§ 27-1-23-2.6 — Primary and subsidiary companies

Indiana § 27-1-23-2.6

• Jurisdiction: Indiana
• Title 27: INSURANCE
• Art. 1: DEPARTMENT OF INSURANCE
• Ch. 23: Regulation of Insurance Holding Company Systems

Text

6. (a) As used in this section, "entity" means:
(1) a sole proprietorship;
(2) a corporation;
(3) a limited liability company;
(4) a partnership;
(5) an association;
(6) a joint stock company;
(7) a mutual fund;
(8) a joint venture;
(9) a trust;
(10) a joint tenancy;
(11) an unincorporated organization; or
(12) a similar entity.
(b) As used in this section, "primary company" means a domestic
insurance company that beneficially owns more than fifty percent
(50%) of one (1) or more subsidiary companies.
(c) As used in this section, "subsidiary company" means an entity of
which more than fifty percent (50%) is beneficially owned by an
insurance company.
(d) As used in this section, "total investment of the primary
company" means the total of:
(1) a direct investment by a primary company in an asset; plus
(2) the primary company's proportionate share of an investment
made by a subsidiary company of the primary company.
The primary company's proportionate share must be determined by
multiplying the amount of the subsidiary company's investment by the
percentage of the primary company's ownership interest in the
subsidiary company.
(e) A primary company may, independently or in cooperation with
another person, organize or acquire one (1) or more subsidiary
companies.
(f) A subsidiary company of a primary company may conduct
business of any kind, and the authority to conduct the business is not
limited because of the status of the subsidiary company as a subsidiary
company of the primary company.
(g) In addition to investments in common stock, preferred stock,
debt obligations, and other securities as permitted under IC 27-1-12-2
or IC 27-1-13-3, a primary company to which this section applies may,
directly or through one (1) or more subsidiary companies, also do the
following:
(1) Invest in common stock, preferred stock, debt obligations, and
other securities of one (1) or more subsidiary companies, amounts
that in total do not exceed the lesser of ten percent (10%) of the
primary company's admitted assets or fifty percent (50%) of the
primary company's surplus as regards policyholders, if, after the
investments, the primary company's surplus as regards
policyholders is reasonable in relation to the primary company's
outstanding liabilities and adequate to the primary company's
financial needs. In calculating the amount of investments
permitted under this subdivision:
(A) investments, whether made directly or through one (1) or
more subsidiary companies, in domestic or foreign insurance
subsidiary companies and health maintenance organizations
must be excluded; and
(B) to the extent that expenditures relate to an investment other
than an investment described in clause (A), the following must
be included:
(i) Total net money or other consideration expended and
obligations assumed in the acquisition or formation of a
subsidiary company, including all organizational expenses
and contributions to capital and surplus of the subsidiary
company, whether or not represented by the purchase of
capital stock or issuance of other securities.
(ii) All amounts expended in acquiring additional common
stock, preferred stock, debt obligations, and other securities
and all contributions to the capital or surplus of a subsidiary
company subsequent to the subsidiary company's acquisition
or formation.
(2) Notwithstanding subdivision (1), invest an amount in common
stock, preferred stock, debt obligations, and other securities of
one (1) or more subsidiary companies engaged or organized to
engage exclusively in the ownership and management of assets
authorized as investments for the primary company, if the
subsidiary company agrees to limit the subsidiary company's
investment in an asset so that, when combined with the
investments of the primary company, the total investment of the
primary company will not exceed the investment limitations
described in subdivision (1) or in any applicable provision of IC 27-1-12-2 or IC 27-1-13-3.
(3) Notwithstanding subdivision (1), with the prior approval of
the commissioner, invest a greater amount in common stock,
preferred stock, debt obligations, or other securities of one (1) or
more subsidiary companies, if, after the investment, the primary
company's surplus as regards policyholders is reasonable in
relation to the primary company's outstanding liabilities and
adequate to the primary company's financial needs.
(h) Investments that are made under this section in common stock,
preferred stock, debt obligations, or other securities of a subsidiary
company are not subject to restrictions or prohibitions under IC 27-1-12-2 or IC 27-1-13-3 that otherwise apply to investments of
primary companies.
(i) Before a primary company to which this section applies makes
an investment described in subsection (g), a primary company shall
make a determination regarding whether the proposed investment
meets the applicable requirements by determining the applicable
investment limitations as though the investment has been made,
considering:
(1) the currently outstanding principal balance on previous
investments in debt obligations; and
(2) the value of previous investments in equity securities as of the
day that the investments in equity securities were made;
net of any return of capital invested.
(j) If a primary company ceases to control a subsidiary company, the
primary company shall dispose of any investment in the subsidiary
company made under this section not more than:
(1) three (3) years from the time of the cessation of control; or
(2) the period determined appropriate by the commissioner;
unless the investment meets the requirements for investment under any
applicable provision of IC 27-1-12-2 or IC 27-1-13-3 and the primary
company has notified the commissioner that the investment meets the
requirements.
(k) A primary company, at the time of establishing a subsidiary
company, must possess:
(1) assets of not less than twenty-five million dollars
($25,000,000); or
(2) not less than three million five hundred thousand dollars
($3,500,000) of:
(A) combined capital and surplus in the case of a stock
company; and
(B) surplus in the case of a mutual company.
(l) The department has the power to:
(1) conduct periodic examinations of a subsidiary company;
(2) require reports that reflect the effect of the condition and
operation of a subsidiary company on the financial condition of
a primary company; and
(3) make additional examinations or require other reports with
respect to a subsidiary company that are necessary to carry out the
purposes of this section.
A noninsurance subsidiary company shall annually furnish the
department financial statements that are prepared under generally
accepted accounting principles and certified by an independent
certified public accountant and the department may rely on the
statements. If a subsidiary company conducts the business of the
subsidiary company in a manner that clearly tends to impair the capital
or surplus fund of the primary company, or otherwise makes the
operation of the primary company financially unsafe, the department
may act under IC 27-1-3-19 with respect to the primary company.
(m) A primary company and a subsidiary company shall, in all
respects, stand before the law as separate and distinct companies and
neither company is liable to the creditors, policyholders, or
stockholders of the other company, acts or omissions of an officer,
director, stockholder, or member of either company notwithstanding.
(n) The board of directors and officers of a primary company and a
subsidiary company may be identical. However, the affairs of each
company shall be carried on separate and distinct from the other
company.
(o) A foreign subsidiary company shall be treated in the same
manner as other foreign companies, except that the treatment may be
withheld or suspended with respect to a subsidiary company that is
domiciled in a state that does not treat a:
(1) primary company; or
(2) subsidiary company;
that is domiciled in Indiana in a manner equal to a foreign or domestic
company doing business in the other state.
(p) Interests in a subsidiary company that are owned by a primary
company must be registered in the name of the primary company
except for shares that are required under Indiana law to be registered
in the name of another person.

Legislative History

As added by P.L.126-2001, SEC.3.