Nevada Administrative Code Chapter 692C - Holding Companies
Overview:
Chapter 692C of the Nevada Administrative Code sets out the rules and requirements for insurance holding companies to ensure transparency, financial stability, and regulatory compliance within the insurance industry in Nevada.
A holding company in this context is an entity (often a corporation or trust) that directly or indirectly controls one or more insurance companies.
Detailed Breakdown of NAC Chapter 692C:
1. Scope and Definitions (General Provisions)
Defines key terms such as:
Holding Company: An entity that owns or controls one or more insurance companies.
Control: Usually defined as owning 10% or more of the voting securities or having the power to influence management.
Insurance Company: Any insurer licensed to do business in Nevada.
Establishes which entities are subject to the rules in this chapter.
2. Registration and Reporting Requirements
Registration of Holding Companies:
Holding companies controlling insurers in Nevada must register with the Nevada Division of Insurance.
Registration involves submitting specific forms and documentation disclosing ownership, organizational structure, and financial information.
Annual Reporting:
Holding companies are required to file annual reports detailing their financial condition, transactions with affiliated companies, and organizational changes.
Reports must include financial statements audited by independent certified public accountants.
3. Filings for Material Transactions
Holding companies must notify and sometimes obtain prior approval from the Nevada Division of Insurance before engaging in “material transactions” with affiliated companies. These transactions might include:
Mergers or acquisitions.
Loans or investments between affiliated entities.
Reinsurance agreements or changes in capital structure.
This ensures that any significant transaction that might affect the financial health or operations of the insurance company is reviewed by regulators.
4. Regulation of Transactions Between Affiliates
The chapter imposes standards for transactions between the holding company and its subsidiaries to prevent conflicts of interest or abusive practices.
It requires that transactions be fair and reasonable and conducted at arm’s length.
Certain transactions might require prior approval or notice to the Division of Insurance.
5. Financial and Organizational Control
Holding companies must maintain records and systems to demonstrate adequate control over their subsidiaries.
They are responsible for ensuring their subsidiaries remain solvent and comply with insurance laws.
The Division of Insurance may require examinations or investigations into the holding company’s operations to verify compliance.
6. Confidentiality
Information filed with the Division of Insurance is often treated as confidential and is not disclosed publicly unless required by law.
However, some summary information may be shared with other regulatory bodies for supervisory purposes.
7. Penalties and Enforcement
Failure to comply with registration, reporting, or transaction requirements can result in administrative penalties, fines, or other regulatory actions.
The Division of Insurance has the authority to enforce compliance, investigate violations, and impose sanctions on holding companies.
8. Coordination with Other Laws
NAC Chapter 692C operates in conjunction with federal laws and other state insurance regulations, ensuring a comprehensive regulatory framework for holding companies.
It aligns with the Insurance Holding Company System Regulatory Act to which Nevada is a party, promoting consistent oversight nationally.
Summary:
The Nevada Administrative Code Chapter 692C — Holding Companies ensures that insurance holding companies operating in Nevada:
Are properly registered and disclose ownership and financial details.
Submit annual and transaction-specific reports to maintain regulatory transparency.
Conduct affiliate transactions fairly, without harming the financial health of subsidiaries.
Remain financially solvent and compliant with insurance regulations.
Are subject to regulatory oversight and enforcement to protect policyholders and maintain market stability.
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