Missouri Revised Statutes













Chapter 375

Provisions Applicable to All Insurance Companies

←375.537

Section 375.539.1

375.570→

August 28, 2015

Hazardous operation, discontinuation determination, standards for--issuance of order by director, hearing procedure.

375.539. 1. The director of the department of insurance, financial

institutions and professional registration may deem an insurance company to be

in such financial condition that its further transaction of business would be

hazardous to policyholders, creditors, and the public, if such company is a

property or casualty insurer, or both a property and casualty insurer, which

has in force any policy with any single net retained risk larger than ten

percent of that company's capital and surplus as of the December thirty-first

next preceding.



2. The following standards, either singly or a combination of two or

more, may be considered by the director to determine whether the continued

operation of any insurer transacting an insurance business in this state might

be deemed to be hazardous to its policyholders, creditors, or the general

public:



(1) Adverse findings reported in financial condition and market conduct

examination reports, audit reports, and actuarial opinions, reports, or

summaries;



(2) The National Association of Insurance Commissioners Insurance

Regulatory Information System and its other financial analysis solvency tools

and reports;



(3) Whether the insurer has made adequate provision, according to

presently accepted actuarial standards of practice, for the anticipated cash

flows required by the contractual obligations and related expenses of the

insurer, when considered in light of the assets held by the insurer with

respect to such reserves and related actuarial items including, but not

limited to, the investment earnings on such assets, and the considerations

anticipated to be received and retained under such policies and contracts;



(4) The ability of an assuming reinsurer to perform and whether the

insurer's reinsurance program provides sufficient protection for the insurer's

remaining surplus after taking into account the insurer's cash flow and the

classes of business written as well as the financial condition of the assuming

reinsurer;



(5) Whether the insurer's operating loss in the last twelve-month period

or any shorter period of time, including but not limited to net capital gain

or loss, change in nonadmitted assets, and cash dividends paid to

shareholders, is greater than fifty percent of the insurer's remaining surplus

as regards to policyholders in excess of the minimum required;



(6) Whether the insurer's operating loss in the last twelve-month period

or any shorter period of time, excluding net capital gains, is greater than

twenty percent of the insurer's remaining surplus as regards to policyholders

in excess of the minimum required;



(7) Whether a reinsurer, obligor, or any entity within the insurer's

insurance holding company system, is insolvent, threatened with insolvency or

delinquent in payment of its monetary or other obligations, and which in the

opinion of the director may affect the solvency of the insurer;



(8) Contingent liabilities, pledges, or guaranties which either

individually or collectively involve a total amount which in the opinion of

the director may affect the solvency of the insurer;



(9) Whether any controlling person of an insurer is delinquent in the

transmitting to, or payment of, net premiums to the insurer. As used in this

subdivision, the term controlling shall have the same meaning assigned to it

in subdivision (2) of section 382.010;



(10) The age and collectibility of receivables;



(11) Whether the management of an insurer, including officers,

directors, or any other person who directly or indirectly controls the

operation of the insurer, fails to possess and demonstrate the competence,

fitness, and reputation deemed necessary to serve the insurer in such

position;



(12) Whether management of an insurer has failed to respond to inquiries

relative to the condition of the insurer or has furnished false and misleading

information concerning an inquiry;



(13) Whether the insurer has failed to meet financial and holding

company filing requirements in the absence of a reason satisfactory to the

director;



(14) Whether management of an insurer either has filed any false or

misleading sworn financial statement, or has released false or misleading

financial statement to lending institutions or to the general public, or has

made a false or misleading entry, or has omitted an entry of material amount

in the books of the insurer;



(15) Whether the insurer has grown so rapidly and to such an extent that

it lacks adequate financial and administrative capacity to meet its

obligations in a timely manner;



(16) Whether the insurer has experienced or will experience in the

foreseeable future cash flow or liquidity problems;



(17) Whether management has established reserves that do not comply with

minimum standards established by state insurance laws, regulations, statutory

accounting standards, sound actuarial principles and standards of practice;



(18) Whether management persistently engages in material underreserving

that results in adverse development;



(19) Whether transactions among affiliates, subsidiaries, or controlling

persons for which the insurer receives assets or capital gains, or both, do

not provide sufficient value, liquidity, or diversity to assure the insurer's

ability to meet its outstanding obligations as they mature;



(20) Any other finding determined by the director to be hazardous to the

insurer's policyholders, creditors, or general public.



3. For the purposes of making a determination of an insurer's financial

condition under this section, the director may:



(1) Disregard any credit or amount receivable resulting from

transactions with a reinsurer that is insolvent, impaired, or otherwise

subject to a delinquency proceeding;



(2) Make appropriate adjustments including disallowance to asset values

attributable to investments in or transactions with parents, subsidiaries, or

affiliates consistent with the National Association of Insurance Commissioners

Accounting Policies and Procedures Manual, state laws and regulations;



(3) Refuse to recognize the stated value of accounts receivable if the

ability to collect receivables is highly speculative in view of the age of the

account or the financial condition of the debtor;



(4) Increase the insurer's liability in an amount equal to any

contingent liability, pledge, or guarantee not otherwise included if there is

a substantial risk that the insurer will be called upon to meet the obligation

undertaken within the next twelve-month period.



4. If the director determines that the continued operation of the

insurer licensed to transact business in this state may be hazardous to its

policyholders, creditors, or the general public, then the director may, to the

extent authorized by law and in accordance with any procedures required by

law, issue an order requiring the insurer to:



(1) Reduce the total amount of present and potential liability for

policy benefits by reinsurance;



(2) Reduce, suspend, or limit the volume of business being accepted or

renewed;



(3) Reduce general insurance and commission expenses by specified

methods;



(4) Increase the insurer's capital and surplus;



(5) Suspend or limit the declaration and payment of dividend by an

insurer to its stockholders or to its policyholders;



(6) File reports in a form acceptable to the director concerning the

market value of an insurer's assets;



(7) Limit or withdraw from certain investments or discontinue certain

investment practices to the extent the director deems necessary;



(8) Document the adequacy of premium rates in relation to the risks

insured;



(9) File, in addition to regular annual statements, interim financial

reports on the form adopted by the National Association of Insurance

Commissioners or in such format as promulgated by the director;



(10) Correct corporate governance practice deficiencies, and adopt and

utilize governance practices acceptable to the director;



(11) Provide a business plan to the director in order to continue to

transact business in the state;



(12) Notwithstanding any other provision of law limiting the frequency

or amount of premium rate adjustments, adjust rates for any nonlife insurance

product written by the insurer that the director considers necessary to

improve the financial condition of the insurer.



5. An insurer subject to an order under subsection 4 of this section may

request a hearing before the director in accordance with the provisions of

chapter 536. The notice of hearing shall be served upon the insurer pursuant

to section 536.067. The notice of hearing shall state the time and place of

hearing and the conduct, condition, or ground upon which the director based

the order. Unless mutually agreed between the director and the insurer, the

hearing shall occur not less than ten days nor more than thirty days after

notice is served and shall be either in Cole County or in some other place

convenient to the parties designated by the director. The director shall hold

all hearings under this subsection privately, unless the insurer requests a

public hearing, in which case the hearing shall be public.



6. This section shall not be interpreted to limit the powers granted the

director by any laws or parts of laws of this state, nor shall this section be

interpreted to supercede any laws or parts of laws of this state, except that

if the insurer is a foreign insurer, the director's order under subsection 4

of this section may be limited to the extent expressly provided by any laws or

parts of laws of this state.



(L. 2010 S.B. 583)







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