HCS HB 238 -- REGULATION OF CAPTIVE INSURANCE COMPANIES

SPONSOR:  Yates

COMMITTEE ACTION:  Voted "do pass" by the Committee on Insurance
Policy by a vote of 8 to 1.

This substitute changes the laws regarding captive insurance
companies and special purpose life reinsurance companies.

CAPTIVE INSURANCE COMPANIES

In the substitute's main provisions, captive insurance companies:

(1)  Are allowed, when permitted, to apply for a license to
provide insurance and annuity contracts under Section 376.010,
RSMo, to parent, affiliated, or controlled unaffiliated
companies;

(2)  Cannot adopt a name that is likely to be confused or
mistaken with an existing company;

(3)  Must maintain adequate paid-in capital and surplus as
required in order to be issued a license.  No dividend can be
paid without prior approval from the Director of the Department
of Insurance, Financial Institutions, and Professional
Registration;

(4)  Are allowed to be incorporated under Section 379.1310;

(5)  Must annually report their financial condition to the
department director as required;

(6)  Will be examined at least once every three years by the
department director or his or her agent;

(7)  Can have their license suspended or revoked by the
department director for cause;

(8)  Must comply with investment requirements contained in
Chapter 375 and Sections 379.080 and 379.082 as applicable;

(9)  May reinsure risks or portions of risks with prior approval
of the department director;

(10)  Cannot be required to join a rating organization or be
allowed to join or contribute financially to a plan, pool,
association, guaranty, or insolvency fund for claims arising out
of the operation of the company;

(11)  Must pay the taxes required under Section 379.1326 to the
Director of the Department of Revenue on or before May 1 of each
year.  Fees and assessments received by the Department of
Insurance, Financial Institutions, and Professional Registration
will be paid into the Insurance Dedicated Fund; and

(12)  Will fall under the jurisdiction of the Division of
Workers' Compensation within the Department of Labor and
Industrial Relations on insurance they provide for excess
workers' compensation insurance to its parent or affiliated
company.

SPECIAL PURPOSE LIFE REINSURANCE COMPANIES

In the substitute's main provisions, special purpose life
reinsurance companies:

(1)  Are created as a means to facilitate financing of life
insurance reserves, annuity reserves, or accident and health
reserves and reinsuring the embedded value of insurance business;

(2)  Are required to be licensed; have minimum surplus
requirements of at least $250,000; and meet statute and
regulation requirements relating to issuance of securities, the
valuing of assets, the payment of dividends, the maintenance of
books and records, and their tax treatment;

(3)  Must file a plan of operation with the Director of the
Department of Insurance, Financial Institutions, and Professional
Registration.  The plan of operation must contain a description
of the contemplated financial transactions and a detailed
description of transaction documents to which the special purpose
companies will be a party;

(4)  Are required to pay an initial license fee and annual
renewals of $7,500;

(5)  Are required to meet various standards for being granted a
license;

(6)  May be organized as a stock corporation, a statutory close
corporation, a limited liability company, or other form of
organization approved by the department director;

(7)  May enter into contracts with ceding companies under certain
conditions; and

(8)  May be ordered by a circuit court into conservation,
rehabilitation, or liquidation under certain conditions.

FISCAL NOTE:  Estimated Income on General Revenue Fund of $2,620
to $9,427,620 in FY 2008, $1,147 to $9,426,147 in FY 2009, and
$56 to $9,425,056 in FY 2010.  Estimated Income on Other State
Funds of $313,139 to $1,475,639 in FY 2008, $249,638 to
$1,412,138 in FY 2009, and $245,513 to $1,408,013 in FY 2010.

PROPONENTS:  Supporters say that the bill will create the
statutory framework to allow these companies to operate in
Missouri.  The bill will help lower the cost of insuring these
types of risks and create economic growth by keeping the money in
the state instead of sending premiums to out-of-state companies.

Testifying for the bill were Representative Yates; Reinsurance
Association of America; and Inglish and Monaco.

OPPONENTS:  There was no opposition voiced to the committee.

OTHERS:  Others testifying on the bill say that there needs to be
some changes to the bill.

Testifying on the bill was Missouri Healthcare Association.

Missouri House of Representatives
94th General Assembly, 1st Regular Session
Last Updated July 25, 2007 at 11:18 am