§ 3682. Subsidiaries of insurers
(a) Any domestic insurer, either by itself or in cooperation with one or more persons,
may organize or acquire one or more subsidiaries engaged in the following kinds of
business:
(1) any kind of insurance business authorized by the jurisdiction in which it is incorporated;
(2) acting as an insurance broker or as an insurance agent for its parent or for any of
its parent’s insurer subsidiaries;
(3) investing, reinvesting, or trading in securities for its own account, that of its
parent, any subsidiary of its parent, or any affiliate or subsidiary;
(4) management of any investment company subject to or registered pursuant to the Investment
Company Act of 1940, as amended, including related sales and service;
(5) acting as a broker-dealer subject to or registered pursuant to the Securities Exchange
Act of 1934, as amended;
(6) rendering investment advice to government agencies, corporations, or other organizations
or groups;
(7) rendering other services related to the operations of an insurance business, including
actuarial, loss prevention, safety engineering, data processing, accounting, claims,
appraisal, and collection services;
(8) ownership and management of assets that the parent corporation could itself own or
manage;
(9) acting as administrative agent for a governmental instrumentality that is performing
an insurance function;
(10) financing of insurance premiums, agents, and other forms of consumer financing;
(11) any other business activity determined by the Commissioner to be reasonably ancillary
to an insurance business; and
(12) owning a corporation or corporations engaged or organized to engage exclusively in
one or more of the businesses specified in this section.
(b) In addition to investments in common stock, preferred stock, debt obligations, and
other securities permitted under all other sections of this title, a domestic insurer
may also:
(1) Invest, in common stock, preferred stock, debt obligations, and other securities of
one or more subsidiaries, amounts that do not exceed the lesser of five 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
made under subsection (a) of this section shall be excluded for all insurers, except
to the extent provided in subsection (f) of this section, and there shall be included:
(A) total net monies 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
(B) 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.
(2) If the insurer’s total liabilities, as calculated for National Association of Insurance
Commissioners annual statement purposes, are less than 10 percent of assets, invest
any amount in common stock, preferred stock, debt obligations, and other securities
of one or more subsidiaries, provided that after such investment the insurer’s surplus
as regards policyholders, considering such investment as if it were a disallowed asset,
will be reasonable in relation to the insurer’s outstanding liabilities and adequate
to its financial needs.
(3) Invest any amount in common stock, preferred stock, debt obligations, and other securities
of one or more subsidiaries, 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 subdivision (1) of this subsection or in sections 3681 through 3692 of this title applicable to the insurer. For the purpose of this subdivision, “the total investment
of the insurer” shall include:
(A) any direct investment by the insurer in an asset; and
(B) 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 insurer’s ownership of such subsidiary.
(4) With the approval of the Commissioner, invest any 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.
(5) Invest any amount in the common stock, preferred stock, debt obligations, or other
securities of any subsidiary exclusively engaged in holding title to and managing
or developing real or personal property, if after considering as a disallowed asset
so much of the investment as is represented by subsidiary assets that if held directly
by the insurer would be considered as a disallowed asset, the insurer’s surplus as
regards policyholders will be reasonable in relation to the insurer’s outstanding
liabilities and adequate to its financial needs, and if following such investment
all voting securities of such subsidiary would be owned by the insurer.
(c) Investments in common stock, preferred stock, debt obligations, or other securities
of subsidiaries made pursuant to subsection (b) of this section shall not be subject
to any of the otherwise applicable restrictions or prohibitions contained in this
chapter applicable to such investments of insurers.
(d) Whether any investment pursuant to subsection (b) of this section meets the applicable
requirements thereof is to be determined immediately after such investment is made,
taking into account the then outstanding principal balance on all previous investments
in debt obligations, and the value of all previous investments in equity securities
as of the date they were made.
(e) If an insurer ceases to control a subsidiary, it shall dispose of any investment therein
made pursuant to this section within three 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 title, and the insurer
has notified the Commissioner thereof.
(f) Nothing in this section shall modify or negate any contractual obligation undertaken
by a mutual insurance holding company reorganizing under subchapter 3A of this chapter. (Added 1971, No. 72, § 2; amended 1999, No. 84 (Adj. Sess.), § 9, eff. April 19, 2000.)