To repeal section 379.080, RSMo 1994, relating to insurance company investments, and to enact in lieu thereof two new sections relating to the same subject.

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

     Section A. Section 379.080, RSMo 1994, is repealed and two new sections enacted in lieu thereof, to be known as sections 379.080 and 379.083, to read as follows:

     379.080. 1. (1) The amount of the minimum capital required of a stock company to write the lines of business it proposes to transact or is transacting, or if the company is a mutual company an amount equal to the minimum capital required of a stock company transacting the same classes of business, shall be held in cash or invested in:

     (a) Treasury notes or bonds of the United States;

     (b) Bonds of the state of Missouri;

     (c) Bonds issued by any school district of the state of Missouri;

     (d) Bonds of any political subdivision of this state;

     (2) The remainder of the capital, surplus or policyholders' surplus of these companies and their other assets may be invested, to the extent allowed by this or any other provision of law, in:

     (a) The investments authorized by subdivision (1) of subsection 1 of this section;

     (b) Loans safely secured by personal property collateral worth, at its cash market value, not less than twenty percent in excess of the amount loaned thereon;

     (c) Stocks, bonds or evidences of indebtedness issued by corporations organized under the laws of this state, or of the United States or of any other state;

     (d) Bonds or other obligations issued by multinational development banks in which the United States is a member nation, including the African Development Bank;

     (e) Bonds of any other state, or of any political subdivision of any other state;

     (f) Mortgages or deeds of trust on unencumbered real estate in this or any other state worth not less than twenty percent in excess of the amount loaned thereon;

     (g) If a company is authorized to do business in a foreign country or a possession of the United States or has outstanding insurance or reinsurance contracts on risks located in a foreign country or United States' possession, the company may invest the remainder of its capital and other assets in securities, cash or other investments payable in the currency of the foreign country or possession that are of substantially the same kinds and classes as those eligible for investments under this subsection, provided that such investments are made with the approval of the director. The aggregate amount of the foreign investments and cash shall not exceed the greater of one and one-half times the amount of the company's reserves and other obligations under the contracts or the amount that the company is required by law to invest in the foreign country or possession, and the aggregate amount of foreign investments and cash shall not exceed five percent of the company's admitted assets. All foreign investments shall be reported to the director from time to time as he directs;

     (h) Loans evidenced by bonds, notes or other evidences of indebtedness guaranteed or insured, but only to the extent guaranteed or insured by the United States, any state, territory or possession of the United States, the District of Columbia, or by any agency, administration, authority or instrumentality of any of the political units enumerated;

     (i) Shares of insured state-chartered building and loan associations and federal savings and loan associations, if such shares are insured by the Federal Deposit Insurance Corporation;

     (j) Investments permitted by section 99.550, RSMo;

     (k) Data processing equipment, automobiles, real estate and put or call options and financial futures contracts to the extent allowed by this section and any other provision of law;

     (l) Investments in subsidiaries to the extent allowed by section 382.020, RSMo;

     (m) Any other investments not described herein provided the aggregate amount of such investments shall not exceed eight percent of the admitted assets of the company; [and]

     (n) Any investments in an investment pool meeting the requirements of section 379.083; and

     (o) Any other investments expressly authorized in writing by the director of the department of insurance.

     2. Violation of any of the provisions of this section by an insurer is grounds for the suspension or revocation of its certificate of authority by the director.

     379.083. 1. As used in this section, the following terms mean:

     (1) "Business entity", a corporation, limited liability company, association, partnership, joint stock company, joint venture, mutual fund trust, or other similar form of business organization, including such an entity when organized as a not for profit entity;

     (2) "Class one money market mutual fund", a money market mutual fund that at all times qualifies for investment using the bond class one reserve factor under the purposes and procedures of the SVO or any successor publication;

     (3) "Government money market mutual fund", a money market mutual fund that at all times:

     (a) Invests only in obligations issued, guaranteed or insured by the federal government or collateralized repurchase agreements composed of these obligations; and

     (b) Qualifies for investment without a reserve under the purposes and procedures of the SVO or any successor publication;

     (4) "Obligation", a bond, note debenture, trust certificate, including equipment certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance, credit tenant loan, loan secured by financing net leases and other evidences of indebtedness for the payment of money, or participation, certificates or other evidences of an interest in any of the foregoing, whether constituting a general obligation of the issuer or payable only out of certain revenues or certain funds pledged or otherwise dedicated for payment;

     (5) "Money market mutual fund", a mutual fund that meets the conditions of 17 C.F.R. paragraph 270.2a-7, under the Investment Company Act of 1940 (15 U.S.C. sections 80a-1 et seq.), as amended;

     (6) "Qualified bank", a national bank, state bank or trust company that at all times is no less than adequately capitalized as determined by the standards adopted by the United States banking regulators and that is either regulated by state banking laws or is a member of the Federal Reserve System;

     (7) "Repurchase transaction", a transaction in which an insurer purchases securities from a business entity that is obligated to repurchase the purchased securities or equivalent securities from the insurer at a specified price, either within a specified period of time or upon demand;

     (8) "Reverse repurchase transaction", a transaction in which an insurer sells securities to a business entity and is obligated to repurchase the sold securities or equivalent securities from the business entity at a specified price, either within a specified period of time or upon demand;

     (9) "Securities lending transaction", a transaction in which securities are loaned by an insurer to a business entity that is obligated to return the loaned securities or equivalent securities to the insurer, either within a specified period of time or upon demand;

     (10) "SVO", the Securities Valuation Office of the National Association of Insurance Commissioners.

     2. An insurer may acquire investments in investment pools that:

     (1) Invest only in:

     (a) Obligations that are rated one or two by the SVO or have an equivalent of an SVO one or two rating or, in the absence of a one or two rating or equivalent rating, the insurer has outstanding obligations with an SVO one or two or equivalent rating, by a nationally recognized statistical rating organization recognized by the SVO and have:

     a. A remaining maturity of three hundred ninety-seven days or less or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding three hundred ninety-seven days; or

     b. A remaining maturity of three years or less and a floating interest rate that resets no less frequently than quarterly on the basis of a current short-term index and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes. As used in this subparagraph, a current short-term index means the index with respect to federal funds, the prime rate, treasury bills, the London interbank offered rate or commercial paper;

     (b) Government money market mutual funds or class one money market mutual funds; or

     (c) Securities lending transactions, repurchase transactions and reverse repurchase transactions that meet all the requirements of sections 379.080 and 379.082; and

     (2) Invest only in investments which an insurer may acquire pursuant to sections 379.080 and 379.082, if the insurer's proportionate interest in the amount invested in these investments does not exceed the applicable limits of sections 379.080 and 379.082.

     3. An investment pool qualified pursuant to this section shall not:

     (1) Acquire securities issued, assumed, guaranteed or insured by the insurer or an affiliate of the insurer;

     (2) Borrow or incur an indebtedness for borrowed money, except for securities lending transactions and reverse repurchase transactions that meet the requirements of sections 379.080 and 379.082; or

     (3) Permit the aggregate value of securities then loaned or sold to, purchased from or invested in any one business entity pursuant to this section to exceed ten percent of the total assets of the investment pool.

     4. The limitations of section 379.082 shall not apply to an insurer's investment in an investment pool; except that, an insurer shall not acquire an investment in an investment pool pursuant to this section if, as a result of such investment, the aggregate amount of investments then held by the insurer pursuant to this section:

     (1) In any one investment pool would exceed ten percent of its admitted assets;

     (2) In all investment pools investing in investments permitted pursuant to subdivision (2) of subsection 2 of this section would exceed twenty-five percent of its admitted assets; or

     (3) In all investment pools would exceed thirty-five percent of its admitted assets.

     5. For an investment in an investment pool to be qualified pursuant to this section, the manager of the investment pool shall:

     (1) Be organized under the laws of the United States or an individual state and be designated as the pool manager in a pooling agreement;

     (2) Be the insurer, an affiliated insurer or a business entity affiliated with the insurer, a qualified bank, a business entity registered under the federal Investment Advisors Act of 1940 (15 U.S.C. section 80a-1 et seq.) as amended or, in the case of a reciprocal insurer or interinsurance exchange, its attorney-in-fact, or in cases of a United States branch of an alien insurer, its United States manager or affiliates or subsidiaries of its United States manager;

     (3) Compile and maintain detailed accounting records setting forth:

     (a) The cash receipts and disbursements reflecting each participant's proportionate investment in the investment pool;

     (b) A complete description of all underlying assets of the investment pool, including amount, interest rate, maturity date, if any, and other appropriate designations; and

     (c) Other records which, on a daily basis, allow third parties to verify each participant's investment in the investment pool; and

     (4) Maintain the assets of the investment pool in one or more accounts, in the name of or on behalf of the investment pool, under a custody agreement with a qualified bank. The custody agreement shall:

     (a) State and recognize the claims and rights of each participant;

     (b) Acknowledge that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and

     (c) Contain an agreement that the underlying assets of the investment pool shall not be commingled with the general assets of the custodian qualified bank or any other person.

     6. The pooling agreement for each investment pool shall be in writing and shall provide that:

     (1) An insurer and its affiliated insurers or, in the case of an investment pool investing solely in investments permitted under subdivision (1) of subsection 2 of this section, the insurer and its subsidiaries, affiliates or any pension or profit sharing plan of the insurer, its subsidiaries and affiliates or, in the case of a United States branch of an alien insurer, its United States manager, affiliates or subsidiaries of its United States manager, shall, at all times, hold one hundred percent of the interests in the investment pool;

     (2) The underlying assets of the investment pool shall not be commingled with the general assets of the pool manager or any other person;

     (3) In proportion to the aggregate amount of each pool participant's interest in the investment pool:

     (a) Each participant owns an undivided interest in the underlying assets of the investment pool; and

     (b) The underlying assets of the investment pool are held solely for the benefit of each participant;

     (4) A participant or, in the event of the participant's insolvency, bankruptcy or receivership, its trustee, receiver or other successor-in-interest, may withdraw all or any portion of its investment from the pool under the terms of the pooling agreement;

     (5) Withdrawals may be made upon demand without penalty or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter not to exceed five business days. Distributions pursuant to this subdivision shall be calculated in each case net of all then applicable fees and expenses of the pool. The pooling agreement shall provide that the pool manager shall distribute to a participant, at the discretion of the pool manager:

     (a) In cash, the then fair market value of the participant's pro rata share of each underlying asset of the investment pool;

     (b) In kind, a pro rata share of each underlying asset; or

     (c) In a combination of cash and in-kind distributions, a pro rata share in each underlying asset; and

     (6) The pool manager shall make the records of the investment pool available for inspection by the director of the department of insurance.

     7. The investment pool authorized pursuant to this section shall be a business entity.

     8. Transactions between the pool and its participants shall not be subject to the provisions of section 382.195, RSMo. Investment activities of pools and transactions between pools and participants shall be reported annually in the registration statement required by section 382.100, RSMo.