INSURANCE HOLDING COMPANIES

This act modifies the scheme regulating insurance holding companies. It adds a definition for "enterprise risk" and expands the definition of "person" to include a limited liability company and exempts venture partnerships focused on tangible personal property from the definition of "person". Currently, notice to the insurer and a filed statement to the director are required only of a person acquiring a controlling interest in a domestic insurer. This act requires that a person seeking to divest a controlling interest in a domestic insurer also provide notice to the insurer and a filed statement to the director.

This act also requires a person acquiring a controlling interest in a domestic insurer to file an agreement to file annual reports with the director and an acknowledgment that all subsidiaries must provide information on request for the director to evaluate enterprise risk to the insurer. The public hearing, when required to approve the merger or acquisition, may be a consolidated hearing if approval is required by more than one State Insurance Commissioner. The director must also make a determination within 60 days of notice of change of control of a domestic insurer if the person acquiring control must restore or maintain the levels of capital of the insurer in accordance with the laws of Missouri. The acquisitions requiring approval by the director are also no longer exempt from the requirements, violations and penalties found in current law.

This act also expands the information required for registration of insurers to include financial statements of the insurance holding company and its affiliates upon request of the director, statements that the insurer's board of directors oversees corporate governance, and any other information required by the director by regulation. A person may be relieved of duty to register or report only if a disclaimer of affiliation is either approved by the director or deemed approved if the director does not take action on the disclaimer within 30 days of receipt of a complete disclaimer. In addition to the previously required registration and reporting requirements, the ultimate controlling person in an insurance holding company system subject to registration must file with the director an annual enterprise risk report for the insurance holding company system. Failure to file the enterprise risk statement will also be a violation of this act.

This act requires that the accounts and records of material transactions between affiliates contain accounting information to support the reasonableness of charges or fees to the respective parties. Agreements for cost sharing services and management will be controlled by rules and regulations issued by the director. Affiliates cannot enter into additional agreement types without notice to and approval of the director including: reinsurance pooling agreements, tax allocation agreements, guarantees when made by the domestic insurer with some exceptions, and some direct and indirect acquisitions in a person that controls the insurer or an affiliate of the insurer. The required notice to the director for modified affiliate agreements must include the reasons for the change and the financial impact on the insurer. Additionally the director must be notified if a domestic insurer investment causes the insurer to acquire a 10% interest in a corporation's voting securities.

This act also expands the powers of the director to examine any registered insurer to ascertain financial condition and enterprise risk. The director may also order an insurer to produce information not in the possession of the insurer if the insurer can obtain the information pursuant to contractual, statutory, or other means. The director may assess a penalty of $1,000 per day for delay in producing the information if the insurer does not provide the director with a detailed explanation for the inability to obtain the information that the director finds to have merit. The director is also given the power to examine affiliates of an insurer under oath and issue subpoenas if an insurer fails to comply with an order.

This act gives the director the power to initiate the establishment of, and participate in a supervisory college to regulate registered insurers that are part of an international insurance holding company system. Insurers subject to this requirement are liable for the reasonable expenses of the director to participate in the supervisory college.

This act also expands the regulations of the confidentiality and privilege for information and documents provided to the director and shared with other regulatory agencies or the National Association of Insurance Commissioners in the performance of the director's duties upon written agreement that the other regulatory agencies or the National Association of Insurance Commissioners will maintain the confidentiality and privilege. The information and documents cannot be subject to discovery or subpoena in any private civil action and the director cannot be permitted or forced to testify in private civil actions.

This act also provides an independent basis for the director to disapprove dividends or distributions if a violation of the chapter prevents a full understanding of the enterprise risk to the insurer.

This act exempts any insurance holding company or its affiliates from several provisions relating to enterprise risk reporting if the insurance company affiliates of such insurance holding company had total premiums of less than one hundred fifty million dollars in the preceding year and such insurance holding company certifies in writing to the Director of the Department of Insurance that more than twenty-five percent of the employees of its non-insurance affiliates are engaged in agricultural operations.

This section is substantially similar to SB 537 (2014) and identical to SB 205 (2015).

OWN RISK AND SOLVENCY ASSESSMENT

This bill enacts the provisions of the model legislation of the own risk and solvency assessments ("ORSA") legislation developed by the National Association of Insurance Commissioners ("NAIC"). The purpose of the model legislation is to allow large- and medium-sized insurers to develop their own model of current and future financial risk and allow regulators to determine how insurers will react to financial stress.

Beginning January 1, 2016, insurers must file an ORSA summary report with the Director of the Department of Insurance, Financial Institutions and Professional Registration ("director") at the request of director but no more than once each year. The ORSA summary report shall be prepared consistent with the current version of the ORSA guidance manual developed and adopted by the NAIC. Insurers may be exempt from the requirements of the act if they meet certain criteria or are granted a waiver by the director per the terms of the act.

All documents, materials, or other information, including the ORSA summary report, disclosed to the director under these provisions are recognized by this state as being proprietary and to contain trade secrets and must be confidential by law and privileged and not subject to disclosure under Chapter 610, RSMo, the Open Meetings and Records Law, commonly known as the Sunshine Law; be subject to subpoena; or be subject to discovery or admissible in evidence in any private civil action. In order to assist in the performance of regulatory duties, the director may share, upon request, ORSA related information with other state, federal, and international financial regulatory agencies, the NAIC, and third-party consultants designated by the director provided that the recipient has the legal authority to and agrees in writing to maintain the confidentiality and privileged status of the information. The director must not make the documents, materials, or other information public without the prior written consent of the insurer. Any insurer failing without just cause to timely file a required ORSA summary report commits a level two violation with respect to each day's delay.

This section is identical to HB 1183 (2014) and SB 206 (2015).

MICHELA BIRK