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(124th General Assembly)
(Substitute House Bill Number 212)
AN ACT
To amend sections 3901.64, 3903.32, 3907.14, and
3925.08 of the Revised
Code to permit assuming
insurers, in the event of
the insolvency of a
ceding insurer, to make
reinsurance payments
directly to an insured or
beneficiary when this is
provided for in a
reinsurance agreement; to
permit
assuming
insurers to introduce defenses in
an
insolvency
proceeding that it deems to be
available to the
ceding insurer; and to permit
insurers to invest in limited liability company
membership interests of insurance, financial,
investment, and investment management companies.
Be it enacted by the General Assembly of the State of Ohio:
SECTION 1. That sections 3901.64, 3903.32, 3907.14, and
3925.08 of the Revised
Code be amended to read as follows:
Sec. 3901.64. (A) A domestic ceding insurer may take
credit
for any reinsurance ceded as provided in sections 3901.61
to
3901.63 of the Revised Code only if the reinsurance agreement
contained in the reinsurance contract, and any agreement that
provides security for the payment of the obligations under the
reinsurance agreement, including any trust agreement, provide, in
substance, for
the following: (1)
The
In the event of the insolvency of the ceding insurer,
the reinsurance, whether paid directly or from trust
assets
securing the reinsurance agreement, shall be payable by
the
assuming insurer on the basis of the liability of the
domestic
ceding insurer under the policy or contract reinsured,
without any
diminution because the
domestic ceding insurer is
insolvent or
because the liquidator or statutory receiver has
failed to pay all
or any portion of any claims; (2) The reinsurance payments, whether paid directly or
from
trust assets securing the reinsurance agreement, shall be
made by
the assuming insurer directly to the
domestic ceding
insurer, or
in the event of its insolvency or liquidation, to its
liquidator
or statutory receiver
except where the reinsurance contract or
other written agreement specifically provides for direct payment
of the reinsurance to the insured or beneficiary of the insurance
policy in the event of the insolvency of the ceding insurer. (B)(1) The reinsurance agreement may provide that the
domiciliary
liquidator or statutory receiver shall give written
notice
to the assuming insurer that a
claim is pending against
the
domestic ceding insurer on the
policy or contract reinsured.
The notice shall be given within a
reasonable amount of time after
the claim is filed with the
liquidator or statutory receiver.
During the pendency of the claim, any assuming insurer may
investigate the claim and interpose, at its own expense, in the
proceeding where the claim is to be adjudicated any defenses which
it deems to be available to the ceding insurer or its liquidator.
(2) The expense may be filed as a claim against the
insolvent ceding insurer to the extent of a proportionate share of
the benefit that may accrue to the ceding insurer solely as a
result of the defense undertaken by the assuming insurer. Where
two or more assuming insurers are involved in the same claim and a
majority in interest elect to interpose a defense to the claim,
the expense shall be apportioned in accordance with the terms of
the reinsurance agreement as though the expense had been incurred
by the ceding insurer.
Sec. 3903.32. The amount recoverable by the liquidator from
reinsurers shall
not be reduced as a result of delinquency
proceedings, regardless of any
provision in the reinsurance
contract or other agreement. Payment made
by a reinsurer
directly
to an insured or other creditor does not diminish the reinsurer's
obligation to the insurer's estate except when the reinsurance
contract, and
any
or other written agreement
that provides
security for the payment
of the obligations under
the contract,
provides
for direct
coverage of a named insured and the payment
is
made in discharge
of that obligation and the contract or agreement
has been
approved
pursuant to division (A)(3) of section 3901.341
or section 3907.12
or
3925.33 of the Revised Code
for direct
payment of the
reinsurance to the insured or beneficiary of the
insurance policy in the event of the
insolvency of the ceding
insurer.
Sec. 3907.14. The capital, surplus, and all accumulations
of
every domestic life insurance company shall be invested as
follows: (A) A domestic company may acquire, hold, and convey real
estate: (1) Which has been acquired or is acquired for its
principal
offices, or which is used in connection therewith,
provided that
it shall not invest more than five per cent of its
admitted assets
on the preceding thirty-first day of December in
such real estate; (2) Which has been mortgaged to it in good faith by way of
security for loans previously contracted or for money due; (3) Which has been conveyed to it in satisfaction of debts
previously contracted in the course of its dealings, or which it
may receive in or on account of an exchange for real estate
acquired in its operations; (4) Which it has purchased at sales under mortgages and on
any legal process in connection with its investments or under
decrees obtained or made for such debts; (5) Which is acquired, owned, or held for the purpose of
developing, improving, or otherwise utilizing such real estate
for
the production of income, without restriction or limitation
as to
time, and may acquire, lease, hold, and manage personal
property
used in connection therewith. No investments in real
estate to be
used primarily for recreational, agricultural, or
mining purposes
shall be made under authority of division
(A)(5) of this section
and except for investments authorized under divisions
(A)(1), (2),
(3), and (4) of this section, no domestic life
insurance company
shall invest in real estate under divisions
(A)(5) and (R) of this
section a sum exceeding in the
aggregate ten per cent of its
admitted assets on the preceding
thirty-first day of December. All real estate specified in divisions (A)(3) and (4) of
this
section, which is not necessary for its accommodation in the
convenient transaction of its business, shall be sold by the
company and disposed of within five years after it has acquired
the title to such real estate or within five years after such
real
estate has ceased to be necessary for the accommodation of
its
business, unless the company procures the certificate of the
superintendent of insurance that its interests will suffer
materially by a forced sale of the real estate, in which event
the
time for the sale may be extended to such time as the
superintendent directs in such certificate. (B) A domestic company may acquire, hold, and convey
tangible personal property or interests therein for the
production
of income, provided no domestic company shall invest
in excess of
two per cent of its admitted assets as of the
preceding
thirty-first day of December under this division. (C) In loans and liens upon the security of its own
policies, not exceeding the reserve or present value of the
policies, computed according to any standard authorized by law or
according to such higher standard as the company has adopted and
maintains on the policy, the reserve being the amount of debts of
the life insurance company by reason of its outstanding policies
in gross, which may be so treated in the returns for taxation
made
by it; (D) In bankers' acceptances and bills of exchange of the
kinds and maturities made eligible by law for rediscount with
federal reserve banks, provided that such acceptances and bills
of
exchange are accepted by a bank or trust company incorporated
under the laws of the United States or of this state or any other
bank or trust company which is a member of the federal reserve
system; (E) In equipment trust obligations or certificates,
security
agreements, or other evidences of indebtedness entered
into
directly or guaranteed by any company operating wholly or
partly
within the United States or Canada, provided that the debt
obligation is secured by a first lien on tangible personal
property which is purchased or secured for payment thereof and
the
debt obligation is repayable within twenty years from the
date of
issue in annual, semiannual, or more frequent
installments
beginning not later than the first year after such
date; (F) In bonds issued by or for federal land banks and any
debentures issued by or for federal intermediate credit banks
under the "Federal Farm Loan Act of 1916," 39 Stat. 360, 12
U.S.C.A. 641 as amended; any debentures issued by or for banks
for
cooperatives under the "Farm Credit Act of 1933," 48 Stat.
257, 12
U.S.C.A. 131 as amended; (G) In bonds issued under the "Home Owners' Loan Act of
1933," 48 Stat. 128, 12 U.S.C.A. 1461; (H) In notes, bonds, debentures, or other such obligations
issued by the federal housing administrator; (I)(1)(a) In bonds or other evidences of indebtedness, not
in default as to principal or interest, which are valid
obligations issued, assumed or guaranteed by the United States,
by
any state thereof, by the Commonwealth of Puerto Rico, by any
territory or insular possession of the United States, or by the
District of Columbia, or which are valid obligations issued,
assumed, or guaranteed by any county, municipal corporation,
district, or political subdivision, or by any civil division or
public instrumentality of such governmental units, if by
statutory
or other legal requirements such obligations are
payable, as to
both principal and interest, from taxes levied
upon all taxable
property within the jurisdiction of such
governmental unit; (b) In bonds or other obligations issued by or for account
of any such governmental unit having a population of five
thousand
or more by the latest official federal or state census,
which are
payable as to both principal and interest from revenues
or
earnings from the whole or any part of a publicly owned
utility
supplying water, gas, sewage disposal facility, or
electricity, or
any or all of them, provided that by statute or
other applicable
legal requirements, rates from the service or
operation of such
utility must be fixed, maintained, and
collected at all times so
as to produce sufficient revenues or
earnings to pay both
principal and interest of such bonds or
obligations as they become
due; (c) In any bonds or obligations payable from and secured
by
revenues of the United States, the Commonwealth of Puerto
Rico, or
any state or instrumentality of any of them, or of the
District of
Columbia or of any commission, board, or other
instrumentality of
one or more of them, provided there is a
specific pledge of
revenues, and provided that there is adequate
provision for
payment of interest prior to completion of
construction and that
rates, fees, tolls, or charges fixed are,
after completion of
construction, sufficient to pay all expenses
of operation and
maintenance and the principal and interest when
due. (2) In legally authorized and executed bonds, notes,
warrants, and securities which are the direct obligation of or
are
guaranteed by Canada, or which are the direct obligation of
or are
guaranteed as to both principal and interest by any
province of
Canada, or which are the direct obligation of or are
guaranteed as
to both principal and interest by any municipality
of Canada
having a population of fifty thousand or more by the
latest
official census, and which are not in default as to
principal or
interest; (3) In bonds or other evidence of indebtedness, not in
default as to principal or interest, which are valid obligations
issued, assumed, or guaranteed by the United States, by any state
thereof, the Commonwealth of Puerto Rico, or by the District of
Columbia, if by statutory or other legal requirements such
obligations are payable, as to both principal and interest, from
selective taxes levied by such governmental unit. (J)(1) In mortgage bonds which are the direct obligation
of
a railroad, and which are the first lien on a substantial
portion
of its property, situated wholly in the United States or
partly in
the United States and partly in Canada, the average net
yearly
earnings of which, after deducting proper charges for
maintenance
of way and equipment, for the five fiscal years
preceding such
investments, have been at least one and one-half
times the average
yearly interest for the same period on its
mortgages, bonds, and
funded debts, and in the junior mortgage
bond issues of such
railroad corporations of the same character
and under the same
conditions where the average net yearly
earnings for the five
fiscal years preceding such investment,
after deducting proper
charges for maintenance of way and
equipment, have been at least
three times the average yearly
interest charges on such issues and
all prior liens; or in the
mortgage bonds of any incorporated
railroad company which have
been assumed or guaranteed, both as to
principal and interest, by
any incorporated railroad company whose
bonds constitute a legal
investment under division (J)(1) of this
section. In
applying the earnings test to any issuing, assuming,
or
guaranteeing company, whether or not in legal existence during
the whole of such five years next preceding the date of
investment
by such insurer, which has at any time during such
five-year
period acquired the assets of any other company by
purchase,
merger, consolidation, or otherwise, substantially as
an entirety,
or has been reorganized pursuant to the bankruptcy
law, the
earnings of such other predecessor or constituent
companies, or of
the company so reorganized, available for
interest for such
portion of such period that has preceded such
acquisition, or such
reorganization, may be included in the
earnings of such issuing,
assuming, or guaranteeing company for
such portion of such period
as is determined in accordance with
adjusted or pro forma
consolidated earnings statements covering
such portion of such
period. In such cases the requirements as
to earnings shall be
based upon the mortgages, bonds, and funded
debts as they exist
immediately after such acquisitions or such
reorganizations. (2) In mortgage bonds or other interest-bearing
obligations
of terminal companies organized under the laws of the
United
States or any state thereof, provided such bonds or
obligations
have been assumed or guaranteed jointly or severally
by two or
more railroad corporations whose bonds constitute legal
investments under division (J)(1) of this section; (3) In loans to veterans guaranteed in whole or in part by
the United States pursuant to Title III of the "Servicemen's
Readjustment Act of 1944," 58 Stat. 284, 38 U.S.C.A. 693, as
amended, provided such guaranteed loans are liens upon real
estate; (4) In mortgage bonds which are the direct obligation of
and
first lien upon the property of a corporation engaged
directly and
primarily in the production and sale of, or in the
purchase and
sale of electricity or gas, or in the operation of
telephone or
telegraph systems or waterworks, or in some
combination of them,
and situated wholly in the United States, or
the Commonwealth of
Puerto Rico, or partly in the United States
and partly in Canada,
the average net yearly earnings of which,
after deducting proper
charges for replacements, depreciation,
and obsolescence, for the
five fiscal years preceding such
investment, have been at least
one and one-half times the average
yearly interest for the same
period on its mortgages, bonds, and
funded debts; (5) Any such corporation, or any of its predecessors,
constituent, or successor corporations, must have been in
business
not less than ten years prior to the date of the
purchase of such
bonds, and must not have defaulted on the
interest or principal of
any of its bonds or funded debts
outstanding during the five years
immediately preceding the date
of purchase, provided that division
(J)(5) of this section
does not preclude investments in mortgage
bonds of railroads
reorganized through purchase of assets, merger,
consolidation,
bankruptcy proceedings, or otherwise if such bonds
are eligible
for investment under division (J)(1) of this section; (6) No investment shall be made under division (J)(1),
(2),
(4), or (5) of this section if such railroad or other
utility
corporation and its business, and its issue of bonds,
funded
debts, and stocks are not under the supervision and
control of an
authorized state or federal official or commission,
provided that
division (J)(6) of this section does not apply
to the mortgage
bonds or other interest-bearing obligations of
companies engaged
in the operation of telephone or telegraph
systems. (K)(1) In bonds or notes secured by mortgages or deeds of
trust which are a first lien upon unencumbered fee simple real
estate in any state, the Commonwealth of Puerto Rico, the
District
of Columbia, or Canada, provided the amount loaned does
not exceed
eighty per cent of the actual market value of such
property. The actual market value of any such property shall be shown
by a valuation and appraisement in writing by a qualified land
appraiser. In the event the amount loaned under division (K)(1)
of this
section exceeds eighty per cent of the actual market
value of the
land, the structures on the land must be insured by
an authorized
fire insurance company or covered by other
comparable
indemnification, and the policies or indemnifications
shall be
payable or assigned to the mortgagee or to a trustee in its
behalf
and shall be held by the mortgagee or an agent of the mortgagee
or
by such trustee; or in lieu of holding such policies or
indemnifications, the
mortgagee may purchase a policy or policies
of mortgage
protection insurance, payable to the mortgagee or a
trustee in
its behalf, insuring the mortgagee against loss
resulting from
the failure of the mortgagor to acquire and
maintain, from such
an authorized fire insurance company or other
comparable source,
insurance or indemnification. (2) In bonds or notes secured by mortgages insured by the
federal housing administrator; (3) In bonds or notes secured by mortgages or deeds of
trust
which are a first lien on leasehold estates in wholly or
partly
improved real property, unencumbered, except rentals
accruing from
the property to the owner of the fee, provided that
any loan
secured by a leasehold estate must provide for
amortization by
repayment of principal at least once in each year
in amounts
sufficient to repay the loan within a period of
four-fifths of the
unexpired term of the leasehold but within a
period of not more
than thirty years, and further provided that
the amount loaned on
the leasehold estate does not exceed
seventy-five per cent of
total market value of the leasehold
estate determined by
appraisements in writing made under oath by
two real estate
owners, residents of the county or local district
in which the
real estate is located, or by a qualified land
appraiser; if the
amount loaned exceeds seventy-five per cent of
the value of that
portion of the leasehold estate represented by
the value of the
land, exclusive of improvements on the land,
such improvements
shall be insured against fire for the benefit
of the mortgagee in
an amount not less than the difference
between seventy-five per
cent of the value of such land,
exclusive of buildings, and the
amount loaned; the policies for
such amount shall be payable to
and held by the mortgagee or a
trustee named in the lease who
shall be required by the terms of
said lease to use and apply the
proceeds of such insurance for
repairing, restoring, or rebuilding
such buildings; (4) The following shall not be considered as prior liens
or
encumbrances in the construction and application of this
section:
leasehold estates of any duration, rights-of-way,
servitudes,
joint driveways, easements, party wall agreements,
current taxes
and assessments not delinquent, and restrictions as
to building,
use, and occupancy. (5) This section does not prohibit a domestic life
insurance
company from renewing or extending a loan for the
original or a
lesser amount nor does it prohibit a company from
accepting as
part payment for real estate sold by it a mortgage
on the real
estate for a greater percentage of the purchase price
of the real
estate than is otherwise permitted by this section. (L) In bonds, notes, or other evidences of indebtedness of
corporations, trusts, partnerships, or similar business entities
organized
under the laws of the United
States, or any state
thereof, the Commonwealth of Puerto Rico,
the District of
Columbia, or Canada or any province of Canada,
secured by
assignment of lease or leases or the rentals payable
under such
leases, of real or personal property or both to (1)
the United
States or any instrumentality thereof, or any state of
the United
States, the Commonwealth of Puerto Rico, or the
District of
Columbia, or any county, city, town, school, or water
district,
authority, or other political subdivision in any such
government,
or Canada, any province of Canada, or any municipal
corporation of
Canada that has a population of fifty thousand or
more by the
latest official census; or (2) one or more
corporations, trusts,
partnerships, or similar business entities
organized under the
laws of the United States, any state thereof,
the Commonwealth of
Puerto Rico, the District of Columbia, or
Canada or any province
of Canada, provided that (a) the fixed
rentals assigned shall be
sufficient to repay the indebtedness
within the unexpired term of
the lease, exclusive of the term
which may be provided by an
enforceable option of renewal; (b)
such lessee has not defaulted
in payment of interest or principal
on any of its bonds, notes,
debentures, or other evidences of
indebtedness during the five
years immediately preceding the date
of the investment, and
provided the average net earnings
available for fixed charges of
such lessee under division (L)(2)
of this section for not less
than five fiscal years preceding
such investment have been at
least one and one-half times average
fixed charges for that period
and during either of the last two
years of such period, the net
earnings available for fixed
charges shall have been not less than
one and one-half times
fixed charges for such year, except that
railroad companies and
utility companies may qualify as lessees
herein by application of
the earnings test provided for railroads
under division (J)(1) of
this section and for utilities under
division (J)(4) of this
section; and (c) a first lien on the
interest of the lessor in
the unencumbered property so leased
shall be obtained as
additional security for the indebtedness; (M) In ground rents, land trust certificates, or fee
ownership certificates representing or evidencing beneficial
ownership of or interest in improved real estate under lease for
not less than twenty-five years from the date of such lease, in
which it must be provided that the lessee shall pay all taxes and
assessments levied on or assessed against said real estate, shall
maintain the improvements on the real estate in good repair, and
shall provide and maintain fire insurance in an amount equal to
the insurable value of the building on the real estate; provided: (1) The value of the land and improvements shall be
evidenced by an appraisement made under oath by a disinterested
appraiser resident in and the owner of real estate in the city in
which the property is situated, and such appraisement shall not
be
less than one and sixty-seven hundredths times the amount of
such
land trust certificates, which amount shall be not less than
twenty times the net annual rental distributable to holders of
outstanding certificates; (2) Such beneficial interests shall only be in properties
on
which actual earning records for five years immediately
preceding
are available; (3) Such declaration of trust or other trust instrument
shall provide for a depreciation or other similar fund, in an
amount which is not less than nine per cent of the net annual
distributable rental, for the benefit of the holders of
outstanding certificates. (N)(1) In certificates of deposit or other evidence of
indebtedness of a savings and loan association provided
the
certificates or other evidence of deposit are insured pursuant to
the
"Financial Institutions Reform, Recovery, and Enforcement Act
of 1989," 103
Stat. 183, 12 U.S.C.A. 1811, as amended; (2) In interest-bearing obligations, including savings
accounts and time certificates of deposit of a national bank or
state bank provided such bank is a member of the federal deposit
insurance corporation created pursuant to the "Banking Act of
1933," 92 Stat. 624, 12 U.S.C.A. 624, as amended. (O) In obligations issued, assumed, or guaranteed by the
international
finance corporation or by the
international bank for
reconstruction and development, the Asian
development bank, the
inter-American development bank, the
African development bank, or
other similar development bank in
which the president, as
authorized by congress and on behalf of
the United States, has
accepted membership; (P)(1) In the preferred stocks of any company organized
under the laws of the United States or of any state thereof
engaged directly and primarily in the production and sale of, or
in the purchase and sale of electricity or gas, or in the
operation of telephone or telegraph systems or water works, or in
some combination of them, if the average annual net earnings of
such company, for not less than five fiscal years preceding
purchase thereof, after deduction of interest on all mortgages,
bonds, debentures, and funded debts and after deduction of the
proper charges for replacements, depreciation, and obsolescence,
have been at least two times the average yearly amount which is
required to pay the dividends or distributions on all preferred
stocks; and in which the mortgages, bonds, debentures, funded
debts, and preferred stocks shall not in the aggregate exceed
seventy per cent of the total capitalization of such company,
including mortgages, bonds, debentures, funded debts, and
preferred and common stocks; (2) In the preferred stocks of any other company organized
under the laws of the United States, or of any state thereof if
the average annual net earnings of such company for a period of
not less than five fiscal years preceding purchase thereof, after
deduction of interest on all mortgages, bonds, debentures, and
funded debts and after deduction of the proper charges for
replacements, depreciation, and obsolescence, have been at least
four times the amount which is required to pay the dividends or
distributions on all preferred stocks, and in which the
mortgages,
bonds, debentures, funded debts, and preferred stocks
shall not in
the aggregate exceed sixty per cent of the total
capitalization of
such company, including mortgages, bonds,
debentures, funded
debts, and preferred and common stocks; (3) A domestic life insurance company shall not purchase
any
preferred stocks when the total market values of such stocks
then
owned with those purchased exceed in the aggregate of book
values
and purchase price the capital, surplus, and contingency
funds,
excluding all reserves required by law, of such company on
the
thirty-first day of December preceding the date of such
purchase,
or contemplated purchase, provided that in case of
appreciations
in values of stocks owned the cost rather than the
market values
shall be used in arriving at such aggregate; the
purpose being to
restrict the investments of such company in all
preferred stocks
to capital, surplus, and contingency funds. (4) In the bonds, notes, debentures, or other evidences of
indebtedness of a solvent corporation,
trust, partnership, or
similar business entity existing under the
laws of the United
States, of any state thereof, the Commonwealth
of Puerto Rico, or
Canada or any province of Canada, provided
that either: (a) The bonds, notes, debentures, or other evidences of
indebtedness
of such corporation, trust, partnership, or similar
business
entity are rated 1 or 2 by the securities valuation
office of the national
association of insurance commissioners; (b) The corporation, trust,
partnership, or similar business
entity has not defaulted in payment of
interest or principal on
any of its bonds, notes, debentures, or other
evidences of
indebtedness during the five years immediately
preceding the date
of purchase, and
the average annual net earnings of such
corporation, trust,
partnership, or similar business entity that
are available for fixed
charges for not
less than five fiscal
years preceding such purchase have been at
least one and one-half
times the average fixed
charges of such corporation, trust,
partnership, or similar business
entity for that period and during
either of the last two years
of such period, the net earnings
available for fixed charges
shall have been not less than one and
one-half times
the fixed charges of such corporation, trust,
partnership, or
similar business entity for such year. (5) In common stocks or shares of any solvent incorporated
company organized under the laws of the United States, or of any
state, district, or territory thereof, or the Commonwealth of
Puerto Rico, provided that a dividend or distribution has been
paid by the
corporation in the preceding twelve months upon such
stock to be purchased, or
that such corporation, together with its
predecessor corporation or
corporations, has been in existence for
a period of at least five years.
No domestic company shall invest
in common stock or
shares under divisions (P)(5) and (R) of this
section a sum exceeding in the aggregate ten per cent of its
admitted assets on the preceding thirty-first day of December. (6) In the stocks
or limited liability company membership
interests of insurance
corporations, financial
corporations,
investment
corporations, and investment management companies,
which investment
management companies are registered with the
securities and exchange
commission under the "Investment Company
Act of
1940," 54 Stat. 789, 15 80a-1, as
amended, except its own
stock, but no domestic
life insurance company shall invest in such
stocks
or limited liability company membership interests under
division
(P)(6) of this section, exclusive of its investments in
stocks
or limited liability company membership interests of
insurance company subsidiaries or subsidiaries engaged exclusively
in the
ownership of insurance company subsidiaries, a sum
exceeding the lesser
of fifty per cent of its policyholder surplus
or
ten per cent of its admitted assets as of the preceding
thirty-first day of
December unless the approval of the
superintendent of insurance is first
obtained. Whenever the
superintendent has reason to believe that
the retention,
investment, or acquisition of the stock
or limited liability
company membership interest of any
such
corporation
company
substantially lessens competition generally in
the business of
insurance or creates a monopoly therein the
superintendent shall
proceed under section 3901.13 of the Revised Code to cause such
domestic insurance company to divest itself of such stock
or
limited liability company membership interest. (7)(a) In bonds, notes, debentures, or other evidences of
indebtedness issued, assumed, or guaranteed by a solvent
corporation, trust,
or partnership formed or existing under the
laws of a foreign jurisdiction,
provided each such foreign
investment is of the same kind and quality as
United States
investments authorized under this section; or
in common or
preferred stock or shares of any solvent corporation formed or
existing under the laws of a foreign jurisdiction provided each
such foreign
investment is of the same kind and quality as United
States
investments authorized under this section; or in bonds or
other evidences of
indebtedness issued, assumed, or guaranteed by
a foreign jurisdiction. An insurer shall not invest in foreign investments under
division
(P)(7) of this section, including investments
denominated
in foreign currency, a sum exceeding in the aggregate fifteen per
cent of its admitted assets as of the preceding thirty-first day
of
December. The aggregate amount of investments held by an
insurer in
a single foreign jurisdiction shall not exceed three
per cent of its admitted
assets as of the preceding thirty-first
day of December. As used in division (P)(7)(a) of this section,
"foreign
jurisdiction" means a jurisdiction outside the United
States,
Puerto Rico, or canada, whose
bonds are rated 1 by the securities
valuation office of the national
association of insurance
commissioners. (b) An insurer may acquire investments denominated in
foreign
currency whether or not they are foreign investments. An insurer shall not invest in investments denominated in
foreign currency
a sum exceeding in the aggregate ten per cent of
its admitted assets as of the
preceding thirty-first day of
December. The aggregate amount of
investments denominated in a
single foreign currency held by an insurer shall
not exceed three
per cent of an insurer's admitted assets as of the preceding
thirty-first day of December. (c) As used in division (P)(7) of this section,
"foreign
currency" means a currency other than that of the United
States. (8) An insurer may invest without limitation in investments
of government
money market funds. As used in division (P)(8) of
this section,
"government money market fund" means a mutual fund
that at all times invests
in obligations issued, guaranteed, or
insured by the federal government of the
United States, or
collateralized repurchase agreements
comprised of these
obligations, and that qualifies for investment without a
reserve
pursuant to the purposes and procedures of the securities
valuation
office of the national association of insurance
commissioners. (Q) In loans upon the pledge of any securities in which
such
companies are authorized by this section to invest, provided
that
any loan upon such a pledge shall not exceed eighty per cent
of
the cash market value of the collateral at the time of the
making
of such loan and at the end of each twelve-month period
thereafter, and such company, through the collateral pledged to
it, shall not exceed the amounts which it may, under this
section,
invest in one corporation so that, in the stocks and
securities
which may be owned and those which are pledged to it,
the
limitations in this section might be indirectly evaded; (R)(1) Any domestic legal reserve life insurance company
may
loan or invest its funds, to an extent not exceeding in the
aggregate five per cent of its total admitted assets, in loans or
investments not permitted under this section. Any such company
may also invest up to an additional five per cent of its total
admitted assets, in loans or investments in small businesses
having more than half of their assets or employees in this state
and in venture capital firms having an office within this state,
provided that, as a condition of a company making an investment
in
a venture capital firm, the firm must agree to use its best
efforts to make investments, in an aggregate amount at least
equal
to the investment to be made by the company in that venture
capital firm, in small businesses having their principal offices
within this state and having either more than one-half of their
assets within this state or more than one-half of their employees
employed within this state. As used in division (R) of this section: (a) "Small businesses" means any corporation, partnership,
proprietorship, or other entity that either does not have more
than four hundred employees, or would qualify as a small business
for the purpose of receiving financial assistance from small
business investment companies licensed under the "Small Business
Investment Act of 1958," 72 Stat. 689, 15 U.S.C.A. 661, as
amended, and rules of the small business administration. (b) "Venture capital firms" means any corporation,
partnership, proprietorship, or other entity, the principal
business of which is or will be the making of investments in
small
businesses. (c) "Investments" means any equity investment, including
limited partnership interests and other equity interests in which
liability is limited to the amount of the investment, but does
not
include general partnership interests or other interests
involving
general liability. (2) In the event that, subsequent to being made under
provisions of division (R) of this section, an investment is
determined to
have become qualified as an investment for a
domestic life
insurance company as provided for in this section,
the company
may consider such investment as held under the
applicable
provisions of the foregoing divisions (A) to (Q) of
this section
and such investment shall no longer be considered as
having been
made under the provisions of this division. (S)(1) No domestic life insurance company shall subscribe
to
or participate in any underwriting for the purchase or sale of
securities or property, nor shall it enter into any such
transaction for purchase or sale on account of said company
jointly with any other person, nor shall any such company enter
into any agreement to withhold from sale any of its property, but
the disposition of its property shall be at all times within the
control of its board of directors. Nothing contained in
division
(S)(1) of this section shall be construed to invalidate
or
prohibit an agreement by an insurance company for the purchase
for
its own account of an entire issue of the securities of a
corporation or to invalidate or prohibit an agreement by an
insurance company and one or more other investors to join and
share in the purchase of investments for their individual
accounts
and for bona fide investment purposes. (2) In the determination of capitalization in this section
the value of all bonds, debentures, and funded debts, and
nonconvertible or nonparticipating preferred stocks shall be
figured at par. Participating or convertible preferred shares
shall be figured at par or market on the preceding thirty-first
day of December, whichever is higher, and the value of all common
shares shall be figured at the market on the preceding
thirty-first day of December. (3) As used in this section: (a) "Funded debt" means all interest-bearing obligations
maturing in more than one year from their issuance and all
guaranteed or assumed interest-bearing obligations or stock.
Securities or stock of a corporation pledged to secure other
funded debt of the corporation are not included in the funded
debt. (b) "Fixed charges" include actual interest incurred in
each
year on funded and unfunded debt and annual apportionment of
debt
discount or premium. Where interest is partially or
entirely
contingent upon earnings, "fixed charges" include
contingent
interest payments. (c) "Net earnings available for fixed charges" means
income
after deducting operating and maintenance expenses, taxes
other
than income taxes, depreciation, and depletion.
Extraordinary,
nonrecurring items of income or expense shall be
excluded. (4) Except as provided in a plan of mutualization adopted
pursuant to the provisions of sections 3913.01 to 3913.10 of the
Revised Code, no domestic life insurance company may invest in or
loan upon its own stock, either directly or indirectly. (5) If the investments of any domestic life insurance
company are at the time of the making thereof or on October 13,
1953, otherwise than as authorized in this section, such
investments shall not be admitted or accepted as authorized
investments for such company. (6) Any earnings test provided for in this section shall
be
deemed to have been met if the requirements of such earnings
test
are met by any company which assumes or guarantees the
investment
or which assumes or guarantees the performance of any
lease which
is the security for the investment. In applying any
such earnings
test, the operations of a company's predecessor
companies, if any,
for the stipulated period shall be included. (7) No domestic life insurance company shall at any time
have invested in or loaned upon the security of the obligations,
property, or securities of a particular corporation, trust,
partnership, or similar business entity a sum exceeding the
greater of two
per cent of its admitted assets as
of the preceding
thirty-first day of December or twenty-five per
cent of that
portion of its capital and surplus, or its surplus
in the case of
a mutual company, that exceeds the minimum
required capital and
surplus under section 3907.05 of the Revised
Code unless the
approval of the superintendent of insurance is
first obtained.
The
restrictions of division (S)(7) of this section do not
apply
to
divisions (C), (F), (G), (H), (P)(6), and (R) of this
section
or
to any valid obligation issued, assumed, or guaranteed
by the
United States, or any state thereof, the Commonwealth of
Puerto
Rico, the District of Columbia, or Canada or any province
of
Canada. For purposes of division (S)(7) of this section, such
company
may, at its option, consider either the lessor or the
lessee
under division (L) of this section to be the person to whom
any
such investment or loan is made. (8) This section does not affect the propriety or legality
of an investment made by a domestic life insurance company which
was in accordance with the laws in force at the time of the
making
of the investment.
Sec. 3925.08. Funds accumulated in the course of
business,
or surplus money above the capital stock, of any
company organized
under any law of this state, for the purpose
provided in section
3925.01 of the Revised Code, shall only be
loaned or invested in
the securities listed in sections 3925.05
and 3925.06 of the
Revised Code, or in the following: (A)(1) Bonds and mortgages on unencumbered real estate
within this or any other state worth twenty-five per cent more
than the sum loaned thereon, exclusive of buildings, unless such
buildings are insured in some company authorized to do business
in
this state, and the policy is transferred to the company
making
the investment; or, in lieu of transferring such policies,
the
mortgagee may purchase a policy or policies of mortgage
protection
insurance, payable to the mortgagee or a trustee in
its behalf,
insuring the mortgagee against loss resulting from
the failure of
the mortgagor to acquire and maintain, from such
an authorized
insurance company, insurance in the amount required
by this
section; (2) Bonds or notes secured by mortgages insured by the
federal housing administrator; (3) Loans to veterans guaranteed in whole or in part by
the
United States pursuant to Title III of the "Servicemen's
Readjustment Act of 1944," 58 Stat. 284, 38 U.S.C. 693, as
amended, provided such guaranteed loans are liens upon real
estate. (B)(1) Legally authorized and executed bonds, notes,
warrants, and securities which are the direct obligation of or
are
guaranteed as to both principal and interest by Canada, or
which
are the direct obligation of or are guaranteed as to both
principal and interest by any province of Canada, or which are
the
direct obligation of or are guaranteed as to both principal
and
interest by any municipal corporation of Canada having a
population of one hundred thousand or more by the latest official
census, and which are not in default as to principal or interest; (2) Obligations issued, assumed, or guaranteed by the
international finance
corporation or by the
international bank for
reconstruction and development, the Asian
development bank, the
inter-American development bank, the
African development bank, or
similar development bank in which
the president, as authorized by
congress and on behalf of the
United States, has accepted
membership. (C) Bonds or other evidences of indebtedness, not in
default
as to principal or interest, which are valid obligations
issued,
assumed, or guaranteed by the United States, by any state
thereof,
the Commonwealth of Puerto Rico, by any territory or
insular
possession of the United States, or by the District of
Columbia,
or which are valid obligations issued, assumed, or
guaranteed by
any county, municipal corporation, district, or
political
subdivision, or by any civil division or public
instrumentality of
such governmental units, if by statutory or
other legal
requirements such obligations are payable, as to both
principal
and interest, from taxes levied upon all taxable
property within
the jurisdiction of such governmental unit, or in
bonds or other
obligations issued by or for account of any such
governmental unit
having a population of five thousand or more by
the latest
official federal or state census, which are payable as
to both
principal and interest from revenues or earnings from the
whole or
any part of a publicly owned utility, provided that by
statute or
other applicable legal requirements, rates from the
service or
operation of such utility must be fixed, maintained,
and collected
at all times so as to produce sufficient revenues
or earnings to
pay both principal and interest of such bonds or
obligations as
they become due, and in any bonds or obligations
issued or
guaranteed by the United States, any state, the
District of
Columbia, the Commonwealth of Puerto Rico, any
county, municipal
corporation, district, political subdivision,
civil division,
commission, board, authority, agency, or other
instrumentality of
one or more of them, provided there is a
specific pledge of
revenues, earnings, or other adequate security
and provided that
no prior or parity obligation of the same
issuer, payable from
revenues or earnings from the same source,
has been in default as
to principal or interest during the five
years next preceding the
date of such investment, but such issuer
need not have been in
existence for that period, and obligations
acquired under this
section may be newly issued, and further
provided that there is
adequate provision for payment of expenses
of operation and
maintenance and the principal and interest on
all obligations when
due; (D)(1) Bonds or other evidences of indebtedness, bearing
or
accruing interest, issued, assumed, or guaranteed by any solvent
corporation, trust, partnership, or similar business entity
organized and existing under the laws of this or any other state,
or of the
United States, the Commonwealth of Puerto Rico, or of
the
District of Columbia, or of Canada or any province of Canada,
upon which there is no existing interest or principal
default,
provided that either: (a) The bonds or other evidences of indebtedness are rated 1
or 2
by the securities valuation office of the national
association of insurance
commissioners; (b) The corporation, together with its predecessor
corporation or
corporations, or the trust, partnership, or similar
business entity, has been
in existence for a period of at least
five years. (2) Stocks
or limited liability company membership interests
of any insurance
corporation, financial
corporation, investment
corporation, and investment
management
company
companies, which
investment management
company is
companies are registered with the
securities and exchange commission under the "Investment
Company
Act of 1940," 54 Stat. 789, 15 U.S.C. 80a-1, as amended,
except
its own stock, and stocks
or limited liability company membership
interests, bonds, notes, and
debentures of any
corporation
company
which is organized for, and limited
in its operations to, the
financing of insurance premiums, upon
approval of such investments
by the superintendent of insurance;
except that approval shall not
be required for the purchase of
the outstanding stocks
or limited
liability company membership interests of any such
corporation
company, if investment
in each such
corporation
company does not
exceed in the
aggregate two and one-half per
cent of the total
admitted assets of the company making the
investment as of the
preceding thirty-first day of December.
Whenever the
superintendent has reason to believe that the
retention,
investment, or acquisition of the stock
or limited liability
company membership interest of any such
corporation
company
substantially lessens competition generally in the
business of
insurance or creates a monopoly therein
he
the
superintendent
shall
proceed under section 3901.13 of the Revised Code to cause
such
domestic insurance company to divest itself of such stock
or
limited liability company membership interest. (3) Other stocks of any solvent corporation organized
under
the laws of this or any other state, or of the United
States, or
of the District of Columbia, or of Canada or any
province of
Canada, provided that a dividend or distribution has
been paid by
the corporation in the preceding twelve months upon
the stock to
be purchased or such corporation, together with its
predecessor
corporation or corporations, has been in existence for a period of
at least five years. (4) A domestic company may acquire, hold, and convey
tangible personal property or interests therein for the
production
of income, provided no domestic company shall invest
in excess of
two per cent of its admitted assets as of the
preceding
thirty-first day of December under this division. (5) In equipment trust obligations or certificates,
security
agreements, or other evidences of indebtedness entered
into
directly or guaranteed by any company operating wholly or
partly
within the United States or Canada, provided
that such debt
obligation is secured by a first lien on tangible personal
property which is purchased or secured for payment thereof and
such debt
obligation is repayable within twenty years from the
date of issue in
annual, semiannual, or more frequent installments
beginning not later than
the first year after such date. (6) An insurer may invest without limitation in investments
of
government money market funds. As used in division (D)(6) of
this
section, "government money market fund" means a fund that at
all times invests
in obligations issued, guaranteed, or insured by
the federal government of the
United States or collateralized
repurchase agreements
comprised of such obligations, and that
qualifies for investment without a
reserve pursuant to the
purposes and procedures of the securities valuation
office of the
national association of insurance commissioners. (E) Negotiable promissory notes maturing in not more than
six months from the date thereof, secured by collateral security
through the transfer of any of the classes of securities
described
in this section or in sections 3925.05 and 3925.06 of
the Revised
Code, with absolute power of sale within twenty days
after default
in payment at maturity; (F)(1) Repurchase agreements with, and interest-bearing
obligations, including savings accounts and time certificates of
deposit of, a national bank of the United States, a commonwealth
bank of Puerto Rico, a chartered bank of Canada, or a state bank,
provided such bank is either a member of the federal deposit
insurance corporation created pursuant to the "Banking Act of
1933," as amended, or the Canada deposit insurance corporation
created pursuant to the act of parliament known as the "Canada
Deposit Insurance Corporation Act," as amended. (2) Certificates of deposit, savings share accounts,
investment share accounts, stock deposits, stock certificates, or
other evidences of indebtedness of a savings and loan association,
provided
all such
evidences of indebtedness are insured pursuant
to the "Financial Institutions
Reform, Recovery, and Enforcement
Act of 1989," 103 Stat. 183, 12 U.S.C.A.
1811, as amended; (3) Bankers' acceptances and bills of exchange of the
kinds
and maturities made eligible by law for rediscount with the
federal reserve banks, provided that the same are accepted by a
bank or trust company incorporated under the laws of the United
States or of this state or any other bank or trust company which
is a member of the federal reserve system. (G) Any securities issued as a result of any
reorganization,
or capital or debt adjustment, in whole or in
part, in exchange
for securities acquired by it prior to such
reorganization, or
capital or debt adjustment; (H)(1) In bonds, notes, debentures, or other evidences of
indebtedness
issued, assumed, or guaranteed by a solvent
corporation, trust, or partnership
formed or existing under the
laws of a foreign jurisdiction, provided each such
foreign
investment is of the same kind and quality as United
States
investments authorized under this section; or in common or
preferred stock or shares of any solvent corporation formed or
existing under
the laws of a foreign jurisdiction, provided each
such foreign investment is of
the same kind and quality as United
States investments
authorized under this section; or in bonds or
other evidences of indebtedness
issued, assumed, or guaranteed by
a foreign jurisdiction. An insurer shall not invest in foreign investments under
division
(H) of this section, including investments denominated in
foreign
currency, a sum exceeding in the aggregate fifteen per
cent of its admitted
assets as of the preceding thirty-first day
of December. The
aggregate amount of investments held by an
insurer in a single foreign
jurisdiction shall not exceed three
per cent of its admitted assets as of the
preceding thirty-first
day of December. As used in division (H)(1) of this section, "foreign
jurisdiction"
means a jurisdiction outside the United States,
Puerto Rico, or Canada whose bonds are rated 1 by
the securities
valuation office of the national association of insurance
commissioners. (2) An insurer may acquire investments denominated in
foreign currency
whether or not they are foreign investments. An insurer shall not invest in investments denominated in
foreign currency
a sum exceeding in the aggregate ten per cent of
its admitted assets as of the
preceding thirty-first day of
December. The aggregate amount of
investments denominated in a
single foreign currency held by an insurer shall
not exceed three
per cent of an insurer's admitted assets as of the preceding
thirty-first day of December. (3) As used in division (H) of this section, "foreign
currency"
means a currency other than that of the United States. (I)(1) Any securities or other property not permitted
under
section 3925.05, 3925.06, 3925.08, or 3925.20 of the
Revised Code
to an extent not exceeding in the aggregate six per
cent of the
total admitted assets of such company on the
preceding
thirty-first day of December, within the limitations
prescribed in
division (J) of this section. Any such company may
also invest up
to an additional five per cent of the total
admitted assets of
such company on the preceding thirty-first day
of December, within
the limitations prescribed in division
(J) of this section, in
loans or investments in small
businesses having
more than half of
their assets or employees in this state and in
venture capital
firms having an office within this state,
provided that, as a
condition of a company making an investment
in a venture capital
firm, the firm must agree to use its best
efforts to make
investments, in an aggregate amount at least
equal to the
investment to be made by the company in that venture
capital firm,
in small businesses having their principal offices
within this
state and having either more than one-half of their
assets within
this state or more than one-half of their employees
employed
within this state. As used in division (I) of this section: (a) "Small businesses" means any corporation, partnership,
proprietorship, or other entity that either does not have more
than four hundred employees, or would qualify as a small business
for the purpose of receiving financial assistance from small
business investment companies licensed under the "Small Business
Investment Act of 1958," 72 Stat. 689, 15 U.S.C.A. 661, as
amended, and rules of the small business administration. (b) "Venture capital firms" means any corporation,
partnership, proprietorship, or other entity, the principal
business of which is or will be the making of investments in
small
businesses. (c) "Investments" means any equity investment, including
limited partnership interests and other equity interests in which
liability is limited to the amount of the investment, but does
not
include general partnership interests or other interests
involving
general liability. (2) In the event that, subsequent to being made under this
division, a loan or investment is determined to have become
qualified as a loan or investment under any of the divisions (A)
to (F) of this section or under section 3925.05, 3925.06, or
3925.20 of the Revised Code, the company may consider such loan
or
investment as held under such other statutory provision and
such
loan or investment shall no longer be considered as having
been
made under this division. (J) No domestic insurance company shall at any time have
invested a sum exceeding five per cent of its admitted assets as
of the preceding thirty-first day of December in the bonds,
notes,
debentures, other evidences of indebtedness, and stocks
of a
particular corporation, trust, partnership, or similar business
entity, except
for investments authorized under divisions (A) and
(D)(2) of this
section, and no domestic insurance company together
with its
subsidiary, if any, shall at any time own directly or
indirectly
more than twenty-five per cent of the outstanding
bonds, notes,
debentures, other evidences of indebtedness, and
stocks of any
corporation, except for investments
authorized under
divisions (A) and (D)(2) of this section. This section does not affect the propriety or legality of
an
investment made by such domestic insurance company which was
in
accordance with the laws in force at the time of the making of
the
investment.
SECTION 2. That existing sections 3901.64, 3903.32, 3907.14,
and 3925.08 of the
Revised Code are hereby repealed.
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