CHAPTER 12. LIFE INSURANCE COMPANY POWERS AND POLICY REQUIREMENTS
IC 27-1-12
Chapter 12. Life Insurance Company Powers and PolicyRequirements
IC 27-1-12-1
Particular rights, privileges, and powers
Sec. 1. In addition to the general rights, privileges, and powersconferred by IC 27-1-5 through IC 27-1-13 and IC 27-11 and subjectto the limitations and restrictions contained in this article and in thearticles of incorporation, every life insurance company shall possessand may exercise the rights, privileges, and powers enumerated inthis chapter.
(Formerly: Acts 1935, c.162, s.146.) As amended by P.L.252-1985,SEC.59; P.L.3-1990, SEC.96.
IC 27-1-12-2
Investments; categories, conditions, limitations, and standards
Sec. 2. (a) The following definitions apply to this section:
(1) "Acceptable collateral" means, as to securities lendingtransactions:
(A) cash;
(B) cash equivalents;
(C) letters of credit; and
(D) direct obligations of, or securities that are fullyguaranteed as to principal and interest by, the government ofthe United States or any agency of the United States,including the Federal National Mortgage Association and theFederal Home Loan Mortgage Corporation.
(2) "Acceptable collateral" means, as to lending foreignsecurities, sovereign debt that is rated:
(A) A- or higher by Standard & Poor's Corporation;
(B) A3 or higher by Moody's Investors Service, Inc.;
(C) A- or higher by Duff and Phelps, Inc.; or
(D) 1 by the Securities Valuation Office.
(3) "Acceptable collateral" means, as to repurchasetransactions:
(A) cash;
(B) cash equivalents; and
(C) direct obligations of, or securities that are fullyguaranteed as to principal and interest by, the government ofthe United States or any agency of the United States,including the Federal National Mortgage Association and theFederal Home Loan Mortgage Corporation.
(4) "Acceptable collateral" means, as to reverse repurchasetransactions:
(A) cash; and
(B) cash equivalents.
(5) "Admitted assets" means assets permitted to be reported asadmitted assets on the statutory financial statement of the lifeinsurance company most recently required to be filed with the
commissioner.
(6) "Business entity" means:
(A) a sole proprietorship;
(B) a corporation;
(C) a limited liability company;
(D) an association;
(E) a partnership;
(F) a joint stock company;
(G) a joint venture;
(H) a mutual fund;
(I) a trust;
(J) a joint tenancy; or
(K) other, similar form of business organization;
whether organized for-profit or not-for-profit.
(7) "Cash" means any of the following:
(A) United States denominated paper currency and coins.
(B) Negotiable money orders and checks.
(C) Funds held in any time or demand deposit in anydepository institution, the deposits of which are insured bythe Federal Deposit Insurance Corporation.
(8) "Cash equivalent" means any of the following:
(A) A certificate of deposit issued by a depositoryinstitution, the deposits of which are insured by the FederalDeposit Insurance Corporation.
(B) A banker's acceptance issued by a depository institution,the deposits of which are insured by the Federal DepositInsurance Corporation.
(C) A government money market mutual fund.
(D) A class one money market mutual fund.
(9) "Class one money market mutual fund" means a moneymarket mutual fund that at all times qualifies for investmentpursuant to the "Purposes and Procedures of the SecuritiesValuation Office" or any successor publication either using thebond class one reserve factor or because it is exempt from assetvaluation reserve requirements.
(10) "Dollar roll transaction" means two (2) simultaneoustransactions that have settlement dates not more than ninety-six(96) days apart and that meet the following description:
(A) In one (1) transaction, a life insurance company sells toa business entity one (1) or both of the following:
(i) Asset-backed securities that are issued, assumed, orguaranteed by the Government National MortgageAssociation, the Federal National Mortgage Association,or the Federal Home Loan Mortgage Corporation or thesuccessor of an entity referred to in this item.
(ii) Other asset-backed securities referred to in Section 106of Title I of the Secondary Mortgage Market EnhancementAct of 1984 (15 U.S.C. 77r-1), as amended.
(B) In the other transaction, the life insurance company isobligated to purchase from the same business entity
securities that are substantially similar to the securities soldunder clause (A).
(11) "Domestic jurisdiction" means:
(A) the United States;
(B) any state, territory, or possession of the United States;
(C) the District of Columbia;
(D) Canada; or
(E) any province of Canada.
(12) "Earnings available for fixed charges" means income, afterdeducting:
(A) operating and maintenance expenses other than expensesthat are fixed charges;
(B) taxes other than federal and state income taxes;
(C) depreciation; and
(D) depletion;
but excluding extraordinary nonrecurring items of income orexpense appearing in the regular financial statements of abusiness entity.
(13) "Fixed charges" includes:
(A) interest on funded and unfunded debt;
(B) amortization of debt discount; and
(C) rentals for leased property.
(14) "Foreign currency" means a currency of a foreignjurisdiction.
(15) "Foreign jurisdiction" means a jurisdiction other than adomestic jurisdiction.
(16) "Government money market mutual fund" means a moneymarket mutual fund that at all times:
(A) invests only in:
(i) obligations that are issued, guaranteed, or insured bythe United States; or
(ii) collateralized repurchase agreements composed ofobligations that are issued, guaranteed, or insured by theUnited States; and
(B) qualifies for investment without a reserve pursuant to the"Purposes and Procedures of the Securities ValuationOffice" or any successor publication.
(17) "Guaranteed or insured," when used in reference to anobligation acquired under this section, means that the guarantoror insurer has agreed to:
(A) perform or insure the obligation of the obligor orpurchase the obligation; or
(B) be unconditionally obligated, until the obligation isrepaid, to maintain in the obligor a minimum net worth,fixed charge coverage, stockholders' equity, or sufficientliquidity to enable the obligor to pay the obligation in full.
(18) "Investment company" means:
(A) an investment company as defined in Section 3(a) of theInvestment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),as amended; or (B) a person described in Section 3(c) of the InvestmentCompany Act of 1940.
(19) "Investment company series" means an investmentportfolio of an investment company that is organized as a seriescompany to which assets of the investment company have beenspecifically allocated.
(20) "Letter of credit" means a clean, irrevocable, andunconditional letter of credit that is:
(A) issued or confirmed by; and
(B) payable and presentable at;
a financial institution on the list of financial institutions meetingthe standards for issuing letters of credit under the "Purposesand Procedures of the Securities Valuation Office" or anysuccessor publication. To constitute acceptable collateral for thepurposes of paragraph 29 of subsection (b), a letter of creditmust have an expiration date beyond the term of the subjecttransaction.
(21) "Market value" means the following:
(A) As to cash, the amount of the cash.
(B) As to cash equivalents, the amount of the cashequivalents.
(C) As to letters of credit, the amount of the letters of credit.
(D) As to a security as of any date:
(i) the price for the security on that date obtained from agenerally recognized source, or the most recent quotationfrom such a source; or
(ii) if no generally recognized source exists, the price forthe security as determined in good faith by the parties to atransaction;
plus accrued but unpaid income on the security to the extentnot included in the price as of that date.
(22) "Money market mutual fund" means a mutual fund thatmeets the conditions of 17 CFR 270.2a-7, under the InvestmentCompany Act of 1940 (15 U.S.C. 80a-1 et seq.).
(23) "Multilateral development bank" means an internationaldevelopment organization of which the United States is amember.
(24) "Mutual fund" means:
(A) an investment company; or
(B) in the case of an investment company that is organizedas a series company, an investment company series;
that is registered with the United States Securities andExchange Commission under the Investment Company Act of1940 (15 U.S.C. 80a-1 et seq.).
(25) "Obligation" means any of the following:
(A) A bond.
(B) A note.
(C) A debenture.
(D) Any other form of evidence of debt.
(26) "Person" means: (A) an individual;
(B) a business entity;
(C) a multilateral development bank; or
(D) a government or quasi-governmental body, such as apolitical subdivision or a government sponsored enterprise.
(27) "Repurchase transaction" means a transaction in which alife insurance company purchases securities from a businessentity that is obligated to repurchase the purchased securities orequivalent securities from the life insurance company at aspecified price, either within a specified period of time or upondemand.
(28) "Reverse repurchase transaction" means a transaction inwhich a life insurance company sells securities to a businessentity and is obligated to repurchase the sold securities orequivalent securities from the business entity at a specifiedprice, either within a specified period of time or upon demand.
(29) "Securities lending transaction" means a transaction inwhich securities are loaned by a life insurance company to abusiness entity that is obligated to return the loaned securitiesor equivalent securities to the life insurance company, eitherwithin a specified period of time or upon demand.
(30) "Securities Valuation Office" refers to:
(A) the Securities Valuation Office of the NationalAssociation of Insurance Commissioners; or
(B) any successor of the office referred to in Clause (A)established by the National Association of InsuranceCommissioners.
(31) "Series company" means an investment company that isorganized as a series company (as defined in Rule 18f-2(a)adopted under the Investment Company Act of 1940 (15 U.S.C.80a-1 et seq.), as amended).
(32) "Supported", when used in reference to an obligation, bywhomever issued or made, means that:
(a) repayment of the obligation by:
(i) a domestic jurisdiction or by an administration, agency,authority, or instrumentality of a domestic jurisdiction; or
(ii) a business entity;
as the case may be, is secured by real or personal property ofvalue at least equal to the principal amount of the obligationby means of mortgage, assignment of vendor's interest in one(1) or more conditional sales contracts, other title retentiondevice, or by means of other security interest in suchproperty for the benefit of the holder of the obligation; and
(b) the:
(i) domestic jurisdiction or administration, agency,authority, or instrumentality of the domestic jurisdiction;or
(ii) business entity;
as the case may be, has entered into a firm agreement to rentor use the property pursuant to which it is obligated to pay
money as rental or for the use of such property in amountsand at times which shall be sufficient, after provision fortaxes upon and other expenses of use of the property, torepay in full the obligation with interest and when suchagreement and the money obligated to be paid thereunder areassigned, pledged, or secured for the benefit of the holder ofthe obligation. However, where the security for therepayment of the obligation consists of a first mortgage lienor deed of trust on a fee interest in real property, theobligation may provide for the amortization, during theinitial, fixed period of the lease or contract, of less than onehundred percent (100%) of the obligation if there is pledgedor assigned, as additional security for the obligation,sufficient rentals payable under the lease, or of contractpayments, to secure the amortized obligation paymentsrequired during the initial, fixed period of the lease orcontract, including but not limited to payments of principal,interest, and taxes other than the income taxes of theborrower, and if there is to be left unamortized at the end ofsuch period an amount not greater than the originalappraised value of the land only, exclusive of allimprovements, as prescribed by law.
(b) Investments of domestic life insurance companies at the timethey are made shall conform to the following categories, conditions,limitations, and standards:
1. Obligations of a domestic jurisdiction or of any administration,agency, authority, or instrumentality of a domestic jurisdiction.
2. Obligations guaranteed, supported, or insured as to principaland interest by a domestic jurisdiction or by an administration,agency, authority, or instrumentality of a domestic jurisdiction.
3. Obligations issued under or pursuant to the Farm Credit Act of1971 (12 U.S.C. 2001 through 2279aa-14) as in effect on December31, 1990, or the Federal Home Loan Bank Act (12 U.S.C. 1421through 1449) as in effect on December 31, 1990, interest bearingobligations of the FSLIC Resolution Fund or shares of any institutionwhose deposits are insured by the Savings Association InsuranceFund of the Federal Deposit Insurance Corporation to the extent thatsuch shares are insured, obligations issued or guaranteed by amultilateral development bank, and obligations issued or guaranteedby the African Development Bank.
4. Obligations issued, guaranteed, or insured as to principal andinterest by a city, county, drainage district, road district, schooldistrict, tax district, town, township, village, or other civiladministration, agency, authority, instrumentality, or subdivision ofa domestic jurisdiction, providing such obligations are authorized bylaw and are:
(a) direct and general obligations of the issuing, guaranteeing orinsuring governmental unit, administration, agency, authority,district, subdivision, or instrumentality;
(b) payable from designated revenues pledged to the payment
of the principal and interest thereof; or
(c) improvement bonds or other obligations constituting a firstlien, except for tax liens, against all of the real estate within theimprovement district or on that part of such real estate notdischarged from such lien through payment of the assessment.The area to which such improvement bonds or other obligationsrelate shall be situated within the limits of a town or city and atleast fifty percent (50%) of the properties within such area shallbe improved with business buildings or residences.
5. Loans evidenced by obligations secured by first mortgage lienson otherwise unencumbered real estate or otherwise unencumberedleaseholds having at least fifty (50) years of unexpired term, suchreal estate, or leaseholds to be located in a domestic jurisdiction.Such loans shall not exceed eighty percent (80%) of the fair value ofthe security determined in a manner satisfactory to the department,except that the percentage stated may be exceeded if and to theextent such excess is guaranteed or insured by:
(a) a domestic jurisdiction or by an administration, agency,authority, or instrumentality of any domestic jurisdiction; or
(b) a private mortgage insurance corporation approved by thedepartment.
If improvements constitute a part of the value of the real estate orleaseholds, such improvements shall be insured against fire for thebenefit of the mortgagee in an amount not less than the differencebetween the value of the land and the unpaid balance of the loan.
For the purpose of this section, real estate or a leasehold shall not bedeemed to be encumbered by reason of the existence in relationthereto of:
(1) liens inferior to the lien securing the loan made by the lifeinsurance company;
(2) taxes or assessment liens not delinquent;
(3) instruments creating or reserving mineral, oil, water ortimber rights, rights-of-way, common or joint driveways,sewers, walls, or utility connections;
(4) building restrictions or other restrictive covenants; or
(5) an unassigned lease reserving rents or profits to the owner.
A loan that is authorized by this paragraph remains qualified underthis paragraph notwithstanding any refinancing, modification, orextension of the loan. Investments authorized by this paragraph shallnot in the aggregate exceed forty-five percent (45%) of the lifeinsurance company's admitted assets.
6. Loans evidenced by obligations guaranteed or insured, but onlyto the extent guaranteed or insured, by a domestic jurisdiction or byany agency, administration, authority, or instrumentality of anydomestic jurisdiction, and secured by second or subsequentmortgages or deeds of trust on real estate or leaseholds, provided theterms of the leasehold mortgages or deeds of trust shall not exceedfour-fifths (4/5) of the unexpired lease term, including enforceablerenewable options remaining at the time of the loan.
7. Real estate contracts involving otherwise unencumbered real
estate situated in a domestic jurisdiction, to be secured by the title tosuch real estate, which shall be transferred to the life insurancecompany or to a trustee or nominee of its choosing. For statementand deposit purposes, the value of a contract acquired pursuant tothis paragraph shall be whichever of the following amounts is theleast:
(a) eighty percent (80%) of the contract price of the real estate;
(b) eighty percent (80%) of the fair value of the real estate atthe time the contract is purchased, such value to be determinedin a manner satisfactory to the department; or
(c) the amount due under the contract.
For the purpose of this paragraph, real estate shall not be deemedencumbered by reason of the existence in relation thereto of: (1)taxes or assessment liens not delinquent; (2) instruments creating orreserving mineral, oil, water or timber rights, rights-of-way, commonor joint driveways, sewers, walls or utility connections; (3) buildingrestrictions or other restrictive covenants; or (4) an unassigned leasereserving rents or profits to the owner. Fire insurance uponimprovements constituting a part of the real estate described in thecontract shall be maintained in an amount at least equal to the unpaidbalance due under the contract or the fair value of improvements,whichever is the lesser.
8. Improved or unimproved real property, whether encumbered orunencumbered, or any interest therein, held directly or evidenced byjoint venture interests, general or limited partnership interests, trustcertificates, or any other instruments, and acquired by the lifeinsurance company as an investment, which real property, ifunimproved, is developed within five (5) years. Real propertyacquired for investment under this paragraph, whether leased orintended to be developed for commercial or residential purposes orotherwise lawfully held, is subject to the following conditions andlimitations:
(a) The real estate shall be located in a domestic jurisdiction.
(b) The admitted assets of the life insurance company mustexceed twenty-five million dollars ($25,000,000).
(c) The life insurance company shall have the right to expendfrom time to time whatever amount or amounts may benecessary to conform the real estate to the needs and purposesof the lessee and the amount so expended shall be added to andbecome a part of the investment in such real estate.
(d) The value for statement and deposit purposes of aninvestment under this paragraph shall be reduced annually byamortization of the costs of improvement and development, lessland costs, over the expected life of the property, which valueand amortization shall for statement and deposit purposes bedetermined in a manner satisfactory to the commissioner. Indetermining such value with respect to the calendar years inwhich an investment begins or ends with respect to a point intime other than the beginning or end of a calendar year, theamortization provided above shall be made on a proportional
basis.
(e) Fire insurance shall be maintained in an amount at leastequal to the insurable value of the improvements or thedifference between the value of the land and the value at whichsuch real estate is carried for statement and deposit purposes,whichever amount is smaller.
(f) Real estate acquired in any of the manners described andsanctioned under section 3 of this chapter, or otherwise lawfullyheld, except paragraph 5 of that section which specificallyrelates to the acquisition of real estate under this paragraph,shall not be affected in any respect by this paragraph unlesssuch real estate at or subsequent to its acquisition fulfills theconditions and limitations of this paragraph, and is declared bythe life insurance company in a writing filed with thedepartment to be an investment under this paragraph. The valueof real estate acquired under section 3 of this chapter, orotherwise lawfully held, and invested under this paragraph shallbe initially that at which it was carried for statement and depositpurposes under that section.
(g) Neither the cost of each parcel of improved real property northe aggregate cost of all unimproved real property acquiredunder the authority of this paragraph may exceed two percent(2%) of the life insurance company's admitted assets. Forpurposes of this paragraph, "unimproved real property" meansland containing no structures intended for commercial,industrial, or residential occupancy, and "improved realproperty" consists of all land containing any such structure.When applying the limitations of subparagraph (d) of thisparagraph, unimproved real property becomes improved realproperty as soon as construction of any commercial, industrial,or residential structure is so completed as to be capable ofproducing income. In the event the real property is mortgagedwith recourse to the life insurance company or the life insurancecompany commences a plan of construction upon real propertyat its own expense or guarantees payment of borrowed funds tobe used for such construction, the total project cost of the realproperty will be used in applying the two percent (2%) test.Further, no more than ten percent (10%) of the life insurancecompany's admitted assets may be invested in all property,measured by the property value for statement and depositpurposes as defined in this paragraph, held under this paragraphat the same time.
9. Deposits of cash in a depository institution, the deposits ofwhich are insured by the Federal Deposit Insurance Corporation, orcertificates of deposit issued by a depository institution, the depositsof which are insured by the Federal Deposit Insurance Corporation.
10. Bank and bankers' acceptances and other bills of exchange ofkinds and maturities eligible for purchase or rediscount by federalreserve banks.
11. Obligations that are issued, guaranteed, assumed, or supported
by a business entity organized under the laws of a domesticjurisdiction and that are rated:
(a) BBB- or higher by Standard & Poor's Corporation (or A-2or higher in the case of commercial paper);
(b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2or higher in the case of commercial paper);
(c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higherin the case of commercial paper); or
(d) 1 or 2 by the Securities Valuation Office.
Investments may also be made under this paragraph in obligationsthat have not received a rating if the earnings available for fixedcharges of the business entity for the period of its five (5) fiscal yearsnext preceding the date of purchase shall have averaged per year notless than one and one-half (1 1/2) times its average annual fixedcharges applicable to such period and if during either of the last two(2) years of such period such earnings available for fixed chargesshall have been not less than one and one-half (1 1/2) times its fixedcharges for such year. However, if the business entity is a financecompany or other lending institution at least eighty percent (80%) ofthe assets of which are cash and receivables representing loans ordiscounts made or purchased by it, the multiple shall be one andone-quarter (1 1/4) instead of one and one-half (1 1/2).
11.(A) Obligations issued, guaranteed, or assumed by a businessentity organized under the laws of a domestic jurisdiction, whichobligations have not received a rating or, if rated, have not receiveda rating that would qualify the obligations for investment underparagraph 11 of this section. Investments authorized by thisparagraph may not exceed ten percent (10%) of the life insurancecompany's admitted assets.
12. Preferred stock of, or common or preferred stock guaranteedas to dividends by, any corporation organized under the laws of adomestic jurisdiction, which over the period of the seven (7) fiscalyears immediately preceding the date of purchase earned an averageamount per annum at least equal to five percent (5%) of the par valueof its common and preferred stock (or, in the case of stocks havingno par value, of its issued or stated value) outstanding at date ofpurchase, or which over such period earned an average amount perannum at least equal to two (2) times the total of its annual interestcharges, preferred dividends and dividends guaranteed by it,determined with reference to the date of purchase. No investmentshall be made under this paragraph in a stock upon which anydividend is in arrears or has been in arrears for ninety (90) dayswithin the immediately preceding five (5) year period.
13. Common stock of any solvent corporation organized under thelaws of a domestic jurisdiction which over the seven (7) fiscal yearsimmediately preceding purchase earned an average amount perannum at least equal to six percent (6%) of the par value of its capitalstock (or, in the case of stock having no par value, of the issued orstated value of such stock) outstanding at date of purchase, but theconditions and limitations of this paragraph shall not apply to the
special area of investment to which paragraph 23 of this sectionpertains.
13.(A) Stock or shares of any mutual fund that:
(a) has been in existence for a period of at least five (5) yearsimmediately preceding the date of purchase, has assets of notless than twenty-five million dollars ($25,000,000) at the dateof purchase, and invests substantially all of its assets ininvestments permitted under this section; or
(b) is a class one money market mutual fund or a class one bondmutual fund.
Investments authorized by this paragraph 13(A) in mutual fundshaving the same or affiliated investment advisers shall not at any one(1) time exceed in the aggregate ten percent (10%) of the lifeinsurance company's admitted assets. The limitations contained inparagraph 22 of this subsection apply to investments in the types ofmutual funds described in subparagraph (a). For the purposes of thisparagraph, "class one bond mutual fund" means a mutual fund thatat all times qualifies for investment using the bond class one reservefactor under the "Purposes and Procedures of the SecuritiesValuation Office" or any successor publication.
The aggregate amount of investments under this paragraph maybe limited by the commissioner if the commissioner finds thatinvestments under this paragraph may render the operation of the lifeinsurance company hazardous to the company's policyholders orcreditors or to the general public.
14. Loans upon the pledge of any of the investments described inthis section other than real estate and those qualifying solely underparagraph 20 of this subsection, but the amount of such a loan shallnot exceed seventy-five percent (75%) of the value of the investmentpledged.
15. Real estate acquired or otherwise lawfully held under theprovisions of IC 27-1, except under paragraph 7 or 8 of thissubsection, which real estate as an investment shall also include thevalue of improvements or betterments made thereon subsequent to itsacquisition. The value of such real estate for deposit and statementpurposes is to be determined in a manner satisfactory to thedepartment.
15.(A) Tangible personal property, equipment trust obligations,or other instruments evidencing an ownership interest or otherinterest in tangible personal property when the life insurancecompany purchasing such property has admitted assets in excess oftwenty-five million dollars ($25,000,000), and where there is a rightto receive determined portions of rental, purchase, or other fixedobligatory payments for the use of such personal property from acorporation whose obligations would be eligible for investmentunder the provisions of paragraph 11 of this subsection, provided thatthe aggregate of such payments together with the estimated salvagevalue of such property at the end of its minimum useful life, to bedetermined in a manner acceptable to the insurance commissioner,and the estimated tax benefits to the insurer resulting from ownership
of such property, is adequate to return the cost of the investment insuch property, and provided further, that each net investment intangible personal property for which any single private corporationis obligated to pay rental, purchase, or other obligatory paymentsthereon does not exceed one-half of one percent (1/2%) of the lifeinsurance company's admitted assets, and the aggregate netinvestments made under the provisions of this paragraph do notexceed five percent (5%) of the life insurance company's admittedassets.
16. Loans to policyholders of the life insurance company inamounts not exceeding in any case the reserve value of the policy atthe time the loan is made.
17. A life insurance company doing business in a foreignjurisdiction may, if permitted or required by the laws of suchjurisdiction, invest funds equal to its obligations in such jurisdictionin investments legal for life insurance companies domiciled in suchjurisdiction or doing business therein as alien companies.
17.(A) Investments in (i) obligations issued, guaranteed, assumed,or supported by a foreign jurisdiction or by a business entityorganized under the laws of a foreign jurisdiction and (ii) preferredstock and common stock issued by any such business entity, if theobligations of such foreign jurisdiction or business entity, asappropriate, are rated:
(a) BBB- or higher by Standard & Poor's Corporation (or A-2or higher in the case of commercial paper);
(b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2or higher in the case of commercial paper);
(c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higherin the case of commercial paper); or
(d) 1 or 2 by the Securities Valuation Office.
If the obligations issued by a business entity organized under thelaws of a foreign jurisdiction have not received a rating, investmentsmay nevertheless be made under this paragraph in such obligationsand in the preferred and common stock of the business entity if theearnings available for fixed charges of the business entity for aperiod of five (5) fiscal years preceding the date of purchase haveaveraged at least three (3) times its average fixed charges applicableto such period, and if during either of the last two (2) years of suchperiod, the earnings available for fixed charges were at least three (3)times its fixed charges for such year. Investments authorized by thisparagraph in a single foreign jurisdiction shall not exceed ten percent(10%) of the life insurance company's admitted assets. Subject tosection 2.2(g) of this chapter, investments authorized by thisparagraph denominated in foreign currencies shall not in theaggregate exceed ten percent (10%) of a life insurance company'sadmitted assets, and investments in any one (1) foreign currencyshall not exceed five percent (5%) of the life insurance company'sadmitted assets. Investments authorized by this paragraph andparagraph 17(B) shall not in the aggregate exceed twenty percent(20%) of the life insurance company's admitted assets. This
paragraph in no way limits or restricts investments which areotherwise specifically eligible for deposit under this section.
17.(B) Investments in:
(a) obligations issued, guaranteed, or assumed by a foreignjurisdiction or by a business entity organized under the laws ofa foreign jurisdiction; and
(b) preferred stock and common stock issued by a businessentity organized under the laws of a foreign jurisdiction;
which investments are not eligible for investment under paragraph17.(A).
Investments authorized by this paragraph 17(B) shall not in theaggregate exceed five percent (5%) of the life insurance company'sadmitted assets. Subject to section 2.2(g) of this chapter, ifinvestments authorized by this paragraph 17(B) are denominated ina foreign currency, the investments shall not, as to such currency,exceed two percent (2%) of the life insurance company's admittedassets. Investments authorized by this paragraph 17(B) in any one (1)foreign jurisdiction shall not exceed two percent (2%) of the lifeinsurance company's admitted assets.
Investments authorized by paragraph 17(A) of this subsection andthis paragraph 17(B) shall not in the aggregate exceed twenty percent(20%) of the life insurance company's admitted assets.
18. To protect itself against loss, a company may in good faithreceive in payment of or as security for debts due or to become due,investments or property which do not conform to the categories,conditions, limitations, and standards set out above.
19. A life insurance company may purchase for its own benefitany of its outstanding annuity or insurance contracts or otherobligations and the claims of holders thereof.
20. A life insurance company may make investments although notconforming to the categories, conditions, limitations, and standardscontained in paragraphs 1 through 11, 12 through 19, and 29 through31 of this subsection, but limited in aggregate amount to the lesserof:
(a) ten percent (10%) of the company's admitted assets; or
(b) the aggregate of the company's capital, surplus, andcontingency reserves reported on the statutory financialstatement of the insurer most recently required to be filed withthe commissioner.
This paragraph 20 does not apply to investments authorized byparagraph 11.(A) of this subsection.
20.(A) Investments under paragraphs 1 through 20 and paragraphs29 through 31 of this subsection are subject to the general conditions,limitations, and standards contained in paragraphs 21 through 28 ofthis subsection.
21. Investments in obligations (other than real estate mortgageindebtedness) and capital stock of, and in real estate and tangiblepersonal property leased to, a single corporation, shall not exceedtwo percent (2%) of the life insurance company's admitted assets,taking into account the provisions of section 2.2(h) of this chapter.
The conditions and limitations of this paragraph shall not apply toinvestments under paragraph 13(A) of this subsection or the specialarea of investment to which paragraph 23 of this subsection pertains.
22. Investments in:
(a) preferred stock; and
(b) common stock;
shall not, in the aggregate, exceed twenty percent (20%) of the lifeinsurance company's admitted assets, exclusive of assets held insegregated accounts of the nature defined in class 1(c) ofIC 27-1-5-1. These limitations shall not apply to investments for thespecial purposes described in paragraph 23 of this subsection nor toinvestments in connection with segregated accounts provided for inclass 1(c) of IC 27-1-5-1.
23. Investments in subsidiary companies must be made inaccordance with IC 27-1-23-2.6.
24. No investment, other than commercial bank deposits and loanson life insurance policies, shall be made unless authorized by the lifeinsurance company's board of directors or a committee designated bythe board of directors and charged with the duty of supervising loansor investments.
25. No life insurance company shall subscribe to or participate inany syndicate or similar underwriting of the purchase or sale ofsecurities or property or enter into any transaction for such purchaseor sale on account of said company, jointly with any othercorporation, firm, or person, or enter into any agreement to withholdfrom sale any of its securities or property, but the disposition of itsassets shall at all times be within its control. Nothing contained inthis paragraph shall be construed to invalidate or prohibit anagreement by two (2) or more companies to join and share in thepurchase of investments for bona fide investment purposes.
26. No life insurance company may invest in the stocks orobligations, except investments under paragraphs 9 and 10 of thissubsection, of any corporation in which an officer of such lifeinsurance company is either an officer or director. However, thislimitation shall not apply with respect to such investments in:
(a) a corporation which is a subsidiary or affiliate of such lifeinsurance company; or
(b) a trade association, provided such investment meets therequirements of paragraph 5 of this subsection.
27. Except for the purpose of mutualization provided for insection 23 of this chapter, or for the purpose of retirement ofoutstanding shares of capital stock pursuant to amendment of itsarticles of incorporation, or in connection with a plan approved bythe commissioner for purchase of such shares by the life insurancecompany's officers, employees, or agents, no life insurance companyshall invest in its own stock.
28. In applying the conditions, limitations, and standardsprescribed in paragraphs 11, 12, and 13 of this subsection to thestocks or obligations of a corporation which in the seven (7) yearperiod preceding purchase of such stocks or obligations acquired its
property or a substantial part thereof through consolidation, merger,or purchase, the earnings of the several predecessors or constituentcorporations shall be consolidated.
29. A. Before a life insurance company may engage in securitieslending transactions, repurchase transactions, reverse repurchasetransactions, or dollar roll transactions, the life insurance company'sboard of directors must adopt a written plan that includes guidelinesand objectives to be followed, including the following:
(1) A description of how cash received will be invested or usedfor general corporate purposes of the company.
(2) Operational procedures for managing interest rate risk,counterparty default risk, and the use of acceptable collateral ina manner that reflects the liquidity needs of the transaction.
(3) A statement of the extent to which the company may engagein securities lending transactions, repurchase transactions,reverse repurchase transactions, and dollar roll transactions.
B. A life insurance company must enter into a written agreementfor all transactions authorized by this paragraph, other than dollarroll transactions. The written agreement:
(1) must require the termination of each transaction not morethan one (1) year after its inception or upon the earlier demandof the company; and
(2) must be with the counterparty business entity, except that,for securities lending transactions, the agreement may be withan agent acting on behalf of the life insurance company if:
(A) the agent is:
(i) a business entity, the obligations of which are ratedBBB- or higher by Standard & Poor's Corporation (or A-2or higher in the case of commercial paper), Baa3 or higherby Moody's Investors Service, Inc. (or P-2 or higher in thecase of commercial paper), BBB- or higher by Duff andPhelps, Inc. (or D-2 or higher in the case of commercialpaper), or 1 or 2 by the Securities Valuation Office;
(ii) a business entity that is a primary dealer in UnitedStates government securities, recognized by the FederalReserve Bank of New York; or
(iii) any other business entity approved by thecommissioner; and
(B) the agreement requires the agent to enter into with eachcounterparty separate agreements that are consistent with therequirements of this paragraph.
C. Cash received in a transaction under this paragraph shall be:
(1) invested:
(A) in accordance with this section 2; and
(B) in a manner that recognizes the liquidity needs of thetransaction; or
(2) used by the life insurance company for its general corporatepurposes.
D. For as long as a transaction under this paragraph remainsoutstanding, the life insurance company or its agent or custodian
shall maintain, as to acceptable collateral received in the transaction,either physically or through book entry systems of the FederalReserve, the Depository Trust Company, the Participants TrustCompany, or another securities depository approved by thecommissioner:
(1) possession of the acceptable collateral;
(2) a perfected security interest in the acceptable collateral; or
(3) in the case of a jurisdiction outside the United States:
(A) title to; or
(B) rights of a secured creditor to;
the acceptable collateral.
E. The limitations set forth in paragraphs 17 and 21 of thissubsection do not apply to transactions under this paragraph 29. Forpurposes of calculations made to determine compliance with thisparagraph, no effect may be given to the future obligation of the lifeinsurance company to:
(1) resell securities, in the case of a repurchase transaction; or
(2) repurchase securities, in the case of a reverse repurchasetransaction.
F. A life insurance company shall not enter into a transactionunder this paragraph if, as a result of the transaction, and after givingeffect to the transaction:
(1) the aggregate amount of securities then loaned, sold to, orpurchased from any one (1) business entity under this paragraphwould exceed five percent (5%) of the company's admittedassets (but in calculating the amount sold to or purchased froma business entity under repurchase or reverse repurchasetransactions, effect may be given to netting provisions under amaster written agreement); or
(2) the aggregate amount of all securities then loaned, sold to,or purchased from all business entities under this paragraphwould exceed forty percent (40%) of the admitted assets of thecompany (provided, however, that this limitation does not applyto a reverse repurchase transaction if the borrowing is used tomeet operational liquidity requirements resulting from anofficially declared catastrophe and is subject to a plan approvedby the commissioner).
G. The following collateral requirements apply to all transactionsunder this paragraph:
(1) In a securities lending transaction, the life insurancecompany must receive acceptable collateral having a marketvalue as of the transaction date at least equal to one hundredtwo percent (102%) of the market value of the securities loanedby the company in the transaction as of that date. If at any timethe market value of the acceptable collateral received from aparticular business entity is less than the market value of allsecurities loaned by the company to that business entity, thebusiness entity shall be obligated to deliver additionalacceptable collateral to the company, the market value ofwhich, together with the market value of all acceptable
collateral then held in connection with all securities lendingtransactions with that business entity, equals at least onehundred two percent (102%) of the market value of the loanedsecurities.
(2) In a reverse repurchase transaction, other than a dollar rolltransaction, the life insurance company must receive acceptablecollateral having a market value as of the transaction date equalto at least ninety-five percent (95%) of the market value of thesecurities transferred by the company in the transaction as ofthat date. If at any time the market value of the acceptablecollateral received from a particular business entity is less thanninety-five percent (95%) of the market value of all securitiestransferred by the company to that business entity, the businessentity shall be obligated to deliver additional acceptablecollateral to the company, the market value of which, togetherwith the market value of all acceptable collateral then held inconnection with all reverse repurchase transactions with thatbusiness entity, equals at least ninety-five percent (95%) of themarket value of the transferred securities.
(3) In a dollar roll transaction, the life insurance company mustreceive cash in an amount at least equal to the market value ofthe securities transferred by the company in the transaction asof the transaction date.
(4) In a repurchase transaction, the life insurance company mustreceive acceptable collateral having a market value equal to atleast one hundred two percent (102%) of the purchase pricepaid by the company for the securities. If at any time the marketvalue of the acceptable collateral received from a particularbusiness entity is less than one hundred percent (100%) of thepurchase price paid by the life insurance company in allrepurchase transactions with that business entity, the businessentity shall be obligated to provide additional acceptablecollateral to the company, the market value of which, togetherwith the market value of all acceptable collateral then held inconnection with all repurchase transactions with that businessentity, equals at least one hundred two percent (102%) of thepurchase price. Securities acquired by a life insurance companyin a repurchase transaction shall not be:
(A) sold in a reverse repurchase transaction;
(B) loaned in a securities lending transaction; or
(C) otherwise pledged.
30. A life insurance company may invest in obligations orinterests in trusts or partnerships regardless of the issuer, which aresecured by:
(a) investments authorized by paragraphs 1, 2, 3, 4, or 11 of thissubsection; or
(b) collateral with the characteristics and limitations prescribedfor loans under paragraph 5 of this subsection.
For the purposes of this paragraph 30, collateral may be substitutedfor other collateral if it is in the same amount with the same or
greater interest rate and qualifies as collateral under subparagraph (a)or (b) of this paragraph.
31. A life insurance company may invest in obligations orinterests in trusts or partnerships, regardless of the issuer, secured byany form of collateral other than that described in subparagraphs (a)and (b) of paragraph 30 of this subsection, which obligations orinterests in trusts or partnerships are rated:
(a) A- or higher by Standard & Poor's Corporation or Duff andPhelps, Inc.;
(b) A 3 or higher by Moody's Investor Service, Inc.; or
(c) 1 by the Securities Valuation Office.
Investments authorized by this paragraph may not exceed ten percent(10%) of the life insurance company's admitted assets.
32. A. A life insurance company may invest in short-term poolingarrangements as provided in this paragraph.
B. The following definitions apply throughout this paragraph:
(1) "Affiliate" means, as to any person, another person that,directly or indirectly through one (1) or more intermediaries,controls, is controlled by, or is under common control with theperson.
(2) "Control" means the possession, directly or indirectly, of thepower to direct or cause the direction of the management andpolicies of a person, whether through the ownership of votingsecurities, by contract (other than a commercial contract forgoods or non-management services), or otherwise, unless thepower is the result of an official position with or corporateoffice held by the person. Control shall be presumed to exist ifa person, directly or indirectly, owns, controls, holds with thepower to vote or holds proxies representing ten percent (10%)or more of the voting securities of another person. Thispresumption may be rebutted by a showing that control does notexist in fact. The commissioner may determine, after furnishingall interested persons notice and an opportunity to be heard andmaking specific findings of fact to support the determination,that control exists in fact, notwithstanding the absence of apresumption to that effect.
(3) "Qualified bank" means a national bank, state bank, or trustcompany that at all times is not less than adequately capitalizedas determined by standards adopted by United States bankingregulators and that is either regulated by state banking laws oris a member of the Federal Reserve System.
C. A life insurer may participate in investment pools qualifiedunder this paragraph that invest only in:
(1) obligations that are rated BBB- or higher by Standard &Poor's Corporation (or A-2 or higher in the case of commercialpaper), Baa 3 or higher by Moody's Investors Service, Inc. (orP-2 or higher in the case of commercial paper), BBB- or higherby Duff and Phelps, Inc. (or D-2 or higher in the case ofcommercial paper), or 1 or 2 by the Securities Valuation Office,and have: (A) a remaining maturity of three hundred ninety-seven(397) days or less or a put that entitles the holder to receivethe principal amount of the obligation which put may beexercised through maturity at specified intervals notexceeding three hundred ninety-seven (397) days; or
(B) a remaining maturity of three (3) years or less and afloating interest rate that resets not less frequently thanquarterly on the basis of a current short-term index (forexample, federal funds, prime rate, treasury bills, LondonInterBank Offered Rate (LIBOR) or commercial paper) andis not subject to a maximum limit, if the obligations do nothave an interest rate that varies inversely to market interestrate changes;
(2) government money market mutual funds or class one moneymarket mutual funds; or
(3) securities lending, repurchase, and reverse repurchase anddollar roll transacti