Current through Register Vol. 49, No. 6, March 15, 2024
PURPOSE: This amendment modernizes the rule and
removes unnecessary language.
PURPOSE: The purpose of this rule is to carry out the
provisions of section
382.190,
RSMo . Specifically, this rule provides the standards by which the director
will determine whether a transaction is material for purposes of section
382.190(1)
and (2), RSMo, whether the terms of material
transactions between a registered insurer and its affiliates are "fair and
reasonable" for purposes of section
382.190(1),
RSMo, and whether charges or fees for
services are "reasonable" for purposes of section
382.190(2),
RSMo.
(1) A transaction is a "material transaction"
for purposes of section
382.190(1)
and (2), RSMo, if:
(A) It involves a registered insurer and one
(1) or more of its affiliates; and
(B) Such transaction, including amendments or
modifications to an existing material transaction:
1. Involves more than one-half of one percent
(0.5%) of such insurer's admitted assets as of the thirty-first day of December
next preceding the transaction; or
2. Is part of a plan or series of like
transactions with persons within the same holding company system as such
insurer and the purpose or effect of such transactions is to avoid the
threshold established in paragraph 1 of subsection (B) of this section and thus
avoid the review that would otherwise occur.
(2) A transaction which is not a material
transaction need not comply with the standards set forth in section
382.190(1)
and (2), RSMo.
(3) Standards for Charges, Fees and Other
Consideration:
(A) For Services.
1. The charges, fees, or other consideration
paid by the registered insurer to an affiliate for a service shall not exceed
the direct cost to the registered insurer. "Direct cost" means the expenses and
costs to the registered insurer of directly performing substantially the same
service for itself. The direct cost is determined by consistently applied,
objectively verifiable, generally recognized, internal accounting
practices.
2. If and only if the
registered insurer cannot determine its direct cost, the charge or fee paid by
the registered insurer to an affiliate for a service shall not exceed the cost
of obtaining substantially the same service on the open market. A service is
obtained on the open market where the service is obtainable from a person-
A. Who is not affiliated with the insurer;
and
B. Either-
(I) Whose cost to the insurer represents the
lowest and best bid for such service, such bid having been submitted in
response to a request for proposal in a competitive bidding process approved by
the director; or
(II) Whose cost to
the insurer represents a price that is, with respect to substantially the same
service, typical of the price paid by other persons who are affiliated with
neither the vendor nor the insurer.
(B) For Assets or Goods. The charges, fees,
or other consideration paid by the registered insurer to an affiliate for an
asset or good shall not exceed the cost of obtaining substantially the same
asset or good on the open market. An asset or good is obtained on the open
market where the asset or good is obtainable from a person-
1. Who is not affiliated with the insurer;
and
2. Either-
A. Whose cost to the insurer represents the
lowest and best bid for such asset or good, such bid having been submitted in
response to a request for proposal in a competitive bidding process approved by
the director; or
B. Whose cost to
the insurer represents a price that is, with respect to substantially the same
asset or good, typical of the price paid by other persons who are affiliated
with neither the vendor nor the insurer.
(C) Notwithstanding the provisions of
subsections (A) and (B) of this section, a transaction between a registered
insurer and its affiliate will be deemed fair and reasonable if the transaction
is the direct result of a winning bid submitted by the affiliate in a
competitive bidding process that has been approved by the director.
(4) The director will presume that
a material transaction is fair and reasonable if such material transaction
complies with the standards set forth in section (3) of this rule. The director
will presume that a material transaction is neither fair nor reasonable if such
material transaction does not comply with the standards set forth in section
(3) of this rule. Any person may seek during the appropriate administrative
proceeding (e.g., a Form D or an examination) to rebut a presumption created by
this section, but evidence relating to whether a transaction is fair or
reasonable will be viewed with a bias in favor of the applicable
presumption.
*Original authority: 374.045, RSMo 1967, amended 1993,
1995; 382.240, RSMo 1971.
