38.2-1411.2 - Investment limits in medium grade and lower grade obligations.
§ 38.2-1411.2. Investment limits in medium grade and lower grade obligations.
A. No domestic insurer shall acquire, directly or indirectly, any mediumgrade or lower grade obligations of any business entity if, after givingeffect to any such acquisition, the aggregate amount of all medium grade andlower grade obligations then held by the domestic insurer would exceed twentypercent of its admitted assets, provided that:
1. No more than ten percent of its admitted assets consists of lower gradeobligations;
2. No more than three percent of its admitted assets consists of lower gradeobligations rated five or six by the Securities Valuation Office of theNational Association of Insurance Commissioners; and
3. No more than one percent of its admitted assets consists of lower gradeobligations rated six by the Securities Valuation Office of the NationalAssociation of Insurance Commissioners.
Attaining or exceeding the limit of any one category shall not preclude aninsurer from acquiring obligations in other categories subject to thespecific and multi-category limits.
B. No domestic insurer may invest more than an aggregate of one percent ofits admitted assets in medium grade obligations issued, guaranteed or insuredby any one business entity nor may it invest more than one-half of onepercent of its admitted assets in lower grade obligations issued, guaranteedor insured by any one business entity. In no event may a domestic insurerinvest more than one percent of its admitted assets in any medium or lowergrade obligations issued, guaranteed or insured by any one business entity.
C. Nothing contained in this section shall prohibit a domestic insurer fromacquiring any obligation which it has committed to acquire if the insurerwould have been permitted to acquire that obligation pursuant to theprovisions of this chapter on the date on which such insurer committed topurchase that obligation.
D. Notwithstanding the foregoing, a domestic insurer may acquire anyobligation of a business entity in which the insurer already has one or moreobligations, if the obligation is acquired in order to protect an investmentpreviously made in the obligations of the business entity; however, all suchacquired obligations shall not exceed one-half of one percent of theinsured's admitted assets.
E. Nothing contained in this section shall prohibit a domestic insurer fromacquiring any obligation as a result of a restructuring of any obligationalready held.
F. Nothing contained in this section shall require a domestic insurer to sellor otherwise dispose of any obligations legally acquired prior to July 1,1992.
G. The Board of Directors of any domestic insurer which acquires or invests,directly or indirectly, more than two percent of its admitted assets inmedium grade or lower grade obligations of any individual business entity,shall adopt a written plan for the making of such investments. The plan shallcontain, in addition to guidelines with respect to the quality of the issuesinvested in, diversification standards including, but not limited to,standards for issuer, industry, duration, liquidity and geographic location.
H. If the Commission finds that economic or other conditions render anyrating of any obligation by the Securities Valuation Office of the NationalAssociation of Insurance Commissioners obsolete or unreflective of adiminished creditworthiness of the business entity issuing such obligations,the Commission may assign the obligations to a lower grade based on thefindings of a national rating agency recognized by the Commission.
(1992, c. 588; 2000, c. 187.)