o An insurer may comply with the Arizona ORSA Summary Report requirements detailed above by providing the most recent and substantially similar report or reports provided by the insurer or another member of the insurance group to the director or commissioner of another state or to a supervisor or regulator of a foreign jurisdiction. However, that report (or reports) must provide information that is comparable to the information described in the ORSA Guidance Manual. If the Report is in a language other than English, it must be translated into the English language.
The Exemptions
The Arizona ORSA statutes also contain limited exemptions from the requirements of the law. Specifically, an insurer is exempt from the requirements of the law if both of the following apply:
1. The insurer has annual and direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premium reinsured with the federal crop insurance corporation and federal flood program of less than five hundred million dollars ($500,000,000).
2. The insurance group in which the insurer is a member has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premium reinsured with the federal crop insurance corporation and federal flood program of less than one billion dollars ($1,000,000,000). [4]
If an insurer qualifies for an exemption in the first subsection above, but not the second, the ORSA Summary Report shall include every insurer within the insurance group. [5]
If an insurer does not qualify for an exemption in the first subsection above, but the insurance group in which the insurer is a member qualifies for the exemption in subsection 2 above, the only ORSA Summary Report that may be required is the report applicable to that insurer. [6]
An insurer that does not qualify for a statutory exemption may also apply to the Director for a waiver from the requirements of the law based upon unique circumstances. In deciding whether to grant the insurer’s request for waiver, the Director may consider the type and volume of the business written, ownership and organizational structure and any other factor the Director considers relevant to the insurer or insurance group. [7] If the insurer is part of an insurance group with insurers domiciled in more than one state, the Director shall coordinate with other state regulators in considering whether to grant a request for waiver.
The Confidentiality Protections
The Arizona law also contains sweeping confidentiality protections for ORSA information submitted to the Director. Specifically, documents, materials or other information, including ORSA Summary Reports, created by or disclosed to the Director or any other person under the statutory article, are recognized as proprietary and containing trade secrets. As such, they are not considered public records under Arizona law. They are likewise not subject to subpoena and are not subject to discovery or admissible in evidence in any private civil action. However, the Director may use the documents, materials or other information in regulatory actions brought as part of his or her official duties. [8] The law also protects the Director, examiners and others operating under the Director’s authority from testifying in any private civil action related to the documents, materials or information. [9]
Notwithstanding the broad protections against disclosure in civil or public settings, the Arizona ORSA statutes do allow the Director to share ORSA-related information with other state, federal and international regulatory agencies, the supervisory college and the NAIC. [10] The Director may also receive ORSA-related documents, materials or information from other state, federal and international regulators, the supervisory college and the NAIC. [11]
The Director may share ORSA-related information with consultants and the NAIC under strict procedures and protocols designed to maintain the confidentiality of such documents and information. [12] Those procedures and protocols:
1. Specify that ownership of information shared with the NAIC and third party consultants remains with the Director and any use is subject to the Direction of the Director.
2. Prohibit the NAIC or a third party consultant from storing information shared pursuant to the ORSA statutes in a permanent database once the underlying analysis is complete.
3. Require prompt notice be given to the insurer whose confidential information is in possession of the NAIC or a third party consultant when such information is subject to an information request or subpoena.
4. Require the NAIC or a third party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or such third party consultant may be required to disclose confidential information about the insurer.
5. In the case of an agreement involving a third party consultant—require the insurer’s written consent.[13]
The Arizona ORSA statutes also make it clear that sharing of information by the Director does not constitute a delegation of his or her authority and it likewise does not constitute a waiver of any applicable privilege or claim of confidentiality. [14]
The Penalties
An insurer that fails, without just cause, to file the ORSA Summary Report required by Arizona law may, after notice and a hearing, be required to pay a penalty of five hundred dollars ($500) per day, not to exceed one hundred thousand dollars ($100,000.00). The Director may reduce the penalty upon demonstration that the fine would constitute a hardship and any fines/penalties must be deposited in the Arizona State General Fund. [15]
The Financial Affairs Division of the Arizona Department of Insurance has informally indicated that they expect these filings to be extremely detailed and complex. Thus, it is incumbent upon insurers not subject to the above-referenced statutory exemptions to begin constructing the framework and reporting mechanisms necessary to timely comply with the new Arizona law.