A.R.S. tit. 20 ch. 2 — Arizona Revised Statutes Title 20 Chapter 2 — Transaction Of Insurance Business

20-201. "Alien" insurer defined An "alien" insurer is one formed under the laws of a country other than the United States. 20-202. "Charter" defined "Charter" means articles of incorporation, of agreement or of association, or other basic constituent document of a corporation, or subscribers' agreement and power of attorney of a reciprocal insurer. 20-202.01. Stock insurer's initial free surplus defined Initial free surplus of a stock insurer is the minimum amount of investment required for the lines authorized over and above the minimum required capital stock. 20-202.02. Mutual insurer's minimum required basic surplus defined A mutual insurer's minimum required basic surplus is defined as the minimum requirement deposited with the state treasurer through the director's office to qualify for the lines of insurance authorized to be written. 20-202.03. Mutual insurer's initial free surplus defined A mutual insurer's initial free surplus is defined as the minimum additional assets required of a mutual insurer over and above the minimum required basic surplus for the lines of insurance authorized to be written. 20-202.04. Reciprocal insurer's required basic surplus defined A reciprocal insurer's required basic surplus is defined as the minimum requirement deposited with the state treasurer through the director's office to qualify for the lines of insurance authorized to be written. 20-202.05. Reciprocal insurer's initial free surplus defined A reciprocal insurer's initial free surplus is defined as the minimum additional assets required of a reciprocal insurer over and above the minimum required basic surplus for the lines of insurance authorized to be written. 20-203. "Domestic" insurer defined A "domestic" insurer is one formed under the laws of this state. 20-204. "Foreign" insurer defined A "foreign" insurer is one formed under the laws of another state of the United States. 20-205. "State," "United States" defined "State" means any state, commonwealth or territory of the United States, including the District of Columbia, and "United States" includes the states, territories, districts and commonwealths thereof. 20-206. Authority to transact insurance A. No person shall act as an insurer and no insurer shall transact insurance in this state except as authorized by a subsisting authority granted to it by the director, except as to such transactions as are expressly otherwise provided for in this title. No such authority shall be required for an insurer, formerly so authorized, to enable it to investigate and settle losses under its policies lawfully written in this state, or to liquidate such assets and liabilities of the insurer, other than collection of new premiums, as has resulted from its former authorized operations in this state. B. An insurer not transacting new insurance business in this state but continuing collection of premiums on and servicing of policies remaining in force as to residents of or risks located in this state, is transacting insurance in this state for the purpose of premium tax requirements only and is not required to have a certificate of authority therefor. This subsection shall not apply to insurers which have withdrawn from this state prior to January 1, 1955. C. As to an insurance coverage on a subject of insurance not resident, located, or expressly to be performed in this state at time of issuance, and solicited, written and delivered outside the state, no such authority shall be required of an insurer as to subsequent transactions in this state on account thereof. 20-207. General qualifications to transact insurance To qualify for and hold authority to transact insurance in this state an insurer shall be otherwise in compliance with the provisions of this title and with its charter powers, and shall be an incorporated stock insurer, an incorporated mutual insurer, a reciprocal insurer, or a Lloyd's association of the same general type as may be formed as a domestic insurer under this title. No foreign or alien insurer shall be authorized to transact insurance in this state which does not maintain reserves as required by article 1 of chapter 3 of this title applicable to the kind or kinds of insurance transacted by such insurer. 20-208. Definition of guaranteed investment contract In this title, unless the context otherwise requires, "guaranteed investment contract" means any unallocated group contract, investment contract, funding agreement, guaranteed interest contract or other similar instrument by whatever name in which an insurance company agrees to guarantee a fixed or variable rate of interest or a future payment that is based on an index or any other similar criteria, that is payable at a predetermined date on monies that are deposited with the insurance company and that is not dependent on the continuance of human life. 20-209. Kinds of insurance an insurer may transact A. An insurer which otherwise qualifies therefor may be authorized to transact any one kind or combination of kinds of insurance as defined in article 2 of this chapter, except that: 1. A life insurer shall not be authorized to transact any other kind of insurance except disability, but if immediately prior to January 1, 1955 any life insurer lawfully held a subsisting certificate of authority granting it the right to transact in this state additional kinds of insurance other than disability, as long as the insurer is otherwise in compliance with this title the director may continue to authorize such insurer to transact the same kinds of insurance as those specified in such prior certificate of authority. 2. A reciprocal insurer shall not transact life insurance. 3. A title insurer shall not transact any other kind of insurance. B. A life insurer authorized to transact life insurance in this state may issue guaranteed investment contracts. An insurer authorized to issue guaranteed investment contracts may offer an annuity option as a feature of a guaranteed investment contract. 20-210. Minimum required capital stock or basic surplus A. Except as provided in subsection B, to qualify for authority to transact any one kind of insurance or combinations of kinds of insurance as shown below, an insurer shall possess and thereafter maintain unimpaired minimum required capital stock, if a stock insurer, or unimpaired minimum required basic surplus, if a mutual or a reciprocal insurer, and free surplus not less than fifty per cent of the initial free surplus, and when first so authorized shall possess initial free surplus, all in amounts not less than as determined from the following table: Stock Insurers Mutual Insurers Reciprocal Insurers Minimum Minimum Minimum Kind or Required Initial Required Initial Required Initial Kinds of Capital Free Basic Free Basic Free Insurance Stock Surplus Surplus Surplus Surplus Surplus Casualty $600,000 $300,000 $600,000 $300,000 $600,000 $300,000 Disability 300,000 150,000 300,000 150,000 300,000 150,000 Life 300,000 150,000 300,000 150,000 Not Applicable Disability and life 400,000 200,000 400,000 200,000 Not Applicable Marine and Transporta- 600,000 300,000 600,000 300,000 600,000 300,000 tion Property 600,000 300,000 600,000 300,000 600,000 300,000 Surety 1,000,000 500,000 1,000,000 500,000 1,000,000 500,000 Multiple Line 1,000,000 500,000 1,000,000 500,000 1,000,000 500,000 Vehicle 600,000 300,000 600,000 300,000 600,000 300,000 Title 500,000 250,000 Not Applicable Not Applicable B. A domestic insurer, including a domestic limited stock insurer subject to the capital and surplus requirements prescribed in subsection D of this section, holding a valid certificate of authority to transact insurance in this state of the kind or kinds as set forth in subsection A prior to the effective date of this section, may, if otherwise qualified, continue to be so authorized while possessing the amount of paid-in capital stock, if a stock insurer, or surplus, if a mutual insurer, required by the laws of this state for such authority immediately prior to the effective date of this section. The director shall not grant such an insurer authority to transact any other or additional kinds of insurance unless such insurer fully complies with the requirements as to capital and surplus, as applied to all kinds of insurance which the insurer proposes to transact, as provided by this section for like insurers applying for original certificates of authority under this title. Upon a change in the control of such an insurer, such insurer shall within one year from the effective date of such change in control meet the capital and surplus requirements for new insurers pursuant to subsection A of this section. For the purposes of this subsection "control" shall have the same meaning and be determined in the same manner as prescribed in section 20-481. C. Capital and surplus requirements are based upon all kinds of insurance transacted by the insurer in all areas in which the insurer operates or proposes to operate whether or not only a portion of such kinds are to be transacted in this state. D. Notwithstanding the limitation in the first sentence of subsection B of this section on increased capitalization for authorized insurers, any domestic limited stock insurer which on January 31, 1969 was the holder of a valid certificate of authority shall not be required to meet the capital and initial free surplus requirement of this section, but after January 31, 1980, any such domestic limited stock insurer shall possess and thereafter maintain: 1. Minimum paid-in capital stock of one hundred thousand dollars, and 2. Surplus funds in an amount of not less than one-half such minimum paid-in capital. On and after the effective date of this section any domestic limited stock insurer which holds a valid certificate of authority immediately prior to such effective date and which qualified under the provisions of subsection B of section 20-708 and whose premium income as a direct writer during calendar year 1976 did not exceed fifty per cent of its total premium income including reinsurance premiums from insurance policies and contracts for such year, shall be a domestic life and disability reinsurer and be subject to the provisions of article 10, of chapter 4 of this title. 20-211. Surplus required A. In addition to the minimum required capital stock, if a stock insurer, or minimum required basic surplus, if mutual or reciprocal insurers, as required by sections 20-210 and 20-212 as to all stock insurers and foreign and alien mutual and reciprocal insurers, by sections 20-768 and 20-212 as to domestic reciprocal insurers, and section 20-711, subsection B and section 20-212 as to domestic mutual insurers, except as stated in subsection C of this section, any foreign or alien insurer, any title insurer, and any domestic insurer shall possess at the time of original authorization in this state initial free surplus as stated in section 20-210, and shall maintain free surplus funds in an amount of not less than one-half such initial free surplus. No other insurer shall be so initially authorized in this state unless it then possesses surplus of not less than initial free surplus as stated in section 20-210, in addition to the minimum required capital stock, if a stock insurer, or minimum required basic surplus, if mutual or reciprocal insurers, otherwise required. B. In addition to the minimum required capital stock if the insurer is a stock insurer or in addition to the minimum required basic surplus if the insurer is a mutual or reciprocal insurer under this article and chapter 4, article 1 of this title, a domestic, foreign or alien insurer shall possess and maintain any additional free surplus that the director may require based on the type, volume or nature of its business as a necessary condition to avoid rendering its transaction of insurance hazardous to its policyholders or the people of this state. The director may adopt rules to implement this subsection. C. Subsection A of this section does not apply to a domestic mutual insurer that qualifies on the basis of applications for insurance as provided in section 20-711, or to reinsurers that qualify pursuant to chapter 4, article 10 of this title and that do not within such five year period transact any kind of insurance in addition to that for which initially authorized. 20-212. Funds required to transact additional kinds of insurance An insurer otherwise qualified may be authorized to transact combinations of kinds of insurance, other than the life and disability combination shown in section 20-210, while possessing and maintaining thereafter additional minimum required capital stock, if a stock insurer, or additional minimum required basic surplus, if a mutual or reciprocal insurer, not less in amount than that determined as follows: For any lawful combination add two hundred thousand dollars for each additional kind of insurance included in the combination to the amount required under section 20-210 for that one kind of insurance in the combination for which the largest amount is required under said section 20- 210, except: 1. Vehicle and disability insurances may be combined with casualty, and in any combination including casualty, without funds in addition to those required because of casualty. 2. With such additional minimum required capital stock or such additional minimum required basic surplus in an amount of not less than five hundred thousand dollars, an insurer, if otherwise qualified, may be authorized to transact all kinds of insurance except life and title insurance. Any domestic stock insurer which on January 1, 1954, was lawfully authorized to transact vehicle insurance, for physical damage only, or casualty insurance, and while possessing paid-in capital of not less than two hundred fifty thousand dollars, may be so authorized to transact all kinds of insurance other than life and title insurances. 3. The amount of such capital or surplus shall not in any event be less than would be required if the insurer proposed to transact in this state all those kinds of insurance which it is transacting elsewhere. 20-213. Deposit requirements The director shall not issue a certificate of authority to any insurer unless it has deposited in trust with the state treasurer through the director's office cash or securities eligible for the investment of capital funds of domestic insurers under this title in an amount not less than the minimum required capital stock, if a stock insurer, or minimum required basic surplus, if a mutual or reciprocal insurer, required pursuant to this article to be maintained for authority to transact the kinds of insurance to be transacted, except: 1. As to life and disability carriers there shall be maintained with the state treasurer or a trustee approved by the director, a deposit in cash, surety bond or securities as described in sections 20-537 through 20-548 and sections 20-551 through 20-556, in an amount equal to the greatest of: (a) Minimum required capital stock or minimum required basic surplus pursuant to section 20-210. (b) Two-thirds of the aggregate reserves as computed under section 20-510. (c) Twenty-five per cent of the earned premium of the prior year. 2. As to title insurers, the deposit shall be in such amount as is required by article 9 of chapter 6 of this title. 3. As to foreign insurers, in lieu of such deposit or part thereof in this state, the director shall accept the current certificate in proper form of the public official having supervision over insurers in any other state to the effect that a like deposit or part thereof by such insurer is being maintained in public custody in such state in trust for the purpose, among other reasonable purposes of protection of policyholders in this state. 4. As to alien insurers, in lieu of such deposit or part thereof in this state, the director shall accept evidence satisfactory to him that the insurer maintains within the United States by way of deposits with public depositaries, or in trust institutions within the United States approved by the director, assets available for discharge of its United States insurance obligations which assets shall be in amount not less than the outstanding liabilities of the insurer arising out of its insurance transactions in the United States, together with, in the case of title insurers, the sum required by article 9 of chapter 6 of this title, and, in the case of all other insurers, together with the larger of the following sums: (a) The largest deposit required by this title to be made in this state by any type of domestic insurer transacting like kinds of insurance, or (b) Three hundred thousand dollars. 5. No deposit requirement for any insurer provided by this section shall exceed five hundred thousand dollars. 20-214. Financial requirements; escalator provisions If with respect to an insurer lawfully authorized to transact insurance in this state immediately prior to the effective date of this section, this title requires a greater amount of capital, surplus or deposit than required of such insurer immediately prior to such effective date, such insurer shall have a period of one year from and after such effective date within which to comply with any such increased requirement. No such increase shall be required of any domestic stock insurer which as of such effective date, was lawfully authorized to transact in this state only automobile physical damage insurance, and for so long as such insurer does not transact any additional insurance. 20-215. Application for certificate of authority To apply for an original certificate of authority an insurer shall file with the director its application for a certificate of authority showing its name, location of its home office or principal office in the United States, if an alien insurer, kinds of insurance to be transacted, date of organization or incorporation, form of organization, state or country of domicile and such additional information as the director may reasonably require, together with the following applicable documents: 1. If a foreign or alien insurer, a copy of its corporate charter with all amendments to the charter certified by the public officer with whom the originals are on file in the state or country of domicile. 2. A copy of its bylaws, as amended, certified by its secretary or other officer having custody of the bylaws. 3. A copy of its annual statement as of December 31 last preceding. 4. A copy of the report of the last examination, if any, made of the insurer, certified by the insurance supervisory official of its state of domicile or of entry into the United States. 5. Appointment of the director as its attorney to receive service of legal process if, as to a foreign or alien insurer, such an appointment is not already on file. 6. Appointment of a statutory agent to receive service of legal process, accompanied by his name and address, as to a domestic insurer. 7. If a foreign or alien insurer, a certificate of the public official having supervision of insurance in its state or country of domicile showing that it is authorized to transact the kinds of insurance proposed to be transacted in this state. 8. If an alien insurer, a copy of the appointment and authority of its United States manager, certified by its officer having custody of its records. 9. If a foreign or alien insurer, a certificate as to deposit if to be tendered pursuant to section 20-213. 20-216. Issuance or refusal of certificate A. If on the completion of an application the director finds that the insurer has met the requirements for and is entitled under this title, the director shall issue to the insurer a proper certificate of authority. If the director does not so find, the director shall issue an order refusing such certificate. The director shall act on an application for a certificate of authority within ninety days after its completion. B. The certificate, if issued, shall specify the kind or kinds of insurance the insurer is authorized to transact in this state. At the insurer's request, the director may issue a certificate of authority limited to particular types of insurance included within a kind of insurance as defined in this title. 20-217. Certificate of authority; term; termination; delivery upon termination or revocation A. The certificate of authority issued by the director to an insurer is evidence of its authority to transact in this state the kind of insurance specified in the certificate. B. A certificate of authority remains in effect until terminated at the request of the insurer or suspended or revoked by the director. C. A certificate of authority remains the property of this state. Upon termination at the request of the insurer or revocation by the director, the insurer shall immediately deliver the certificate of authority to the director. D. The director shall not grant the request of an insurer to terminate its certificate of authority if the insurer has any outstanding obligations under a policy of insurance to policyholders or claimants who are residents of this state. This subsection does not apply if the insurer has deposited with the state treasurer securities acceptable to the director in an amount equal to its liabilities, as computed by the director, including its reserves as required by this title in respect to its business in this state for the sole benefit of its policyholders and creditors who are residents of this state. The state treasurer shall hold and administer the deposits pursuant to chapter 3, article 3 of this title. This subsection does not apply if the insurer has fully reinsured such outstanding obligations with a reinsurer under an agreement filed with and approved in writing by the director pursuant to section 20-261. This subsection does not apply when the termination of the insurer's certificate of authority is the result of a merger or consolidation if the emerging or surviving insurer is or becomes authorized to transact business in this state and assumes such outstanding obligations of the terminating insurer. E. The certificate of authority shall be suspended or revoked if the insurer fails to pay the annual certificate of authority fee denominated a renewal fee in section 20-167 at the time provided in section 20-223. 20-218. Name of insurer A. No insurer shall be authorized to transact insurance in this state which has or uses a name so similar to that of any insurer already so authorized as to cause uncertainty or confusion. In case of conflict of names between two insurers the director may permit or require the newly authorized insurer to use in this state such supplementation or modification of its name as may reasonably be necessary to avoid such conflict. B. No insurer shall be authorized to transact insurance in this state which has or uses a name which tends to deceive or mislead as to the type of organization of the insurer. 20-218.01. Appointment of a statutory agent A. Each domestic insurer shall have and continuously maintain in this state: 1. A known place of business which may be the office of its statutory agent. 2. A statutory agent, which agent may be the director, an individual, who has been a resident of this state for three years, a domestic corporation or a foreign corporation authorized to transact business in this state. B. Failure to appoint a statutory agent by a domestic insurer may result in the revocation or suspension of such insurer's certificate of authority. C. The appointment required herein shall be filed with the director. 20-218.02. Change of known place of business or statutory agent A. A domestic insurer may change its known place of business in this state or its statutory agent in this state, or both, upon filing with the director a statement setting forth: 1. The name of the insurer. 2. The address of its then known place of business. 3. If the address of its known place of business is to be changed, the address to which it is to be changed. 4. The name and address of its then statutory agent. 5. If its statutory agent or his address is to be changed, the name and address of its successor statutory agent, or the new address. 6. That such change was duly authorized by the insurer. B. If a domestic insurer's statutory agent is changed or resigns, a new statutory agent shall be appointed by the insurer. The termination of an existing statutory agent shall not take effect until the insurer has appointed a new valid statutory agent. 20-219. Mandatory revocation or suspension The director shall refuse to renew or shall revoke or suspend an insurer's certificate of authority: 1. If such action is required by any provision of this title, or 2. If the insurer no longer meets the requirements for the authority originally granted, on account of deficiency in assets or otherwise. 20-220. Certificate of authority; refusal to renew; revocation or suspension; civil penalty A. The director may after a hearing refuse to renew or may revoke or suspend an insurer's certificate of authority, in addition to other grounds therefor in this title, if the insurer: 1. Violates any provision of this title other than a provision as to which refusal, suspension or revocation is mandatory. 2. Knowingly fails to comply with any lawful rule or order of the director. 3. Is found by the director to be in unsound condition or in such condition as to render its further transaction of insurance in this state hazardous to its policyholders or to the people of this state. 4. Usually compels claimants under its policies to accept less than the amount due them or to bring suit against it to secure full payment thereof. 5. Refuses to be examined or to produce its accounts, records and files for examination by the director when required. 6. Fails to pay any final judgment rendered against it in this state within thirty days after the judgment becomes final. 7. Is affiliated with and under the same general management or interlocking directorate or ownership as another insurer which transacts direct insurance in this state without having a certificate of authority therefor, except as permitted to a surplus lines insurer under article 5 of this chapter. B. If after a hearing the director finds grounds pursuant to subsection A to suspend or revoke an insurer's certificate of authority, the director may impose, in lieu of or in addition to such suspension or revocation, the following civil penalties: 1. A penalty not to exceed one thousand dollars for each violation and not to exceed an aggregate of ten thousand dollars within any six-month period with respect to unintentional violations. 2. A penalty not to exceed five thousand dollars for each violation and not to exceed an aggregate of fifty thousand dollars within any six-month period with respect to intentional violations. The insurer shall pay the civil penalty to the director who shall deposit it, pursuant to sections 35-146 and 35-147, in the state general fund. The civil penalty is in addition to any other penalty imposed by law. C. The director may adopt rules to provide the criteria to be used for identifying insurers who are found to be in a condition that would render the continuance of their business hazardous to their policyholders or the people of this state. 20-220.01. Hazardous financial condition; determination; order A. The director may consider the following standards, either singly or a combination of two or more, in determining whether the continued operation of any insurer transacting an insurance business in this state may be deemed to be hazardous to its policyholders or creditors or the general public: 1. Adverse findings reported in financial condition and market conduct examination reports, audit reports and actuarial opinions, reports or summaries. 2. The national association of insurance commissioners insurance regulatory information system and its other financial analysis solvency tools and reports. 3. Whether the insurer has made adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the insurer, when considered in light of the assets held by the insurer with respect to the reserves and related actuarial items, including investment earnings on the assets, and the considerations anticipated to be received and retained under the policies and contracts. 4. The ability of an assuming reinsurer to perform and whether the insurer's reinsurance program provides sufficient protection for the insurer's remaining surplus after taking into account the insurer's cash flow and the classes of business written as well as the financial condition of the assuming reinsurer. 5. Whether the insurer's operating loss in the last twelve-month period or any shorter period of time, including net capital gain or loss, change in nonadmitted assets and cash dividends paid to shareholders, is greater than fifty per cent of the insurer's remaining surplus as regards policyholders in excess of the minimum required. 6. Whether the insurer's operating loss in the last twelve-month period or any shorter period of time, excluding net capital gains, is greater than twenty per cent of the insurer's remaining surplus as regards policyholders in excess of the minimum required. 7. Whether a reinsurer, an obligor or any entity within the insurer's insurance holding company system is insolvent, threatened with insolvency or delinquent in payment of its monetary or other obligations and that, in the director's opinion, may affect the insurer's solvency. 8. Contingent liabilities, pledges or guaranties that either individually or collectively involve a total amount that, in the director's opinion, may affect the insurer's solvency. 9. Whether any affiliate or controlling person of an insurer is delinquent in the transmitting to or payment of net premiums to the insurer. 10. The age and collectability of receivables. 11. Whether the management of an insurer, including officers, directors or other persons who directly or indirectly control the operation of the insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in the position. 12. Whether the management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry. 13. Whether the insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the director. 14. Whether the management of an insurer either has filed any false or misleading sworn financial statement, has released false or misleading financial statements to lending institutions or to the general public, has made a false or misleading entry or has omitted an entry of material amount in the insurer's books. 15. Whether the insurer has grown so rapidly and to an extent that the insurer lacks adequate financial and administrative capacity to meet its obligations in a timely manner. 16. Whether the insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems. 17. Whether the management of an insurer has established reserves that do not comply with minimum standards established by state insurance laws, rules, statutory accounting standards, sound actuarial principles and standards of practice. 18. Whether the management of an insurer persistently engages in material under reserving that results in adverse development. 19. Whether transactions among affiliates, subsidiaries or controlling persons for which the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity or diversity to assure the insurer's ability to meet its outstanding obligations as they mature. 20. Any other finding determined by the director to be hazardous to the insurer's policyholders or creditors or the general public. B. For the purposes of making a determination of an insurer's financial condition under this section, the director may: 1. Disregard any credit or amount receivable resulting from transactions with a reinsurer that is insolvent, impaired or otherwise subject to a delinquency proceeding. 2. Make appropriate adjustments including disallowance to asset values attributable to investments in or transactions with parents, subsidiaries or affiliates consistent with the accounting practices and procedures manual adopted by the national association of insurance commissioners, state laws and rules. 3. Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor. 4. Increase the insurer's liability in an amount equal to any contingent liability, pledge or guarantee not otherwise included if there is a substantial risk that the insurer will be called on to meet the obligation undertaken within the next twelve-month period. C. If the director determines that the continued operation of the insurer licensed to transact business in this state may be hazardous to its policyholders or creditors or the general public, in addition to any other action authorized by this title, the director may issue an order requiring the insurer to: 1. Reduce the total amount of present and potential liability for policy benefits by reinsurance. 2. Reduce, suspend or limit the volume of business being accepted or renewed. 3. Reduce general insurance and commission expenses by specified methods. 4. Increase the insurer's capital and surplus. 5. Suspend or limit the declaration and payment of dividends by an insurer to its stockholders or its policyholders. 6. File reports in a form acceptable to the director concerning the market value of an insurer's assets. 7. Limit or withdraw from certain investments or discontinue certain investment practices to the extent the director deems necessary. 8. Document the adequacy or premium rates in relation to the risks insured. 9. In addition to regular annual statements, file interim financial reports on the form adopted by the national association of insurance commissioners or in a format prescribed by the director. 10. Correct corporate governance practice deficiencies and adopt and use governance practices acceptable to the director. 11. Provide a business plan to the director in order to continue to transact business in this state. 12. Notwithstanding any other law limiting the frequency or amount of premium rate adjustments, adjust rates for any nonlife insurance product written by the insurer that the director considers necessary to improve the financial condition of the insurer. D. A hearing demanded by an insurer aggrieved by an order of the director as prescribed by rule shall be closed to the public but the hearing shall be open to the public if requested according to section 20-164, subsection A. E. This section does not limit or supersede any provision of this title or any other provision of law pertaining to the powers of the director or the regulation of the financial condition of insurers transacting insurance in this state. 20-221. Director as agent for service of process A. Each authorized foreign or alien insurer shall appoint the director as its attorney to receive service of legal process issued against it in this state. The appointment shall be irrevocable, shall bind any successor in interest or to the assets or liabilities of the insurer and shall remain in effect as long as there is in force in this state any contract made by the insurer or obligations arising therefrom. B. Service of process against a foreign or alien insurer shall be made only by service of process upon the director. Service of process against a domestic insurer shall be made upon the insurer corporation in the manner provided by laws applying to corporations generally, or upon the insurer's attorney-in-fact if a reciprocal insurer. C. Each foreign or alien insurer at the time of application for a certificate of authority shall file with the director the name and address of a designated person to whom process against it served upon the director is to be forwarded. The insurer may change such designation by a new filing. D. Any authorized domestic insurer who does not have or maintain a statutory agent shall appoint the director as its attorney to receive service of legal process issued against it in this state. 20-222. Service of process; time to answer A. Duplicate copies of legal process against an insurer for whom the director is attorney shall be served upon him. At the time of service the plaintiff shall pay to the director five dollars, taxable as costs in the action. Upon receiving such service the director shall promptly forward a copy thereof by registered mail to the person last so designated by the insurer to receive process. B. Where process is served upon the director as an insurer's attorney, no further proceedings shall be had against the insurer, and the insurer shall not be required to appear, answer or plead until expiration of forty days after date of such service upon the director. C. Process served upon the director and copy thereof forwarded as in this section provided shall constitute service thereof upon the insurer. 20-223. Annual statement; payment of fees; penalty for failure to file or pay A. Each authorized domestic insurer shall annually on or before March 31 and each other authorized insurer shall annually on or before March 1 file with the director, or a repository designated by the director, a true statement of its financial condition, transactions and affairs as of the December 31 preceding. The statement shall be completed pursuant to the instructions and accounting practices and procedures that are approved by the national association of insurance commissioners. The statement shall be in such general form and context as approved by the national association of insurance commissioners for the kinds of insurance to be reported upon, and as supplemented for additional information required by the director. Coincident with the filing of its annual statement, each such insurer shall pay such fees prescribed by section 20-167 for filing the annual statement and renewal of its certificate of authority. B. The statement of an alien insurer shall relate only to its transactions and affairs in the United States unless the director requires otherwise. The statement shall be verified by the insurer's United States manager or other officer duly authorized. C. The director may refuse to renew, or may suspend or revoke, the certificate of authority of any insurer failing to file its annual statement or pay its fees when due or within any extension of time therefor which the director, for good cause, may have granted. D. Any insurer failing to file an annual statement or to pay its fees pursuant to this section is subject to payment of a penalty fee not to exceed twenty-five dollars for each day of delinquency. 20-223.01. Annual report of product liability insurer At the time of filing the annual report each insurer providing product liability insurance or excess insurance above self-insured retention for product liability, either as a separate policy or as part of a package, to one or more manufacturers or sellers in this state shall file with the director a report of the product liability claims made against its insureds, located in this state, which have been closed during the preceding calendar year. This section shall not require the reporting of any information regarding claims closed prior to June 30, 1978. Each report shall be in such form and provide such information as may be required by the director under appropriate rules and regulations promulgated by the director. 20-224. Premium tax; reports A. On or before March 1 of each year, each authorized domestic insurer, each other insurer and each formerly authorized insurer referred to in section 20-206, subsection B shall file with the director a report in a form prescribed by the director showing total direct premium income including policy membership and other fees and all other considerations for insurance from all classes of business whether designated as a premium or otherwise received by it during the preceding calendar year on account of policies and contracts covering property, subjects or risks located, resident or to be performed in this state, after deducting from such total direct premium income applicable cancellations, returned premiums, the amount of reduction in or refund of premiums allowed to industrial life policyholders for payment of premiums direct to an office of the insurer and all policy dividends, refunds, savings coupons and other similar returns paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. No deduction shall be made of the cash surrender values of policies or contracts. Considerations received on annuity contracts, as well as the unabsorbed portion of any premium deposit, shall not be included in total direct premium income, and neither shall be subject to tax. The report shall separately indicate the total direct fire insurance premium income received from property located in the incorporated cities and towns certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company. B. Coincident with the filing of the tax report, each insurer shall pay to the director for deposit, pursuant to sections 35-146 and 35-147, a tax on such net premiums at the following rates: 1. For fire insurance: (a) On property located in a city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company, .66 percent. (b) On all other property, 2.2 percent. 2. For disability insurance, 2.0 percent. 3. For health care service plans, the rates prescribed under sections 20-837, 20-1010 and 20-1060. 4. For other insurance: (a) For premiums received in calendar year 2016, 1.95 percent. (b) For premiums received in calendar year 2017, 1.90 percent. (c) For premiums received in calendar year 2018, 1.85 percent. (d) For premiums received in calendar year 2019, 1.80 percent. (e) For premiums received in calendar year 2020, 1.75 percent. (f) For premiums received in calendar year 2021 and for each subsequent calendar year, 1.70 percent. C. Any payments of tax pursuant to subsection F of this section shall be deducted from the tax payable pursuant to subsection B of this section. Each insurer shall reflect the cost savings attributable to the lower tax in fire insurance premiums charged on property located in an incorporated city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company. No insurer shall be liable to the state or to any other person, or shall be subject to regulatory action, relating to the calculation or submittal of fire insurance premium taxes based in good faith on the office of the state fire marshal's certification. D. Eighty-five percent of the tax paid under this section by an insurer on account of premiums received for fire insurance shall be separately specified in the report and shall be apportioned in the manner provided by sections 9-951, 9-952 and 9-972, except that all of the tax so allocated to a fund of a municipality or fire district that has no volunteer firefighters or pension obligations to volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system and all of the tax so allocated to a fund of a municipality or fire district that has both full-time paid firefighters and volunteer firefighters or pension obligations to full-time paid firefighters or volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system where it shall be reallocated by actuarial procedures proportionately to the municipality or fire district for the account of the full-time paid firefighters and to the municipality or fire district for the account of the volunteer firefighters. A municipality or fire district shall provide to the public safety personnel retirement system all information that the system deems necessary to perform the reallocation prescribed by this section. A full accounting of the reallocation shall be forwarded to the municipality or fire district and its local boards. E. This section does not apply to title insurance. Title insurers shall be taxed as provided in section 20-1566. F. Any insurer that paid or is required to pay a tax of $50,000 or more on net premiums received during the preceding calendar year, pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07, shall file on or before the fifteenth day of each month from March through August a report for that month, on a form prescribed by the director, accompanied by a payment in an amount equal to fifteen percent of the amount paid or required to be paid during the preceding calendar year pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07. The payments are due and payable on or before the fifteenth day of each month and shall be made to the director for deposit, pursuant to sections 35-146 and 35-147. G. Except for the tax paid on fire insurance premiums pursuant to subsections B and D of this section, an insurer may claim a premium tax credit if the insurer qualifies for a credit pursuant to section 20-224.06 or 20-224.07. H. On receipt of a properly documented claim, a refund shall be provided to an insurer from available funds for the excess amount of any fire insurance premium improperly paid by the insurer. The insurer shall reflect the refund in the fire insurance premiums charged on the property that was charged the excessive amount. I. On or before September 30 of each year, the director of the department of insurance and financial institutions shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the amount of insurance premium tax credits established by sections 20-224.05, 20-224.06 and 20-224.07 that were used during the previous fiscal year. J. For the purposes of: 1. Subsection B of this section, fire insurance is one hundred percent of fire lines, forty percent of commercial multiple peril nonliability lines, thirty-five percent of homeowners' multiple peril lines, twenty-five percent of farm owners' multiple peril lines and twenty percent of allied lines. 2. Section 20-416, fire insurance is eighty-five percent of fire and allied lines. K. From and after December 31, 2017, the director may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department's official website a list of one or more acceptable third-party services through which an insurer must submit reports and payments. 20-224.01. Additional premium tax; civil penalty A. Coincident with filing the tax report as required in section 20-224, each insurer shall pay to the director, for deposit, pursuant to sections 35-146 and 35-147, a tax of .4312 percent of such net premiums received from all insurance carried for or on vehicles as defined in section 28-101, in addition to other applicable taxes. B. The tax of .4312 percent of such net premiums received by the director and paid by an insurer on account of premiums received for insurance on certain vehicles as defined in section 28-101 shall be separately specified in the insurer's report required in section 20-224 and is appropriated to the public safety personnel retirement system and shall be transferred by the state treasurer to the board of trustees of the public safety personnel retirement system for deposit in the highway patrol account. If the tax received is greater than the amount necessary to fund the highway patrol account, the state treasurer shall deposit the excess in the Arizona highway patrol fund established by section 41-1752 in any amount required by legislative appropriation. C. An insurer shall report and pay the taxes required by this section in the manner prescribed by section 20-224. An insurer that fails to pay the tax on or before the prescribed payment dates is subject to a civil penalty determined pursuant to section 20-225. 20-224.02. Credit for overpayment of tax If an overpayment of the taxes imposed by sections 20-224, 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07 results from payments made pursuant to the method prescribed in section 20-224, subsection F, the director shall within three months after the due date refund the overpayment without interest. 20-224.05. Premium tax credit for health insurance certificates submitted by qualified persons; definitions A. From and after December 31, 2006, an annual tax credit is allowed against the premium tax liability incurred by a health care insurer pursuant to section 20-224, 20-837 or 20-1060 for an individual or a small business that has received a certificate from the department of revenue pursuant to section 43-210 and obtained health insurance from a health care insurer within ninety days after the date the certificate was issued. B. The maximum amount of tax credits allowed under this section shall not exceed the aggregate amount of certificates approved by the department of revenue pursuant to section 43-210. C. For coverage issued to an individual, the amount of the credit is the lesser of: 1. One thousand dollars for coverage on a single person, five hundred dollars for coverage on a child or three thousand dollars for family coverage. 2. Fifty per cent of the health insurance premium. D. For coverage issued to a small business, the amount of the credit is the lesser of: 1. One thousand dollars for coverage on a single person or three thousand dollars for each employee who elects family coverage. 2. Fifty per cent of the health insurance premium. E. If the allowable tax credit exceeds the state premium tax liability, the amount of the claim not used as an offset against the state premium tax liability may be carried forward as a tax credit against subsequent years' state premium tax liability for a period not to exceed five taxable years or refunded as allowed under section 20-224.02. F. The department may adopt rules necessary for the administration of this section. G. A health care insurer allowed a credit against its premium tax liability under this section shall not be required to pay any additional retaliatory tax levied pursuant to section 20-230 as a result of claiming the credit. H. For the purposes of this section: 1. "Family" means any of the following: (a) An adult and the adult's spouse. (b) An adult, the adult's spouse and all unmarried dependent children under nineteen years of age or under twenty-five years of age if a full-time student. (c) An adult and the adult's unmarried dependent children under nineteen years of age or under twenty-five years of age if a full-time student. 2. "Health care insurer" means a disability insurer, group disability insurer, blanket disability insurer, health care services organization, hospital service corporation, medical service corporation or hospital, medical, dental and optometric service corporation that provides health insurance in this state. 3. "Health insurance" means a licensed health care plan or arrangement that pays for or furnishes medical or health care services and that is issued by a health care insurer. Health insurance does not include limited benefit coverage as defined in section 20-1137. 4. "Small business" means a business that has been in existence for at least one calendar year in this state, that has not provided health insurance to its employees for at least six months and that had between two and twenty-five employees during the most recent calendar year. 20-224.06. Premium tax credit for contributions to school tuition organization; low-income scholarships A. A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07 for the amount of voluntary cash contributions made by the insurer during the tax year to a school tuition organization. B. The amount of the credit is the total amount of the insurer's contributions for the tax year under subsection A of this section that is preapproved by the department of revenue pursuant to section 43-1183, subsection D. C. The procedures, conditions, limitations, definitions and other requirements prescribed by section 43-1183 and title 43, chapter 15 apply to the following: 1. Insurers that claim a credit under this section. 2. Claims for credit under this section. 3. School tuition organizations that receive contributions from insurers for the purposes of this section. 4. Schools that qualify to receive scholarship monies contributed by insurers for the purposes of this section. 5. Students who receive scholarships from monies contributed by insurers for the purposes of this section. D. If the allowable amount of a credit under this section exceeds the insurer's state premium tax liability, the amount of the claim not used to offset the premium tax liability may be carried forward as a credit against the insurer's subsequent years' premium tax liability for a period not to exceed five taxable years. E. A credit is not allowed if the insurer designates the contribution for the direct benefit of any specific student. F. An insurer that claims a tax credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20-230 as a result of claiming that tax credit. G. The department of insurance and financial institutions, with the cooperation of the department of revenue, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of this section. 20-224.07. Premium tax credit for contributions to school tuition organization; displaced students and students with disabilities A. A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07 for the amount of voluntary cash contributions made by the insurer during the tax year to a school tuition organization. B. The amount of the credit is the total amount of the insurer's contributions for the tax year under subsection A of this section that is preapproved by the department of revenue pursuant to section 43-1184, subsection D. C. The procedures, conditions, limitations, definitions and other requirements prescribed by section 43-1184 and title 43, chapter 15 apply to: 1. Insurers that claim a credit under this section. 2. Claims for credit under this section. 3. School tuition organizations that receive contributions from insurers for the purposes of this section. 4. Qualified schools that participate under this section. 5. Students who receive scholarships from monies contributed by insurers for the purposes of this section. D. If the allowable amount of a credit under this section exceeds the insurer's state premium tax liability, the amount of the claim not used to offset the premium tax liability may be carried forward as a credit against the insurer's subsequent years' premium tax liability for a period not to exceed five taxable years. E. A credit is not allowed if the insurer designates the contribution for the direct benefit of any specific student. F. An insurer that claims a tax credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20-230 as a result of claiming that tax credit. G. The department of insurance and financial institutions, with the cooperation of the department of revenue, shall adopt rules necessary for the administration of this section. 20-225. Failure to pay tax; penalty; exception A. Any insurer failing to pay the tax prescribed by sections 20-224, 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07 is subject to a civil penalty not to exceed the greater of twenty-five dollars or five percent of the amount due plus interest at the rate of one percent per month from the date the tax was due. B. The director may refuse to renew the certificate of authority of any insurer failing to pay the tax on or before the date it is due. The director shall revoke the certificate of authority of any insurer failing to pay the tax for more than thirty days after it was due. C. If the director requires the tax to be paid electronically through a designated third-party service pursuant to section 20-224, subsection K, no penalty accrues with respect to any payment of tax or interest that is late due to delays caused by the third-party service. 20-226. Exclusive character of premium tax; exception A. With respect to authorized insurers the premium tax provided by section 20-224 shall be payment in full and in lieu of all other demands for any and all state, county, district, municipal and school taxes, licenses and excises of whatever kind or character, excepting only: 1. The fees prescribed by this title. 2. Taxes on real and tangible personal property located within this state. 3. The transaction privilege tax and the use tax imposed as provided in title 42, chapter 5, articles 1 and 4. 4. The transaction privilege taxes and use taxes imposed by any county, city or town. B. Except as provided in subsection A of this section, the state preempts the field of imposing excise, privilege, franchise, income, license and similar taxes upon insurers and their general agents and agents as such and on the intangible property of insurers or such agents. Except as provided in subsection A of this section, no county, municipality, district, school district or other political subdivision or agency in this state shall levy upon insurers, or upon their general agents and agents as such, any tax additional to such as are levied in this title. Nothing in this section allows a county, city or town to impose a transaction privilege tax or use tax on insurance policies, premiums, brokers or agents. 20-227. Disposition of tax proceeds The purpose of the taxes provided by this title is to assist in defraying the cost of state government and to lessen the tax burden upon tangible property. All taxes collected under this title shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund and shall be used, together with the revenue from other sources, to pay appropriations for the maintenance of state government, except as provided in subsection C of section 20-224 (firemen's relief and pension fund) and in section 20-224.01 (highway patrol account of the public safety personnel retirement system) and other applicable statutes. 20-228. Exemption of insurers from general corporation reports and fees Notwithstanding any other statute, no authorized insurer or surplus line insurer is required to file with the corporation commission the annual report required of corporations by section 10-1622 or the certificate of disclosure required of corporations which are exempt from filing an annual report by section 10-1622 or the statement of bankruptcy req