HCS SB 464 -- REGULATION OF CERTAIN BUSINESS ENTITIES

SPONSOR:  Stouffer (Yates)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Insurance
Policy by a vote of 9 to 1.

This substitute changes the laws regarding the regulation of
certain business entities.

TAXATION OF INSURANCE COMPANIES (Sections 143.441 - 148.370,
RSMo)

Currently, insurance companies which pay an annual tax on gross
premium receipts are exempt from Missouri corporate income and
franchise taxes.  The substitute specifies that insurance
companies which are subject to an annual tax on gross premium
receipts are exempt from Missouri corporate income and franchise
taxes.

INSURANCE IDENTIFICATION CARDS (Section 303.024)

The crime of knowingly or intentionally producing, manufacturing,
selling, or distributing a fraudulent insurance identification
card is created, a class D felony.  Any person who knowingly or
intentionally possesses a fraudulent insurance identification
card will be guilty of a class B misdemeanor.

BAIL BOND AGENTS (Sections 374.702 - 374.755)

Beginning August 28, 2009, the substitute requires a person
licensed as an active bail bond agent to hold that license for a
period of at least four years prior to becoming a general bail
bond agent or being an officer of a corporation that is
authorized as surety on a bail bond.  When applying for license
renewal, a general bail bond agent licensed prior to August 28,
2009, must have completed at least two years as a bail bond agent
and possess at least $10,000 in liquid assets along with an
executed assignment of $10,000 to the state.  For a general bail
bond agent licensed on or after August 28, 2009, he or she must
have completed four years as a bail bond agent and possess
$50,000 in liquid assets along with an executed assignment of
$50,000 to the state.  In addition, the general bail bond agent
must execute an assignment of $5,000 for each bail bond agent
licensed under his or her authority on or after August 28, 2009.
A bail bond agent will not be required to assign $5,000 for any
agent licensed under the authority of the same general bail bond
agent prior to August 28, 2009.

The substitute also removes the provision allowing a person to
apply for licensure as a bail bond agent after 15 years from a
final adjudication or plea of guilty or nolo contendere in a
criminal prosecution.  Disclosure of a suspended sentence is not
required for licensing or renewal purposes and will not be a
basis for a license denial.

AUDITED FINANCIAL REPORTS OF CERTAIN INSURERS (Sections
375.1025 - 375.1057)

The substitute changes the laws regarding audited financial
reports for certain insurers.  In its main provisions, the
substitute:

(1)  Exempts insurers with less than $1 million in direct
premiums written in Missouri and less than 1,000 policies or
certificate holders nationwide in a calendar year from the
financial report auditing requirements unless the Director of the
Department of Insurance, Financial Institutions and Professional
Registration finds that an audit is necessary;

(2)  Exempts foreign or alien insurers from filing a report of
internal control over financial reporting when the insurer has
filed a substantially similar report in another state;

(3)  Specifies that a similar 30-day extension is granted for the
filing of the management's report of internal control over
financial reporting when an insurer has been granted an extension
of the June 1 filing date for audit reports;

(4)  Requires certain insurers to designate a group of
individuals as its audit committee;

(5)  Changes the content requirements for the financial report;

(6)  Adds several provisions regarding the qualifications of the
certified public accountant for an insurer's annual audited
financial report;

(7)  Specifies that an insurer can apply, in writing, to the
department director for permission to file audited combined
financial statements in certain situations;

(8)  Removes the statement of liability insurance coverage from
the required contents of the accountant's letter;

(9)  Requires an accountant to have an understanding of the
internal control of the insurer to plan the audit;

(10)  Requires an insurer to provide the department director with
a written communication of any unresolved material weaknesses in
its internal control over financial reporting noted during the
audit and the completed or proposed actions to correct them,
unless the actions have been described in the accountant's
communication;

(11)  Establishes the membership requirements and functions of
the audit committee;

(12)  Specifies that false or misleading statements to an
accountant in connection with any audit, review, or required
communication will be considered a level three violation under
Section 374.049; and

(13)  Requires certain insurers to file a report of internal
control over financial reporting and establishes the requirements
for these reports.

UNCLAIMED FUNDS (Section 375.1224)

The substitute specifies that withheld and unclaimed funds in a
liquidator's possession will be distributed according to the
priority of distribution in Section 375.1218 when an insurer is
being liquidated.

GROUP HEALTH INSURANCE COVERAGE AFTER TERMINATION OF EMPLOYMENT
(Section 376.428)

The substitute requires group policies by a health carrier or
health benefit plan to comply with the federal Consolidated
Omnibus Budget Reconciliation Act (COBRA) provisions regarding
the continuation of group health insurance coverage to an
individual who has terminated employment or membership.

LIFE INSURANCE (Section 376.502)

Life insurance companies are prohibited from denying or refusing
to accept an application for life insurance; refusing to renew,
cancelling, restricting, or terminating a life insurance policy;
or charging a different rate for life insurance based on the
applicant's past or future lawful travel destinations unless it
is based on sound actuarial principles or an anticipated
experience.  A violation of these provisions will be considered
an unfair trade practice and subject to penalties specified in
Sections 375.930 - 375.948.  The provisions of the substitute
apply to any life insurance policy issued or renewed on or after
August 28, 2009.

CAPTIVE INSURANCE COMPANIES (Sections 379.1300 - 379.1412)

The substitute changes the laws regarding captive insurance
companies and allows an association captive insurance company or
an industrial insured captive insurance company to be organized
as a reciprocal insurer.  It its main provisions, the substitute:

(1)  Requires the captive insurance company's subscribers'
advisory committee to meet at least once a year;

(2)  Removes the requirement that a captive insurance company
hold at least 35% of its assets in Missouri;

(3)  Requires organizers of a reciprocal insurer to petition the
Director of the Department of Insurance, Financial Institutions
and Professional Registration to issue a certificate finding that
the proposed association will promote the general good of the
state;

(4)  Specifies that the captive insurance company statutes will
control in cases where there is a conflict between them and the
reciprocal insurance statutes;

(5)  Requires the State Treasurer to deposit 90% of the premium
taxes collected from captive insurance companies and special
purpose life reinsurance captive (SPLRC) companies into the
General Revenue Fund and 10% into the Insurance Dedicated Fund,
subject to a maximum of 3% of the current fiscal year's
appropriation from the fund;

(6)  Allows an association captive insurance company or an
industrial insured captive insurance company to be converted to
or merged with and into a reciprocal insurer and specifies the
requirements and procedures for the conversion or merger plan;

(7)  Reduces from two to one the number of Missouri residents
required to incorporate or organize a SPLRC; and

(8)  Changes the way in which the assets of a SPLRC are valued.

INSURANCE PRODUCERS AND BROKERS (Sections 382.400 - 384.062)

The substitute changes the laws regarding insurance producers and
brokers.  In its main provisions, the substitute:

(1)  Adds entities that provide educational courses to producers
to the list of programs which meet the standards for continuing
educational requirements;

(2)  Changes the term "broker" to "producer" in Sections
382.400 - 382.409;

(3)  Changes surplus lines license renewal requirements from
annually with a $50 fee to biennial with a $100 fee;

(4)  Requires surplus lines brokers to report quarterly to the
Director of the Department of Insurance, Financial Institutions
and Professional Registration the gross amount charged for
surplus lines insurance and the amount of net premiums;

(5)  Requires the Department of Revenue to notify the Director of
the Department of Insurance, Financial Institutions and
Professional Registration the amount of premium taxes collected
from each surplus lines licensee;

(6)  Repeals the provisions requiring the Department of
Insurance, Financial Institution and Professional Registration to
annually report to the appropriate committees of the General
Assembly on enforcement actions relating to health maintenance
organizations, utilization review agents, and managed care health
benefit plans; and

(7)  Repeals the provisions regarding the reporting requirements
for surplus lines insurance brokers and licensees.

TRAVEL CLUBS (Section 407.1243)

Any travel club offering vacation benefits for sale is required
to demonstrate that it has liquid assets of at least $250,000.
Demonstration of proof can be made to the Office of the Attorney
General or the Department of Insurance, Financial Institutions
and Professional Registration with one or more certificates of
deposit, a letter of credit from a financial institution with
assets of at least $75 million, or an executed assignment to the
state of Missouri in the required amount.  Any interest earned
will accrue to the travel club, except for any money due to the
Attorney General.

The substitute contains an emergency clause for the provisions
regarding group health insurance coverage after termination of
employment.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of At least
$11,821 in FY 2010, FY 2011, and FY 2012.  Estimated Income on
Other State Funds of At least $11,821 in FY 2010, FY 2011, and
FY 2012.

PROPONENTS:  Supporters say that the bill codifies a previous
executive order, changes references from "brokers" to
"producers," and clarifies existing language.

Testifying for the bill were Senator Stouffer; and Department of
Insurance, Financial Institutions and Professional Registration.

OPPONENTS:  There was no opposition voiced to the committee.

Missouri House of Representatives
95th General Assembly, 1st Regular Session
Last Updated November 17, 2009 at 9:26 am