Section 401-B:2 Subsidiaries of Insurers.
I. Authorization. Any domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries. The kinds of businesses that may be organized or acquired are as follows:
(a) Any kind of insurance business authorized by the jurisdiction in which it is incorporated;
(b) Acting as an insurance broker or as an insurance agent for its parent or for any of its parent's insurer subsidiaries;
(c) Investing, reinvesting or trading in securities for its own account, that of its parent, any subsidiary of its parent, or any affiliate or subsidiary;
(d) Management of any investment company subject to or registered pursuant to the Investment Company Act of 1940, as amended, including related sales and services;
(e) Acting as a broker-dealer subject to or registered pursuant to the Securities Exchange Act of 1934, as amended;
(f) Acting as administrative agent for, rendering investment advice to, or managing the investments of, governments, government agencies, corporations or other organizations or groups;
(g) Rendering investment advice;
(h) Rendering other services related to the operations of any insurance business including, but not limited to, actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal and collection services;
(i) Ownership and management of assets which the parent corporation could itself own or manage;
(j) Acting as administrative agent for a governmental instrumentality which is performing an insurance function;
(k) Financing of insurance premiums, agents and other forms of consumer financing;
(l) Any other business activity determined by the commissioner to be reasonably ancillary to an insurance business; and
(m) Owning a corporation or corporations engaged or organized to engage exclusively in one or more of the businesses specified in this section.
II. Additional Investment Authority. In addition to investments in common stock, preferred stock, debt obligations and other securities permitted under this title, a domestic insurer may also:
(a) Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of 10 percent of such insurer's assets or 50 percent of such insurer's surplus as regards policyholders, provided that after such investments, the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, investments in domestic or foreign insurance subsidiaries shall be excluded, and there shall be included:
(1) Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of such subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and
(2) All amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation.
(b) Invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer, provided that each such subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subparagraph II(a). For the purpose of this paragraph, ""the total investment of the insurer'' shall include:
(1) Any direct investment by the insurer in an asset; and
(2) The insurer's proportionate share of any investment in an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiary's investment by the percentage of the ownership of such subsidiary.
(c) With the approval of the commissioner, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, provided that after such investment the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.
III. [Repealed.]
IV. [Repealed.]
V. Qualification of Investment; When Determined. Whether any investment pursuant to paragraph II meets the applicable requirements thereof is to be determined before such investment is made, by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the current value of all previous investments in equity securities, net of any return of capital invested, not including dividends.
VI. Cessation of Control. If an insurer ceases to control a subsidiary, it shall dispose of any investment in such subsidiary made pursuant to this section within 3 years from the time of the cessation of control or within such further time as the commissioner may prescribe, unless at any time after such investment shall have been made, such investment shall have met the requirements for investment under any other section of this chapter, and the insurer has notified the commissioner of the requirement fulfillment.
Source. 1971, 176:1. 1973, 235:1-6. 1987, 184:1. 1991, 99:1, 2. 1992, 288:7. 1993, 254:2, 3. 1996, 136:1-4, eff. Jan. 1, 1997.