(a) An insurer may invest any of its funds in obligations rated 1 or 2 by the SVO if they are issued, assumed or guaranteed by any solvent institution created or existing under the laws of the United States or Canada or of any state, district, province or territory thereof.
(b) An insurer may also invest any of its funds in any medium or lower grade obligations of any institution created or existing under the laws of the United States or Canada or of any state, district, province or territory thereof, provided, however, that:
(1) Without prior approval of the Commissioner, no insurer shall invest any of its funds in any medium grade or lower grade obligation of any institution if, after giving effect to any such acquisition, the aggregate amount of all medium grade and lower grade obligations then held by the insurer would exceed 20 percent of its admitted assets.
(2) Without the prior approval of the Commissioner, no insurer shall invest any of its funds in any lower grade obligation of any institution if, after giving effect to any such acquisition, the aggregate amount of all lower grade obligations then held by the insurer would exceed 10 percent of its admitted assets; provided, that no more than 3 percent of its admitted assets consists of obligations rated 5 or 6 by the Securities Valuation Office. In addition, without the Commissioner’s prior approval, no insurers shall acquire any obligation rated 6 by the Securities Valuation Office and no more than 1 percent of its admitted assets may consist of obligations rated 6 by the Securities Valuation Office.
(3) Attaining the limit of any 1 category referred to in paragraph (b)(2) of this section shall not preclude an insurer from investing any of its funds in obligations in other categories subject to the specific and multicategory limits. Nothing contained in this section shall prohibit an insurer from investing any of its funds in any obligation which it has committed to acquire if the insurer would have been permitted to invest any of its funds in that obligation pursuant to this section on that date on which such insurer committed to make such investment. For the purposes of determining limitations contained in this chapter, an insurer shall give appropriate recognition to any commitments to acquire investments. Notwithstanding the foregoing, an insurer may invest any of its funds in an obligation of an institution in which such insurer already has 1 or more investments, if such investment is made in order to protect an investment previously made in the obligations of such institution; provided, that such investment shall not exceed1/2of 1 percent of the insurer’s admitted assets.
(c) An insurer may also invest any of its funds in obligations other than those permitted in subsection (a) or (b) of this section or those eligible for investment under § 1323 (real estate mortgages) of this title if they are issued, assumed or guaranteed by any solvent institution created or existing under the laws of the United States or Canada or of any state, district, province or territory thereof and are qualified under any of the following:
(1) Obligations which are secured by adequate collateral security and bear fixed interest, if during each of any 3, including either of the last 2, fiscal years of a period of not less than 3 nor more than 5 fiscal years next preceding the date of acquisition by such insurer, the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges, as defined in § 1309 of this title, shall have been not less than 11/4times the total of its fixed charges for such year, or obligations which, at the date of acquisition by such insurer, are adequately secured and have investment qualities and characteristics wherein the speculative elements are not predominant. In determining the adequacy of collateral security not more than1/3of the total value of such required collateral shall consist of stock other than stock meeting the requirements of § 1310 (preferred or guaranteed stocks) of this title.
(2) Fixed interest-bearing obligations, other than those described in paragraph (c)(1) of this section, or noninterest-bearing obligations issued at a discount and repayable at a stated value on a specific maturity date, if the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by such insurer shall have averaged per year not less than 11/2times its average annual fixed charges applicable to such period and if during either of the last 2 years of such period such net earnings shall have been not less than 11/2times its fixed charges for such year.
(3) Adjustment, income or other contingent interest obligations including, without limitation, variable or adjustable rate interest obligations if the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by the insurer have averaged per year not less than 11/2times the sum of its average annual fixed charges and its average annual maximum contingent interest applicable to such period and if during either of the last 2 years of such period such net earnings have not been less than 11/2times the sum of its fixed charges and maximum contingent interest for such year.
(4) Fixed interest-bearing obligations, other than those described in paragraphs (c)(1) and (2) of this section, or noninterest-bearing obligations issued at a discount and repayable at a stated value on a specific maturity date, if:
a. The net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by such insurer shall have averaged per year not less than 11/4times its average annual fixed charges applicable to such period and if during each of any 4 fiscal years of such period such net earnings shall have been not less than 11/4times its fixed charges for such year;
b. The net earnings of such institution available for its fixed charges during a period of not less than 7 nor more than 10 fiscal years next preceding the date of acquisition by such insurer shall have been such that for each of any 7 fiscal years of such period such net earnings shall have been not less than 11/4times its fixed charges for such year; and
c. The liquid assets of such institution shall have been not less than 105 percent of its liabilities (other than deferred income taxes, deferred investment tax credits, capital stock and surplus).
(5) Fixed interest-bearing obligations, other than those described in paragraphs (c)(1), (2) and (4) of this section, or noninterest-bearing obligations issued at a discount and repayable at a stated value on a specific maturity date, if either: (i) The net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges during each of the 5 fiscal years next preceding the date of acquisition by such insurer shall have been not less than 125 percent of its fixed charges for such year, and (ii) the liquid assets of such institution as of the end of the fiscal year next preceding the date as of which determination thereof shall be made and as of the end of each of the 4 fiscal years next preceding such fiscal year shall have been not less than 95 percent of its liabilities (other than deferred income taxes, deferred investment tax credits, capital stock and surplus); or (i) the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by such insurer shall have averaged per year not less than 115 percent of its average annual fixed charges applicable to such period and during each of any 4 fiscal years of such period such net earnings shall have been not less than 115 percent of its fixed charges for such year and during any fiscal year of such 5-year period such net earnings shall have been not less than 105 percent of its fixed charges for such year, and (ii) the liquid assets of such institution as of the end of the fiscal year next preceding the date as of which determination thereof shall be made and as of the end of each of the 4 fiscal years next preceding such fiscal year shall have been not less than 105 percent of its liabilities (other than deferred income taxes, deferred investment tax credits, capital stock and surplus).