Missouri Code of State Regulations
Title 20 - DEPARTMENT OF COMMERCE AND INSURANCE
Division 200 - Insurance Solvency and Company Regulation
Chapter 1 - Financial Solvency and Accounting Standards
Section 20 CSR 200-1.070 - Subordinated Indebtedness
Current through Register Vol. 49, No. 6, March 15, 2024
PURPOSE: This amendment modernizes the rule and removes outdated and unnecessary language.
PURPOSE: This rule specifies information to be submitted to the director for prior approval of subordinated indebtedness agreements, the form of consideration for these agreements and the accounting procedures to be followed. This rule implements sections 354.355, 354.480, 375.535, 375.539, and 381.075, RSMo.
(1) Application. This rule applies to all health service corporations, health maintenance organizations (HMOs), insurance companies, and reciprocal interinsurance exchanges organized under the laws of this state and is applicable to any debts other than those shown as a legal liability of the company. Notwithstanding any other provision to the contrary, no company or other entity which has the power to assess its members may issue any subordinated indebtedness unless it is a mutual company organized under Chapter 379, RSMo.
(2) Definition, Subordinated Indebtedness (Surplus Notes). Subordinated indebtedness, for the purposes of this rule includes any contingent obligation for the repayment of a sum of money upon a written agreement that the loan or advance with interest shall be repaid only out of surplus profits of the company, as defined at 20 CSR 200-11.150(2), or as deemed necessary by the director of insurance to secure the interests of the policyhold-ers and creditors of this company.
(3) Approval by the Director.
(4) Consideration. The consideration tendered to the company in exchange for the agreement shall be in the form of cash or other admitted assets having readily determinable values and liquidity acceptable to and approved by the director.
(5) Reporting and Accounting of Subordinated Indebtedness.
(6) Approval of Repayment by Director. Repayment of principal or payment of interest may be made only with the approval of the director when s/he is satisfied that the financial condition of the company warrants this action. Repayment of surplus note interest should first reverse any unapproved accrued interest accounting by debiting the special surplus account and crediting unassigned funds. The interest payment should then be recorded by debiting interest expense and crediting cash. Repayment of principal should follow the guidance set forth in the National Association of Insurance Commissioners' Accounting Practices and Procedures Manual.
(7) Other Loans. Nothing in this section is to be construed to mean that a company cannot otherwise borrow money, but the amount so borrowed with accrued interest shall be carried by the company as a liability.
*Original authority: 354.040, RSMo 1973, amended 1983; 354.485, RSMo 1983; 374.045, RSMo 1967; and 380.561, RSMo 1984.