MISSISSIPPI LEGISLATURE

1999 Regular Session

To: Insurance; Finance

By: Senator(s) Kirby

AN ACT TO AMEND SECTION 83-1-21, MISSISSIPPI CODE OF 1972, TO EXEMPT CERTAIN INFORMATION RECEIVED BY THE COMMISSIONER OF INSURANCE FROM THE MISSISSIPPI PUBLIC RECORDS ACT; TO AMEND SECTION 83-19-31, MISSISSIPPI CODE OF 1972, TO DELETE THE PROHIBITION OF LOANING ANY CAPITAL OR SURPLUS OF A DOMESTIC INSURANCE COMPANY TO ANY STOCKHOLDER, OFFICER OR DIRECTOR OF THE COMPANY; TO AMEND SECTION 83-19-51, MISSISSIPPI CODE OF 1972, TO PROHIBIT ANY AMOUNT OF CAPITAL OR SURPLUS OF A DOMESTIC INSURANCE COMPANY FROM BEING LOANED TO ANY STOCKHOLDER, OFFICER OR DIRECTOR OF THE COMPANY; TO AMEND SECTION 83-19-67, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT MANAGEMENT CONTRACTS SHALL BE FILED WITH, AND SUBJECT TO REVIEW AND FINAL APPROVAL OF, THE DEPARTMENT OF INSURANCE; TO AMEND SECTION 83-39-17, MISSISSIPPI CODE OF 1972, TO REVISE THE NOTICE REQUIREMENTS FOR REVOCATION HEARINGS OF BAIL AGENT PRIVILEGE LICENSES; TO AMEND SECTION 83-57-13, MISSISSIPPI CODE OF 1972, TO REVISE THE METHOD OF COMPUTING THE NET ASSET REQUIREMENT OF HOME WARRANTY ASSOCIATIONS; TO AMEND SECTION 83-57-31, MISSISSIPPI CODE OF 1972, TO CORRECT AN INCORRECT CODE SECTION REFERENCE; TO CREATE A NEW CODE SECTION TO BE CODIFIED WITHIN CHAPTER 5 OF TITLE 83, MISSISSIPPI CODE OF 1972, TO REQUIRE INSURERS TO NOTIFY THE COMMISSIONER OF INSURANCE AND FILE A BIOGRAPHICAL AFFIDAVIT WHEN CHANGING OFFICERS AND DIRECTORS; TO REPEAL SECTION 83-19-25, MISSISSIPPI CODE OF 1972, WHICH PROHIBITS DOMESTIC INSURANCE COMPANIES FROM PAYING SALARIES IN EXCESS OF $5,000.00 TO NON-RESIDENT OFFICERS AND EMPLOYEES; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 83-1-21, Mississippi Code of 1972, is amended as follows:

83-1-21. The commissioner shall keep in his office for public inspection all reports received by him, a record of all his proceedings, including a concise statement of the result of official examinations, an exhibit of the financial condition and methods of all insurers under his supervision, as disclosed by their statements or by official examination, and such other information with regard to them as he may deem it proper to preserve. However, all complaints, or information related thereto, filed with the Commissioner of Insurance or his staff shall be exempt from the Mississippi Public Records Act. If requested by a third party, the commissioner shall produce under subpoena the information with the personal information pertaining to the complaining party deleted. The requesting party shall be responsible for the cost of reproducing these materials.

Such reports or records which are no longer useful or necessary may be disposed of in accordance with approved records control schedules. No records, however, may be destroyed without the approval of the Director of the Department of Archives and History.

SECTION 2. Section 83-19-31, Mississippi Code of 1972, is amended as follows:

83-19-31. (1) No corporation so formed shall transact any other business than that specified in its charter and articles of association. Companies so formed must meet the following capital and surplus requirements:

(a) Single-line companies so formed to write a classification listed in paragraphs (a) through (n) in Section 27-15-83, the minimum capital requirement shall be Four Hundred Thousand Dollars ($400,000.00) and the surplus shall be a minimum of Six Hundred Thousand Dollars ($600,000.00).

(b) Multi-line companies so formed to write a combination of the classifications listed in paragraphs (a) through (n) in Section 27-15-83, the minimum capital requirement shall be Six Hundred Thousand Dollars ($600,000.00) and the surplus shall be a minimum of Nine Hundred Thousand Dollars ($900,000.00).

(c) Companies so formed for the purpose of transacting the business of life insurance on the industrial plan may organize with a minimum capital of One Hundred Thousand Dollars ($100,000.00) and a minimum surplus of Fifty Thousand Dollars ($50,000.00).

An industrial life insurer shall be limited to the following:

1. A life insurance policy, in the aggregate value of Five Thousand Dollars ($5,000.00) in death benefits, exclusive of multiple indemnity benefits.

2. A disability policy in the aggregate benefits of Sixty Dollars ($60.00) per week.

3. A policy providing benefits for dismembered and broken limbs and/or loss of eyesight in the aggregate of Five Thousand Dollars ($5,000.00) per policy year.

4. A policy which provides benefits for the payment for or furnishing of hospitalization, drugs, attending physicians and surgical costs in the aggregate of Three Thousand Five Hundred Dollars ($3,500.00) per policy year.

(d) All mutual and reciprocal companies shall possess at the time of initial license and maintain thereafter a surplus, after deductions for services, in an amount equal to the capital and surplus requirements of a stock company writing similar lines of insurance.

(e) If at any time the surplus of such domestic company or association shall be less than the minimum surplus noted above, such company or association shall be considered impaired; and it shall be the duty of the officers of such company or association to report any such impairment of surplus to the State Commissioner of Insurance in writing within ten (10) days after such impairment occurs. When any such impairment is reported, or if the Commissioner of Insurance should determine that the company is operating in an impaired condition, the commissioner may suspend the certificate of authority and license of such domestic insurance company or association to do business in this state until such company shall raise or increase its surplus to the minimum amount required herein.

(2) Any domestic company qualifying under the foregoing sections shall deposit with the State Treasurer fifty percent (50%) of its capital stock, either in cash or in such bonds or securities in which such company is authorized by law to invest its funds. Upon such deposit and evidence, by affidavit or otherwise, satisfactory to the Insurance Commissioner that the capital and surplus is all paid in and that the company is the actual and unqualified owner of the securities representing the paid-up capital and surplus, he shall issue to such company his certificate authorizing it to transact business in this state * * *.

The provisions of this section as to the minimum requirements as to paid-up capital stock and cash surplus shall not become effective until January 1, 1988, concerning any domestic company which was authorized to do business and was writing business in this state on July 1, 1985.

(3) No insurance company, including any mutual insurance company, organized under the laws of this state and transacting business in this state shall expose itself to loss on any one (1) risk or hazard to an amount exceeding ten percent (10%) of its paid-up capital and surplus unless the excess is reinsured in some other company duly authorized to transact similar business in this state or as otherwise provided in the insurance code. For purposes of this subsection, the terms "risk" and "hazard" apply to the subject matter of any one (1) insurance policy and not to any one (1) peril.

(4) The Commissioner of Insurance may require additional capital and surplus based on the type, nature or volume of business transacted.

SECTION 3. Section 83-19-51, Mississippi Code of 1972, is amended as follows:

83-19-51. (1) A domestic insurance company may invest its capital, surplus, and other funds, or certain parts thereof, in the following:

(a) Bonds or other evidence of indebtedness of the United States, of any state of the United States, of the Dominion of Canada, or of any province thereof.

(b) Bonds or other evidence of indebtedness of any county, city, town, village, school district, municipal district, or other civil district within the United States or the Dominion of Canada.

(c) Bonds or notes secured by mortgages or deeds of trust upon unencumbered real estate in the United States or Dominion of Canada worth at least thirty-three and one-third percent (33-1/3%) more than the amount loaned thereon, and may also loan upon the security of improved unencumbered real property in any state, provided the security be eligible for insurance and be insured under provisions of the National Housing Act and any amendments thereto. Where improvements on the land constitute a part of the value on which the loan is made, the improvements shall be insured against fire and tornado for the benefit of the mortgagee, in an amount not less than the difference between seventy-five percent (75%) of the value of the land and the amount of the loan. For the purposes of this subsection (c), real estate shall not be deemed to be encumbered within the meaning of this section by reason of the existence of taxes or assessments that are not delinquent, instruments creating or reserving mineral, oil, or timber rights, rights-of-way, joint driveways, sewer rights, rights in walls, or other comparable or similar instruments, rights, restrictions, and covenants, nor by reason of building restrictions or restrictive covenants, nor when such real estate is subject to lease in whole or in part whereby rents or profits are reserved to the owner, provided such lease and the notes for rent given thereunder be assigned by the lessor to the company.

(d) Bonds, notes, or other evidences of indebtedness which are secured by mortgages, security deeds, vendor's liens, or deeds of trust upon leasehold estates having an unexpired term of twenty-five (25) years or longer in improved unencumbered real estate in the United States worth at least thirty-three and one-third percent (33-1/3%) more than the amount loaned thereon. For the purposes of this subsection (d), the real estate on which such leasehold estate exists shall not be deemed to be encumbered within the meaning of this section by reason of the existence of taxes or assessments that are not delinquent, instruments creating or reserving mineral, oil, or timber rights, rights-of-way, joint driveways, sewer rights, rights in walls, or other comparable or similar instruments, rights, restrictions, and covenants, nor by reason of building restrictions or restrictive covenants.

(e) In bankers' acceptances and bills of exchange of the kinds and maturities made eligible by law for rediscount with Federal Reserve banks, provided that the same are accepted by a bank or trust company incorporated under the laws of the United States, of this commonwealth, or by any other bank or trust company which is a member of the Federal Reserve system. However, not more than ten percent (10%) of the admitted assets shall be so invested.

(f) Stock in Federal Home Loan Bank, or bonds, debentures, notes, or other evidences of indebtedness, or the preferred or guaranteed stock or shares of any solvent institution created or existing under the laws of the United States, of any state thereof, of the Dominion of Canada, or of any province thereof, if such institution, or in the case of guaranteed bonds, debentures, notes, or other evidences of indebtedness, or guaranteed stocks or shares, the guaranteeing institution, during each of any three (3) years, including the last two (2) years, of the five (5) years next preceding such investment, shall have earned a sum applicable to dividends equal, at least, to four percent (4%) upon the par value (or, in the case of stock or shares having no par value, then upon the value upon which such stock was issued) of all its capital stock or shares outstanding in each of such three (3) years. No life insurance company shall invest in its own stock and may not invest more than ten percent (10%) of its total assets in the preferred or guaranteed stock or bonds of any one (1) corporation, as above described.

(g) Loans upon the pledge of any of the securities herein authorized.

(h) In adequately secured equipment trust certificates or other adequately secured instruments evidencing an interest in equipment wholly or partly within the United States, and a right to receive determined portions or rental, purchase or other fixed obligatory payments for the use or purchase of such equipment, provided that not more than five percent (5%) of its total assets be so invested.

(i) The common capital stock of any bank or trust company which is a member of the Federal Deposit Insurance Corporation and has earned no less than five percent (5%) on its total capital accounts for each of the preceding three (3) years, not to exceed, however, ten percent (10%) of the actually issued and outstanding common capital stock of any one (1) such bank or trust company; or a building and loan association which is a member of the Federal Savings and Loan Insurance Association and has earned no less than five percent (5%) on its total capital accounts for each of the preceding three (3) years, not to exceed, however, ten percent (10%) of the actually issued and outstanding common capital stock of any one (1) such building and loan association; provided that not more than five percent (5%) of the assets of such domestic company shall be so invested at any time in common stock of either banks or trust companies, or building and loan associations, or in an aggregate of the two (2).

Provided, however, no domestic insurance company may acquire common stock in any bank or building and loan association in this state when such acquisition will cause the aggregate of such stock held by any domestic insurance company or companies to exceed fifteen percent (15%) of the common stock of such bank or building and loan association.

(j) A life insurance company may also purchase for its own benefit any policy of life insurance or other obligation of the company and claims of the holders thereof, and may lend to the holders of its life insurance policies sums not exceeding in any case the reserve value of the policy at the time the loan is made and, for the payment of any such loan, the policy and all profits thereon shall be pledged.

(k) A company doing business in a foreign country may invest the funds required to meet its obligations in such country and, in conformity to the laws thereof, in the same kinds of securities in such foreign country that such company is allowed by law to invest in the United States.

(l) Bonds or other evidences of indebtedness of the Inter-American Development Bank.

(m) Cash or deposits in checking or savings accounts, under certificates of deposit or in any other form, or other certificates or evidence of indebtedness from solvent banks and trust companies and in savings accounts, certificates of deposit or similar certificates or evidences of deposits in solvent savings and loan associations and building and loan associations.

(n) Construction loans, repurchase agreement transactions, standby mortgage loan commitments, electronic, computer or data processing equipment investments, financial risk limiting and balancing transactions, including put and call options purchased solely for legitimate financial futures hedging, nonspeculative purposes if these transactions are traded upon a contract market designated and regulated by a federal agency.

(o) Bonds or other evidences of indebtedness of the African Development Bank.

(p) Any other investment expressly authorized by law.

(2) Any domestic company may invest an amount not to exceed in the aggregate ten percent (10%) of its admitted assets and to further increase such authority by an additional four percent (4%) provided such four percent (4%) investments are made in the State of Mississippi without regard to the restrictions in, and notwithstanding the provisions of, any other subsection of this section or of any other act or acts regulating or governing the investments of domestic companies.

(3) Any domestic company may invest an amount not to exceed ten percent (10%) of its admitted assets in common shares of solvent corporations incorporated under the laws of any of the states among the United States of America without regard to the restrictions in, and notwithstanding the provisions of, any other subsection of this section or of any other act or acts regulating or governing the investments of domestic companies; provided, however, that the solvent corporation, during each of any three (3) years, including the last two (2) years, of the five (5) years next preceding such investment, shall have earned a sum applicable to dividends equal, at least, to four percent (4%) upon the par value (or, in the case of stock or shares having no par value, then upon the value upon which such stock was issued) of all of its capital stock or shares outstanding in each of such three (3) years. No life insurance company shall invest more than five percent (5%) of its admitted assets in common shares of any one (1) corporation as hereinbefore provided.

Conflict of interest. Provided, however, no domestic insurance company shall under this section acquire common stock in any company where the officers or directors of the insurance company, individually or collectively, hold an interest in excess of ten percent (10%) of the company in which the common stock is acquired. For the purpose of this limitation, interest is defined as actual ownership, ownership in the name of a trustee, ownership in the name of a relative within the third degree, ownership in the name of an owned or controlled corporation or business, or ownership in the form of an option.

Provided, further, no officer or director of the insurance company shall either directly or indirectly derive any profit or revenue from stock purchases under the above subsection, either in the form of commissions, brokerage, or the outright sale of shares of stock to the insurance company.

(4) No amount of capital or surplus of any domestic insurance company shall be loaned to any stockholder, officer or director of the company.

(5) Notwithstanding the provisions of this section, the commissioner may, after notice and hearing, order a company to limit or withdraw from certain investments, or discontinue certain investment practices, to the extent that the commissioner finds that such investments or investment practices endanger the solvency of the company.

(6) No loan or investment, except loans on the security of life insurance policies, shall be made by any such company unless the same shall have been authorized by the board of directors or by a committee thereof charged with the duty of supervising loans or investments, and no company shall enter into any agreement to withhold from sale any of its securities or property; but the disposition of its assets shall at all times be within the control of the company.

Nothing in this law shall prohibit a company from accepting in good faith, to protect its interest, securities or property other than herein referred to, in payment of or to secure debts due or to become due the company.

(7) Nothing in this section shall be construed as affecting any investment existing on April 27, 1966; and this section shall not repeal Sections 43-33-301 through 43-33-307 of the Mississippi Code of 1972.

SECTION 4. Section 83-19-67, Mississippi Code of 1972, is amended as follows:

83-19-67. * * * Any management contract between a domestic insurance company and a person, as defined in Section 83-6-1(f), shall be filed with, and subject to review and approval of, the Department of Insurance.

SECTION 5. Section 83-39-17, Mississippi Code of 1972, is amended as follows:

83-39-17. Before any license shall be refused or suspended or revoked, or the renewal thereof refused hereunder, the commissioner shall give notice of his intention to do so, by certified mail, to the applicant or licensee and to the insurer or professional bail agent appointing or employing the applicant or licensee, as the case may be, and shall set a date, not less than ten (10) days from the date of mailing the notice, when the applicant or licensee and a duly authorized representative of the insurer or professional bail agent may appear to be heard and produce evidence. This notice shall constitute automatic suspension of license. In the conduct of the hearing, the commissioner or any regular salaried employee specially designated by him for this purpose shall have power to administer oaths, to require the appearance of and examine any person under oath, and to require the production of books, records, or papers relevant to the inquiry upon his own initiative or upon the request of the applicant or licensee. Upon the termination of the hearing, findings shall be reduced to writing and, upon approval by the commissioner, shall be filed in his office and notice of the findings sent by certified mail to the applicant or licensee and the insurer or professional bail agent concerned.

SECTION 6. Section 83-57-13, Mississippi Code of 1972, is amended as follows:

83-57-13. (1) An association licensed under this chapter shall maintain a funded, unearned premium reserve account, consisting of unencumbered assets, equal to a minimum of twenty-five percent (25%) of the gross written premiums received by it from all warranty contracts in force. Such assets shall be held in the form of cash or invested in approved securities for investments.

(2) An association shall maintain, at a minimum, net assets equal to one-sixth (1/6) of the written premiums it receives for the issuance and delivery of any binder or warranty in force. Net assets may be less than one-sixth (1/6) of the premiums written provided the association has net assets of not less than Five Hundred Thousand Dollars ($500,000.00) and maintains a funded, unearned premium reserve account consisting of unencumbered assets equal to a minimum of forty percent (40%) of the gross written premiums received by it from all warranty contracts in force which shall be held in the form of cash or invested in securities for investments.

(3) In computing the net asset requirement, goodwill, franchises, customer lists, patents or trademarks, receivables from or advances to officers, directors, employees, salesmen or affiliated companies, * * * assets deposited outside the United States, and any other assets that are non-admitted in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual shall be deducted from the net assets of the association.

(4) An association shall not be required to set up an unearned premium reserve if it has purchased contractual liability insurance which demonstrates to the satisfaction of the department that one hundred percent (100%) of its claim exposure is covered by such insurance. Such contractual liability insurance shall be obtained from an insurer that holds a certificate of authority to do business within the state or from an insurer approved by the department as financially capable of meeting the obligations incurred pursuant to the policy. For purposes of this subsection, the contractual liability policy shall contain the following provisions:

(a) If the home warranty association is unable to fulfill its obligation under its contracts issued in this state for any reason, including insolvency, bankruptcy, or dissolution, the contractual liability insurer will pay losses and unearned premiums under such plans directly to persons making claims under such contracts.

(b) The insurer issuing the policy shall assume full responsibility for the administration of claims in the event of the inability of the association to do so.

(c) The policy may not be cancelled or not renewed by either the insurer or the association unless sixty (60) days' written notice thereof has been given to the department by the insurer before the date of such cancellation or nonrenewal.

(5) An association that purchases contractual liability insurance on the warranties that it issues shall provide the department with claim statistics required to be filed by associations not purchasing such insurance.

SECTION 7. Section 83-57-31, Mississippi Code of 1972, is amended as follows:

83-57-31. Home warranty associations licensed under this chapter shall be subject to periodic examinations by the department, in the same manner and subject to the same terms and conditions as apply to insurers under Sections 83-5-201 and 83-6-27, Mississippi Code of 1972.

SECTION 8. All domestic insurers shall notify the Commissioner of Insurance in writing within thirty (30) days after any change of officers or directors of the insurers. The notice shall include a biographical affidavit on the new officer or director in a format as developed by the commissioner.

SECTION 9. Section 83-19-25, Mississippi Code of 1972, which prohibits domestic insurance companies from paying salaries in excess of Five Thousand Dollars ($5,000.00) to non-resident officers and employees, is hereby repealed.

SECTION 10. Section 8 of this act shall be codified within Chapter 5 of Title 83, Mississippi Code of 1972.

SECTION 11. This act shall take effect and be in force from and after July 1, 1999.