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§1405
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§1405 . Investments of life insurers.
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§1405(a)
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(a) The assets of a domestic insurer that is authorized to make investments under (this §) may be invested in the following types of investments, in addition to investments otherwise authorized, subject in the case of investments made under (this §) to the limitations set forth below and the provisions of subsections (this §)(c) , (this §)(d) and (this §)(e) :
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§1405(a)(1)
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(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 (item (ii)) , (item (iii)) and (item (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 ¶) if payable solely out of special assessments on properties benefited by local improvements.
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§1405(a)(2)
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(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 §) shall not exceed 2% of the insurer's admitted assets.
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§1405(a)(3)
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(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 (this sub§)(1) or (this sub§)(2) ,provided that no insurer making investments under the authority of (this §) shall invest in or loan upon the security of any 1 property, under the authority of (this ¶) ,more than $30,000 or 2% of admitted assets, whichever is the greater.
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§1405(a)(4)
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(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 ¶) and then held by such insurer shall not exceed 25% of the insurer's admitted assets, (II) the aggregate amount of investments made under item (this ¶)(i) and then held by such insurer shall not exceed 20% 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 2% 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 10% 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 2% 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 1-5th 1 of the insurer's admitted assets.
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§1405(a)(5)
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(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 ¶) and then held by such insurer shall not exceed 10% of the insurer's admitted assets and (ii) investments held under (this ¶) in the item personal property constituting such investment shall not in the aggregate exceed 1% of the insurer's admitted assets.
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§1405(a)(6)
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(6) Equity interests. Investments (in addition to investments of the types described in (this ¶) but made or acquired under article 17, §1403 , paragraphs this subsection or section42404 and this subsection or section42405 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 ¶) in the institution in which such investment is then being made and then held by such insurer shall not exceed 2% of the insurer's admitted assets and (ii) the aggregate amount of all investments made under (this ¶) and then held by such insurer shall not exceed 20% of the insurer's admitted assets.
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§1405(a)(7)
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(7) Foreign investments. (A) Canadian investments substantially of the same types as those eligible for investment under paragraphs 1 through 6 of (this sub§) ,provided that, after giving effect to any investment made under (this sub¶) ,the aggregate amount of investments made under (this sub¶) and then held by such insurer shall not exceed 10% of the insurer's admitted assets, except where a greater amount is permitted under (sub¶ (B)) below (in which case the provisions of (this sub¶) shall not be applicable).
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§1405(a)(7)(B)
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(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 1 through 6 of (this sub§) ; provided that, except where a greater amount is permitted under (sub¶ (A)) above, after giving effect to any investment in such foreign country or possession made under (this sub¶) ,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 sub¶) and then held by such insurer shall not exceed 1 and 0.5 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.
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§1405(a)(7)(C)
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(C) Investments in foreign countries, in addition to Canadian investments and investments permitted by subparagraph (this ¶)(B) ,that are substantially of the same types as those eligible for investment under paragraphs 1 through 6 of (this sub§) ,provided that, after giving effect to any investment made under (this sub¶) ,the aggregate amount of investments qualified under (this sub¶) and then held by such insurer shall not exceed 16% of the insurer's admitted assets; and
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§1405(a)(7)(C)(i)
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(i) the issuer or obligor is (I) a jurisdiction, which is rated in 1 of the 4 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 (this sub§)(3) and (this sub§)(4) ,the real property is located in any such jurisdiction; and
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§1405(a)(7)(C)(ii)
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(ii) if the investment is denominated in any currency other than United States, the investment is effectively hedged, substantially in its entirety, against the United States :
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§1405(a)(7)(C)(ii)(I)
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(I) for an insurer that has an approved derivative use plan under §1410 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
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§1405(a)(7)(C)(ii)(II)
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(II) for any other insurer, pursuant to contracts or agreements which are: (aa) issued by or traded on a securities exchange or board of trade regulated under the laws of the United States or Canada or a province thereof or (bb) entered into with: (aaa) a United States banking institution which has assets in excess of $5,000,000,000 and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in 1 of the 2 highest rating categories by an independent, nationally recognized, United States rating agency; (bbb) a broker-dealer registered with the Securities and Exchange Commission which has net capital in excess of $250,000,000 ; or
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§1405(a)(7)(C)(ccc)
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(ccc) any other banking institution which has assets in excess of $5,000,000,000 and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in 1 of the 2 highest rating categories by an independent, nationally recognized, United States rating agency and which is organized under the laws of a jurisdiction which is rated in 1 of the 2 highest rating categories by an independent, nationally recognized, United States rating agency; and
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§1405(a)(7)(C)(iii)
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(iii) provided that an insurer shall not make any investment in any foreign country pursuant to (this sub¶) ,if such investment, together with all other investments in the same foreign country so made and then held by such insurer, would exceed 6% of the insurer's admitted assets.
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§1405(a)(7)(D)
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(D) In addition to the foreign investments permitted under the preceding subparagraphs ,foreign investments that are substantially of the same types as those eligible for investment under paragraphs 1 through 6 of (this sub§) ,provided that, after giving effect to any investment made under (this sub¶) ,the aggregate amount of investments made under (this sub¶) and then held by such insurer shall not exceed 4% of the insurer's admitted assets, and provided further that an insurer shall not make any investment in any foreign country pursuant to (this sub¶) ,if such investment, together with all other investments in the same foreign country so made and then held by such insurer, would exceed 2% of the insurer's admitted assets.
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§1405(a)(8)
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(8) Other investments. Investments that do not qualify or are not permitted under any other paragraph ,provided that, after giving effect to any such investment, (i) if such investment is of a type described in paragraph (this sub§)(4)(3) or (this sub§)(4)(5) or item (this sub§)(4)(i) ,the aggregate amount of investments of such type made under (this ¶) and then held by such insurer shall not exceed 5% of the insurer's admitted assets, (ii) if such investment is of a type described in paragraph (this sub§)(6) ,the aggregate amount of such investments made under (this ¶) in the institution in which such investment is then being made and then held by such insurer shall not exceed 2% of the insurer's admitted assets, (iii) if such investment is of a type described in paragraph (this sub§)(7) ,the aggregate amount of investments of all types described in said (¶ (7)) and made under (this ¶) and then held by such insurer shall not exceed 2% of the insurer's admitted assets, and (iv) the aggregate amount of all investments made under (this ¶) and then held by such insurer shall not exceed 14% (but not more than 10% 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 ¶) as provided in paragraph §1403(d)(1) of this article, shall be subject to all the provisions of (this ¶) and may not be acquired if the aggregate amount thereof immediately after such acquisition would exceed 3% of the insurer's admitted assets.
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§1405(b)
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(b)
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§1405(b)(1)
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(1) For the purposes of (this §) ,article 17 of this chapter and §1403 of this article,
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§1405(b)(1)(A)
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(A) "aggregate amount" of investments means, subject to the provisions of the final sentence of (this sub§) ,the aggregate depreciated cost thereof, in the case of investments of the types described in paragraphs (this §),(a)(4) and (this §),(a)(5) and the aggregate cost thereof in the case of investments of other types;
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§1405(b)(1)(B)
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(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;
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§1405(b)(1)(B)(i)
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(i) assets held in separate accounts established under §4240 of this chapter shall be included only to the extent of amounts allocated to such separate accounts pursuant to paragraph a3 said §4240 ; and
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§1405(b)(1)(B)(ii)
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(ii) investments in subsidiaries referred to in subsection §1704(c) of this chapter shall be excluded; and
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§1405(b)(1)(C)
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(C) the eligibility of any investment under any paragraph shall be determined at the time of acquisition thereof, except that (i) any investment qualified pursuant to item 7Cii such (sub§ (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 8 said (sub§ (a)) may be requalified at a later date under another paragraph said (sub§ (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 (this §)(a)(4) and (this §)(a)(5) ,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 (¶ (4)) ,the cost of an investment shall be depreciated over its estimated useful life, not to exceed 50 years.
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§1405(b)(2)
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(2) In computing the "aggregate amount" of investments, as provided in the 1st sentence of paragraph this subsection, A1 valuation of investments acquired under paragraph (this §)(a)(4) 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 §1702 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 §1704(d) of this chapter.
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§1405(c)
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(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 §) ,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 (this §)(a)(2) and (this §)(a)(6) and investments that are substantially of the same types as those eligible for investment under such ,but are made under paragraph 7 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.
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§1405(d)
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(d) After giving effect to any investment of a type described in (item (i)) below, the aggregate amount of (i) investments in subsidiaries charged against the limit contained in paragraph §1705(a)(1) of this chapter, (ii) investments made under item this section, and iiia4i investments of the types described in said item (¶ (4))(i) and such (¶ (5)) and (¶ (6)) but made under paragraph (this §)(a)(7) or (this §)(a)(8) ,shall not exceed 40% of the insurer's admitted assets plus, to the extent permitted by the superintendent, investments (not exceeding 5% 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 the 1st sentence of (this sub§) ,the aggregate amount of investments of the types described in clauses I , II , III , IV and V such sentence made by the insurer on or after the date on which this subdivision becomes effective and then held by the insurer is 1% or more of its admitted assets, then the 40% figure in such sentence shall be deemed to be increased by an equal amount up to a maximum of 45%, thus providing for a maximum of investments described in (item (i)) , (item (ii)) and (item (iii)) herein of 50% of total admitted assets.
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§1405(e)
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(e) No domestic life insurer shall hold a direct or indirect ownership interest in a risk retention group, as defined in article 59 of this chapter, other than in a risk retention group all of whose members are insurance companies. Source Data downloaded: 2009-04-09 14: 24: 52; Processed: 2009-05-08 15: 35: 50
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