| HB 43 - Insurance; investments of insurers; investment pools |
First Reader Summary
A BILL to amend Title 33 of the Official Code of Georgia
Annotated, relating to insurance, so as to change certain
provisions relating to investments of insurers; to change certain
provisions relating to investment pools; and for other purposes.
| Recorded Votes |
| Vote # |
HV99-1033 |
PASS |
03/03/99 |
| House |
Action |
Senate |
| 1/12/99 |
Read 1st Time |
3/4/99 |
| 1/13/99 |
Read 2nd Time |
3/17/99 |
| 2/24/99 |
Favorably Reported |
3/17/99 |
| Sub |
Committee Amend/Sub |
Am |
| 3/3/99 |
Read 3rd Time |
3/23/99 |
| 3/3/99 |
Passed/Adopted |
3/23/99 |
| CS |
Comm/Floor Amend/Sub |
CA |
| 3/24/99 |
Amend/Sub Agreed To |
|
| 4/12/99 |
Sent to Governor |
|
| 4/28/99 |
Signed by Governor |
|
| 336 |
Act/Veto Number |
|
| 1/1/00/9 |
Effective Date |
|
HB 43 HB 43/AP
H. B. No. 43 (AS PASSED HOUSE AND SENATE)
By: Representative Williams of the 114th
A BILL TO BE ENTITLED
AN ACT
1- 1 To amend Part 6 of Article 17 of Chapter 2 of Title 20 of
1- 2 the Official Code of Georgia Annotated, relating to health
1- 3 insurance plans for public school teachers and public school
1- 4 employees, so as to change certain provisions relating to
1- 5 the health insurance fund for public school teachers; to
1- 6 change certain provisions relating to investment of the
1- 7 health insurance fund for public school employees; to amend
1- 8 Title 33 of the Official Code of Georgia Annotated, relating
1- 9 to insurance, so as to change certain provisions relating to
1-10 valuation of reserves; to revise extensively provisions
1-11 relating to investments of insurers; to provide for
1-12 investments of life, accident and sickness, property, and
1-13 casualty insurers; to change certain provisions relating to
1-14 investment pools; to change certain provisions relating to
1-15 investment of funds of health care corporations; to amend
1-16 Title 43 of the Official Code of Georgia Annotated, relating
1-17 to professions and businesses, so as to change certain
1-18 provisions relating to auctioneers education, research, and
1-19 recovery fund; to change certain provisions relating to real
1-20 estate education, research, and recovery fund; to amend
1-21 Article 1 of Chapter 18 of Title 45 of the Official Code of
1-22 Georgia Annotated, relating to the state employees' health
1-23 insurance plan, so as to change certain provisions relating
1-24 to deposit of amounts from the health insurance fund
1-25 available for investment in trust account and investment and
1-26 withdrawal of funds; to designate and redesignate certain
1-27 portions of the Code; to provide for related matters; to
1-28 provide an effective date; to repeal conflicting laws; and
1-29 for other purposes.
1-30 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
1-31 SECTION 1.
1-32 Part 6 of Article 17 of Chapter 2 of Title 20 of the
1-33 Official Code of Georgia Annotated, relating to health
1-34 insurance plans for public school teachers and public school
1-35 employees, is amended by striking subsection (b) of Code
-1-
2- 1 Section 20-2-891, relating to health insurance fund for
2- 2 public school teachers, and inserting in lieu thereof the
2- 3 following:
2- 4 "(b) Any amounts held by the health insurance fund which
2- 5 are available for investment shall be paid over to the
2- 6 Office of Treasury and Fiscal Services. The director of
2- 7 the Office of Treasury and Fiscal Services shall deposit
2- 8 such funds in a trust account for credit only to the
2- 9 health insurance fund. The director of the Office of
2-10 Treasury and Fiscal Services shall invest these health
2-11 insurance funds subject to all the terms, conditions,
2-12 limitations, and restrictions imposed by the laws of this
2-13 state Articles 1 and 3 of Chapter 11 of Title 33 upon
2-14 domestic life insurance companies in the making and
2-15 disposing of their investments. All income derived from
2-16 such investment shall accrue to the health insurance fund.
2-17 When moneys are paid over to the Office of Treasury and
2-18 Fiscal Services as provided in this subsection, the
2-19 commissioner shall submit an estimate of the date such
2-20 funds shall no longer be available for investment. When
2-21 the commissioner wishes to withdraw funds from the trust
2-22 account provided for in this subsection, he or she shall
2-23 submit a request for such withdrawal, in writing, to the
2-24 director of the Office of Treasury and Fiscal Services."
2-25 SECTION 2.
2-26 Said part is further amended by striking Code Section
2-27 20-2-919, relating to investment of the health insurance
2-28 fund for public school employees, and inserting in lieu
2-29 thereof the following:
2-30 "20-2-919.
2-31 Any amounts held by the health insurance fund which are
2-32 available for investment shall be paid over to the Office
2-33 of Treasury and Fiscal Services. The director of the
2-34 Office of Treasury and Fiscal Services shall deposit such
2-35 funds in a trust account for credit only to the health
2-36 insurance fund. The director of the Office of Treasury
2-37 and Fiscal Services shall invest these health insurance
2-38 funds subject to all the terms, conditions, limitations,
2-39 and restrictions imposed by the laws of this state
2-40 Articles 1 and 3 of Chapter 11 of Title 33 upon domestic
2-41 life insurance companies in the making and disposing of
2-42 their investments. All income derived from such
2-43 investments shall accrue to the health insurance fund.
-2-
3- 1 When moneys are paid over to the Office of Treasury and
3- 2 Fiscal Services, as provided in this Code section, the
3- 3 commissioner shall submit an estimate of the date such
3- 4 funds shall no longer be available for investment. When
3- 5 the commissioner wishes to withdraw funds from the trust
3- 6 account provided for in this Code section, he or she shall
3- 7 submit a request for such withdrawal, in writing, to the
3- 8 director of the Office of Treasury and Fiscal Services."
3- 9 SECTION 3.
3-10 Title 33 of the Official Code of Georgia Annotated, relating
3-11 to insurance, is amended by striking Code Section 33-10-14,
3-12 relating to valuation of reserves including bonds and other
3-13 evidences of debt, and inserting in lieu thereof the
3-14 following:
3-15 "33-10-14. (a) All bonds or other evidence of debt having a fixed
3-17 term and rate of interest held by an insurer may, if amply
3-18 secured and not in default as to principal or interest, be
3-19 valued as follows: (1) If purchased at par, at the par value; (2) If purchased above or below par, on the basis of the
3-22 purchase price adjusted so as to bring the value to par
3-23 at maturity and so as to yield in the meantime the
3-24 effective rate of interest at which the purchase was
3-25 made or, in lieu of such method, according to the
3-26 accepted methods of valuation as is approved by the
3-27 Commissioner; (3) Purchase price shall in no case be taken at a higher
3-29 figure than the actual market value at the time of
3-30 purchase plus actual brokerage, transfer, postage, or
3-31 express charges paid in the acquisition of such
3-32 securities; and (4) Unless otherwise provided by valuation established
3-34 or approved by the Commissioner, no security shall be
3-35 carried at above the call price for the entire issue
3-36 during any period within which the security may be so
3-37 called.
3-38 (b) The Commissioner shall have discretion in determining
3-39 the method of calculating values according to the rules
3-40 set forth in this Code section but no such method or
3-41 valuation shall be inconsistent with any applicable
-3-
4- 1 valuation or method used by insurers in general or any
4- 2 such method then currently formulated or approved by the
4- 3 National Association of Insurance Commissioners or its
4- 4 successor organization. The value or amount of
4- 5 investments, unless otherwise specified in this chapter,
4- 6 and excluding assets of separate accounts which are
4- 7 subject to Code Sections 33-11-65 through 33-11-67, shall
4- 8 be the value at which assets of an insurer are required to
4- 9 be reported for statutory accounting purposes as
4-10 determined in accordance with procedures prescribed in
4-11 published accounting and valuation standards of the
4-12 National Association of Insurance Commissioners and
4-13 adopted by regulation promulgated by the Commissioner or
4-14 as otherwise prescribed by regulation promulgated by the
4-15 Commissioner."
4-16 SECTION 4.
4-17 Said title is further amended by striking and reserving Code
4-18 Section 33-10-15, relating to valuation of reserves
4-19 including other securities, preferred or guaranteed stocks
4-20 or shares, and stock of subsidiary corporations.
4-21 SECTION 5.
4-22 Said title is further amended by striking the phrase "this
4-23 chapter" and inserting in lieu thereof "this article"
4-24 wherever such phrase occurs in Chapter 11, relating to
4-25 investments of insurers, as follows:
4-26 (1) In Code Section 33-11-1, relating to scope of
4-27 chapter;
4-28 (2) In Code Section 33-11-2, relating to eligible
4-29 investments;
4-30 (3) In Code Section 33-11-3, relating to acquisition of
4-31 securities or investments by insurers generally;
4-32 (4) In Code Section 33-11-5, relating to required
4-33 investments and limitations;
4-34 (5) In Code Section 33-11-8, relating to foreign
4-35 securities;
4-36 (6) In Code Section 33-11-16, relating to obligations
4-37 issued, assumed, or guaranteed by the International Bank
4-38 for Reconstruction and Development or the International
4-39 Finance Corporation;
-4-
5- 1 (7) In Code Section 33-11-23, relating to loans secured
5- 2 by pledge of securities or by pledge or assignment of
5- 3 life insurance policies;
5- 4 (8) In Code Section 33-11-25, relating to obligations
5- 5 secured by first mortgage or deed of trust upon improved
5- 6 or income-producing real property in the United States
5- 7 or Canada;
5- 8 (9) In Code Section 33-11-26, relating to chattel
5- 9 mortgage loans;
5-10 (10) In Code Section 33-11-27, relating to abstract
5-11 plant and equipment and stocks of abstract companies;
5-12 (11) In Code Section 33-11-30, relating to investment of
5-13 assets in real estate acquired for purposes of leasing;
5-14 (12) In Code Section 33-11-33, relating to prohibited
5-15 investments and underwriting of offering of securities
5-16 or property by other persons;
5-17 (13) In Code Section 33-11-37, relating to investment of
5-18 funds in excess of reserve and capital, or surplus, in
5-19 authorized and approved investments;
5-20 (14) In Code Section 33-11-39, relating to time limit
5-21 for disposal by insurer of real estate;
5-22 (15) In Code Section 33-11-42, relating to investments
5-23 of foreign and alien insurers; and
5-24 (16) In Code Section 33-11-43, relating to compliance
5-25 with Secondary Mortgage Market Enhancement Act.
5-26 SECTION 6.
5-27 Said title is further amended by designating the existing
5-28 provisions of Chapter 11, relating to investments of
5-29 insurers, as Article 1 of said chapter.
5-30 SECTION 7.
5-31 Said title is further amended by designating the existing
5-32 provisions of Code Section 33-11-1, relating to scope of
5-33 article, as subsection (a) of said Code section and adding a
5-34 new subsection (b) to read as follows:
5-35 "(b) The provisions of this article shall apply only to
5-36 those insurers that are not subject to Article 2 of this
5-37 chapter."
-5-
6- 1 SECTION 8.
6- 2 Said title is further amended by striking and reserving Code
6- 3 Section 33-11-24, relating to life insurers' loans to
6- 4 policyholders secured by policies.
6- 5 SECTION 9.
6- 6 Said title is further amended by striking and reserving Code
6- 7 Section 33-11-34, relating to separate accounts of domestic
6- 8 life insurance companies in connection with pension,
6- 9 retirement, and profit-sharing plans.
6-10 SECTION 10.
6-11 Said title is further amended by striking and reserving Code
6-12 Section 33-11-35, relating to separate accounts of domestic
6-13 life insurance companies in connection with variable annuity
6-14 contracts.
6-15 SECTION 11.
6-16 Said title is further amended by striking and reserving Code
6-17 Section 33-11-36, relating to separate accounts of domestic
6-18 life insurance companies in connection with variable life
6-19 insurance policies.
6-20 SECTION 12.
6-21 Said title is further amended by adding to Chapter 11 a new
6-22 Article 2 to read as follows:
6-23 33-11-50.
6-24 (a) The purpose of this article is to protect and to
6-25 further the interests of insureds, creditors, and the
6-26 general public. This objective will be met by the
6-27 establishment of:
6-28 (1) Prudent standards by which an insurer shall develop
6-29 its investment policy and investment portfolio;
6-30 (2) A minimum financial security benchmark and a minimum
6-31 asset requirement, each of which shall be supported by
6-32 classes of investments and, as applicable, noninvested
6-33 assets, described in this article;
6-34 (3) A level of investment discretion whereby the
6-35 regulation of an insurer's investment practices has
6-36 minimum interference with management initiative and
6-37 judgment; and
-6-
7- 1 (4) A prescribed process for actions by the Commissioner
7- 2 to address situations where an insurer's investment
7- 3 policy or investment portfolio is not prudent under
7- 4 prevailing circumstances.
7- 5 (b) This article and the regulations adopted to interpret
7- 6 and implement it shall apply only to domestic life,
7- 7 accident and sickness, property, and casualty insurers
7- 8 licensed pursuant to Code Section 33-3-2 to transact the
7- 9 classes of business described in paragraphs (1) through
7-10 (5) of Code Section 33-3-5 and United States branches of
7-11 similar alien insurers entered through this state if such
7-12 entry is otherwise permitted by law.
7-13 (c) Separate accounts established in accordance with Code
7-14 Sections 33-11-65 through 33-11-67 shall be governed
7-15 pursuant to those Code sections.
7-16 33-11-51.
7-17 For purposes of this article, the term:
7-18 (1) 'Admitted assets' means assets permitted to be
7-19 reported as admitted assets on the statutory financial
7-20 statement of the insurer most recently required to be
7-21 filed with the Commissioner.
7-22 (2) 'Asset-backed/mortgage-backed securities' shall
7-23 include the types of securities defined below:
7-24 (A) 'Single-class mortgage-backed/asset-backed
7-25 securities' means pass-through certificates and other
7-26 securitized loans issued using only one class where
7-27 the payment of interest and/or principal of the
7-28 security is directly proportional to interest and/or
7-29 principal received by the business entity from the
7-30 loans supporting the security;
7-31 (B) 'Multiclass residential mortgage-backed
7-32 securities' means mortgage-backed securities which
7-33 have been divided into two or more classes, which do
7-34 not receive proportionate payments of principal and
7-35 interest, each of which represents an ownership
7-36 interest in instruments which are directly or
7-37 indirectly secured by liens on one-family to
7-38 four-family residential properties, including:
7-39 (i) 'Defined multiclass residential mortgage-backed
7-40 securities' which are first liens and are rated in
7-41 one of the two highest generic rating categories
-7-
8- 1 established by a Nationally Recognized Statistical
8- 2 Rating Organization that is recognized by the
8- 3 Securities Valuation Office in accordance with
8- 4 valuation standards adopted by the National
8- 5 Association of Insurance Commissioners and adopted
8- 6 by regulation promulgated by the Commissioner or as
8- 7 otherwise prescribed by regulation promulgated by
8- 8 the Commissioner; and
8- 9 (ii) 'Other multiclass residential mortgage-backed
8-10 securities' which are not first liens or, if secured
8-11 by first liens, are rated below the two highest
8-12 generic rating categories established by a
8-13 Nationally Recognized Statistical Rating
8-14 Organization that is recognized by the Securities
8-15 Valuation Office in accordance with valuation
8-16 standards adopted by the National Association of
8-17 Insurance Commissioners and adopted by regulation
8-18 promulgated by the Commissioner or as otherwise
8-19 prescribed by regulation promulgated by the
8-20 Commissioner; and
8-21 (C) 'Multiclass commercial
8-22 mortgage-backed/asset-backed securities' means
8-23 securities which have been divided into two or more
8-24 classes, which do not receive proportionate payments
8-25 of principal and interest, each of which represents an
8-26 ownership interest in instruments or cash flows, but
8-27 not including those secured by liens on one to four
8-28 family residential properties, including:
8-29 (i) 'Defined multiclass commercial mortgage-backed
8-30 securities' which have been divided into two or more
8-31 classes, which do not receive proportionate payments
8-32 of principal and interest, each of which represents
8-33 an ownership interest in instruments, directly or
8-34 indirectly secured by a first lien on one or more
8-35 parcels of real estate upon which is located one or
8-36 more commercial structures, and rated in one of the
8-37 two highest generic rating categories established by
8-38 a Nationally Recognized Statistical Rating
8-39 Organization that is recognized by the Securities
8-40 Valuation Office in accordance with valuation
8-41 standards adopted by the National Association of
8-42 Insurance Commissioners and adopted by regulation
8-43 promulgated by the Commissioner or as otherwise
-8-
9- 1 prescribed by regulation promulgated by the
9- 2 Commissioner; and
9- 3 (ii) 'Other multiclass commercial
9- 4 mortgage-backed/asset-backed securities' which have
9- 5 been divided into two or more classes, which do not
9- 6 receive proportionate payments of principal and
9- 7 interest, each of which represents an ownership
9- 8 interest in instruments or cash flows, including,
9- 9 but not limited to, instruments secured by liens on
9-10 one or more parcels of real estate upon which is
9-11 located one or more commercial structures that are
9-12 not first liens or, if secured by first liens, the
9-13 securities are rated below the two highest generic
9-14 rating categories established by a Nationally
9-15 Recognized Statistical Rating Organization that is
9-16 recognized by the Securities Valuation Office in
9-17 accordance with valuation standards adopted by the
9-18 National Association of Insurance Commissioners and
9-19 adopted by regulation promulgated by the
9-20 Commissioner or as otherwise prescribed by
9-21 regulation promulgated by the Commissioner.
9-22 (2.1) 'Asset-valuation reserve' means the reserve
9-23 required to be computed and reported in the annual and
9-24 quarterly financial statements, adopted for use by the
9-25 Commissioner, which is designed to address the
9-26 credit-related and equity risks of a domestic life or
9-27 accident and sickness insurer's assets.
9-28 (3) 'Debt-like preferred stock' means an investment with
9-29 the structure of a preferred stock that has the cash
9-30 flow characteristics of a debt instrument.
9-31 (4) 'Counterparty exposure amount' means:
9-32 (A) The net amount of credit risk attributable to a
9-33 derivative instrument entered into with a business
9-34 entity other than through a qualified exchange,
9-35 qualified foreign exchange, or cleared through a
9-36 qualified clearinghouse ('over-the-counter derivative
9-37 instrument'). The amount of credit risk equals:
9-38 (i) The market value of the over-the-counter
9-39 derivative instrument if the liquidation of the
9-40 derivative instrument would result in a final cash
9-41 payment to the insurer; or
-9-
10- 1 (ii) Zero if the liquidation of the derivative
10- 2 instrument would not result in a final cash payment
10- 3 to the insurer;
10- 4 (B) If over-the-counter derivative instruments are
10- 5 entered into under a written master agreement which
10- 6 provides for netting of payments owed by the
10- 7 respective parties, and the domiciliary jurisdiction
10- 8 of the counterparty is either within the United States
10- 9 or, if not within the United States, within a foreign
10-10 jurisdiction listed in the NAIC Purposes and
10-11 Procedures of the Securities Valuation Office as
10-12 eligible for netting in accordance with procedures
10-13 adopted by the National Association of Insurance
10-14 Commissioners and adopted by regulation promulgated by
10-15 the Commissioner or as otherwise prescribed by
10-16 regulation promulgated by the Commissioner, the net
10-17 amount of credit risk shall be the greater of zero or
10-18 the net sum of:
10-19 (i) The market value of the over-the-counter
10-20 derivative instruments entered into under the
10-21 agreement, the liquidation of which would result in
10-22 a final cash payment to the insurer; and
10-23 (ii) The market value of the over-the-counter
10-24 derivative instruments entered into under the
10-25 agreement, the liquidation of which would result in
10-26 a final cash payment by the insurer to the business
10-27 entity; and
10-28 (C) For open transactions, market value shall be
10-29 determined at the end of the most recent quarter of
10-30 the insurer's fiscal year and shall be reduced by the
10-31 market value of acceptable collateral held by the
10-32 insurer or placed in escrow by one or both parties.
10-33 (5) 'Derivative instrument' means a cap, collar, floor,
10-34 forward, future, option, swap, or warrant, as defined
10-35 below:
10-36 (A) 'Cap' means an option contract in which the cap
10-37 writer (seller), in return for a premium, agrees to
10-38 limit, or cap, the cap holder's (purchaser's) risk
10-39 associated with an increase in a reference rate or
10-40 index;
10-41 (B) 'Collar' means a combination of a cap and a floor
10-42 (one purchased and one written). A collar fixes the
-10-
11- 1 rate between two levels (the strike prices of the cap
11- 2 and the floor);
11- 3 (C) 'Floor' means an option contract in which the
11- 4 floor writer (seller), in return for a premium, agrees
11- 5 to limit the risk associated with a decline in a
11- 6 reference rate or index;
11- 7 (D) 'Forward' means a contract in which there is an
11- 8 agreement (other than a futures) between two parties
11- 9 that commit one party to purchase and the other to
11-10 sell the instrument or commodity underlying the
11-11 contract at a specified future date;
11-12 (E) 'Future' means a standardized forward contract
11-13 traded on organized exchanges. Each exchange specifies
11-14 the standard terms of futures contracts it sponsors.
11-15 Futures contracts are available for a wide variety of
11-16 underlying instruments, including insurance,
11-17 agricultural commodities, minerals, debt instruments
11-18 (such as U.S. Treasury bonds and bills), composite
11-19 stock indices, and foreign currencies;
11-20 (F) 'Option' means a contract that gives the option
11-21 holder (purchaser of the option rights) the right, but
11-22 not the obligation, to enter into a transaction with
11-23 the option writer (seller of the option rights) on
11-24 terms specified in the contract. A call option allows
11-25 the holder to buy the underlying instrument, while a
11-26 put option allows the holder to sell the underlying
11-27 instrument;
11-28 (G) 'Swap' means a contract to exchange, for a period
11-29 of time, the investment performance of one underlying
11-30 instrument for the investment performance of another
11-31 underlying instrument, typically without exchanging
11-32 the instruments themselves. An interest rate swap is
11-33 a contractual agreement between two parties to
11-34 exchange interest rate payments (usually fixed for
11-35 variable) based on a specified amount of underlying
11-36 assets or liabilities (known as the notional amount)
11-37 for a specified period. The swap does not involve an
11-38 exchange of principal. The result of these
11-39 transactions is to transform payments from a variable
11-40 rate to a fixed rate, from a fixed rate to a variable
11-41 rate or from one variable rate index to another
11-42 variable rate index; and
-11-
12- 1 (H) 'Warrant' means an instrument that gives the
12- 2 holder the right to purchase an underlying financial
12- 3 instrument at a given price and time or at a series of
12- 4 prices and times outlined in the warrant agreement.
12- 5 (6) 'Derivative transaction' means a transaction
12- 6 involving the use of one or more derivative instruments.
12- 7 (7) 'Domestic jurisdiction' means the United States,
12- 8 Canada, any state, any province of Canada, or any
12- 9 political subdivision of any of the foregoing.
12-10 (8) 'Equity-like preferred stock' means an investment
12-11 with the structure of a preferred stock that has the
12-12 characteristics of an equity instrument.
12-13 (9) 'Government sponsored enterprise' means a:
12-14 (A) Governmental agency; or
12-15 (B) Corporation, limited liability company,
12-16 association, partnership, joint stock company, joint
12-17 venture, trust or other entity or instrumentality
12-18 organized under the laws of any domestic jurisdiction
12-19 to accomplish a public policy or other governmental
12-20 purpose.
12-21 (10) 'Hedging transaction' means a derivative
12-22 transaction which is entered into and maintained to
12-23 reduce or manage:
12-24 (A) The risk of a change in the value, yield, price,
12-25 cash flow, or quantity of assets or liabilities which
12-26 the insurer has acquired or incurred or anticipates
12-27 acquiring or incurring; or
12-28 (B) The currency exchange rate risk or the degree of
12-29 exposure as to assets or liabilities which an insurer
12-30 has acquired or incurred or anticipates acquiring or
12-31 incuring.
12-32 (11) 'High grade investment' means an investment rated 1
12-33 or 2 by the Securities Valuation Office or any successor
12-34 office, in accordance with valuation standards adopted
12-35 by the National Association of Insurance Commissioners
12-36 and adopted by regulation promulgated by the
12-37 Commissioner or as otherwise prescribed by regulation
12-38 promulgated by the Commissioner.
12-39 (12) 'Lower grade investment' means an investment rated
12-40 4, 5, or 6 by the Securities Valuation Office or any
-12-
13- 1 successor office in accordance with valuation standards
13- 2 adopted by the National Association of Insurance
13- 3 Commissioners and adopted by regulation promulgated by
13- 4 the Commissioner or as otherwise prescribed by
13- 5 regulation promulgated by the Commissioner.
13- 6 (13) 'Medium grade investment' means an investment rated
13- 7 3 by the Securities Valuation Office or any successor
13- 8 office in accordance with valuation standards adopted by
13- 9 the National Association of Insurance Commissioners and
13-10 adopted by regulation promulgated by the Commissioner or
13-11 as otherwise prescribed by regulation promulgated by the
13-12 Commissioner.
13-13 (14) 'Minimum asset requirement' means the sum of an
13-14 insurer's liabilities and its minimum financial security
13-15 benchmark.
13-16 (15) 'Minimum financial security benchmark' means the
13-17 amount an insurer is required to maintain under Code
13-18 Section 33-11-52.
13-19 (16) 'Potential exposure' means the amount determined in
13-20 accordance with the NAIC Annual Statement Instructions
13-21 adopted by the National Association of Insurance
13-22 Commissioners and adopted by regulation promulgated by
13-23 the Commissioner or as otherwise prescribed by
13-24 regulation promulgated by the Commissioner.
13-25 (17) 'Replication' means a derivative transaction
13-26 involving one or more derivative instruments being used
13-27 to modify the cash flow characteristics of one or more
13-28 investments held by an insurer in a manner so that the
13-29 aggregate cash flows of the derivative instruments and
13-30 investments reproduce the cash flows of another
13-31 investment having a higher risk-based capital charge
13-32 than the risk-based capital charge of the original
13-33 investments or investments.
13-34 (18) 'Special rated credit instrument' means an
13-35 asset-backed/mortgage-backed security authorized by
13-36 paragraph (2) of Code Section 33-11-55 where the
13-37 investment is structured such that:
13-38 (A) The payments are the interest only portion of the
13-39 underlying collateral;
13-40 (B) Such payments are reduced as the balance of the
13-41 underlying collateral is reduced; and
-13-
14- 1 (C) Such reduction may cause a significant loss of the
14- 2 original investment. For purposes of this
14- 3 subparagraph, 'significant' shall mean a loss of 15
14- 4 percent or more.
14- 5 (19) 'SVO listed mutual fund' means a money market
14- 6 mutual fund or short-term bond fund that is registered
14- 7 with the United States Securities and Exchange
14- 8 Commission under the Investment Company Act of 1940, and
14- 9 that has been determined by the Securities Valuation
14-10 Office or any successor office in accordance with
14-11 valuation standards adopted by the National Association
14-12 of Insurance Commissioners and adopted by regulation
14-13 promulgated by the Commissioner or as otherwise
14-14 prescribed by regulation promulgated by the Commissioner
14-15 to be eligible for special reserve and reporting
14-16 treatment other than as common stock.
14-17 33-11-52.
14-18 (a)(1) Unless otherwise established in accordance with
14-19 paragraphs (2) and (3) of this subsection, the amount of
14-20 the minimum financial security benchmark for an insurer
14-21 shall be the greater of:
14-22 (A) The authorized control level risk-based capital
14-23 applicable to the insurer as set forth by Code Section
14-24 33-56-3 less the asset valuation reserve and voluntary
14-25 investment reserves as defined by the valuation
14-26 procedures in Code Section 33-10-14; or
14-27 (B) The minimum capital and surplus required by this
14-28 title for maintenance of an insurer's certificate of
14-29 authority.
14-30 (2) The Commissioner may, in accordance with the factors
14-31 in paragraph (2) of subsection (b) of this Code section,
14-32 establish by order a minimum financial security
14-33 benchmark to apply to a specific insurer provided it is
14-34 not less than the amount determined by paragraph (1) of
14-35 this subsection.
14-36 (3) The Commissioner may establish by regulation a
14-37 minimum financial security benchmark that is a multiple
14-38 of authorized control level risk-based capital to apply
14-39 to any class of insurers provided the amount established
14-40 by the regulation is not less than the amount determined
14-41 in paragraph (1) of this subsection.
-14-
15- 1 (b) The Commissioner shall determine the amount of surplus
15- 2 that shall constitute an insurer's minimum financial
15- 3 security benchmark, as an amount that will provide
15- 4 reasonable security against contingencies affecting the
15- 5 insurer's financial position that are not fully covered by
15- 6 reserves or by reinsurance.
15- 7 (1) The Commissioner shall consider the risks of the
15- 8 following types of contingencies:
15- 9 (A) Increases in the frequency or severity of losses
15-10 beyond the levels contemplated by the rates charged;
15-11 (B) Increases in expenses beyond those contemplated by
15-12 the rates charged;
15-13 (C) Decreases in the value of or the return on
15-14 invested assets below those planned on;
15-15 (D) Changes in economic conditions that would make
15-16 liquidity more important than contemplated and would
15-17 force untimely sale of assets or prevent timely
15-18 investments;
15-19 (E) Currency devaluation to which the insurer may be
15-20 subject; and
15-21 (F) Any other contingencies the Commissioner can
15-22 identify that may affect the insurer's operations.
15-23 (2) In determining an insurer's minimum financial
15-24 security benchmark under this subsection, the
15-25 Commissioner shall take into account the following
15-26 factors:
15-27 (A) The most reliable information available as to the
15-28 magnitude of the various risks under paragraph (1) of
15-29 this subsection;
15-30 (B) The extent to which the risks in paragraph (1) of
15-31 this subsection are independent of each other or are
15-32 related, and whether any dependency is direct or
15-33 inverse;
15-34 (C) The insurer's recent history of profits or losses;
15-35 (D) The extent to which the insurer has provided
15-36 protection against the contingencies in other ways
15-37 than the establishment of surplus; including
15-38 redundancy of premiums, adjustability of contracts
15-39 under their terms, investment valuation reserves
15-40 whether voluntary or mandatory, appropriate
-15-
16- 1 reinsurance, the use of conservative actuarial
16- 2 assumptions to provide a margin of security, reserve
16- 3 adjustments in recognition of previous rate
16- 4 inadequacies, contingency or catastrophe reserves,
16- 5 diversification of assets and underwriting risks;
16- 6 (E) Independent judgments of the soundness of the
16- 7 insurer's operations, as evidenced by the ratings of
16- 8 reliable professional financial reporting services;
16- 9 and
16-10 (F) Any other relevant factors.
16-11 (3) An insurer subject to the provisions of this article
16-12 shall invest and maintain invested funds not less in
16-13 amount than the minimum financial security benchmark
16-14 only in the following:
16-15 (A) Cash;
16-16 (B) Certificates of deposit or similar certificates or
16-17 evidences of deposit in banks and trust companies to
16-18 the extent that the certificates or deposits are
16-19 insured by the Federal Deposit Insurance Corporation;
16-20 (C) Savings accounts, certificates of deposit, or
16-21 similar certificates or evidences of deposit in
16-22 savings and loan associations and building loan
16-23 associations to the extent that the same are insured
16-24 by the Savings Association Insurance Fund of the
16-25 Federal Deposit Insurance Corporation;
16-26 (D) Bonds, notes, warrants, and other evidences of
16-27 indebtedness which are direct obligations of the
16-28 government of the United States of America or for
16-29 which the full faith and credit of the government of
16-30 the United States of America is pledged for the
16-31 payment of principal and interest;
16-32 (E) Loans guaranteed as to principal and interest by
16-33 the government of the United States of America, or by
16-34 any agency or instrumentality of the government of the
16-35 United States of America, to the extent of such
16-36 guaranty;
16-37 (F) Bonds, notes, warrants, and other securities not
16-38 in default which are the direct obligations of any
16-39 domestic jurisdiction, or for which the full faith and
16-40 credit of such domestic jurisdiction has been pledged
16-41 for the payment of principal and interest;
-16-
17- 1 (G) The obligations of any county, any incorporated
17- 2 city, town, or village, any school district, water
17- 3 district, sewer district, road district, or any
17- 4 special district, or any other political subdivision
17- 5 or public authority of any state, territory, or
17- 6 insular possession of the United States, or of the
17- 7 District of Columbia, or of the Canadian cities having
17- 8 a population of over 25,000 according to the most
17- 9 recent official census, which has not defaulted for a
17-10 period of 120 days in the payment of interest upon, or
17-11 for a period of more than one year in the payment of
17-12 principal of, any of its bonds, notes, warrants,
17-13 certificates of indebtedness, securities, or any other
17-14 interest-bearing obligation during the five years
17-15 immediately preceding the acquisition of the
17-16 investment;
17-17 (H) Bonds, notes, or other evidences of indebtedness,
17-18 in addition to those eligible corporate bonds and
17-19 debentures, which are secured by first mortgages on
17-20 real estate situated within a domestic jurisdiction,
17-21 or purchase money mortgages or like securities
17-22 received upon the sale or exchange of real property
17-23 acquired; provided, however, that not more than 45
17-24 percent in the case of life insurers, and not more
17-25 than 25 percent in the case of nonlife insurers, of
17-26 the minimum financial security benchmark may be made
17-27 up of such investments;
17-28 (I) High grade investments in corporate bonds and
17-29 debentures having a remaining maturity of five years
17-30 or less; and
17-31 (J) Any other investment not otherwise prohibited by
17-32 this article that is considered exempt from risk based
17-33 capital requirements pursuant to Code Section 33-56-2
17-34 in accordance with risk-based capital instructions
17-35 adopted by the National Association of Insurance
17-36 Commissioners and adopted by regulation promulgated by
17-37 the Commissioner or as otherwise prescribed by
17-38 regulation promulgated by the Commissioner.
17-39 33-11-53.
17-40 The following factors shall be evaluated by the insurer
17-41 and considered along with its business in determining
17-42 whether an investment portfolio or investment policy is
17-43 prudent, and the Commissioner shall consider the following
-17-
18- 1 factors prior to making a determination that an insurer's
18- 2 investment portfolio or investment policy is not prudent:
18- 3 (1) General economic conditions;
18- 4 (2) The possible effect of inflation or deflation;
18- 5 (3) The expected tax consequences of investment
18- 6 decisions or strategies;
18- 7 (4) The fairness and reasonableness of the terms of an
18- 8 investment considering its probable risk and reward
18- 9 characteristics and relationship to the investment
18-10 portfolio as a whole;
18-11 (5) The extent of the diversification of the insurer's
18-12 investments among:
18-13 (A) Individual investments;
18-14 (B) Classes of investments;
18-15 (C) Industry concentrations;
18-16 (D) Dates of maturity; and
18-17 (E) Geographic areas;
18-18 (6) The quality and liquidity of investments in
18-19 affiliates;
18-20 (7) The investment exposure to the following risks,
18-21 quantified in a manner consistent with the insurer's
18-22 acceptable risk level appropriate for the insurer given
18-23 the level of capitalization and expertise available to
18-24 the insurer:
18-25 (A) Liquidity;
18-26 (B) Credit and default;
18-27 (C) Systemic (market);
18-28 (D) Interest rate;
18-29 (E) Call, prepayment and extension;
18-30 (F) Currency; and
18-31 (G) Foreign sovereign, political subdivision, and
18-32 corporate;
18-33 (8) The amount of the insurer's assets, capital and
18-34 surplus, premium writings, insurance in force, and other
18-35 appropriate characteristics;
-18-
19- 1 (9) The amount and adequacy of the insurer's reported
19- 2 liabilities;
19- 3 (10) The relationship of the expected cash flows of the
19- 4 insurer's assets and liabilities, and the risk of
19- 5 adverse changes in the insurer's assets and liabilities;
19- 6 (11) The adequacy of the insurer's capital and surplus
19- 7 to secure the risks and liabilities of the insurer; and
19- 8 (12) Any other factors appropriate for consideration and
19- 9 relevant to whether an investment is prudent.
19-10 33-11-54.
19-11 (a) An insurer's board of directors shall adopt a written
19-12 plan for acquiring and holding investments and for
19-13 engaging in investment practices that specifies guidelines
19-14 as to the quality, maturity, and diversification of
19-15 investments and other specifications, including investment
19-16 strategies intended to assure that the investments and
19-17 investment practices are appropriate for the business
19-18 conducted by the insurer, its liquidity needs, and its
19-19 capital and surplus. The board shall review and assess the
19-20 insurer's technical investment and administrative
19-21 capabilities and expertise before adopting a written plan
19-22 concerning an investment strategy or investment practice.
19-23 (b) Investments acquired and held under this article shall
19-24 be acquired and held under the supervision and direction
19-25 of the board of directors of the insurer. The board of
19-26 directors shall evidence by formal resolution, at least
19-27 annually, that it has determined whether all investments
19-28 have been made in accordance with delegations, standards,
19-29 limitations, and investment objectives prescribed by the
19-30 board or a committee of the board charged with the
19-31 responsibility to direct its investments.
19-32 (c) On no less than a quarterly basis, and more often if
19-33 deemed appropriate, an insurer's board of directors or
19-34 committee of the board of directors shall:
19-35 (1) Receive and review a summary report on the insurer's
19-36 investment portfolio, its investment activities, and
19-37 investment practices engaged in under delegated
19-38 authority, in order to determine whether the investment
19-39 activity of the insurer is consistent with its written
19-40 plan; and
19-41 (2) Review and revise, as appropriate, the written plan.
-19-
20- 1 (d) In discharging its duties under this Code section, the
20- 2 board of directors shall require that records of any
20- 3 authorizations or approvals, other documentation as the
20- 4 board may require, and reports of any action taken under
20- 5 authority delegated under the plan referred to in
20- 6 subsection (a) of this Code section shall be made
20- 7 available on a regular basis to the board of directors.
20- 8 (e) If an insurer does not have a board of directors, all
20- 9 references to the board of directors in this article shall
20-10 be deemed to be references to the governing body of the
20-11 insurer having authority equivalent to that of a board of
20-12 directors.
20-13 (f) In discharging their duties under this Code section,
20-14 the directors of an insurer shall perform their duties to
20-15 the same degree required by Code Section 14-2-830.
20-16 33-11-55.
20-17 (a) The following classes of investments are eligible for
20-18 support of an insurer's outstanding liabilities, whether
20-19 they are made directly or through limited partnership
20-20 interests, joint ventures, stock of an investment
20-21 subsidiary or membership interests in a limited liability
20-22 company, trust certificates, participation certificates,
20-23 or other similar instruments and, with the prior written
20-24 approval of the Commissioner, general partnership
20-25 interests:
20-26 (1) Cash;
20-27 (2) Bonds, investment pools, trust certificates,
20-28 asset-backed/mortgage-backed securities, SVO listed
20-29 mutual funds, debt-like preferred stock, or evidences of
20-30 indebtedness of governmental units or government
20-31 sponsored enterprises of a domestic jurisdiction, or
20-32 private business entities domiciled in a domestic
20-33 jurisdiction;
20-34 (3)(A) Obligations secured by mortgages on real estate
20-35 situated within a domestic jurisdiction, in an
20-36 aggregate amount which, together with those
20-37 investments made pursuant to paragraph (6) of this
20-38 subsection, does not exceed 45 percent of admitted
20-39 assets in the case of life insurers and 25 percent in
20-40 the case of nonlife insurers; but a mortgage loan
20-41 which is secured by other than a first lien may only
20-42 be acquired when:
-20-
21- 1 (i) The insurer is the holder of the first lien; or
21- 2 (ii) No senior loan is cross-collateralized or
21- 3 cross-defaulted with another mortgage loan secured
21- 4 by real estate, and the insurer has the right to
21- 5 cure a default on any senior loans.
21- 6 (B) The obligations held by the insurer and any
21- 7 obligations with an equal lien priority shall not, at
21- 8 the time of acquisition of the obligation, exceed:
21- 9 (i) Ninety percent of the fair market value of the
21-10 real estate, if the mortgage loan is secured by a
21-11 purchase money mortgage or like security received by
21-12 the insurer upon disposition of the real estate;
21-13 (ii) Eighty percent of the fair market value of the
21-14 real estate, if the mortgage loan requires immediate
21-15 scheduled payment in periodic installments of
21-16 principal and interest, has an amortization period
21-17 of 30 years or less, and has periodic payments made
21-18 no less frequently than annually. Each periodic
21-19 payment shall be sufficient to assure that at all
21-20 times the outstanding principal balance of the
21-21 mortgage loan shall be not greater than the
21-22 outstanding principal balance that would be
21-23 outstanding under a mortgage loan with the same
21-24 original principal balance, with the same interest
21-25 rate and requiring equal payments of principal and
21-26 interest with the same frequency over the same
21-27 amortization period. Mortgage loans permitted under
21-28 this subsection are permitted notwithstanding the
21-29 fact that they provide for a payment of the
21-30 principal balance prior to the end of the period of
21-31 amortization of the loan. For residential mortgage
21-32 loans, the 80 percent limitation may be increased to
21-33 97 percent if acceptable private mortgage insurance
21-34 has been obtained; or
21-35 (iii) Seventy-five percent of the fair market value
21-36 of the real estate for mortgage loans that do not
21-37 meet the requirements of division (i) or (ii) of
21-38 this subparagraph.
21-39 (C) For purposes of subparagraph (A) of this
21-40 paragraph, the amount of an obligation required to be
21-41 included in the calculation of the loan-to-value ratio
21-42 may be reduced to the extent the obligation is insured
21-43 by the Federal Housing Administration or guaranteed by
-21-
22- 1 the United States Department of Veterans Affairs, or
22- 2 their successors.
22- 3 (D) Subject to the limitations of Code Section
22- 4 33-11-58, credit tenant loans with the following
22- 5 characteristics shall be exempt from the provisions of
22- 6 subparagraph (B) of this paragraph:
22- 7 (i) The loan amortizes over the initial fixed lease
22- 8 term at least in an amount sufficient so that the
22- 9 loan balance at the end of the lease term does not
22-10 exceed the original appraised value of the real
22-11 estate;
22-12 (ii) The lease payments cover or exceed the total
22-13 debt service over the life of the loan;
22-14 (iii) A tenant or its affiliated entity whose
22-15 outstanding obligations have a high grade
22-16 designation or a comparable rating from a Nationally
22-17 Recognized Statistical Rating Organization
22-18 recognized by the Securities Valuation Office or any
22-19 successor office in accordance with valuation
22-20 standards adopted by the National Association of
22-21 Insurance Commissioners and adopted by regulation
22-22 promulgated by the Commissioner or as otherwise
22-23 prescribed by regulation promulgated by the
22-24 Commissioner and where the tenant or its affiliated
22-25 entity has a full faith and credit obligation to
22-26 make the lease payments;
22-27 (iv) The insurer holds or is the beneficial holder
22-28 of a first lien mortgage on the real estate;
22-29 (v) The expenses of the real estate are passed
22-30 through to the tenant, excluding exterior,
22-31 structural, parking, and heating, ventilation, and
22-32 air conditioning replacement expenses, unless annual
22-33 escrow contributions from cash flows derived from
22-34 the lease payments cover the expense shortfall; and
22-35 (vi) There is a perfected assignment of the rents
22-36 due pursuant to the lease to, or for the benefit of,
22-37 the insurer.
22-38 (E) An insurer shall not acquire an investment under
22-39 this paragraph if, as a result of and after giving
22-40 effect to the investment, the aggregate amount of all
22-41 investments then held by the insurer under this
22-42 paragraph would exceed:
-22-
23- 1 (i) Four percent of its admitted assets in mortgage
23- 2 loans covering any one secured location;
23- 3 (ii) One percent of its admitted assets in
23- 4 construction loans covering any one secured
23- 5 location; or
23- 6 (iii) Eight percent of its admitted assets in
23- 7 construction loans in the aggregate;
23- 8 (4) Common stock or equity-like preferred stock or
23- 9 equity interests in any business entity in a domestic
23-10 jurisdiction, or shares of mutual funds registered with
23-11 the Securities and Exchange Commission of the United
23-12 States under the Investment Company Act of 1940, other
23-13 than Securities Valuation Office listed mutual funds, in
23-14 an amount not exceeding 20 percent of admitted assets in
23-15 the case of life insurers, and 25 percent in the case of
23-16 nonlife insurers;
23-17 (5) Real property for the convenient accommodation of
23-18 the insurer's (which may include its affiliates)
23-19 business operations, including home office, branch
23-20 office, and field office operations, in an amount not
23-21 exceeding 10 percent of admitted assets;
23-22 (A) Real estate acquired under this paragraph may
23-23 include excess space for rent to others, if the excess
23-24 space, valued at its fair market value, would
23-25 otherwise be a permitted investment under paragraph
23-26 (6) of this subsection and is so qualified by the
23-27 insurer;
23-28 (B) The real estate acquired under this paragraph may
23-29 be subject to one or more mortgages, liens, or other
23-30 encumbrances, the amount of which shall, to the extent
23-31 that the obligations secured by the mortgages, liens,
23-32 or encumbrances are without recourse to the insurer,
23-33 be deducted from the amount of the investment of the
23-34 insurer in the real estate for purposes of determining
23-35 compliance with this Code section; and
23-36 (C) For purposes of this paragraph, business
23-37 operations shall not include that portion of real
23-38 estate used for the direct provision of health care
23-39 services by an accident and sickness insurer for its
23-40 insureds. An insurer may acquire real estate used for
23-41 these purposes under paragraph (6) of this subsection;
-23-
24- 1 (6) Real property, together with the fixtures,
24- 2 furniture, furnishings, and equipment pertaining thereto
24- 3 situated in a domestic jurisdiction, in an amount not
24- 4 exceeding 20 percent of admitted assets in the case of
24- 5 life insurers, and 10 percent in the case of nonlife
24- 6 insurers. Real estate acquired under this paragraph:
24- 7 (A) Shall be income producing or intended for
24- 8 improvement or development for investment purposes
24- 9 under an existing program (in which case the real
24-10 estate shall be deemed to be income producing);
24-11 (B) May be subject to mortgages, liens, or other
24-12 encumbrances, the amount of which shall, to the extent
24-13 that the obligations secured by the mortgages, liens,
24-14 or encumbrances are without recourse to the insurer,
24-15 be deducted from the amount of the investment of the
24-16 insurer in the real estate for purposes of determining
24-17 compliance with subparagraph (C) of this paragraph;
24-18 and
24-19 (C) An insurer shall not acquire an investment under
24-20 this paragraph if, as a result of and after giving
24-21 effect to the investment and any outstanding
24-22 guarantees made by the insurer in connection with the
24-23 investment, the aggregate amount of investments then
24-24 held by the insurer under this paragraph plus the
24-25 guarantees then outstanding would exceed:
24-26 (i) Four percent of its admitted assets in one
24-27 parcel or group of contiguous parcels of real
24-28 estate, except that this limitation shall not apply
24-29 to that portion of real estate used for the direct
24-30 provision of health care services by an accident and
24-31 sickness insurer for its insureds, such as
24-32 hospitals, medical clinics, medical professional
24-33 buildings, or other health facilities used for the
24-34 purpose of providing health services; or
24-35 (ii) Fifteen percent of its admitted assets in the
24-36 aggregate;
24-37 (7) Loans, securities, or other investments of the types
24-38 described in paragraphs (1) through (6) of this
24-39 subsection in countries other than the United States and
24-40 Canada; provided that the aggregate amount of
24-41 investments shall not exceed 20 percent of admitted
24-42 assets;
-24-
25- 1 (8) Bonds or other evidences of indebtedness of
25- 2 international development organizations of which the
25- 3 United States is a member, in an amount not exceeding 5
25- 4 percent of admitted assets in each organization;
25- 5 (9) Loans upon the security of the insurer's own
25- 6 policies in amounts that are adequately secured by the
25- 7 policies and that in no case exceed the surrender values
25- 8 of the policies;
25- 9 (10) Tangible personal property under contract of sale
25-10 or lease under which contractual payments may reasonably
25-11 be expected to return the principal of and provide
25-12 earnings on the investment within its anticipated useful
25-13 life, in an amount not exceeding 2 percent of admitted
25-14 assets;
25-15 (11) Loans guaranteed as to principal and interest by
25-16 the Georgia Higher Education Assistance Corporation, to
25-17 the extent of such guaranty;
25-18 (12) Chattel mortgage loans as follows:
25-19 (A) In connection with a loan on the security of real
25-20 estate designed and used primarily for residential
25-21 purposes only, which loan was acquired in accordance
25-22 with paragraph (3) of subsection (a) of this Code
25-23 section, an insurer may lend or invest an amount not
25-24 exceeding 20 percent of the amount loaned on a chattel
25-25 mortgage to be amortized by regular periodic payments
25-26 within a term of not more than five years, and
25-27 representing a first and prior lien, except for taxes
25-28 not then delinquent, on personal property constituting
25-29 durable equipment owned by the mortgagor or security
25-30 grantor and kept and used in the mortgaged premises;
25-31 (B) For the purpose of this paragraph, the term
25-32 'durable equipment' shall include only mechanical
25-33 refrigerators, air-conditioning equipment, mechanical
25-34 laundering machines, heating and cooking stoves and
25-35 ranges, and in addition, in the case of apartment
25-36 houses and hotels, room furniture and furnishings;
25-37 (C) Prior to the acquisition of a chattel mortgage as
25-38 prescribed by this Code section, items of property to
25-39 be included in such mortgage shall be separately
25-40 appraised by a qualified appraiser and the fair market
25-41 value of such items of property determined. No
25-42 chattel mortgage loan shall exceed in amount the same
-25-
26- 1 ratio of loan to the value of the property as is
26- 2 applicable to the companion loan on the real property;
26- 3 and
26- 4 (D) This paragraph shall not prohibit an insurer from
26- 5 taking liens on personal property as additional
26- 6 security for any investment otherwise eligible under
26- 7 this article;
26- 8 (13)(A) If real property securing any evidence of
26- 9 indebtedness held by an insurer is used for
26-10 agricultural purposes and a proceeding to foreclose
26-11 the security instrument or an insolvency proceeding
26-12 relating to the mortgagor has been commenced or, if
26-13 the mortgagor has made an assignment for the benefit
26-14 of creditors, the insurer may, for the purpose of
26-15 preserving or enhancing the earnings of the property:
26-16 (i) Purchase agricultural livestock or equipment and
26-17 utilize the same or cause the same to be utilized in
26-18 the operation of the property by the mortgagor, or a
26-19 receiver or trustee, or by the insurer-creditor; or
26-20 (ii) Lend up to the value of any agricultural
26-21 equipment or livestock which may be used in the
26-22 operation of the property, on the security of a
26-23 first lien on the equipment and livestock.
26-24 (B) Nothing in this Code section shall be deemed to
26-25 limit any right which the insurer may otherwise have
26-26 under or with respect to any loan, mortgage, or
26-27 investment;
26-28 (14) Subject to prior approval of the Commissioner, an
26-29 insurer may acquire and hold real property for
26-30 recreation, hospitalization, convalescence, and
26-31 retirement purposes of its employees. All investments
26-32 under this paragraph shall not exceed 5 percent of the
26-33 insurer's surplus; or, if a mutual or reciprocal
26-34 insurer, all of those investments shall not exceed 5
26-35 percent of the insurer's surplus in excess of the
26-36 surplus required to be maintained under this title for
26-37 its authority to transact insurance;
26-38 (15) Other investments the Commissioner authorizes by
26-39 regulation; and
26-40 (16) Investments not otherwise expressly permitted by
26-41 this Code section but not specifically prohibited by
-26-
27- 1 statute, to the extent of not more than 10 percent of
27- 2 the insurer's admitted assets.
27- 3 (b) An insurer may exceed the aggregate limitation
27- 4 contained in paragraph (3) of subsection (a) of this Code
27- 5 section by no more than 30 percent of its admitted assets
27- 6 if:
27- 7 (1) This increased amount is invested only in
27- 8 residential mortgage loans;
27- 9 (2) The insurer has no more than 10 percent of its
27-10 admitted assets invested in mortgage loans other than
27-11 residential mortgage loans;
27-12 (3) The loan-to-value ratio of each residential mortgage
27-13 loan does not exceed 60 percent at the time the mortgage
27-14 loan is qualified under this increased authority, and
27-15 the fair market value is supported by an appraisal no
27-16 more than two years old, prepared by an independent
27-17 appraiser; and
27-18 (4) A single mortgage loan qualified under this
27-19 increased authority shall not exceed 0.5 percent of its
27-20 admitted assets.
27-21 (c) With the permission of the Commissioner, additional
27-22 amounts of real estate may be acquired under paragraph (5)
27-23 of subsection (a) of this Code section.
27-24 33-11-56.
27-25 (a) An insurer may, directly or indirectly through an
27-26 investment subsidiary, engage in derivative transactions
27-27 under this article under the following conditions:
27-28 (1) An insurer may use derivative instruments under this
27-29 Code section to engage in hedging transactions which
27-30 manage risk and certain income generation transactions,
27-31 as these terms may be further defined in regulation
27-32 promulgated by the Commissioner;
27-33 (2) An insurer shall be able to demonstrate to the
27-34 Commissioner the intended hedging characteristics and
27-35 the ongoing effectiveness of the derivative transaction
27-36 or combination of the transactions through cash flow
27-37 testing or other appropriate analyses.
27-38 (3) An insurer may enter into hedging transactions under
27-39 this Code section if, as a result of and after giving
27-40 effect to the transaction:
-27-
28- 1 (A) The aggregate statement value of options, caps,
28- 2 floors and warrants not attached to another financial
28- 3 instrument purchased and used in hedging transactions
28- 4 does not exceed 7.5 percent of its admitted assets;
28- 5 (B) The aggregate statement value of options, caps,
28- 6 and floors written in hedging transactions does not
28- 7 exceed 3 percent of its admitted assets; and
28- 8 (C) The aggregate potential exposure of collars,
28- 9 swaps, forwards, and futures used in hedging
28-10 transactions does not exceed 6.5 percent of its
28-11 admitted assets;
28-12 (4) An insurer may only enter into the types of income
28-13 generation transactions described in subparagraphs (A)
28-14 through (D) of this paragraph if, as a result of and
28-15 after giving effect to the transactions, the aggregate
28-16 statement value of the fixed income assets that are
28-17 subject to call or that generate the cash flows for
28-18 payments under the caps or floors, plus the face value
28-19 of fixed income securities underlying a derivative
28-20 instrument subject to call, plus the amount of the
28-21 purchase obligations under the puts, does not exceed 10
28-22 percent of its admitted assets:
28-23 (A) Sales of covered call options on noncallable fixed
28-24 income securities, callable fixed income securities if
28-25 the option expires by its terms prior to the end of
28-26 the noncallable period, or derivative instruments
28-27 based on fixed income securities;
28-28 (B) Sales of covered call options on equity
28-29 securities, if the insurer holds in its portfolio, or
28-30 can immediately acquire through the exercise of
28-31 options, warrants, or conversion rights already owned,
28-32 the equity securities subject to call during the
28-33 complete term of the call option sold;
28-34 (C) Sales of covered puts on investments that the
28-35 insurer is permitted to acquire under this article, if
28-36 the insurer has escrowed, or entered into a custodian
28-37 agreement segregating, cash or cash equivalents with a
28-38 market value equal to the amount of its purchase
28-39 obligations under the put during the complete term of
28-40 the put option sold; or
28-41 (D) Sales of covered caps or floors, if the insurer
28-42 holds in its portfolio the investments generating the
-28-
29- 1 cash flow to make the required payments under the caps
29- 2 or floors during the complete term that the cap or
29- 3 floor is outstanding; and
29- 4 (5) An insurer shall include all counterparty exposure
29- 5 amounts in determining compliance with the limitations
29- 6 of this article.
29- 7 (b) The Commissioner may approve additional transactions
29- 8 involving the use of derivative instruments in excess of
29- 9 the limits of this Code section or for other risk
29-10 management purposes under regulations promulgated by the
29-11 Commissioner.
29-12 33-11-57.
29-13 (a) Investments not conforming to this article shall not
29-14 be admitted assets.
29-15 (b) Subject to subsection (c) of this Code section, an
29-16 insurer shall not acquire or hold an investment as an
29-17 admitted asset unless at the time of acquisition it is:
29-18 (1) Eligible for the payment or accrual of interest or
29-19 discount (whether in cash or other forms of income or
29-20 securities), eligible to receive dividends or other
29-21 distributions, or is otherwise income producing;
29-22 (2) Acquired under Code Section 33-11-55, Code Section
29-23 33-11-56, or Code Section 33-11-63, as a result of
29-24 securities lending, repurchase, reverse repurchase,
29-25 dollar roll transactions or, if a life insurer, the
29-26 administration of policy loans; or
29-27 (3) Under the authority of provisions of this chapter
29-28 other than this article.
29-29 (c) An insurer may acquire or hold as admitted assets
29-30 investments that do not otherwise qualify as provided in
29-31 this article if the insurer has not acquired them for the
29-32 purpose of circumventing any limitations contained in this
29-33 article, the insurer complies with the provisions of Code
29-34 Section 33-11-60 and values such investments in accordance
29-35 with Code Section 33-10-14, and if the insurer acquires
29-36 the investments in the following circumstances:
29-37 (1) As payment on account of existing indebtedness or in
29-38 connection with the refinancing, restructuring, or
29-39 workout of existing indebtedness, if taken to protect
29-40 the insurer's interest in that investment;
-29-
30- 1 (2) As realization on collateral for an obligation;
30- 2 (3) In connection with an otherwise qualified investment
30- 3 or investment practice, as interest on or a dividend or
30- 4 other distribution related to the investment or
30- 5 investment practice or in connection with the
30- 6 refinancing of the investment, in each case for no
30- 7 additional or only nominal consideration;
30- 8 (4) Under a lawful and bona fide agreement of
30- 9 recapitalization or voluntary or involuntary
30-10 reorganization in connection with an investment held by
30-11 the insurer; or
30-12 (5) Under a bulk reinsurance, merger, or consolidation
30-13 transaction approved by the Commissioner if the assets
30-14 constitute admissible investments for the ceding,
30-15 merged, or consolidated companies.
30-16 (d) An investment or portion of an investment acquired by
30-17 an insurer under subsection (c) of this Code section shall
30-18 become a nonadmitted asset three years (or five years in
30-19 the case of mortgage loans and real estate) from the date
30-20 of its acquisition, unless within that period the
30-21 investment has become a qualified investment under a
30-22 provision of this article other than subsection (c) of
30-23 this Code section, but an investment acquired under an
30-24 agreement of bulk reinsurance, merger, or consolidation
30-25 may be qualified for a longer period if so provided in the
30-26 plan for reinsurance, merger, or consolidation as approved
30-27 by the Commissioner. Upon application by the insurer and a
30-28 showing that the nonadmission of an asset held under
30-29 subsection (c) of this Code section would materially
30-30 injure the interests of the insurer, the Commissioner may
30-31 extend the period for admissibility for an additional
30-32 reasonable period of time.
30-33 (e) Except as provided in subsections (f) and (h) of this
30-34 Code section, an investment acquired or committed to be
30-35 acquired prior to the effective date of this article shall
30-36 qualify under this article if, on the date the insurer
30-37 committed to acquire the investment or on the date of its
30-38 acquisition, it would have qualified under provisions of
30-39 this chapter then in effect. For the purposes of
30-40 determining limitations contained in this article, an
30-41 insurer shall give appropriate recognition to any
30-42 commitments to acquire investments.
-30-
31- 1 (f)(1) Each specific transaction constituting an
31- 2 investment practice of the type described in this
31- 3 article that was lawfully entered into by an insurer and
31- 4 was in effect on the effective date of this article
31- 5 shall continue to be permitted under this article until
31- 6 its expiration or termination under its terms.
31- 7 (2) A mortgage made pursuant to Code Section 33-11-55 or
31- 8 held as an admitted asset pursuant to paragraph (1) of
31- 9 this subsection shall remain qualified as an admitted
31-10 asset regardless of any refinancing, modification, or
31-11 extension of such mortgage loan.
31-12 (g) Unless otherwise specified, an investment limitation
31-13 computed on the basis of an insurer's admitted assets or
31-14 capital and surplus shall relate to the amount required to
31-15 be shown on the statutory balance sheet of the insurer
31-16 most recently required to be filed with the Commissioner.
31-17 (h) An investment qualified, in whole or in part, for
31-18 acquisition or holding as an admitted asset may be
31-19 qualified or requalified at the time of acquisition or a
31-20 later date, in whole or in part, under any other provision
31-21 of this article, if the relevant conditions contained in
31-22 such other provision are satisfied at the time of
31-23 qualification or requalification.
31-24 (i) An insurer shall maintain documentation demonstrating
31-25 that investments were acquired in accordance with this
31-26 article and specifying the Code section under which they
31-27 were acquired.
31-28 (j) An insurer shall not enter into an agreement to
31-29 purchase securities in advance of their issuance for
31-30 resale to the public as part of a distribution of the
31-31 securities by the issuer or otherwise guarantee the
31-32 distribution, except that an insurer may acquire privately
31-33 placed securities with registration rights.
31-34 (k) Notwithstanding the provisions of this article, the
31-35 Commissioner, for good cause, may order under an insurer
31-36 to nonadmit, limit, dispose of, withdraw from, or
31-37 discontinue an investment or investment practice. The
31-38 authority of the Commissioner under this subsection is in
31-39 addition to any other authority of the Commissioner.
31-40 (l) Insurance futures and insurance futures options are
31-41 not considered investments or investment practices for
31-42 purposes of this article.
-31-
32- 1 33-11-58.
32- 2 (a)(1) For purposes of determining compliance with Code
32- 3 Section 33-11-61, securities of a single issuer and its
32- 4 affiliates, other than:
32- 5 (A) The government of the United States; or
32- 6 (B) Government sponsored enterprises,
32- 7 shall not exceed 10 percent of admitted assets.
32- 8 (2) This limitation shall not apply to the aggregate
32- 9 amounts insured by a single financial guaranty insurer
32-10 with the highest generic rating issued by a Nationally
32-11 Recognized Statistical Rating Organization.
32-12 (b) For the purpose of determining compliance with the
32-13 limitations of this Code section, the admitted portion of
32-14 assets of subsidiaries authorized under Code Section
32-15 33-13-2 shall be deemed to be owned directly by the
32-16 insurer and any other investors in proportion to the
32-17 market value or, if there is no market, the reasonable
32-18 value, of their interest in the subsidiaries.
32-19 (c) To the extent that investments exceed the limitations
32-20 specified in subsections (a) and (b) of this Code section,
32-21 the excess may be assigned to the investment class
32-22 authorized in paragraph (15) of Code Section 33-11-55,
32-23 until that limit is exhausted.
32-24 (d) Unless otherwise specified, an investment limitation
32-25 computed on the basis of an insurer's admitted assets or
32-26 capital and surplus shall relate to the amount required to
32-27 be shown on the statutory balance sheet of the insurer
32-28 most recently required to be filed with the Commissioner.
32-29 (e) Notwithstanding any provision of the federal Secondary
32-30 Mortgage Enhancement Act, 15 U.S.C. Section 77r-1, to the
32-31 contrary, any insurer subject to the provisions of this
32-32 article shall comply with all restrictions and limitations
32-33 concerning investments provided in this article.
32-34 (f) Notwithstanding any other provision of this article,
32-35 an insurer authorized to transact insurance in a foreign
32-36 country may make investments, in a manner consistent with
32-37 the laws of such country, in securities or other
32-38 investments which are similar in characteristics and
32-39 quality to like investments required pursuant to this
32-40 chapter for investments in the United States of America.
32-41 The aggregate amount of the investments must not exceed
-32-
33- 1 the amount which is customary and necessary for the
33- 2 servicing of the insurance which the insurer has in force
33- 3 in the foreign country.
33- 4 (g) Subject to the restrictions and limitations provided
33- 5 in this article, an insurer may invest in bonds, notes,
33- 6 warrants, and other securities not in default which are
33- 7 the direct obligations of the government of any foreign
33- 8 country for which the full faith and credit of such
33- 9 government has been pledged for the payment of principal
33-10 and interest, provided such securities are listed as high
33-11 by a securities rating organization accepted by the
33-12 National Association of Insurance Commissioners in
33-13 accordance with valuation standards adopted by the
33-14 National Association of Insurance Commissioners and
33-15 adopted by regulation promulgated by the Commissioner or
33-16 as otherwise prescribed by regulation promulgated by the
33-17 Commissioner.
33-18 33-11-59.
33-19 An insurer doing business that requires it to make payment
33-20 in different currencies shall have investments in
33-21 securities in each of these currencies in an amount that
33-22 independently of all other investments meets the
33-23 requirements of this article as applied separately to the
33-24 insurer's obligations in each currency. The Commissioner
33-25 may by order exempt an insurer, or by regulation a class
33-26 of insurers, from this requirement if the obligations in
33-27 other currencies are small enough that no significant
33-28 problem for financial solidity would be created by
33-29 substantial fluctuations in relative currency values.
33-30 33-11-60.
33-31 In addition to investments excluded or prohibited pursuant
33-32 to other provisions of this article, an insurer shall not,
33-33 directly or indirectly:
33-34 (1) Engage on its own behalf or through one or more
33-35 affiliates in a transaction or series of transactions
33-36 designed to evade the prohibitions of this article; or
33-37 (2) Invest in or lend its funds upon the security of
33-38 shares of its own stock, except that an insurer may
33-39 acquire shares of its own stock for the following
33-40 purposes, but the shares shall not be admitted assets of
33-41 the insurer:
-33-
34- 1 (A) Conversion of a stock insurer into a mutual or
34- 2 reciprocal insurer or a mutual or reciprocal insurer
34- 3 into a stock insurer;
34- 4 (B) Issuance to the insurer's officers, employees or
34- 5 agents in connection with a plan approved by the
34- 6 Commissioner for converting a publicly held insurer
34- 7 into a privately held insurer or in connection with
34- 8 other stock option and employee benefit plans; or
34- 9 (C) In accordance with any other plan approved by the
34-10 Commissioner.
34-11 33-11-61.
34-12 (a) Invested assets may be counted toward satisfaction of
34-13 the minimum asset requirement only so far as they are
34-14 invested in compliance with this article and applicable
34-15 regulations promulgated and orders issued by the
34-16 Commissioner pursuant to this article. Assets other than
34-17 invested assets may be counted toward satisfaction of the
34-18 minimum asset requirement at admitted annual statement
34-19 value.
34-20 (b) An investment held as an admitted asset by an insurer
34-21 on the effective date of this article which qualified
34-22 under Article 1 of this chapter shall remain qualified as
34-23 an admitted asset under this article.
34-24 (c) If an insurer does not own, or is unable to apply
34-25 toward compliance with this article, an amount of assets
34-26 equal to its minimum asset requirement, the Commissioner
34-27 may deem it to be financially hazardous under Chapter 37
34-28 of this title.
34-29 33-11-62.
34-30 (a) The Commissioner may retain at the insurer's expense
34-31 attorneys, actuaries, accountants, and other experts not
34-32 otherwise a part of the Commissioner's staff as may be
34-33 reasonably necessary to assist in reviewing the insurer's
34-34 investments. Persons so retained shall be under the
34-35 direction and control of the Commissioner and shall act in
34-36 a purely advisory capacity.
34-37 (b) The investment policy or information related to the
34-38 investment policy provided to the Commissioner for review
34-39 under this article shall be considered confidential and
34-40 shall not be a public record for purposes of Article 4 of
34-41 Chapter 18 of Title 50 or subject to subpoena, and shall
-34-
35- 1 be subject to disclosure only as required for purposes of
35- 2 and in accordance with this title.
35- 3 33-11-63.
35- 4 (a) If the Commissioner determines that an insurer's
35- 5 investment practices do not meet the provisions of this
35- 6 article, the Commissioner may, after notification to the
35- 7 insurer of the Commissioner's findings, order the insurer
35- 8 to make changes necessary to comply with the provisions of
35- 9 this article.
35-10 (b) If the Commissioner determines that by reason of the
35-11 financial condition, current investment practice, or
35-12 current investment plan of an insurer, the interests of
35-13 insureds, creditors, or the general public are or may be
35-14 endangered, the Commissioner may impose reasonable
35-15 additional restrictions upon the admissibility or
35-16 valuation of investments or may impose restrictions on the
35-17 investment practices of an insurer, including prohibition
35-18 or divestment.
35-19 (c) If the Commissioner is satisfied by evidence of an
35-20 insurer's financial strength and the competence of
35-21 management and its investment advisors, the Commissioner
35-22 may count toward satisfaction of the minimum asset
35-23 requirement any other investment not specifically
35-24 prohibited by this article to the extent that the
35-25 Commissioner is satisfied that the interests of insureds,
35-26 creditors, and the general public of this state are
35-27 protected.
35-28 33-11-64.
35-29 (a) An insurer shall not acquire an investment under this
35-30 article if, as a result of and after giving effect to the
35-31 investment, the aggregate amount of all investments then
35-32 held by the insurer under this article would exceed:
35-33 (1) For medium and lower grade investments, 20 percent
35-34 of admitted assets;
35-35 (2) For lower grade investments, 10 percent of admitted
35-36 assets;
35-37 (3) For investments rated 5 or 6 by the Securities
35-38 Valuation Office or any successor office pursuant to the
35-39 valuation procedures of Code Section 33-10-14, 5 percent
35-40 of admitted assets; or
-35-
36- 1 (4) For investments rated 6 by the Securities Valuation
36- 2 Office or any successor office pursuant to the valuation
36- 3 procedures of Code Section 33-10-14, 1 percent of
36- 4 admitted assets.
36- 5 (b) The aggregate amount of special rated credit
36- 6 instruments held by an insurer pursuant to the valuation
36- 7 procedures of Code Section 33-10-14 shall not exceed 10
36- 8 percent of admitted assets.
36- 9 33-11-65.
36-10 (a) Any domestic life insurance company may establish one
36-11 or more separate accounts and may allocate to such
36-12 separate account or accounts, in accordance with the terms
36-13 of a written agreement, any amounts paid to the company in
36-14 connection with a pension, retirement, or profit-sharing
36-15 plan, which is established by or in behalf of any group
36-16 listed in Code Section 33-27-1, which are to be applied to
36-17 provide benefits payable in fixed or variable dollar
36-18 amounts.
36-19 (b) The amounts allocated to each account and
36-20 accumulations thereon may be invested and reinvested in
36-21 any class of investments which may be authorized in the
36-22 written agreement without regard to any requirements or
36-23 limitations prescribed by the laws of this state governing
36-24 the investments of domestic life insurance companies,
36-25 provided that, to the extent that the company's reserve
36-26 liability with regard to benefits guaranteed as to amount
36-27 and duration and funds guaranteed as to principal amount
36-28 or stated rate of interest is maintained in any separate
36-29 account, a portion of the assets of such separate account
36-30 at least equal to such reserve liability shall be invested
36-31 in accordance with the laws of this state governing the
36-32 investment of reserves of domestic life insurance
36-33 companies, as set forth in this article. The investments
36-34 in such separate account or accounts shall not be taken
36-35 into account in applying the investment limitations
36-36 applicable to other investments of the company.
36-37 (c) The income, if any, and gains and losses realized or
36-38 unrealized on each account shall be credited to or charged
36-39 against the amounts allocated to the account in accordance
36-40 with the written agreement, without regard to other
36-41 income, gains, or losses of the company.
36-42 (d) Assets allocated to a separate account shall be valued
36-43 at their market value on the date of valuation or, if
-36-
37- 1 there is no readily available market, in accordance with
37- 2 the terms of the applicable written agreement, provided
37- 3 that the portion of the assets of such separate account at
37- 4 least equal to the company's reserve liability with regard
37- 5 to the guaranteed benefits and funds referred to in
37- 6 subsection (b) of this Code section, if any, shall be
37- 7 valued in accordance with the rules otherwise applicable
37- 8 to the company's assets.
37- 9 (e) Amounts allocated to a separate account in the
37-10 exercise of the power granted by this Code section shall
37-11 be owned by the company, and the company shall not be, nor
37-12 hold itself out to be, a trustee with respect to those
37-13 amounts.
37-14 (f) If the agreement provides for payment of benefits in
37-15 variable amounts, any contract entered into pursuant to
37-16 this chapter and delivered in this state providing for
37-17 such variable benefits shall be a group annuity contract.
37-18 Such contract shall:
37-19 (1) Cover at least ten persons at the time it is entered
37-20 into;
37-21 (2) Be for the purpose of funding a pension, retirement,
37-22 or profit-sharing plan or agreement which meets the
37-23 requirements for qualification under Section 401, 403,
37-24 or 414 of the United States Internal Revenue Code, as
37-25 now or hereafter amended, or any corresponding
37-26 provisions of prior or subsequent United States revenue
37-27 laws; and
37-28 (3) Prohibit the allocation to the separate account of
37-29 any payment or contribution made by any employee.
37-30 The contract shall contain a statement of the essential
37-31 features of the procedure to be followed by the company in
37-32 determining the dollar amounts of such variable benefits.
37-33 The contract and any group certificate issued under the
37-34 contract shall state that such dollar amounts may decrease
37-35 or increase and shall contain on its first page, in a
37-36 prominent position, a statement that the benefits under
37-37 the contract are on a variable basis.
37-38 (g) No domestic life insurance company and no foreign or
37-39 Canadian life insurance company admitted to transact
37-40 business in this state shall be authorized to deliver
37-41 within this state any contract entered into pursuant to
37-42 this article and providing benefits in variable amounts
-37-
38- 1 until said company has satisfied the Commissioner that its
38- 2 condition or methods of operation in connection with the
38- 3 issuance of such contracts will not be such as would
38- 4 render its operation hazardous to the public or its
38- 5 policyholders in this state. In determining the
38- 6 qualification of a company requesting authority to deliver
38- 7 the contracts in this state, the Commissioner shall
38- 8 consider, among other things:
38- 9 (1) The history and financial condition of the company;
38-10 (2) The character, responsibility, and general fitness
38-11 of the officers and directors of the company; and
38-12 (3) In the case of a foreign or Canadian company,
38-13 whether the regulations provided by the state of its
38-14 domicile or that province in which its head office is
38-15 located provides a degree of protection to policyholders
38-16 and the public which is substantially equal to that
38-17 provided by this Code section and the rules and
38-18 regulations issued thereunder.
38-19 (h) Notwithstanding any other provisions of law, the
38-20 Commissioner shall have sole authority to issue such
38-21 reasonable rules and regulations as may be necessary to
38-22 carry out the purposes of this Code section.
38-23 (i) Nothing in this Code section shall be deemed to repeal
38-24 any provision of Code Section 33-25-9 and no contract or
38-25 agreement made pursuant to this Code section, or policy or
38-26 certificate issued under this Code section, shall be
38-27 construed to violate Code Section 33-25-9.
38-28 33-11-66.
38-29 (a) This Code section is cumulative of and in addition to
38-30 the authority granted by any other law of this state
38-31 relating to separate accounts for insurance companies or
38-32 to annuity contracts on a variable basis and shall not be
38-33 deemed to repeal or affect the provisions of Code Section
38-34 33-11-65 dealing with the group variable annuity contracts
38-35 referred to in subsection (f) of Code Section 33-11-65.
38-36 (b) When used in this Code section, the term 'variable
38-37 annuity contract' shall mean any individual or group
38-38 contract issued by an insurance company or annuity company
38-39 providing for annuity benefits and incidental contractual
38-40 payments or values which vary in whole or in part so as to
38-41 reflect investment results of any segregated portfolio of
38-42 investments or of a designated separate account or
-38-
39- 1 accounts in which amounts received or retained in
39- 2 connection with any of the contracts have been placed.
39- 3 (c) Any domestic life insurance company may establish one
39- 4 or more separate accounts and may allocate to those
39- 5 accounts amounts to provide for annuities (and benefits
39- 6 incidental thereto) payable in fixed or variable amounts
39- 7 or both.
39- 8 (d) Except as provided in subsection (f) of this Code
39- 9 section, amounts allocated to any separate account and
39-10 accumulations thereon may be invested and reinvested
39-11 without regard to any requirements or limitations
39-12 prescribed by the laws of this state governing the
39-13 investments of domestic life insurance companies, provided
39-14 that, to the extent that the company's reserve liability
39-15 with regard to benefits guaranteed as to amount and
39-16 duration and funds guaranteed as to principal amount or
39-17 stated rate of interest is maintained in any separate
39-18 account, a portion of the assets of such separate account
39-19 at least equal to the reserve liability shall be invested
39-20 in accordance with the laws of this state governing the
39-21 investment of reserves of life insurance companies. The
39-22 investments in the separate account or accounts shall not
39-23 be taken into account in applying the investment
39-24 limitations applicable to other investments of the
39-25 company.
39-26 (e) To the extent any such domestic company deems it
39-27 necessary to comply with any applicable federal or state
39-28 laws, the company, with respect to any separate account,
39-29 including without limitation any separate account which is
39-30 a management investment company or a unit investment
39-31 trust, may provide for persons having an interest in such
39-32 separate account appropriate voting and other rights and
39-33 special procedures for the conduct of the business of such
39-34 account, including without limitation, special rights and
39-35 procedures relating to investment policy, investment
39-36 advisory services, selection of independent public
39-37 accountants, and the selection of a committee, the members
39-38 of which need not be otherwise affiliated with the
39-39 company, to manage the business of the account. This
39-40 subsection shall not affect existing laws pertaining to
39-41 the voting rights of the life insurance company's
39-42 stockholders or policyholders except as provided in this
39-43 Code section.
-39-
40- 1 (f) No domestic company shall, for any separate account,
40- 2 purchase the voting securities of a single issuer if such
40- 3 purchase would result in such company, and all domestic
40- 4 insurance companies, directly or indirectly controlling,
40- 5 controlled by, or under common control with the company
40- 6 and holding in the company's or companies' separate
40- 7 account or accounts an amount in excess of 10 percent of
40- 8 the total issued and outstanding voting securities of the
40- 9 issuer, provided that this limitation shall not apply with
40-10 respect to securities held in separate accounts, the
40-11 voting rights in which are exercisable in accordance with
40-12 instructions from persons having interests in such
40-13 accounts. This limitation shall not apply to the
40-14 investment for a separate account in the securities of an
40-15 investment company registered under the Investment Company
40-16 Act of 1940.
40-17 (g) No sale, exchange, or other transfer of assets may be
40-18 made by any domestic company between any of its separate
40-19 accounts or between any other investment account and one
40-20 or more of its separate accounts unless, in case of a
40-21 transfer into a separate account, the transfer is made
40-22 solely to establish the account or to support the
40-23 operation of the contracts with respect to the separate
40-24 account to which the transfer is made and unless the
40-25 transfer, whether into or from a separate account, is made
40-26 by transfer of cash or by a transfer of securities having
40-27 a readily determinable market value, provided that
40-28 transfer of securities is approved by the Commissioner.
40-29 The Commissioner may approve other transfers among such
40-30 accounts if, in his or her opinion, the transfers would
40-31 not be inequitable.
40-32 (h) The income, if any, and gains and losses, realized or
40-33 unrealized, from assets allocated to each account shall be
40-34 credited to or charged against the account without regard
40-35 to income, gains, or losses of the company.
40-36 (i) Unless otherwise approved by the Commissioner, assets
40-37 allocated to a separate account shall be valued at their
40-38 market value on the date of valuation or, if there is no
40-39 readily available market, as provided under the terms of
40-40 the contract or the rules or other written agreement
40-41 applicable to such separate account, provided that the
40-42 portion of the assets of the separate account equal to the
40-43 company's reserve liability with regard to the guaranteed
40-44 benefits and funds referred to in subsection (d) of this
-40-
41- 1 Code section, if any, shall be valued in accordance with
41- 2 the rules otherwise applicable to the company's assets.
41- 3 The reserve liability for variable annuity contracts shall
41- 4 be determined in accordance with actuarial procedures that
41- 5 recognize the variable nature of the benefits provided and
41- 6 any mortality guarantees.
41- 7 (j) The amounts held in any separate account shall not be
41- 8 chargeable with liabilities arising out of any other
41- 9 business the company may conduct but shall be held and
41-10 applied exclusively for the benefit of the owners or
41-11 beneficiaries of the variable annuity contracts applicable
41-12 thereto.
41-13 (k) Each domestic life insurance company shall have the
41-14 power within the limits of its corporate charter to do all
41-15 things necessary under any applicable state or federal law
41-16 in order that variable annuity contracts may be lawfully
41-17 sold or offered for sale including, without limitation,
41-18 the power to provide for management of a separate account
41-19 by persons who may otherwise be unaffiliated with the life
41-20 insurance company and the power to grant in connection
41-21 with such contracts such voting rights as are set forth in
41-22 subsection (e) of this Code section. Each domestic life
41-23 insurance company may allocate from its general accounts
41-24 to each separate account established under this Code
41-25 section an initial cash amount necessary to meet minimum
41-26 capitalization requirements for such account as prescribed
41-27 by the Securities and Exchange Commission, provided that
41-28 the total of all such allocations shall not exceed 10
41-29 percent of the company's assets or $1 million, whichever
41-30 is less. Any allocation may be withdrawn when sufficient
41-31 amounts have been received by the company in connection
41-32 with variable annuity contracts and allocated to a
41-33 separate account to meet the minimum capitalization
41-34 requirement.
41-35 (l) Amounts allocated to a separate account in the
41-36 exercise of the power granted by this Code section shall
41-37 be owned by the company, and the company shall not be, or
41-38 hold itself out to be, a trustee with respect to such
41-39 amounts.
41-40 (m) Any variable annuity contract providing benefits
41-41 payable in variable amounts issued under this Code section
41-42 shall contain a statement of the essential features of the
41-43 procedure to be followed by the company in determining the
41-44 dollar amount of such variable benefits. Any contract,
-41-
42- 1 including a group contract and certificate in evidence or
42- 2 variable benefits issued under such contract, shall state
42- 3 that such dollar amount will vary to reflect investment
42- 4 experience and shall contain on its first page a statement
42- 5 to the effect that benefits under the contract are on a
42- 6 variable basis.
42- 7 (n) No company shall deliver or issue for delivery
42- 8 variable annuity contracts within this state unless it is
42- 9 licensed or organized to do a life insurance or annuity
42-10 business in this state or is organized as a nonprofit
42-11 educational corporation in its state of domicile and
42-12 issues variable annuity contracts solely for the purpose
42-13 of aiding and strengthening nonproprietary and
42-14 nonprofit-making colleges, universities, and other
42-15 institutions engaged primarily in education or research
42-16 and the Commissioner is satisfied that its condition or
42-17 method of operation in connection with the issuance of
42-18 such contracts will not render its operation hazardous to
42-19 the public or its policyholders in this state. In this
42-20 connection, the Commissioner shall consider among other
42-21 things:
42-22 (1) The history and financial condition of the company;
42-23 (2) The character, responsibility, and fitness of the
42-24 officers and directors of the company; and
42-25 (3) The law and regulation under which the company is
42-26 authorized in the state of domicile to issue variable
42-27 contracts.
42-28 (o) The Commissioner shall have sole and exclusive
42-29 authority to regulate the issuance or sale of the
42-30 contracts and to issue such reasonable rules and
42-31 regulations as may be necessary to carry out the purposes
42-32 and provisions of this Code section; and the contracts,
42-33 the companies which issue them, and the agent or other
42-34 persons who sell them shall not be subject to Chapter 5 of
42-35 Title 10, the 'Georgia Securities Act of 1973,' in the
42-36 sale of the contracts.
42-37 (p) Notwithstanding any other laws of this state, no
42-38 person shall, within this state, sell or offer for sale
42-39 variable annuity contracts as defined in this Code section
42-40 unless the person shall have both a valid and current life
42-41 insurance license and variable annuity license issued by
42-42 the Commissioner. No license shall be issued unless and
42-43 until the Commissioner is satisfied, after examination,
-42-
43- 1 that the person is by training, knowledge, ability, and
43- 2 character qualified to act as such a variable annuity
43- 3 agent. The Commissioner may reject any application or
43- 4 suspend or revoke or refuse to renew any variable annuity
43- 5 agent's license upon any ground that would bar the
43- 6 applicant or the agent from being licensed to sell life
43- 7 insurance contracts in this state or for the violation of
43- 8 any federal or state securities laws or regulations. The
43- 9 rules governing any proceedings relating to the suspension
43-10 or revocation of a life insurance agent's license shall
43-11 also govern any proceedings for the suspension or
43-12 revocation of a variable annuity agent's license. Renewal
43-13 of a variable annuity agent's license shall follow the
43-14 same procedure established for renewal of an agent's
43-15 license to sell life insurance contracts in this state.
43-16 (q) No contract or agreement made pursuant to this Code
43-17 section or policy or certificate issued under this Code
43-18 section shall be construed to violate Code Section
43-19 33-25-9, and the sale or offer of any policy or
43-20 certificate shall not be deemed an unfair method of
43-21 competition or an unfair or deceptive act or practice in
43-22 the business of insurance in violation of paragraph (7)
43-23 and subparagraphs (B) and (C) of paragraph (8) of Code
43-24 Section 33-6-4.
43-25 (r) Except for paragraphs (1), (5), and (6) of subsection
43-26 (b) of Code Section 33-28-2 and except as otherwise
43-27 provided in this Code section, all pertinent provisions of
43-28 this title shall apply to separate accounts and variable
43-29 annuity contracts relating thereto. The Commissioner, by
43-30 regulation, may require that any individual variable
43-31 annuity contract delivered or issued for delivery in this
43-32 state contain provisions as to grace period and
43-33 reinstatement appropriate for a variable annuity contract.
43-34 33-11-67.
43-35 (a) As used in this Code section, 'variable life insurance
43-36 policy' means any individual or group policy issued by an
43-37 insurance company providing for life insurance and
43-38 benefits incidental thereto, under which payments or
43-39 values may vary in whole or in part so as to reflect
43-40 investment results of any segregated portfolio of
43-41 investments or of a designated separate account or
43-42 accounts in which amounts received or retained in
43-43 connection with any of such policies have been placed.
-43-
44- 1 (b) A domestic life insurance company may establish one or
44- 2 more separate accounts and may allocate to the accounts
44- 3 amounts including without limitation proceeds applied
44- 4 under optional modes of settlement or under dividend
44- 5 options to provide for life insurance and benefits
44- 6 incidental thereto, payable in variable amounts, subject
44- 7 to the following:
44- 8 (1) The income, gains, and losses, realized or
44- 9 unrealized, from assets allocated to a separate account
44-10 shall be credited to or charged against the account,
44-11 without regard to other income, gains, or losses of the
44-12 company;
44-13 (2) Except as provided in paragraph (4) of this
44-14 subsection, amounts allocated to any separate account
44-15 and accumulations thereon may be invested and reinvested
44-16 without regard to any requirements or limitations
44-17 prescribed by the laws of this state governing the
44-18 investments of domestic life insurance companies,
44-19 provided that, to the extent that the company's reserve
44-20 liability with regard to benefits guaranteed as to
44-21 amount and duration and funds guaranteed as to principal
44-22 amount or stated rate of interest is maintained in any
44-23 separate account, a portion of the assets of the
44-24 separate account at least equal to the reserve liability
44-25 shall be invested in accordance with the laws of this
44-26 state governing the investment of reserves of life
44-27 insurance companies. The investments in the separate
44-28 account or accounts shall not be taken into account in
44-29 applying the investment limitations applicable to other
44-30 investments of the company;
44-31 (3) To the extent any domestic company deems it
44-32 necessary to comply with any applicable federal or state
44-33 laws, the company, with respect to any separate account,
44-34 including without limitation any separate account which
44-35 is a management investment company or a unit investment
44-36 
