Section 23-63-805 - Diversification of investments - DefinitionsAn insurer shall invest in or hold as admitted assets categories of investments only within applicable limits as follows:
(1)One Person.(A)(i)(a) Except with the consent of the Insurance Commissioner and except as otherwise specified in this subchapter, an insurer shall not have, directly or indirectly through an investment subsidiary, an investment under this subchapter if, as a result of and after giving effect to the investment, the insurer holds more than five percent (5%) of its admitted assets in investments of all kinds issued, assumed, accepted, insured, or guaranteed by a single person or five percent (5%) of its admitted assets in investments in the voting securities of a depository institution or any company that controls the institution.(b) The five percent (5%) limitation under subdivision (1)(A)(i)(a) of this section shall not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.(ii)(a) Investments in certificates of deposit and savings and loan association deposits in any one (1) person may be the greater of:(1) Ten percent (10%) of the insurer's assets; or(2) The maximum amount of federal insurance applicable to the deposit.(b) The restriction under subdivision (1)(A)(i)(a) of this section does not apply to general obligations of the United States or any state or include policy loans made under § 23-63-821.(iii) The applicable limitation shall be twenty-five percent (25%) rather than five percent (5%) for investments permitted under § 23-63-812.(B) If upon enactment, the immediate application of this provision would have the effect of reducing the admitted asset value of assets held by a particular insurer, the insurer may continue to reflect as admitted those assets that would be admissible but for the enactment of this provision, until the annual statement filing for the year ended December 31, 2004;(2)Minimum Capital. An insurer, other than a title insurer, shall invest and maintain invested funds not less in amount than the minimum paid-in capital stock required under the Arkansas Insurance Code of a domestic stock insurer transacting like kinds of insurance only in cash and the securities provided for under §§ 23-63-806, 23-63-808, and 23-63-826;(3)Life Insurance Reserves. A life insurer shall also invest and keep invested its funds in amount not less than seventy-five percent (75%) of the reserves under its life insurance policies and annuity contracts, other than variable annuities, in force, in cash, securities, or investments allowed under this subchapter, other than stocks of subsidiaries of the insurer;(4)Common Stocks. An insurer, other than a life insurer, may invest and have invested at any one (1) time an aggregate amount not more than twenty-five percent (25%) of its assets in all stocks under § 23-63-816 concerning common stocks, § 23-63-817 concerning insurance stocks, and § 23-63-820 concerning investment trust securities. A life insurer may so invest and have invested in the stocks no more than ten percent (10%) of its assets. This provision shall not apply as to stock of a controlled or subsidiary insurance corporation or other corporation under § 23-63-817 or § 23-63-818, or as to variable annuities;(5)Miscellaneous. Except with the commissioner's consent, an insurer shall not have invested at any one (1) time more than twenty percent (20%) of its assets in the class of securities described in §§ 23-63-815 and 23-63-819;(6)Other Specific Limits. Limits as to investments in the category of real estate shall be as provided in § 23-63-828. Other specific limits shall apply as stated in the sections dealing with other respective kinds of investments; and(7)Limitations on Acquisitions and Investments. Notwithstanding any other provision of this subchapter to the contrary: (A)(i) No insurer shall acquire, directly or indirectly, any medium grade or lower grade obligation of any institution if, after giving effect to any such acquisition, the aggregate amount of all medium grade and lower grade obligations then held by the domestic insurer would exceed twenty percent (20%) of its admitted assets, provided that no more than ten percent (10%) of its admitted assets consist of obligations rated four (4), five (5), or six (6) by the Securities Valuation Office of the National Association of Insurance Commissioners, and no more than three percent (3%) of its admitted assets consist of obligations rated five (5) or six (6) by the Securities Valuation Office, and no more than one percent (1%) of its admitted assets consist of obligations rated six (6) by the Securities Valuation Office. Attaining or exceeding the limit of any one (1) category shall not preclude an insurer from acquiring obligations in other categories subject to the specific and multicategory limits.(ii)(a) No insurer may invest more than an aggregate of one percent (1%) of its admitted assets in medium grade obligations issued, guaranteed, or insured by any one (1) person or institution, nor may it invest more than one-half of one percent (0.5%) of its admitted assets in lower grade obligations issued, guaranteed, or insured by any one (1) person or institution.(b) In the case of a downgrade of securities held by an insurer, the commissioner may grant temporary relief from the investment limitations on medium grade obligations and lower grade obligations.(iii) An insurer may acquire an obligation of an institution in which the insurer already has one (1) 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 such acquired obligations shall not exceed one-half of one percent (0.5%) of the insurer's admitted assets.(iv) Nothing contained in this subdivision (7):(a) Shall prohibit an insurer from acquiring any obligations which it has committed to acquire if the insurer would have been permitted to acquire that obligation pursuant to this subchapter on the date on which the insurer committed to purchase that obligation;(b) Shall prohibit an insurer from acquiring an obligation as a result of restructuring of a medium or lower grade obligation already held; or(c) Shall require an insurer to sell or otherwise dispose of any obligation legally acquired prior to March 16, 1993.(v)(a) The board of directors of any insurer which acquires or invests, directly or indirectly, more than two percent (2%) of its admitted assets in medium grade and lower grade obligations of any institution shall adopt a written plan for the making of such investments.(b) The plan, in addition to the guidelines with respect to the quality of the issues invested in, shall contain diversification standards, including, but not limited to, standards for issuer, industry, duration, liquidity, and geographic location; and(B) For purposes of this subdivision (7):(i) "Admitted assets" means the amount thereof as of the last day of the most recently concluded annual statement year, computed in the same manner as admitted assets pursuant to § 23-63-601 et seq.;(ii) "Aggregate amount" of medium grade and lower grade obligations means the aggregate statutory statement value thereof;(iii) "Institution" means a corporation, a joint-stock company, an association, a trust, a business partnership, a business joint venture, or similar entity;(iv) "Lower grade obligations" means obligations which are rated five (5) or six (6) by the Securities Valuation Office; and(v) "Medium grade obligations" means obligations which are rated three (3) or four (4) by the Securities Valuation Office.Amended by Act 2015, No. 231,§ 3, eff. 7/22/2015.Acts 1959, No. 148, § 101; 1981, No. 809, § 3; 1983, No. 522, § 7; A.S.A. 1947, § 66-2605; Acts 1993, No. 527, §§ 7, 8; 2001, No. 1604, § 35; 2005, No. 506, §§ 24-26.