that are obtained by, created by, or disclosed to the commissioner or any other person pursuant to KRS 304.3-600 to 304.3-635 and 304.99-055, are recognized as being proprietary and containing trade secrets. All documents, materials, or other information shall be confidential by law and privileged, and shall not be subject to disclosure under the Kentucky Open Records Act, KRS 61.872 to 61.884, and shall not be subject to subpoena, discovery, or admission as evidence in any private civil action. However, the commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer. (2) Neither the commissioner nor any person who received documents, materials, or other ORSA-related information through examination or otherwise, while acting under the authority of the commissioner or with whom such documents, materials, or other information are shared pursuant to KRS 304.3-600 to 304.3-635 and 304.99-055, shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (1) of this section. (3) To assist in the performance of the commissioner's regulatory duties, the commissioner: (a) May share documents, materials, or information, upon request, subject to subsection (1) of this section, including proprietary information or trade secrets, with other state, federal, and international financial regulatory agencies, including members of any supervisory college, as defined in KRS 304.37-010, the NAIC, and any third-party consultants designated by the commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information, and has verified in writing the legal authority to maintain confidentiality; (b) May receive documents, materials, or other ORSA-related information, including confidential and privileged documents, materials, or information including proprietary and trade-secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college, as defined in KRS 304.37-010, and the NAIC, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and (c) Shall enter into a written agreement with the NAIC or a third-party consultant governing the sharing and use of information provided pursuant to this section that shall: 1. Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to this section, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information, and has verified in writing the legal authority to maintain confidentiality; 2. Specify that ownership of information shared with the NAIC or a third- party consultant pursuant to this section shall remain with the commissioner, and that the NAIC's or third-party consultant's use of the information is subject to the direction of the commissioner; 3. Prohibit the NAIC or third-party consultant from storing the shared information pursuant to this section in a permanent database after the analysis is completed; 4. Require prompt notice be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant pursuant to this section is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production; 5. Require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer that was shared with the NAIC or a third- party consultant pursuant to this section; and 6. If an agreement involves a third-party consultant, provide for the insurer's written consent. (4) The sharing of information and documents by the commissioner pursuant to this section shall not constitute a delegation of regulatory authority, and the commissioner shall be solely responsible for the administration, execution, and enforcement of the provisions of this section. (5) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials, or other ORSA-related information shall occur as a result of disclosure of the ORSA-related information or documents to the commissioner under this section or as a result of sharing as authorized in this section. (6) Documents, materials, or other information in the possession or control of the NAIC or a third-party consultant pursuant to this section shall be confidential by law and privileged, shall not be subject to the Kentucky Open Records Act, KRS 61.872 to 61.884, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. Effective: January 1, 2015 History: Created 2014 Ky. Acts ch. 119, sec. 8, effective January 1, 2015.

KRS 304.3-700 Definitions for KRS 304.3-700 to 304.3-735

304.3-700. Definitions for KRS 304.3-700 to 304.3-735 As used in KRS 304.3-700 to 304.3-735, unless context requires otherwise: (1) "Applicant" means a person that has filed an application under KRS 304.3-705; (2) "Beta test" means the phase of testing of an insurance innovation in the regulatory sandbox through the use, sale, license, or availability of the insurance innovation by or to clients or consumers under the supervision of the department; (3) "Client" means a person, other than a consumer, utilizing a participant's insurance innovation during a beta test to carry on some activity regulated by the department; (4) "Director" means the director of insurance innovation; (5) "Extended no-action letter" or "extended letter" means a public notice setting forth the conditions for an extended safe harbor beyond the beta test under which the department will not take any administrative or regulatory action against any person using the insurance innovation described in the extended no-action letter; (6) "Innovation's utility" means an evaluation by the commissioner of the insurance innovation's ability to adequately satisfy factors set forth in KRS 304.3-705(1)(b)1.; (7) "Insurance innovation" or "innovation" means any product, process, method, or procedure relating to the sale, solicitation, negotiation, fulfilment, administration, or use of any product or service regulated by the department: (a) That has not been used, sold, licensed, or otherwise made available in this Commonwealth before the effective filing date of the application, whether or not the product or service is marketed or sold directly to consumers; and (b) That has regulatory and statutory barriers that prevent its use, sale, license, or availability within this Commonwealth; (8) "Limited no-action letter" or "limited letter" means a letter setting forth the conditions of a beta test and establishing a safe harbor under which the department will not take any administrative or regulatory action against a participant or client of the participant concerning the compliance of the insurance innovation with Kentucky law so long as the participant or client abides by the terms and conditions established in the limited no-action letter; (9) "Participant" means an applicant that has been issued a limited no-action letter under KRS 304.3-715; and (10) "Regulatory sandbox" or "sandbox" means the process established under KRS 304.3-700 to 304.3-735 by which a person may apply to beta test and obtain a limited no-action letter for an innovation, potentially resulting in the issuance of an extended no-action letter. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 147, sec. 1, effective June 27, 2019.

KRS 304.3-705 Application for admission to regulatory sandbox -- Disclosure and stability requirements -- Disqualifying factors -- Participation in regulatory sandbox under KRS 15.268

304.3-705. Application for admission to regulatory sandbox -- Disclosure and stability requirements -- Disqualifying factors -- Participation in regulatory sandbox under KRS 15.268 (1) Except as provided in subsection (2) of this section, on or before December 31, 2030, a person may apply to the department for admission to the sandbox by submitting an application in the form prescribed by the commissioner, accompanied by the following: (a) A filing fee of seven hundred fifty dollars ($750); (b) A detailed description of the innovation, which shall include: 1. An explanation of how the innovation will: a. Add value to customers and serve the public interest; b. Be economically viable for the applicant; c. Provide suitable consumer protection; an d d. Not pose an unreasonable risk of consumer harm; 2. A detailed description of the statutory and regulatory issues that may prevent the innovation from being currently utilized, issued, sold, solicited, distributed, or advertised in the market; 3. A description of how the innovation functions and the manner in which it will be offered or provided; 4. If the innovation involves the use of software, hardware, or other technology developed for the purpose of implementing or operating it, a technical white paper setting forth a description of the operation and general content of technology to be utilized, including: a. The problem addressed by that technology; and b. The interaction between that technology and its users; 5. If the innovation involves the issuance of a policy of insurance, a statement that either: a. If the applicant will be the insurer on the policy, that the applicant holds a valid certificate of authority and is authorized to issue the insurance coverage in question; or b. If some other person will be the insurer on the policy, that the other person holds a valid certificate of authority and is authorized to issue the insurance coverage in question; and 6. A statement by an officer of the applicant certifying that no product, process, method, or procedure substantially similar to the innovation ha s been used, sold, licensed, or otherwise made available in this Commonwealth before the effective filing date of the application; (c) The name, contact information, and bar number of the applicant's insurance regulatory counsel, which shall be a person wi th experience providing insurance regulatory compliance advice; (d) A detailed description of the specific conduct that the applicant proposes should be permitted by the limited no -action letter; (e) Proposed terms and conditions to govern the applicant's beta test, which shall include: 1. Citation to the provisions of Kentucky law that should be excepted in the notice of acceptance issued under KRS 304.3-710(6); and 2. Any request for an extension of the time period for a beta test under KRS 304.3-720(1) and the grounds for the request; (f) Proposed metrics by which the department may reasonably test the innovation's utility during the beta test; (g) Disclosure of all: 1. Persons who are directors and executive officers of the applicant; 2. General partners of the applicant if the applicant is a limited partnership; 3. Members of the applicant if the applicant is a limited liability applicant; 4. Persons who are beneficial owners of ten percent (10%) or more of the voting securities of the applicant; 5. Other persons with direct or indirect power to direct the management and policies of the applicant by contract, other than a commercial contract for goods or nonmanagement services; and 6. Conflicts of interest with respect to any person listed in this paragra ph and the department; (h) A statement that the applicant has funds of at least twenty -five thousand dollars ($25,000) available to guarantee its financial stability through one (1) or a combination of any of the following: 1. A contractual liability insurance policy; 2. A surety bond issued by an authorized surety; 3. Securities of the type eligible for deposit by authorized insurers in this Commonwealth; 4. Evidence that the applicant has established an account payable to the commissioner in a federally insured financial institution in this Commonwealth and has deposited money of the United States in an amount equal to the amount required by this paragraph that is not available for withdrawal, except by direct order of the commissioner; 5. A letter of credit issued by a qualified United States financial institution as defined in KRS 304.9-700; or 6. Another form of security authorized by the commissioner; and (i) A statement confirming that the applicant is not seeking authorization for, nor shall it engage in, any conduct that would render the applicant unauthorized to make an application under subsection (2) of this section. (2) (a) The following persons shall not be authorized to make an application to the department for admission to the s andbox: 1. Any person seeking to sell or license an insurance innovation directly to any federal, state, or local government entity, agency, or instrumentality as the insured person or end user of the innovation; 2. Any person seeking to sell, license, or use an insurance innovation that is not in compliance with subsection (1)(b)5. of this section; 3. Any person seeking to make an application that would result in the person having more than five (5) active beta tests ongoing within the Commonwealth at any one (1) time; and 4. Any person seeking a limited or extended no-action letter or exemption from any administrative regulation or statute concerning: a. Assets, deposits, investments, capital, surplus, or other solvency requirements applicable to insurers; b. Required participation in any assigned risk plan, residual market, or guaranty fund; c. Any licensing or certificate of authority requirements; or d. The application of any taxes or fees. (b) For the purposes of this subsection, "federal, state, or loc al government entity, agency, or instrumentality" includes any county, city, municipal corporation, urban-county government, charter county government, consolidated local government, unified local government, special district, special purpose governmental entity, public school district, or public institution of education. (3) Notwithstanding any other provision of this chapter, a person regulated under this chapter may participate in the regulatory sandbox described in KRS 15.268 if the person is: (a) Not authorized to make an application under this section; or (b) Seeking regulatory relief that is not available under KRS 304.3 -700 to 304.3- 735. Effective: June 27, 2025 History: Amended 2025 Ky. Acts ch. 67, sec. 1, effective June 27, 2025. -- Amended 2023 Ky. Acts ch. 122, sec. 12, effective March 15, 2024. -- Created 2019 Ky. Acts ch. 147, sec. 2, effective June 27, 2019.

KRS 304.3-710 Director of insurance innovation -- Review of applications -- Notice of acceptance or rejection -- Hearing

304.3-710. Director of insurance innovation -- Review of applications -- Notice of acceptance or rejection -- Hearing (1) There shall be a director of insurance innovation within the department, responsible for administering KRS 304.3-700 to 304.3-735. The director shall be appointed by the secretary of the Public Protection Cabinet with the approval of the Governor in accordance with KRS 12.050. (2) The director shall review all applications for admission to the sandbox. (3) (a) Unless extended as provided in paragraph (b) of this subsection, the commissioner shall issue a notice of acceptance or rejection in accordance with this section within sixty (60) days from the date an application is received. (b) The commissioner may extend by not more than thirty (30) days the period provided in paragraph (a) of this subsection if he or she notifies the applicant before expiration of the initial sixty (60) day period. (c) An application that has not been accepted or rejected by a notice of acceptance or rejection issued by the commissioner prior to expiration of the initial sixty (60) day period, or if applicable, the period provided in paragraph (b) of this subsection, shall be deemed accepted. (4) The commissioner may request from the applicant any additional material or information necessary to evaluate the application, including but not limited to: (a) Proof of financial stability; (b) A proposed business plan; (c) Pro-forma financial statement; and (d) Executive profiles on the applicant and its leadership demonstrating insurance or insurance-related industry experience and applicable experience in the use of the technology. (5) The commissioner shall review the application to: (a) Identify and assess: 1. The potential risks to consumers, if any, posed by the innovation; and 2. The manner in which the innovation would be offered or provided; and (b) Determine whether it satisfies the following requirements: 1. The application satisfies the requirements of KRS 304.3-705; 2. The application proposes a product, process, method, or procedure that meets the definition of innovation under KRS 304.3-700; 3. Approval of the application does not pose an unreasonable risk of consumer harm; 4. The application identifies statutory or regulatory requirements that actually prevent the innovation from being utilized, issued, sold, solicited, distributed, or advertised in this Commonwealth; and 5. The application proposes an innovation that is not substantially similar to an innovation: a. That has been previously beta tested; or b. Proposed in an application that is currently pending with the department. (6) Upon review of the application, the commissioner shall, in his or her discretion, issue one (1) of the following: (a) If the commissioner determines that the application fails to satisfy any of the requirements under subsection (5)(b) of this section, he or she shall: 1. Issue a notice of rejection to the applicant; and 2. Describe in the notice of rejection the specific defects in the application; or (b) If the commissioner determines that the application satisfies the requirements of subsection (5)(b) of this section, he or she shall issue a notice of acceptance to the applicant. The notice of acceptance shall: 1. Set forth the terms and conditions that will govern the applicant's beta test, which shall include, at a minimum: a. Requiring the applicant to: i. Abide by all Kentucky law, except where explicitly excepted; ii. Utilize the insurance innovation within this Commonwealth; and iii. Report any change in the disclosures made pursuant to KRS 304.3-705(1)(g); b. Notice of the licenses required to be obtained prior to the commencement of the beta test; c. Monthly reporting obligations structured to determine the progress of the beta test; d. Consumer protection measures deemed necessary by the commissioner to be employed by the applicant; e. The level of financial stability required to be in place for the beta test. The commissioner may increase, decrease, or waive the requirements for financial stability required under KRS 304.3- 705(1)(h), commensurate with the risk of consumer harm posed by the insurance innovation; f. Duration of the beta test, including any extension authorized under KRS 304.3-720; g. Permitted conduct under the limited letter; h. Any limits established by the commissioner on the: i. Financial exposure that may be assumed by an applicant during the beta test; ii. Number of customers an applicant may accept; and iii. Volume of transactions that an applicant or its clients may complete during the beta test; and i. Metrics the commissioner intends to use to determine the innovation's utility; and 2. Provide that the notice of acceptance shall expire unless: a. It is accepted by the applicant in writing; and b. The acceptance is filed with the department within sixty (60) days of the issuance of the notice. (7) An applicant may request a hearing pursuant to KRS 304.2-310 on: (a) A notice of rejection; and (b) A notice of acceptance, if the request is made prior to its expiration. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 147, sec. 3, effective June 27, 2019.

KRS 304.3-715 Limited no-action letter -- Safe harbor of limited letter -- Publication of limited letter on department's Web site

304.3-715. Limited no-action letter -- Safe harbor of limited letter -- Publication of limited letter on department's Web site (1) Within ten (10) days following the timely receipt of an acceptance pursuant to KRS 304.3-710(6)(b)2., the commissioner shall issue a limited no-action letter that: (a) Sets forth terms and conditions for the participant that are the same as those set forth in the notice of acceptance issued under KRS 304.3-710(6); and (b) Provides that so long as the participant and any clients of the participant abide by the terms and conditions set forth in the letter, no administrative or regulatory action concerning the compliance of the insurance innovation with Kentucky law will be taken by the commissioner against the participant or any clients during the term of the beta test. (2) If the application is deemed accepted under KRS 304.3-710(3)(c), the proposed limited no-action letter included with the application shall be deemed to have the effect of a limited letter issued by the commissioner. (3) The safe harbor of the limited letter shall persist until the earlier of: (a) The early termination of the beta test under KRS 304.3-720; (b) The issuance of an extended no-action letter; or (c) The issuance of a notice declining to issue an extended no-action letter. (4) A limited no-action letter issued by the commissioner under this section shall be exempt from the application of KRS 13A.130. (5) The commissioner shall publish any limited letter issued pursuant to this section on the department's Web site. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 147, sec. 4, effective June 27, 2019.

KRS 304.3-720 One-year period for beta test -- Extension by commissioner -- Terms and conditions -- Early termination -- Cease and desist order -- Appeal

304.3-720. One-year period for beta test -- Extension by commissioner -- Terms and conditions -- Early termination -- Cease and desist order -- Appeal (1) The time period for a beta test shall be one (1) year. The time period may be extended by the commissioner in the notice of acceptance for a period that is not longer than one (1) year if a request is made in accordance with KRS 304.3- 705(1)(e). (2) During the beta test, the participant and any clients of the participant shall: (a) Comply with all terms and conditions set forth in the limited no-action letter; and (b) Provide the department with all documents, data, and information requested by the commissioner. (3) (a) For any violation of the terms or conditions set forth in the limited letter, the commissioner may: 1. Issue an order terminating the beta test and the safe harbor of the limited letter before the time period set forth in the limited letter has expired; and 2. Impose a fine of not more than two thousand dollars ($2,000) per violation. (b) The commissioner may also issue an order under paragraph (a)1. of this subsection if, following receipt of information or complaints, the commissioner determines the beta test is causing consumer harm. (4) (a) The commissioner may issue an order requiring a client to cease and desist any activity violating the terms or conditions set forth in the limited letter. (b) The issuance of a cease and desist order to one (1) client shall not otherwise impact the ability of the participant or any other clients to continue activities relating to the innovation in a manner compliant with the requirements of the limited letter. (5) A participant or client may request a hearing on any order issued under this section pursuant to KRS 304.2-310. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 147, sec. 5, effective June 27, 2019.

KRS 304.3-725 Completion and review of beta test -- Issuance of extended no-action letter or notice declining to issue extended letter -- Safe harbor of extended letter -- Use of innovation and conduct permitted -- Hearing -- Publication of extended letter on department's Web site

304.3-725. Completion and review of beta test -- Issuance of extended no-action letter or notice declining to issue extended letter -- Safe harbor of extended letter -- Use of innovation and conduct permitted -- Hearing -- Publication of extended letter on department's Web site (1) (a) Within sixty (60) days of completion of the beta test, unless the time period is extended up to thirty (30) days upon notice from the commissioner, the commissioner shall issue an extended no-action letter or a notice declining to issue an extended no-action letter. (b) The participant may continue to employ the insurance innovation pursuant to the terms and conditions of the limited letter during the period between the completion of the beta test and the issuance of either an extended no-action letter or a notice declining to issue an extended no-action letter. (2) The commissioner shall review the results of the beta test to determine whether the innovation satisfies the following requirements: (a) The data presented demonstrates that the innovation's utility was meritorious of an extension; (b) Regulatory and statutory barriers prevent continued use of the innovation within this Commonwealth; (c) The innovation provided a benefit to Kentucky consumers; and (d) The issuance of an extended no-action letter: 1. Presents no risk of unreasonable harm to consumers or the marketplace; and 2. Serves the public interest. (3) Upon review of the results of the beta test, the commissioner shall, in his or her discretion, issue one (1) of the following: (a) If the commissioner determines that the innovation fails to satisfy any of the requirements under subsection (2) of this section, he or she shall: 1. Issue a notice declining to issue an extended no-action letter; 2. Describe in the notice the reasons for the declination; 3. Notify the participant for the innovation of the notice; and 4. Publish the notice on the department's Web site; or (b) If the commissioner determines that the innovation satisfies the requirements under subsection (2) of this section, he or she shall issue an extended no- action letter. An extended no-action letter issued by the commissioner shall include: 1. A description of the insurance innovation and the specific conduct permitted by the extended letter in sufficient detail to enable any person to use the innovation or a product, process, method, or procedure not substantially different from the innovation within the safe harbor of the extended letter; 2. Notice of any certificate of authority, license, or permit the commissioner determines is necessary to use, sell, or license the innovation, or make the innovation available, in this Commonwealth; 3. An expiration date not greater than three (3) years following the date of issuance; 4. Notice that the extended no-action letter may: a. Only be modified by: i. Promulgation of an administrative regulation, if the safe harbor addresses a requirement established by administrative regulation; or ii. An act of the General Assembly; and b. Be rescinded prior to its expiration if the commissioner receives complaints and determines continued activity poses a risk of harm to consumers; 5. Clarification of required procedures related to the issuance and cancellation of any policies of insurance, if applicable, due to the expiration period; and 6. Notice that, upon expiration, all persons relying on the extended no- action letter shall cease and desist operations related to the innovation unless changes have been made to Kentucky law to permit the innovation by: a. The promulgation of an administrative regulation, if the safe harbor address a requirement established by administrative regulation; or b. An act of the General Assembly. (4) A hearing on a notice of declination may be requested in accordance with KRS 304.2-310. (5) An extended no-action letter issued by the commissioner pursuant to this section shall be: (a) Exempt from the application of KRS 13A.130; and (b) Published on the department's Web site. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 147, sec. 6, effective June 27, 2019.

KRS 304.3-730 Confidentiality of financial information -- Permissible disclosures in extended no-action letter

304.3-730. Confidentiality of financial information -- Permissible disclosures in extended no-action letter (1) All documents, materials, or other information in the possession or control of the department that are created, produced, obtained, or disclosed in relation to KRS 304.3-700 to 304.3-735 and that relate to the financial condition of any person shall be confidential and shall not be subject to public disclosure pursuant to the Kentucky Open Records Act, KRS 61.870 to 61.884. (2) Notwithstanding any law to the contrary, the commissioner may disclose in an extended no-action letter any information relating to the insurance innovation necessary to clearly establish the safe harbor of the extended letter. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 147, sec. 7, effective June 27, 2019.

KRS 304.3-735 Annual report

304.3-735. Annual report (1) One hundred twenty days (120) days prior to the start of the 2026, 2027, 2028, 2029, and 2030 regular sessions of the General Assembly, the commissioner shall submit a written report to the Interim Joint Committee on Banking and Insurance that meets the requirements of subsection (2) of this section. Thereafter, the commissioner shall submit the report annually, upon request. (2) The report shall include the following: (a) The number of: 1. Applications filed and accepted; 2. Beta tests conducted; and 3. Extended letters issued; (b) A description of the innovations tested; (c) The length of each beta test; (d) The results of each beta test; (e) A description of each safe harbor created under KRS 304.3-725; (f) The number and types of orders or other actions taken by the commissioner or any other interested party under KRS 304.3-700 to 304.3-725; (g) Identification of any statutory barriers for co nsideration of amendment by the General Assembly following successful beta tests and the issuance of extended letters; and (h) Any other information or recommendations deemed relevant by the commissioner. (3) The commissioner shall also provide the Interim Joint Committee on Banking and Insurance a detailed briefing, upon request, to discuss and explain any report submitted under this section. Effective: June 27, 2025 History: Amended 2025 Ky. Acts ch. 67, sec. 2, effective June 27, 2025. -- Created 2019 Ky. Acts ch. 147, sec. 8, effective June 27, 2019.

KRS 304.3-750 Definitions for KRS 304.3-750 to 304.3-768

304.3-750. Definitions for KRS 304.3-750 to 304.3-768 As used in KRS 304.3-750 to 304.3-768: (1) "Consumer" means an individual, including but not limited to an applicant, policyholder, insured, beneficiary, claimant, and certificate holder: (a) Who is a resident of this Commonwealth; and (b) Whose nonpublic information is in a licensee's possession, custody, or control; (2) "Cybersecurity event": (a) Means an event resulting in unauthorized access to, disruption of, or misuse of an information system or nonpublic information stored on an information system; and (b) Shall not include: 1. Unauthorized acquisition of encrypted nonpublic information if the encryption, process, or key is not also acquired, released, or used without authorization; or 2. An event with regard to which the licensee has determined that the nonpublic information accessed by an unauthorized person: a. Has not been used or released; and b. Has been returned or destroyed; (3) "Encrypted" means the transformation of data into a fo rm that results in a low probability of assigning meaning without the use of a protective process or key; (4) "Information security program" means the administrative, technical, and physical safeguards that a licensee uses to access, collect, distribute, p rocess, protect, store, use, transmit, dispose of, or otherwise handle nonpublic information; (5) "Information system": (a) Means a discrete set of electronic nonpublic information resources organized for the collection, processing, maintenance, use, shari ng, dissemination, or disposition of electronic information; and (b) Shall include any specialized system such as industrial or process controls systems, telephone switching and private branch exchange systems, and environmental control systems; (6) "Licensee": (a) Means any person who is, or is required to be, licensed, authorized to operate, or registered pursuant to the insurance laws of this state; and (b) Shall not include: 1. A purchasing group or a risk retention group chartered and licensed in a state other than this state; or 2. A licensee that is acting as an assuming insurer that is domiciled in another state or jurisdiction; (7) "Nonpublic information": (a) Means electronic information that is not publicly available information; and (b) Shall include: 1. Business-related information of a licensee that if tampered with, or disclosed, accessed, or used without authorization, would cause a material adverse impact to the business, operations, or security of the licensee; 2. Any confidential personal identifying information of a consumer, including: a. Social Security number; b. Operator's license number or personal identification card number; c. Financial account number; d. Credit or debit card number; e. Any security code, access code, or password tha t would permit access to a consumer's financial account; or f. Biometric records; and 3. Any information or data, except age or gender, in any form or medium created by or derived from a health care provider or a consumer that relates to: a. The past, present, or future physical, mental, or behavioral health or condition of any consumer or member of the consumer's family; b. The provision of health care to any consumer; or c. Payment for the provision of health care to any consumer; (8) "Person" means any individual or nongovernmental entity, including but not limited to any nongovernmental partnership, corporation, branch, agency, or association; (9) (a) "Publicly available information" means any information that a licensee has a reasonable basis to believe is lawfully made available to the general public from: 1. Federal, state, or local government records; 2. Widely distributed media; or 3. Disclosures to the general public t hat are required to be made by federal, state, or local law. (b) For purposes of this definition, a licensee has a reasonable basis to believe that information is lawfully made available to the general public if the licensee has taken steps to determine: 1. That the information is of the type that is available to the general public; and 2. Whether the consumer can direct that information not be made available to the general public, and if so, that the consumer has not done so; and (10) "Third-party service provider" means a person, other than a licensee, that: (a) Contracts with a licensee to maintain, process, or store nonpublic information; or (b) Is otherwise permitted access to nonpublic information through its provision of services to a licensee. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 1, effective January 1, 2023.

KRS 304.3-752 Exemption qualifications

304.3-752. Exemption qualifications A licensee with fewer than fifty (50) employees, including independent contractors, shall be exempt from the requirements of KRS 304.3-750 to 304.3-768. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 2, effective January 1, 2023.

KRS 304.3-754 Applicability

304.3-754. Applicability Notwithstanding any other law, KRS 304.3-750 to 304.3-768 establish the exclusive requirements applicable to licensees, except licensees exempt under KRS 304.3-752, under the laws of the Commonwealth of Kentucky for: (1) Data security; (2) The investigation of a cybersecurity event; and (3) Notification to the commissioner regarding the occurrence of a cybersecurity event. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 3, effective January 1, 2023.

KRS 304.3-756 Written information security program -- Requirements -- Assessments -- Written incident response plan -- Annual certification to commissioner

304.3-756. Written information security program -- Requirements -- Assessments -- Written incident response plan -- Annual certification to commissioner (1) As used in this section: (a) "Authorized individual" means an individual: 1. Known to, and screened by, the licensee; and 2. Determined to be necessary and appropriate to have access to the nonpublic information held by the licensee and its information systems; (b) "Multi-factor authentication" means authentication through verification of at least two (2) of the following methods of authentication factors: 1. Knowledge factors, such as a password; 2. Possession factors, such as a token or text message on a mobile phone; or 3. Inherence factors, such as a biometric characteristic; and (c) "Risk assessment" means the risk assessment that each licensee is required to conduct under subsection (3) of this section. (2) (a) Each licensee shall develop, implement, and maintain a comprehensive written information security program based on the licen see's risk assessment that contains administrative, technical, and physical safeguards for the protection of nonpublic information and the licensee's information system. (b) The information security program required under this subsection shall be: 1. Commensurate with the: a. Size and complexity of the licensee; b. Nature and scope of the licensee's activities, including its use of third-party service providers; and c. Sensitivity of the nonpublic information used by the licensee or in the licensee's possession, custody, or control; and 2. Designed to: a. Protect the security and confidentiality of nonpublic information and the security of the information system; b. Protect against any threats or hazards to the security or integrity of nonpublic information and the information system; c. Protect against unauthorized access to or use of nonpublic information and minimize the likelihood of harm to any consumer; and d. Define, and periodically reevaluate: i. A schedule for retention of nonpublic information; and ii. A mechanism for the destruction of nonpublic information when no longer needed, which shall comply with KRS 365.725. (3) Each licensee shall: (a) Designate one (1) or more employees, an affiliate, or an outside vendor designated to act on behalf of the licensee who is responsible for the information security program; (b) Identify reasonably foreseeable internal or external threats that could result in unauthorized access, transmission, disclosure, misuse, alteration, or destruction of nonpublic information, including the security of information systems and nonpublic information that are accessible to, or held by, third- party service providers; (c) Assess the likelihood and potential damage of the threats identified under paragraph (b) of this subsection, taking into consideration the sensitivity of the nonpublic information; (d) Assess the sufficiency of policies, procedures, information systems, and other safeguards in place to manage the threats identified under paragraph (b) of this subsection, including consideration of threats in each relevant area of the licensee's operations, including: 1. Employee training and management; 2. Information systems, including network and software design, information classification, governance, processing, storage, transmission, and disposal; and 3. Detection, prevention, and response to attacks, intrusions, or other system failures; (e) Implement information safeguards to manage the threats identified in the licensee's ongoing assessment; and (f) No less than annually, assess the effectiveness of the key controls, systems, and procedures of the safeguards implemented under paragraph (e) of this subsection. (4) Based on its risk assessment, each licensee shall: (a) Design its information security program to mitigate the identified risks commensurate with the: 1. Size and complexity of the licensee; and 2. Nature and scope of the licensee's activities, including its use of third - party service providers; (b) Implement the following security measures, as appropriate: 1. Place access controls on information systems, including controls to authenticate and permit access only to authorized individuals to protect against the unauthorized acquisition of nonpublic information; 2. Identify and manage the data, personnel, devices, systems, and facilities that enable the organization to achieve business purposes in accordance with their relative importance to business objectives and the organization's risk strategy; 3. Restrict physical access to nonpublic information to authorized individuals only; 4. Protect, by encryption or other appropriate means, all nonpublic information: a. While being transmitted over an external network; and b. Stored on a laptop computer or other portable c omputing or storage device or media; 5. Adopt: a. Secure development practices for in -house developed applications utilized by the licensee; and b. Procedures for evaluating, assessing, or testing the security of externally developed applications utilized by the licensee; 6. Modify the information system in accordance with the licensee's information security program; 7. Utilize effective controls, which may include multi -factor authentication procedures for any individual accessing nonpublic information; 8. Regularly test and monitor systems and procedures to detect actual and attempted attacks on, or intrusions into, information systems; 9. Include audit trails within the information security program designed to: a. Detect and respond to cybersecurity event s; and b. Reconstruct material financial transactions sufficient to support normal operations and obligations of the licensee; 10. Implement measures to protect against destruction, loss, or damage of nonpublic information due to environmental hazards, su ch as fire and water damage, or other catastrophes or technological failures; and 11. Develop, implement, and maintain procedures for the secure disposal of nonpublic information in any format; (c) Include cybersecurity risks in the licensee's enterprise r isk management process; (d) Stay informed regarding emerging threats or vulnerabilities; (e) Utilize reasonable security measures when sharing information commensurate with the character of the sharing and the type of information shared; and (f) Provide its personnel with cybersecurity awareness training that is updated as necessary to reflect risks identified by the licensee in its risk assessment. (5) (a) A licensee's executive management or its delegates shall, at a minimum: 1. Develop, implement, and maintain the licensee's information security program; and 2. If the licensee has a board of directors or other appropriate committee, report at least annually, in writing, to the board or committee the following information: a. The overall status of the information security program and the licensee's compliance with KRS 304.3 -750 to 304.3-768; and b. Material matters related to the information security program , addressing issues including risk assessment, risk management and control decisions, third-party service provider arrangements, results of testing, cybersecurity events or violations and management's response to the events or violations, and recommendations for changes in the information security program. (b) If a licensee's executive management delegates any of its responsibilities under this subsection, executive management shall: 1. Oversee the development, implementation, and maintenance of the licensee's information security program prepared by the delegate or delegates; and 2. Receive a report from the delegate or delegates that complies with the requirements of paragraph (a)2. of this subsection. (6) Each licensee that uses a third-party service provider shall: (a) Exercise due diligence in selecting the third-party service provider; and (b) Require the third-party service provider to implement appropriate administrative, technical, and physical measures to protect and secure the information systems and nonpublic information that are accessible to, or held by, the third-party service provider. (7) Each licensee shall monitor, evaluate, and adjust, as appropriate, the information security program consistent with: (a) Any relevant changes in technology; (b) The sensitivity of its nonpublic information; (c) Internal or external threats to information; and (d) The licensee's own changing business arrangements, including mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to information systems. (8) (a) As part of its information security program, each licensee shall establish a written incident response plan designed to promptly respond to, and recover from, any cybersecurity event that compromises: 1. The confidentiality, integrity, or availability of nonpublic information in its possession; 2. The licensee's information systems; or 3. The continuing functionality of any aspect of the licensee's business or operations. (b) The incident response plan established under this subsection shall address the following: 1. The internal process for responding to a cybersecurity event; 2. The goals of the incident response plan; 3. The definition of clear roles, responsibilities, and levels of decision- making authority; 4. External and internal communications and information sharing; 5. Identification of requirements for the remediation of any identified weaknesses in information systems and associated controls; 6. Documentation and reporting regarding cybersecurity events and related incident response activities; and 7. The evaluation and revision, as necessary, of the incident response plan following a cybersecurity event. (9) (a) Each insurer domiciled in this state shall: 1. By February 15 of each year, submit to the commissioner a written statement certifying that the insurer is in compliance with this section; and 2. Maintain, for examination by the department, all records, schedules, and data supporting the certification submitted under subparagraph 1. of this paragraph for a period of five (5) years. (b) 1. To the extent an insurer has identified areas, systems, or processes that require material improvement, updating, or redesign, the insurer shall document the identification and remedial efforts planned and underway to address the areas, systems, or processes identified. 2. The documentation required under this paragraph shall be available for inspection by the commissioner for a period of five (5) years. (10) (a) An employee, agent, representative, or designee of a licensee, who is also a licensee, shall be exempt from the requirements of this section and shall not be required to develop its own information security program to the extent that the employee, agent, representative, or designee is covered by the information security program of the other licensee. (b) In the event that a licensee ceases to qualify for an exception under paragraph (a) of this subsection, the licensee shall have one hundred eighty (180) days to comply with this section. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 4, effective January 1, 2023.

KRS 304.3-758 Cybersecurity event investigation

304.3-758. Cybersecurity event investigation (1) (a) If a licensee learns that a cybersecurity event has or may have occurred, the licensee, or an outside vendor or service provider designated to act on behalf of the licensee, shall conduct a prompt investigation. (b) During an investigation required under this subsection, the licensee, or outside vendor or service provider designated to act on behalf of the licensee, shall, at a minimum: 1. Determine whether a cybersecurity event has occurred; 2. Assess the nature and scope of the cybersecurity event; 3. Identify any nonpublic information that may have been involved in the cybersecurity event; and 4. Perform or oversee reasonable measures to restore the security of the information systems compromised in the cybersecurity event in order to prevent further unauthorized acquisition, release, or use of nonpublic information in the licensee's possession, custody, or control. (2) If a licensee learns that a cybersecurity event has or may have occurred in a system maintained by a third-party service provider, the licensee shall complete, or confirm and document that the third-party service provider has completed, the steps listed in subsection (1)(b) of this section. (3) Each licensee shall maintain, and produce upon demand of the commissioner, records concerning all cybersecurity events for a period of at least five (5) years from the date of the cybersecurity event. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 5, effective January 1, 2023.

KRS 304.3-760 Notification to commissioner of cybersecurity event -- Procedures

304.3-760. Notification to commissioner of cybersecurity event -- Procedures (1) Each licensee shall notify the commissioner of a cybersecurity event involving nonpublic information that is in the possession of the licensee as promptly as possible, but in no event later than three (3) business days from a determination that a cybersecurity event has occurred, if: (a) In the case of an insurer, this state is the licensee's state of domicile and the cybersecurity event has a reasonable likelihood of har ming any material part of normal operations of the licensee; (b) In the case of an insurance producer, this state is the licensee's home state, as those terms are defined in KRS 304.9 -020; or (c) The licensee reasonably believes that: 1. The nonpublic information involved in the cybersecurity event is related to two hundred fifty (250) or more consumers residing in this state; and 2. The cybersecurity event is either of the following: a. A cybersecurity event requiring the licensee to provide notice to any governmental body, self-regulatory agency, or any other supervisory body pursuant to any state or federal law; or b. A cybersecurity event that has a reasonable likelihood of materially harming any: i. Consumer residing in this state; or ii. Material part of the normal operations of the licensee. (2) (a) In its notification to the commissioner under subsection (1) of this section, the licensee shall provide, in an electronic form prescribed by the commissioner, the following information: 1. The date of the cybersecurity event; 2. A description of how the information was exposed, lost, stolen, or breached, including the specific roles and responsibilities of third-party service providers, if any; 3. How the cybersecurity event was discovered; 4. Whether any lost, stolen, or breached information has been recovered, and if so, how the information was recovered; 5. The identity of the source of the cybersecurity event; 6. Whether the licensee has filed a police report or has notified any regulatory, government, or law enforcement agencies, and if so, when the notification was provided; 7. A description of the specific types of information acquired without authorization, including but not limited to types of medical information, financial information, or information allowing identification of the consumer; 8. The period during which the information system was compromised by the cybersecurity event; 9. The licensee's best estimate of the number of total consumers in this state affected by the cybersecurity event, which shall be updated with each subsequent report to the commissioner pursuant to this section; 10. The results of any internal review: a. Identifying a lapse in automated controls or internal procedures; or b. Confirming that all automated controls or internal procedures were followed; 11. A description of the efforts being undertaken to remediate the situation that permitted the cybersecurity event to occur; 12. A copy of the licensee's privacy policy an d a statement outlining the steps the licensee will take to investigate and notify consumers affected by the cybersecurity event; 13. A copy of the notice sent to consumers under KRS 365.732, if applicable; and 14. The name of a contact person who is famil iar with the cybersecurity event and authorized to act for the licensee. (b) The licensee shall have a continuing obligation under subsection (1) of this section to update and supplement initial and subsequent notifications to the commissioner concerning the cybersecurity event. (3) Each licensee shall comply with KRS 365.732, as applicable. (4) In the case of a cybersecurity event in a system maintained by a third -party service provider of which the licensee has become aware: (a) Except as provided under s ubsection (5) of this section, the licensee shall treat the cybersecurity event as it would under subsection (1) of this section; and (b) The computation of the licensee's deadlines under this subsection shall begin on the earlier of the day after: 1. The third-party service provider notifies the licensee of the cybersecurity event; or 2. The licensee otherwise has actual knowledge of the cybersecurity event. (5) Nothing in KRS 304.3-750 to 304.3-768 shall prevent or abrogate an agreement between a licensee and another licensee, a third -party service provider, or any other party to fulfill the obligations of or obligations similar to: (a) Investigation requirements under KRS 304.3 -758; or (b) Notice requirements under this section. (6) (a) In the case of a cybersecurity event involving nonpublic information that is used by a licensee acting as an assuming insurer, or that is in the possession, custody, or control of a licensee that is acting as an assuming insurer, and the assuming insurer does not have a direct contractual relationship with the affected consumers, the assuming insurer shall notify its affected ceding insurers and the commissioner of its state of domicile within three (3) business days of making the determination that a cybersecurity event has occurred. (b) In the case of a cybersecurity event involving nonpublic information that is in the possession, custody, or control of a third-party service provider of a licensee that is an assuming insurer, the assuming insurer shall notify its affected ceding insurers and the commissioner of its state of domicile within three (3) business days of receiving notice from its third-party service provider that a cybersecurity event has occurred. (c) A ceding insurer under paragraph (a) or (b) of this subsection that has a direct contractual relationship with affected consumers shall fulfill: 1. The consumer notification requirements imposed under KRS 365.732; and 2. Any other notification requirements relating to a cybersecurity event under this section. (d) Except as provided in paragraph (a) or (b) of this subsection, a licensee acting as an assuming insurer shall not be subject to any notice obligations relating to a cybersecurity event or other data breach under this section. (7) (a) Except as provided in paragraph (b) of this subsection, in the case of a cybersecurity event involving nonpublic information that is in the possession, custody, or control of a licensee that is an insurer, or its third -party service provider, and for which a consumer accessed the insurer's services through an independent insurance producer, the insurer shall notify the producers of record at the same time as all affected consumers when a licensee is required to notify consumers under KRS 365.732. (b) An insurer shall not be required to comply with paragraph (a) of this subsection when the insurer does not have the current producer of record information for any individual consumer. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 6, effective January 1, 20 23.

KRS 304.3-762 Powers of commissioner

304.3-762. Powers of commissioner (1) (a) The commissioner shall have the power to examine and investigate the affairs of any licensee to determine whether the licensee has been or is engaged in any conduct in violation of KRS 304.3-756, 304.3-758, or 304.3-760. (b) The power granted to the commissioner under this subsection shall be in addition to the powers of the commissioner under KRS 304.2-100. (c) Any investigation or examination conducted under this subsection shall be conducted pursuant to KRS 304.2-210. (2) If the commissioner has reason to believe that a licensee has been or is engaged in conduct in this state that violates KRS 304.3-756, 304.3-758, or 304.3-760, the commissioner may take action that is necessary or appropriate to enforce the relevant provisions. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 7, effective January 1, 2023.

KRS 304.3-764 Documents, materials, and other information -- Confidentiality -- Releases

304.3-764. Documents, materials, and other information -- Confidentiality -- Releases (1) (a) Subject to paragraph (b) of this subsection and subsections (3) and (6) of this section, any documents, materials, or other information in the control or possession of the department that are furnished by a licensee, or an employee or agent acting on behalf of a licensee, under KRS 304.3 -756, 304.3-758, or 304.3-760 or that are obtained by the commissioner in an investigation or examination under KRS 304.3-762 shall: 1. Be confidential by law and privileged; 2. Not be subject to KRS 61.870 to 61.884; 3. Not be subject to subpoena; and 4. Not be subject to discovery or admissible in evidence in any private civil action. (b) The commissioner may use documents, m aterials, or other information referenced under paragraph (a) of this subsection in furtherance of any regulatory or legal action brought as part of the commissioner's duties, and shall not otherwise make the documents, materials, or other information public without the written consent of the licensee. (2) The commissioner, and any person who received documents, materials, or other information while acting under the authority of the commissioner, shall not be permitted, or required, to testify in any privat e civil action concerning any confidential documents, materials, or other information subject to subsection (1)(a) of this section. (3) In order to assist in the performance of the commissioner's duties under KRS 304.3 - 750 to 304.3-768, the commissioner: (a) May share documents, materials, and other information, including confidential and privileged documents, materials, or other informati on subject to subsection (1) of this section, with the following if the recipient agrees, in writing, to maintain the confidentiality and privileged status of the documents, materials, or other information: 1. State, federal, and international regulatory agencies; 2. The National Association of Insurance Commissioners, its affiliates, or subsidiaries; and 3. State, federal, and international law enforcement authorities; (b) May receive documents, materials, and other information, including confidential and privileged documents, materials, or information, from: 1. The National Association of Insurance Commissioners, its affiliates, or subsidiaries; and 2. Regulatory and law enforcement officials of other foreign and domestic jurisdictions; (c) Shall maintain as confidential and privileged any document, material, or information received with notice or understanding that it is confidential and privileged under the laws of the jurisdiction that is the source of the documents, materials, or other information; (d) May share documents, materials, and other information subject to subsection (1) this section with a third-party consultant or vendor, if the consultant or vendor agrees, in writing, to maintain the confidentiality and privileged status of the documents, materials, or other information; and (e) May enter into agreements governing the sharing and use of information consistent with this section. (4) No waiver of any applicable privilege or claim of confidentiality shall occur as a result of: (a) A disclosure to the commissioner of documents, materials, or other information under this section; or (b) The sharing of the documents, materials, or other information as authorized under subsection (3) of this section. (5) Documents, materials, and other information in the possession or control of the National Association of Insurance Commissioners or a third-party consultant or vendor pursuant to KRS 304.3-750 to 304.3-768 shall: (a) Be confidential by law and privileged; (b) Not be subject to KRS 61.870 to 61.884; (c) Not be subject to subpoena; and (d) Not be subject to discovery or admissible in evidence in any private civil action. (6) Nothing in KRS 304.3-750 to 304.3-768 shall prohibit the commissioner from releasing final, adjudicated actions that are open to pu blic inspection under KRS 304.2-150 to a database or other clearinghouse service maintained by the National Association of Insurance Commissioners, its affiliates, or subsidiaries. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 8, effective January 1, 2023.

KRS 304.3-766 Compliance requirements

304.3-766. Compliance requirements (1) A licensee shall be deemed in compliance with KRS 304.3-750 to 304.3-768 if the licensee: (a) 1. Is subject to, governed by, and compliant with the privacy, security, and breach notifications rules issued by the United States Department of Health and Human Services, 45 C.F.R. Parts 160 and 164, as amended, established pursuant to the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, as amended, and the Health Information Technology for Economic and Clinical Health Act, Pub. L. No. 111-5, as amended; 2. Maintains nonpublic information in the same manner as protected health information; and 3. Submits to the commissioner: a. An annual written statement certifying its compliance with the applicable provisions referenced under sub paragraph 1. of this paragraph; and b. A copy of any individual breach notification required under 45 C.F.R. sec. 164.404, as amended, at the same time as all affected individuals; or (b) 1. Is a financial institution, as defined in KRS 304.9 -135, that is subject to, governed by, and compliant with the privacy, security, and breach notification standards issued under Section 501 of the Gramm -Leach- Bliley Act of 1999, 15 U.S.C. sec. 6801, as amended; and 2. Submits to the commissioner: a. An annual written statement certifying its compliance with the applicable provisions referenced under subparagraph 1. of this paragraph; and b. A copy of any breach notification at the same time and in the same manner as notifications provided to the financial institution's federal regulatory authorities. (2) Nothing in subsection (1)(a) of this section shall be construed to restrict the commissioner's authority to examine and investigate the affairs of any licensee under KRS 304.3-762 to verify the licensee's annual certification under this section. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 9, effective January 1, 2023.

KRS 304.3-768 Penalties

304.3-768. Penalties Penalties for violations of KRS 304.3-750 to 304.3-768 shall be in accordance with KRS 304.99-020. Effective: January 1, 2023 History: Created 2022 Ky. Acts ch. 149, sec. 10, effective January 1, 2023.
Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38687Fetched: 10/20/2026

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