374.205. Examination, director may conduct when, required when--duties--nonresident insurer, options, procedures--reports, contents, use of--hearings, procedures--working papers, records, confidential

MISSOURI STATUTES AND CODES

374.205. Examination, director may conduct when, required when--duties--nonresident insurer, options, procedures--reports, contents, use of--hearings, procedures--working papers, records, confidential

Examination, director may conduct when, requiredwhen--duties--nonresident insurer, options, procedures--reports,contents, use of--hearings, procedures--working papers, records,confidential.

374.205. 1. (1) The director or any of the director's examiners mayconduct an examination pursuant to sections 374.202 to 374.207 of anycompany as often as the director in his or her sole discretion deemsappropriate, but shall, at a minimum, conduct a financial examination ofevery insurer licensed in this state at least once every five years. Inscheduling and determining the nature, scope and frequency of examinations,the director may consider such matters as the results of financialstatement analyses and ratios, changes in management or ownership,actuarial opinions, reports of independent certified public accountants,consumer complaints, and other criteria as set forth in the Examiners'Handbook adopted by the National Association of Insurance Commissioners andin effect when the director exercises discretion pursuant to this section.

(2) For purposes of completing an examination of any company pursuantto sections 374.202 to 374.207, the director may examine or investigate anyperson, or the business of any person, insofar as such examination orinvestigation is, in the sole discretion of the director, necessary ormaterial to the examination of the company.

(3) In lieu of a financial examination pursuant to section 374.207 ofany foreign or alien insurer licensed in this state, the director mayaccept a financial examination report on the company as prepared by theinsurance department or other appropriate agency for the company's state ofdomicile or port-of-entry state until January 1, 1994. After January 1,1994, such reports may only be accepted if such insurance department orother appropriate agency was at the time of the examination accreditedpursuant to the National Association of Insurance Commissioners' FinancialRegulation Standards and Accreditation Program or the examination isperformed under the supervision of an accredited insurance department orother appropriate agency or with the participation of one or more examinerswho are employed by such an accredited state insurance department or otherappropriate agency and who, after a review of the examination workpapersand report, state under oath that the examination was performed in a mannerconsistent with the standards and procedures required by their insurancedepartment or other appropriate agency.

2. (1) Upon determining that an examination should be conducted, thedirector or the director's designee shall issue an examination warrantappointing one or more examiners to perform the examination and instructingthem as to the scope of the examination. In conducting the examination,the examiner shall observe those guidelines and procedures set forth in theExaminers' Handbook adopted by the National Association of InsuranceCommissioners. The director may also employ such other guidelines orprocedures as the director may deem appropriate.

(2) Every company or person from whom information is sought, itsofficers, directors and agents shall provide to the examiners appointedpursuant to subdivision (1) of this subsection timely, convenient and freeaccess at all reasonable hours at its offices to all books, records,accounts, papers, documents and any or all computer or other recordingsrelating to the property, assets, business and affairs of the company beingexamined. The company or person being examined shall provide within tencalendar days any record requested by an examiner during a market conductexamination, unless such company or person demonstrates to the satisfactionof the director that the requested record cannot be provided within tencalendar days of the request. All policy records for each policy issuedshall be maintained for the duration of the current policy term plus twocalendar years and all claim files shall be maintained for the calendaryear in which the claim is closed plus three calendar years. The officers,directors, employees and agents of the company or person shall facilitatethe examination and aid in the examination so far as it is in their powerto do so. The refusal of any company, by its officers, directors,employees or agents, to submit to examination or to comply with anyreasonable written request of the examiners shall be grounds for suspensionor refusal of, or nonrenewal of, any license or authority held by thecompany to engage in an insurance or other business subject to thedirector's jurisdiction. Any such proceeding for suspension, revocation orrefusal of any license or authority shall be conducted pursuant to section374.046.

(3) The director or any of the director's examiners may issuesubpoenas to administer oaths and to examine under oath any person as toany matter pertinent to the examination. Upon the failure or refusal ofany person to obey a subpoena, the director may petition a court ofcompetent jurisdiction, and upon proper showing, the court may enter anorder compelling the witness to appear and testify or produce documentaryevidence. Failure to obey the court order shall be punishable as contemptof court. Such subpoenas may also be enforced pursuant to the provisionsof sections 375.881 and 375.1162, RSMo.

(4) When making an examination pursuant to sections 374.202 to374.207, the director may retain attorneys, appraisers, independentactuaries, independent certified public accountants or other professionalsand specialists as examiners, the cost of which shall be borne directly bythe company which is the subject of the examination.

(5) The provisions of sections 374.202 to 374.207 shall not beconstrued to limit the director's authority to terminate or suspend anyexamination in order to pursue other legal or regulatory action pursuant tothe insurance laws of this state. Findings of fact and conclusions madepursuant to any examination shall be prima facie evidence in any legal orregulatory action.

(6) Nothing contained in sections 374.202 to 374.207 shall beconstrued to limit the director's authority to use and, if appropriate, tomake public any final or preliminary examination report, any examiner orcompany workpapers or other documents, or any other information discoveredor developed during the course of any examination in the furtherance of anylegal or regulatory action which the director may, in his or her solediscretion, deem appropriate.

3. (1) All examination reports shall be comprised of only factsappearing upon the books, records, or other documents of the company, itsagents or other persons examined, or as ascertained from the testimony ofits officers or agents or other persons examined concerning its affairs,and such conclusions and recommendations as the examiners find reasonablywarranted from the facts.

(2) No later than sixty days following completion of the examination,the examiner in charge shall file with the department a verified writtenreport of examination under oath. Upon receipt of the verified report, thedepartment shall transmit the report to the company examined, together witha notice which shall afford the company examined a reasonable opportunityof not more than thirty days to make a written submission or rebuttal withrespect to any matters contained in the examination report.

(3) Within thirty days of the end of the period allowed for thereceipt of written submissions or rebuttals, the director shall fullyconsider and review the report, together with any written submissions orrebuttals and any relevant portions of the examiner's workpapers and eitherinitiate legal action or enter an order:

(a) Adopting the examination report as filed or with modification orcorrections. If the examination report reveals that the company isoperating in violation of any law, regulation or prior order of thedirector, the director may order the company to take any action thedirector considers necessary and appropriate to cure such violation;

(b) Rejecting the examination report with directions to the examinersto reopen the examination for purposes of obtaining additional data,documentation or information, and refiling pursuant to subsection 1 of thissection;

(c) Calling for an investigatory hearing with no less than twentydays' notice to the company for purposes of obtaining additionaldocumentation, data, information and testimony; or

(d) Calling for such regulatory action as the director deemsappropriate, provided that this order shall be a confidential internalorder directing the department to take certain action.

(4) All orders entered pursuant to paragraph (a) of subdivision (3)of this subsection shall be accompanied by findings and conclusionsresulting from the director's consideration and review of the examinationreport, relevant examiner workpapers and any written submissions orrebuttals. Any such order shall be considered a final administrativedecision and may be appealed pursuant to section 536.150, RSMo, and shallbe served upon the company by certified mail, together with a copy of theadopted examination report. Within thirty days of the issuance of theadopted report, the company shall file affidavits executed by each of itsdirectors stating under oath that they have received a copy of the adoptedreport and related orders. Any hearing conducted pursuant to paragraph (c)of subdivision (3) of this subsection by the director or authorizedrepresentative shall be conducted as a nonadversarial confidentialinvestigatory proceeding as necessary for the resolution of anyinconsistencies, discrepancies or disputed issues apparent upon the face ofthe filed examination report or raised by or as a result of the director'sreview of relevant workpapers or by the written submission or rebuttal ofthe company. Within twenty days of the conclusion of any such hearing, thedirector shall enter an order pursuant to paragraph (a) of subdivision (3)of this subsection. In conducting a hearing pursuant to paragraph (c) ofsubdivision (3) of this subsection:

(a) The director shall not appoint an examiner as an authorizedrepresentative to conduct the hearing. The hearing shall proceedexpeditiously with discovery by the company limited to the examiner'sworkpapers which tend to substantiate any assertions set forth in anywritten submission or rebuttal. The director or his or her representativemay issue subpoenas for the attendance of any witnesses or the productionof any documents deemed relevant to the investigation whether under thecontrol of the department, the company or other persons. The documentsproduced shall be included in the record, and testimony taken by thedirector or his or her representative shall be under oath and preserved forthe record. The provisions of this section shall not require thedepartment to disclose any information or records which would indicate orshow the existence of any investigation or activity of a criminal justiceagency; and

(b) The hearing shall proceed with the director or his or herrepresentative posing questions to the persons subpoenaed. Thereafter, thecompany and the department may present testimony relevant to theinvestigation. Cross-examination shall be conducted only by the directoror the director's representative. The company and the department shall bepermitted to make closing statements and may be represented by counsel oftheir choice.

(5) Upon the adoption of the examination report pursuant to paragraph(a) of subdivision (3) of this subsection, the director shall continue tohold the content of the examination report as private and confidentialinformation for a period of ten days except to the extent provided in thissubdivision. Thereafter, the director may open the report for publicinspection so long as no court of competent jurisdiction has stayed itspublication. Nothing contained in the insurance laws of this state shallprevent or be construed as prohibiting the director from disclosing thecontent of an examination report, preliminary examination report orresults, or any matter relating thereto, to the insurance department ofthis or any other state or country, or to law enforcement officials of thisor any other state or agency of the federal government at any time, so longas such agency or office receiving the report or matters relating theretoagrees in writing to hold it confidential and in a manner consistent withthis section. In the event the director determines that legal orregulatory action is appropriate as a result of any examination, he or shemay initiate any proceedings or actions as provided by law.

4. All working papers, recorded information, documents and copiesthereof produced by, obtained by or disclosed to the director or any personin the course of an examination made pursuant to this section shall begiven confidential treatment and are not subject to subpoena and may not bemade public by the director or any other person, except to the extentprovided in subdivision (5) of subsection 3 of this section. Access mayalso be granted to the National Association of Insurance Commissioners.Such parties shall agree in writing prior to receiving the information toprovide to it the same confidential treatment as required by this section,unless the prior written consent of the company to which it pertains hasbeen obtained.