GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
S	2
SENATE BILL 321*
Insurance and Consumer Protection Committee Substitute Adopted 4/23/01

Short Title:	Insurance Exam Law Amendments.	()	
Sponsors:	     	
Referred to:	     	
March 5, 2001

A BILL TO BE ENTITLED
AN ACT TO PROVIDE FOR SHARING OF INFORMATION PRODUCED BY, OBTAINED BY, OR DISCLOSED TO THE INSURANCE COMMISSIONER UNDER THE EXAMINATION LAW; AND TO CLARIFY THAT THE EXAMINATION LAW APPLIES TO ALL entities SUBJECT TO REGULATION BY THE INSURANCE COMMISSIONER. 

The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 58‑2‑131(d) reads as rewritten:
"(d)	The Commissioner may conduct an examination of any entity whenever the Commissioner deems it to be prudent for the protection of policyholders or the public, but shall at a minimum conduct a regular examination of every domestic insurer not less frequently than once every five years. In scheduling and determining the nature, scope, and frequency of examinations, the Commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and other criteria as set forth in the NAIC Examiners' Handbook."
SECTION 2.  G.S. 58‑2‑131(e) reads as rewritten:
"(e)	To complete an examination of any  entity, the Commissioner may authorize an examination or investigation of any person, or the business of any person, insofar as the examination or investigation is necessary or material to the entity under examination."
SECTION 3.  G.S. 58‑2‑131(1) reads as rewritten:
"(l)	Pending, during, and after the examination of any  entity, the Commissioner shall not make public the financial statement, findings, or examination report, or any report affecting the status or standing of the entity examined, until the entity examined has either accepted and approved the final examination report or has been given a reasonable opportunity to be heard on the report and to answer or rebut any statements or findings in the report. The hearing, if requested, shall be informal and private."
SECTION 4.  G.S. 58‑2‑132 reads as rewritten:
"§ 58‑2‑132.  Examination reports.
(a)	All examination reports shall comprise only facts appearing upon the books, records, or other documents of the  entity, its agents or other persons examined, or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs, and conclusions and recommendations that the examiners find reasonably warranted from the facts.
(b)	No later than 60 days following completion of an examination, the examiners shall file with the Department a verified written examination report under oath. Upon receipt of the verified report, the Department shall send the report to the entity examined, together with a notice that affords the  entity examined a reasonable opportunity of not more than 30 days to make a written submission or rebuttal with respect to any matters contained in the examination report. Within 30 days after the date of the examination report, the  entity examined shall file affidavits executed by each of its directors stating under oath that they have received and read a copy of the report.
(c)	At the end of the 30 days provided for the receipt of written submissions or rebuttals, the Commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant parts of the examiners' work papers and enter an order:
(1)	Adopting the examination report as filed or with modifications or corrections. If the examination report reveals that the entity examined is operating in violation of any law, rule, or prior order of the Commissioner, the Commissioner may order the entity examined to take any action the Commissioner considers necessary and appropriate to cure the violation; or
(2)	Rejecting the examination report with directions to the examiners to reopen the examination to obtain additional data, documentation of the information, and refiling under subdivision (1) of this subsection; or
(3)	Calling for an investigatory hearing with no less than 20 days' notice to the insurer for purposes of obtaining additional documentation, data, and testimony.
(d)	All orders entered under subdivision (c)(1) of this section shall be accompanied by findings and conclusions resulting from the Commissioner's consideration and review of the examination report, relevant examiner work papers, and any written submissions or rebuttals. Any such order shall be considered a final administration decision and shall be served upon the entity examined by certified mail. Any hearing conducted under subdivision (c)(3) of this section shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies, or disputed issues apparent on the face of the filed examination report or raised by or as a result of the Commissioner's review of relevant work papers or by the written submission or rebuttal of the entity examined. Within 20 days after the conclusion of any such hearing, the Commissioner shall enter an order under subdivision (c)(1) of this section. The Commissioner may not appoint a member of the Department's examination staff as an authorized representative to conduct the hearing. The hearing shall proceed expeditiously with discovery by the entity examined limited to the examiner's work papers that tend to substantiate any assertions set forth in any written submission or rebuttal. The Commissioner may issue subpoenas for the attendance of any witnesses or the production of any documents the Commissioner considers to be relevant to the investigation, whether they are under the control of the Department, the entity examined, or other persons. The documents produced shall be included in the record, and testimony taken by the Commissioner shall be under oath and preserved for the record. Nothing in this section requires the Department to disclose any information or records that would show the existence or content of any investigation or activity of any federal or state criminal justice agency. In the hearing, the Commissioner shall question the persons subpoenaed. Thereafter the entity examined and the Department may present testimony relevant to the investigation. Cross‑examination shall be conducted only by the Commissioner. The entity examined and the Department may make closing statements and may be represented by counsel of their choice.
(e)	Upon completion of the examination report under subdivision (c)(1) of this section, the Commissioner shall hold the content of the examination report as private and confidential information for the 30‑day period provided for written submissions or rebuttals. If after 30 days after the examination report has been submitted to it, the entity examined has neither notified the Commissioner of its acceptance and approval of the report nor requested to be heard on the report, the report shall then be filed as a public document and shall be open to public inspection, as long as no court of competent jurisdiction has stayed its publication. Nothing in the Examination Law prohibits the Commissioner from disclosing the content of the examination report, preliminary examination report or results, or any related matter, to an insurance regulator or to law enforcement officials of this or any other state or country or of the United States government at any time, as long as the person or agency receiving the report or related matters agrees in writing and is authorized by law to hold it confidential and in a manner consistent with this section. If the Commissioner determines that further regulatory action is appropriate as a result of any examination, the Commissioner may initiate such proceedings or actions as provided by law.
(f)	All working papers,  information, documents, and copies thereof produced by, obtained by, or disclosed to the Commissioner or any other person in connection with an examination or financial analysis shall be given confidential treatment, are not subject to subpoena, and  shall not be made public by the Commissioner or any other person. The Commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the Commissioner's official duties.
(g)	In order to assist in the performance of the Commissioner's duties, the Commissioner may:
(1)	Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (f) of this section, with other state, federal, and international regulatory agencies, with the NAIC, 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, communication, or other information.
(2)	Receive documents, materials, communications, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC, and 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.
(3)	Enter into agreements governing sharing and use of information consistent with this section.
(h)	No waiver of an existing privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the Commissioner under this section or as a result of sharing as authorized in subsection (g) of this section.
(i)	A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this section shall be available and enforced in any proceeding in, and in any court of, this State.
(j)	In this section, 'department,' 'insurance regulator,' 'law enforcement official or authority,' 'NAIC,' and 'regulatory official or agency' include employees, agents, consultants, and contractors of those entities."
SECTION 5.  If any section or provision of this act is declared unconstitutional, preempted, or otherwise invalid by the courts, it does not affect the validity of the act as a whole or any part other than the part so declared to be unconstitutional, preempted, or otherwise invalid.
SECTION 6.  This act is effective when it becomes law.