§ 27-1-12-2 — Investments; categories, conditions, limitations, and standards

(a) The following definitions apply to this
section:
(1) "Acceptable collateral" means, as to securities lending
transactions:
(A) cash;
(B) cash equivalents;
(C) letters of credit; and
(D) direct obligations of, or securities that are fully guaranteed
as to principal and interest by, the government of the United
States or any agency of the United States, including the Federal
National Mortgage Association and the Federal Home Loan
Mortgage Corporation.
(2) "Acceptable collateral" means, as to lending foreign securities,
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 repurchase transactions:
(A) cash;
(B) cash equivalents; and
(C) direct obligations of, or securities that are fully guaranteed
as to principal and interest by, the government of the United
States or any agency of the United States, including the Federal
National Mortgage Association and the Federal Home Loan
Mortgage Corporation.
(4) "Acceptable collateral" means, as to reverse repurchase
transactions:
(A) cash; and
(B) cash equivalents.
(5) "Admitted assets" means assets permitted to be reported as
admitted assets on the statutory financial statement of the life
insurance 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 any depository
institution, the deposits of which are insured by the Federal
Deposit Insurance Corporation.
(8) "Cash equivalent" means any of the following:
(A) A certificate of deposit issued by a depository institution,
the deposits of which are insured by the Federal Deposit
Insurance Corporation.
(B) A banker's acceptance issued by a depository institution, the
deposits of which are insured by the Federal Deposit Insurance
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 money
market mutual fund that at all times qualifies for investment
pursuant to the Purposes and Procedures Manual of the NAIC
Investment Analysis Office either using the bond class one
reserve factor or because it is exempt from asset valuation reserve
requirements.
(10) "Dollar roll transaction" means two (2) simultaneous
transactions 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 to a
business entity one (1) or both of the following:
(i) Asset-backed securities that are issued, assumed, or
guaranteed by the Government National Mortgage
Association, the Federal National Mortgage Association, or
the Federal Home Loan Mortgage Corporation.
(ii) Other asset-backed securities referred to in Section 106
of Title I of the Secondary Mortgage Market Enhancement
Act of 1984 (15 U.S.C. 77r-1).
(B) In the other transaction, the life insurance company is
obligated to purchase from the same business entity securities
that are substantially similar to the securities sold under 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, after
deducting:
(A) operating and maintenance expenses other than expenses
that are fixed charges;
(B) taxes other than federal and state income taxes;
(C) depreciation; and
(D) depletion;
but excluding extraordinary nonrecurring items of income or
expense appearing in the regular financial statements of a
business 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 foreign
jurisdiction.
(15) "Foreign jurisdiction" means a jurisdiction other than a
domestic jurisdiction.
(16) "Government money market mutual fund" means a money
market mutual fund that at all times:
(A) invests only in:
(i) obligations that are issued, guaranteed, or insured by the
United States; or
(ii) collateralized repurchase agreements composed of
obligations that are issued, guaranteed, or insured by the
United States; and
(B) qualifies for investment without a reserve pursuant to the
Purposes and Procedures Manual of the NAIC Investment
Analysis Office.
(17) "Guaranteed or insured," when used in reference to an
obligation acquired under this section, means that the guarantor
or insurer has agreed to:
(A) perform or insure the obligation of the obligor or purchase
the obligation; or
(B) be unconditionally obligated, until the obligation is repaid,
to maintain in the obligor a minimum net worth, fixed charge
coverage, stockholders' equity, or sufficient liquidity 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 the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.); or
(B) a person described in Section 3(c) of the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.).
(19) "Investment company series" means an investment portfolio
of an investment company that is organized as a series company
to which assets of the investment company have been specifically
allocated.
(20) "Letter of credit" means a clean, irrevocable, and
unconditional 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 meeting
the standards for issuing letters of credit under the Purposes and
Procedures Manual of the NAIC Investment Analysis Office. To
constitute acceptable collateral for the purposes of paragraph 29
of subsection (b), a letter of credit must have an expiration date
beyond the term of the subject transaction.
(21) "Market value" means the following:
(A) As to cash, the amount of the cash.
(B) As to cash equivalents, the amount of the cash equivalents.
(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 a
generally recognized source, or the most recent quotation
from such a source; or
(ii) if no generally recognized source exists, the price for the
security as determined in good faith by the parties to a
transaction;
plus accrued but unpaid income on the security to the extent not
included in the price as of that date.
(22) "Money market mutual fund" means a mutual fund that
meets the conditions of 17 CFR 270.2a-7, under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.).
(23) "Multilateral development bank" means an international
development organization of which the United States is a
member.
(24) "Mutual fund" means:
(A) an investment company; or
(B) in the case of an investment company that is organized as
a series company, an investment company series;
that is registered with the United States Securities and Exchange
Commission under the Investment Company Act of 1940 (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 a
political subdivision or a government sponsored enterprise.
(27) "Repurchase transaction" means a transaction in which a life
insurance company purchases securities from a business entity
that is obligated to repurchase the purchased securities or
equivalent securities from the life insurance company at a
specified price, either within a specified period of time or upon
demand.
(28) "Reverse repurchase transaction" means a transaction in
which a life insurance company sells securities to a business
entity and is obligated to repurchase the sold securities or
equivalent securities from the business entity at a specified price,
either within a specified period of time or upon demand.
(29) "Securities lending transaction" means a transaction in which
securities are loaned by a life insurance company to a business
entity that is obligated to return the loaned securities or equivalent
securities to the life insurance company, either within a specified
period of time or upon demand.
(30) "Securities Valuation Office" refers to the Securities
Valuation Office of the NAIC.
(31) "Series company" means an investment company that is
organized 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.)).
(32) "Supported", when used in reference to an obligation, by
whomever 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 of
value at least equal to the principal amount of the obligation by
means of mortgage, assignment of vendor's interest in one (1)
or more conditional sales contracts, other title retention device,
or by means of other security interest in such property 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 rent or
use the property pursuant to which it is obligated to pay money
as rental or for the use of such property in amounts and at times
which shall be sufficient, after provision for taxes upon and
other expenses of use of the property, to repay in full the
obligation with interest and when such agreement and the
money obligated to be paid thereunder are assigned, pledged,
or secured for the benefit of the holder of the obligation.
However, where the security for the repayment of the obligation
consists of a first mortgage lien or deed of trust on a fee interest
in real property, the obligation may provide for the
amortization, during the initial, fixed period of the lease or
contract, of less than one hundred percent (100%) of the
obligation if there is pledged or assigned, as additional security
for the obligation, sufficient rentals payable under the lease, or
of contract payments, to secure the amortized obligation
payments required during the initial, fixed period of the lease
or contract, including but not limited to payments of principal,
interest, and taxes other than the income taxes of the borrower,
and if there is to be left unamortized at the end of such period
an amount not greater than the original appraised value of the
land only, exclusive of all improvements, as prescribed by law.
(b) Investments of domestic life insurance companies at the time
they 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 principal and
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 of
1971 (12 U.S.C. 2001 through 2279aa-14) as in effect on December 31,
1990, or the Federal Home Loan Bank Act (12 U.S.C. 1421 through
1449) as in effect on December 31, 1990, interest bearing obligations
of the FSLIC Resolution Fund or shares of any institution whose
deposits are insured by the Federal Deposit Insurance Corporation to
the extent that such shares are insured, obligations issued or guaranteed
by a multilateral development bank, and obligations issued or
guaranteed by the African Development Bank.
4. Obligations issued, guaranteed, or insured as to principal and
interest by a city, county, drainage district, road district, school district,
tax district, town, township, village, or other civil administration,
agency, authority, instrumentality, or subdivision of a domestic
jurisdiction, providing such obligations are authorized by law and are:
(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 the payment of
the principal and interest thereof; or
(c) improvement bonds or other obligations constituting a first
lien, except for tax liens, against all of the real estate within the
improvement district or on that part of such real estate not
discharged from such lien through payment of the assessment.
The area to which such improvement bonds or other obligations
relate shall be situated within the limits of a town or city and at
least fifty percent (50%) of the properties within such area shall
be improved with business buildings or residences.
5. Loans evidenced by obligations secured by first mortgage liens
on otherwise unencumbered real estate or otherwise unencumbered
leaseholds having at least fifty (50) years of unexpired term, such real
estate, or leaseholds to be located in a domestic jurisdiction. Such loans
shall not exceed eighty percent (80%) of the fair value of the security
determined in a manner satisfactory to the department, except that the
percentage stated may be exceeded if and to the extent 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 the
department.
If improvements constitute a part of the value of the real estate or
leaseholds, such improvements shall be insured against fire for the
benefit of the mortgagee in an amount not less than the difference
between 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 be
deemed to be encumbered by reason of the existence in relation thereto
of:
(1) liens inferior to the lien securing the loan made by the life
insurance company;
(2) taxes or assessment liens not delinquent;
(3) instruments creating or reserving mineral, oil, water or timber
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 under this
paragraph notwithstanding any refinancing, modification, or extension
of the loan. Investments authorized by this paragraph shall not in the
aggregate exceed forty-five percent (45%) of the life insurance
company's admitted assets.
6. Loans evidenced by obligations guaranteed or insured, but only
to the extent guaranteed or insured, by a domestic jurisdiction or by any
agency, administration, authority, or instrumentality of any domestic
jurisdiction, and secured by second or subsequent mortgages or deeds
of trust on real estate or leaseholds, provided the terms of the leasehold
mortgages or deeds of trust shall not exceed four-fifths (4/5) of the
unexpired lease term, including enforceable renewable 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 to
such real estate, which shall be transferred to the life insurance
company or to a trustee or nominee of its choosing. For statement and
deposit purposes, the value of a contract acquired pursuant to this
paragraph shall be whichever of the following amounts is the least:
(a) eighty percent (80%) of the contract price of the real estate;
(b) eighty percent (80%) of the fair value of the real estate at the
time the contract is purchased, such value to be determined in 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 deemed
encumbered by reason of the existence in relation thereto of: (1) taxes
or assessment liens not delinquent; (2) instruments creating or
reserving mineral, oil, water or timber rights, rights-of-way, common
or joint driveways, sewers, walls or utility connections; (3) building
restrictions or other restrictive covenants; or (4) an unassigned lease
reserving rents or profits to the owner. Fire insurance upon
improvements constituting a part of the real estate described in the
contract shall be maintained in an amount at least equal to the unpaid
balance due under the contract or the fair value of improvements,
whichever is the lesser.
8. Improved or unimproved real property, whether encumbered or
unencumbered, or any interest therein, held directly or evidenced by
joint venture interests, general or limited partnership interests, trust
certificates, or any other instruments, and acquired by the life insurance
company as an investment, which real property, if unimproved, is
developed within five (5) years. Real property acquired for investment
under this paragraph, whether leased or intended to be developed for
commercial or residential purposes or otherwise lawfully held, is
subject to the following conditions and limitations:
(a) The real estate shall be located in a domestic jurisdiction.
(b) The admitted assets of the life insurance company must
exceed twenty-five million dollars ($25,000,000).
(c) The life insurance company shall have the right to expend
from time to time whatever amount or amounts may be necessary
to conform the real estate to the needs and purposes of the lessee
and the amount so expended shall be added to and become a part
of the investment in such real estate.
(d) The value for statement and deposit purposes of an investment
under this paragraph shall be reduced annually by amortization of
the costs of improvement and development, less land costs, over
the expected life of the property, which value and amortization
shall for statement and deposit purposes be determined in a
manner satisfactory to the commissioner. In determining such
value with respect to the calendar years in which an investment
begins or ends with respect to a point in time other than the
beginning or end of a calendar year, the amortization provided
above shall be made on a proportional basis.
(e) Fire insurance shall be maintained in an amount at least equal
to the insurable value of the improvements or the difference
between the value of the land and the value at which such real
estate is carried for statement and deposit purposes, whichever
amount is smaller.
(f) Real estate acquired in any of the manners described and
sanctioned under section 3 of this chapter, or otherwise lawfully
held, except paragraph 5 of that section which specifically relates
to the acquisition of real estate under this paragraph, shall not be
affected in any respect by this paragraph unless such real estate
at or subsequent to its acquisition fulfills the conditions and
limitations of this paragraph, and is declared by the life insurance
company in a writing filed with the department to be an
investment under this paragraph. The value of real estate acquired
under section 3 of this chapter, or otherwise lawfully held, and
invested under this paragraph shall be initially that at which it was
carried for statement and deposit purposes under that section.
(g) Neither the cost of each parcel of improved real property nor
the aggregate cost of all unimproved real property acquired under
the authority of this paragraph may exceed two percent (2%) of
the life insurance company's admitted assets. For purposes of this
paragraph, "unimproved real property" means land containing no
structures intended for commercial, industrial, or residential
occupancy, and "improved real property" consists of all land
containing any such structure. When applying the limitations of
subparagraph (d) of this paragraph, unimproved real property
becomes improved real property as soon as construction of any
commercial, industrial, or residential structure is so completed as
to be capable of producing income. In the event the real property
is mortgaged with recourse to the life insurance company or the
life insurance company commences a plan of construction upon
real property at its own expense or guarantees payment of
borrowed funds to be used for such construction, the total project
cost of the real property will be used in applying the two percent
(2%) test. Further, no more than ten percent (10%) of the life
insurance company's admitted assets may be invested in all
property, measured by the property value for statement and
deposit purposes as defined in this paragraph, held under this
paragraph at the same time.
9. Deposits of cash in a depository institution, the deposits of which
are insured by the Federal Deposit Insurance Corporation, or
certificates of deposit issued by a depository institution, the deposits of
which are insured by the Federal Deposit Insurance Corporation.
10. Bank and bankers' acceptances and other bills of exchange of
kinds and maturities eligible for purchase or rediscount by federal
reserve banks.
11. Obligations that are issued, guaranteed, assumed, or supported
by a business entity organized under the laws of a domestic jurisdiction
and that are rated:
(a) BBB- or higher by Standard & Poor's Corporation (or A-2 or
higher in the case of commercial paper);
(b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or
higher in the case of commercial paper);
(c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in
the case of commercial paper); or
(d) 1 or 2 by the Securities Valuation Office.
Investments may also be made under this paragraph in obligations
that have not received a rating if the earnings available for fixed
charges of the business entity for the period of its five (5) fiscal years
next preceding the date of purchase shall have averaged per year not
less than one and one-half (1 1/2) times its average annual fixed
charges applicable to such period and if during either of the last two (2)
years of such period such earnings available for fixed charges shall
have been not less than one and one-half (1 1/2) times its fixed charges
for such year. However, if the business entity is a finance company or
other lending institution at least eighty percent (80%) of the assets of
which are cash and receivables representing loans or discounts made
or purchased by it, the multiple shall be one and one-quarter (1 1/4)
instead of one and one-half (1 1/2).
11.(A) Obligations issued, guaranteed, or assumed by a business
entity organized under the laws of a domestic jurisdiction, which
obligations have not received a rating or, if rated, have not received a
rating that would qualify the obligations for investment under
paragraph 11 of this section. Investments authorized by this paragraph
may not exceed twenty percent (20%) of the life insurance company's
admitted assets.
12. Preferred stock of, or common or preferred stock guaranteed as
to dividends by, any corporation organized under the laws of a
domestic jurisdiction, which over the period of the seven (7) fiscal
years immediately preceding the date of purchase earned an average
amount per annum at least equal to five percent (5%) of the par value
of its common and preferred stock (or, in the case of stocks having no
par value, of its issued or stated value) outstanding at date of purchase,
or which over such period earned an average amount per annum at least
equal to two (2) times the total of its annual interest charges, preferred
dividends and dividends guaranteed by it, determined with reference
to the date of purchase. No investment shall be made under this
paragraph in a stock upon which any dividend is in arrears or has been
in arrears for ninety (90) days within the immediately preceding five
(5) year period.
13. Common stock of any solvent corporation organized under the
laws of a domestic jurisdiction which over the seven (7) fiscal years
immediately preceding purchase earned an average amount per annum
at least equal to six percent (6%) of the par value of its capital stock
(or, in the case of stock having no par value, of the issued or stated
value of such stock) outstanding at date of purchase, but the conditions
and limitations of this paragraph shall not apply to the special area of
investment to which paragraph 23 of this section pertains.
13.(A) Stock or shares of any mutual fund that:
(a) has been in existence for a period of at least five (5) years
immediately preceding the date of purchase, has assets of not less
than twenty-five million dollars ($25,000,000) at the date of
purchase, and invests substantially all of its assets in investments
permitted under this section; or
(b) is a class one money market mutual fund or a class one bond
mutual fund.
Investments authorized by this paragraph 13(A) in mutual funds having
the same or affiliated investment advisers shall not at any one (1) time
exceed in the aggregate ten percent (10%) of the life insurance
company's admitted assets. The limitations contained in paragraph 22
of this subsection apply to investments in the types of mutual funds
described in subparagraph (a). For the purposes of this paragraph,
"class one bond mutual fund" means a mutual fund that at all times
qualifies for investment using the bond class one reserve factor under
the Purposes and Procedures Manual of the NAIC Investment Analysis
Office.
The aggregate amount of investments under this paragraph may be
limited by the commissioner if the commissioner finds that investments
under this paragraph may render the operation of the life insurance
company hazardous to the company's policyholders or creditors or to
the general public.
14. Loans upon the pledge of any of the investments described in
this section other than real estate and those qualifying solely under
paragraph 20 of this subsection, but the amount of such a loan shall not
exceed seventy-five percent (75%) of the value of the investment
pledged.
15. Real estate acquired or otherwise lawfully held under the
provisions of IC 27-1, except under paragraph 7 or 8 of this subsection,
which real estate as an investment shall also include the value of
improvements or betterments made thereon subsequent to its
acquisition. The value of such real estate for deposit and statement
purposes is to be determined in a manner satisfactory to the
department.
15.(A) Tangible personal property, equipment trust obligations, or
other instruments evidencing an ownership interest or other interest in
tangible personal property when the life insurance company purchasing
such property has admitted assets in excess of twenty-five million
dollars ($25,000,000), and where there is a right to receive determined
portions of rental, purchase, or other fixed obligatory payments for the
use of such personal property from a corporation whose obligations
would be eligible for investment under the provisions of paragraph 11
of this subsection, provided that the aggregate of such payments
together with the estimated salvage value of such property at the end
of its minimum useful life, to be determined 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 in such property, and provided further, that
each net investment in tangible personal property for which any single
private corporation is obligated to pay rental, purchase, or other
obligatory payments thereon does not exceed one-half of one percent
(1/2%) of the life insurance company's admitted assets, and the
aggregate net investments made under the provisions of this paragraph
do not exceed five percent (5%) of the life insurance company's
admitted assets.
16. Loans to policyholders of the life insurance company in amounts
not exceeding in any case the reserve value of the policy at the time the
loan is made.
17. A life insurance company doing business in a foreign
jurisdiction may, if permitted or required by the laws of such
jurisdiction, invest funds equal to its obligations in such jurisdiction in
investments legal for life insurance companies domiciled in such
jurisdiction 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 entity organized
under the laws of a foreign jurisdiction and (ii) preferred stock and
common stock issued by any such business entity, if the obligations of
such foreign jurisdiction or business entity, as appropriate, are rated:
(a) BBB- or higher by Standard & Poor's Corporation (or A-2 or
higher in the case of commercial paper);
(b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or
higher in the case of commercial paper);
(c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in
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 the laws
of a foreign jurisdiction have not received a rating, investments may
nevertheless be made under this paragraph in such obligations and in
the preferred and common stock of the business entity if the earnings
available for fixed charges of the business entity for a period of five (5)
fiscal years preceding the date of purchase have averaged at least three
(3) times its average fixed charges applicable to such period, and if
during either of the last two (2) years of such period, the earnings
available for fixed charges were at least three (3) times its fixed
charges for such year. Investments authorized by this paragraph in a
single foreign jurisdiction shall not exceed ten percent (10%) of the life
insurance company's admitted assets. Subject to section 2.2(g) of this
chapter, investments authorized by this paragraph denominated in
foreign currencies shall not in the aggregate exceed ten percent (10%)
of a life insurance company's admitted assets, and investments in any
one (1) foreign currency shall not exceed five percent (5%) of the life
insurance company's admitted assets. Investments authorized by this
paragraph and paragraph 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 are
otherwise specifically eligible for deposit under this section.
17.(B) Investments in:
(a) obligations issued, guaranteed, or assumed by a foreign
jurisdiction or by a business entity organized under the laws of a
foreign jurisdiction; and
(b) preferred stock and common stock issued by a business entity
organized under the laws of a foreign jurisdiction;
which investments are not eligible for investment under paragraph
17.(A).
Investments authorized by this paragraph 17(B) shall not in the
aggregate exceed five percent (5%) of the life insurance company's
admitted assets. Subject to section 2.2(g) of this chapter, if investments
authorized by this paragraph 17(B) are denominated in a foreign
currency, the investments shall not, as to such currency, exceed two
percent (2%) of the life insurance company's admitted assets.
Investments authorized by this paragraph 17(B) in any one (1) foreign
jurisdiction shall not exceed two percent (2%) of the life insurance
company's admitted assets.
Investments authorized by paragraph 17(A) of this subsection and
this 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 faith
receive 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 benefit any
of its outstanding annuity or insurance contracts or other obligations
and the claims of holders thereof.
20. A life insurance company may make investments although not
conforming to the categories, conditions, limitations, and standards
contained in paragraphs 1 through 11, 12 through 19, and 29 through
31 of this subsection, but limited in aggregate amount to the greater of:
(a) ten percent (10%) of the company's admitted assets; or
(b) seventy-five percent (75%) of the company's capital and
surplus reported on the statutory financial statement of the insurer
most recently required to be filed with the commissioner.
This paragraph 20 does not apply to investments authorized by
paragraph 11.(A) of this subsection.
20.(A) Investments under paragraphs 1 through 20 and paragraphs
29 through 31 of this subsection are subject to the general conditions,
limitations, and standards contained in paragraphs 21 through 28 of
this subsection.
21. Investments in obligations (other than real estate mortgage
indebtedness) and capital stock of, and in real estate and tangible
personal property leased to, a single corporation, shall not exceed three
percent (3%) 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 to
investments under paragraph 13(A) of this subsection or the special
area 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 life
insurance company's admitted assets, exclusive of assets held in
segregated accounts of the nature defined in class 1(c) of IC 27-1-5-1.
These limitations shall not apply to investments for the special
purposes described in paragraph 23 of this subsection nor to
investments in connection with segregated accounts provided for in
class 1(c) of IC 27-1-5-1.
23. Investments in subsidiary companies must be made in
accordance with IC 27-1-23-2.6.
24. No investment, other than commercial bank deposits and loans
on life insurance policies, shall be made unless authorized by the life
insurance company's board of directors or a committee designated by
the board of directors and charged with the duty of supervising loans
or investments.
25. No life insurance company shall subscribe to or participate in
any syndicate or similar underwriting of the purchase or sale of
securities or property or enter into any transaction for such purchase or
sale on account of said company, jointly with any other corporation,
firm, or person, or enter into any agreement to withhold from sale any
of its securities or property, but the disposition of its assets shall at all
times be within its control. Nothing contained in this paragraph shall
be construed to invalidate or prohibit an agreement by two (2) or more
companies to join and share in the purchase of investments for bona
fide investment purposes.
26. No life insurance company may invest in the stocks or
obligations, except investments under paragraphs 9 and 10 of this
subsection, of any corporation in which an officer of such life insurance
company is either an officer or director. However, this limitation shall
not apply with respect to such investments in:
(a) a corporation which is a subsidiary or affiliate of such life
insurance company; or
(b) a trade association, provided such investment meets the
requirements of paragraph 5 of this subsection.
27. Except for the purpose of mutualization provided for in section
23 of this chapter, or for the purpose of retirement of outstanding
shares of capital stock pursuant to amendment of its articles of
incorporation, or in connection with a plan approved by the
commissioner for purchase of such shares by the life insurance
company's officers, employees, or agents, no life insurance company
shall invest in its own stock.
28. In applying the conditions, limitations, and standards prescribed
in paragraphs 11, 12, and 13 of this subsection to the stocks or
obligations of a corporation which in the seven (7) year period
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 constituent corporations
shall be consolidated.
29. A. Before a life insurance company may engage in securities
lending transactions, repurchase transactions, reverse repurchase
transactions, or dollar roll transactions, the life insurance company's
board of directors must adopt a written plan that includes guidelines
and objectives to be followed, including the following:
(1) A description of how cash received will be invested or used
for general corporate purposes of the company.
(2) Operational procedures for managing interest rate risk,
counterparty default risk, and the use of acceptable collateral in
a manner that reflects the liquidity needs of the transaction.
(3) A statement of the extent to which the company may engage
in securities lending transactions, repurchase transactions, reverse
repurchase transactions, and dollar roll transactions.
B. A life insurance company must enter into a written agreement for
all transactions authorized by this paragraph, other than dollar roll
transactions. The written agreement:
(1) must require the termination of each transaction not more than
one (1) year after its inception or upon the earlier demand of the
company; and
(2) must be with the counterparty business entity, except that, for
securities lending transactions, the agreement may be with an
agent acting on behalf of the life insurance company if:
(A) the agent is:
(i) a business entity, the obligations of which are rated BBB-
or higher by Standard & Poor's Corporation (or A-2 or higher
in the case of commercial paper), Baa3 or higher by Moody's
Investors Service, Inc. (or P-2 or higher in the case of
commercial paper), BBB- or higher by Duff and Phelps, Inc.
(or D-2 or higher in the case of commercial paper), or 1 or 2
by the Securities Valuation Office;
(ii) a business entity that is a primary dealer in United States
government securities, recognized by the Federal Reserve
Bank of New York; or
(iii) any other business entity approved by the commissioner;
and
(B) the agreement requires the agent to enter into with each
counterparty separate agreements that are consistent with the
requirements 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 the
transaction; or
(2) used by the life insurance company for its general corporate
purposes.
D. For as long as a transaction under this paragraph remains
outstanding, 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 Federal Reserve, the
Depository Trust Company, the Participants Trust Company, or another
securities depository approved by the commissioner:
(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 this
subsection do not apply to transactions under this paragraph 29. For
purposes of calculations made to determine compliance with this
paragraph, no effect may be given to the future obligation of the life
insurance company to:
(1) resell securities, in the case of a repurchase transaction; or
(2) repurchase securities, in the case of a reverse repurchase
transaction.
F. A life insurance company shall not enter into a transaction under
this paragraph if, as a result of the transaction, and after giving effect
to the transaction:
(1) the aggregate amount of securities then loaned, sold to, or
purchased from any one (1) business entity under this paragraph
would exceed five percent (5%) of the company's admitted assets
(but in calculating the amount sold to or purchased from a
business entity under repurchase or reverse repurchase
transactions, effect may be given to netting provisions under a
master written agreement); or
(2) the aggregate amount of all securities then loaned, sold to, or
purchased from all business entities under this paragraph would
exceed forty percent (40%) of the admitted assets of the company
(provided, however, that this limitation does not apply to a reverse
repurchase transaction if the borrowing is used to meet
operational liquidity requirements resulting from an officially
declared catastrophe and is subject to a plan approved by the
commissioner).
G. The following collateral requirements apply to all transactions
under this paragraph:
(1) In a securities lending transaction, the life insurance company
must receive acceptable collateral having a market value as of the
transaction date at least equal to one hundred two percent (102%)
of the market value of the securities loaned by the company in the
transaction as of that date. If at any time the market value of the
acceptable collateral received from a particular business entity is
less than the market value of all securities loaned by the company
to that business entity, the business entity shall be obligated to
deliver additional acceptable collateral to the company, the
market value of which, together with the market value of all
acceptable collateral then held in connection with all securities
lending transactions with that business entity, equals at least one
hundred two percent (102%) of the market value of the loaned
securities.
(2) In a reverse repurchase transaction, other than a dollar roll
transaction, the life insurance company must receive acceptable
collateral having a market value as of the transaction date equal
to at least ninety-five percent (95%) of the market value of the
securities transferred by the company in the transaction as of that
date. If at any time the market value of the acceptable collateral
received from a particular business entity is less than ninety-five
percent (95%) of the market value of all securities transferred by
the company to that business entity, the business entity shall be
obligated to deliver additional acceptable collateral to the
company, the market value of which, together with the market
value of all acceptable collateral then held in connection with all
reverse repurchase transactions with that business entity, equals
at least ninety-five percent (95%) of the market value of the
transferred securities.
(3) In a dollar roll transaction, the life insurance company must
receive cash in an amount at least equal to the market value of the
securities transferred by the company in the transaction as of the
transaction date.
(4) In a repurchase transaction, the life insurance company must
receive acceptable collateral having a market value equal to at
least one hundred two percent (102%) of the purchase price paid
by the company for the securities. If at any time the market value
of the acceptable collateral received from a particular business
entity is less than one hundred percent (100%) of the purchase
price paid by the life insurance company in all repurchase
transactions with that business entity, the business entity shall be
obligated to provide additional acceptable collateral to the
company, the market value of which, together with the market
value of all acceptable collateral then held in connection with all
repurchase transactions with that business entity, equals at least
one hundred two percent (102%) of the purchase price. Securities
acquired by a life insurance company in 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 or interests
in trusts or partnerships regardless of the issuer, which are secured by:
(a) investments authorized by paragraphs 1, 2, 3, 4, or 11 of this
subsection; or
(b) collateral with the characteristics and limitations prescribed
for loans under paragraph 5 of this subsection.
For the purposes of this paragraph 30, collateral may be substituted for
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 or interests
in trusts or partnerships, regardless of the issuer, secured by any form
of collateral other than that described in subparagraphs (a) and (b) of
paragraph 30 of this subsection, which obligations or interests in trusts
or partnerships are rated:
(a) BBB- or higher by Standard & Poor's Corporation or Duff and
Phelps, Inc.;
(b) Baa3 or higher by Moody's Investor Service, Inc.; or
(c) 1 or 2 by the Securities Valuation Office.
Investments authorized by this paragraph may not exceed twenty
percent (20%) of the life insurance company's admitted assets.
32. A. A life insurance company may invest in short-term pooling
arrangements 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 the
person.
(2) "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting
securities, by contract (other than a commercial contract for goods
or non-management services), or otherwise, unless the power is
the result of an official position with or corporate office held by
the person. Control shall be presumed to exist if a person, directly
or indirectly, owns, controls, holds with the power to vote or holds
proxies representing ten percent (10%) or more of the voting
securities of another person. This presumption may be rebutted by
a showing that control does not exist in fact. The commissioner
may determine, after furnishing all interested persons notice and
an opportunity to be heard and making specific findings of fact to
support the determination, that control exists in fact,
notwithstanding the absence of a presumption to that effect.
(3) "Qualified bank" means a national bank, state bank, or trust
company that at all times is not less than adequately capitalized
as determined by standards adopted by United States banking
regulators and that is either regulated by state banking laws or is
a member of the Federal Reserve System.
C. A life insurer may participate in investment pools qualified under
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 commercial paper),
Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or
higher in the case of commercial paper), BBB- or higher by Duff
and Phelps, Inc. (or D-2 or higher in the case of commercial
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 receive the
principal amount of the obligation which put may be exercised
through maturity at specified intervals not exceeding three
hundred ninety-seven (397) days; or
(B) a remaining maturity of three (3) years or less and a floating
interest rate that resets not less frequently than quarterly on the
basis of a current short-term index (for example, federal funds,
prime rate, treasury bills, London InterBank Offered Rate
(LIBOR) or commercial paper) and is not subject to a
maximum limit, if the obligations do not have an interest rate
that varies inversely to market interest rate changes;
(2) government money market mutual funds or class one money
market mutual funds; or
(3) securities lending, repurchase, and reverse repurchase and
dollar roll transactions that meet the requirements of paragraph 29
of this subsection and any applicable regulations of the
department;
provided that the investment pool shall not acquire investments in any
one (1) business entity that exceed ten percent (10%) of the total assets
of the investment pool.
D. For an investment pool to be qualified under this paragraph, the
investment pool shall not:
(1) acquire securities issued, assumed, guaranteed, or insured by
the life insurance company or an affiliate of the company; or
(2) borrow or incur any indebtedness for borrowed money, except
for securities lending, reverse repurchase, and dollar roll
transactions that meet the requirements of paragraph 29 of this
subsection.
E. A life insurance company shall not participate in an investment
pool qualified under this paragraph if, as a result of and after giving
effect to the participation, the aggregate amount of participation then
held by the company in all investment pools under this paragraph and
section 2.4 of this chapter would exceed thirty-five percent (35%) of its
admitted assets.
F. For an investment pool to be qualified under this paragraph:
(1) the manager of the investment pool must:
(A) be organized under the laws of the United States, a state or
territory of the United States, or the District of Columbia, and
designated as the pool manager in a pooling agreement; and
(B) be the life insurance company, an affiliated company, a
business entity affiliated with the company, or a qualified bank
or a business entity registered under the Investment Advisors
Act of 1940 (15 U.S.C. 80a-1 et seq.);
(2) the pool manager or an entity designated by the pool manager
of the type set forth in subdivision (1) of this subparagraph F shall
compile and maintain detailed accounting records setting forth:
(A) the cash receipts and disbursements reflecting each
participant's proportionate participation in the investment pool;
(B) a complete description of all underlying assets of the
investment pool (including amount, interest rate, maturity date
(if any) and other appropriate designations); and
(C) other records which, on a daily basis, allow third parties to
verify each participant's interest in the investment pool; and
(3) the assets of the investment pool shall be held in one (1) or
more accounts, in the name of or on behalf of the investment pool,
under a custody agreement or trust agreement with a qualified
bank, which must:
(A) state and recognize the claims and rights of each
participant;
(B) acknowledge that the underlying assets of the investment
pool are held solely for the benefit of each participant in
proportion to the aggregate amount of its participation in the
investment pool; and
(C) contain an agreement that the underlying assets of the
investment pool shall not be commingled with the general
assets of the qualified bank or any other person.
G. The pooling agreement for an investment pool qualified under
this paragraph must be in writing and must include the following
provisions:
(1) Insurers, subsidiaries, or affiliates of insurers holding interests
in the pool, or any pension or profit sharing plan of such insurers
or their subsidiaries or affiliates, shall, at all times, hold one
hundred percent (100%) of the interests in the investment pool.
(2) The underlying assets of the investment pool shall not be
commingled with the general assets of the pool manager or any
other person.
(3) In proportion to the aggregate amount of each pool
participant's interest in the investment pool:
(A) each participant owns an undivided interest in the
underlying assets of the investment pool; and
(B) the underlying assets of the investment pool are held solely
for the benefit of each participant.
(4) A participant or (in the event of the participant's insolvency,
bankruptcy, or receivership) its trustee, receiver, or other
successor-in-interest may withdraw all or any portion of its
participation from the investment pool under the terms of the
pooling agreement.
(5) Withdrawals may be made on demand without penalty or
other assessment on any business day, but settlement of funds
shall occur within a reasonable and customary period thereafter.
Payments upon withdrawals under this paragraph shall be
calculated in each case net of all then applicable fees and
expenses of the investment pool. The pooling agreement shall
provide for such payments to be made to the participants in one
(1) of the following forms, at the discretion of the pool manager:
(A) in cash, the then fair market value of the participant's pro
rata share of each underlying asset of the investment pool;
(B) in kind, a pro rata share of each underlying asset; or
(C) in a combination of cash and in kind distributions, a pro
rata share in each underlying asset.
(6) The records of the investment pool shall be made available for
inspection by the commissioner.
Formerly: Acts 1935, c.162, s.147; Acts 1937, c.288, s.1; Acts
1939, c.63, s.3; Acts 1941, c.115, s.9; Acts 1945, c.175, s.1; Acts 1947,
c.43, s.1; Acts 1959, c.21, s.1; Acts 1961, c.138, s.1; Acts 1967, c.60,
s.1; Acts 1969, c.184, s.1; Acts 1974, P.L.121, SEC.1; Acts 1975,
P.L.44, SEC.2; Acts 1975, P.L.279, SEC.1. As amended by Acts 1981,
P.L.236, SEC.1; P.L.267-1987, SEC.1; P.L.49-1988, SEC.2;
P.L.8-1991, SEC.8; P.L.26-1991, SEC.7; P.L.1-1992, SEC.145;
P.L.186-1997, SEC.1; P.L.126-2001, SEC.1; P.L.40-2004, SEC.1;
P.L.89-2011, SEC.29; P.L.124-2018, SEC.12; P.L.130-2020,
SEC.2.