§ 1407. Non-reserve and prohibited investments for property/casualty
and certain other insurers. (a) Any insurer that makes investments under
the authority of subsection (c) of section one thousand four hundred
three of this article and meets the requirements of such subsection (c)
and section one thousand four hundred two of this article may invest in,
or otherwise acquire or loan upon, directly or indirectly, any of the
types of investments described in section one thousand four hundred four
of this article, but without having to meet the applicable qualitative
standards or quantitative limitations which are set forth in subsection
(a) of section one thousand four hundred four of this article, except
the following prohibited investments:

(1) Obligations, shares or other securities of any institution which
is insolvent at the time of the investment.

(2) Obligations secured by real property or real property or interest
therein, which are either not eligible under or which exceed the
investment limitations under paragraph four or five of subsection (a) of
section one thousand four hundred four of this article.

(3) Shares of stock of the investing insurer, except to the extent
permitted by the provisions of subsection (d) of section one thousand
four hundred eleven of this article.

(4) Obligations, shares or other securities (including certificates of
deposit) issued by a parent corporation or a corporation which is an
affiliate or will be an affiliate after direct or indirect acquisition
by the insurer. Nothing in this paragraph shall be deemed to prevent any
investment in obligations, shares or other securities of:

(A) another insurance corporation within the limitations prescribed in
section one thousand four hundred eight of this article,

(B) a subsidiary organized to engage exclusively in the acquisition,
ownership or management of investments of the type described in
paragraphs one, two, three, six, seven, eight or ten of subsection (a)
of section one thousand four hundred four of this article, provided such
subsidiary is wholly-owned by two or more insurance companies domiciled
in the United States who are members of the same holding company system,
as such term is defined in article fifteen of this chapter. Furthermore,
each individual insurer's share of the net investment made by such
subsidiary shall be:

(i) computed in proportion to its equity interests in such subsidiary,
and

(ii) included when computing any applicable investment limitations, or

(C) subsidiaries subject to and within the limitations prescribed in
article sixteen of this chapter.

(5) Investments made under the leeway provision, as set forth in
subsection (b) of section one thousand four hundred four of this
article, if the aggregate amount of such investments exceed twelve
percent of the insurer's invested assets as shown by its last statement
on file with the superintendent; or if the aggregate amount of
investments that are neither interest-bearing nor income-paying exceed
three percent of the insurer's invested assets as shown by its last
statement on file with the superintendent.

(6) Obligations, shares or other securities issued by a corporation,
if a majority of the shares having voting powers of such issuing
corporation is owned directly or indirectly by or for the benefit of one
or more officers or directors of the insurer.

(7) Foreign investments, meaning obligations, shares or other
securities of any person or governmental or business unit of or in a
foreign country or of any person or business unit of or in a possession
of the United States, except such as conform substantially with the
limitations imposed by this section upon like domestic investments; but
the aggregate amount of foreign investments including obligations of
American institutions payable outside of the United States and cash
deposited in a bank, trust company or thrift institution located outside
of the United States held at any time by such insurer under this
paragraph and under paragraph six of subsection (a) of section one
thousand four hundred four of this article shall not exceed the greatest
of (i) twelve percent of the insurer's admitted assets as shown by its
last statement on file with the superintendent, (ii) fifteen percent of
the insurer's invested assets as shown by its last statement on file
with the superintendent, or (iii) one and one-half times the amount of
its reserves and other obligations under its insurance and reinsurance
contracts on risks resident or located in such foreign countries and
subdivisions thereof. An investment in the shares of an alien insurer,
which results in the control of such insurer by the investing insurer,
shall not be included when calculating the limitations under this
paragraph, but such an investment shall only be subject to the
limitations of section one thousand four hundred eight of this article.

(8) 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, in which
case any investment in such a risk retention group shall be subject to
the limitations prescribed in section one thousand four hundred eight of
this article.

(9) Acquiring any interest in an investment through a partnership,
other than an interest acquired as a limited partner in a limited
partnership.

(10) Any investment found by the superintendent to be against public
policy or designed to evade any prohibition of this chapter.

(b) This section shall not prohibit any such insurer from accepting
securities, otherwise ineligible, which may be distributed pursuant to
any judicial or lawful non-judicial plan of reorganization or
dissolution.

(c) Any investment pursuant to the provisions of this section shall be
subject to other requirements of law (statutory or otherwise) that
affect the standard of care of directors and officers of corporations,
and in making investments under this section the insurer's 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.