§ 1712. Relationships and transactions between parent corporation and
subsidiary. (a) The business operations, corporate proceedings and
fiscal and accounting records of subsidiaries shall be conducted or
maintained so as to assure the separate legal and operating identities
of the parent corporation and subsidiary, but nothing herein shall
preclude arrangements for common management or the cooperative or joint
use of personnel, property, or services, otherwise consistent with this
chapter. All transactions between the parent corporation and its
subsidiaries shall be fair and equitable, charges or fees for services
performed shall be reasonable and all expenses incurred and payments
received shall be allocated to the parent corporation on an equitable
basis in conformity with customary insurance accounting practices
consistently applied. The books, accounts and records of each party to
all such transactions shall be so maintained as to disclose clearly and
accurately the nature and details of the transactions, including such
accounting information as is necessary to support the reasonableness of
the charges or fees to the respective parties.

(b) The following transactions between a parent corporation and any
subsidiary may not be entered into unless the parent corporation has
notified the superintendent in writing of its intention to enter into
any such transaction at least thirty days prior thereto, or with regard
to reinsurance treaties or agreements at least forty-five days prior
thereto, or such shorter period as the superintendent may permit, and
the superintendent has not disapproved it within such period:

(1) sales, purchases, exchanges, loans, extensions of credit, or
investments with a subsidiary, provided the transactions are equal to or
exceed:

(A) three percent of the parent corporation's admitted assets at last
year-end, with regard to a domestic life insurance company; or

(B) the lesser of three percent of the parent corporation's admitted
assets or twenty-five percent of capital and surplus at last year-end,
with regard to a domestic corporation subject to article forty-three of
this chapter; or

(2) loans or extensions of credit to any person who is not a
subsidiary, where the parent corporation makes loans or extensions of
credit with the agreement or understanding that the proceeds of such
transactions, in whole or in substantial part, are to be used to make
loans or extensions of credit to, purchase assets of, or make
investments in, any subsidiary of the parent corporation making the
loans or extensions of credit, provided the transactions are equal to or
exceed:

(A) three percent of the parent corporation's admitted assets at last
year-end, with regard to a domestic life insurance company; or

(B) the lesser of three percent of the parent corporation's admitted
assets or twenty-five percent of capital and surplus at last year-end,
with regard to a domestic corporation subject to article forty-three of
this chapter; or

(3) reinsurance treaties or agreements with a subsidiary that the
parent corporation has not otherwise submitted to the superintendent.
This shall include agreements that may require, as consideration, the
transfer of assets from a parent corporation to a non-subsidiary, if an
agreement or understanding exists between the parent corporation and
non-subsidiary that any portion of the assets will be transferred to one
or more subsidiaries of the parent corporation; and

(4) management agreements, service contracts, tax allocation
agreements, guarantees, and all cost-sharing arrangements.