§ 1608. Relationships and transactions between parent and subsidiary.
(a) The business operations, corporate proceedings and fiscal and
accounting records of subsidiaries organized or acquired pursuant to
this article shall be conducted or maintained so as to assure the
separate legal and operating identities of the parent 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.

(b) All transactions between the insurer 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 insurer on an equitable basis in conformity with
customary insurance accounting practices consistently applied.

(c) The books, accounts and records of each party to all such
transactions shall be so maintained as to clearly and accurately
disclose 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.

(d) The superintendent may promulgate regulations relating to such
subsidiaries, their management and their relationships and transactions
with their parent insurance companies and their affiliates to the extent
that the same may affect the operations, management or financial
condition of domestic insurers. Subsidiaries that are persons within a
holding company system, as such terms are defined in article fifteen of
this chapter, shall be subject to the provisions of such article.

(e) The following transactions between a domestic insurer and any
subsidiary may not be entered into unless the insurer 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 subsidy, provided the transactions are equal to or
exceed the lesser of three percent of the insurer's admitted assets or
twenty-five percent of surplus to policyholders at last year-end;

(2) loans or extensions of credit to any person who is not a
subsidiary, where the insurer 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 insurer making the loans or extensions of credit,
provided the transactions are equal to or exceed the lesser of three
percent of the insurer's admitted assets or twenty-five percent of
surplus to policyholders at last year-end;

(3) reinsurance treaties or agreements with a subsidiary that the
insurer has not otherwise submitted to the superintendent, provided,
however, the insurer need not submit a copy of a reinsurance agreement
unless requested by the superintendent where the reinsurance premium or
a change in the insurer's liabilities, or the projected reinsurance
premium or a change in the insurer's liabilities in any of the next
three years, is less than five percent of the insurer's surplus to
policyholders at last year-end. This shall include agreements that may
require, as consideration, the transfer of assets from an insurer to a
non-subsidiary, if an agreement or understanding exists between the
insurer and non-subsidiary that any portion of the assets will be
transferred to one or more subsidiaries of the insurer; and

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