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H0446...........................................................by BUSINESS
INSURERS - Amends existing law relating to borrowed surplus of stock and
mutual insurers to provide that a commission or promotion expense may be
paid in connection with issuance of a loan upon approval of the director of
the Department of Insurance.
01/24 House intro - 1st rdg - to printing
01/25 Rpt prt - to Bus
02/10 Rpt out - rec d/p - to 2nd rdg
02/13 2nd rdg - to 3rd rdg
02/15 3rd rdg - PASSED - 64-0-6
AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer, Bell,
Bilbao, Block, Boe, Bolz, Brackett, Bradford, Cannon, Chadderdon,
Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge,
Field(18), Field(23), Garrett, Hart(Jacobson), Harwood, Henbest,
Henderson, Jaquet, Kemp, Lake, Loertscher, Martinez, Mathews,
McGeachin, McKague, Miller, Moyle, Nielsen, Nonini, Pasley-Stuart,
Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sayler,
Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30),
Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills, Wood
NAYS -- None
Absent and excused -- Bedke, Black, LeFavour, Mitchell, Sali, Mr.
Speaker
Floor Sponsor - Rusche
Title apvd - to Senate
02/16 Senate intro - 1st rdg - to Com/HuRes
02/22 Rpt out - rec d/p - to 2nd rdg
02/23 2nd rdg - to 3rd rdg
03/02 3rd rdg - PASSED - 35-0-0
AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough,
Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce,
Richardson, Schroeder, Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- None
Floor Sponsor - Cameron
Title apvd - to House
03/03 To enrol
03/06 Rpt enrol - Sp signed
03/07 Pres signed
03/08 To Governor
03/11 Governor signed
Session Law Chapter 25
Effective: 07/01/06
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature Second Regular Session - 2006
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 446
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO BORROWED SURPLUS OF STOCK AND MUTUAL INSURERS; AMENDING SECTION
3 41-2841, IDAHO CODE, TO PROVIDE THAT A COMMISSION OR PROMOTION EXPENSE MAY
4 BE PAID IN CONNECTION WITH ISSUANCE OF A LOAN UPON APPROVAL OF THE DIREC-
5 TOR OF THE DEPARTMENT OF INSURANCE AND TO MAKE A TECHNICAL CORRECTION.
6 Be It Enacted by the Legislature of the State of Idaho:
7 SECTION 1. That Section 41-2841, Idaho Code, be, and the same is hereby
8 amended to read as follows:
9 41-2841. BORROWED SURPLUS. (1) A domestic stock or mutual insurer may
10 borrow money to defray the expenses of its organization, provide it with sur-
11 plus funds, or for any purpose of its business, upon a written agreement that
12 such money is required to be repaid only out of the insurer's surplus in
13 excess of that stipulated in such agreement. The agreement may provide for
14 interest at such rate or rates approved by the director, which interest shall
15 or shall not constitute a liability of the insurer as to its funds other than
16 such excess or surplus, as stipulated in the agreement. No A commission or
17 promotion expense shall may be paid in connection with any such loan upon
18 approval of the director.
19 (2) Money so borrowed, together with the interest thereon if so stipu-
20 lated in the agreement, shall not form a part of the insurer's legal liabili-
21 ties except as to its surplus in excess of the amount thereof stipulated in
22 the agreement, or be the basis of any set-off setoff, but until repaid, finan-
23 cial statements filed or published by the insurer shall show as a footnote
24 thereto the amount thereof then unpaid together with any interest thereon
25 accrued but unpaid.
26 (3) Any such loan shall be subject to the director's approval. The
27 insurer shall, in advance of the loan, file with the director a statement of
28 the purpose of the loan and a copy of the proposed loan agreement. The loan
29 and agreement shall be deemed approved unless within fifteen (15) days after
30 the date of such filing the insurer is notified of the director's disapproval
31 and the reasons therefor. The director shall disapprove any proposed loan or
32 agreement if he finds the loan is unnecessary or excessive for the purpose
33 intended, or that the terms of the loan agreement are not fair and equitable
34 to the parties, and to other similar lenders, if any, to the insurer, or that
35 the information so filed by the insurer is inadequate.
36 (4) Any such loan to a mutual insurer or substantial portion thereof
37 shall be repaid by the insurer when no longer reasonably necessary for the
38 purpose originally intended. No repayment of such a loan shall be made by a
39 mutual insurer unless approved in advance by the director.
40 (5) This section shall not apply to loans obtained by the insurer in
41 ordinary course of business from banks and other financial institutions, nor
42 to loans secured by pledge or mortgage of assets.
STATEMENT OF PURPOSE
RS 15453
This statute, originally enacted in 1961, allows for domestic
insurance companies to raise additional capital through the
issuance of debt instruments, commonly referred to as "surplus
notes," the repayment of which must be pre-approved by the Director
of the Idaho Department of Insurance. Surplus notes may be issued
directly or through pooled capital transactions. As the statute
currently exists, an insurer is prohibited from paying a commission
or "placement fee" in conjunction with the issuance of the note.
This prohibition is contrary to current business practices as it
relates to the issuance of these notes. The issuance of these
notes is often accomplished via very large underwritten bond
offerings for which the payment of placement fees is a necessity
for participation. These capital-raising transactions allow Idaho
domestic insurance companies to grow their business competitively
with insurers in other states. While there is no direct fiscal
impact to the state, permitting Idaho insurers to add capital to
fund growth will lead to an increase in insurance sales, resulting
in higher premium tax collections. Also, with business growth
comes employment growth and related state revenue.
FISCAL NOTE
No negative impact.
Contact
Name: John Mackey, United Heritage
Phone: 322-2685
STATEMENT OF PURPOSE/FISCAL NOTE H 446