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The applicant must demonstrate favorable liquidity, adequate reinsurance from companies authorized in this state, sound management, at least three years of favorable operating results, and stable revenue, earnings and surplus trends. per Colorado Regulation 2-1-7 Concerning Issuance of a Certificate of Authority. The relevant section is below.
A. Any foreign company seeking a Certificate of Authority in Colorado as an insurer, fraternal benefit society, or interinsurance exchange shall submit a UCAA expansion application.
B. An applicant’s capital and surplus must meet or exceed the minimum required by Colorado statute. Section 10-3-201, C.R.S. establishes the minimum amount of capital and surplus for each company type. The Division will review both the applicant’s company type as determined by its state of domicile and the lines of business that it currently writes. The Division will determine the minimum required under each of these scenarios and apply the greater of the two amounts. For example, an insurer licensed as a multiple line carrier by its state of domicile, which currently only writes casualty lines of business as defined by a Colorado certificate of authority, would be considered a multiple line carrier in Colorado. As such the company would need to meet the capital and surplus requirement for a multiple line company.
C. If the company's operation is predominately that of a reinsurer the surplus requirements of a reinsurer pursuant to § 10-3-118, C.R.S. must be met. The $20 million surplus requirement shall not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.
D. The applicant must demonstrate the ability to maintain the minimum level of capital and surplus at the time of initial licensure and on an on-going basis. This includes the ability to fund for product development and for other causes of surplus strain resulting from increasing business writings or new business ventures. An amount in excess of the statutory minimum capital and surplus is necessary at the time of licensure to ensure that the company has a sufficient cushion to absorb any surplus strain. Generally, the applicant should have three (3) times the authorized control level based on the most recent annual risk based capital calculation.
E. The applicant must have a sound business plan, sufficient capital to support the plan, and adequate access to additional capital. In addition, the applicant must also demonstrate favorable liquidity, adequate reinsurance from companies authorized in this state, sound management, at least three years of favorable operating results, and stable revenue, earnings and surplus trends. The commissioner may waive the three years of favorable operating results requirement if the applicant:
a. Information and documentation as may be necessary to demonstrate to the Commissioner that there is no reasonable or adequate market among authorized insurers for the type of coverage involved in the request
b. Documentation that the applicant possesses the financial capability to adequately fund the loss and underwriting costs associated with the type of coverage involved
c. A certification from the applicant acknowledging that if the requested waiver is approved, the applicant’s authority to transact business shall be limited to the line, or lines of business and type, or types, of coverage involved in the request
F. The commissioner may require an actuarial opinion and a surplus sufficiency report prior to licensure or at any time after licensure when the commissioner believes that there is a need to review the adequacy of the available surplus with respect to the types of assets and writings of the company. A company seeking licensure must be authorized by its domiciliary state to write the lines of insurance being requested and demonstrate that it possesses the expertise necessary to write and service such insurance. An applicant who is increasing its market to include new products is also required to demonstrate the necessary expertise. The commissioner may waive this requirement if the company is affiliated with a company licensed in Colorado that writes the same type of insurance being requested. An applicant may be required to provide a guaranty on a form prescribed by the commissioner, to maintain surplus either at the amount required by statute or three (3) times the authorized control level based on the most recent annual risk based capital calculation, whichever is greater.
H. The commissioner may require any applicant, or affiliated company of the applicant to remedy any hazardous financial condition as outlined in Regulation 3-1-7 prior to licensure.
I. Substantial errors, fraudulent statements contained in an application or incomplete applications constitute sufficient grounds for denial of the application.
J. The most recent financial examination of the applicant must have a date of account no later than five years from the date of the application for licensure.