§431:6-324  Subsidiaries.  (a)  Anydomestic insurer, either by itself or in cooperation with one or more persons,may organize or acquire one or more subsidiaries subject to the limitations ofthis section.

(b)  In addition to investments in common stock,preferred stock, debt obligations, and other securities permitted under allother sections of this article, a domestic insurer also may do one or more ofthe following:

(1)  Invest, in common stock, preferred stock, debtobligations, and other securities of one or more subsidiaries, amounts that donot exceed the lesser of ten per cent of the insurer's assets or fifty per centof the insurer's surplus as regards policyholders.  However, after theinvestments, the insurer's surplus as regards policyholders shall be reasonablein relation to the insurer's outstanding liabilities and adequate to itsfinancial needs.  In calculating the amount of the investments, investments indomestic or foreign insurance subsidiaries shall be excluded, and there shallbe included:

(A)  Total net moneys or other considerationexpended and obligations assumed in the acquisition or formation of asubsidiary, including all organizational expenses and contributions to capitaland surplus of the subsidiary, whether represented by the purchase of capitalstock or issuance of other securities; and

(B)  All amounts expended in acquiringadditional common stock, preferred stock, debt obligations, and othersecurities and all contributions to the capital or surplus, of a subsidiary subsequentto its acquisition or formation;

(2)  If the insurer's total liabilities, as calculatedfor  National Association of Insurance Commissioners' annual statementpurposes, are less than ten per cent of assets, invest any amount in commonstock, preferred stock, debt obligations, and other securities of one or moresubsidiaries.  However, after the investment the insurer's surplus as regardspolicyholders, considering the investment as if it were a disallowed asset,shall be reasonable in relation to the insurer's outstanding liabilities andadequate to its financial needs;

(3)  Invest any amount in common stock, preferredstock, debt obligations, and other securities of one or more subsidiaries;provided that each subsidiary agrees to limit its investments in any asset sothat the investments will not cause the amount of the total investment of theinsurer to exceed any of the investment limitations specified in paragraph (1)or in this article applicable to the insurer.  For the purpose of this subsection,the total investment of the insurer shall include:

(A)  Any direct investment by the insurer in anasset; and

(B)  The insurer's proportionate share of anyinvestment of an asset by any subsidiary of the insurer, which shall becalculated by multiplying the amount of the subsidiary's investment by thepercentage of the insurer's ownership of the subsidiary;

(4)  With the approval of the commissioner, invest anyamount in common stock, preferred stock, debt obligations, or other securitiesof one or more subsidiaries; provided that after the investment, the insurer'ssurplus as regards policyholders shall be reasonable in relation to theinsurer's outstanding liabilities and adequate to its financial needs; or

(5)  Invest any amount in the common stock, preferredstock, debt obligations, or other securities of any subsidiary exclusivelyengaged in holding title to, or holding title to and managing or developingreal or personal property, if after considering as a disallowed asset so muchof the investment as is represented by subsidiary assets, which if helddirectly by the insurer would be considered as a disallowed asset, theinsurer's surplus as regards policyholders shall be reasonable in relation tothe insurer's outstanding liabilities and adequate to its financial needs.

(c)  Investments in common stock, preferredstock, debt obligations, or other securities of subsidiaries made pursuant tosubsection (b) shall not be subject to any of the otherwise applicablerestrictions or prohibitions contained in this article applicable to theinvestment of insurers.

(d)  Whether any investment pursuant tosubsection (b) meets the applicable requirements is to be determinedimmediately after the investment is made, taking into account the thenoutstanding principal balance on all previous investments in debt obligations,and the value of all previous investments in equity securities as of the datethey were made.

(e)  If an insurer ceases to control asubsidiary, it shall dispose of any investment therein made pursuant to thissection within three years from the time of the cessation of control or withinsuch further times as the commissioner may prescribe, unless at any time afterthe investment has been made, the investment has met the requirements for investmentunder any other section of this article, and the insurer has notified thecommissioner thereof.

(f)  In addition to the above subsection, anyinsurer acquiring or disposing of any subsidiary, must also comply with article11 of this code. [L 1987, c 349, §6; am L 1993, c 205, §10; am L 2004, c 122,§22]