SECOND REGULAR SESSION
[PERFECTED]
SENATE SUBSTITUTE FOR
SENATE BILL NO. 1359
102ND GENERAL ASSEMBLY
INTRODUCED BY SENATOR TRENT.
5286S.03P KRISTINA MARTIN, Secretary
AN ACT
To repeal section 374.190, RSMo, and to enact in lieu thereof five new sections relating to
reinsurance and examinations of insurance companies.
Be it enacted by the General Assembly of the State of Missouri, as follows:
Section A. Section 374.190, RSMo, is repealed and five 1
new sections enacted in lieu thereof, to be known as sections 2
374.190, 374.192, 375.1183, 380.621, and 380.631, to read as 3
follows:4
374.190. 1. The director shall examine and inquire 1
into all violations of the insurance laws of the state, and 2
inquire into and investigate the business of insurance 3
transacted in this state by any insurance agent, broker, 4
agency or insurance company. 5
2. He or any of his duly appointe d agents may compel 6
the attendance before him, and may examine, under oath, the 7
directors, officers, agents, employees, solicitors, 8
attorneys or any other person, in reference to the 9
condition, affairs, management of the business, or any 10
matters relating thereto. He may administer oaths or 11
affirmations, and shall have power to summon and compel the 12
attendance of witnesses, and to require and compel the 13 SS SB 1359 2
production of records, books, papers, contracts or other 14
documents, if necessary. 15
3. The director may make and conduct the investigation 16
in person, or he may appoint one or more persons to make and 17
conduct the same for him. If made by another than the 18
director in person, the person duly appointed by the 19
director shall have the same powers as above granted to the 20
director. A certificate of appointment, under the official 21
seal of the director, shall be sufficient authority and 22
evidence thereof for the person or persons to act. For the 23
purpose of making the investigations, or having the same 24
made, the director may employ the necessary clerical, 25
actuarial and other assistance. 26
4. Notwithstanding any provision of law to the 27
contrary, the confidentiality provisions of section 374.205, 28
including subdivision (5) of subsection 3 of se ction 29
374.205, and subsection 4 of section 374.205, shall apply to 30
all reports, working papers, recorded information, 31
documents, and copies thereof, produced by, obtained by, or 32
disclosed to the director or any other person in the course 33
of any market conduct investigation or market conduct action. 34
374.192. 1. Notwithstanding any provision of law to 1
the contrary, a regulated entity shall have not less than 2
thirty calendar days to submit any record or material 3
requested by the department. This subsection shall not 4
apply to requests for records or materials by the division 5
of consumer affairs. 6
2. Notwithstanding any provision of law to the 7
contrary, any record or document, regardless of physical 8
form or characteristic, m aintained beyond the record 9
retention period specified in section 374.205 shall not be 10
subject to request or review by the director unless the 11 SS SB 1359 3
director has substantial and competent evidence that the 12
regulated entity has willfully engaged in an act or omission 13
constituting a level four or five violation of the laws of 14
this state relating to insurance, including this chapter, 15
chapter 354, and chapters 375 to 385, or has been convicted 16
of any felony related to the business of insurance, in which 17
case the director may request or review records or documents 18
maintained beyond the record retention period specified in 19
section 374.205 that directly relate to the violation or 20
conviction. 21
375.1183. 1. Contracts reinsuring policies of l ife or 1
health insurance or annuities referred to in section 2
375.1178 issued by a ceding insurer that has been placed in 3
conservation or rehabilitation proceedings under sections 4
375.1150 to 375.1246 shall be continued or terminated under 5
the terms and conditions of each contract and the provisions 6
of this section. 7
2. Contracts reinsuring policies of life or health 8
insurance or annuities referred to in section 375.1178 9
issued by a ceding insurer that has been placed into 10
liquidation under sect ions 375.1150 to 375.1246 shall be 11
continued, subject to the provisions of this section, unless: 12
(1) The contracts were terminated pursuant to their 13
terms prior to the date of the order of liquidation; or 14
(2) The contracts were terminated pur suant to the 15
order of liquidation, in which case the provisions of 16
subsection 9 of this section shall apply. 17
3. (1) At any time within one hundred eighty days of 18
the date of the order of liquidation, a guaranty association 19
covering policies of l ife or health insurance or annuities 20
referred to in section 375.1178, in whole or in part, may 21
elect to assume the rights and obligations of the ceding 22 SS SB 1359 4
insurer that relate to the policies or annuities under any 23
one or more reinsurance contracts between the ceding insurer 24
and its reinsurers. Any such assumption shall be effective 25
as of the date of the order of liquidation. The election 26
shall be made by the guaranty association or the national 27
organization of life and health insurance guaranty 28
associations on its behalf by sending written notice, return 29
receipt requested, to the affected reinsurers. 30
(2) To facilitate the decision, the receiver and each 31
affected reinsurer shall make available upon request to the 32
guaranty association or to th e national organization of life 33
and health insurance guaranty associations on its behalf: 34
(a) Copies of in-force reinsurance contracts and all 35
related files and records relevant to the determination of 36
whether such contracts should be assumed; and 37
(b) Notices of any defaults under the reinsurance 38
contracts or any known event or condition which with the 39
passage of time could become a default under the reinsurance 40
contracts. 41
(3) Paragraphs (a) through (d) of this subdivision 42
shall apply to reinsurance contracts so assumed by a 43
guaranty association: 44
(a) The guaranty association shall be responsible for 45
all unpaid premiums due under the reinsurance contracts, for 46
periods both before and after the date of the order of 47
liquidation, and shall be responsible for the performance of 48
all other obligations to be performed after the date of the 49
order of liquidation. 50
(b) The guaranty association shall be entitled to any 51
amounts payable by the reinsurer under the reinsurance 52
contracts with respect to losses or events that occur in 53
periods on or after the date of the order of liquidation. 54 SS SB 1359 5
(c) Within thirty days following the date of the 55
guaranty association's election to assume a reinsurance 56
contract, the guaranty associat ion and the reinsurer shall 57
calculate the balance due to or from the guaranty 58
association under each reinsurance contract as of the date 59
of such election, and the guaranty association or reinsurer 60
shall pay any remaining balance due the other within th irty- 61
five days of the date of such election. Any disputes over 62
the amounts due to either the guaranty association or the 63
reinsurer shall be resolved by arbitration pursuant to the 64
terms of the affected reinsurance contract or, if the 65
contract contains no arbitration clause, pursuant to the 66
provisions of subdivision (3) of subsection 9 of this 67
section. 68
(d) If the guaranty association, or receiver on behalf 69
of such guaranty association, within sixty days of the date 70
of the guaranty association 's election to assume a 71
reinsurance contract, pays the unpaid premiums due for 72
periods both before and after the date of such election that 73
are due pursuant to the reinsurance contract, the reinsurer 74
shall not be entitled to terminate the reinsurance c ontract 75
for failure to pay premiums, and shall not be entitled to 76
set off any unpaid amounts due under other contracts, or 77
unpaid amounts due from parties other than the guaranty 78
association, against amounts due such guaranty association. 79
4. If a receiver continues policies of life or health 80
insurance or annuities referred to in section 375.1178 in 81
force following an order of liquidation, and the policies or 82
annuities are not covered in whole or in part by one or more 83
guaranty associations, th e receiver may, within one hundred 84
eighty days of the date of the order of liquidation, elect 85
to assume the rights and obligations of the ceding insurer 86 SS SB 1359 6
under any one or more of the reinsurance contracts that 87
relate to the policies or annuities, provid ed the contracts 88
have not been terminated as set forth in subsection 2 of 89
this section. The election shall be made by sending written 90
notice, return receipt requested, to the affected 91
reinsurers. In that event, payment of premiums on the 92
reinsurance contracts for the policies and annuities, for 93
periods both before and after the date of the order of 94
liquidation, shall be chargeable against the estate as a 95
class 1 administrative expense. Amounts paid by the 96
reinsurer on account of losses on the po licies and annuities 97
shall be to the estate of the ceding insurer. 98
5. During the period from the date of the order of 99
liquidation until the date the guaranty association or the 100
receiver elects to assume the rights and obligations of the 101
ceding insurer under any one or more of the reinsurance 102
contracts that relate to the policies or annuities as 103
provided for in subsection 3 or 4 of this section, the 104
guaranty association, the receiver, and the reinsurer shall 105
not have any rights or obligations u nder any reinsurance 106
contract that is eligible for assumption by such association 107
or the receiver. 108
6. (1) If the guaranty association or the receiver, 109
as the case may be, has timely elected to assume a 110
reinsurance contract pursuant to subsection 3 or 4 of this 111
section, as applicable, the parties' rights and obligations 112
shall be governed by the provisions of subsection 3 or 4 of 113
this section, as applicable. 114
(2) Where the guaranty association covering policies 115
of life or health insurance or annuities referred to in 116
section 375.1178 or the receiver, as the case may be, does 117
not timely elect to assume a reinsurance contract pursuant 118 SS SB 1359 7
to subsection 3 or 4 of this section, as applicable, the 119
reinsurance contract shall be terminated retroact ively 120
effective on the date of the order of liquidation and 121
subsection 9 of this section shall apply. 122
7. When policies of life or health insurance or 123
annuities referred to in section 375.1178, or the 124
obligations of the guaranty association with r espect 125
thereto, are transferred to an assuming insurer, reinsurance 126
on the policies or annuities may also be transferred by the 127
guaranty association, in the case of contracts assumed under 128
subsection 3 of this section, or the receiver, in the case 129
of contracts assumed under subsection 4 of this section, 130
subject to the following: 131
(1) Unless the reinsurer and the assuming insurer 132
agree otherwise, the reinsurance contract transferred shall 133
not cover any new policies or annuities in addition to th ose 134
transferred; 135
(2) The obligations described in subsections 3 and 4 136
of this section shall no longer apply with respect to 137
matters arising after the effective date of the transfer; and 138
(3) Notice shall be given in writing, return receipt 139
requested, by the transferring party to the affected 140
reinsurer not less than thirty days prior to the effective 141
date of the transfer. 142
8. The provisions of this section shall, to the extent 143
provided in sections 375.1150 to 375.1246, supersede the 144
provisions of any law or of any affected reinsurance 145
contract that provides for or requires any payment of 146
reinsurance proceeds, on account of losses or events that 147
occur in periods after the date of the order of liquidation, 148
to the receiver of the cedi ng insurer or any other person. 149
The receiver shall remain entitled to any amounts payable by 150 SS SB 1359 8
the reinsurer under the reinsurance contracts with respect 151
to losses or events that occur in periods prior to the date 152
of the order of liquidation, subject to provisions of 153
sections 375.1150 to 375.1246 including applicable setoff 154
provisions. 155
9. When a reinsurance contract is terminated pursuant 156
to sections 375.1150 to 375.1246, the reinsurer and the 157
receiver shall commence a mandatory negotiation pro cedure in 158
accordance with this subsection: 159
(1) No later than thirty days after the date of 160
termination, each party shall appoint an actuary to 161
determine an estimated sum due as a result of the 162
termination of the reinsurance contract calculated in a way 163
expected to make the parties economically indifferent as to 164
whether the reinsurance contract continues or terminates, 165
giving due regard to the economic effects of the 166
insolvency. The sum shall take into account the present 167
value of future cash flows expected under the reinsurance 168
contract and be based on a gross premium valuation of net 169
liability using current assumptions that reflect post - 170
insolvency experience expectations, with no additional 171
margins, net of any amounts payable and receiva ble, with a 172
market value adjustment to reflect premature sale of assets 173
to fund the settlement; 174
(2) Within ninety days of the date of termination, 175
each party shall provide the other party with its estimate 176
of the sum due as a result of the termin ation of the 177
reinsurance contract, together with all relevant documents 178
and other information supporting the estimate. The parties 179
shall make a good faith effort to reach agreement on the sum 180
due; 181 SS SB 1359 9
(3) If the parties are unable to reach agreement 182
within ninety days following the submission of materials 183
required in subdivision (2) of this subsection, either party 184
may initiate arbitration proceedings as provided in the 185
reinsurance contract. In the event that the reinsurance 186
contract does not contain an arbitration clause, either 187
party may initiate arbitration pursuant to this subdivision 188
by providing the other party with a written demand for 189
arbitration. The arbitration shall be conducted pursuant to 190
the following procedures: 191
(a) Venue for the arbitration shall be within the 192
county of the court's jurisdiction pursuant to section 193
375.1154, or another location agreed to by the parties; 194
(b) Within thirty days of the responding party's 195
receipt of the arbitration demand, each part y shall appoint 196
an arbitrator who is a disinterested active or retired 197
officer or executive of a life or health insurance or 198
reinsurance company, or other professional with no less than 199
ten years' experience in or relating to the field of life or 200
health insurance or reinsurance. The two arbitrators shall 201
appoint an independent, impartial, disinterested umpire who 202
is an active or retired officer or executive of a life or 203
health insurance or reinsurance company, or other 204
professional with no less th an ten years' experience in the 205
field of life or health insurance or reinsurance. If the 206
arbitrators are unable to agree on an umpire, each 207
arbitrator shall provide the other with the names of three 208
qualified individuals, each arbitrator shall strike two 209
names from the other's list, and the umpire shall be chosen 210
by drawing lots from the remaining individuals; 211
(c) Within sixty days following the appointment of the 212
umpire, the parties shall, unless otherwise ordered by the 213 SS SB 1359 10
panel, submit to the arbitration panel their estimates of 214
the sum due as a result of the termination of the 215
reinsurance contract, together with all relevant documents 216
and other information supporting the estimate; 217
(d) The time periods set forth in these paragraphs ma y 218
be extended upon mutual agreement of the parties; 219
(e) The panel shall have all powers necessary to 220
conduct the arbitration proceedings in a fair and 221
appropriate manner, including the power to request 222
additional information from the parties, aut horize 223
discovery, hold hearings, and hear testimony. The panel 224
also may appoint independent actuarial experts, the expense 225
of which shall be shared equally between the parties; 226
(4) An arbitration panel considering the matters set 227
forth in this subsection shall apply the standards set forth 228
in this subsection and shall issue a written award 229
specifying a net settlement amount due from one party or the 230
other as a result of the termination of the reinsurance 231
contract. The receivership court shal l confirm that award 232
absent proof of statutory grounds for vacating or modifying 233
arbitration awards under the Federal Arbitration Act; 234
(5) If the net settlement amount agreed or awarded 235
pursuant to this subsection is payable by the reinsurer, the 236
reinsurer shall pay the amount due to the estate subject to 237
any applicable set-off under section 375.1198. If the net 238
settlement amount agreed or awarded pursuant to this 239
subsection is payable by the ceding insurer, the reinsurer 240
shall be deemed to h ave a timely filed claim against the 241
estate for that amount, which claim shall be paid pursuant 242
to the priority established in subsection 5 of section 243
375.1218. The affected guaranty associations shall not be 244
entitled to receive the net settlement amo unt, except to the 245 SS SB 1359 11
extent they are entitled to share in the estate assets as 246
creditors of the estate, and shall have no responsibility 247
for the net settlement amount. 248
10. Except as otherwise provided in this section, 249
nothing in this section shall alter or modify the terms and 250
conditions of any reinsurance contract. Nothing in this 251
section shall abrogate or limit any rights of any reinsurer 252
to claim that it is entitled to rescind a reinsurance 253
contract. Nothing in this section shall give a pol icyholder 254
or beneficiary an independent cause of action against a 255
reinsurer that is not otherwise set forth in the reinsurance 256
contract. Nothing in this section shall limit or affect any 257
guaranty association's rights as a creditor of the estate 258
against the assets of the estate. Nothing in this section 259
shall apply to reinsurance contracts covering property or 260
casualty risks. 261
11. This section and subdivision (10) of subsection 1 262
of section 376.734 shall be construed together in a manner 263
that is consistent with each other and with the purpose 264
provided for in section 376.715. 265
380.621. 1. This section shall be known as the 1
"Protecting Missouri's Mutual Insurance Companies Act". 2
2. As used in this section, the followin g terms shall 3
mean: 4
(1) "Adequate reinsurance", commercially available 5
reinsurance as deemed appropriate by the board of directors 6
of the company; 7
(2) "Unlimited aggregate reinsurance", aggregate 8
reinsurance coverage where the losses covere d by the 9
reinsurer are not limited, including but not limited to the 10
annual aggregate reinsurance amount set forth in subdivision 11
(1) of 20 CSR 200-12.030. 12 SS SB 1359 12
3. Notwithstanding any provision of law to the 13
contrary, the authority expressly granted i n this chapter 14
shall be the sole authority granted to the department over 15
any Missouri mutual insurance company operating under the 16
provisions of this chapter, provided however that any 17
provisions regarding premium taxation set forth in chapter 18
148 that are applicable to Missouri mutual insurance 19
companies shall remain applicable to Missouri mutual 20
insurance companies and further provided however that 21
chapter 382, as amended, shall remain applicable to any 22
Missouri mutual insurance company which is a member of, or 23
is seeking to become a member of, an "insurance holding 24
company system", as that term is defined in section 382.010, 25
as amended, provided however that any examination authorized 26
by chapter 382 shall comply with subsection 6 below where a 27
Missouri mutual insurance company owns, in whole or part, an 28
affiliate subject to examination. The department shall not 29
require any company operating under the provisions of this 30
chapter to waive any rights, benefits, or requirements 31
specified in this chapter, nor shall it confer favorable 32
treatment in exchange for, nor condition the granting of any 33
exception upon, any company conceding additional regulatory 34
oversight by the department. If the department and any 35
company operating under the pro visions of this chapter have 36
entered into any agreement in which the department has 37
received concessions, including but not limited to 38
additional regulatory oversight beyond the authority 39
expressly granted in this chapter, then such agreement as it 40
relates to the department's authority is void upon the 41
enactment of this section, but such agreement shall remain 42
in full force and effect for the stated duration of the 43 SS SB 1359 13
agreement as it relates to any benefits, allowances, or 44
exemptions granted to the co mpany by the agreement. 45
4. Notwithstanding any provision of law to the 46
contrary, nothing in this chapter nor any regulation 47
promulgated by the department, including but not limited to 48
any regulation promulgated pursuant to sections 374.045, 49
380.021, 380.271, and 380.561, shall require or be construed 50
to require any company operating under the provisions of 51
this chapter to acquire or carry reinsurance greater than 52
adequate reinsurance, including but not limited to unlimited 53
aggregate reinsuranc e. Nothing in this section shall be 54
construed to limit the option of an offer of unlimited 55
aggregate reinsurance. 56
5. Notwithstanding any provision of law to the 57
contrary, including but not limited to the provisions of 58
section 380.321, the direct or shall not have the authority 59
to hold a hearing regarding a proposed merger of companies 60
operating pursuant to the provisions of this chapter, unless 61
the director has substantial and competent evidence to 62
believe the proposed merger will prejudice th e interests of 63
the policyholders of the companies. The director shall have 64
fifteen business days to review the petition for merger and, 65
upon substantial and competent evidence to believe the 66
proposed merger will prejudice the interests of the 67
policyholders of the companies, send a written notice of a 68
hearing regarding the proposed merger. The written notice 69
of hearing shall itemize the reasons why the director 70
believes the proposed merger will prejudice the 71
policyholders of the companies and shal l include the date of 72
a hearing regarding the proposed merger no earlier than 73
thirty days and no later than sixty days after the notice of 74 SS SB 1359 14
hearing is received by the companies involved in the 75
proposed merger. 76
6. Notwithstanding the provisions of section 380.491, 77
the department shall not charge a rate for examinations in 78
excess of a reasonable fee. A reasonable fee is determined 79
by the average market rate typically charged by third party 80
vendors for such services. All working papers, recorded 81
information, documents, and copies thereof, produced by, 82
obtained by, or disclosed to the department or any other 83
person in the course of an examination made under this 84
chapter shall be confidential and not subject to subpoena, 85
and shall not be made public by the department or shared 86
with any other person, except as follows: 87
(1) Upon adoption, the director may open the final 88
examination report for public inspection; 89
(2) The director may disclose the content of an 90
examination report, pre liminary examination report or 91
results, or any matter relating thereto, to the insurance 92
department of this or any other state or country, or to law 93
enforcement officials of this or any other state or agency 94
of the federal government at any time, so lo ng as such 95
agency or office receiving the report or matters relating 96
thereto agrees in writing to hold it confidential and in a 97
manner consistent with this section; and 98
(3) In the event the director determines that legal or 99
regulatory action is a ppropriate as a result of any 100
examination, he or she may initiate any proceedings or 101
actions as provided by law. 102
7. (1) At any time after notification of the 103
commencement of an examination and through its completion, a 104
company may request a sche duling conference with the 105
department to discuss the following: 106 SS SB 1359 15
(a) The purpose and scope of the examination; 107
(b) The estimated costs of the examination; 108
(c) The types of information that the company will be 109
asked to produce; 110
(d) The most efficient means of conducting the 111
examination; and 112
(e) Any alternative approaches in conducting the 113
examination that would be more convenient, less burdensome, 114
or less expensive for the company while still providing for 115
an effective examination by the department. 116
(2) (a) No more than thirty days after the scheduling 117
conference, the department shall provide the company with a 118
detailed written budget estimate for the examination that 119
shall, for each forthcoming phase of the examin ation: 120
a. Identify the individuals or firms performing the 121
examination and their daily or hourly rates; 122
b. Provide an estimate of travel, lodging, meal, and 123
other administrative or supply costs; and 124
c. Estimate the length of time necess ary to conduct on- 125
site and off-site examination activities. 126
(b) Within fifteen days of receipt of a budget 127
estimate under paragraph (a) of this subdivision, the 128
company and the department shall have an additional 129
discussion regarding the most eff icient means of conducting 130
the examination and producing information. If necessary, 131
revisions of the budget estimate shall be made. 132
(c) The time periods under paragraphs (a) and (b) of 133
this subdivision may be extended if the company and the 134
department mutually agree to the extension. 135
(d) At any time during the examination, the department 136
shall hold another scheduling conference with the company in 137
accordance with the provisions of this subsection and 138 SS SB 1359 16
provide a revised budget estimate as set forth in paragraph 139
(a) of this subdivision if: 140
a. The department determines that the cost of the 141
examination will exceed the stated estimated budget by more 142
than ten percent; or 143
b. There is a material change in staffing. 144
380.631. 1. This section applies to any company 1
operating under the provisions of this chapter. 2
2. A company operating under the provisions of chapter 3
380 is "insolvent" if it is unable to pay its obligations 4
when they are due, or if its admi tted assets do not exceed 5
its liabilities plus the reserve fund or adequate guaranty 6
fund required by section 380.021 or 380.271, as applicable. 7
3. Notwithstanding any provision of law to the 8
contrary, including but not limited to the specific 9
exception in subdivision (1) of subsection 2 of section 10
375.1150, as amended, the proceedings authorized by sections 11
375.1150 to 375.1246 may be applied to all companies 12
operating under the provisions of chapter 380, except that 13
such companies shall not be subject to sections 375.1160 to 14
375.1164. Sections 375.570 to 375.750, as amended, shall 15
apply to such proceedings. 16