How often must the Commissioner examine the affairs of each domestic insurer?

The correct answer is that the Commissioner must examine the affairs of each domestic insurer at least once every five years. This is established in order to ensure that insurers are operating within the regulations and maintaining sound financial practices over a reasonable period of time. The five-year examination cycle allows the Commissioner to thoroughly review an insurer’s financial health, business practices, and compliance with state laws and regulations.

Regular examinations are crucial for protecting policyholders and ensuring that insurers can meet their obligations. This timeframe strikes a balance, giving the Commissioner adequate time to assess the financial status and practices of the insurer while not overwhelming the Department with excessive examination requests.

The rationale behind not examining domestic insurers more frequently than every five years is related to the resources available to the Department and the idea that with proper governance and risk management, insurers may not need to be examined more often. Therefore, a five-year interval is considered sufficient for maintaining the oversight necessary to ensure the stability and reliability of domestic insurers in California.