SB 0759 - Fiscal Note

Fiscal Note - SB 0759 - Insurance & Risk-Based Capital, Mutual Holding Company

L.R. NO.  2443-05
BILL NO.  Truly Agreed To and Finally Passed HCS SCS SB 759
SUBJECT:  Insurance,  Insurance-General, Insurance-Property, Department of
Insurance
TYPE:     Original
DATE:     May 7, 1996



                              FISCAL SUMMARY

                    ESTIMATED NET EFFECT ON STATE FUNDS

FUND AFFECTED               FY 1997         FY 1998         FY 1999

None

Total Estimated
Net Effect on All
State Funds                      $0              $0              $0


                   ESTIMATED NET EFFECT ON FEDERAL FUNDS

FUND AFFECTED               FY 1997         FY 1998         FY 1999

None

Total Estimated
Net Effect on All
Federal Funds                    $0              $0              $0


                    ESTIMATED NET EFFECT ON LOCAL FUNDS

FUND AFFECTED               FY 1997         FY 1998         FY 1999

Local Government                 $0              $0              $0


                              FISCAL ANALYSIS

ASSUMPTION

Officials from the Department of Insurance (INS) stated that passage of this
legislation would have no fiscal impact on their agency.  However, the
passage of more than one similar proposal could require the INS to request
increased appropriations to cover cumulative administrative cost.


FISCAL IMPACT - State Government     FY 1997   FY 1998   FY 1999
                                    (10 Mo.)

                                          $0        $0        $0

FISCAL IMPACT - Local Government     FY 1997   FY 1998   FY 1999
                                    (10 Mo.)

                                          $0        $0        $0

DESCRIPTION

This act includes property and casualty insurers in the sections regulating
risk-based capital (RBC).

RBC REPORTS - Property and casualty insurers shall report RBC levels annually
in a manner similar to life and health insurers.  RBC reports by domestic
insurers shall be made by March 1st of each year (instead of March 15th).
Insurers should seek to maintain capital above the levels required.

COMPANY ACTION LEVEL EVENT - Property and casualty insurers need not worry
about a negative trend in adjusted capital.

REGULATORY ACTION LEVEL EVENT - It shall be a regulatory action level event
if the insurer fails to eliminate a company action level event.

MANDATORY CONTROL LEVEL EVENT - Property and casualty insurers which are
running-off existing business need not be placed under regulatory control.

DEPARTMENT - Hearings by the Department of Insurance shall  be confidential.
RBC instructions, reports and plans shall not be used for ratemaking
purposes.  The Director of Insurance may adopt rules to implement these
sections and may exempt small domestic property and casualty insurers.  The
Director and the Department of Insurance shall have no liability for actions
taken under these sections.

FOREIGN INSURERS - One option for the maximum time for submitting an RBC
report is lowered from 45 to 15 days after the request is received.  An RBC
plan may be required for an authorized control level event.

PHASING IN FOR PROPERTY & CASUALTY - The regulatory actions which may be
taken against property and casualty insurers are reduced for the 1996 RBC
reports.

In addition, this proposal  revises the law pertaining to mutual insurance
holding companies.  It contains separate sections for life insurance
companies organized under Chapter 376, RSMo, and insurance companies
organized under Chapter 379, RSMo. A mutual life insurance company can become
a  mutual life insurance holding company.  The mutual shall file an
application and plan with the Director of Insurance, who shall conduct an
adequate review and may conduct a hearing.  The plan shall be approved unless
it is not fair and equitable to the policyholders.  The mutual holding
company shall own a majority of the shares of the stock of the reorganized
life insurance company.  Any subsidiaries of the life insurance company may
remain such or become subsidiaries of the mutual holding company.  The
policyholders' membership interests shall be transferred to the holding
company.  Members are not liable for the obligations of the company, and they
may not be assessed  for liabilities. The articles of incorporation and any
amendments shall be subject to approval by the Director and the Attorney
General.  Mutual holding companies shall have the same powers granted to
regular holding companies under Chapter 382, RSMo.  No holding company shall
engage in the insurance business, but it  may enter into an affiliation or
merger agreement with a mutual life insurance company.  A mutual holding
company shall be party to any proceeding under the Insurers Supervision,
Rehabilitation and Liquidation Act involving a subsidiary of the holding
company or  a subsidiary of a stock holding company created under this act.
In such an action, the assets of the holding company shall be available to
satisfy claims against the subsidiary. Any mutual insurance company formed
under Chapter 379, RSMo (property, liability, fidelity & surety, accident &
health) may form a mutual insurance holding company in the same manner as
provided above.

This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.



SOURCES OF INFORMATION

Department of Insurance