This subtitle applies to insurers that are subject to registration under Subtitle 6 of this title. This subtitle does not authorize an insurer that is a member of an insurance holding company system to enter into a transaction that otherwise would be contrary to law for an insurer that is not a member of the same insurance holding company system.

Each transaction within an insurance holding company system to which an insurer subject to registration under Subtitle 6 of this title is a party is subject to the following standards: the terms shall be fair and reasonable in light of the purposes of this title; the records of each party shall clearly and accurately disclose the precise nature and details of the transaction, including accounting information necessary to support the reasonableness of the charges or fees to the parties; after the transaction, including any dividend or distribution to shareholder affiliates, the insurer has assets and surplus as regards policyholders that: bear a reasonable relation to the insurer’s outstanding liabilities; and are adequate to meet the insurer’s financial needs; charges or fees for services performed shall be reasonable; expenses incurred and payments received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied; and agreements, including management agreements, service contracts, tax allocation agreements, or cost–sharing agreements, shall include the provisions that the Commissioner requires by regulation.

Before a domestic insurer and another member of the same insurance holding company system enter into any of the transactions specified in subsection (d) of this section, including amendments or modifications of affiliate agreements previously filed under this section, the domestic insurer shall notify the Commissioner in writing of its intention to enter into the transaction. The notice for amendments or modifications shall include the reasons for the amendments or modifications and the projected financial impact of the amendments or modifications on the domestic insurer. A domestic insurer that intends to terminate an agreement or other transaction previously filed under this section shall provide the Commissioner with written notice within 30 days after the termination of the agreement or other transaction. The insurer shall notify the Commissioner under subsection (a) of this section: at least 30 days before the transaction is to be entered into; or if the Commissioner allows a shorter notice period, within the time that the Commissioner sets. A domestic insurer and another member of the same insurance holding company system may enter into, amend, or modify a transaction or an agreement under this section only if, within the notice period under subsection (b) of this section, the Commissioner does not disapprove the transaction. The following transactions are subject to subsections (a), (b), and (c) of this section: a sale, purchase, exchange, loan, or extension of credit, if, as of the December 31 immediately preceding the transaction, the amount of the transaction equals or exceeds: with respect to a life insurer, 3% of the insurer’s admitted assets; and with respect to an insurer other than a life insurer, the lesser of 3% of the insurer’s admitted assets and 25% of surplus as regards policyholders; a loan or extension of credit by an insurer to a person that is not an affiliate if: the parties have an agreement or understanding that the proceeds of the transaction, as a whole or in substantial part, are to be used to make loans or extensions of credit to purchase assets of or to make investments in an affiliate of the insurer; and as of the December 31 immediately preceding the transaction, the amount of the transaction equals or exceeds: with respect to a life insurer, 3% of the insurer’s admitted assets; and with respect to an insurer other than a life insurer, the lesser of 3% of the insurer’s admitted assets and 25% of surplus as regards policyholders; in accordance with subsection (h) of this section, a reinsurance agreement, or a modification to a reinsurance agreement, including an agreement that requires as consideration the transfer of assets from an insurer to a person that is not its affiliate, if, as of the December 31 immediately preceding the transaction, the amount of the reinsurance premium or change in the insurer’s liabilities or the projected reinsurance premium or change in the insurer’s liabilities in any of the next 3 years equals or exceeds 5% of the insurer’s surplus as regards policyholders; all reinsurance pooling agreements; a management agreement, service contract, tax allocation agreement, or cost–sharing arrangement; subject to subsection (i) of this section, guarantees made by a domestic insurer; direct or indirect investments in a person that controls the insurer or an affiliate of the insurer in an amount that, together with its present holdings in the investments, exceeds 2.5% of the insurer’s surplus as regards policyholders; notwithstanding item (7) of this subsection, any direct or indirect investment in or acquisition of a subsidiary of the insurer; and a material transaction, as specified by regulation, that the Commissioner determines may adversely affect the interests of the insurer’s policyholders. In reviewing transactions under subsection (d) of this section, the Commissioner shall consider whether a transaction: complies with the standards stated in § 7–702 of this subtitle; or potentially adversely affects the interests of policyholders. A transaction that does not conform to this section is a violation of this title. In addition to the sanctions in §§ 7–802, 7–803, 7–805, and 7–807 of this title, the Commissioner may set aside and rescind a transaction that the Commissioner finds does not conform to this section at the initiative of the Commissioner or otherwise under applicable law. Within 90 days after the date that the Commissioner receives information about a transaction that the Commissioner finds does not conform to this section, the Commissioner shall give the insurer notice of the proposed action to set aside or rescind the transaction and an opportunity for a hearing. A domestic insurer and another member of the same insurance holding company system may not enter into a transaction that is part of a plan or series of like transactions if the purpose of making separate transactions is to avoid exceeding limitations under this section and the review of the transaction that otherwise would occur. If the Commissioner determines that separate transactions were entered into during any 12–month period in violation of paragraph (1) of this subsection, the Commissioner may impose any sanction authorized by §§ 7–802, 7–803, 7–805, and 7–807 of this title. A reinsurance agreement subject to subsection (d)(3) of this section includes an agreement that requires as consideration the transfer of assets from an insurer to a nonaffiliate if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer. A guarantee that is quantifiable as to amount is not subject to the notice requirements of subsection (d)(6) of this section unless the guarantee exceeds the lesser of 0.5% of the insurer’s admitted assets or 10% of the insurer’s surplus as regards policyholders as of the December 31 immediately preceding the guarantee. All guarantees made by a domestic insurer that are not quantifiable as to amount are subject to the notice requirements of subsection (d)(6) of this section.

A domestic insurer shall notify the Commissioner within 30 days after making any investment in one corporation if the total investment in the corporation by the domestic insurer’s insurance holding company system exceeds 10% of the corporation’s voting securities.

Except as provided in § 7-706 of this subtitle, before an insurer subject to registration under Subtitle 6 of this title pays a dividend or makes a distribution to its shareholders, the insurer shall notify the Commissioner of its intention to pay the dividend or make the distribution. The insurer shall notify the Commissioner under subsection (a) of this section: within 5 business days after the declaration; and at least 10 days before the payment or distribution date. The Commissioner shall keep the notice required by subsection (a) of this section confidential until the payment or distribution date. If the Commissioner finds that, after the payment or distribution to shareholders under this section, the insurer’s surplus as regards policyholders would be inadequate or could lead the insurer to a hazardous financial condition, the Commissioner may order that the dividend not be paid.

In this section, “earned surplus” means the part of surplus that, after deduction of all losses, represents the net earnings, gains, or profits that have not been distributed to shareholders as dividends, transferred to stated capital, transferred to capital surplus, or applied to other purposes allowed by law. In this section, “earned surplus” does not include unrealized capital gains or reevaluation of assets. In this section, “extraordinary dividend” or “extraordinary distribution” includes any dividend or distribution of cash or other property with a fair market value, that when combined with the fair market value of any other dividends or distributions made in the preceding 12 months exceeds the lesser of: 10% of the insurer’s surplus as regards policyholders as of December 31 of the preceding year; or for a life insurer, the net gain from operations of the insurer not including: realized capital gains for the 12-month period ending December 31 of the preceding year; and pro rata distributions of any class of the insurer’s own securities; or for an insurer that is not a life insurer, the net investment income of the insurer not including: realized capital gains for the 12-month period ending December 31 of the preceding year; and pro rata distributions of any class of the insurer’s own securities. In determining whether a dividend or distribution is extraordinary under this section, an insurer that is not a life insurer may carry forward net investment income from the 3 calendar years prior to the preceding calendar year that has not already been paid out as dividends. The amount carried forward under paragraph (1) of this subsection shall be computed by taking the net investment income from the 3 calendar years prior to the preceding calendar year: not including realized capital gains; and minus dividends paid in the preceding 3 calendar years. An insurer that is not a life insurer may pay an extraordinary dividend only out of earned surplus. A domestic insurer may not pay an extraordinary dividend or make any other extraordinary distribution to its shareholders unless: the insurer provides notice of the declaration to the Commissioner at least 30 days before the declaration is made; and the Commissioner has approved or not disapproved the declaration within the 30 days following notice. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or extraordinary distribution conditioned on the Commissioner’s approval. A conditional declaration confers no rights on shareholders unless, within 30 days after the Commissioner receives the notice under subsection (e) of this section, the Commissioner either approves the payment or distribution, or does not disapprove the payment or distribution.