HB 2222 -- Insurers Supervision, Rehabilitation and Liquidation
Act

Sponsor:  Hobbs

This bill changes the laws regarding the Insurers Supervision,
Rehabilitation and Liquidation Act to provide for the treatment
of qualified financial contracts in insurance insolvency
proceedings.  In its main provisions, the bill:

(1)  Defines "qualified financial contract," commonly used in the
financial market, as a commodity contract and forward contract
and "netting agreement" as a contract or agreement that documents
one or more transactions between the parties to the agreement for
or involving one or more qualified financial contracts and that
provides for the netting, liquidation, setoff, termination,
acceleration, or closeout under or in connection with one or more
qualified financial contracts or present or future payment or
delivery obligations or payment of delivery entitlements
thereunder among the parties to the netting agreement (Section
375.1152, RSMo);

(2)  Allows for the enforcement and recognition of the
contractual rights of the insurer's counterparties under
qualified financial contracts, netting agreements, and related
security agreements to terminate, liquidate, accelerate, or close
out contracts; to offset and net off obligations owed under
contracts; and to enforce any security rights under agreements,
free of any stay or prohibition that might otherwise apply under
a delinquency proceeding (Sections 375.1155 and 375.1191.1);

(3)  Requires any net or settlement amount owed under a qualified
financial contract by the nondefaulting party to an insurer to be
transferred to or on the order of the receiver for the insurer
(Section 375.1191.2);

(4)  Requires a receiver to transfer all netting agreements and
qualified financial contracts between an insurer and a single
counterparty and its affiliates together if a bulk transfer of
insurer liabilities or contracts is made by the receiver
(Sections 375.1191.3 and 375.1191.4);

(5)  Prohibits a receiver from avoiding a transfer of money or
property under a netting agreement or qualified financial
contract made prior to the commencement of a formal delinquency
proceeding unless the transfer was made with the intent to
hinder, delay, or defraud the insurer, a receiver appointed for
the insurer, or existing or future creditors (Section
375.1191.5); and

(6)   Requires the receiver for the insurer to disaffirm or
repudiate all contracts if the receiver disaffirms or repudiates
any qualified financial contract or netting agreement with a
counterparty and establishes the amount of the counterparty's
claim in the event of disaffirmance or repudiations.  The amount
of a claim for damages must be the actual direct compensatory
damages determined as of the date of the disaffirmance or
repudiation of the netting agreement or qualified financial
contract (Section 375.1191.6).

Missouri House of Representatives
95th General Assembly, 2nd Regular Session
Last Updated September 14, 2010 at 3:13 pm