[PART VI. INVESTMENT POOLS]

 

§431:6-601  Insurer investment pools.  (a) For purposes of this section:

"Business entity" means acorporation, limited liability company, association, partnership, joint stockcompany, joint venture, mutual fund trust, or other similar form of businessorganization, whether organized for-profit or not-for-profit.

"Class one money market mutual funds"means a mutual fund that at all times qualifies for investment using the bondclass one reserve factor under the Purposes and Procedures of the SVO or anysuccessor publication.

"Government money market mutual fund"means a money market mutual fund that at all times:

(1)  Invests only in obligations issued, guaranteed,or insured by the government of the United States or collateralized repurchaseagreements composed of these obligations; and

(2)  Qualifies for investment without a reserve underthe Purposes and Procedures of the SVO or any successor publication.

"Money market mutual fund" means amutual fund that meets the conditions of 17 Code of Federal Regulations Part270.2a-7, under the Investment Company Act of 1940 (15 United States CodeSection 80a-1 et seq.), as amended, or renumbered.

"Obligation" means a bond, note,debenture, trust certificate, including equipment certificate, productionpayment, negotiable bank certificate of deposit, bankers' acceptance, credittenant loan, loan secured by financing net leases and other evidence ofindebtedness for the payment of money (or participation, certificates, or otherevidence of an interest in any of the foregoing), whether constituting ageneral obligation of the issuer or payable only out of certain revenues orcertain funds pledged or otherwise dedicated for payment.

"Qualified bank" means a nationalbank, state bank, or trust company that at all times is no less than adequatelycapitalized as determined by the standards adopted by the United States bankingregulators and that is either regulated by state banking laws or is a member ofthe Federal Reserve System.

"Repurchase transaction" means atransaction in which an insurer purchases securities from a business entitythat is obligated to repurchase the purchased securities or equivalentsecurities from the insurer at a specified price, either within a specifiedperiod of time or upon demand.

"Reverse repurchase transaction"means a transaction in which an insurer sells securities to a business entityand is obligated to repurchase the sold securities or equivalent securitiesfrom the business entity at a specified price, either within a specified periodof time or upon demand.

"Securities lending transaction"means a transaction in which securities are loaned by an insurer to a businessentity that is obligated to return the loans, securities, or equivalentsecurities to the insurer, either within a specified period of time or upondemand.

(b)  An insurer may acquire investments ininvestment pools that:

(1)  Invest only in:

(A)  Obligations that are rated 1 or 2 by theSVO or have an equivalent of an SVO 1 or 2 rating (or, in the absence of a 1 or2 rating or equivalent rating, the issuer has outstanding obligations with anSVO 1 or 2 or equivalent rating) by a nationally-recognized statistical ratingorganization recognized by the SVO and have:

(i)  A remaining maturity of three hundredninety-seven days or less or a put that entitles the holder to receive theprincipal amount of the obligation which put may be exercised through maturityat specified intervals not exceeding three hundred ninety-seven days; or

(ii)  A remaining maturity of three years or lessand a floating interest rate that resets no less frequently than quarterly onthe basis of a current short-term index (federal funds, prime rate, treasurybills, London InterBank Offered Rate or commercial paper) and is subject to nomaximum limit, if the obligations do not have an interest rate that variesinversely to market interest rate changes;

(B)  Government money market mutual funds orclass one money market mutual funds; or

(C)  Securities lending, repurchase, andreverse repurchase transactions that meet all the requirements of section431:6-318; or

(2)  Invest only in investments which an insurer mayacquire under this article, if the insurer'sproportionate interest in the amount invested in these investments does notexceed the applicable limits of this article.

(c)  For an investment in an investment pool tobe qualified under this article, the investment pool shall not:

(1)  Acquire securities issued, assumed, guaranteed,or insured by the insurer or an affiliate of the insurer;

(2)  Borrow or incur an indebtedness for borrowedmoney, except for securities lending and reverse repurchase transactions thatmeet the requirements of this article; or

(3)  Permit the aggregate value of securities thenloaned or sold to, purchased from or invested in any one business entity underthis section to exceed ten per cent of the total assets of the investment pool.

(d)  The limitations of sections 431:6-105 and431:6-402 shall not apply to an insurer's investment in an investment pool;however, an insurer shall not acquire an investment in an investment pool underthis section if, as a result of and after giving effect to the investment, theaggregate amount of investments then held by the insurer under this section:

(1)  In any one investment pool would exceed ten percent of its admitted assets;

(2)  In all investment pools investing in investmentspermitted under subsection (b)(2) would exceed twenty-five per cent of itsadmitted assets; or

(3)  In all investment pools would exceed thirty-fiveper cent of its admitted assets.

(e)  For an investment in an investment pool tobe qualified under this section, the manager of the investment pool shall:

(1)  Be organized under the laws of the United Statesor a state and designated as the pool manager in a pooling agreement;

(2)  Be the insurer, an affiliated insurer, or abusiness entity affiliated with the insurer, a qualified bank, a businessentity registered under the Investment Advisers Act of 1940 (15 U.S.C. §80a-1et seq.), as amended, or, in the case of a reciprocal insurer or interinsuranceexchange, its attorney-in-fact, or in the case of a United States branch of analien insurer, its United States manager or affiliates or subsidiaries of itsUnited States manager;

(3)  Compile and maintain detailed accounting recordssetting forth:

(A)  The cash receipts and disbursementsreflecting each participant's proportionate investment in the investment pool;

(B)  A complete description of all underlyingassets of the investment pool (including amount, interest rate, maturity date(if any), and other appropriate designations); and

(C)  Other records that on a daily basis, allowthird parties to verify each participant's investment in the investment pool;and

(4)  Maintain the assets of the investment pool in oneor more accounts, in the name of or on behalf of the investment pool, under acustody agreement with a qualified bank.  The custody agreement shall:

(A)  State and recognize the claims and rightsof each participant;

(B)  Acknowledge that the underlying assets ofthe investment pool are held solely for the benefit of each participant inproportion to the aggregate amount of its investments in the investment pool;and

(C)  Contain an agreement that the underlyingassets of the investment pool shall not be commingled with the general assetsof the custodian qualified bank or any other person.

(f)  The pooling agreement for each investmentpool shall be in writing and shall provide that:

(1)  An insurer and its affiliated insurers or, in thecase of an investment pool investing solely in investments permitted undersubsection (b)(1), the insurer and its subsidiaries, affiliates, or any pensionor profit sharing plan of the insurer, its subsidiaries and affiliates or, inthe case of a United States branch of an alien insurer, affiliates orsubsidiaries of its United States manager, at all times, shall hold one hundredper cent of the interests in the investment pool;

(2)  The underlying assets of the investment poolshall not be commingled with the general assets of the pool manager or anyother person;

(3)  In proportion to the aggregate amount of eachpool participant's interest in the investment pool:

(A)  Each participant owns an undividedinterest in the underlying assets of the investment pool; and

(B)  The underlying assets of the investmentpool are held solely for the benefit of each participant;

(4)  A participant, or in the event of theparticipant's insolvency, bankruptcy, or receivership, its trustee, receiver,or other successor-in-interest, may withdraw all or any portion of itsinvestment from the pool under the terms of the pooling agreement;

(5)  Withdrawals may be made on demand without penaltyor other assessment on any business day, but settlement of funds shall occurwithin a reasonable and customary period thereafter not to exceed five businessdays.  Distributions under this paragraph shall be calculated in each case netof all then applicable fees and expenses of the investment pool.  The poolingagreement shall provide that the pool manager shall distribute to aparticipant, at the discretion of the pool manager:

(A)  In cash, the then fair market value of theparticipant's pro rata share of each underlying asset of the investment pool;

(B)  In kind, a pro rata share of eachunderlying asset; or

(C)  In a combination of cash and in kinddistributions, a pro rata share in each underlying asset; and

(6)  The pool manager shall make the records of theinvestment pool available for inspection by the commissioner.

(g)  The investment pool authorized under theseprovisions shall be a business entity.

(h)  Transactions between the pool and itsparticipants shall not be subject to section 431:11-106.  Investment activitiesof pools and transactions between pools and participants shall be reportedannually in the registration statement required by section 431:11-105. [L 1997,c 233, pt of §1; am L 2004, c 122, §23; am L 2008, c 142, §10]