State RegulationsOH specificDifficulty 2/5
An Ohio life insurer's surplus drops below the minimum required under Ohio financial rules. The most likely regulatory response is that:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Ohio's financial requirement framework — including the rule-based standards of OAC 3901-1-50 and OAC 3901-3-04 and the capital and surplus expectations tied to ORC 3907.05 — exists to keep insurers able to pay policyholder obligations on an ongoing basis, not merely at licensure. When an insurer's capital or surplus falls short, the Superintendent may exercise supervisory authority to protect policyholders rather than allow the shortfall to go unaddressed.
Why the other options are wrong
- B) A capital or surplus shortfall does not automatically void in-force policies; regulatory supervision is the designed response to protect policyholders.
- C) There is no rule requiring wholesale refund of a year of premiums when surplus falls short; the regulatory focus is restoring financial strength, not unwinding coverage.
- D) Financial requirements are continuing obligations, not one-time licensing hurdles, so a shortfall triggers regulatory attention.
Memory hook
Surplus rules guard policyholders for life, not just at licensing day.