§ 27-1-7-19 — Mutual or stock companies; borrowing for surplus funds

Indiana § 27-1-7-19

• Jurisdiction: Indiana
• Title 27: INSURANCE
• Art. 1: DEPARTMENT OF INSURANCE
• Ch. 7: General Corporate Powers and Responsibilities of

Text

(a) A mutual or stock company organized
under this article may borrow or assume a liability for the repayment
of a sum of money to provide itself with surplus funds with the prior
approval of the department. The rate of interest on any loan or advance
may not exceed the following:
(1) The corporate base rate in effect on the first business day of
the month in which the loan document is executed, as reported by
the bank or branch with the greatest amount of assets in Indiana,
plus three percent (3%) per annum.
(2) A variable rate determined by a formula that:
(A) is specified in the loan document;
(B) is based on objective data or information that is reasonably
related to commercial lending rates;
(C) provides an initial rate that is not more than the corporate
base rate in effect on the first business day of the month in
which the loan document is executed, as reported by the bank
or branch with the greatest amount of assets in Indiana, plus
two percent (2%) per annum; and
(D) is approved by the department as reasonable and
appropriate in relation to the company's financial condition.
The company shall elect and state in the written agreement whether the
interest rate is to be fixed or floating for the term of the agreement. The
agreement shall be submitted to and approved by the department before
the agreement's execution.
(b) The loan or advance, with interest at a rate not exceeding the
maximum rate of interest as defined in subsection (a), shall be repaid
only out of the surplus of the company. Repayment of principal or
payment of interest may be made only when approved by the
department whenever in its judgment the financial condition of the
company shall warrant. However, the department may not withhold
approval if:
(1) the company has and submits to the department satisfactory
evidence that a surplus that is equal to or greater than the surplus
existing immediately after the issuance of the loan or advance will
exist after the repayment; and
(2) the surplus that will exist immediately after repayment of
principal or payment of interest is:
(A) reasonable in relation to the company's outstanding
liabilities; and
(B) adequate to the company's financial needs;
in light of the factors set forth in IC 27-1-23-4(f).
(c) A loan or advance made under this section, or interest accruing
on the loan or advance, may not form a part of the legal liabilities of the
company until authorized for payment by the department. However,
until a loan or an advance is repaid, all statements published by the
company or filed with the department must show the amount of the
loan or advance then remaining unpaid, including any accrued and
unpaid interest charges.
Formerly: Acts 1935, c.162, s.97. As amended by P.L.138-1984,
SEC.1; P.L.253-1985, SEC.1; P.L.184-1996, SEC.1; P.L.111-2000,
SEC.1.