376.292. Definitions.
Definitions.
376.292. As used in sections 376.291 to 376.307, the following termsmean:
(1) "Acceptable collateral", as to securities lending repurchase andreverse repurchase transactions, any financial assets of a type for which,when taken as collateral by an insurer in such transactions, would permitthe subject securities or repurchase agreements, as the case may be, toconstitute admitted assets of the insurer under the relevant statutoryaccounting principles promulgated from time to time by the NAIC as adoptedby the director;
(2) "Acceptable private mortgage insurance", insurance written by aprivate insurer protecting a mortgage lender against loss occasioned by amortgage loan default and issued by a licensed mortgage insurance companywith an SVO "1" designation or a rating issued by a nationally recognizedstatistical rating organization equivalent to an SVO "1" designation thatcovers losses to an eighty percent loan-to-value ratio;
(3) "Accident and health insurance", protection that provides paymentof benefits for covered sickness or accidental injury, excluding creditinsurance, disability insurance, accidental death and dismembermentinsurance, and long-term care insurance;
(4) "Accident and health insurer", a licensed life or health insureror health service corporation whose insurance premiums and requiredstatutory reserves for accident and health insurance constitute at leastninety-five percent of total premium considerations or total statutoryrequired reserves, respectively;
(5) "Admitted assets", assets permitted to be reported as admittedassets on the statutory financial statement of the insurer most recentlyrequired to be filed with the director but excluding assets of separateaccounts;
(6) "Affiliate", as to any person, another person that, directly orindirectly through one or more intermediaries controls, is controlled by,or is under common control with the person;
(7) "Asset-backed security", a security or other instrument,excluding shares in a mutual fund, evidencing an interest in or the rightto receive payments from, or payable from distributions on an asset, a poolof assets, or specifically divisible cash flows which are legallytransferred to a trust or another special purpose bankruptcy-remotebusiness entity on the following conditions:
(a) The trust or other business entity is established solely for thepurpose of acquiring specific types of assets or rights to cash flows,issuing securities and other instruments representing an interest in orright to receive cash flows from those assets or rights, and engaging inactivities required to service the assets or rights and any creditenhancement or support features held by the trust or other business entity;and
(b) The assets of the trust or other business entity consist solelyof interest-bearing obligations or other contractual obligationsrepresenting the right to receive payment from the cash flow from theassets. However, the existence of credit enhancements, such as letters ofcredit or guarantees or support features, such as swap agreements, shallnot cause a security or other instrument to be ineligible as anasset-backed security;
(8) "Business entity", a sole proprietorship, limited liabilitycompany, association, partnership, joint stock company, joint venture,mutual fund, trust, joint tendency, or other similar form of businessorganization, whether organized for profit or not for profit;
(9) "Capital and surplus", the sum of the capital and surplus of theinsurer required to be shown on the statutory financial statement of theinsurer most recently required to be filed with the director;
(10) "Cash equivalents", short-term, highly rated, and highly liquidinvestments or securities readily convertible to known amounts of cashwithout penalty and so near maturity that they present insignificant riskof change in value. Cash equivalents include government money marketmutual funds and class one money market mutual funds. For purposes of thissubdivision:
(a) "Short-term" means investments with a remaining term to maturityof ninety days or less; and
(b) "Highly rated" means an investment rated "P-1" by Moody'sInvestors Service, Inc., or "A-1" by Standard and Poor's division of TheMcGraw Hill Companies, Inc., or its equivalent rating by a nationallyrecognized statistical rating organization recognized by the SVO;
(11) "Class one bond mutual fund", a mutual fund that at all timesqualifies for investment using the bond class one reserve factor under thePurpose and Procedures of the Securities Valuation Office or any successorpublication;
(12) "Class one money market mutual fund", a money market mutual fundthat at all times qualifies for investment using the bond class one reservefactor under the Purpose and Procedures of the Securities Valuation Officeor any successor publication;
(13) "Code", this chapter and chapters 374, 375, and 382, RSMo;
(14) "Commercial mortgage loan", a loan secured by a mortgage otherthan a residential mortgage loan;
(15) "Construction loan", a loan less than three years in term madefor financing the cost of construction of a building or other improvementto real estate that is secured by the real estate;
(16) "Control", the possession, directly or indirectly, of the powerto direct or cause the direction of the management and policies of aperson, whether through the ownership of voting securities, by contract,other than a commercial contract for goods or nonmanagement service, orotherwise, unless the power is the result of an official position with orcorporate office held by the person. Control shall be presumed to exist ifa person, directly or indirectly, owns, controls, holds with power to vote,or holds proxies representing ten percent or more of the voting securitiesof another person. This presumption may be rebutted by a showing thatcontrol does not exist in fact. The director may determine afterfurnishing all interested persons notice and an opportunity to be heard andmaking specific findings of fact to support the determination that controlexists in fact, notwithstanding the absence of a presumption to thateffect;
(17) "Credit tenant loan", a mortgage loan which is made primarily inreliance on the credit standing of a major tenant, structured with anassignment of the rental payments to the lender with real estate pledged ascollateral in the form of a first lien;
(18) "Direct" or "directly", in connection with an obligation, thedesignated obligor primarily liable on the instrument representing theobligation;
(19) "Dollar-roll transaction", two simultaneous transactions withdifferent settlement dates no more than ninety-six days apart so that inthe transaction with the earlier settlement date an insurer sells to abusiness entity, and in the other transaction the insurer is obligated topurchase, from the same business entity, substantially similar securitiesof the following types:
(a) Asset-backed securities issued, assumed or guaranteed by theGovernment National Mortgage Association, the Federal National MortgageAssociation, or the Federal Home Loan Mortgage Corporation or theirrespective successors; and
(b) Other asset-backed securities referred to in section 106 of TitleI of the Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C.77r-1), as amended;
(20) "Domestic jurisdiction", the United States, Canada, any state,any province of Canada, or any political subdivision of the foregoing;
(21) "Equity interest", any of the following that are not ratedcredit instruments:
(a) Common stock;
(b) Preferred stock;
(c) Trust certificate;
(d) Equity investment in an investment company other than a moneymarket mutual fund or a class one bond mutual fund;
(e) Investment in a common trust fund of a bank regulated by afederal or state agency;
(f) An ownership interest in mineral, oil, or gas to which the rightshave been separated from the underlying fee interest in the real estatewhere the mineral, oil, or gas are located;
(g) Instruments which are mandatorily, or at the option of theissuer, convertible to equity;
(h) Limited partnership interests and those general partnershipinterests authorized under subdivision (4) of section 376.294;
(i) Member interests in limited liability companies;
(j) Warrants or other rights to acquire equity interests that arecreated by the person that owns or would issue the equity to be acquired;or
(k) Instruments that would be rated credit instruments except for theprovisions under subdivision (47) of this section;
(22) "Foreign currency", currency other than that of a domesticjurisdiction;
(23) (a) "Foreign investment", an investment in a foreignjurisdiction or an investment in a person, real estate, or asset domiciledin a foreign jurisdiction that is substantially of the same type as thoseeligible for investment under this chapter other than under section376.304. An investment shall not be deemed foreign if the issuing person,qualified primary credit source, or qualified guarantor is a domesticjurisdiction or a person domiciled in a domestic jurisdiction unless:
a. The issuing person is a shell business entity; and
b. The investment is not assumed, accepted, guaranteed, or insured orotherwise backed by a domestic jurisdiction, or a person that is not ashell business entity domiciled in a domestic jurisdiction;
(b) For purposes of this definition:
a. "Shell business entity" means a business entity having no economicsubstance except as a vehicle for owning interests in assets issued, owned,or previously owned by a person domiciled in a foreign jurisdiction;
b. "Qualified guarantor" means a guarantor against which an insurerhas a direct claim for full and timely payment, evidenced by a contractualright for which an enforcement action can be brought in a domesticjurisdiction;
c. "Qualified primary credit score" means the credit score to whichan insurer looks for payment as to an investment and against which aninsurer has a direct claim for full and timely payment evidenced by acontractual right for which an enforcement action can be brought in adomestic jurisdiction;
(24) "Foreign jurisdiction", a jurisdiction other than a domesticjurisdiction;
(25) "Government money market mutual fund", a money market mutualfund that at all times:
(a) Invests only in obligations issued, guaranteed, or insured by thefederal government of the United States or collateralized repurchaseagreements composed of these obligations; and
(b) Qualifies for investment without a reserve under the Purposes andProcedures of the Securities Valuation Office or any successor publication;
(26) "Government sponsored enterprise", a:
(a) Government agency; or
(b) Corporation, limited liability company, association, partnership,joint stock company, joint venture, trust, or other entity orinstrumentality organized under the laws of any domestic jurisdiction toaccomplish a public policy or other governmental purpose;
(27) "Guaranteed" or "insured", in connection with an obligationacquired under this chapter, the guarantor or insurer has agreed to:
(a) Perform or insure the obligation of the obligor or purchase theobligation; or
(b) Be unconditionally obligated until the obligation is repaid tomaintain in the obligor a minimum net worth, fixed charge coverage,stockholders' equity or sufficient liquidity to enable the obligor to paythe obligation in full;
(28) "High-grade investment", a rated credit instruments rated "1","2", "P1", "P2", "PSF1", or "PSF2" by the SVO;
(29) "Investment company", an investment company as defined inSection 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-1), asamended, and a person described in Section 3(c) of that act;
(30) "Investment company series", an investment portfolio of aninvestment company that is organized as a series company and to whichassets of the investment company have been specifically allocated;
(31) "Investment subsidiary", a subsidiary of an insurer engaged ororganized to engage exclusively in the ownership and management of assetsauthorized as investments for the insurer if such subsidiary limits itsinvestment in any asset so that its investments will not cause the amountof the total investment of the insurer to exceed any of the investmentlimitation or avoid any other provisions of this chapter applicable to theinsurer. As used in this subdivision, the total investment insurer shallinclude:
(a) Direct investment by the insurer in an asset; and
(b) The insurer's proportionate share of an investment in an asset byan investment subsidiary of the insurer which shall be calculated bymultiplying the amount of the subsidiary's investment by the percentage ofthe insurer's ownership interest in the subsidiary;
(32) "Investment strategy", the techniques and methods used by aninsurer to meet its investment objectives, such as active bond portfoliomanagement, passive bond portfolio management, interest rate anticipation,growth investing, and value investing;
(33) "Letter of credit", a clean, irrevocable, and unconditionalletter of credit issued or confirmed by and payable and presentable at afinancial institution on the list of financial institutions meeting thestandards for issuing letters of credit under the Purposes and Proceduresof the Securities Valuation Office or any successor publication. Toconstitute applicable collateral for the purposes of section 376.303, aletter of credit shall have an expiration date beyond the term of thesubject transaction;
(34) "Limited liability company", a business organization, excludingpartnerships and ordinary business corporations, organized or operatingunder the laws of the United States or any state thereof that limits thepersonal liability of investors to the equity investment of the investor inthe business entity;
(35) "Lower grade investment", a rated credit instrument rated "4","5", "6", "P4", "P5", "P6", "PSF4", "PSF5", or "PSF6" by the SVO;
(36) "Market value":
(a) As to cash and credit, the amounts thereof; and
(b) As to a security as of any date, the price for the security inthat date obtained from a generally recognized source or the most recentquotation from a source, or to the extent no generally recognized sourceexists, the price for the security reasonably as determined by the insurerplus accrued but unpaid income thereon to the extent not included in theprice as of that date;
(37) "Medium grade investment", a rated credit instrument rated "3","P3", or "PSF3" by the SVO;
(38) "Money market mutual fund", a mutual fund that meets theconditions of 17 C.F.R. 270.2a-7 under the Investment Company Act of 1940(15 U.S.C. 80a-1, et seq.), as amended or renumbered;
(39) "Mortgage loan", an obligation secured by a mortgage, deed oftrust, trust deed, or other consensual lien on real estate;
(40) "Multilateral development bank", an international developmentorganization of which the United States is a member;
(41) "Mutual fund", an investment company or in the case of aninvestment company that is organized as a series company, an investmentcompany series, that in either case is registered with the United StatesSecurities and Exchange Commission under the Investment Company Act of 1940(15 U.S.C. 80a-1, et seq.), as amended;
(42) "NAIC", the National Association of Insurance Commissioners;
(43) "Obligation", a bond, note, debenture, trust certificate,including an equipment trust certificate, production payment, negotiablebank certificate of deposit, bankers' acceptance, credit tenant loan, loansecured by financing net leases, and other evidence of indebtedness for thepayment of money, or participations, certificates, or other evidence of aninterest in any of the foregoing, whether constituting a general obligationof the issuer or payable only out of certain revenues or certain fundspledged or otherwise dedicated for payment;
(44) "Person", an individual, a business entity, a multilateraldevelopment bank, or a government or quasigovernment body, such as apolitical subdivision or a government sponsored enterprise;
(45) "Preferred stock", preferred, preference, or guaranteed stock ofa business entity authorized to issue the stock that has a preference inliquidation over the common stock of the business entity;
(46) "Qualified business entity", a business entity that is:
(a) An issuer of obligations or preferred stock that are rated "1" or"2" by the SVO or an issuer of obligations, preferred stock, or derivativeinstruments that are rated the equivalent of "1" or "2" by the SVO or theequivalent by a nationally recognized statistical rating organizationrecognized by the SVO;
(b) A primary dealer in the United States government securitiesrecognized by the Federal Reserve Bank of New York; or
(c) With respect to section 376.303, an affiliate of an entity thatis a qualified business entity under paragraph (a) or (b) of thissubdivision whose arrangement with the insurer is guaranteed by theaffiliated entity that is a qualified business entity under paragraph (a)or (b) of this subdivision;
(47) "Rated credit instrument":
(a) An obligation or other instrument which gives its holder acontractual right to receive cash or another rated credit instrument fromanother entity if the instrument:
a. Is rated or required to be rated by the SVO;
b. In the case of an instrument with a maturity of three hundredninety-seven days or less, is issued, guaranteed, or insured by an entitythat is rated by or another instrument of such entity is rated by the SVOor by a nationally recognized statistical rating organization recognized bythe SVO;
c. In the case of an instrument with a maturity of ninety days orless, is issued, assumed, accepted, guaranteed, or insured by a qualifiedbank;
d. Is a share of a class one bond mutual fund; or
e. Is a share of a money market mutual fund;
(b) "Rated credit instrument" shall not mean:
a. An instrument that is mandatorily, or at the option of the issuer,convertible to an equity interest; or
b. A security that has a par value and whose terms provide that theissuer's net obligation to repay all or part of the security's par value isdetermined by reference to the performance of an equity, a commodity, aforeign currency, or an index of equities, commodities, foreign currencies,or combination thereof;
(48) "Real estate":
(a) Real property;
(b) Interests in real property, such as leaseholds, mineral, oil, andgas that have not been separated from the underlying fee interest;
(c) Improvements and fixtures located on or in real property; and
(d) The seller's equity in a contract providing for a deed of realestate;
As to a mortgage on a leasehold estate, real estate shall include theleasehold estate only if it has an unexpired term, including renewaloptions exercisable at the option of the lessee extending beyond thescheduled maturity date of the obligation that is secured by a mortgage ona leasehold estate by a period equal to at least twenty percent of theoriginal term of the obligation or ten years, whichever is greater;
(49) "Repurchase transaction", a transaction in which an insurerpurchases securities from a business entity that is obligated to repurchasethe purchased securities or substantially the same securities from theinsurer at a specified price within a specified period of time or ondemand;
(50) "Required liabilities", total liabilities required to bereported on the statutory financial statement of the insurer most recentlyrequired to be filed with the director;
(51) "Residential mortgage loan", a loan primarily secured by amortgage on real estate improved with a one-to-four family residence;
(52) "Reverse repurchase transaction", a transaction in which aninsurer sells substantially the same securities to a business entity and isobligated to repurchase the sold securities or substantially the samesecurities from the business entity at a specified price within a specifiedperiod of time or upon demand;
(53) "Secured location", the contiguous real estate owned by oneperson;
(54) "Securities lending transaction", a transaction in whichsecurities are loaned by an insurer to a business entity that is obligatedto return the loaned securities or substantially the same securities to theinsurer within a specified period of time or upon demand;
(55) "Series company", an investment company that is organized asseries company, as defined in Rule 18f-2 under the Investment Company Actof 1940 (15 U.S.C. 80a-1, et seq.), as amended;
(56) "Sinking fund stock", preferred stock that:
(a) Is subject to a mandatory sinking fund or similar arrangementthat will provide for the redemption or open market purchase of the entireissue over a period not longer than forty years from the date ofacquisition; and
(b) Provides for mandatory sinking fund installments or open marketpurchases commencing not more than ten and one-half years from the date ofissue with the sinking fund installments providing for the purchase orredemption on a cumulative basis commencing ten years from the date ofissue of at least two and one-half percent per year of the original numberof shares of that issue of preferred stock;
(57) "Special rated credit instrument", a rated credit instrumentthat is:
(a) Structured so that if it is held until retired by or on behalf ofthe issuer, its rate of return based on its purchase cost and any cash flowstream possible under the structure of the transaction may become negativedue to reasons other than the credit risk associated with the issuer of theinstrument; however, a rated credit instrument shall not be a special ratedcredit instrument under this paragraph if it is:
a. A share in a class one bond mutual fund;
b. An instrument other than an asset-backed security with payments ofpar value fixed as to an amount and timing or callable but in any eventpayable only at par value or greater and interest or dividend cash flowsthat are based on a fixed or variable rate determined by reference to aspecified rate or index;
c. An instrument other than an asset-backed security that has a parvalue and is purchased at a price no greater than one hundred ten percentof par;
d. An instrument, including an asset-backed security, whose rate ofreturn would become negative only as a result of prepayment due tocasualty, condemnation, or economic obsolescence of collateral or change oflaw;
e. An asset-backed security that relies on collateral that meets therequirements of subparagraph b. of this paragraph and the par value ofwhich collateral:
(i) Is not permitted to be paid sooner than one-half of the remainingterm to maturity from the date of acquisition;
(ii) Is permitted to be paid prior to maturity only at a premiumsufficient to provide a yield to maturity for the investment, consideringthe amount of prepaid and reinvestment rates at the time of earlyrepayment, at least equal to the yield to maturity of the initialinvestment; or
(iii) Is permitted to be paid prior to maturity at a premium at leastequal to the yield of a treasury issue of comparable remaining life; or
f. An asset-backed security that relies on cash flow from assets thatare not prepayable at any time at par but is not otherwise governed bysubparagraph e. of this paragraph if the asset-backed security has a parvalue reflecting principal payments to be received if held until retired byor on behalf of the issuer and is purchased at a price no greater than onehundred five percent of such par amount;
(b) An asset-backed security that:
a. Relies on cash flow from assets that are prepayable at par at anytime;
b. Does not make payments of par that are fixed as to amount andtiming; and
c. Has a negative rate of return at the time of acquisition if aprepayment threshold assumption is used with such prepayment thresholdassumption defined as either:
(i) Two times the prepayment expectation reported by a recognizedpublicly available source as being the median of expectations contributedby broker dealers or other entities except insurers engaged in the businessof selling or evaluating such securities or assets. At the insurer'selection, the prepayment expectation used in this calculation shall be theprepayment expectation for pass-through securities of the Federal NationalMortgage Association, the Federal Home Loan Mortgage Corporation, theGovernment National Mortgage Association, or for other assets of the sametype of assets that underlie the asset-backed security in a gross weightedaverage coupon comparable to the gross weighted average coupon of theassets that underlie the asset-backed security; or
(ii) Another prepayment threshold assumption specified by thedirector by regulation;
(c) For purposes of paragraph (b) of this subdivision, if theasset-backed security is purchased in combination with one or more otherasset-backed securities that are supported by identical underlyingcollateral, the insurer may calculate the rate of return for these specificcombined asset-backed securities in combination. The insurer shallmaintain documentation demonstrating that such securities were acquired andare continuing to be held in combination;
(58) "State", a state, territory, or possession of the United States,District of Columbia, or the Commonwealth of Puerto Rico;
(59) "Substantially the same securities", securities that meet allcriteria for substantially the same securities specified in the NAICAccounting Practices and Procedures Manual, as amended, as adopted by thedirector;
(60) "Subsidiary", as to any person, an affiliate controlled by suchperson, directly or indirectly, through one or more intermediaries;
(61) "SVO", the Securities Valuation Office of the NAIC or anysuccessor office established by the NAIC;
(62) "Unrestricted surplus", the amount by which total admittedassets exceed one hundred and twenty-five percent of the insurer's requiredliabilities.
(L. 2007 S.B. 66)