SCS SB 1188 -- ANNUITY CONTRACTS

SPONSOR:  Loudon (Luetkemeyer)

COMMITTEE ACTION:  Voted "do pass by consent" by the Committee on
Financial Services by a vote of 19 to 0.

This substitute amends the formula that may be used for
determining the minimum present value of an annuity when it is
terminated early.  Current law requires these contracts to offer
a minimum interest rate of 1.5%.  The substitute removes this
minimum and allows a rate that is tied to the five-year Constant
Maturity Treasury Rate, as reported by the Federal Reserve.  The
substitute allows the sellers of annuities to continue to use the
current formula until July 1, 2006.  The current law expires on
July 1, 2004.

The substitute contains an emergency clause.

FISCAL NOTE:  No impact on General Revenue Fund in FY 2005, FY
2006, and FY 2007.  Estimated Income on Other State Funds of $0
to $17,500 in FY 2005, $0 in FY 2006, and $0 in FY 2007.

PROPONENTS:  Supporters say that the bill is based upon a model
law revision published last year by the National Association of
Insurance Commissioners.  Sixteen states have adopted this model
language.  In 2002, the standard minimum nonforfeiture rate of 3%
was reduced to 1.5% to reflect the current low interest rate
environment.  Without the reduction, many insurers would have
been forced to withdraw their annuity products from the market,
giving Missouri investors fewer choices.  The proposed index
would permit the minimum nonforfeiture rate to fluctuate with
market conditions, which is a fair solution for investors and
insurers.

Testifying for the bill were Representative Luetkemeyer; Life
Insurance Association of Missouri; General American Financial;
Met Life; and AIG Financial Services.

OPPONENTS:  There was no opposition voiced to the committee.

Richard Smreker, Senior Legislative Analyst

Missouri House of Representatives
92nd General Assembly, 2nd Regular Session
Last Updated September 23, 2004 at 11:16 am