To amend chapter 375, RSMo, by adding thereto seven new sections relating to community investments by insurance companies.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF MISSOURI, AS FOLLOWS:

     Section A. Chapter 375, RSMo, is amended by adding thereto seven new sections, to be known as sections 375.1300, 375.1305, 375.1310, 375.1315, 375.1320, 375.1325 and 375.1330, to read as follows:

     375.1300. In enacting this article, the general assembly hereby finds and declares all of the following:

     (1) Insurance companies are a major source of investment capital in Missouri. Many low-income communities in the state, both rural and urban, need greater access to investment capital for purposes such as small business and community economic development and affordable housing rehabilitation and construction. Financial institutions, another major source of investment capital in Missouri, are required by the federal Community Reinvestment Act to address the credit needs of low-income communities in the areas they serve. Investments made pursuant to that federal act have helped revitalize low-income communities;

     (2) Insurers collect premiums from individuals and families throughout Missouri, including low-income communities. These premiums are part of an insurer's investable assets. Because insurance companies are separately regulated by each state, there has been no requirement that a portion of insurers' investment be made in low-income communities. Thus, insurers have not invested sufficiently in low-income communities in this state. The lack of investment in low-income communities has inhibited economic growth and stability in Missouri and contributed to their overall economic decline. Insurers that write a significant amount of coverage in Missouri should be required to invest a part of their total investable assets in low-income communities;

     (3) Those insurance companies that generate an average annual written premium of at least fifteen million dollars in Missouri have significant investable assets and have a continuing and affirmative obligation to invest in low-income communities of this state in such a way that those communities will be positively impacted;

     (4) Safe and sound investments authorized under sections 375.1300 to 375.1330 or by administrative regulations adopted pursuant thereto are available to insurers in low-income communities. Those investments are overlooked business opportunities that offer competitive rates of return and do not compromise the financial interests of shareholders and policyholders;

     (5) Insurers should be required to make safe and sound investments in low-income communities as a condition of maintaining a certificate of authority to do business in this state.

     375.1305. 1. As used in sections 375.1300 to 375.1330, unless the context requires otherwise, the following terms shall mean:

     (1) "Affordable housing", housing affordable to low-income families in Missouri, as determined by the department of economic development;

     (2) "Community development corporation", a private, nonprofit organization whose purpose is to foster economic growth and revitalization, create small businesses, or to develop affordable housing in a defined neighborhood or for a targeted population. A community development organization shall provide financial assistance for any of the following:

     (a) Commercial facilities that promote revitalization, community stability, or job creation or retention;

     (b) Businesses that provide jobs for low-income and very low income people, are owned by low-income and very low income people, or that enhance the availability of products and services to low-income and very low income people;

     (c) Community facilities;

     (d) Housing affordable to low-income and very low income people;

     (3) "Community development credit union", a credit union that has as a basic purpose the stimulation of economic development activities and community revitalization efforts aimed at benefiting the community it serves, a majority of which shall be low-income or very low income residents;

     (4) "Community development loan", a line of credit, commitment, or letter of credit for affordable housing and economic development not being met by the private market;

     (5) "Community development financial institution", a person other than an individual that:

     (a) Has a primary mission of promoting community development;

     (b) Serves an investment area or targeted population;

     (c) Provides development services in conjunction with equity investments or loans, directly or through a subsidiary or affiliate;

     (d) Maintains, through representation on its governing board or otherwise, accountability to residents of its investment area or targeted populations; and

     (e) Is not an agency or instrumentality of the United States, or of any state or political subdivision of a state;

     (6) "Director", the director of the department of insurance;

     (7) "Economically targeted investments", investments by insurers in low-income or very low income communities that benefit low-income or very low income individuals and have a positive impact on those communities. Economically targeted investments may be made directly by insurers, through intermediaries, or through partnerships, consortia, or other entities organized by insurers or other financial institutions. Those investments include, but are not limited to, the following:

     (a) Equity or debt investments:

     a. Through financial intermediaries (including, but not limited to, community development financial institutions, community development corporations, loan pools or consortia, microenterprise development organizations, minority-and women-owned financial institutions, and low-income or community development credit unions) that primarily lend or facilitate lending in low-income and very low income areas or to low-income and very low income individuals in order to promote community economic development or affordable housing development;

     b. In businesses or farms with gross annual revenues of less than or equal to one million dollars;

     c. In organizations promoting small and microenterprise businesses;

     d. In housing affordable to low-income and very low income households and community economic development in low-income and very low income communities; or

     e. In loan guaranty funds for low-income or very low income housing;

     (b) Community development loans;

     (c) Investments in projects eligible for the federal low-income housing tax credit;

     (d) Investments in state and municipal obligations that specifically support community economic development or affordable housing to benefit low-income and very low income individuals or communities;

     (e) Purchases of loans for multifamily affordable housing on the secondary market;

     (f) Grants or deferred interest loans to nonprofit organizations engaging in any of the following activities:

     a. Affordable rental housing rehabilitation and new construction;

     b. Supporting or developing facilities that promote community economic development in low-income and very low income areas or for low-income and very low income individuals, such as day care facilities;

     c. Activities essential to the capacity of low-income and very low income individuals or communities to utilize credit or sustain economic development;

     d. Small business or microenterprise development;

     (8) "Low-income", in the case of a person, an individual income, or in the case of a geographic area, a median family income, that is at least fifty percent and less than eighty percent of the adjusted area median income, with adjustments for family size and revised annually;

     (9) "Microenterprise", a commercial enterprise with ten or fewer employees, one or more of whom owns the enterprise;

     (10) "NAIC-3", investments that are of medium investment grade and rated 3, P3, or PSF3 by the Securities Valuation Office of the National Association of Insurance Commissioners;

     (11) "Small business", a commercial enterprise with gross annual revenues of less than or equal to one million dollars;

     (12) "Very low income", in the case of a person, an individual income, or in the case of a geographic area, a median family income, that is less than fifty percent of the adjusted area median income, with adjustments for family size and revised annually.

     375.1310. 1. An admitted life insurer shall invest one percent, and an admitted insurer other than a life insurer shall invest one-half of one percent (the "investment percentage") of Missouri direct written premiums in economically targeted investments, as follows:

     (1) During the 1998 calendar year, an admitted insurer that wrote at least fifteen million dollars of Missouri direct written premiums in the 1997 calendar year shall invest the investment percentage of its 1997 calendar year Missouri direct written premiums in economically targeted investments;

     (2) During the 1999 calendar year, an admitted insurer that wrote an aggregate of at least thirty million dollars of Missouri direct written premiums in the 1997 and 1998 calendar years shall invest the investment percentage of its aggregate 1997 and 1998 calendar years' Missouri direct written premiums in economically targeted investments. Economically targeted investments made during the 1998 calendar year pursuant to subdivision (1) may be counted toward that requirement;

     (3) During the 2000 calendar year, and during each subsequent calendar year, an admitted insurer that has written an aggregate of least forty-five million dollars of direct written premiums in Missouri in the three preceding calendar years shall have economically targeted investments in an amount equal to the investment percentage multiplied by its aggregate Missouri direct written premiums for the preceding three calendar years;

     (4) An insurer shall not be required to make economically targeted investments that are rated below NAIC-3. For the purpose of this article, investments shall be valued at actual cost.

     2. The amount that every insurer shall invest pursuant to this section shall be reduced by one dollar for every dollar that the insurer invests in economically targeted investments that are:

     (1) Loans to or equity investments in community development corporations engaged in promoting small or microenterprise business opportunities for low-income or very low income people through loans or equity investments;

     (2) Loans to or equity investments in small businesses or farms with gross annual revenues of less than one million dollars; or

     (3) Those investments which are either low-income or very low income economic development or deed restricted very low income housing.

     3. Every insurer shall include as part of its annual statement, a community investment report that states the type, number, dollar amount of economically targeted investments, and location by address and census tract of where economically targeted investments are invested, and a calculation of the value of the investments. This information shall be provided both in the aggregate and separately for low-income and very low income communities. The director may require additional information as is necessary to evaluate the investment performance of insurers and compliance with sections 375.1300 to 375.1330.

     375.1315. The board of directors of every admitted insurer shall adopt a community investment plan annually and cause a copy to be filed with the director. Every community investment plan shall contain at least the following:

     (1) A description of the specific community development needs to be addressed by the insurer's economically targeted investments;

     (2) The geographic areas where the insurer intends to make economically targeted investments;

     (3) A list of the specific types of economically targeted investments the insurer intends to make;

     (4) An assessment of the insurer's previous efforts in making economically targeted investments;

     (5) An identification of any obstacles to making economically targeted investments;

     (6) Strategies for overcoming any identified obstacles to making economically targeted investments that the insurer intends to take; and

     (7) Goals for the next year.

     375.1320. 1. Whenever the director has reason to believe that an admitted insurer has failed to adequately make economically targeted investments in accordance with sections 375.1300 to 375.1330 or she shall issue an order to show cause containing a statement of the charges, a statement of the insurer's potential liability, and a notice of hearing to be held at a time and place fixed therein which shall not be less than thirty days after service thereof, for the purpose of determining whether the director should issue an order that the insurer pay the penalty imposed by section 375.1325 and to cease and desist from further noncompliance with sections 375.1300 to 375.1330. The hearing shall be conducted in accordance with chapter 536, RSMo, or by an administrative law judge appointed by the director.

     2. If the charges are found to be justified, the director shall issue an order specifying the penalty that the insurer shall pay pursuant to section 375.1325, specifying remedial actions as are appropriate to require compliance, and specifying that the insurer shall cease and desist from engaging in investment practices that are found to be discriminatory or not in compliance with sections 375.1300 to 375.1330.

     3. Any interested person may file a petition with the director seeking the issuance of an order to show cause directed at an admitted insurer, for the reasons set forth in this section.

     375.1325. 1. An insurer that is found to have violated sections 375.1300 to 375.1330 is liable to the state for a civil penalty, to be fixed by the director as follows:

     (1) For the fist violation, an amount not to exceed fifty thousand dollars for each year in each three-year period during which the insurer was not in compliance;

     (2) For any subsequent violation, an amount not to exceed one hundred thousand dollars ($100,000) for each year in each three-year period during which the insurer was not in compliance.

     2. An insurer that fails to comply with a final order of the director under sections 375.1300 to 375.1330 shall be liable to the state in an amount not to exceed one hundred fifty thousand dollars. That penalty shall be in addition to any penalty arising under subsection 1 of this section. The director shall collect the amount so payable and may bring an action in the name of the State of Missouri to enforce collection. These penalties may be in addition to any other penalties provided by law.

     3. In addition to other penalties provided in this article, the director may suspend or revoke the certificate of authority of any insurer which fails to comply with an order issued pursuant to section 375.1320, and the director may suspend or revoke, in whole or in part, the certificate of authority of any insurer that receives more than one order to comply with sections 375.1300 to 375.1330.

     375.1330. Prior to January 1, 1998, the commissioner may issue bulletins adopting rules and guidelines for the purpose of implementing sections 375.1300 to 375.1330. Not later than January 1, 1998, the director shall adopt regulations for the purpose of implementing sections 375.1300 to 375.1330. The bulletins and regulations may specify or define additional economically targeted investments.