§ 26.1-10-02 — Subsidiaries of insurers

1. Any domestic insurer, either by itself or in cooperation with one or more persons, may
organize or acquire one or more subsidiaries. A subsidiary may conduct any kind of
business and its authority to do so is not limited because it is a subsidiary of a
domestic insurer.
2. In addition to investments in common stock, preferred stock, debt obligations, and
other securities permitted under all other sections of this chapter, a domestic insurer
may also:
a. Invest, in common stock, preferred stock, debt obligations, and other securities of
one or more subsidiaries, amounts which do not exceed the lesser of ten percent
of the insurer's assets or fifty percent of the insurer's surplus as regards
policyholders; provided, that after the investments the insurer's surplus as
regards policyholders will be reasonable in relation to the insurer's outstanding
liabilities and adequate to meet its financial needs. In calculating the amount of
the investments, investments in domestic or foreign insurance subsidiaries and
health maintenance organizations shall be excluded, and there must be included:
(1) Total net moneys or other consideration expended and obligations assumed
in the acquisition or formation of a subsidiary, including all organizational
expenses and contributions to capital and surplus of such subsidiary
whether or not represented by the purchase of capital stock or issuance of
other securities; and
(2) 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 subsequent to its acquisition or formation.
b. Invest any amount in common stock, preferred stock, debt obligations, and other
securities of one or more subsidiaries engaged or organized to engage
exclusively in the ownership and management of assets authorized as
investments for the insurer, provided that each subsidiary agrees to limit its
investments in any asset so that the investments will not cause the amount of the
total investment of the insurer to exceed any of the investment limitations
specified in subdivision a. "The total investment of the insurer" includes:
(1) Any direct investment by the insurer in an asset; and
(2) The insurer's proportionate share of any investment in an asset by any
subsidiary of the insurer which must be calculated by multiplying the amount
of the subsidiary's investment by the percentage of the ownership of the
subsidiary.

c. With the approval of the commissioner, invest any greater amount in common
stock, preferred stock, debt obligations, or other securities of one or more
subsidiaries; provided, that after the investment the insurer's surplus as regards
policyholders will be reasonable in relation to the insurer's outstanding liabilities
and adequate to its financial needs.
3. Investments in common stock, preferred stock, debt obligations, or other securities of
subsidiaries made pursuant to subsection 2 are not subject to any of the otherwise
applicable restrictions or prohibitions applicable to such investments of an insurer.
4. Whether any investment pursuant to subsection 2 meets the applicable requirements
thereof is to be determined before the investment is made, by calculating the
applicable investment limitations as though the investment had already been made,
taking into account the then outstanding principal balance on all previous investments
in debt obligations, and the value of all previous investments in equity securities as of
the date they were made net of any return of capital invested, not including dividends.
5. If an insurer ceases to control a subsidiary, it shall dispose of any investment therein
made pursuant to this section within three years from the time of the cessation of
control or within such further time as the commissioner prescribes, unless at any time
after the investment has been made, the investment has met the requirements for
investment under any other section, and the insurer has so notified the commissioner.