CHAPTER 13. CASUALTY, FIRE, AND MARINE INSURANCE COMPANY POWERS AND POLICY REQUIREMENTS
IC 27-1-13
Chapter 13. Casualty, Fire, and Marine Insurance CompanyPowers and Policy Requirements
IC 27-1-13-1
Particular rights, privileges, and powers of casualty, fire, ormarine insurers; exceptions
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 casualty, fire, or marine insurancecompany shall possess and may exercise the rights, privileges, andpowers enumerated in this chapter, except that such powers shall notbe intended or interpreted to mean that a company organized undereither class as set out and defined in IC 27-1-5-1 shall make any kindor kinds of insurance as set out and defined in any other class ofIC 27-1-5-1 other than as expressly provided in such classification.
(Formerly: Acts 1935, c.162, s.170.) As amended by P.L.252-1985,SEC.67; P.L.3-1990, SEC.97.
IC 27-1-13-2
Repealed
(Repealed by Acts 1981, P.L.241, SEC.4.)
IC 27-1-13-3
Investment of capital and funds above capital
Sec. 3. (a) The following definitions apply throughout thissection:
(1) "Acceptable collateral" means the following:
(A) As to securities lending transactions and for the purposeof calculating counterparty exposure:
(i) cash;
(ii) cash equivalents;
(iii) letters of credit; and
(iv) direct obligations of, or securities that are fullyguaranteed as to principal and interest by, the governmentof the United States or any agency of the United States,including the Federal National Mortgage Association andthe Federal Home Loan Mortgage Corporation.
(B) As to lending foreign securities, sovereign debt rated 1by the Securities Valuation Office.
(C) As to repurchase transactions:
(i) cash;
(ii) cash equivalents; and
(iii) direct obligations of, or securities that are fullyguaranteed as to principal and interest by, the governmentof the United States or any agency of the United States,including the Federal National Mortgage Association andthe Federal Home Loan Mortgage Corporation.
(D) As to reverse repurchase transactions: (i) cash; and
(ii) cash equivalents.
(2) "Admitted assets" means assets permitted to be reported asadmitted assets on the statutory financial statement of theinsurer most recently required to be filed with thecommissioner.
(3) "Business entity" means any of the following:
(A) A sole proprietorship.
(B) A corporation.
(C) A limited liability company.
(D) An association.
(E) A general partnership.
(F) A limited partnership.
(G) A limited liability partnership.
(H) A joint stock company.
(I) A joint venture.
(J) A trust.
(K) A joint tenancy.
(L) Any other similar form of business organization, whetherfor profit or nonprofit.
(4) "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.
(5) "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 (1) money market mutual fund.
(6) "Class one (1) money market mutual fund" means a moneymarket mutual fund that at all times qualifies for investmentusing the bond class one (1) reserve factor pursuant to thePurposes and Procedures of the Securities Valuation Office ofthe National Association of Insurance Commissioners or anysuccessor publication.
(7) "Government money market mutual fund" means a moneymarket mutual fund that at all times:
(A) invests only in obligations issued, guaranteed, or insuredby the United States or collateralized repurchase agreementscomposed of these obligations; and
(B) qualifies for investment without a reserve pursuant to thePurposes and Procedures of the Securities Valuation Officeof the National Association of Insurance Commissioners orany successor publication. (8) "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.).
(9) "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.).
(10) "Obligation" means any of the following:
(A) A bond.
(B) A note.
(C) A debenture.
(D) Any other form of evidence of debt.
(11) "Qualified business entity" means a business entity that is:
(A) an issuer of obligations or preferred stock that is ratedone (1) or two (2) or is rated the equivalent of one (1) or two(2) by the Securities Valuation Office or by a nationallyrecognized statistical rating organization recognized by theSecurities Valuation Office; or
(B) a primary dealer in United States government securities,recognized by the Federal Reserve Bank of New York.
(12) "Securities Valuation Office" refers to the SecuritiesValuation Office of the National Association of InsuranceCommissioners or any successor of the Office established bythe National Association of Insurance Commissioners.
(b) Any company, other than one organized as a life insurancecompany, organized under the provisions of IC 27-1 or any other lawof this state and authorized to make any or all kinds of insurancedescribed in class 2 or class 3 of IC 27-1-5-1 shall invest its capitalor guaranty fund as follows and not otherwise:
(1) In cash.
(2) In:
(A) direct obligations of the United States; or
(B) obligations secured or guaranteed as to principal andinterest by the United States.
(3) In:
(A) direct obligations; or
(B) obligations secured by the full faith and credit;
of any state of the United States or the District of Columbia.
(4) In obligations of any county, township, city, town, village,school district, or other municipal district within the UnitedStates which are a direct obligation of the county, township,city, town, village, or district issuing the same.
(5) In obligations secured by mortgages or deeds of trust orunencumbered real estate or perpetual leases thereon in theUnited States not exceeding eighty percent (80%) of the fairvalue of the security determined in a manner satisfactory to thedepartment, except that the percentage stated may be exceeded
if and to the extent such excess is guaranteed or insured by theUnited States, any state, territory, or possession of the UnitedStates, the District of Columbia, Canada, any province ofCanada, or by an administration, agency, authority, orinstrumentality of any such governmental units. Whereimprovements on the land constitute a part of the value onwhich the loan is made, the improvements shall be insuredagainst fire and tornado for the benefit of the mortgagee. Forthe purposes of this section, real estate may not be deemed to beencumbered by reason of the existence of taxes or assessmentsthat are not delinquent, instruments creating or reservingmineral, oil, or timber rights, rights-of-way, joint driveways,sewer rights, rights-in-walls, nor by reason of buildingrestrictions, or other restrictive covenants, nor when such realestate is subject to lease in whole or in part whereby rents orprofits are reserved to the owner. The restrictions contained inthis subdivision do not apply to loans or investments madeunder section 5 of this chapter.
(c) Any company organized under the provisions of this article orany other law of this state and authorized to make any or all of thekinds of insurance described in class 2 or class 3 of IC 27-1-5-1 shallinvest its funds over and above its required capital stock or requiredguaranty fund as follows, and not otherwise:
(1) In cash or cash equivalents. However, not more than tenpercent (10%) of admitted assets may be invested in any singlegovernment money market mutual fund or class one (1) moneymarket mutual fund.
(2) In direct obligations of the United States or obligationssecured or guaranteed as to principal and interest by the UnitedStates.
(3) In obligations issued, guaranteed, or insured as to principaland interest by a city, county, drainage district, road district,school district, tax district, town, township, village or other civiladministration, agency, authority, instrumentality or subdivisionof a state, territory, or possession of the United States, theDistrict of Columbia, Canada, or any province of Canada,providing such obligations are authorized by law and are either:
(A) direct and general obligations of the issuing,guaranteeing, or insuring governmental unit, administration,agency, authority, district, subdivision, or instrumentality;
(B) payable from designated revenues pledged to thepayment of the principal and interest of the obligations; or
(C) improvement bonds or other obligations constituting afirst lien, except for tax liens, against all of the real estatewithin the improvement district or on that part of such realestate not discharged from such lien through payment of theassessment.
The area to which the improvement bonds or other obligationsunder clause (C) relate must be situated within the limits of atown or city and at least fifty percent (50%) of the properties
within that area must be improved with business buildings orresidences.
(4) In:
(A) direct obligations; or
(B) obligations secured by the full faith and credit;
of any state of the United States, the District of Columbia, orCanada or any province thereof.
(5) In obligations guaranteed, supported, or insured as toprincipal and interest by the United States, any state, territory,or possession of the United States, the District of Columbia,Canada, any province of Canada, or by an administration,agency, authority, or instrumentality of any of the political unitslisted in this subdivision. An obligation is "supported" for thepurposes of this subdivision when repayment of the obligationis secured by real or personal property of value at least equal tothe principal amount of the indebtedness by means of mortgage,assignment of vendor's interest in one (1) or more conditionalsales contracts, other title retention device, or by means of othersecurity interest in the property for the benefit of the holder ofthe obligation, and one (1) of the political units listed in thissubdivision, or an administration, agency, authority, orinstrumentality listed in this subdivision, has entered into a firmagreement to rent or use the property pursuant to which entityis obligated to pay money as rental or for the use of the propertyin amounts and at times that are sufficient, after provision fortaxes upon and for other expenses of the use of the property, torepay in full the indebtedness, both principal and interest, andwhen the firm agreement and the money obligated to be paidunder the agreement are assigned, pledged, or secured for thebenefit of the holder of the obligation. However, where thesecurity consists of a first mortgage lien or deed of trust on a feeinterest in real property, the obligation may provide for theamortization, during the initial fixed period of the lease orcontract of less than one hundred percent (100%) of theindebtedness if there is pledged or assigned, as additionalsecurity for the obligation, sufficient rentals payable under thelease, or of contract payments, to secure the amortizedobligation payments required during the initial, fixed period ofthe lease or contract, including but not limited to payments ofprincipal, interest, and taxes other than the income taxes of theborrower, and if there is to be left unamortized at the end of theperiod an amount not greater than the original appraised valueof the land only, exclusive of all improvements, as prescribedby law.
(6) In obligations secured by mortgages or deeds of trust orunencumbered real estate or perpetual leases thereon, in anystate in the United States, the District of Columbia, Canada, orany province of Canada, not exceeding eighty percent (80%) ofthe fair value of the security determined in a mannersatisfactory to the department, except that the percentage stated
may be exceeded if and to the extent that the excess isguaranteed or insured by the United States, any state, territory,or possession of the United States, the District of Columbia,Canada, any province of Canada, or by an administration,agency, authority, or instrumentality of any of suchgovernmental units. The value of the real estate must bedetermined by a method and in a manner satisfactory to thedepartment. The restrictions contained in this subdivision donot apply to loans or investments made under section 5 of thischapter.
(7) In obligations issued under or pursuant to the Farm CreditAct of 1971 (12 U.S.C. 2001 through 2279aa-14) as in effect onDecember 31, 1990, or the Federal Home Loan Bank Act (12U.S.C. 1421 through 1449) as in effect on December 31, 1990,interest bearing obligations of the FSLIC Resolution Fund andshares of any institution that is insured by the SavingsAssociation Insurance Fund of the Federal Deposit InsuranceCorporation to the extent that the shares are insured, obligationsissued or guaranteed by the International Bank forReconstruction and Development, obligations issued orguaranteed by the Inter-American Development Bank, andobligations issued or guaranteed by the African DevelopmentBank.
(8) In any mutual fund that:
(A) has been registered with the Securities and ExchangeCommission for a period of at least five (5) yearsimmediately preceding the date of purchase;
(B) has net assets of at least twenty-five million dollars($25,000,000) on the date of purchase; and
(C) invests substantially all of its assets in investmentspermitted under this subsection.
The amount invested in any single mutual fund shall not exceedten percent (10%) of admitted assets. The aggregate amount ofinvestments under this subdivision may be limited by thecommissioner if the commissioner finds that investments underthis subdivision may render the operation of the companyhazardous to the company's policyholders, to the company'screditors, or to the general public. This subdivision in no waylimits or restricts investments that are otherwise specificallypermitted under this section.
(9) In obligations payable in United States dollars and issued,guaranteed, assumed, insured, or accepted by a foreigngovernment or by a solvent business entity existing under thelaws of a foreign government, if the obligations of the foreigngovernment or business entity meet at least one (1) of thefollowing criteria:
(A) The obligations carry a rating of at least A3 conferred byMoody's Investor Services, Inc.
(B) The obligations carry a rating of at least A- conferred byStandard & Poor's Corporation. (C) The earnings available for fixed charges of the businessentity for a period of five (5) fiscal years preceding the dateof purchase have averaged at least three (3) times theaverage fixed charges of the business entity applicable to theperiod, and if during either of the last two (2) years of theperiod, the earnings available for fixed charges were at leastthree (3) times the fixed charges of the business entity forthe year. As used in this subdivision, the terms "earningsavailable for fixed charges" and "fixed charges" have themeanings set forth in IC 27-1-12-2(a).
Foreign investments authorized by this subdivision shall notexceed twenty percent (20%) of the company's admitted assets.This subdivision in no way limits or restricts investments thatare otherwise specifically permitted under this section. Canadais not a foreign government for purposes of this subdivision.
(10) In the obligations of any solvent business entity existingunder the laws of the United States, any state of the UnitedStates, the District of Columbia, Canada, or any province ofCanada, provided that interest on the obligations is not indefault.
(11) In the preferred or guaranteed shares of any solventbusiness entity, so long as the business entity is not and has notbeen for the preceding five (5) years in default in the paymentof interest due and payable on its outstanding debt or in arrearsin the payment of dividends on any issue of its outstandingpreferred or guaranteed stock.
(12) In the shares, other than those specified in subdivision (7),of any solvent business entity existing under the laws of anystate of the United States, the District of Columbia, Canada, orany province of Canada, and in the shares of any institutionwherever located which has the insurance protection providedby the Savings Association Insurance Fund of the FederalDeposit Insurance Corporation. Except for the purpose ofmutualization or for the purpose of retirement of outstandingshares of capital stock pursuant to amendment of its articles ofincorporation, or in connection with a plan approved by thecommissioner for purchase of such shares by the insurancecompany's officers, employees, or agents, or for the eliminationof fractional shares, no company subject to the provisions ofthis section may invest in its own stock.
(13) In loans upon the pledge of any mortgage, stocks, bonds,or other evidences of indebtedness, acceptable as investmentsunder the terms of this chapter, if the current value of themortgage, stock, bond, or other evidences of indebtedness is atleast twenty-five percent (25%) more than the amount loaned onit.
(14) In real estate, subject to subsections (d) and (e).
(15) In securities lending, repurchase, and reverse repurchasetransactions with business entities, subject to the followingrequirements: (A) The company's board of directors shall adopt a writtenplan that specifies guidelines and objectives to be followed,such as:
(i) a description of how cash received will be invested orused for general corporate purposes of the company;
(ii) operational procedures to manage interest rate risk,counterparty default risk, and the use of acceptablecollateral in a manner that reflects the liquidity needs ofthe transaction; and
(iii) the extent to which the company may engage in thesetransactions.
(B) The company shall enter into a written agreement for alltransactions authorized in this subdivision. The writtenagreement shall require the termination of each transactionnot more than one (1) year from its inception or upon theearlier demand of the company. The agreement shall be withthe counterparty business entity but, for securities lendingtransactions, the agreement may be with an agent acting onbehalf of the company if the agent is a qualified businessentity and if the agreement:
(i) requires the agent to enter into separate agreementswith each counterparty that are consistent with therequirements of this section; and
(ii) prohibits securities lending transactions under theagreement with the agent or its affiliates.
(C) Cash received in a transaction under this section shall beinvested in accordance with this section and in a manner thatrecognizes the liquidity needs of the transaction or used bythe company for its general corporate purposes. For as longas the transaction remains outstanding, the company or itsagent or custodian shall maintain, as to acceptable collateralreceived in a transaction under this section, either physicallyor through book entry systems of the Federal Reserve,Depository Trust Company, Participants Trust Company, orother securities depositories approved by the commissioner:
(i) possession of the acceptable collateral;
(ii) a perfected security interest in the acceptablecollateral; or
(iii) in the case of a jurisdiction outside the United States,title to, or rights of a secured creditor to, the acceptablecollateral.
(D) For purposes of calculations made to determinecompliance with this subdivision, no effect may be given tothe company's future obligation to resell securities in thecase of a repurchase transaction, or to repurchase securitiesin the case of a reverse repurchase transaction. A companyshall not enter into a transaction under this subdivision if, asa result of and after giving effect to the transaction:
(i) the aggregate amount of securities then loaned, sold to,or purchased from any one (1) business entity pursuant to
this subdivision would exceed five percent (5%) of itsadmitted assets (but, in calculating the amount sold to orpurchased from a business entity pursuant to repurchase orreverse repurchase transactions, effect may be given tonetting provisions under a master written agreement); or
(ii) the aggregate amount of all securities then loaned, soldto, or purchased from all business entities under thissubdivision would exceed forty percent (40%) of itsadmitted assets.
(E) In a securities lending transaction, the company shallreceive acceptable collateral having a market value as of thetransaction date at least equal to one hundred two percent(102%) of the market value of the securities loaned by thecompany in the transaction as of that date. If at any time themarket value of the acceptable collateral is less than themarket value of the loaned securities, the business entityshall be obligated to deliver additional acceptable collateral,the market value of which, together with the market value ofall acceptable collateral then held in connection with thetransaction, at least equals one hundred two percent (102%)of the market value of the loaned securities.
(F) In a reverse repurchase transaction, the company shallreceive acceptable collateral having a market value as of thetransaction date at least equal to ninety-five percent (95%)of the market value of the securities transferred by thecompany in the transaction as of that date. If at any time themarket value of the acceptable collateral is less thanninety-five percent (95%) of the market value of thesecurities so transferred, the business entity shall beobligated to deliver additional acceptable collateral, themarket value of which, together with the market value of allacceptable collateral then held in connection with thetransaction, equals at least ninety-five percent (95%) of themarket value of the transferred securities.
(G) In a repurchase transaction, the company shall receive asacceptable collateral transferred securities having a marketvalue equal to at least one hundred two percent (102%) ofthe purchase price paid by the company for the securities. Ifat any time the market value of the acceptable collateral isless than one hundred percent (100%) of the purchase pricepaid by the company, the business entity shall be obligatedto provide additional acceptable collateral, the market valueof which, together with the market value of all acceptablecollateral then held in connection with the transaction,equals at least one hundred two percent (102%) of thepurchase price. Securities acquired by a company in arepurchase transaction shall not be sold in a reverserepurchase transaction, loaned in a securities lendingtransaction, or otherwise pledged.
(16) In mortgage backed securities, including collateralized
mortgage obligations, mortgage pass through securities,mortgage backed bonds, and real estate mortgage investmentconduits, adequately secured by a pool of mortgages, whichmortgages are fully guaranteed or insured by the government ofthe United States or any agency of the United States, includingthe Federal National Mortgage Association or the Federal HomeLoan Mortgage Corporation.
(17) In mortgage backed securities, including collateralizedmortgage obligations, mortgage pass through securities,mortgage backed bonds, and real estate mortgage investmentconduits, adequately secured by a pool of mortgages, if thesecurities carry a rating of at least:
(A) A3 conferred by Moody's Investor Services, Inc.; or
(B) A- conferred by Standard & Poor's Corporation.
The amount invested in any one (1) obligation or pool ofobligations described in this subdivision shall not exceed fivepercent (5%) of admitted assets. The aggregate amount of allinvestments under this subdivision shall not exceed ten percent(10%) of admitted assets.
(18) Any other investment acquired in good faith as payment onaccount of existing indebtedness or in connection with therefinancing, restructuring, or workout of existing indebtedness,if taken to protect the interests of the company in thatinvestment.
(19) In obligations or interests in trusts or partnerships in whicha life insurance company may invest as described in paragraph31 of IC 27-1-12-2(b). Investments authorized by this paragraphmay not exceed ten percent (10%) of the company's admittedassets.
(20) In any other investment. The total of all investments underthis subdivision, except for investments in subsidiary companiesunder IC 27-1-23-2.6, may not exceed an aggregate amount often percent (10%) of the insurer's admitted assets. Investmentsare not permitted under this subdivision:
(A) if expressly prohibited by statute; or
(B) in an insolvent organization or an organization in defaultwith respect to the payment of principal or interest on itsobligations.
(d) Any company subject to the provisions of this section shallhave power to acquire, hold, or convey real estate, or an interesttherein, as described below, and no other:
(1) Leaseholds, provided the mortgage term shall not exceedfour-fifths (4/5) of the unexpired lease term, includingenforceable renewable options, remaining at the time of theloan, such real estate or leaseholds to be located in the UnitedStates, any territory or possession of the United States, orCanada, the value of such leasehold for statement purposesshall be determined in a manner and form satisfactory to thedepartment. At the time the leasehold is acquired and approvedby the department, a schedule of annual depreciation shall be
set up by the department in which the value of said leasehold isto be depreciated, and said depreciation is to be averaged outover not exceeding a period of fifty (50) years.
(2) The building in which it has its principal office and the landon which it stands.
(3) Such as shall be necessary for the convenient transaction ofits business.
(4) Such as shall have been acquired for the accommodation ofits business.
(5) Such as shall have been mortgaged to it in good faith by wayof security for loans previously contracted or for money due.
(6) Such as shall have been conveyed to it in connection with itsinvestments in real estate contracts or its investments in realestate under lease or for the purpose of leasing or such as shallhave been acquired for the purpose of investment under anylaw, order, or regulation authorizing such investment, forstatement purposes, the value of such real estate shall bedetermined in a manner satisfactory to the department.
(7) Such as shall have been conveyed to it in satisfaction ofdebts previously contracted in the course of its dealings, or inexchange for real estate so conveyed to it.
(8) Such as it shall have purchased at sales on judgments,decrees, or mortgages obtained or made for such debts.
(e) All real estate described in subsection (d)(4) through (d)(8)which is not necessary for the convenient transaction of its businessshall be sold by said company and disposed of within ten (10) yearsafter it acquired title to the same, or within five (5) years after thesame has ceased to be necessary for the accommodation of itsbusiness, unless the company procures the certificate of thecommissioner that its interests will suffer materially by a forced saleof the real estate, in which event the time for the sale may beextended to such time as the commissioner directs in the certificate.
(Formerly: Acts 1935, c.162, s.172; Acts 1937, c.288, s.3; Acts 1939,c.63, s.4; Acts 1949, c.206, s.1; Acts 1971, P.L.384, SEC.1; Acts1973, P.L.277, SEC.1.) As amended by Acts 1981, P.L.241, SEC.1;P.L.159-1986, SEC.3; P.L.161-1986, SEC.1; P.L.121-1990, SEC.2;P.L.8-1991, SEC.9; P.L.184-1996, SEC.2; P.L.186-1997, SEC.7;P.L.1-2002, SEC.104; P.L.40-2004, SEC.2.
IC 27-1-13-3.5
Intangible assets attributable to investment in subsidiary; amountas percentage of capital and surplus
Sec. 3.5. (a) Except as provided by subsection (b), goodwill, tradenames, and other like intangible assets attributable to any investmentin a subsidiary shall be admitted as assets except:
(1) to the extent that the aggregate amount thereof exceeds tenpercent (10%) of the capital and surplus of the insurer asreported in its latest annual report filed with the commissioner;
(2) to the extent that any such asset is not being amortizedratably over a period of ten (10) years or less from the date of
acquisition; and
(3) in determining the financial condition or solvency of aninsurer under IC 27-9.
(b) The commissioner may increase the ten percent (10%)limitation in subsection (a)(1) to an amount not to exceed twentypercent (20%) of the capital and surplus of the insurer as reported inits latest annual statement filed with the commissioner if:
(1) the assets of the insurer include good will, trade names, andother like intangible assets that are attributable to theacquisition after December 31, 1998, of an insurance companyor health maintenance organization authorized to do businessunder the laws of any state; and
(2) as of the date of the initial request for an increase in the tenpercent (10%) limitation in subsection (a)(1) the total adjustedcapital of the insurer is at least four hundred percent (400%) ofthe authorized control level risk based capital of the insurer asreported in the latest annual report filed with the commissioner.
(c) The commissioner may retain experts to assist with a requestmade under subsection (b). The insurer shall pay all costs for theexperts.
As added by P.L.160-1986, SEC.2. Amended by P.L.88-2000, SEC.1.
IC 27-1-13-4
Valuation of bonds and securities
Sec. 4. (a) All bonds or other evidences of debt having a fixedterm and rate of interest held by an insurer may, if amply secured andnot in default as to principal or interest, be valued as follows: Ifpurchased at par, at the par value; if purchased above or below par,on the basis of the purchase price adjusted so as to bring the value topar at maturity and so as to yield in the meantime the effective rateof interest at which the purchase was made, or, instead of thismethod, according to an accepted method of valuation as is approvedby the department. The purchase price shall in no case be taken at ahigher figure than the actual market value at the time of purchase,plus actual brokerage, transfer, postage, or express charges paid inthe acquisition of the securities. The department shall have fulldiscretion in determining the method of calculating values accordingto the rules set forth in this subsection. However, no such method orvaluation under this subsection may be inconsistent with anyapplicable method or valuation used by insurers in general or anysuch method then currently formulated or approved by the NationalAssociation of Insurance Commissioners or its successororganization.
(b) Securities held by an insurer, other than those referred to insubsection (a), shall be valued, in the discretion of the department,at their market value or at their appraised value or at pricesdetermined by the department as representing the fair market valueof the securities. Preferred or guaranteed stocks or shares, whilepaying full dividends, may be carried at a fixed value in lieu ofmarket value at the discretion of the department and in accordance
with the method of valuation that the department approves. Novaluation under this subsection may be inconsistent with anyapplicable valuation or method then currently formulated orapproved by the National Association of Insurance Commissionersor its successor organization.
(Formerly: Acts 1935, c.162, s.172a.) As amended by P.L.130-1994,SEC.20; P.L.116-1994, SEC.27.
IC 27-1-13-5
Insured loans and investments
Sec. 5. (a) Subject to such rules as the department finds to benecessary and proper, any insurance company other than oneorganized as a life insurance company organized under theprovisions of this article or any other law of this state and authorizedto make any or all of the kinds of insurance described in Class 2 orClass 3 of IC 27-1-5-1 shall have the following powers:
(1) To make such loans and advances of credit and purchase ofobligations representing loans and advances of credit as areeligible for insurance by the federal housing administrator, andto obtain such insurance.
(2) To make such loans secured by mortgages on real propertyor leasehold, as the federal housing administrator insures ormakes a commitment to insure, and to obtain such insurance.
(3) To purchase, invest its capital and other funds in, anddispose of, notes or bonds secured by deed of trusts or mortgageinsured by the federal housing administrator or debenturesissued by the federal housing administrator, or bonds or othersecurities issued by national mortgage associations.
(b) No law of this state prescribing the nature, amount, or form ofsecurity or requiring security upon which loans or advances ofcredits may be made, or prescribing or limiting interest rates uponloans or advances of credit, or prescribing or limiting the period forwhich loans or advances of credit may be made shall be deemed toapply to loans, advances of credit, or purchases made pursuant tosubsections (a)(1) and (a)(2).
(c) Any rule made and promulgated under and pursuant to thissection may apply to one (1) or more of the insurance companies towhich this section is applicable.
(Formerly: Acts 1935, c.162, s.173; Acts 1937, c.288, s.4.) Asamended by P.L.252-1985, SEC.68.
IC 27-1-13-6
Limitation on risks; effect of reinsurance
Sec. 6. (a) No company organized to make any kind or kinds ofinsurance included in class II and class III of IC 27-1-5-1 may take,on any one (1) risk of whatever nature, a sum exceeding one-tenth(1/10) part of its paid-up capital, surplus, and contingent reserves, ifany, if a stock company, or one-tenth (1/10) part of its surplus andcontingent reserves, if any, if other than a stock company. No portionof any such risk or hazard which shall have been reinsured in
accordance with any regulations that the commissioner may enactpursuant to this section shall be included in determining thelimitation of risk prescribed in this section. This section shall notapply to marine insurances, companies organized to make lifeinsurance, or companies organized to issue title insurance.
(b) No stock or mutual insurance company transacting fidelity orsurety business in this state shall expose itself to any loss on any one(1) fidelity or surety risk or hazard in an amount exceeding tenpercent (10%) of its capital, surplus and contingent reserves, if any,unless it shall be protected in excess of that amount by: (a)Reinsurance in a company authorized to transact the fidelity or suretybusiness in this state, provided that such reinsurance is in such formas to enable the obligee or beneficiary to maintain an action thereonagainst the company reinsured jointly with such reinsurer and, uponrecovering judgment against such reinsured, to have recovery againstsuch reinsurer for payment to the extent in which it may be liableunder such reinsurance and in discharge thereof; or (b) thecosuretyship of such a company similarly authorized; or (c) depositwith it in pledge or conveyance to it in trust for its protection ofproperty; or (d) conveyance or mortgage for its protection; or (e) incase a suretyship obligation was made on behalf or on account of afiduciary holding property in a trust capacity, deposit or otherdisposition of a portion of the property so held in trust that no futuresale, mortgage, pledge or other disposition can be made thereofwithout the consent of such company; except by decree or order ofa court of competent jurisdiction. However (1) such a company mayexecute what are known as transportation or warehousing bonds forUnited States internal revenue taxes to an amount equal to fiftypercent (50%) of its capital, surplus and contingent reserves, if any;(2) when the penalty of the suretyship obligation exceeds the amountof a judgment described therein as appealed from and therebysecured, or exceeds the amount of the subject-matter in controversyor of the estate in the hands of the fiduciary for the performance ofwhose duties it is conditioned, the bond may be executed if the actualamount of the judgment or the subject-matter in controversy or estatenot subject to supervision or control of the surety is not in excess ofsuch limitation; and (3) when the penalty of the suretyship obligationexecuted for the performance of a contract exceeds the contractprice, the latter shall be taken as the basis for estimating the limit ofrisk within the meaning of this section. No such company may,anything to the contrary in this section notwithstanding, executesuretyship obligations guaranteeing the deposits of any singlefinancial institution in an aggregate amount in excess of ten percent(10%) of the capital, surplus and contingent reserves, if any, of suchcorporate surety, unless it is protected in excess of that amount bycredits in accordance with subdivisions (a), (b), (c) or (d) of thissubsection.
(Formerly: Acts 1935, c.162, s.175.) As amended by Acts 1982,P.L.162, SEC.1; P.L.260-1983, SEC.4.
IC 27-1-13-7
Required provisions of policies
Sec. 7. (a) No policy of insurance against loss or damage resultingfrom accident to, or death or injury suffered by, an employee or otherperson or persons and for which the person or persons insured areliable, or, against loss or damage to property resulting from collisionwith any moving or stationary object and for which loss or damagethe person or persons insured is liable, shall be issued or delivered inthis state by any domestic or foreign corporation, insuranceunderwriters, association, or other insurer authorized to do businessin this state, unless there shall be contained within such policy aprovision that the insolvency or bankruptcy of the person or personsinsured shall not release the insurance carrier from the payment ofdamages for injury sustained or loss occasioned during the life ofsuch policy, and stating that in case execution against the insured isreturned unsatisfied in an action brought by the injured person or hisor her personal representative in case death resulted from theaccident because of such insolvency or bankruptcy then an actionmay be maintained by the injured person, or his or her personalrepresentative, against such domestic or foreign corporation,insurance underwriters, association or other insurer under the termsof the policy for the amount of the judgment in the said action notexceeding the amount of the policy. No such policy shall be issuedor delivered in this state by any foreign or domestic corporation,insurance underwriters, association or other insurer authorized to dobusiness in this state, unless there shall be contained within suchpolicy a provision that notice given by or on behalf of the insured toany authorized agent of the insurer within this state, with particularssufficient to identify the insured, shall be deemed to be notice to theinsurer. No such policy shall be issued or delivered in this state to theowner of a motor vehicle, by any domestic or foreign corporation,insurance underwriters, association or other insurer authorized to dobusiness in this state, unless there shall be contained within suchpolicy a provision insuring such owner against liability for damagesfor death or injury to person or property resulting from negligence inthe operation of such motor vehicle, in the business of such owner orotherwise, by any person legally using or operating the same with thepermission, expressed or implied, of such owner. If a motor vehicleis owned jointly by a husband and wife, either spouse may, with thewritten consent of the other spouse, be excluded from coverage underthe policy. A husband and wife may choose instead to have theirliability covered under separate policies. A policy issued in violationof this section shall, nevertheless, be held valid but be deemed toinclude the provisions required by this section, and when anyprovision in such policy or rider is in conflict with the provisionrequired to be contained by this section, the rights, duties andobligations of the insurer, the policyholder and the injured person orpersons shall be governed by the provisions of this section.
(b) No policy of insurance shall be issued or delivered in this stateby any foreign or domestic corporation, insurance underwriters,
association, or other insurer authorized to do business in this state,unless it contains a provision that authorizes such foreign ordomestic corporation, insurance underwriters, association, or otherinsurer authorized to do business in this state to settle the liability ofits insured under IC 34-18 without the consent of its insured whenthe unanimous opinion of the medical review panel underIC 34-18-10-22(b)(1) is that the evidence supports the conclusionthat the defendant failed to comply with the appropriate standard ofcare as charged in the complaint.
(Formerly: Acts 1935, c.162, s.177.) As amended by Acts 1981,P.L.241, SEC.2; P.L.111-1998, SEC.1.
IC 27-1-13-8
Estimating condition; classification of items as assets or liabilities;reserves
Sec. 8. In estimating the condition of any company which makesinsurance comprised within class 2 or class 3 of IC 27-1-5-1, thedepartment shall allow only such investments as assets as areauthorized by the laws of this state at the date of the investigation,but unpaid premiums on policies or renewals written within three (3)months shall be admitted as available resources. It shall charge asliabilities in addition to all other outstanding indebtedness of thecompany the capital stock, if any, and the following:
(a) The premium reserve on policies in force equal to fifty percent(50%) of the gross premiums charged for covering risks, less thereserve computed by the same method, on reinsurance in force.However, the department may, in its discretion, charge a premiumreserve equal to the unearned portions of the gross premium chargedby computing on each respective risk from the date of the issuanceof the policy, less the reserve, computed by the same method, onreinsurance in force.
(b) In the case of policies of marine or inland navigation ortransportation insurance it shall charge as a liability fifty percent(50%) of the amount of the premiums written in such policies uponyearly risks and upon risks covering not more than one (1) passagenot terminated and the full amount of premiums written in policiesupon all other such risks not terminated.
(c) The reserve for outstanding losses at least equal to theaggregate estimated amounts due or to become due on account of alllosses or claims of which the company has received notice. However,the loss reserve shall also include the estimated liability on anynotices received by the company of the occurrence of any eventwhich may result in a loss and the estimated liability for all losseswhich have occurred but on which no notice has been received. Forthe purpose of such reserves, the company shall keep a complete anditemized record showing all losses and claims on which it hasreceived notice, including all notices received by it of the occurrenceof any event which may result in a loss.
(d) Any other reserves as are required by or provided for in theannual statement blanks adopted by the National Association of
Insurance Commissioners and furnished to companies underIC 27-1-3-13.
(e) Whenever, in the judgment of the department, the loss reservescalculated in accordance with subsections (a), (b), (c), and (d) areinadequate, it may in its discretion require a company to maintainadditional reserves.
(Formerly: Acts 1935, c.162, s.179.) As amended by P.L.260-1983,SEC.7.
IC 27-1-13-8.5
Rules to prescribe minimum standards for establishment ofreserves
Sec. 8.5. The department shall adopt rules under IC 4-22-2 toprescribe minimum standards for the establishment of reserves asrequired by the National Association of Insurance Commissioners orits successor organization for insurers writing Class 2 and Class 3lines of business.
As added by P.L.130-1994, SEC.21 and P.L.116-1994, SEC.28.
IC 27-1-13-9
Trading or dealing in commodities, goods, wares, and merchandise
Sec. 9. No company shall directly or indirectly deal or trade inbuying or selling goods, wares, merchandise or other commodities,except such as may have been insured by it and such as may be soldunder judicial process or otherwise, in which, or in the profits of thesale of which, it may be interested by reason of having previouslybecome insurers of the same or of some share or portion thereof.
(Formerly: Acts 1935, c.162, s.180.)
IC 27-1-13-10
Insurance rating bureaus; organizational regulations
Sec. 10. Any insurance rating bureau which files any rating plan,manual, classifications, rules or rates for fire, marine or inlandmarine and allied risks insurance with the insurance department ofthe state of Indiana for its members or subscribers shall as acondition precedent to the filing of an application to act as a ratingbureau in the state of Indiana, establish in its constitution or by-lawsthe right of domestic insurers organized and operating under the lawsof the state of Indiana, who are members of such rating bureau, tohave representation on the board of directors, board of governors orany other governing body whatsoever, controlling said rating bureau,in an amount of not less than 33 1/3% of all of the voting membersof such governing body. The constitution and by-laws of said ratingbureau shall also contain the condition that all meetings of thegoverning body of said rating bureau shall be held either in Chicago,Illinois or in Indianapolis, Indiana; Provided, however, That nothingcontained herein shall limit the representation of such domesticinsurers on said governing body. Indiana representatives on suchgoverning body shall be nominated by special meeting of the Indianamembers of such rating bureau at least 10 days preceding the election
of representatives on the governing body of such rating bureau. Theinsurance commissioner of the state of Indiana shall have no right toapprove any such rating bureau as a rating bureau in the state ofIndiana until the aforesaid conditions are met by such bureau.
(Formerly: Acts 1935, c.162, s.180a; Acts 1947, c.269, s.1.)
IC 27-1-13-11
Insurance rating bureaus; meetings; appearance by aggrievedpersons
Sec. 11. At all such meetings of the governing body held atIndianapolis, Indiana, as set out in section 10 of this chapter, anyaggrieved policyholder, insurance producer, company,representative, or any other aggrieved person may appear before suchmeeting to have complaints heard in full, and it shall be the duty ofsuch rating bureau to rectify such conditions as are justly complainedof in such manner as is reasonably possible.
(Formerly: Acts 1935, c.162, s.180b; Acts 1947, c.269, s.2.) Asamended by P.L.252-1985, SEC.69; P.L.178-2003, SEC.19.
IC 27-1-13-12
Insurance rating bureau; division of representation
Sec. 12. The representation of Indiana insurors on such governingbody of such rating bureau described in section 10 of this chaptershall be equally divided as between domestic stock and mutualinsurors, and the number of members on such governing body ofsuch rating bureau shall be fixed so this can be accomplished.
(Formerly: Acts 1935, c.162, s.180c; Acts 1947, c.269, s.3.) Asamended by P.L.252-1985, SEC.70.
IC 27-1-13-13
Repealed
(Repealed by P.L.108-1985, SEC.1.)
IC 27-1-13-14
Casualty and liability insurance; qualified public transportationagency; group coverage for functions
Sec. 14. (a) As used in this section:
"Casualty and liability insurance" means insurance included inClass II and Class III of IC 27-1-5-1.
"Qualified public transportation agency" means any of thefollowing:
(1) A public transportation corporation established underIC 36-9-4.
(2) An agency of a city that provides for public transportation.
(3) An agency of a town that provides for public transportation.
(4) An agency of a township that provides for publictransportation.
(5) Any person who provides public transportation to a countyunder an agreement with the county.
(b) A company authorized to issue casualty and liability insurance
policies in Indiana may sell group casualty and liability insurance totwo (2) or more qualified public transportation agencies only for thepurpose of insuring their public transportation functions.
As added by P.L.256-1983, SEC.1.
IC 27-1-13-15
Property and casualty insurance blanket policies for planned unitdevelopment owners association or corporation
Sec. 15. (a) As used in this section, "planned unit development"has the meaning set forth in IC 36-7-1-14.5.
(b) As used in this section, "property and casualty insurance"means one (1) or more of the types of insurance described inIC 27-1-5-1, Class 2 and Class 3.
(c) An insurance company may issue a blanket policy of propertyand casualty insurance to an association or a nonprofit corporationcomposed of the owners of the property within a planned unitdevelopment for the purpose of insuring:
(1) the association or nonprofit corporation;
(2) the owners of the property within the planned unitdevelopment;
(3) the executive body of the association or nonprofitcorporation;
(4) the managing agent of the association or nonprofitcorporation, if any;
(5) all persons who act as agents or employees of:
(A) the association or nonprofit corporation;
(B) the owners of the property;
(C) the executive body; or
(D) the managing agent;
with respect to the planned unit development; and
(6) all other persons entitled to occupy any unit or other portionof the planned unit development, including property owners;
against losses under this subsection, including loss or damage toproperty within the planned unit development and loss of use oroccupancy.
(d) An association or a nonprofit corporation composed of theowners of all of the property within a planned unit development isauthorized to purchase an insurance policy described in subsection(c).
As added by P.L.116-1994, SEC.29. Amended by P.L.1-2010,SEC.110.
IC 27-1-13-16
Notice of residential policy changes
Sec. 16. (a) This section applies to a policy of insurance that:
(1) covers first party loss to property located in Indiana; and
(2) insures against loss or damage to:
(A) real property consisting of not more than four (4)residential units, one (1) of which is the principal place ofresidence of the named insured; or (B) personal property in which the named insured has aninsurable interest and that is used within a residentialdwelling for personal, family, or household purposes.
(b) An insurer that reduces, restricts, or removes, through a rideror an endorsement, coverage provided by a policy of insurance mustprovide to the named insured written notice, through the UnitedStates mail or by electronic means, of the changes to the policy. Thewritten notice required by this subsection must:
(1) be part of a document that is separate from the rider orendorsement;
(2) be printed in at least 12 point type, 1 point leaded;
(3) consist of text that achieves a minimum score of forty (40)on the Flesch reading ease test or an equivalent score on acomparable test approved by the commissioner as provided byIC 27-1-26-6;
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