17B:20-4 - Stock of subsidiary or alien corporations
17B:20-4. Stock of subsidiary or alien corporations
17B:20-4. In addition to the authority expressly contained in this chapter and notwithstanding any limitation contained in this title, any domestic insurer may invest in the voting stock of one or more subsidiaries, as provided in this section.
a. As used in this section the following terms shall have the following meanings: (1) "voting stock" as used with reference to any corporation means any shares of capital stock of such corporation having general voting power under ordinary circumstances, when voting (together with one or more other classes, if any) as a class, to elect a majority of the board of directors of such corporation irrespective of whether or not at the time stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency, and shall also include voting trust certificates, certificates of deposit, interim receipts and other similar instruments representing such stock and (2) "subsidiary" means a corporation of which a majority of the voting stock is owned or controlled by a domestic insurer, or by one or more subsidiaries of such insurer or by such insurer and one or more subsidiaries of such insurer, except that "subsidiary" shall not include a corporation of which a majority of the voting stock is acquired by the insurer or its subsidiaries pursuant to any other section of this chapter.
b. The business of a subsidiary, whether or not it is organized under the laws of this State, shall be limited to that authorized for a corporation organized under any law of this State, except that "subsidiary" shall not include any bank organized pursuant to the laws of this State and shall not include any national bank maintaining its principal office in this State.
c. (Deleted by amendment, P.L.1989, c.267.)
d. The investments of any such subsidiary engaged exclusively in the ownership and management of assets authorized as investments for the insurer when added, on a basis proportional to the insurer's interest in such subsidiary, to the investments of such insurer (referred to herein as the "controlling insurer") shall not cause the investments of the controlling insurer to exceed any of the limitations applicable to domestic insurers contained in N.J.S.17B:20-1 or N.J.S.17B:20-2 of this chapter except as may be permitted by subsection h. of N.J.S.17B:20-1 or N.J.S.17B:20-3.
e. The investment in such subsidiary shall not tend substantially to lessen competition or tend to create a monopoly.
f. Such subsidiary shall not be used directly or indirectly to promote the private interests of any officer or director of such insurer, except that compensation may be paid by any subsidiary to officers and directors of such insurer for services rendered when such compensation is authorized by the board of directors of such subsidiary and approved by the board of directors of such insurer.
g. The aggregate amount invested by the controlling insurer in the voting stock of all subsidiaries pursuant to this section together with the aggregate amount of all other investments of the controlling insurer in such subsidiaries, valued at cost (less any amount invested by the controlling insurer and such subsidiaries in any subsidiary which is (1) engaged primarily in the life insurance business or (2) engaged exclusively in the ownership and management of assets authorized as investments for the controlling insurer) shall not exceed 8% of the total admitted assets of such insurer as of December 31 next preceding.
h. Within 30 days, or such longer period as may be permitted by the commissioner, after an investment in voting stock of any subsidiary has been made by the controlling insurer or any subsidiary thereof pursuant to this section, the controlling insurer shall file notice of such investment with the commissioner; provided, that after an investment in voting stock has been made pursuant to this section, no notice of further investments in the voting stock or other securities of the same subsidiary shall be required. The commissioner shall have the power to conduct periodic examinations and require reports in connection with the operation of subsidiaries and, if he shall determine either that the interests of policyholders or the public so require or that the investments of any subsidiary do not comply with the requirements of this section, to order that a domestic insurer or any subsidiary thereof dispose of its investment in any subsidiary or that any subsidiary dispose of any noncomplying investments, in each case within a reasonable period of time.
i. Each domestic insurer that has made investments in one or more subsidiaries shall annually, on or before May 1, file a subsidiary information report with the commissioner. The report shall set forth the name of each subsidiary in which such insurer has made an investment, the aggregate amount invested by the controlling insurer in each such subsidiary, valued at cost, and such other information with respect to each such subsidiary as the commissioner may prescribe.
j. The aggregate amount invested by the controlling insurer pursuant to this section in the voting stock of all subsidiaries engaged primarily in the life insurance business, together with the aggregate amount of all other investments of the controlling insurer in such subsidiaries, valued at cost, shall not exceed 5% of the total admitted assets of such insurer as of December 31 next preceding.
L.1971, c.144; amended 1973, c.372, s.3; 1976, c.74, s.3; 1980, c.88; 1987, c.60,s.2; 1989,c.267,s.3.