31A-17-401 - Valuation of assets.
31A-17-401. Valuation of assets.
(1) The commissioner shall value the assets of insurers in accordance with then currentinsurance business practices, but not in a manner inconsistent with the provisions of this title. Invaluing assets, the commissioner shall consider any method then current, formulated, or approvedby the National Association of Insurance Commissioners.
(2) Assets that are not qualified assets under Subsection 31A-17-201(2) are considered tohave no value in evaluating an insurer's compliance with Chapter 17, Part 6, Risk-Based Capital. Those assets may be used in evaluating the insurer's financial condition only to the extent theinsurer has excess surplus.
(3) (a) Insurance subsidiaries are valued on the books of a parent insurer as follows:
(i) Except as provided under Subsections (3)(a)(iii) and (iv), common stock of thesubsidiary is valued on the basis of the parent insurer's percentage of ownership of the commonstock multiplied by the total of the subsidiary's capital and surplus, less amounts needed toliquidate all claims to the capital and surplus which are senior to common stock. Subsection31A-18-106(1)(k) provides applicable limitations on investments in subsidiaries.
(ii) The value of securities other than common stock issued by a subsidiary is the lesser ofthe present value of the future income to be derived under the securities or the amount the parentinsurer would receive as a result of the securities if the subsidiary were liquidated and allcreditors of the subsidiary and holders of the subsidiary's securities with senior priority were paidin full. The present value of future income derived from securities is determined by rule adoptedby the commissioner. A parent insurer may attribute value to a security of its subsidiary only ifthe parent insurer is being paid dividends or interest on the security, and only if the parent insurercan reasonably anticipate that dividends or interest will continue to be paid on the security.
(iii) Except as provided under Subsection (3)(a)(iv), any portion of the subsidiary's valuepermitted under Subsection (3)(a) that is represented by assets other than assets listed underSection 31A-17-201, may only be classified as excess surplus of the parent insurer, and then onlyto the extent the parent insurer has established that it has excess surplus under Section31A-17-202.
(iv) For the purposes of Subsection (3)(a)(iii), assets of a newly acquired subsidiary thatare the equivalent of qualified assets in the subsidiary's domiciliary state, are, for the first fiveyears after the subsidiary's acquisition, considered to be qualified assets under Section31A-17-201. This assumption stands even if the assets are not otherwise qualified assets underSection 31A-17-201.
(b) A subsidiary formed or acquired to hold or manage investments that the parentinsurance company might hold or manage directly, shall be valued as if the assets of thesubsidiary were owned directly by the insurer in a percentage equal to the insurer's percentage ofownership of the subsidiary. The subsidiary investment limitation of Subsection31A-18-106(1)(k) does not apply to these subsidiaries.
(c) Subsidiaries other than those described in Subsections (3)(a) and (b) shall be valued inaccordance with Subsection (1). The subsidiary investment limitation under Subsection31A-18-106(1)(k) applies to these subsidiaries in the same manner as to subsidiaries described inSubsection (3)(a).
(d) In determining an insurer's financial condition, no value is given to:
(i) any interest held by the insurer in its own stock, including debts due the insurer thatare secured by the insurer's own stock; or
(ii) any proportionate interest in the insurer's own stock, including debts that are securedby the insurer's own stock, which is held by any corporation, partnership, business unit, firm, orperson owned in whole or in part by the insurer.
(4) The commissioner shall adopt rules to implement the provisions of this section.
Amended by Chapter 116, 2001 General Session