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SECTION 1405
Investments of life insurers
Insurance (ISC) CHAPTER 28, ARTICLE 14
§ 1405. Investments of life insurers. (a) The assets of a domestic
insurer that is authorized to make investments under this section may be
invested in the following types of investments, in addition to
investments otherwise authorized, subject in the case of investments
made under this section to the limitations set forth below and the
provisions of subsections (c), (d) and (e) of this section:

(1) Governmental obligations. Obligations, not in default, issued,
assumed, guaranteed or insured by (i) the United States of America or by
any agency or instrumentality thereof, (ii) any state of the United
States of America, (iii) the District of Columbia, (iv) any territory or
possession of the United States of America or any other governmental
unit in the United States, or (v) any agency or instrumentality of any
governmental unit referred to in items (ii), (iii) and (iv) above,
provided that, in the case of obligations issued, assumed, guaranteed or
insured by any governmental unit referred to in item (iv) above or any
agency or instrumentality referred to in item (v) above, such
obligations are by law (statutory or otherwise) payable, as to both
principal and interest, from taxes levied or by law required to be
levied or from adequate special revenues pledged or otherwise
appropriated or by law required to be provided for the purpose of such
payment, but in no event shall obligations be eligible for investment
under this paragraph if payable solely out of special assessments on
properties benefited by local improvements.

(2) Obligations and preferred shares of American institutions. (i)
Obligations, not in default, whether or not secured and with or without
recourse, issued, assumed, guaranteed, insured or accepted by American
institutions (or trustees or receivers therefor) and (ii) preferred
shares of any such institution, provided, however, that after giving
effect to any such investment in preferred shares of any institution,
the aggregate amount of investments in preferred shares of such
institution made under this section shall not exceed two percent of the
insurer's admitted assets.

(3) Obligations secured by real property or interests therein.
Obligations, or participations therein, secured by liens on real
property or interests therein located within the United States and not
eligible under paragraph one or two of this subsection, provided that no
insurer making investments under the authority of this section shall
invest in or loan upon the security of any one property, under the
authority of this paragraph, more than thirty thousand dollars or two
percent of admitted assets, whichever is the greater.

(4) Real property or interests therein. Investments in real property
or interests therein located in the United States, held directly or
evidenced by partnership interests, stock of corporations (including,
without limitation, subsidiaries engaged or organized to engage
exclusively in the ownership and management of real property or
interests therein), trust certificates or other instruments, and
acquired (i) as an investment for the production of income or to be
improved or developed for such investment purpose, or (ii) for the
convenient accommodation of the insurer's business; provided that, after
giving effect to any such investment, (I) the aggregate amount of such
investments made under this paragraph and then held by such insurer
shall not exceed twenty-five percent of the insurer's admitted assets,
(II) the aggregate amount of investments made under item (i) of this
paragraph and then held by such insurer shall not exceed twenty percent
of the insurer's admitted assets, and (III) investments held under item
(i) above in each property constituting such investment (including
improvements thereon) shall not in the aggregate exceed two percent of
the insurer's admitted assets, and provided, further, that no investment
in real property may be made under item (ii) herein, (aa) if, after
giving effect thereto, the aggregate amount of such investments then
held by the insurer would exceed ten percent of the insurer's admitted
assets, (bb) without the prior approval of the superintendent, if, after
giving effect thereto, the aggregate amount of such investments in each
property constituting such investment (including improvements thereon)
then held by such insurer would exceed two percent of the insurer's
admitted assets, and (cc) without the prior approval of the
superintendent, in the case of an investment by a domestic insurer in
real property located outside this state, if, after giving effect
thereto, the aggregate amount of such investments in the property
constituting such investment (including improvements thereon) would
exceed one-fifth of one percent of the insurer's admitted assets.

(5) Personal property or interests therein. Investments in personal
property or interests therein located or used wholly or in part within
the United States, held directly or evidenced by partnership interests,
stock of corporations (including, without limitation, subsidiaries
engaged or organized to engage exclusively in the ownership and
management of personal property or interests therein), trust
certificates or other instruments, provided that, after giving effect to
any such investment, (i) the aggregate amount of such investments made
under this paragraph and then held by such insurer shall not exceed ten
percent of the insurer's admitted assets and (ii) investments held under
this paragraph in the item of personal property constituting such
investment shall not in the aggregate exceed one percent of the
insurer's admitted assets.

(6) Equity interests. Investments (in addition to investments of the
types described in this paragraph but made or acquired under article
seventeen, section one thousand four hundred three, paragraphs four and
five of this subsection or section four thousand two hundred forty of
this chapter) in common shares, partnership interests, trust
certificates or other equity interests (other than preferred shares) of
American institutions, provided that, after giving effect to any
investment made under this paragraph, (i) the aggregate amount of
investments made under this paragraph in the institution in which such
investment is then being made and then held by such insurer shall not
exceed two percent of the insurer's admitted assets and (ii) the
aggregate amount of all investments made under this paragraph and then
held by such insurer shall not exceed twenty percent of the insurer's
admitted assets.

(7) Foreign investments. (A) Canadian investments substantially of the
same types as those eligible for investment under paragraphs one through
six of this subsection, provided that, after giving effect to any
investment made under this subparagraph, the aggregate amount of
investments made under this subparagraph and then held by such insurer
shall not exceed ten percent of the insurer's admitted assets, except
where a greater amount is permitted under subparagraph (B) below (in
which case the provisions of this subparagraph shall not be applicable).

(B) In the case of any domestic insurer that is authorized to do
business in a foreign country or possession of the United States of
America or that has outstanding insurance, annuity or reinsurance
contracts on lives or risks resident or located in such foreign country
or possession, investments in such foreign country or possession that
are substantially of the same types as those eligible for investment
under paragraphs one through six of this subsection; provided that,
except where a greater amount is permitted under subparagraph (A) above,
after giving effect to any investment in such foreign country or
possession made under this subparagraph, the aggregate amount of cash in
the currency of such foreign country or possession and of investments in
such foreign country or possession made under this subparagraph and then
held by such insurer shall not exceed one and one-half times the amount
of such insurer's reserves and other obligations under such contracts or
the amount which such insurer is required by law to invest in such
country or possession, whichever shall be greater.

(C) Investments in foreign countries, in addition to Canadian
investments and investments permitted by subparagraph (B) of this
paragraph, that are substantially of the same types as those eligible
for investment under paragraphs one through six of this subsection,
provided that, after giving effect to any investment made under this
subparagraph, the aggregate amount of investments qualified under this
subparagraph and then held by such insurer shall not exceed twenty
percent of the insurer's admitted assets; and

(i) the issuer or obligor is (I) a jurisdiction, which is rated in one
of the four highest rating categories by an independent, nationally
recognized United States rating agency, (II) any political subdivision
or other governmental unit of any such jurisdiction, or any agency or
instrumentality of any such jurisdiction, political subdivision or other
governmental unit or (III) an institution which is organized under the
laws of any such jurisdiction or, in the case of such paragraphs three
and four of this subsection, the real property is located in any such
jurisdiction; and

(ii) an insurer shall not make any investment in any foreign country
pursuant to this subparagraph, if such investment, together with all
other investments in the same foreign country so made and then held by
such insurer, would exceed seven percent of the insurer's admitted
assets.

(D) In addition to the foreign investments permitted under the
preceding subparagraphs of this paragraph, foreign investments that are
substantially of the same types as those eligible for investment under
paragraphs one through six of this subsection, provided that, after
giving effect to any investment made under this subparagraph, the
aggregate amount of investments made under this subparagraph and then
held by such insurer shall not exceed six percent of the insurer's
admitted assets, and provided further that an insurer shall not make any
investment in any foreign country pursuant to this subparagraph, if such
investment, together with all other investments in the same foreign
country so made and then held by such insurer, would exceed three
percent of the insurer's admitted assets.

(8) Other investments. Investments that do not qualify or are not
permitted under any other paragraph of this subsection, provided that,
after giving effect to any such investment, (i) if such investment is of
a type described in paragraph three or five or item (i) of paragraph
four or paragraph six of this subsection, the aggregate amount of
investments of such type made under this paragraph and then held by such
insurer shall not exceed five percent of the insurer's admitted assets,
(ii) if such investment is of a type described in paragraph six of this
subsection, the aggregate amount of such investments made under this
paragraph in the institution in which such investment is then being made
and then held by such insurer shall not exceed two percent of the
insurer's admitted assets, (iii) if such investment is of a type
described in paragraph seven of this subsection, the aggregate amount of
investments of all types described in said paragraph seven and made
under this paragraph and then held by such insurer shall not exceed two
percent of the insurer's admitted assets, and (iv) the aggregate amount
of all investments made under this paragraph and then held by such
insurer shall not exceed fourteen percent (but not more than ten percent
in investments in institutions not having their principal operations in
this state and in real and personal property and interests therein
located outside this state and in mortgages and security interests with
respect to real and personal property located outside this state) of the
insurer's admitted assets. Investments that are neither interest bearing
nor income paying, made under this paragraph as provided in paragraph
one of subsection (d) of section one thousand four hundred three of this
article, shall be subject to all the provisions of this paragraph and
may not be acquired if the aggregate amount thereof immediately after
such acquisition would exceed three percent of the insurer's admitted
assets.

(b) (1) For the purposes of this section, article seventeen of this
chapter and section one thousand four hundred three of this article,

(A) "aggregate amount" of investments means, subject to the provisions
of the final sentence of this subsection, the aggregate depreciated cost
thereof, in the case of investments of the types described in paragraphs
four and five of subsection (a) of this section, and the aggregate cost
thereof in the case of investments of other types;

(B) "admitted assets" means the amount thereof as of the last day of
the most recently concluded annual statement year subject to the
following adjustments;

(i) assets held in separate accounts established under section four
thousand two hundred forty of this chapter shall be included only to the
extent of amounts allocated to such separate accounts pursuant to
paragraph three of subsection (a) of said section four thousand two
hundred forty; and

(ii) investments in subsidiaries referred to in subsection (c) of
section one thousand seven hundred four of this chapter shall be
excluded; and

(C) the eligibility of any investment under any paragraph of
subsection (a) of this section shall be determined at the time of
acquisition thereof, except that (i) any investment qualified pursuant
to item (ii) of subparagraph (C) of paragraph seven of such subsection
(a) shall remain so qualified only at such time or times as the hedging
requirements of such item (ii) are met with respect thereto; and (ii)
investments qualified under paragraph eight of said subsection (a) may
be requalified at a later date under another paragraph of said
subsection (a), if the relevant conditions are satisfied at the time of
such requalification. In computing depreciated cost of investments of
the types described in paragraphs four and five of subsection (a) of
this section, depreciation may be computed at a rate no greater than
that permitted for federal income tax purposes and, in the case of
investments described in said paragraph four, the cost of an investment
shall be depreciated over its estimated useful life, not to exceed fifty
years.

(2) In computing the "aggregate amount" of investments, as provided in
the first sentence of paragraph one of this subsection, (A) valuation of
investments acquired under paragraph four of subsection (a) of this
section shall also be subject to any regulation with respect to such
valuation that the superintendent may prescribe and (B) investments of
investment subsidiaries as defined in section one thousand seven hundred
two of this chapter shall be valued as though the parent corporation
owned the assets of such subsidiaries directly instead of the stock of
such subsidiaries and shall be subject to the provisions of subsection
(d) of section one thousand seven hundred four of this chapter.

(c) In addition to other requirements of law (statutory or otherwise)
that affect the standard of care of directors and officers of
corporations, in making investments under this section, directors and
officers shall perform their duties in good faith and with that degree
of care that an ordinarily prudent individual in a like position would
use under similar circumstances. In the case of investments made under
paragraphs two and six of subsection (a) of this section and investments
that are substantially of the same types as those eligible for
investment under such paragraphs, but are made under paragraph seven of
such subsection, the institution that determines the eligibility of any
such investment shall be a solvent institution whose obligations, if
any, are not in default as to principal or interest, unless such
investment is necessary to protect an investment theretofore made in the
securities of such institution.

(d) After giving effect to any investment of a type described in item
(i), (ii) or (iii) below, the aggregate amount of (i) investments in
subsidiaries charged against the limit contained in paragraph one of
subsection (a) of section one thousand seven hundred five of this
chapter, (ii) investments made under item (i) of paragraph four and
paragraphs five and six of subsection (a) of this section, and (iii)
investments of the types described in said item (i) of paragraph four
and such paragraphs five and six but made under paragraph seven or eight
of subsection (a) of this section, shall not exceed forty percent of the
insurer's admitted assets plus, to the extent permitted by the
superintendent, investments (not exceeding five percent of the insurer's
admitted assets) of the types referred to above in (I) new business
enterprises located in the state; (II) technologically oriented
businesses located in the state; (III) minority-owned businesses located
in the state; (IV) businesses located in areas in the state that have
experienced a high rate of chronic unemployment; and (V) development of
housing in the state for families and persons of low income. If, at the
time of the making of any investment of a type described in item (i),
(ii) or (iii) of the first sentence of this subsection, the aggregate
amount of investments of the types described in clauses (I), (II),
(III), (IV) and (V) of such sentence made by the insurer on or after the
date on which this subdivision becomes effective and then held by the
insurer is one percent or more of its admitted assets, then the forty
percent figure in such sentence shall be deemed to be increased by an
equal amount up to a maximum of forty-five percent, thus providing for a
maximum of investments described in items (i), (ii) and (iii) herein of
fifty percent of total admitted assets.

(e) No domestic life insurer shall hold a direct or indirect ownership
interest in a risk retention group, as defined in article fifty-nine of
this chapter, other than in a risk retention group all of whose members
are insurance companies.

(f) Any investment may be denominated in a currency other than United
States dollars, provided that the aggregate amount of all such
investments (other than investments made pursuant to subparagraphs (A)
and (B) of paragraph seven of subsection (a) of this section) that are
not effectively hedged, substantially in their entirety, against the
United States dollar, reduced, on a currency by currency basis, by the
amount of foreign-currency denominated insurance liabilities may not
exceed four percent of the insurer's admitted assets. An investment
shall be deemed to be effectively hedged, substantially in its entirety,
if it has been hedged:

(1) for an insurer that has an approved derivative use plan under
section one thousand four hundred ten of this article, pursuant to
contracts or agreements entered into under and in accordance with that
derivative use plan and subject to the counterparty exposure limits
thereunder; or

(2) for any other insurer, pursuant to contracts or agreements
(derivative transactions) which are cleared through a "derivatives
clearinghouse" or entered into with a "qualified counterparty", as those
terms are defined pursuant to subsection (f) of section one thousand
four hundred ten of this article.