B 26-0426

                                                                        ENROLLED ORIGINAL
                                              AN ACT
                                  _________________________
                    IN THE COUNCIL OF THE DISTRICT OF COLUMBIA
                                  _________________________
To amend the Holding Company System Act of 1993 to update the group capital calculation for
      the purpose of insurance holding company system group solvency supervision and add a
      liquidity stress test for macroprudential surveillance.
       BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this
act may be cited as the “Holding Company System Amendment Act of 2026”.
        Sec. 2. The Holding Company System Act of 1993, effective October 21, 1993 (D.C.
Law 10-44; D.C. Official Code § 31-701 et seq.), is amended as follows:
        (a) Section 2 (D.C. Official Code § 31-701) is amended as follows:
                (1) A new paragraph (3A-i) is added to read as follows:
                “(3A-i) “Group capital calculation instructions” means the group capital
calculation instructions as adopted by the NAIC and as amended by the NAIC from time to
time.”.
                (2) New paragraphs (5A-i) and (5A-ii) are added to read as follows:
                “(5A-i) “Lead state” means the one state that takes the lead with respect to
conducting group-wide supervision of the insurance holding company system within the U.S.
solvency system.
                “(5A-ii) “Lead state commissioner” means the commissioner of the lead state for
an insurance group.”.
                (3) A new paragraph (5C-i) is added to read as follows:
                “(5C-i) “NAIC liquidity stress test framework” means a separate NAIC
publication that includes a history of the NAIC’s development of regulatory liquidity stress
testing, the Liquidity Stress Test instructions and reporting templates for a specific data year, and
the scope criteria applicable for a specific data year as adopted by the NAIC and as amended by
the NAIC from time to time.”.
                (4) A new paragraph (6A) is added to read as follows:
                “(6A) “Scope criteria” means the designated exposure bases along with minimum
magnitudes thereof for the specified data year as detailed in the NAIC liquidity stress test
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framework, used to establish a preliminary list of insurers considered scoped into the NAIC
liquidity stress test framework for that data year.”.
                 (5) A new paragraph (8A) is added to read as follows:
                 “(8A) “Task Force” means the NAIC Financial Stability Task Force or its
successor.”.
        (b) Section 6 (D.C. Official Code § 31-705) is amended as follows:
                 (1) Subsection (d) is amended as follows:
                         (A) The existing test is redesignated as paragraph (1).
                         (B) A new paragraph (2) is added to read as follows:
                 “(2) Notwithstanding paragraph (1) of this subsection, for purposes of the group
capital calculation, as described in subsection (k-2) of this section, or the NAIC liquidity stress
test framework, as described in subsection (k-3) of this section, sales, purchases, exchanges,
loans or extensions of credit, investments, or guarantees involving one-half of 1% or less of an
insurer’s admitted assets as of the 31st day of December shall be material.”.
                 (2) New subsections (k-2) and (k-3) are added to read as follows:
        “(k-2)(1) Except as provided in this paragraph, the ultimate controlling person of every
insurer subject to registration shall concurrently file with the registration an annual group capital
calculation as directed by the lead state commissioner. The report shall be completed in
accordance with the group capital calculation instructions, which may permit the lead state
commissioner to allow a controlling person that is not the ultimate controlling person to file the
group capital calculation. The report shall be filed with the lead state commissioner as
determined by the Commissioner in accordance with the procedures within the Financial
Analysis Handbook adopted by the NAIC. The following insurance holding company systems
are exempt from filing the group capital calculation:
                         “(A) An insurance holding company system that:
                                “(i) Has only one insurer within its holding company structure that
only writes business;
                                “(ii) Is only licensed in its domestic state; and
                                “(iii) Assumes no business from any other insurer;
                         “(B) An insurance holding company system required to perform a group
capital calculation by the United States Federal Reserve Board; provided, that if the Federal
Reserve Board refuses or is unable to share the calculation with the lead state commissioner after
a request from the lead state commissioner, the insurance holding company system is not exempt
from the group capital calculation filing;
                         “(C) An insurance holding company whose non-U.S. group-wide
supervisor is located within a reciprocal jurisdiction, as defined in section 2(f-1)(11)(B) of the
Law on Credit for Reinsurance Act of 1993, effective October 15, 1993 (D.C. Law 10-36; D.C.
Official Code § 31-501(f-1)(11)(B)), that recognizes the U.S. state regulatory approach to group
supervision and group capital; and
                         “(D) An insurance holding company system:
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                                 “(i) That provides information to the lead state that meets the
requirements for accreditation under the NAIC financial standards and accreditation program,
either directly or indirectly through the group-wide supervisor, who has determined such
information is satisfactory to allow the lead state to comply with the NAIC group supervision
approach, as detailed in the NAIC Financial Analysis Handbook; and
                                 “(ii) Whose non-U.S. group-wide supervisor that is not in a
reciprocal jurisdiction recognizes and accepts, as specified by the Commissioner in regulation,
the group capital calculation as the world-wide group capital assessment for U.S. insurance
groups who operate in that jurisdiction.
                 “(2) Notwithstanding the provisions of paragraph (1)(C) and (D) of this
subsection, the lead state commissioner shall require the group capital calculation for U.S.
operations of any non-U.S. based insurance holding company system where, after any necessary
consultation with other supervisors or officials, it is deemed appropriate by the lead state
commissioner for prudential oversight and solvency monitoring purposes or for ensuring the
competitiveness of the insurance marketplace.
                 “(3) Notwithstanding the exemptions from filing the group capital calculation
stated in paragraph (1) of this subsection, if the lead state commissioner exempts the ultimate
controlling person from filing the annual group capital calculation or accepts a limited group
capital filing or report in accordance with criteria as specified by the lead state commissioner in
regulation, the ultimate controlling person shall be exempt from filing the annual group capital
calculation.
                 “(4) If the lead state commissioner determines that an insurance holding company
system no longer meets one or more of the requirements for an exemption from filing the group
capital calculation under this section, the insurance holding company system shall file the group
capital calculation at the next annual filing date unless given an extension by the lead state
commissioner based on reasonable grounds shown.
         “(k-3)(1) The ultimate controlling person of every insurer subject to registration under
this act and also scoped into the NAIC liquidity stress test framework shall file the results of a
specific year’s liquidity stress test with the lead state commissioner, as determined by the
procedures within the Financial Analysis Handbook adopted by the NAIC.
                 “(2)(A) Any change to the NAIC liquidity stress test framework or to the data
year for which the scope criteria are to be measured shall be effective on January 1 of the year
following the calendar year when such changes are adopted.
                          “(B) For the purposes of paragraph (1) of this subsection, insurers meeting
at least one threshold of the scope criteria shall be considered scoped into the NAIC liquidity
stress test framework for the specified data year unless the lead state commissioner, in
consultation with the Task Force, determines the insurer should not be scoped into the framework
for that data year. Insurers that do not trigger at least one threshold of the scope criteria shall be
considered scoped out of the NAIC liquidity stress test framework for the specified data year,
unless the lead state insurance commissioner, in consultation with the Task Force, determines the
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insurer should be scoped into the NAIC liquidity stress test framework for that data year.
                 “(3) When the District is serving as the lead state commissioner, in consultation
with the Task Force, it shall evaluate concerns of having insurers scoped in and out of the NAIC
liquidity stress test framework on a frequent basis as part of the determination for an insurer.
                 “(4) The performance of, and filing of the results from, a specific year’s liquidity
stress test shall comply with the NAIC liquidity stress test framework’s instructions and
reporting templates for that year and any lead state commissioner determinations, in conjunction
with the Task Force, provided within the NAIC liquidity stress test framework.”.
         (c) Section 7 (D.C. Official Code § 31-706) is amended by adding new subsections (e)
and (f) to read as follows:
         “(e)(1)(A) If an insurer subject to this act is deemed by the Commissioner to be in a
hazardous financial condition as provided in section 2 of the Standards to Identify Insurance
Companies Deemed to Be in Hazardous Financial Condition Act of 1993, effective October 21,
1993 (D.C. Law 10-43; D.C. Official Code § 31-2101), or a condition that would be grounds for
supervision, conservation, or a delinquency proceeding, the Commissioner may require the
insurer to secure and maintain either a deposit, held by the Commissioner, or a bond, as
determined by the insurer at the insurer’s discretion, for the duration of the contractual
obligations or agreements held by the insurer or the duration of the existence of the condition for
which the Commissioner required the deposit or the bond.
                         “(B) In determining whether to exercise the Commissioner’s authority
under subparagraph (A) of this paragraph to require a insurer to secure and maintain a deposit or
bond, the Commissioner may consider whether concerns exist with respect to the affiliated
person’s ability to fulfill the contractual obligations or agreements of the insurer if the insurer
were to be put into liquidation.
                         “(C) If the insurer is deemed to be in a hazardous financial condition or a
condition that would be grounds for supervision, conservation, or a delinquency proceeding, and
a deposit or bond is necessary, the Commissioner has discretion to determine the amount of the
deposit or bond, not to exceed the value of the contractual obligations or agreements of the
insurer in any one year, and whether such deposit or bond should be required for a single
contract, multiple contracts, or a contract only with a specific person or persons.
                 “(2)(A) All records and data of the insurer held by an affiliate are and remain the
property of the insurer, are subject to control of the insurer, shall be identifiable, and shall be
segregated or readily capable of segregation at no additional cost to the insurer from all other
persons’ records and data. This includes all records and data that are otherwise the property of
the insurer, in whatever form maintained, including claims and claim files, policyholder lists,
application files, litigation files, premium records, rate books, underwriting manuals, personnel
records, financial records or similar records within the possession, custody or control of the
affiliate.
                         “(B) At the request of the insurer, the affiliate shall provide that the
receiver can obtain a complete set of all records of any type that pertain to the insurer’s business,
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obtain access to the operating systems on which the data is maintained, obtain the software that
runs those systems either through assumption of licensing agreements or otherwise, and restrict
the use of the data by the affiliate if it is not operating the insurer’s business.
                         “(C) The affiliate shall provide a waiver of any landlord lien or other
encumbrance to give the insurer access to all records and data in the event of the affiliate’s
default under a lease or other agreement.
                 “(3) Premiums or other funds belonging to the insurer that are collected by or held
by an affiliate are the exclusive property of the insurer and shall be subject to the control of the
insurer; any right of offset in the event an insurer is placed into receivership shall be subject to
the Insurers Rehabilitation Act of 1993, effective October 15, 1993 (D.C. Law 10-35; D.C.
Official Code § 31-1301 et seq.).
         “(f)(1) Any affiliate that is party to an agreement or contract with a domestic insurer that
is subject to subsection (a)(2)(D) of this section shall be subject to the jurisdiction of any
supervision, seizure, conservatorship, or receivership proceedings against the insurer and to the
authority of any supervisor, conservator, rehabilitator or liquidator for the insurer appointed
pursuant to District law, for the purpose of interpreting, enforcing, and overseeing the affiliate’s
obligations under the agreement or contract to perform services for the insurer that are:
                         “(A) An integral part of the insurer’s operations, including management,
administrative, accounting, data processing, marketing, underwriting, claims handling,
investment, or any other similar functions; or
                         “(B) Essential to the insurer’s ability to fulfill its obligations under
insurance policies.
                 “(2) The Commissioner may require that an agreement or contract for the
provision of services described in paragraph (1)(A) or (B) of this subsection specify that the
affiliate consents to the jurisdiction as set forth in paragraph (1) of this subsection.”.
         (d) Section 9 (D.C. Official Code § 31-708) is amended as follows:
                 (1) Subsection (a) is amended by striking the phrase “shall be confidential” and
inserting the phrase “are recognized by the District as being proprietary and to contain trade
secrets, and shall be confidential” in its place.
                 (2) A new subsection (a-1) is added to read as follows:
         “(a-1) Subject to the proviso in subsection (a) of this section, for purposes of the
information reported and provided to the Department of Insurance, Securities, and Banking
pursuant to section 6(k-2) and (k-3), the Commissioner shall maintain the confidentiality of:
                 “(1) The group capital calculation and group capital ratio produced within the
calculation and any group capital information received from an insurance holding company
supervised by the Federal Reserve Board or any U.S. group-wide supervisor; and
                 “(2) The liquidity stress test results and supporting disclosures and any liquidity
stress test information received from an insurance holding company supervised by the Federal
Reserve Board and non-U.S. group wide supervisors.”.
                 (3) Subsection (c) is amended as follows:
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                        (A) Paragraph (1) is amended to read as follows:
                “(1) May share documents, materials or other information, including the
confidential and privileged documents, materials, or information described at subsection (a) of
this section, and which shall include proprietary and trade secret documents and materials, with
other state, federal, and international regulatory agencies, the NAIC, any third-party consultants
designated by the Commissioner, and state, federal, and international law enforcement
authorities, including members of any supervisory college described in section 8a; provided, that
the recipient agrees in writing to maintain the confidentiality and privileged status of the
document, material, or other information, and verifies in writing the legal authority to maintain
confidentiality.”.
                        (B) Paragraph (1A) is amended by striking the phrase “section 6” and
inserting the phrase “section 6(k-1)” in its place.
                        (C) Paragraph (2) is amended by striking the phrase “information, from
the National Association of Insurance Commissioners” and inserting the phrase “information,
including proprietary and trade secret information, from NAIC” in its place.
                        (D) Paragraph (3) is amended to read as follows:
                “(3) Shall enter into written agreements with the NAIC and any third-party
consultant designated by the Commissioner governing the sharing and use of information
provided pursuant to this act and consistent with this subsection, which shall:
                        “(A) Specify procedures and protocols regarding the confidentiality and
security of information shared with the NAIC or a third-party consultant designated by the
Commissioner pursuant to this act, including procedures and protocols for sharing by the NAIC
with other state, federal or international regulators. The agreement shall provide that the recipient
agrees in writing to maintain the confidentiality and privileged status of the documents, materials
or other information and has verified in writing the legal authority to maintain such
confidentiality;
                        “(B) Specify that ownership of information shared with the NAIC or a
third-party consultant pursuant to this act remains with the Commissioner and the NAIC’s or a
third-party consultant’s use of the information is subject to the direction of the Commissioner;
                        “(C) Excluding documents, material, or information reported pursuant to
section 6(k-3), prohibit the NAIC or third-party consultant designated by the Commissioner from
storing information shared pursuant to this act in a permanent database after the underlying
analysis is completed;
                        “(D) Require prompt notice to be given to an insurer that the insurer’s
confidential information in the possession of the NAIC or a third-party consultant designated by
the Commissioner pursuant to this act is subject to a request or subpoena to the NAIC or a third-
party consultant for disclosure or production;
                        “(E) Require the NAIC or a third-party consultant designated by the
Commissioner 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
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about the insurer shared with the NAIC or a third-party consultant and its affiliates and
subsidiaries pursuant to this act; and
                          “(F) For reporting of documents, material, or information pursuant to
section 6(k-3), in the case of an agreement involving a third-party consultant designated by the
Commissioner, provide for notification of the identity of the consultant to the applicable
insurers.”.
                 (4) Subsection (d-1) is amended by striking the abbreviation “NAIC” and
inserting the phrase “NAIC, or a third-party consultant designated by the Commissioner” in its
place.
                 (5) A new subsection (d-2) is added to read as follows:
         “(d-2) Except as otherwise required under this act, no insurer, broker, or other person
engaged in any manner in the insurance business may make, publish, disseminate, circulate or
place before the public, or cause directly or indirectly to be made, published, disseminated,
circulated or placed before the public in a newspaper, magazine or other publication, or in the
form of a notice, circular, pamphlet, letter or poster, or over any radio or television station or any
electronic means of communication available to the public, or in any other way as an
advertisement, announcement, or statement containing a representation or statement, with regard
to the group capital calculation, group capital ratio, the liquidity stress test results, or supporting
disclosures for the liquidity stress test of any insurer or any insurer group, or of any component
derived in the calculation; provided, that if any materially false statement with respect to the
group capital calculation, resulting group capital ratio, a false or misleading comparison of any
amount to an insurer’s or insurance group’s group capital calculation or resulting group capital
ratio, liquidity stress test result, supporting disclosures for the liquidity stress test, or a false or
misleading comparison of any amount to an insurer’s or insurance group’s liquidity stress test
result or supporting disclosures is published in any written publication and the insurer is able to
demonstrate to the Commissioner with substantial proof the falsity of such statement or its false
or misleading nature as the case may be, then the insurer may publish announcements in a
written publication if the sole purpose of the announcement is to rebut the materially false or
misleading statement.”.
       Sec. 3. Fiscal impact statement.
       The Council adopts the fiscal impact statement in the committee report as the fiscal
impact statement required by section 4a of the General Legislative Procedures Act of 1975,
approved October 16, 2006 (120 Stat. 2038; D.C. Official Code § 1-301.47a).
       Sec. 4. Effective date.
       This act shall take effect following approval by the Mayor (or in the event of veto by the
Mayor, action by the Council to override the veto) and a 30-day period of congressional review
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as provided in section 602(c)(1) of the District of Columbia Home Rule Act, approved December
24, 1973 (87 Stat. 813; D.C. Official Code § 1-206.02(c)(1)).
              ___________________________________
              Chairman
              Council of the District of Columbia
_________________________________
Mayor
District of Columbia
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