§ 58-2-131. Examinations to be made; authority, scope, scheduling, and conduct of examinations.
§ 58‑2‑131. Examinations to be made; authority, scope, scheduling, and conduct ofexaminations.
(a) This section andG.S. 58‑2‑132 through G.S. 58‑2‑134 shall be known andmay be cited as the Examination Law. The purpose of the Examination Law is toprovide an effective and efficient system for examining the activities,operations, financial condition, and affairs of all persons transacting thebusiness of insurance in this State and all persons otherwise subject to theCommissioner's jurisdiction; and to enable the Commissioner to use a flexiblesystem of examinations that directs resources that are appropriate andnecessary for the administration of the insurance statutes and rules of thisState.
(b) As used in thissection and G.S. 58‑2‑132 through G.S. 58‑2‑134, unlessthe context clearly indicates otherwise:
(1) "Commissioner"includes an authorized representative or designee of the Commissioner.
(2) "Examination"means an examination conducted under the Examination Law.
(3) "Examiner"means any person authorized by the Commissioner to conduct an examination.
(4) "Insuranceregulator" means the official or agency of another jurisdiction that isresponsible for the regulation of a foreign or alien insurer.
(5) "Person"includes a trust or any affiliate of a person.
(c) Before licensingany person to write insurance in this State, the Commissioner shall besatisfied, by such examination and evidence as the Commissioner decides to makeand require, that the person is otherwise duly qualified under the laws of thisState to transact business in this State.
(d) The Commissionermay conduct an examination of any entity whenever the Commissioner deems it tobe prudent for the protection of policyholders or the public, but shall at aminimum conduct a financial examination of every domestic insurer not lessfrequently than once every five years. In scheduling and determining thenature, scope, and frequency of examinations, the Commissioner shall considersuch matters as the results of financial statement analyses and ratios, changesin management or ownership, actuarial opinions, reports of independentcertified public accountants, and other criteria as set forth in the NAICExaminers' Handbook.
(e) To complete anexamination of any entity, the Commissioner may authorize an examination orinvestigation of any person, or the business of any person, insofar as theexamination or investigation is necessary or material to the entity underexamination.
(f) Instead ofexamining any foreign or alien insurer licensed in this State, the Commissionermay accept an examination report on that insurer prepared by the insurer'sdomiciliary insurance regulator. In making a determination to accept thedomiciliary insurance regulator's report, the Commissioner may consider whether(i) the insurance regulator was at the time of the examination accredited underNAIC Financial Regulation Standards and Accreditation Program, or (ii) theexamination is performed under the supervision of an NAIC‑accreditedinsurance regulator or with the participation of one or more examiners who areemployed by the regulator and who, after a review of the examination workpapers and report, state under oath that the examination was performed in amanner consistent with the standards and procedures required by the regulator.
(g) If it appears thatthe insurer is of good financial and business standing and is solvent, and itis certified in writing and attested by the seal, if any, of the insurer'sinsurance regulator that it has been examined by the regulator in the mannerprescribed by its laws, and was by the examination found to be in soundcondition, that there is no reason to doubt its solvency, and that it is stillpermitted under the laws of such jurisdiction to do business therein, then, inthe Commissioner's discretion, further examination may be dispensed with, andthe obtained information and the furnished certificate may be accepted assufficient evidence of the solvency of the insurer.
(h) Upon determiningthat an examination should be conducted, the Commissioner shall issue a noticeof examination appointing one or more examiners to perform the examination andinstructing them about the scope of the examination. In conducting theexamination, an examiner shall observe the guidelines and procedures in theNAIC Examiners' Handbook. The Commissioner may also use such other guidelinesor procedures as the Commissioner deems to be appropriate.
(i) Every person fromwhom information is sought and its officers, directors, and agents must provideto the Commissioner timely, convenient, and free access, at all reasonablehours at its offices, to all data relating to the property, assets, business,and affairs of the entity being examined. The officers, directors, employees,and agents of the entity must facilitate and aid in the examination. Therefusal of any entity, by its officers, directors, employees, or agents, tosubmit to examination or to comply with any reasonable written request of theCommissioner or to knowingly or willfully make any false statement in regard tothe examination or written request, is grounds for revocation, suspension,refusal, or nonrenewal of any license or authority held by the entity to engagein an insurance or other business subject to the Commissioner's jurisdiction.
(j) The Commissionermay issue subpoenas, administer oaths, and examine under oath any person aboutany matter pertinent to the examination. Upon the failure or refusal of anyperson to obey a subpoena, the Commissioner may petition the Superior Court ofWake County, and upon proper showing the Court may enter any order compellingthe witness to appear and testify or produce documentary evidence. Failure toobey the Court order is punishable as contempt of court.
(k) When making anexamination, the Commissioner may retain attorneys, appraisers, independentactuaries, independent certified public accountants, or other professionals andspecialists as examiners. In the case of an examination of an insurer, theinsurer shall bear the cost of retaining those persons.
(l) Pending, during,and after the examination of any entity, the Commissioner shall not make publicthe financial statement, findings, or examination report, or any reportaffecting the status or standing of the entity examined, until the entityexamined has either accepted and approved the final examination report or hasbeen given a reasonable opportunity to be heard on the report and to answer orrebut any statements or findings in the report. The hearing, if requested,shall be informal and private.
(m) Nothing in theExamination Law limits the Commissioner's authority to terminate or suspend anyexamination in order to pursue other legal or regulatory action under the lawsand rules of this State and to use any final or preliminary examination report,any examiner or insurer work papers or other documents, or any otherinformation discovered or developed during any examination in the furtheranceof any legal or regulatory action that the Commissioner may consider to beappropriate. Findings of fact and conclusions made pursuant to any examinationare prima facie evidence in any legal or regulator action. (1991, c. 681, s. 2; 1995, c.360, s. 2(c); c. 517, s. 1; 1998‑212, s. 26B(b), (c), (f); 2001‑180,ss. 1, 2, 3; 2002‑144, s. 6; 2002‑187, ss. 2.1, 2.2; 2003‑284,s. 22.2; 2004‑124, s. 21.1.)