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This entry was published on 2014-09-22
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SECTION 1411
Authorization of, and restrictions on, investments
Insurance (ISC) CHAPTER 28, ARTICLE 14
§ 1411. Authorization of, and restrictions on, investments. (a) No
domestic insurer shall make any loan or investment, except as provided
in subsection (h) hereof, unless authorized or approved by its board of
directors or a committee thereof responsible for supervising or making
such investment or loan. The committee's minutes shall be recorded and a
report submitted to the board of directors at its next meeting.

(b) No such insurer shall participate in any underwriting of the
purchase or sale of securities in advance of their issuance. Any such
insurer may enter into any agreement to sell or withhold from sale any
of its property as long as the insurer is not participating in an
underwriting. The disposition of its property shall be the
responsibility of its board of directors, in accordance with its charter
and by-laws.

(c) Except as otherwise specifically provided in this chapter, no
domestic insurer shall pledge or transfer any securities as collateral
for a loan (including a sale of securities subject to an unconditional
obligation to repurchase the same) if such loan and all other
outstanding loans secured by pledge or deposit of its securities will
exceed, when the loan is made, five percent of its admitted assets as
shown by its last sworn statement to the superintendent, unless the
superintendent shall first give his permission for such loan as
necessary in the conduct of the insurer's business. No pledge or
transfer of securities for a loan shall be made if the insurer does not
receive the loan's proceeds. Nothing in this section shall be construed
as prohibiting an insurer from selling or purchasing individually or on
its account jointly with one or more of its subsidiaries the securities
of any investment company to which the insurer or any of its
subsidiaries renders management, investment advisory or sales services,
nor from participating in such sales or purchases jointly with any
person in the insurer's holding company system, as defined in section
one thousand five hundred one of this chapter.

(d) No domestic stock insurer shall purchase its own capital shares
except pursuant to section seven thousand three hundred two of this
chapter or pursuant to a plan of stock redemption and retirement
approved by the superintendent as reasonable and equitable. No domestic
insurer shall enter into any agreement in connection with the sale of
any property to repurchase such property or any part thereof, except
that such an insurer may (subject to the provisions of subsection (b) of
this section) sell securities subject to an unconditional obligation to
repurchase the same on a date not more than one year from the date of
sale. This subsection shall not apply to the purchase or sale of
directors' qualifying shares.

(e) No director or officer of an insurer doing business in this state
shall receive, in addition to his fixed salary or compensation, any
money or valuable thing, directly or indirectly, or through any
substantial interest in any other corporation or business unit, for
negotiating, procuring, recommending or aiding in any purchase or sale
of property, or loan, made by such insurer or any affiliate or
subsidiary thereof; nor shall he be pecuniarily interested, as
principal, co-principal, agent or beneficiary, directly or indirectly,
or through any substantial interest in any other corporation or business
unit, in any such purchase, sale or loan. This subsection shall not
prohibit:

(1) a member of the board of directors of an insurer, other than life,
from receiving his share of the usual commission earnings of a stock
exchange firm of which he is a partner;

(2) an insurer, other than life, or any life insurer all of whose
shares (except directors' qualifying shares) is owned by any corporation
organized primarily for, and engaged primarily in the business of,
providing support, relief, pensions, annuities or insurance for the
priests, clergy or ministers of any religious denomination or their
dependents, from paying any corporation or partnership in which any
director of the insurer has an interest or is an officer or director or
partner, a reasonable fee for investment advice, provided such
compensation is not in excess of the amounts customarily charged for the
same type of service; or

(3) any transaction or class of transactions which comply with section
one thousand five hundred five or article sixteen of this chapter.

(f) (1) No insurer doing business in this state shall, except as
provided in subsection (h) hereof, make any loan to any of its directors
or officers, directly or indirectly, or through its subsidiaries; nor
shall any such director or officer accept any such loan directly or
indirectly.

(2) No such insurer shall make any advance to any of its directors or
officers for future services to be performed beyond a period of one year
from the date of making such advance.

(g) No insurer doing business in this state, nor any affiliate or
subsidiary thereof, shall directly or indirectly guarantee the financial
obligation of any director or officer of such insurer, affiliate or
subsidiary, and any such guaranty shall be void. In this subsection,
"guarantee" shall not include the making of a contract of insurance of
the kind specified in paragraphs thirteen, fourteen, fifteen or sixteen
of subsection (a) of section one thousand one hundred thirteen of this
chapter.

(h) Nothing contained in this chapter shall prohibit a life insurance
company from making a policy loan upon its policy or contract in an
amount not exceeding the net reserve value of the policy or contract, or
any insurer from:

(1) Acquiring (i) in the case of an insurer making investments under
the authority of section one thousand four hundred four of this article,
such real property serving as the residence of a non-director officer as
may be acquired under the provisions of paragraph five of subsection (a)
of section one thousand four hundred four of this article, or (ii) in
the case of an insurer making investments under the authority of section
one thousand four hundred five of this article, real property serving as
the residence of a non-director officer, under the provisions of
paragraph four of subsection (a) of section one thousand four hundred
five of this article and with the approval of the superintendent in the
case of domestic insurers, in connection with the relocation by the
insurer of the place of employment of such officer (including any
relocation in connection with initial employment), at a purchase price
not exceeding the lesser of the value of such property as determined by
an independent appraiser for the purpose of such acquisition or one
hundred fifty thousand dollars, provided such officer has made
reasonable efforts otherwise to dispose of such property for a period of
not less than one month immediately prior to such acquisition; or

(2) Making a loan to a non-director officer secured by real property
owned by such officer and improved with a one-family dwelling, which is
to serve as such officer's residence, provided that (i) such loan
qualifies under paragraph four of subsection (a) of section one thousand
four hundred four (in the case of an insurer that makes investments
under the authority of section one thousand four hundred four) or
paragraph three of subsection (a) of section one thousand four hundred
five (in the case of an insurer that makes investments under the
authority of section one thousand four hundred five) of this article,
(ii) such loan is made in connection with the relocation by the insurer
of the place of employment of such officer (including any relocation in
connection with initial employment), and (iii) in the case of a domestic
insurer, such loan is approved by the superintendent.

For the purposes of paragraphs one and two of this subsection,
paragraphs four and five of subsection (a) of section one thousand four
hundred four and paragraphs three and four of subsection (a) of section
one thousand four hundred five of this article, real property shall
include a condominium unit and stock of a cooperative apartment
corporation, if such stock entitles the holder thereof to a proprietary
lease of a one-family apartment serving as the residence of the officer.