Section 38-12-40 - Insurer acquisitions, holdings or investments(A) Insurers may acquire, hold, or invest in investments or engage in investment practices as provided in this chapter or as is not prohibited otherwise by this title including, without limitation, investments permitted pursuant to Chapter 21 of this title. Investments not conforming to this chapter are not admitted assets unless they are acquired pursuant to other authority of this title.(B) Subject to subsection (C), an insurer may not acquire or hold an investment as an admitted asset unless at the time of acquisition it is:(1) eligible for the payment or accrual of interest or discount, whether in cash, securities, or other forms of income, or eligible to receive dividends or other distributions, or is otherwise income producing; or(2) acquired pursuant to Sections 38-12-270(C), 38-12-280, 38-12-300, 38-12-320, 38-12-480(C), 38-12-490, 38-12-510, 38-12-520, or other sections of this title.(C) An insurer may acquire or hold as admitted assets investments that otherwise do not qualify as provided in this chapter if the insurer has not acquired them for the purpose of circumventing a limitation contained in this chapter, if the insurer complies with the provisions of Sections 38-12-60 and 38-12-80 as to the investments and the insurer acquires the investments:(1) as payment on account of existing indebtedness or in connection with the refinancing, restructuring, or workout of existing indebtedness, if taken to protect the insurer's interest in that investment;(2) as realization on collateral for an obligation;(3) in connection with an otherwise qualified investment or investment practice, as interest on or a dividend or other distribution related to the investment or investment practice, or in connection with the refinancing of the investment, in each case for no additional or only nominal consideration;(4) under a lawful and bona fide agreement of recapitalization or voluntary or involuntary reorganization in connection with an investment held by the insurer; or(5) under a bulk reinsurance, merger, or consolidation transaction approved by the director if the assets constitute admissible investments for the ceding, merged, or consolidated companies.(D) An investment or portion of an investment acquired by an insurer pursuant to subsection (C) becomes a nonadmitted asset three years, or five years in the case of mortgage loans and real estate, from the date of its acquisition, unless within that period the investment has become a qualified investment pursuant to a provision of this chapter other than subsection (C). An investment acquired pursuant to an agreement of bulk reinsurance, merger, or consolidation may be qualified for a longer period if provided in the plan for reinsurance, merger, or consolidation as approved by the director. The director may extend the period for admissibility for an additional reasonable period, upon application by the insurer and a showing that the nonadmission of an asset held pursuant to subsection (C) would injure materially the interests of the insurer.(E) Except as otherwise provided in subsections (F) and (H), an investment qualifies pursuant to this chapter if, on the date the insurer committed to acquire the investment or on the date of its acquisition, it would have qualified pursuant to this chapter. For purposes of determining its compliance with the limitations contained in this chapter, an insurer shall give appropriate recognition to any commitments to acquire investments.(F)(1) An investment held as an admitted asset by an insurer on the effective date of this chapter which qualified as an admitted asset immediately before the effective date of this chapter remains qualified as an admitted asset pursuant to this chapter.(2) Each specific transaction constituting an investment practice of the type described in this chapter that lawfully was entered into by an insurer and was in effect on the effective date of this chapter continues to be permitted by this chapter until its expiration or termination under its terms.(G) Unless otherwise specified, an investment limitation computed on the basis of the admitted assets or capital and surplus of an insurer must relate to the amount required to be shown on the statutory balance sheet most recently required to be filed by the insurer with the director. For purposes of determining its compliance with any limitation pursuant to this chapter based upon admitted assets, the insurer shall deduct from the amount of its admitted assets the amount of the liability recorded on the statutory balance sheet for:(1) the return of acceptable collateral received in a reverse repurchase transaction or a securities lending transaction;(2) cash received in a dollar roll transaction; and(3) the amount reported as borrowed money in the most recently filed financial statement to the extent not included in items (1) and (2).(H) An investment qualified, in whole or in part, for acquisition or holding as an admitted asset may be qualified or requalified at the time of acquisition or a later date, in whole or in part, pursuant to another section, if the relevant conditions contained in the other section are satisfied at the time of qualification or requalification.(I) An insurer shall maintain documentation demonstrating that the insurer acquired investments and engaged in investment practices in accordance with this chapter, and specifying the section of this chapter pursuant to which the insurer acquired the investments or engaged in the investment practices.(J) An insurer may not enter into an agreement to purchase securities in advance of their issuance for resale to the public as part of a distribution of the securities by the issuer or otherwise guarantee the distribution, except that an insurer may acquire privately placed securities with registration rights.(K) Notwithstanding the provisions of this chapter, the director, for good cause, may require an insurer to nonadmit, limit, dispose of, withdraw from, or discontinue an investment or investment practice. The authority of the director under this subsection is in addition to any other authority of the director.2002 Act No. 319, Section 2, eff 6/3/2002.