Missouri Senate

Senate Committee Substitute

VOLUNTARY LIQUIDATION OF DOMESTIC STOCK INSURANCE COMPANIES -

Under this act, a domestic insurer organized as a stock insurance company may voluntarily dissolve and liquidate provided that the director of the Department of Insurance approves the articles of dissolution prior to the insurer's filing of such articles with the Secretary of State and the insurer files with the secretary of state a copy of the director's approval, certified by the director, along with articles of dissolution.

In determining whether to approve the articles of dissolution, the director shall consider, among other factors, whether:

1) The insurer's annual financial statements filed with the director show no written insurance premiums for 5 years;

2) The insurer has demonstrated that all policyholder claims have been satisfied or have been transferred to another insurer in a transaction approved by the director; and

3) A market conduct examination of the insurer has been completed within the last 5 years (section 375.1175). This provision is identical the one contained in SCS/SB 834 (2010).

ANTICANCER DRUG PARITY - Under this act, every health benefit plan that is issued in this state that provides coverage for cancer chemotherapy treatment must provide coverage for a prescribed, orally administered anticancer medication used to kill or slow the growth of cancerous cells on a basis no less favorable than intravenously administered or injected cancer medications that are covered under the health benefit plan. The act shall not apply to certain supplemental insurance policies such as specified disease policies, Medicare supplement policies, and similar products (section 376.1257). This provision is also contained in SS/SB 786 (2010).

APPROVAL OF LONG-TERM CARE INSURANCE RATES - Under this act, no insurance company shall issue any policy or certificate of long-term care insurance in this state, unless the classification of risks and the premium rates pertaining to such policy have been filed with and approved by the director.

Under the terms of the act, rates for long-term care insurance shall not be excessive, inadequate, or unfairly discriminatory. Rates charged to any policyholder or certificate holder shall not increase by more than 15% during any annual period, unless the insurer can clearly document a material and significant change in the risk characteristics of all of its in force long-term care insurance policies or certificates. When formulating rates for long-term care insurance, consideration shall be given to:

(1) Past and prospective loss experience;

(2) Past and prospective expenses;

(3) Adequate contingency reserves; and

(4) All other relevant factors within and without the state.

The director shall approve or disapprove a rate filing within 45 days after the filing. The failure of the director to take action approving or disapproving a submitted rate filing within the stipulated time shall be deemed an approval until such time as the director shall notify the submitting company of his or her disapproval. Reasons for disapproving a rate shall be stated in writing. Any notice of disapproval shall state that a hearing shall be granted, if requested by the insurer (Section 376.1110). This provision is also contained in SCS/SB 979 (2010).

REFUNDING OF MEDICARE SUPPLEMENT AND LONG-TERM CARE INSURANCE PREMIUMS - This act enacts various provisions pertaining to refunding of unearned premiums for Medicare supplement policies and long-term care insurance policies. Under this act, if a Medicare supplement policy issued, delivered, or renewed in Missouri on or after January 1, 2011, is cancelled for any reason, the insurer must refund the unearned portion of any premium paid beyond the month in which the cancellation is effective. Any refund shall be returned to the policyholder within 20 days from the date the insurer receives notice of the cancellation. Under the act, a policyholder may cancel a Medicare supplement policy by sending verbal, written, or electronic notification (Section 376.882). Under this act, if a long-term care insurance policy issued, delivered, or renewed in Missouri on or after January 1, 2011, is cancelled for any reason, the insurer must refund the unearned portion of any premium paid beyond the month in which the cancellation is effective. Any refund shall be returned to the policy holder within 20 days from the date the insurer receives notice of the cancellation.. The long-term care insurance policy must contain notices which inform applicants that they are entitled to a refund of unearned premiums if such policies are cancelled for any reason. Under the act, a policyholder may cancel a long-term care insurance policy by sending verbal, written, or electronic notification (Section 376.1109). These provisions may also be found in SCS/SB 583 (2010).

DETERMINING WHETHER AN INSURANCE COMPANY IS OPERATING IN A HAZARDOUS FINANCIAL CONDITION - This act authorizes the director of the Department of Insurance to determine whether an insurance company is in a hazardous financial condition. Under the act, the director may deem any property or casualty insurance company which has any policy in force with a net retained risk that exceeds 10% of the company's capital and surplus to be in a hazardous financial condition. The act also sets forth twenty factors for the director to consider when determining whether an insurance company may be in hazardous financial condition. For example, the director may consider "adverse findings reported in financial condition and market conduct examination reports, audit reports, and actuarial opinions, reports or summaries" when determining whether the continued operation of the insurer may be hazardous to Missouri's policyholders, creditors, or the general public. If the director determines that the continued operation of an insurer may be hazardous to Missouri' policyholders, creditors or the general public, the director may issue an order requiring the insurer to take various actions. For instance, the director may require the insurer to reduce its total amount of present and potential liability for policy benefits by reinsurance, reduce its volume of business, increase its capital and surplus, or document the adequacy of premium rates in relation to the risks insured. Any insurer subject to an order from the director may request a hearing and the hearing shall be conducted in private unless the insurer requests a public hearing (section 375.539). This provision may also be found in SCS/SB 685 (2010).

This act modifies Missouri's current law regarding risk-based capital (amount of required capital that the insurance company must maintain based on the inherent risks in the insurer's operations) reporting requirements for property and casualty insurance companies. Under this act, the Department of Insurance may require a property and casualty insurance company to take action if its risk based capital fails the National Association of Insurance Commissioners (NAIC) RBC trend test. The RBC trend test for property and casualty insurance companies is stated in the act as a company action level event where "the insurer has total adjusted capital which is greater than or equal to its Company Action Level RBC but less than the product of its Authorized Control Level RBC and 3.0 triggers the trend test determined in accordance with the trend test calculation included in the Property & Casualty RBC report instructions." Risk-Based Capital tests the adequacy of an insurance company's capital to meet the risks posed by its investment portfolio and the types and volume of insurance it underwrites. Risk-based capital tests the adequacy of an insurance company's capital by comparing its actual capital to the minimum amount capital determined necessary to operate the insurance company based on the risk factors associated with the volume and type of insurance business it transacts and the types of investments it makes (section 375.1255). This provision may also be found in SCS/SB 685 (2010).

INSURERS SUPERVISION, REHABILITATION AND LIQUIDATION ACT - This act amends the "Insurers Supervision, Rehabilitation and Liquidation Act" (Sections 375.1150 to 375.1246), to provide for the treatment of qualified financial contracts in insurance insolvency proceedings. The central purpose of the act is to increase certainty of insurers and their creditors with respect to the enforceability of certain financial market transactions and related netting agreements in the event of an insurer insolvency. To accomplish this, this act adopts certain termination, netting, and liquidation provisions applicable to derivative transactions that are contained in the latest version of the NAIC Insurance Receivership Model Act (IRMA).

The act provides definitions for specific types of financial contracts commonly used in the financial markets, including commodity contracts, forward contracts, qualified financial contracts, and the related netting agreements. As defined in this act, "qualified financial contracts" encompass a range of commonly traded financial market contracts, including over-the counter and exchange traded derivatives, such as swap agreements, forward contracts, securities contracts, repurchase (repo) agreements, and commodity contracts. The act also provides a definition for the term "netting agreement". A "netting agreement" is defined, based upon IRMA, as a contract or agreement that documents one or more transactions between the parties for or involving one or more qualified financial contracts and that provides for the netting or liquidation of qualified financial contracts or present or future payment obligations or payment entitlements thereunder (Section 375.1152).

The act provides for the enforcement and recognition of the contractual rights of the insurer's counterparties under qualified financial contracts, netting agreements, and related security agreements to terminate, accelerate, and close out such contracts, to offset and net off obligations owing under such contracts, and to enforce any security rights under such agreements, free of any stay or prohibition that might otherwise apply under a delinquency proceeding (subsection 3 of Section 375.1155 and subsection 1 of Section 375.1191).

This act provides for the transfer of any net or settlement amount owing under a qualified financial contract by the nondefaulting party to the insurer to the receiver. If netting results in an amount owing to the insurer, this provision confirms that the receiver steps into the "insurer's shoes" as to that net amount (subsection 2 of Section 375.1191).

The act provides for the transfer of all netting agreements and qualified financial contracts between an insurer and a single counterparty and its affiliates together if a bulk transfer of insurer liabilities or contracts is made by the receiver (subsections 3 and 4 of Section 375.1191).

This act provides for validation of payments and transfers of money and property under netting agreements and qualified financial contracts made prior to the commencement of a formal delinquency proceeding, unless such transfers were made with actual intent to hinder, delay or defraud the insurer, the receiver appointed for the insurer, or other creditors (subsection 5 of Section 375.1191).

This act provides that if the receiver disaffirms or repudiates any qualified financial contracts or netting agreements with a counterparty, the receiver must disaffirm or repudiate all such contacts (subsection 6 of Section 375.1191). The act also establishes the amount of the counterparty's claim in the event of disaffirmance or repudiations. The amount of a claim for damages shall be actual direct compensatory damages as of the date of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract.

These provisions can also be found in SCS/SB 978 (2010).

STEPHEN WITTE