Cal. Code Regs. tit. 10 § 2605.01

Current through Register 2024 Notice Reg. No. 24, June 14, 2024

Section 2605.01 - Applications for Organizational Permits

Applications by underwritten title companies, attorneys-in-fact of reciprocal insurers, and exclusive managers of domestic insurance companies for permits to sell their stock for initial capitalization purposes, are subject to and shall comply with the applicable portions of Articles 1 through 4, paragraphs B., C., E., G., and H., of this Section 2605.01, and paragraph B. of Section 2605.02. Similar applications by insurance companies (organizations organized to assume the risk of loss under contracts of insurance) in addition to complying with the last aforementioned sections and articles hereof, shall (Sections 717, 718, 721, 839, 843):

A. Comply with Article 3, except Sections 2603.14 and 2603.15, of these regulations and with the additional requirements set forth in this section.

B. Attach as an exhibit and incorporate by reference on a form provided by the Commissioner, a biographical affidavit of every officer, director, trustee, each proposed principal supervising or managerial personnel, and of each known proposed investor who is expected to purchase or hold or control for such person's own self or otherwise, directly or indirectly, 10% or more of applicant's stock when it is sold and issued. Such affidavit shall be completed by the individual concerned and, if executed in this state, shall be either certified to under penalty of perjury or sworn to before an officer duly authorized to administer oaths; and if executed in any other place than the State of California, shall be duly sworn to under oath according to the law of the place where the affidavit is made. The form and text of such affidavit shall be as set forth in Section 2613.07, infra. (Sections 704.5, 717, 718, 843) It may be filed in a singular copy only.

C. Allege or attach as an exhibit incorporated by reference a plan of operation explaining fully at least the following to the extent that these items are appropriate to the nature of the applicant.

NOTE: All items are appropriate to an organization expecting to transact "insurance" as the same is defined by Insurance Code Section 22):

1. Kind of business the company will transact; if "insurance" as defined by Insurance Code Section 22, name the classes as they are defined by Insurance Code Section 101- 120; otherwise, describe it. Specify where and with what facilities business will be transacted and the estimated premium volume of such transactions by month or year.

2. Whether company will operate on the American Agency System or as direct writers.

3. Where and how it will recruit its agents or other producers. How and by whom they will be trained.

4. Commission rates or salaries to be paid. Attach sample contract forms and commission schedule, including those for general agents.

5. Where and how business will be developed.

6. Sales techniques to be used.

7. Advertising methods to be employed.

8. Whether applicant will control agents' advertising and sales methods and, if so, how.

9. How and by whom claims will be processed and losses adjusted and paid; the relationship of such adjusters to company.

10. How claims adjusting personnel will be compensated.

11. If applicable, whether applicant will comply with Insurance Code Sections 815 and/or 816, as appropriate.

12. How and by whom applications will be underwritten.

13. Initial salaries proposed to be paid.

14. How and by whom the company's investments will be managed and, if by other than a company officer, for what compensation.

15. If applicant expects to transact life or disability insurance, whether it will pay or contract to pay directly or indirectly to any officer, director, trustee, medical director, actuary or investment committeeman any commission or compensation contingent on life or disability business written, renewed or paid for and, if so, at what rate or rates and under what circumstances.

16. What procedure, if any, company will have to ascertain whether its officers and directors occupy positions in other businesses or have other financial interests such that applicant's business or investment transactions or conduct of its business will directly or indirectly affect them or their other financial interest, and vice versa. (Sections 843, 1101 and Ops. Cal. Atty. Gen. No. 64/230, Sept. 24, 1965.) (Sections 839, 843 and Corporations Code Sec. 820 as to noninsuring insurers.)

D. Attach as an exhibit and incorporate by reference its principal policy or policies (usually not more than two) to be sold and the rates therefor. Typewritten forms are acceptable for application purposes. Statutory forms may be identified by reference to the statute. Standard forms and Bureau forms may be identified by form number and printed copies attached.

In the case of nonstandard policies, there shall be included an actuarial demonstration of the financial soundness of such policy or policies and rates.

The requirements of this paragraph D are customarily waived as to other than life and disability applicants if they can otherwise demonstrate the financial soundness of their policies and rates.

E. Attach as an exhibit and incorporate by reference a financial projection, based on reasonable and practicable assumptions of every applicable factor, including volume and kind of business to be produced, premiums to be collected and disbursements to be made, all year by year, showing separately:

(1) all elements of income,

(2) all elements of disbursement and reserves, and

(3) unassigned surplus at the end of each year. Such projection shall cover a period of years from inception to and including a year when it shows applicant is definitely producing a net gain from operations after dividends to policyholders and excluding capital gains and losses. (Secs. 839, 843)

F. Actuarial computations and estimates are not acceptable unless signed and certified to by a qualified actuary.

G. Attach as an exhibit and incorporate by reference a detailed estimate of all expenses incurred or to be incurred, beginning with the cost of incorporation and extending to and including the procuring of a Certificate of Authority. (Secs. 839.5, 715) Limit to expenses of organization and stock selling in case of noninsuring insurers.

H. Attach as an exhibit and incorporate by reference applicant's proposed reinsurance contracts. (Insurance contracts in case of underwritten title companies.) If the text of these is not available, attach written commitments and typical contract; otherwise, attach analysis of bids for reinsurance and statement of company's choice and include terms. (Sections 717, 839, 843)

Cal. Code Regs. Tit. 10, § 2605.01

1. Change without regulatory effect amending paragraph B. filed 7-14-2021 pursuant to section 100, title 1, California Code of Regulations (Register 2021, No. 29). Filing deadline specified in Government Code section 11349.3(a) extended 60 calendar days pursuant to Executive Order N-40-20.