58-27-1
Application of chapter.
58-27-2
Eligible investments by insurers--Violation as misdemeanor.
58-27-3
Time of determination of eligibility of investment.
58-27-4
Prior legal investment deemed eligible.
58-27-5
Acquisition of ineligible securities or property--Disposition.
58-27-6
Time of investment limitation based on amount of insurer's admitted assets,
risk based capital, or capital and surplus.
58-27-7
Investments required to produce income--Exemptions--Rules.
58-27-8
Security or investment ineligible for purchase or exchange at more than
market value.
58-27-9
Obligations of United States or Canada.
58-27-10
Loans guaranteed by United States or Canada.
58-27-11
Obligations of states, provinces, and political subdivisions.
58-27-12
Revenue bonds of states, provinces, and political subdivisions.
58-27-12.1
Maximum investments in bonds, warrants, and evidence of indebtedness.
58-27-13
Obligations or stock of federal agencies.
58-27-14
Certificates of deposit in federally insured banks.
58-27-15
Federally insured savings and loan accounts.
58-27-15.1
Credit Union accounts.
58-27-16
Obligations of international bank and certain development banks for
reconstruction and development.
58-27-17
Investments authorized for insurers.
58-27-18 to 58-27-22.
Repealed.
58-27-23
Nonassessable common stock of corporation--Insurance stocks excepted.
58-27-24
Stock of solvent insurers meeting requirements.
58-27-25
Insurer acquiring controlling interest in another stock insurer--Limitation
as to amount.
58-27-26
Investments in stock of majority owned subsidiary corporations.
58-27-27
Maximum amount of investments in stock of majority owned subsidiary,
or another insurer or wholly owned subsidiary.
58-27-28
Equipment trust obligations or certificates.
58-27-29
Foreign securities--Insurer authorized to do business in foreign country--Limitation as to amount.
58-27-30
Collateral loans--Pledge of securities--Restricted amount.
58-27-31
Policy loans by life insurer--Maximum amount.
58-27-32
Real estate mortgages and deeds of trust.
58-27-33
Improved real property defined.
58-27-34
Interests and restrictions not constituting encumbrances upon improved real
property.
58-27-35
Deduction of sum owing on real property but not due or delinquent--Reserved rights not included in fair value of property.
58-27-36
Bonds or notes secured by mortgage or trust deed guaranteed by federal
housing administration.
58-27-37
Bonds or notes secured by mortgage or trust deed guaranteed by
administrator of veterans' affairs.
58-27-38
Equity of seller of real property in contract for deed--Maximum amount of
investment.
58-27-1. Application of chapter.
Except for § 58-27-68, this chapter applies to domestic insurers only.
Source: SL 1966, ch 111, ch 6, § 1.
58-27-2. Eligible investments by insurers--Violation as misdemeanor.
Insurers shall invest in or lend their funds on the security of, and shall hold as invested assets, only eligible investments as prescribed in this chapter. Violation of this section is a Class 2 misdemeanor.
Source: SL 1966, ch 111, ch 6, § 2 (1); SL 1978, ch 359, § 2.
58-27-3. Time of determination of eligibility of investment.
Eligibility of an investment shall be determined as of the date of its making or acquisition, except as stated in § 58-27-4, and shall at all times be subject to the aggregate investment limitations set forth in this chapter.
Source: SL 1966, ch 111, ch 6, § 2 (3); SL 1997, ch 294, § 1.
58-27-4. Prior legal investment deemed eligible.
Any particular investment held by an insurer on July 1, 1997, and which was a legal investment at the time it was made, and which the insurer was legally entitled to possess immediately prior to July 1, 1997 shall be deemed to be an eligible investment.
Source: SL 1966, ch 111, ch 6, § 2 (2); SL 1997, ch 294, § 2.
58-27-5. Acquisition of ineligible securities or property--Disposition.
No provision of this chapter shall prohibit the acquisition by an insurer of other or additional securities or property if received as a dividend or as a lawful distribution of assets, or under a lawful and bona fide agreement of bulk reinsurance, merger, or consolidation. Any investment so acquired which is not otherwise eligible under this chapter shall be disposed of pursuant to §§ 58-27-73 and 58-27-74 if personal property or securities, or pursuant to §§ 58-27-70 to 58-27-72, inclusive, if real property.
Source: SL 1966, ch 111, ch 6, § 3 (3).
58-27-6. Time of investment limitation based on amount of insurer's admitted assets, risk based capital, or capital and surplus.
Unless otherwise specified, any investment limitation based upon the amount of the insurer's admitted assets, risk based capital, or capital and surplus, shall relate to such admitted assets, risk based capital, or capital and surplus as shown by the insurer's annual statement as of the December thirty-first next preceding date of acquisition of the investment by the insurer, or as shown by a current financial statement filed with the director. For purposes of computing any limitation based upon admitted assets, the insurer shall deduct the following to the extent included in the insurer's admitted assets, from the amount of its admitted assets:
(1) Collateral received in a reverse repurchase transaction or a securities lending transaction;
(2) Cash received in a dollar roll transaction; and
(3) The assets in any separate accounts maintained by the insurer.
Source: SL 1966, ch 111, ch 6, § 2 (4); SL 1997, ch 294, § 3.
58-27-7. Investments required to produce income--Exemptions--Rules.
No security or investment, other than real and personal property acquired under § 58-27-50; common shares of solvent institutions acquired under § 58-27-23, 58-27-25, 58-27-26, or 58-27-51; investments acquired under § 58-27-103, 58-27-104, or 58-27-111; and mutual funds acquired under subdivision 58-27-17(4) that invest less than ninety percent in bonds, is eligible for acquisition unless it is interest-bearing or interest-accruing or dividend- or income-paying, and the insurer is entitled to receive for its exclusive account and benefit the interest or income accruing thereon. The director of the Division of Insurance may promulgate rules regarding the acquisition of over-the-counter and exchange listed options and financial futures, including the exemption of these securities from the operation of this section.
Source: SL 1966, ch 111, ch 6, § 3 (1); SL 1972, ch 264; SL 1983, ch 376, § 2; SL 1997, ch 294, § 4.
58-27-8. Security or investment ineligible for purchase or exchange at more than market value.
No security or investment shall be eligible for purchase or exchange at a price above its market value.
Source: SL 1966, ch 111, ch 6, § 3 (2).
58-27-9. Obligations of United States or Canada.
An insurer may invest in bonds, notes, warrants, and other evidences of indebtedness which are direct obligations of the United States of America or of Canada or for which the full faith and credit of the United States of America or of Canada is pledged for the payment of principal and interest.
Source: SL 1966, ch 111, ch 6, § 6.
58-27-10. Loans guaranteed by United States or Canada.
An insurer may invest in loans guaranteed as to principal and interest by the United States of America or Canada, or by any agency or instrumentality of the United States or Canada.
Source: SL 1966, ch 111, ch 6, § 7.
58-27-11. Obligations of states, provinces, and political subdivisions.
An insurer may invest any of its funds in bonds, warrants, or other evidences of indebtedness which are general obligations of, or are secured by pledge of specific revenues by, this state or of any other state of the United States or province of Canada or of any of the political subdivisions or other taxing districts of such states or provinces.
Source: SL 1966, ch 111, ch 6, § 8.
58-27-12. Revenue bonds of states, provinces, and political subdivisions.
An insurer may invest in bonds, notes, or evidences of indebtedness of any state of the United States or province of Canada, or any political subdivision thereof or any agency or instrumentality of any of the foregoing, which are payable from revenues or earnings specifically pledged for the payment of the principal and interest on such obligations, and for the payment of which a lawful debt service fund or reserve fund has been established and is being maintained.
Source: SL 1966, ch 111, ch 6, § 9.
58-27-12.1. Maximum investments in bonds, warrants, and evidence of indebtedness.
An insurer may invest up to twenty percent of its admitted assets in any bonds, warrants, or evidence of indebtedness described in §§ 58-27-11 and 58-27-12 and not rated pursuant to § 58-27-108. The valuation of such investments shall be the amortized cost of the investments or the market value of the investments, whichever is less.
Source: SL 2004, ch 309, § 1.
58-27-13. Obligations or stock of federal agencies.
An insurer may invest in the obligations, or stock thereof where stated, of the following agencies of the government of the United States of America, whether or not such obligations are guaranteed by such government:
(1) Commodity credit corporation;
(2) Federal intermediate credit banks;
(3) Federal land banks;
(4) Banks for cooperatives;
(5) Federal home loan banks, and stock thereof;
(6) Federal national mortgage association, and stock thereof when acquired in connection with sale of mortgage loans to such association; and
(7) Any other similar agency of the government of the United States of America and of similar financial quality.
Source: SL 1966, ch 111, ch 6, § 10; SL 1979, ch 37, § 7.
58-27-14. Certificates of deposit in federally insured banks.
An insurer may invest in certificates of deposit in any bank that is a member of the federal deposit insurance corporation.
Source: SL 1966, ch 111, ch 6, § 18; SL 1971, ch 265, § 1; SL 1974, ch 316.
58-27-15. Federally insured savings and loan accounts.
To the extent that such an account is insured by the Savings Association Insurance Fund (SAIF), or any successor organizations, an insurer may invest in share or savings accounts of savings and loan and building and loan associations.
Source: SL 1966, ch 111, ch 6, § 21; SL 1971, ch 265, § 2; SL 1982, ch 364; SL 1997, ch 294, § 5.
58-27-15.1. Credit Union accounts.
To the extent that such an account is insured by the National Credit Union Share Insurance Fund (NCUSIF), or any successor organizations, an insurer may invest in member accounts of federal or state-chartered credit unions.
Source: SL 1997, ch 294, § 6.
58-27-16. Obligations of international bank and certain development banks for reconstruction and development.
An insurer may invest in obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development, by the African Development Bank, or other development banks as approved by and reflected in the securities valuation manual of the National Association of Insurance Commissioners.
Source: SL 1966, ch 111, ch 6, § 11; SL 1989, ch 435.
58-27-17. Investments authorized for insurers.
An insurer may invest in:
(1) Bonds, debentures, notes, and other evidences of indebtedness, or participations thereon, issued, assumed, or guaranteed by any solvent institution existing under the laws of the United States of America or Canada, or any state or province thereof, and which bear or accrue interest at a fixed or floating rate;
(2) Secured and unsecured obligations of institutions described in subdivision (1) of this section, bearing or accruing interest at a fixed or floating rate, with mandatory principal and interest due at specified times;
(3) Adjustment, income, or other contingent interest obligations of institutions described in subdivision (1) of this section;
(4) Securities of any (a) open-end or closed-end management type investment company or investment trust fund registered under the Investment Company Act of 1940, as adopted by the director pursuant to rules promulgated pursuant to chapter 1-26, or (b) issuer meeting the requirements of Section 3(c)(1) of the Investment Company Act of 1940, as adopted by the director pursuant to rules promulgated pursuant to chapter 1-26; and
(5) Preferred shares of any solvent institution existing under the laws of the United States of America or Canada, or of any state or province thereof.
If an insurer has an investment in violation of this section, it shall divest itself of the investment pursuant to § 58-27-74.
Source: SL 1966, ch 111, ch 6, § 12 (1); SL 1992, ch 350, § 13; SL 1994, ch 384, § 2; SL 1997, ch 294, § 7.
58-27-23. Nonassessable common stock of corporation--Insurance stocks excepted.
An insurer may invest in nonassessable common shares, trust certificates, or other equity interests, excluding preferred shares, insurance stocks, or acquisitions subject to subdivision 58-27-17(5) or § 58-27-111, of any solvent institution existing under the laws of the United States of America or Canada, or any state or province thereof.
Source: SL 1966, ch 111, ch 6, § 14; SL 1997, ch 294, § 8.
58-27-24. Stock of solvent insurers meeting requirements.
An insurer may invest in the stocks of other solvent insurers formed under the laws of this or another state, which stocks meet the applicable requirements of subdivision 58-27-17(5) and § 58-27-23.
Source: SL 1966, ch 111, ch 6, § 15 (1); SL 1992, ch 350, § 19.
58-27-25. Insurer acquiring controlling interest in another stock insurer--Limitation as to amount.
An insurer may acquire and hold the controlling interest in the outstanding voting stock of another stock insurer formed under the laws of this or another state. All stocks under this section shall be subject to the limitation as to amount as provided in § 58-27-27.
Source: SL 1966, ch 111, ch 6, § 15 (2).
58-27-26. Investments in stock of majority owned subsidiary corporations.
With the consent of the director of the Division of Insurance, an insurer may invest in the stock of its majority owned subsidiary insurance corporation; or in the stock of any other majority owned corporation.
Source: SL 1966, ch 111, ch 6, § 16; SL 1969, ch 130; SL 1983, ch 376, § 3.
58-27-27. Maximum amount of investments in stock of majority owned subsidiary, or another insurer or wholly owned subsidiary.
The insurer's investments in the stock of its majority owned subsidiary insurance corporation under § 58-27-26, together with its investments in insurance stocks under § 58-27-25, may not at any time exceed the amount of the investing insurer's surplus, if a life insurer, or its surplus to policyholders if other than a life insurer. Any investment in a noninsurance majority owned corporation under § 58-27-26 is subject to the limitations under § 58-5A-73.
Source: SL 1966, ch 111, ch 6, § 16; SL 1969, ch 130; SL 1994, ch 385.
58-27-28. Equipment trust obligations or certificates.
An insurer may invest in equipment trust obligations or certificates adequately secured and evidencing an interest in transportation equipment, wholly or in part within the United States of America, which obligations or certificates carry the right to receive determined portions of rental, purchase, or other fixed obligatory payments to be made for the use or purchase of such transportation equipment.
Source: SL 1966, ch 111, ch 6, § 12 (5).
58-27-29. Foreign securities--Insurer authorized to do business in foreign country--Limitation as to amount.
An insurer authorized to transact insurance in a foreign country may make investments, in aggregate amount not exceeding its deposit and obligations incurred in such country, in securities of or in such country possessing characteristics and of a quality similar to like investments required pursuant to this chapter for investments in the United States of America. Canadian securities eligible for investment under other provisions of this chapter are not subject to this section.
Source: SL 1966, ch 111, ch 6, § 22.
58-27-30. Collateral loans--Pledge of securities--Restricted amount.
An insurer may lend and thereby invest its funds upon the pledge of securities eligible for investment under this chapter. As of the date made, no such loan shall exceed in amount seventy-five percent of the market value of such collateral pledged. The amount so loaned shall be included pro rata in determining the maximum percentage of funds permitted under this chapter to be invested in the respective categories of securities so pledged.
Source: SL 1966, ch 111, ch 6, § 20.
58-27-31. Policy loans by life insurer--Maximum amount.
A life insurer may lend to its policyholder upon pledge of the policy as collateral security, any sum not exceeding the cash surrender value of the policy; or may lend against pledge or assignment of any of its supplementary contracts or other contracts or obligations, so long as the loan is adequately secured by such pledge or assignment.
Source: SL 1966, ch 111, ch 6, § 19.
58-27-32. Real estate mortgages and deeds of trust.
An insurer may invest any of its funds in bonds, notes, or other evidences of indebtedness which are secured by first mortgages or deeds of trust on improved unencumbered real property located in the United States.
Source: SL 1966, ch 111, ch 6, § 24 (1).
58-27-33. Improved real property defined.
For the purposes of § 58-27-32, "improved real property" shall constitute only farm lands used for tillage, crop or pasture, and real estate on which permanent improvements, or improvements under construction or in process of construction, suitable for residence, institutional, commercial, or industrial use, are situated.
Source: SL 1966, ch 111, ch 6, § 27.
58-27-34. Interests and restrictions not constituting encumbrances upon improved real property.
Real property shall not be deemed to be encumbered within the meaning of § 58-27-32 by reason of the existence of instruments reserving mineral, oil, timber, or similar rights, rights-of-way, sewer rights, rights in walls, nor by reason of any liens for taxes or assessments not yet due, or on account of liens not delinquent for community recreational facilities, or for the maintenance of community facilities, nor by reason of building restrictions or other restrictive covenants common to the community in which the property is located, nor by liens for service and maintenance of water rights where not delinquent, nor when such real property is subject to lease under which rents or profits are reserved to the owner if in any event the security for the loan or investment is a first lien upon the real property.
Source: SL 1966, ch 111, ch 6, § 28 (1).
58-27-35. Deduction of sum owing on real property but not due or delinquent--Reserved rights not included in fair value of property.
If under any of the exceptions set forth in § 58-27-34 there is any sum owing but not due or delinquent, the total amount of such sum shall be deducted from the amount which otherwise might be loaned on the property. The value of any mineral, oil, timber, or similar right reserved shall not be included in the fair value of the property.
Source: SL 1966, ch 111, ch 6, § 28 (2).
58-27-36. Bonds or notes secured by mortgage or trust deed guaranteed by federal housing administration.
An insurer may invest any of its funds in bonds or notes secured by mortgage or trust deed guaranteed or insured by the federal housing administration under the terms of an act of Congress of the United States of June 27, 1934, entitled the "National Housing Act," as amended.
Source: SL 1966, ch 111, ch 6, § 24 (4).
58-27-37. Bonds or notes secured by mortgage or trust deed guaranteed by administrator of veterans' affairs.
An insurer may invest any of its funds in bonds or notes secured by mortgage or trust deed guaranteed or insured as to principal in whole or in part by the administrator of veterans' affairs pursuant to the provisions of title III of an act of Congress of the United States of June 22, 1944, entitled the "Servicemen's Readjustment Act of 1944," as amended.
Source: SL 1966, ch 111, ch 6, § 24 (5).
58-27-38. Equity of seller of real property in contract for deed--Maximum amount of investment.
An insurer may invest any of its funds in the equity of the seller of real property in a contract for deed, covering the entire balance due on a bona fide sale of such property, in amount not to exceed ten thousand dollars or the amount permissible under §§ 58-27-52 to 58-27-60, inclusive, whichever is greater, in any one such contract for deed; nor in any amount in excess of the following percentages of the actual sale price or fair value of the property, whichever is the smaller:
(1) If a dwelling primarily designed for single-family occupancy and occupied by the purchaser under such contract, seventy-five percent.
(2) In all other cases, seventy-five percent.
Source: SL 1966, ch 111, ch 6, § 24 (2).
58-27-39. Evidences of debt secured by mortgage or trust deed upon leasehold estates--Eligibility for investment.
An insurer may invest any of its funds in evidences of debt secured by first mortgages or deeds of trust upon leasehold estates, running for a term of not less than fifteen years beyond the maturity of the loan as made or as extended, in improved real property, otherwise unencumbered, and if the mortgagee is entitled to be subrogated to all the rights under the leasehold.
Source: SL 1966, ch 111, ch 6, § 24 (6).
58-27-40. Purchase money mortgage or other securities received by insurer upon sale or exchange of real property.
An insurer may invest any of its funds in purchase money mortgages or like securities received by it upon the sale or exchange of real property acquired pursuant to § 58-27-50.
Source: SL 1966, ch 111, ch 6, § 24 (3).
58-27-41. Maximum loan on security of real property--Misdemeanor.
An insurer shall not make or acquire a loan or loans upon the security of any one parcel of real property in aggregate amount in excess of ten thousand dollars or more than the amount permissible under § 58-27-53, whichever is the greater. Violation of this section is a Class 2 misdemeanor.
Source: SL 1966, ch 111, ch 6, § 26 (2); SL 1978, ch 359, § 2.
58-27-42. Real property mortgage loan limited by property value--Loan on leasehold--Additional investment in other assets.
No mortgage loan or investment in a mortgage loan upon any one parcel of real property may exceed in amount at the time of acquisition:
(1) Seventy-five percent of the fair value of the property if the property is a dwelling house primarily intended for occupancy by one family and the loan is required to be amortized within not more than thirty years by payment of installments on the loan at regular intervals not less frequent than annually; or
(2) Seventy-five percent of the fair value of the property in all other cases. However, the percentage may be up to one hundred percent if the loan is made to a corporation which qualifies under subdivision 58-27-17(2) for investment in its bonds, notes, or other evidences of indebtedness, or if the borrower assigns to the lender a noncancellable lease or leases on the real estate providing rentals payable to the borrower in amount sufficient to repay the loan with interest in the manner specified by the note or notes evidencing the loan and executed as lessee or lessees by a corporation or corporations, which qualified under subdivision 58-27-17(2) for investment in its or their bonds, notes, or other evidences of indebtedness and in each case the obligations of the borrower or of the lessee or lessees shall be rated in the three highest grades by any one of the recognized rating agencies or whose securities, if publicly issued, would qualify for a rating. The director shall define "noncancellable lease" and "recognized rating agencies" by regulation. No mortgage loan upon a leasehold may be made or acquired pursuant to this subdivision unless the terms of the mortgage loan shall provide for amortization payments to be made by the borrower on the principal thereof at least once in each year in amount sufficient to completely amortize the loan within four-fifths of the term of the leasehold which is unexpired at the time the loan is made, but in no event exceeding thirty years.
(3) An additional ten percent of the fair value of the property in excess of the limitation imposed by subdivisions (1) and (2) of this section, but not to exceed one hundred percent in all, if the excess is treated as an investment under § 58-27-51 and within the limitations imposed by the section.
An insurer's investments authorized under this section may not exceed twenty five percent of its admitted assets.
Source: SL 1966, ch 111, ch 6, § 25 (1); SL 1967, ch 130; SL 1972, ch 265; SL 1992, ch 350, § 20; SL 1995, ch 285, § 1.
58-27-43. Deduction from loan of amount guaranteed by administrator of veterans' affairs.
The extent to which a mortgage loan made under § 58-27-36 or 58-27-37 is guaranteed by the administrator of veterans' affairs may be deducted before application of the limitations contained in § 58-27-42. The provisions of § 58-27-42 shall not apply to the bonds or notes described in § 58-27-36.
Source: SL 1966, ch 111, ch 6, § 25 (2).
58-27-44. Appraisal to determine market value of property.
The fair value of property shall be determined by appraisal by a competent appraiser at the time of the making or acquisition of a mortgage loan or investing in a contract for the deed thereon; except, that as to bonds or notes secured by mortgage or trust deed guaranteed or insured by the federal housing administration, or guaranteed or insured as to principal in full or in part by the administrator of veterans' affairs, or guaranteed or insured by the farmers home administration, the valuation made by such administration or administrator shall be deemed to have been made by a competent appraiser for the purposes of this section.
Source: SL 1966, ch 111, ch 6, § 26 (1).
58-27-45. Loan on or investment in real estate mortgage on security of chattel mortgage--Limited amount.
In connection with a mortgage loan on the security of real estate designed and used primarily for residential purposes only, which mortgage loan was acquired pursuant to §§ 58-27-32 to 58-27-40, inclusive, an insurer may lend or invest an amount not exceeding twenty percent of the amount loaned on or invested in such real estate mortgage on the security of a chattel mortgage to be amortized by regular periodic payments within a term of not more than five years, and representing a first and prior lien, except for taxes not then delinquent, on personal property constituting durable equipment owned by the mortgagor and kept and used in the mortgaged premises.
Source: SL 1966, ch 111, ch 6, § 29 (1).
58-27-46. "Durable equipment" defined.
For the purposes of § 58-27-45, the term "durable equipment" shall include only mechanical refrigerators, air conditioning equipment, mechanical laundering machines, heating and cooking stoves and ranges, and, in addition, in the case of apartment houses, motels and hotels, room furniture and furnishings.
Source: SL 1966, ch 111, ch 6, § 29 (2).
58-27-47. Acquisition of chattel mortgage--Separate appraisal of included items to determine fair market value--Maximum amount of loan.
Prior to the acquisition of a chattel mortgage under § 58-27-45, items of property to be included therein shall be separately appraised by a qualified appraiser and the fair market value thereof determined. No such chattel mortgage loan shall exceed in amount the same ratio of loan to the value of the property as is applicable to the companion loan on the real property.
Source: SL 1966, ch 111, ch 6, § 29 (3).
58-27-48. Liens on personal property as additional security permitted.
Sections 58-27-45 to 58-27-47, inclusive, shall not prohibit an insurer from taking liens on personal property as additional security for any investment otherwise eligible under this chapter.
Source: SL 1966, ch 111, ch 6, § 29 (4).
58-27-49. Sale of mortgage loans to federal national mortgage association.
Notwithstanding any other provision of law, any institution, including an insurance company or other insuring organization, organized under the laws of this state, which has as one of its principal purposes the making or purchasing of loans secured by real estate mortgages, is authorized to sell such mortgage loans to the federal National Mortgage Association, a corporation chartered by an act of Congress, or any successor thereof, and in connection therewith to make payments of any capital contributions, required pursuant to law, in the nature of subscriptions for stock of the federal National Mortgage Association or any successor thereof, to receive stock evidencing such capital contributions, and to hold or dispose of such stock.
Source: SL 1955, ch 231; SDC Supp 1960, § 39.0309.
58-27-50. Restrictions on purposes and amount of real estate investments.
An insurer may invest in real estate only if used for the purposes or acquired in the manners and within the limits as follows:
(1) The land and the building thereon in which it has its principal office and such other real estate including regional home offices as shall be requisite for its convenient accommodation in the transaction of its business. Except with the consent of the director of the Division of Insurance, all such investments may not aggregate more than fifteen percent of the insurer's admitted assets;
(2) Real estate acquired in satisfaction of loans, mortgages, liens, judgments, decrees, or debts previously owing to the insurer in the course of its business;
(3) Real estate acquired in part payment of the consideration on the sale of other real estate owned by it, if such transaction does not increase the insurer's investment in real estate;
(4) Real estate acquired by gift or devise, or through merger, consolidation, or bulk reinsurance of another insurer under this title;
(5) The seller's interest in real property subject to an agreement of purchase or sale, but the sum invested in any such parcel of real estate may not exceed three-fourths of the market value of such parcel;
(6) Real estate, or any interest therein acquired or held by purchase, lease, or otherwise, other than real estate to be used primarily for agricultural, ranch, mining, development of oil or mineral resources, recreational, amusement, or club purposes, acquired as an investment for the production of income, or acquired to be improved or developed for investment purposes pursuant to an existing program therefor. The insurer may hold, improve, develop, maintain, manage, lease, sell, and convey real estate acquired by it under this section. No insurer may have at any one time invested in real estate under this subdivision an amount exceeding fifteen percent of its admitted assets, nor in any single parcel of real estate under this subdivision, an amount in excess of five percent of its admitted assets; or
(7) Additional real estate and equipment incident to real estate, if necessary or convenient for the purpose of enhancing the sale or other value of real estate previously acquired or held by the insurer under subdivision (2), (3), (4), or (6). Such real estate and equipment shall be included, together with the real estate for the enhancement of which it was acquired, for the purpose of applicable investment limits, and shall be subject to disposal at the same time and under the same conditions as applying to such enhanced real estate under §§ 58-27-70 to 58-27-72, inclusive.
Except with the director's consent, all real estate owned by the insurer under this section, except a seller's interest specified in subdivision (5) may not at any one time exceed twenty percent of the insurer's admitted assets.
Source: SL 1966, ch 111, ch 6, § 30; SL 1983, ch 376, § 4; SL 1997, ch 294, § 9.
58-27-51. Maximum investments in other assets--Exceptions.
Notwithstanding the aggregate limitations set forth in chapter 58-27, an insurer may exceed such limitations if it does not invest, in the aggregate, an amount in excess of fifty percent of its capital and surplus in excess of four hundred thousand dollars, if such investment otherwise complies with chapter 58-27. The provisions of this section do not apply to the exceptions set forth in § 58-27-53 or 58-27-57.
Source: SL 1966, ch 111, ch 6, § 23; SL 1974, ch 317; SL 1983, ch 376, § 5; SL 1985, ch 390; SL 1997, ch 294, § 10; SL 2000, ch 245, § 2; SL 2001, ch 284, § 2.
58-27-51.1. Additional investment authority--Life and health insurers.
In addition to the authority provided under § 58-27-51, an insurer authorized to write life or health insurance, or both, may invest a percentage of the amount by which the insurer's total adjusted capital equals or exceeds two hundred percent of its company action level risk-based capital in investments of any kind, in the discretion of the insurer, without regard to any condition of, restriction in, or exclusion prescribed in chapter 58-27, and regardless of whether the same or a similar type of investment has been included in, or omitted from, any such section, subject to an aggregate limitation equal to the greatest of:
(1) Fifty percent of the excess of total adjusted capital over the risk-based capital threshold if the insurer has total adjusted capital that equals or exceeds two hundred percent of its company action level risk-based capital;
(2) Seventy-five percent of the excess of total adjusted capital over the risk-based capital threshold if the insurer has total adjusted capital that equals or exceeds two hundred twenty-five percent of its company action level risk-based capital; or
(3) One hundred percent of the excess of total adjusted capital over the risk-based capital threshold if the insurer has total adjusted capital that equals or exceeds two hundred fifty percent of its company action level risk-based capital.
For the purpose of this section, risk-based capital threshold means two hundred percent of an insurer's company action level risk-based capital. The director shall promulgate rules pursuant to chapter 1-26 to define company action level risk-based capital and total adjusted capital.
Source: SL 1997, ch 294, § 11.
58-27-51.2. Additional investment authority--Property and casualty insurers.
In addition to the authority provided under § 58-27-51, an insurer authorized to write property and casualty insurance may invest a percentage of the amount by which the insurer's total adjusted capital equals or exceeds two hundred percent of its company action level risk-based capital in investments of any kind, in the discretion of the insurer, without regard to any condition of, restriction in, or exclusion prescribed in chapter 58-27, and regardless of whether the same or a similar type of investment has been included in, or omitted from, any such section, subject to an aggregate limitation equal to the greatest of:
(1) Fifty percent of the excess of total adjusted capital over the risk-based capital threshold if the insurer has total adjusted capital that equals or exceeds two hundred twenty five percent of its company action level risk-based capital;
(2) Seventy-five percent of the excess of total adjusted capital over the risk-based capital threshold if the insurer has total adjusted capital that equals or exceeds two hundred fifty percent of its company action level risk-based capital; or
(3) One hundred percent of the excess of total adjusted capital over the risk-based capital threshold if the insurer has total adjusted capital that equals or exceeds two hundred seventy-five percent of its company action level risk-based capital.
For the purpose of this section, risk-based capital threshold means two hundred percent of an insurer's company action level risk-based capital. The director shall promulgate rules pursuant to chapter 1-26 to define company action level risk-based capital and total adjusted capital.
Source: SL 1997, ch 294, § 12.
58-27-51.3. Additional investment authority--Valuation of investments.
Any investment purchased and held pursuant to § 58-27-51.1 or 58-27-51.2 shall be valued in accordance with chapters 58-26 and 58-27 or in accordance with the methods established by the National Association of Insurance Commissioners. If valuation methods are not prescribed by chapter 58-26 or 58-27, or the National Association of Insurance Commissioners has not established a valuation method for any investment, the investment must be valued at the lower of cost or market.
Source: SL 1997, ch 294, § 13.
58-27-52. Limits on categories of investments.
Except as otherwise provided in this chapter, an insurer shall invest in or hold as admitted assets categories of investments only within applicable limits as prescribed by §§ 58-27-53 to 58-27-60, inclusive.
Source: SL 1966, ch 111, ch 6, § 5; SL 1997, ch 294, § 14.
58-27-53. Maximum amount of investments or loans with one person, institution, corporation, or municipal corporation--Exceptions.
An insurer may not, except with the consent of the director, have any combination of investments in or loans upon the security of the obligations, property, or securities of any one person, institution, corporation, or municipal corporation aggregating an amount exceeding five percent of the insurer's assets. This restriction does not apply to the following:
(1) Bonds, notes, debentures, certificates, participations, or interest or other obligations issued by, or the payment of which is guaranteed or insured by, the United States Government or any agency or instrumentality or subdivision thereof;
(2) Obligations of the Student Loan Marketing Association, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation;
(3) Bonds, notes, debentures, or other obligations issued by, or the payment of which is guaranteed by, the State of South Dakota or any state as defined in subdivision 58-1-2(17); or
(4) Policy loans made under § 58-27-31 or investments made pursuant to either § 58-27-25 or 58-27-26, or both.
Source: SL 1966, ch 111, ch 6, § 5 (1); SL 1983, ch 376, § 6; SL 1993, ch 364, § 1; SL 1997, ch 294, § 15; SL 2000, ch 245, § 1; SL 2017, ch 214, § 1.
58-27-54. Maximum amount of investment in voting stock of corporation--Exceptions.
An insurer may not invest in or hold at any one time more than ten percent of the outstanding voting stock of any corporation, except with respect to voting rights of preference stock during default and of dividends; this section does not apply to stock of a majority owned subsidiary of the insurer or to controlling stock of an insurer acquired under §§ 58-27-24 to 58-27-26, inclusive.
Source: SL 1966, ch 111, ch 6, § 5 (2); SL 1983, ch 376, § 7.
58-27-55. Maintenance of invested funds--Minimum amount--Guaranteed securities--Real property.
An insurer, other than title insurer, shall invest and maintain invested funds not less in amount than the minimum paid-in capital stock required under this title of a domestic stock insurer transacting like kinds of insurance, only in cash and the securities provided for under §§ 58-27-9 to 58-27-15, inclusive, and under §§ 58-27-32 to 58-27-40, inclusive.
Source: SL 1966, ch 111, ch 6, § 5 (3).
58-27-56. Minimum investments by life insurer.
A life insurer shall also invest and keep invested its funds in amount not less than the reserves under its life insurance policies and annuity contracts in force, in cash or investments provided for under this chapter.
Source: SL 1966, ch 111, ch 6, § 5 (4).
58-27-57. Maximum amount of investment in certain classes of securities.
Except with the director's consent, no insurer may have invested at any one time more than forty percent of its assets in the class of securities described in subdivisions 58-27-17(1), (2), (3), and (4) and in § 58-27-28, exclusive of obligations of the Student Loan Marketing Association, public utilities and securities described in §§ 58-27-103 and 58-27-104, and obligations guaranteed or insured by the United States government or any instrumentality or subdivision thereof or any state as defined in subdivision 58-1-2(17). For purposes of determining compliance with this section, the investments under subdivision 58-27-17(4) are limited to those mutual funds that are investing at least ninety percent in bonds defined in subdivisions 58-27-17(1), (2), and (3) and §§ 58-27-9 to 58-27-13, inclusive.
Source: SL 1966, ch 111, ch 6, § 5 (5); SL 1992, ch 350, § 21; SL 1993, ch 364, § 5; SL 1997, ch 294, § 16; SL 2001, ch 284, § 1; SL 2017, ch 214, § 2.
58-27-58. Limitations on investments in corporate stock--Exceptions.
An insurer may invest and have invested at any one time in aggregate amount not more than twenty percent of its assets in all investments under §§ 58-27-23 and 58-27-24 and not more than twenty-five percent of its assets in all investments under subdivisions 58-27-17(4) and (5) and §§ 58-27-23 and 58-27-24. Determination of the amount which an insurer has invested for the purposes of this section shall be based on the cost of such investments to the insurer. This section does not apply to stock of a controlled or subsidiary insurance corporation or other corporation under §§ 58-27-25 and 58-27-26. This section does not apply to § 58-27-101. For purposes of determining compliance with this section, the investments under subdivision 58-27-17(4) are limited to those mutual funds investing less than ninety percent in bonds defined in subdivisions 58-27-17(1), (2), and (3) and §§ 58-27-9 to 58-27-13, inclusive.
Source: SL 1966, ch 111, ch 6, § 5 (6); SL 1983, ch 376, § 8; SL 1992, ch 350, § 22; SL 1997, ch 294, § 17.
58-27-60. Limits of investments in real estate--Law governing.
Limits as to investments in the category of real estate shall be as provided in § 58-27-50.
Source: SL 1966, ch 111, ch 6, § 5 (8).
58-27-61. Investment or loans on own capital stock.
In addition to investments excluded pursuant to other provisions of this title, no insurer may invest in or lend its funds upon the security of issued shares of its own capital stock except out of unborrowed surplus, or except in connection with a pension plan approved by the director for the benefit of the insurer's officers, employees, representatives, or insurance producers. No such stock may, however, constitute an asset of the insurer in any determination of its financial condition.
Source: SL 1966, ch 111, ch 6, § 34 (1) (a); SL 2001, ch 286, § 135.
58-27-62. Loan secured by own stock as collateral.
In addition to investments excluded pursuant to other provisions of this title, an insurer shall not invest in or lend its funds upon the security of any note or other evidence of indebtedness secured by its own stock as collateral or other than as authorized by §§ 58-27-31, 58-27-36, and 58-27-37, either directly or indirectly, to any of its officers, directors, or affiliates, except that it may make loans of the type described in §§ 58-27-32 to 58-27-40, inclusive, to corporate affiliates, provided that no such loan or loans to an affiliate or affiliates, so made or acquired, shall in the aggregate exceed forty percent of the surplus of the insurer, and no single loan shall exceed twenty percent of such surplus. The real estate involved in any such loan to an affiliate shall be worth at least double the amount loaned thereon, as justified by the appraisal report of an independent, competent, and recognized appraiser or appraisers. The investments authorized by this section may be made notwithstanding the provisions of §§ 47-1A-830 to 47-1A-833.1, inclusive, to the contrary and without liability on the part of the officers and directors specified therein.
Source: SL 1966, ch 111, ch 6, § 34 (1) (c); SL 2005, ch 202, § 25.
58-27-64. Affiliate defined.
The term "affiliate" when used in §§ 58-27-62 to 58-27-66, inclusive, shall mean any person, firm, trust, corporation, or other business entity, which by stock ownership or by any contractual arrangement whatsoever, has the power, either directly or indirectly, to control twenty-five percent or more of the voting shares or voting rights of such insurer or any such organization which is similarly controlled by any such insurer to such extent and all other affiliates of any such affiliate.
Source: SL 1966, ch 111, ch 6, § 34 (1) (e).
58-27-65. Finding of director that security designed to evade chapter--Investment or loan prohibited.
In addition to investments excluded pursuant to other provisions of this title, an insurer shall not invest in or lend its funds upon the security of any investment or security which is found by the director to be designed to evade any prohibition of this chapter.
Source: SL 1966, ch 111, ch 6, § 34 (1) (b).
58-27-66. Pension or profit-sharing trust agreement not prohibited.
The provisions of §§ 58-27-62 and 58-27-65 shall not be construed to prohibit the making of pension or profit-sharing trust agreements involving the employees of affiliates or consolidations, mergers, or other transactions otherwise authorized by this title.
Source: SL 1966, ch 111, ch 6, § 34 (1) (f).
58-27-67. Underwriting of securities or property prohibited.
No insurer shall underwrite or participate in the underwriting of an offering of securities or property by any other person.
Source: SL 1966, ch 111, ch 6, § 34 (2).
58-27-68. Foreign insurer--Permitted investment portfolio--Domicile of alien insurer.
The investment portfolio of a foreign insurer shall be as permitted by the laws of its domicile but shall be of a quality substantially as high as that required under this chapter for similar funds of like domestic insurers. For the purposes of this provision, the domicile of an alien insurer, other than a life insurer formed under the laws of Canada, shall be deemed to be that state in which it maintains its principal deposit.
Source: SL 1966, ch 111, ch 6, § 35.
58-27-69. Authorization of investment or loan by board or committee of insurer.
An insurer may not make any investment or loan, other than policy loans or annuity contract loans of a life insurer, unless the same is authorized, approved, or ratified by the insurer's board of directors or by a committee authorized by such board and charged with the supervision or making of such investment or loan. The minutes of any such committee shall be recorded and regular reports of such committee shall be submitted to the board of directors.
Source: SL 1966, ch 111, ch 6, § 4; SL 1997, ch 294, § 19.
58-27-70. Disposal of real estate unnecessary for transaction of insurance business--Time limit.
Except as stated in § 58-27-72, the insurer shall dispose of real estate acquired under subdivision 58-27-50(1) within five years after it has ceased to be necessary for the convenient accommodation of the insurer in the transaction of its business.
Source: SL 1966, ch 111, ch 6, § 31 (1).
58-27-71. Disposal of real estate acquired in satisfaction of debt, as part payment of consideration on sale of real estate, as gift or devise, or through merger, consolidation, or bulk reinsurance--Time limit.
Except as stated in § 58-27-72, the insurer shall dispose of real estate acquired under subdivisions 58-27-50(2), (3), and (4) within five years after the date of acquisition. The insurer may agree to sell such real estate by contract for deed upon the best terms obtainable.
Source: SL 1966, ch 111, ch 6, § 31 (2).
58-27-72. Extension of time for disposal of real estate--Election to hold as investment for income purposes, acquisition cost.
Upon proof satisfactory to him that the interests of the insurer will suffer materially by the forced sale thereof, the director may by order grant a reasonable extension of the period, as specified in such order, within which the insurer shall dispose of any particular parcel of such real estate; unless the insurer elects to hold such real estate as an investment for income purposes under subdivision 58-27-50(6), in which event thereafter such real estate shall be deemed to have been acquired at a cost equal to its book value at the time of such election and to be held under, and subject to, the provisions of subdivision 58-27-50(6).
Source: SL 1966, ch 111, ch 6, § 31 (3).
58-27-73. Immediate disposal of ineligible property or security unlawfully acquired.
Any ineligible property or security unlawfully acquired by an insurer shall be disposed of forthwith, and for failure so to do within thirty days after order of the director requiring such disposal, the director may suspend or revoke the insurer's certificate of authority.
Source: SL 1966, ch 111, ch 6, § 32 (3).
58-27-74. Disposal of lawfully acquired ineligible property--Extension of time.
Any personal property or securities lawfully acquired by an insurer which it could not otherwise have invested in or loaned its funds upon at the time of such acquisition, shall be disposed of by the insurer within one year from date of acquisition, unless within such period the security has attained the standard for eligibility. The director, upon application and proof that forced sale of any such property or security would be against the best interests of the insurer, may extend the disposal period for an additional reasonable time.
Source: SL 1966, ch 111, ch 6, § 32 (1).
58-27-75. Ineligible personal property or securities not allowable as assets of insurer.
While any property or security described in § 58-27-74 remains so ineligible it shall not be allowed as an asset of the insurer.
Source: SL 1966, ch 111, ch 6, § 32 (2).
58-27-76. Expiration of period for disposal of ineligible property or securities--Disallowance as admitted asset.
Any real estate, personal property, or securities acquired and held by an insurer after expiration of the period for disposal thereof or any extension of such period granted by the director, as provided in §§ 58-27-50 and 58-27-70 to 58-27-75, inclusive, shall not be allowed as an admitted asset of the insurer.
Source: SL 1966, ch 111, ch 6, § 33 (1).
58-27-77. Immediate disposal of ineligible investment unlawfully acquired.
The insurer shall forthwith dispose of any ineligible investment unlawfully acquired by it, and the director may suspend or revoke the insurer's certificate of authority if the insurer fails to dispose of the investment within such reasonable time as the director may, by his order, specify.
Source: SL 1966, ch 111, ch 6, § 33 (2).
58-27-78. Nominee holding investments--Definitions.
Terms used in §§ 58-27-78 to 58-27-84, inclusive, mean:
(1) "Clearing corporation," a corporation as defined in subdivision 57A-8-102(5);
(2) "Custodian bank," any bank or trust company which is supervised or examined by a state or federal authority having supervision over banks and which may act as custodian for an insurer;
(3) "Member bank," a national bank, state bank, or trust company which is a member of the United States Federal Reserve System;
(4) "Securities lending transaction," a transaction in which securities are loaned by an insurer to an institution that is obligated to return equivalent or substantially similar securities to the insurer, either within a specified period of time or upon demand;
(5) "Reverse repurchase transaction," a transaction in which an insurer sells securities to an institution and is obligated to repurchase equivalent or substantially similar securities from the institution at a specified price, either within a specified period of time or upon demand;
(6) "Repurchase transaction," a transaction in which an insurer purchases securities from an institution that is obligated to repurchase equivalent or substantially similar securities from the insurer at a specified price, either within a specified period of time or upon demand;
(7) "Dollar roll transaction," two simultaneous transactions with different settlement dates no more than ninety-six days apart, so that in the transaction with the earlier settlement date, an insurer sells to an institution, and in the other transaction, the insurer is obligated to purchase from the same institution, substantially similar securities of the following type:
(a) Securities issued, assumed, or guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation, or their respective successors;
(b) Securities referred to in Section 106 of Title I of the Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C. § 77r-1), as adopted by the director pursuant to rules promulgated pursuant to chapter 1-26;
(c) Any other securities approved by the director;
(8) "Substantially similar securities," securities of the same issuer having similar features that meet all criteria for substantially similar or equivalent securities specified in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, as adopted by the director pursuant to rules promulgated pursuant to chapter 1-26; and
(9) "Securities," any investment of the type authorized or permitted under chapter 58-27.
Source: SL 1983, ch 377, § 1; SL 1997, ch 294, § 20; SL 2017, ch 214, § 3.
58-27-79. Name in which investments held.
A company's investments shall be held in its own name or the name of its nominee. However, this provision does not apply under the circumstances outlined in §§ 58-27-80 to 58-27-83, inclusive.
Source: SL 1983, ch 377, § 2.
58-27-80. Holding in name of clearing corporation, custodian bank or nominee--Conditions.
Investments may be held in the name of a clearing corporation or of a custodian bank or in the name of the nominee of either under the following conditions:
(1) The clearing corporation, custodian bank, or nominee is legally authorized to hold the particular investment for the account of others;
(2) If the investment is evidenced by a certificate and held in the name of a custodian bank or the nominee of a custodian bank, a written agreement shall provide that certificates so deposited shall at all times be kept separate and apart from other deposits with the depository so that at all times they may be identified as belonging solely to the company making the deposit; and
(3) If a clearing corporation is to act as depository, the investment may be merged or held in bulk in the clearing corporation's or its nominee's name with other investments deposited with the clearing corporation by any other person if a written agreement provides that adequate evidence of the deposit is to be obtained and retained by the company or a custodian bank.
Source: SL 1983, ch 377, § 3.
58-27-81. Securities lending, repurchase, reverse repurchase and dollar roll transactions--Agreement required.
An insurer may enter into securities lending, repurchase, reverse repurchase, and dollar roll transactions subject to the following requirements:
(1) A written plan or investment policy that specifies guidelines and objectives relating to such transactions shall be adopted by the insurer's board of directors or a committee authorized and charged by such board with the supervision or making of investments or loans;
(2) All transactions entered into pursuant to this section, other than dollar roll transactions, shall be subject to a written agreement, including a master agreement for a series of transactions or an agreement with an agent acting on behalf of the insurer, which provides that:
(a) Transactions authorized in this section shall be fully collateralized by cash or eligible securities as permitted or authorized under chapter 58-27 excluding any investments acquired under § 58-27-51.1 or 58-27-51.2;
(b) The collateral shall be marked to market each business day and adjusted as needed to comply with subsection (a) of this subdivision;
(c) For purposes of this agreement, market value shall include accrued interest; and
(d) The insurer may retain the collateral or use the collateral to purchase investments equivalent to the loaned securities if the borrower defaults under the terms of the agreement and the borrower remains liable for any losses and expenses incurred by the insurer due to default that are not covered by the collateral;
(3) Any transaction entered into pursuant to this section may be terminated at a specified time or upon the earlier demand of the insurer;
(4) Any cash received by an insurer in a transaction under this section shall be invested in accordance with chapter 58-27 and in a manner that recognizes the liquidity needs of the transaction or used by the insurer for its general corporate purposes;
(5) An insurer is limited to no more than five percent of its admitted assets being subject to securities lending, repurchase, or reverse repurchase transactions outstanding with any one institution under this section;
(6) No more than forty percent of an insurer's admitted assets in the aggregate may be subject to securities lending, repurchase, and reverse repurchase transactions.
The director of the Division of Insurance may promulgate rules pursuant to chapter 1-26 to establish financial solvency standards, valuation standards, and reporting requirements for investments and transactions under this section.
Source: SL 1983, ch 377, § 4; SL 1997, ch 294, § 21.
58-27-82. Participation in federal reserve book-entry system.
A company may participate through a member bank in the federal reserve book-entry system and the records of the member bank shall at all times show that the investments are held for the company or for specific accounts of the company.
Source: SL 1983, ch 377, § 5.
58-27-83. Interest in pool of obligations--Fractional interest in an obligation--Requirements.
An investment may consist of an individual interest in a pool of obligations or a fractional interest in a single obligation if the certificate of participation or interest or the confirmation of participation or interest in the investment is issued in the name of the company or the name of the custodian bank or the nominee of either and if the certificate or confirmation must, if held by a custodian bank, be kept separate and apart from the investments of others so that at all times the participation may be identified as belonging solely to the company making the investment.
Source: SL 1983, ch 377, § 6.
58-27-84. Evidence of investment required in absence of certificate.
If an investment is not evidenced by a certificate, except as provided in § 58-27-82, adequate evidence of the insurer's investment shall be obtained and retained by the insurer, a custodian bank, or clearing corporation. Adequate evidence, for purposes of this section, means a written receipt or other verification issued by the depository or issuer or a custodian bank which shows that the investment is held for the insurer, or if applicable under § 58-27-111, limited partnership or joint venture documentation. Transfers of ownership of investments held as described in subdivision 58-27-80(3), §§ 58-27-82 and 58-27-83 may be evidenced by bookkeeping entry on the books of the issuer of the investment or its transfer or recording agent or the clearing corporation without physical delivery of certificates, if any, evidencing the insurer's investment.
Source: SL 1983, ch 377, § 7; SL 1997, ch 294, § 22.
58-27-85. Banking business authorized--Acquisition of banks--Regulation of such banking business.
Any insurance company, directly or through subsidiaries, may engage in all facets of the banking business. Any such insurance company may acquire all or substantially all of the shares of an existing bank which is established under the laws of this state or any other state. Any such banking business is subject to the same laws and regulations and the application thereof by the Division of Banking as are applicable to the operation of banks which are unaffiliated with insurance companies.
Source: SL 1983, ch 376, § 10.
58-27-86. Approval of banking acquisition required--Considerations in determining--Conditions.
Any acquisition under § 58-27-85 is subject to approval by the Division of Insurance. In considering an application for approval, the division may consider whether, in the case of an insurance company, the economic advantages to the state in terms of employment and capital investment are adequate to permit approval of the application. Any approval granted to an insurance company or an insurance holding company by the division is subject to such conditions as the division deems necessary and to the division's continuing authority to ascertain the insurance company's compliance with the provisions of this section and the conditions of approval.
Source: SL 1983, ch 376, § 11.
58-27-87. Banking patronage as prerequisite to issuance of insurance policy prohibited.
No insurance company as a prerequisite to the sale of an insurance policy may require the insured or those purchasing insurance on his behalf to do banking business with any insurance company or a subsidiary bank.
Source: SL 1983, ch 376, § 12.
58-27-88. Limitation on application of Secondary Mortgage Market Enhancement Act to certain investments.
Any investments set forth in section 106 of the Secondary Mortgage Market Enhancement Act of 1984 (PL 98-440) shall be approved by the director. The director may limit the amount in each investment or disapprove the investment.
Source: SL 1991, ch 403.
58-27-89. Definition of terms.
Terms used in §§ 58-27-89 to 58-27-102, inclusive, mean:
(1) "Admitted assets," assets as shown by the insurer's annual statement as of the December thirty-first next preceding date of acquisition of the investment by the insurer, or as shown by a current financial statement filed with the director, computed in the same manner as admitted assets in chapter 58-26, and for purposes of computing any limitation based upon admitted assets, the insurer shall deduct from the amount of its admitted assets the amounts specified in subdivisions (1) to (3) of § 58-27-6;
(2) "Aggregate amount of medium to lower quality obligations," the aggregate statutory statement value thereof;
(3) "Lower grade obligations," obligations and preferred shares which are rated four, five, or six by the Securities Valuation Office of the National Associations of Insurance Commissioners;
(4) "Medium grade obligations," obligations and preferred shares which are rated three by the Securities Valuation Office of the National Association of Insurance Commissioners.
Source: SL 1992, ch 350, § 1; SL 1994, ch 384, § 3; SL 1997, ch 294, § 23.
58-27-90. Limitations on acquiring medium or lower grade obligations.
No domestic insurer may acquire, directly or indirectly, any medium or lower grade obligation of any institution if, after acquisition, the aggregate amount of all medium and lower grade obligations then held by the domestic insurer would exceed twenty percent of its admitted assets. Of that twenty percent, no more than ten percent may consist of obligations rated four, five, or six. Of the ten percent, not more than three percent may be a combination of obligations rated five and six. Obligations rated six may not exceed one percent. Attaining or exceeding the limit of any one category does not preclude an insurer from acquiring obligations in other categories subject to the specific and multi-category limits. An insurer may exceed the limit of any one category if the rating of an obligation changes after the purchase, but at no time may the insurer exceed the twenty percent limitation.
Source: SL 1992, ch 350, § 2.
58-27-91. Obligations contracted prior to July 1, 1992.
A domestic insurer is not prohibited from acquiring an obligation if, before July 1, 1992, it was contractually committed to acquire and it would have been permitted to acquire but it shall notify the director of the acquisition and submit a copy of the contract.
Source: SL 1992, ch 350, § 3.
58-27-92. Multiple obligations in same institution.
Notwithstanding the requirements of §§ 58-27-89 and 58-27-90, a domestic insurer may acquire an obligation of an institution in which the insurer already has one or more obligations, if the obligation is acquired in order to protect an investment previously made in the obligations of the institution, provided that all acquired obligations may not exceed one-half of one percent of the insurer's admitted assets.
Source: SL 1992, ch 350, § 4.
58-27-93. Written plans for making medium or lower grade obligations--Contents of plan--Deadline.
The board of directors of any domestic insurance company which acquires or invests in, directly or indirectly, medium or lower grade obligations of any institution, shall adopt a written plan for the making of those investments. The plan, in addition to guidelines with respect to the quality of the issues invested in, shall contain diversification standards including standards for issuer, industry, duration, liquidity, and geographic location. Within one year from July 1, 1992, the board shall have adopted a plan.
Source: SL 1992, ch 350, § 5.
58-27-94. Limit on amount invested in medium or lower grade obligations.
No domestic insurer may invest more than an aggregate of one percent of its admitted assets in medium grade obligations issued, guaranteed, or insured by any one institution nor may it invest more than one-half of one percent of its admitted assets in lower grade obligations issued, guaranteed, or insured by any one institution. In no event, however, may a domestic insurer invest more than one percent of its admitted assets in any medium or lower grade obligations issued, guaranteed, or insured by any one institution.
Source: SL 1992, ch 350, § 6.
58-27-95. Restructuring of medium or lower grade obligation already held.
A domestic insurer is not prohibited from acquiring an obligation as a result of a restructuring of a medium or lower grade obligation already held.
Source: SL 1992, ch 350, § 7.
58-27-96. Conflicting provisions.
If any provision of this Title conflicts with the provisions of §§ 58-27-89 to 58-27-102, inclusive, and has a lesser standard of investment, the provisions of §§ 58-27-89 to 58-27-102, inclusive, shall prevail.
Source: SL 1992, ch 350, § 8.
58-27-97. Excess transactions.
If an insurer exceeds any one category, the excess is nonadmitted and the director may require the company to increase capital and surplus to protect policyholders. The insurer's excess transaction is also subject to § 58-27-74.
Source: SL 1992, ch 350, § 9.
58-27-98. Promulgation of rules.
The director may promulgate rules, pursuant to chapter 1-26, for determining the quality and quantity of investments and assets.
Source: SL 1992, ch 350, § 10.
58-27-99. Application of §§ 58-27-89 to 58-27-102.
Sections 58-27-89 to 58-27-102, inclusive, applies to all persons doing insurance business notwithstanding any provision exempting them from other insurance laws except insurers licensed pursuant to chapter 58-35.
Source: SL 1992, ch 350, § 11.
58-27-100. Time limit for compliance with §§ 58-27-89 to 58-27-102.
All persons subject to §§ 58-27-89 to 58-27-102, inclusive, shall be in compliance with §§ 58-27-89 to 58-27-102, inclusive, by July 1, 1993. The director may establish limitations on the obligations or time frames for those persons to reduce obligations in violation of §§ 58-27-89 to 58-27-102, inclusive.
Source: SL 1992, ch 350, § 12.
58-27-101. Investment in money market funds.
The term, money market fund, means any open end, diversified management type of mutual fund registered under the Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., as adopted by the director pursuant to rules promulgated pursuant to chapter 1-26, the moneys of which are invested only in the following kinds of investments, none of which shall mature more than three hundred ninety-seven days from the date of acquisition by the mutual fund:
(1) Securities issued or guaranteed as to principal and interest by the government of the United States or by agencies, government sponsored enterprises, or instrumentalities thereof;
(2) Certificates of deposit and bankers' acceptances of banks chartered by the United States or any state thereof or foreign branches of such banks;
(3) Commercial paper and other obligation of corporations chartered by or under the laws of the United States or any state thereof;
(4) Repurchase agreements with respect to those investments; and
(5) Dollar-denominated unsecured promissory obligations of foreign corporations which have an investment grade rating from at least one rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners.
Insurance companies may invest in the shares of any one or more money market funds the objectives of which include the maintenance of a stable net asset value of a specified dollar amount per share and the shareholders of which may withdraw the value of their shares by check, telephone, or mail.
In addition to the forty percent investment limitation available for money-market fund investments pursuant to § 58-27-57, an insurer may acquire additional money market funds pursuant to this section not to exceed ten percent of its admitted assets. The aggregate value of all money market shares which may be acquired under this section and § 58-27-57 may not exceed fifty percent of the insurance company's total admitted assets. At the time of the investment, no insurance company's investment may exceed five percent of the outstanding shares of any one money market fund. No investment may exceed the lesser of the amount in this section or the amount in § 58-27-53.
The limitations set forth in this section do not apply to investments in money market funds in which portfolio assets are invested entirely in the type of securities permitted pursuant to §§ 58-27-9 to 58-27-13, inclusive.
Source: SL 1992, ch 350, § 24; SL 1994, ch 384, § 5; SL 1997, ch 294, § 24.
58-27-102. Investment in company owned life insurance contracts.
An insurer may invest in company owned life insurance contracts if:
(1) The life insurance is whole life;
(2) The life insurance contract does not vest in any employee of the insurer; and
(3) The company is the beneficiary and has an insurable interest.
All cash values of life insurance contracts owned by the insurers under this section may not at any one time exceed five percent of the insurers' admitted assets.
Source: SL 1992, ch 350, § 25.
58-27-103. Investment in a collateralized pool of mortgages--Requirements--Restrictions.
In addition to investment in mortgages in §§ 58-27-32 to 58-27-48, inclusive, an insurer may invest in obligations or certificates entitled to receive both principal and interest, or both principal and implied interest, from a pool collateralized by one or more commercial and residential mortgages. The collateral for the investments shall have been sold to and be currently owned by either a trust or institution established solely for the purpose of holding the mortgages or certificates for the benefit of the obligee. Any investment authorized under this section shall have a minimum quality rating of two by the Securities Valuation Office of the National Association of Insurance Commissioners and shall meet volatility standards. If at any time thereafter the quality rating drops below a rating of two the insurer is subject to § 58-27-90. The director shall promulgate rules pursuant to chapter 1-26 to set volatility standards and reporting requirements for investments under this section.
An insurer's investments authorized under this section may not exceed forty percent of its admitted assets. This restriction does not apply to obligations of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and those issued, assumed, guaranteed, or insured by the United States or a government sponsored enterprise of the United States, if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States.
Any particular investment held by an insurer on February 7, 1995, under this section, which was a legal investment at the time it was made, and which is the type of investment the insurer was legally entitled to possess under this section immediately prior to February 7, 1995, is considered an eligible investment under this section. Any additional investment pursuant to this section may not be made if the total amount invested would at any time exceed forty percent of admitted assets.
Source: SL 1993, ch 364, § 2; SL 1994, ch 384, § 6; SL 1995, ch 285, § 2; SL 1995, ch 286; SL 1996, ch 299; SL 1997, ch 294, § 25.
58-27-104. Investment in a collateralized pool of assets other than mortgages--Requirements.
An insurer may invest in an interest in a collateralized pool whose underlying assets are not addressed or may be prohibited by chapter 58-26 or 58-27. An insurer may invest in interest-bearing obligations entitled to receive both principal and interest, or both principal and implied interest, from a pool collateralized by one or more assets other than those authorized in § 58-27-103. The collateral for the investments shall have been sold to and be currently owned by a trust or corporation established solely for the purpose of holding the assets for the benefit of the obligee. Any investment authorized under this section shall have a minimum quality rating of two by the Securities Valuation Office of the National Association of Insurance Commissioners. If at any time thereafter the quality rating drops below a rating of two the insurer is subject to § 58-27-90.
An insurer's investments authorized under this section may not exceed forty percent of its admitted assets.
If the underlying investment of the pool is an investment set forth in chapters 58-26 and 58-27, any requirement or limitation for that investment shall apply. This section is subject to the five percent limitation of § 58-27-53.
Source: SL 1993, ch 364, § 3; SL 1994, ch 384, § 7; SL 1997, ch 294, § 26.
58-27-105. Foreign investments.
An insurer may invest in securities or other investments which are issued or denominated in the currency of countries other than the United States or whose obligor is domiciled in another country. The securities and investments shall meet the limitation, quality, and quantity requirements of chapters 58-26 and 58-27.
The investments in other countries may not exceed in the aggregate twenty percent of the insurer's admitted assets or one hundred percent of capital and surplus, whichever is less.
Source: SL 1993, ch 364, § 4; SL 1997, ch 294, § 27.
58-27-107. Ratification of investment.
Any investment satisfying the provisions of § 58-27-53, 58-27-57, 58-27-103, 58-27-104, or 58-27-105 entered into before January 1, 1993, is hereby ratified.
Source: SL 1993, ch 364, § 7; SL 1997, ch 294, § 29.
58-27-108. Rating and valuation of investments--Requirements--Divestment.
Any investment shall be rated and valued in accordance with standards promulgated by the Securities Valuation Office of the National Association of Insurance Commissioners as adopted by the director pursuant to rules promulgated pursuant to chapter 1-26. The rating of the investment must comply with the statutory requirement for the investment.
Any insurer may purchase any investment not rated by the Securities Valuation Office of the National Association of Insurance Commissioners if the investment has received an equivalent rating by an independent rating agency which is recognized by the Securities Valuation Office. If the insurer purchases an investment not previously rated and valued by the Securities Valuation Office, application for a rating and valuation shall be filed in accordance with the standards promulgated by the Securities Valuation Office. If the investment, when rated by the Securities Valuation Office, does not comply with the statutory requirement, the insurer must divest of the investment pursuant to § 58-27-97.
Nothing in this section is applicable to the assets in any separate accounts maintained by the insurer.
Source: SL 1994, ch 384, § 1; SL 1997, ch 294, § 30.
58-27-109. Institution defined.
For purposes of this chapter, an institution is a corporation, a joint stock company, an association, a trust, a business partnership, a business joint venture, or a similar entity.
Source: SL 1994, ch 384, § 4.
58-27-110. Title plans investments.
A domestic title insurer may make investments in title plants in an aggregate amount not exceeding twenty-five percent of the insurer's assets.
Source: SL 1997, ch 294, § 32.
58-27-111. Joint venture and limited partnership investments.
Notwithstanding direct investment limitations applicable to real estate, securities, and other assets as provided in this chapter, an insurer may become a limited partner in a limited partnership or invest in a joint venture with equity interests in real estate, securities, or other assets. Investments made under this section are treated as a permitted investment under §§ 58-27-51, 58-27-51.1, and 58-27-51.2, and within the limitations imposed by those sections. An insurer may not invest more than five percent of its admitted assets in any one limited partnership or joint venture. Determination of the amount an insurer has invested in limited partnerships or joint ventures for the purposes of this section shall be based on the cost of such investments to the insurer. Any investment satisfying the provisions of this section and entered into before July 1, 1997, is hereby ratified.
Source: SL 1997, ch 294, § 33.