A BILL TO BE ENTITLED
AN ACT to make technical and other changes to the insurance Laws of North Carolina, as recommended by the Department of insurance.
The General Assembly of North Carolina enacts:

REVISE LOAN TO VALUE REQUIREMENTS FOR INSURER MORTGAGE INVESTMENTS
SECTION 1.(a)  G.S. 58‑7‑179(c) reads as rewritten:
"(c)	No such mortgage loan or loans made or acquired by an insurer on any one property shall, at the time of investment by the insurer, exceed the larger of the following amounts, as applicable:
(1)	Ninety‑seven percent (97%) of the value of the real property or leasehold securing the real property in the case of a mortgage on a dwelling primarily intended for occupancy by not more than four families if they insure down to eighty percent (80%) with a licensed mortgage insurance company, or seventy‑five percent (75%) of the value in the case of other real estate mortgages;
(2)	The amount of any insurance or guaranty of the loan by the United States or by an agency or instrumentality thereof; or
(3)	The percentage‑of‑value limit on the amount of the loan applicable under subdivision (1) of this subsection, plus the amount by which the excess of the loan over the percentage‑of‑value limit is insured or guaranteed by the United States or by any agency or instrumentality thereof."
SECTION 1.(b)  This section becomes effective January 1, 2018.

CAPTIVE INSURANCE TECHNICAL CHANGES
SECTION 2.(a)  G.S. 58‑10‑345(g) reads as rewritten:
"(g)	The Commissioner is authorized to retain legal, financial, and audit services from outside the Department, the costs of which shall be reimbursed by the business entity. G.S. 58‑2‑160 shall apply to audits and processing conducted under the authority of this section."
SECTION 2.(b)  G.S. 58‑10‑355 reads as rewritten:
"§ 58‑10‑355.  Organizational audit.
In addition to the processing of the application, an organizational audit may be performed before an applicant business entity is licensed. Such investigation or audit shall consist of a general review of the applicant business entity's corporate records, including charters, bylaws, and minute books; verification of capital and surplus; verification of principal place of business; determination of assets and liabilities; and a review of such other factors as the Commissioner deems necessary."
SECTION 2.(c)  G.S. 58‑10‑385(a) reads as rewritten:
"(a)	Every captive insurance company shall report to the Commissioner within 30 days after any change in its executive officers or directors, including in its report a biographical affidavit for each new officer or director. The change shall be deemed approved unless it is disapproved within 30 days from the completion of the Commissioner's review of the biographical affidavit."

INSURANCE HOLDING COMPANY AFFILIATES
SECTION 3.  G.S. 58‑19‑10(b) reads as rewritten:
"(b)	In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under this Chapter, a domestic insurer may also:
(1)	Invest, in common stock, preferred stock, debt obligations, and other securities of one or more affiliates or subsidiaries, amounts that do not exceed the lesser of ten percent (10%) of the insurer's admitted assets or fifty percent (50%) of the insurer's  policyholders' surplus, provided that after those investments, the insurer's policyholders' surplus will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. In calculating the amount of the investments, investments in domestic or foreign insurance affiliates or subsidiaries and health maintenance organizations shall be excluded, and there shall be included: (i) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and (ii) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities, and all contributions to the capital or surplus, of a subsidiary subsequent to its acquisition or formation;
...
(3)	With the approval of the Commissioner, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more affiliates or subsidiaries; provided that after such investment the insurer's policyholders' surplus will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs."

SURPLUS LINES ACT TECHNICAL CHANGES
SECTION 4.(a)  G.S. 58‑21‑40 reads as rewritten:
"§ 58‑21‑40.  Surplus lines regulatory support organization.
(a)	The North Carolina Surplus Lines Assocation (NCSLA) shall serve as the regulatory support organization of surplus lines licensees and shall carry out the following functions:
(1)	Facilitate and encourage compliance by resident and nonresident surplus lines licensees with the laws of this State and the rules and regulations of the Commissioner relative to surplus lines insurance.
(2)	Communicate with organizations of admitted insurers with respect to the proper use of the surplus lines market.
(3)	Receive and disseminate to surplus lines licensees information about surplus lines insurance, including, without limitation, new electronic filing procedures approved by the Commissioner, changes in the list of eligible surplus lines insurers, and modifications in coverages, procedures, and requirements as may be requested by the Commissioner.
(4)	Establish and operate a stamping office to process all surplus lines insurance and remit premium taxes for those coverages under G.S. 58‑21‑85 by means satisfactory to the Commissioner, and charge surplus lines licensees a fee for such processing.
(b)	The NCSLA shall file with the Commissioner:
(1)	A copy of its constitution, articles of agreement or association, or certificate of incorporation;
(2)	A copy of its bylaws and rules governing its activities;
(3)	An annually updated list of surplus lines licensees;
(4)	The name and address of a resident of this State upon whom notices or orders of the Commissioner or processes issued at his direction may be served; and
(5)	An agreement that the Commissioner may examine the NCSLA in accordance with subsection (c) of this section.
(c)	The Commissioner may, at times deemed appropriate, make or cause to be made an examination of the NCSLA in which case the provisions of G.S. 58‑2‑131, 58‑2‑132, 58‑2‑133, 58‑2‑134, 58‑2‑150, 58‑2‑155, 58‑2‑180, 58‑2‑185, 58‑2‑190, 58‑2‑195, and 58‑2‑200 shall apply. If the Commissioner finds the NCSLA or any surplus lines licensee to be in violation of this Article, the Commissioner may issue an order requiring the discontinuance of the violation.
(d)	Each surplus lines licensee shall maintain active membership in the NCSLA as a condition of continued licensure under this Article."
SECTION 4.(b)  G.S. 58‑21‑65 reads as rewritten:
"§ 58‑21‑65.  Licensing of surplus lines licensee.
(a)	For insureds whose home state is this State, no agent or broker licensed by the Commissioner shall directly procure any contract of surplus lines insurance with any nonadmitted insurer, unless he possesses a current surplus lines insurance license issued by the Commissioner.
(b)	The Commissioner shall issue a surplus lines license to any qualified holder of a current property and casualty agent's license, but only when the agent has:
(1)	Remitted the fifty dollars ($50.00) annual fee to the Commissioner;
(2)	Submitted a completed license application on a form supplied by the Commissioner, and the application has been approved by the Commissioner;
(3)	Passed a qualifying examination approved by the Commissioner; except that all holders of a license prior to July 11, 1985 shall be deemed to have passed such an examination; and
(4)	Repealed by Session Laws 2004‑199, s. 20(c), effective August 17, 2004.
…."
SECTION 4.(c)  G.S. 58‑21‑75 reads as rewritten:
"§ 58‑21‑75.  Records of surplus lines licensee.
Each surplus lines licensee shall keep in his or her office in this State a full and true record of each surplus lines insurance contract placed by or through the licensee, including a copy of the policy, certificate, cover note, or other evidence of insurance. The record shall include the following items:
(1)	Amount of the insurance and perils insured;
(2)	Brief description of the property insured and its location;
(3)	Gross premium charged;
(4)	Any return premium paid;
(5)	Rate of premium charged upon the several items of property;
(6)	Effective date of the contract, and the terms of the contract;
(7)	Name and address of the insured;
(8)	Name and address of the insurer;
(9)	Amount of tax and other sums to be collected from the insured; and
(10)	Identity of the producing broker, any confirming correspondence from the insurer or its representative, and the application.
The record of each contract shall be kept open at all reasonable times to examination by the Commissioner without notice for a period not less than five years following termination of the contract."
SECTION 4.(d)  G.S. 58‑21‑85(a) reads as rewritten:
"§ 58‑21‑85.  Surplus lines tax.
(a)	Gross premiums charged, less any return premiums, for surplus lines insurance on insureds for whom North Carolina is the home state are subject to a premium receipts tax of five percent (5%), which shall be collected in a manner approved by the Commissioner, in addition to the full amount of the gross premium charged by the insurer for the insurance. The tax on any portion of the premium unearned at termination of insurance having been credited by the State to the licensee shall be returned by the licensee directly to the policyholder. The surplus lines licensee is prohibited from absorbing such tax and from rebating for any reason, any part of such tax. To the extent that other states in which portions of the properties, risks, or exposures reside have failed to enter into a compact or reciprocal allocation procedure with this State, the premium tax collected shall be retained by this State."

CREDIT INSURANCE REGULATORY AMENDMENTS
SECTION 5.(a)  G.S. 58‑57‑90(a) reads as rewritten:
"(a)	As used in this Article, the term "single interest credit property" insurance means insurance of the personal property of the debtor against loss, with the creditor as sole beneficiary; and the term "dual credit property" insurance means insurance of personal household property of the debtor, with the creditor as primary beneficiary and the debtor as beneficiary of proceeds not paid to the creditor. For the purpose of this Article, "personal property" means household furniture, furnishings and appliances designed for household use and other property of the debtor, exclusive of an automobile, not used by the debtor in a business trade or profession."
SECTION 5.(b)  G.S. 58‑57‑110(a) reads as rewritten:
"(a)	Beginning September 1, 2018, and every third year thereafter, the Commissioner shall prescribe a minimum incurred loss ratio standard requirement to develop a premium rate reasonable in relation to the benefits provided by credit unemployment insurance coverage. This requirement shall be effective on January 1 of the year following the year the Commissioner prescribes it and shall remain in effect until the next minimum incurred loss ratio standard requirement prescribed by the Commissioner takes effect. The following requirements must be met:
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STATE MANUFACTURED HOUSING BOARD CONFORMING CHANGE
SECTION 6.  G.S. 143‑143.10(a) reads as rewritten:
"(a)	There is created the North Carolina Manufactured Housing Board within the Department. The Board shall be composed of 11 members as follows:
(1)	The Commissioner of Insurance or the Commissioner's designee.
(2)	A manufactured home manufacturer.
(3)	A manufactured home dealer.
(4)	A representative of the banking and finance industry.
(5)	A representative of the insurance industry.
(6)	A manufactured home supplier.
(7)	A set‑up contractor.
(8)	Two representatives of the general public.
(9)	A person who is employed with a HUD‑approved housing counseling agency in the State.
(10)	An accountant.
The Commissioner or the Commissioner's designee shall chair the Board. The Governor shall appoint to the Board the manufactured home manufacturer and the manufactured home dealer. The General Assembly upon the recommendation of the Speaker of the House of Representatives in accordance with G.S. 120‑121 shall appoint to the Board the representative of the banking and finance industry, the employee of a HUD‑approved housing counseling agency, and the representative of the insurance industry. The General Assembly upon the recommendation of the President Pro Tempore of the Senate in accordance with G.S. 120‑121 shall appoint to the Board the manufactured home supplier, the accountant, and the set‑up contractor. The Commissioner shall appoint two representatives of the general public. Except for the representatives from the general public and the persons appointed by the General Assembly, each member of the Board shall be appointed by the appropriate appointing authority from a list of nominees submitted to the appropriate appointing authority by the Board of Directors of the North Carolina Manufactured and Modular Homebuilders Association. At least three nominations shall be submitted for each position on the Board. The members of the Board shall be residents of the State.
The members of the Board shall serve for terms of three years. In the event of any vacancy of a position appointed by the Governor or Commissioner, the appropriate appointing authority shall appoint a replacement in the same manner as provided for the original appointment to serve the remainder of the unexpired term. Vacancies in appointments made by the General Assembly shall be filled in accordance with G.S. 120‑122. In the event of any vacancy, the appropriate appointing authority shall appoint a replacement to serve the remainder of the unexpired term. Such appointment shall be made in the same manner as provided for the original appointment. No member of the Board shall serve more than two consecutive, three‑year terms.
The members of the Board designated in subdivisions (8), (9), and (10) of this subsection shall have no current or previous financial interest connected with the manufactured housing industry. No member of the Board shall participate in any proceeding before the Board involving that member's own business.
Each member of the Board, except the Commissioner and any other State employee, shall receive per diem and allowances as provided with respect to occupational licensing boards by G.S. 93B‑5. Fees collected by the Board under this Article shall be credited to the Insurance Regulatory Fund created under G.S. 58‑6‑25."
SECTION 7.  Except as otherwise provided, this act is effective when it becomes law.