The Arizona Department of Insurance and Financial Institutions (hereinafter referred to as “State Agency”) is authorized by ARS § 20-148 to contract for and procure, on a fee or part-time basis, or both, such actuarial, technical and other professional services as may be required for the operation of the State Agency. The State Agency is permitted by ARS § 20-142(C) to conduct examinations and investigations of insurance matters. The State Agency is required by ARS § 20-156 to examine the financial affairs, transactions, accounts, records and assets of each insurer seeking to do business in Arizona, and of other authorized insurers as often as deemed advisable. The State Agency is permitted by ARS § 20-157 to employ experts to correct examinee accounting records and appraisers to valuate real estate. The State Agency is permitted by House Bill 2322, Chapter 238 Second Regular Session 2018 to conduct examinations and investigations of insurance matters related to health insurer provider credentialing. Insurers that hold a certificate of authority issued pursuant to ARS § 20-216 generally file financial statements with the State Agency pursuant to statutory accounting practices. Financial examinations of these insurers must be conducted in accordance with the NAIC Examiners Handbook to determine whether those statements are in accordance with statutory accounting standards. Captive insurers that hold a certificate of authority issued pursuant ARS § 20-1098.01, and certain other entities over which the State Agency has examination authority, may prepare and file their financial statements using generally accepted accounting principles. Examinations of entities using generally accepted accounting principles will be conducted pursuant to the NAIC Examiners Handbook, where applicable. The State Agency may pursuant to ARS § 20-358 utilize independent contractor examiners to review workers’ compensation manuals of classification, rules, rating plans and rates. The State Agency must pursuant to ARS § 20-1615 and AAC R20-6-604.03 establish prima facie rates for credit disability insurance, credit property insurance and credit life insurance, and may contract for such actuarial, technical, and other professional services as may be needed pursuant to ARS § 20- 148. The State Agency is required by ARS §§ 11-952.01(M), 15-382(B)(2) and 41- 621.01(K) to examine each public agency pool and each contractor pool. ARS §§ 20-662 and 20-683 establish the Arizona Property and Casualty Fund and the Arizona Life and Disability Insurance Guaranty Fund, respectively, within the State Agency. The State Agency is authorized by ARS §§ 20-678 and 20-691 to examine the funds. The State Agency may review compliance of insurers and other regulated entities with Arizona statutes and rules governing premium rates, rating practices, reasonableness of benefits in relation to premium charged, policy form or rate filings and related requirements. Such services may be required as part of, or independent from, a financial examination. The State Agency may conduct insurance risk assessment and valuation analysis necessary to implement state-adopted provisions of the federal Patient Protection and Affordable Care Act (“PPACA”). Services may include threshold rate review, review of benefit plan design or other assessments of health care insurance. The State Agency may, pursuant to ARS § 20-156(A), conduct timely pay and grievance examinations, which involve verifying that insurers are paying claims in a timely manner, have an effective internal system for resolving grievances, and are paying appropriate interest if claims are not paid timely. The State Agency may, pursuant to ARS § 20-156(A), conduct market conduct examinations, which can involve the review of marketing, advertising, underwriting, premium rating, complaints and claims activities of licensed insurers to determine compliance with Arizona and Federal laws and rules. The State Agency is authorized by ARS § 20-159(B) to compensate independent contractors utilized pursuant to ARS § 20-148 for travel expenses, living expense allowance and per diem compensation. Persons receiving reimbursement or compensation are required by ARS § 20-159(C) to provide a detailed account of all expenses and compensation necessarily incurred on account of an examination. The State Agency is required to collect retaliation pursuant to ARS § 20-230 when another state or foreign country imposes taxes, fees, assessments, fines, penalties, licenses, deposit requirements or other material obligations, prohibitions or restrictions (collectively “obligations”) upon Arizona- domiciled insurers that in total exceed the total obligations that Arizona imposes upon similar insurers of the other state or foreign country. Retaliation is calculated as part of insurer annual tax- and fee-reporting requirements. The calculation of retaliation excludes ad valorem taxes on real or personal property, personal income taxes, surcharges that are imposed on policyholders (even when collected and remitted to the state by insurers), and credits to insurers for the payment of insolvent insurer policyholder claims. The obligations imposed by each state can differ by type of insurer, by type of insurance transacted, by calculation methodology, by time period, and by other factors. The State Agency is required to calculate an “addition to the rate of taxes” pursuant to AAC R20-6- 205 for each state in which counties, cities and other political subdivisions of the state levy taxes, fees, assessments or other obligations on Arizona insurers, other than ad valorem taxes on real or personal property, personal income taxes, or credits to insurers for the payment of insolvent insurer policyholder claims.
