2009 Iowa Code
Title 13 - Commerce
Subtitle 1 - Insurance and Related Regulation
CHAPTER 515 - INSURANCE OTHER THAN LIFE
515.35 - INVESTMENTS.

        515.35  INVESTMENTS.
         1.  General considerations.  The following considerations
      apply in the interpretation of this section:
         a.  This section applies to the investments of insurance
      companies other than life insurance companies.
         b.  The purpose of this section is to protect and further the
      interests of policyholders, claimants, creditors, and the public by
      providing standards for the development and administration of
      programs for the investment of the assets of companies organized
      under this chapter.  These standards, and the investment programs
      developed by companies, shall take into account the safety of the
      company's principal, investment yield and growth, stability in the
      value of the investment, and liquidity necessary to meet the
      company's expected business needs, and investment diversification.
         c.  Financial terms relating to insurance companies have the
      meanings assigned to them under statutory accounting methods.
      Financial terms relating to companies other than insurance companies
      have the meanings assigned to them under generally accepted
      accounting principles.
         d.  Investments shall be valued in accordance with the
      valuation procedures established by the national association of
      insurance commissioners, unless the commissioner requires or finds
      another method of valuation reasonable under the circumstances.
         e.  If an investment qualifies under more than one subsection,
      a company may elect to hold the investment under the subsection of
      its choice.  This section does not prevent a company from electing to
      hold an investment under a subsection different from the one under
      which it previously held the investment.
         2.  Definitions.  For purposes of this section:
         a.  "Admitted assets", for purposes of computing percentage
      limitations on particular types of investments, means the assets
      which are authorized to be shown on the national association of
      insurance commissioner's annual statement blank as admitted assets as
      of the December 31 immediately preceding the date the company
      acquires the investment.
         b.  "Capital and surplus", for purposes of computing
      percentage limitations on particular types of investments, means the
      capital and surplus that is authorized to be shown as capital and
      surplus on the national association of insurance commissioners'
      annual statement blank as of the December 31 immediately preceding
      the date the company acquires the investment.
         c.  "Clearing corporation" means as defined in section
      554.8102.
         d.  "Custodian bank" means a bank or trust company that is
      supervised and examined by state or federal authority having
      supervision over banks and is acting as custodian for a clearing
      corporation.
         e.  "Issuer" means as defined in section 554.8201.
         f.  "Member bank" means a national bank, state bank, or trust
      company which is a member of the United States federal reserve
      system.
         g.  "National securities exchange" means an exchange
      registered under section 6 of the Securities Exchange Act of 1934 or
      an exchange regulated under the laws of the Dominion of Canada.
         h.  "Obligations" includes bonds, notes, debentures,
      transportation equipment certificates, domestic repurchase
      agreements, and obligations for the payment of money not in default
      as to payments of principal and interest on the date of investment,
      which constitute general obligations of the issuer or payable only
      out of certain revenues or certain funds pledged or otherwise
      dedicated for payment of principal and interest on the obligations.
      A lease is an obligation if the lease is assigned to the insurer and
      is nonterminable by the lessee upon foreclosure of any lien upon the
      leased property, and if rental payments are sufficient to amortize
      the investment over the primary lease term.
         3.  Investments in name of company or nominee and
      prohibitions.
         a.  A company's investments shall be held in its own name or
      the name of its nominee, except as follows:
         (1)  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 on the
      following conditions:
         (a)  The clearing corporation, custodian bank, or nominee must be
      legally authorized to hold the particular investment for the account
      of others.
         (b)  When 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.
         (c)  If a clearing corporation is to act as depository, the
      investment may be merged or held in bulk in the name of the clearing
      corporation or its nominee with other investments deposited with the
      clearing corporation by any other person, if a written agreement
      between the clearing corporation and the company provides that
      adequate evidence of the deposit is to be obtained and retained by
      the company or a custodian bank.
         (2)  A company may loan securities held by it to a broker-dealer
      registered under the Securities Exchange Act of 1934, a national
      bank, or a state bank, foreign bank, or trust company that is a
      member of the United States federal reserve system, and the loaned
      securities shall continue to be allowable investments of the company.

         (a)  The loan shall be fully collateralized by cash, cash
      equivalents, or obligations issued or guaranteed by the United States
      or an agency or instrumentality of the United States.  The company
      shall take delivery of the collateral either directly or through an
      authorized custodian.
         (b)  If the loan is collateralized by cash or cash equivalents,
      the cash or cash equivalent collateral may be reinvested by the
      company in either individual securities which are allowable
      investments of the company or in repurchase agreements fully
      collateralized by such securities if the company takes delivery of
      the collateral either directly or through an authorized custodian or
      a pooled fund comprised of individual securities which are allowable
      investments of the company.  If such reinvestment is made in
      individual securities or in repurchase agreements, the individual
      securities or the securities which collateralize the repurchase
      agreements shall mature in less than two hundred seventy days.  If
      such reinvestment is made in a pooled fund, the average maturity of
      the securities comprising such pooled fund must be less than two
      hundred seventy days.  Individual securities and securities
      comprising the pooled fund shall be investment grade.
         (c)  The loan shall be evidenced by a written agreement which
      provides all of the following:
         (i)  That the loan will be fully collateralized at all times
      during the term of the loan, and that the collateral will be adjusted
      as necessary each business day during the term of the loan to
      maintain the required collateralization in the event of market value
      changes in the loaned securities or collateral.
         (ii)  If the loan is fully collateralized by cash or cash
      equivalents, the cash or cash equivalent collateral may be reinvested
      by the company as provided in subparagraph division (b).
         (iii)  That the loan may be terminated by the company at any time,
      and that the borrower shall return the loaned stocks and obligations
      or equivalent stocks or obligations within five business days after
      termination.
         (iv)  That the company has the right to 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 that the borrower remains liable for any losses and expenses
      incurred by the company due to default that are not covered by the
      collateral.
         (d)  Securities loaned pursuant to this subparagraph (2) are not
      eligible for investment of the company in excess of twenty percent of
      admitted assets.
         (3)  A company may participate through a member bank in the United
      States 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.
         (4)  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 interest as evidenced by the certificate or
      confirmation is, if held by a custodian bank, 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.
         (5)  Transfers of ownership of investments held as described in
      paragraph "a", subparagraph (1), subparagraph division (c), and
      subparagraphs (3) and (4) may be evidenced by bookkeeping entry on
      the books of the issuer of the investment, its transfer or recording
      agent, or the clearing corporation without physical delivery of
      certificate, if any, evidencing the company's investment.
         b.  Except as provided in paragraph "a", subparagraph (5),
      if an investment is not evidenced by a certificate, adequate evidence
      of the company's investment shall be obtained from the issuer or its
      transfer or recording agent and retained by the company, a custodian
      bank, or clearing corporation.  Adequate evidence, for purposes of
      this paragraph, 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 company.
         4.  Investments.  Except as otherwise permitted by this
      section, a company organized under this chapter may invest in the
      following and no other:
         a.  United States government obligations.  Obligations issued
      or guaranteed by the United States or an agency or instrumentality of
      the United States.
         Bonds or other evidences of indebtedness issued, assumed, or
      guaranteed by the United States of America, or by any agency or
      instrumentality of the United States of America include investments
      in an open-end management investment company registered with the
      federal securities and exchange commission under the federal
      Investment Company Act of 1940, 15 U.S.C. § 80(a), and operated in
      accordance with 17 C.F.R. § 270.2a-7, the portfolio of which is
      limited to the United States government obligations described in this
      paragraph "a", and which are included in the national association
      of insurance commissioners' securities valuation office's United
      States direct obligation--full faith and credit list.
         b.  Certain development bank obligations.  Obligations issued
      or guaranteed by the international bank for reconstruction and
      development, the Asian development bank, the inter-American
      development bank, the export-import bank, the world bank, or any
      United States government-sponsored organization of which the United
      States is a member, if the principal and interest is payable in
      United States dollars.  A company shall not invest more than five
      percent of its total admitted assets in the obligations of any one of
      these banks or organizations, and shall not invest more than a total
      of ten percent of its total admitted assets in the obligations
      authorized by this paragraph.
         c.  State obligations.  Obligations issued or guaranteed by a
      state of the United States, or a political subdivision of a state, or
      an instrumentality of a state or political subdivision of a state.
         d.  Canadian government obligations.  Obligations issued or
      guaranteed by the Dominion of Canada, or by an agency or province of
      Canada, or by a political subdivision of a province, or by an
      instrumentality of any of those provinces or political subdivisions.

         e.  Corporate and business trust obligations.  Obligations
      issued, assumed, or guaranteed by a corporation or business trust
      organized under the laws of the United States or a state of the
      United States, or the laws of Canada or a province of Canada,
      provided that a company shall not invest more than five percent of
      its admitted assets in the obligations of any one corporation or
      business trust.
         Aggregate investments in below investment grade bonds shall not
      exceed five percent of assets.
         f.  Stocks.  A company may invest in common stocks, common
      stock equivalents, mutual fund shares, securities convertible into
      common stocks or common stock equivalents, or preferred stocks issued
      or guaranteed by a corporation incorporated under the laws of the
      United States or a state of the United States, or the laws of Canada
      or a province of Canada.
         (1)  Stocks purchased under this section shall not exceed one
      hundred percent of capital and surplus.  With the approval of the
      commissioner, a company may invest any amount in common stocks,
      preferred stocks, or other securities of one or more subsidiaries
      provided that after such investments the insurer's surplus as regards
      policyholders will be reasonable in relation to the insurer's
      outstanding liabilities and adequate to its financial needs.
         (2)  A company shall not invest more than ten percent of its
      capital and surplus in the stocks of any one corporation.
         g.  Real estate mortgages.  Mortgages and other
      interest-bearing securities that are first liens upon real estate
      located within this state or any other state of the United States.
      However, a mortgage or other security does not qualify as an
      investment under this paragraph if at the date of acquisition the
      total indebtedness secured by the lien exceeds seventy-five percent
      of the value of the property that is subject to the lien.
      Improvements shall not be considered in estimating value unless the
      owner contracts to keep them insured during the life of the loan in
      one or more reliable fire insurance companies authorized to transact
      business in this state and for a sum at least equal to the excess of
      the loan above seventy-five percent of the value of the ground,
      exclusive of improvements, and unless this insurance is payable in
      case of loss to the company investing its funds as its interest may
      appear at the time of loss.  For the purpose of this section, a lien
      upon real estate shall not be held or construed to be other than a
      first lien by reason of the fact that drainage or other improvement
      assessments have been levied against the real estate covered by the
      lien, whether or not the installment of the assessments have matured,
      but in determining the value of the real estate for loan purposes the
      amount of drainage or other assessment tax that is unpaid shall be
      first deducted.
         h.  Real estate.
         (1)  Except as provided in subparagraphs (2), (3), and (4) of this
      paragraph, a company may acquire, hold, and convey real estate only
      as follows:
         (a)  Real estate mortgaged to it in good faith as security for
      loans previously contracted, or for moneys due.
         (b)  Real estate conveyed to it in satisfaction of debts
      previously contracted in the course of its dealings.
         (c)  Real estate purchased at sales on judgments, decrees, or
      mortgages obtained or made for debts previously contracted in the
      course of its dealings.
         (d)  Real estate subject to a contract for deed under which the
      company holds the vendor's interest to secure the payments the vendee
      is required to make under the contract.
         All real estate specified in subparagraph divisions (a), (b), and
      (c) shall be sold and disposed of within three years after the
      company acquires title to it, or within three years after the real
      estate ceases to be necessary for the accommodation of the company's
      business, and the company shall not hold any of those properties for
      a longer period unless the company elects to hold the property under
      another paragraph of this section, or unless the company procures a
      certificate from the commissioner of insurance that its interest will
      suffer materially by the forced sale of those properties and that the
      time for the sale is extended to the time the commissioner directs in
      the certificate.
         (2)  A company may acquire, hold, and convey real estate as
      required for the convenient accommodation and transaction of its
      business.
         (3)  A company may acquire real estate or an interest in real
      estate as an investment for the production of income, and may hold,
      improve, or otherwise develop, subdivide, lease, sell, and convey
      real estate so acquired directly or as a joint venture or through a
      limited or general partnership in which the company is a partner.
         (4)  A company may also acquire and hold real estate if the
      purpose of the acquisition is to enhance the sale value of real
      estate previously acquired and held by the company under this
      paragraph, and if the company expects the real estate so acquired to
      qualify under subparagraph (2) or (3) of this paragraph within three
      years after acquisition.
         (5)  A company may, after securing the written approval of the
      commissioner, acquire and hold real estate for the purpose of
      providing necessary living quarters for its employees.  However, the
      company shall dispose of the real estate within three years after it
      has ceased to be necessary for that purpose unless the commissioner
      agrees to extend the holding period upon application by the company.

         (6)  A company shall not invest more than twenty-five percent of
      its total admitted assets in real estate.  The cost of a parcel of
      real estate held for both the accommodation of business and for the
      production of income shall be allocated between the two uses
      annually.  A company shall not invest more than ten percent of its
      total admitted assets in real estate held under subparagraph (3) of
      this paragraph.
         (7)  A company is not required to divest itself of real estate
      assets owned or contracted for prior to July 1, 1982, in order to
      comply with the limitations established under this paragraph.
         i.  Foreign investments.  Obligations of and investments in
      foreign countries, as follows:
         (1)  A company may acquire and hold other investments in foreign
      countries that are required to be held as a condition of doing
      business in those countries, so long as such investments are of
      substantially the same types as those eligible for investment under
      this section.
         (2)  A company shall not invest more than two percent of its
      admitted assets in the stocks or stock equivalents of foreign
      corporations or business trusts, other than the stocks or stock
      equivalents of foreign corporations or business trusts incorporated
      or formed under the laws of Canada, and then only if the stocks or
      stock equivalents of such foreign corporations or business trusts are
      regularly traded on the New York, London, Paris, Zurich, Hong Kong,
      Toronto, or Tokyo stock exchange, or a similar exchange approved by
      the commissioner by rule or order.
         (3)  A company may invest in the obligations of a foreign
      government other than Canada or of a corporation incorporated under
      the laws of a foreign government other than Canada.  Any such
      governmental obligation must be valid, legally authorized and issued,
      and on the date of acquisition have predominantly investment
      qualities and characteristics as provided by rule.  Any such
      corporate obligation must on the date of acquisition have investment
      qualities and characteristics, and must not have speculative elements
      which are predominant, as provided by rule.  A company shall not
      invest more than two percent of its admitted assets in the
      obligations of a foreign government other than Canada and the United
      Kingdom.  Investments in obligations of the United Kingdom are not
      eligible in excess of four percent of admitted assets.  A company
      shall not invest more than two percent of its admitted assets in the
      obligations of a corporation incorporated under the laws of a foreign
      government other than a corporation incorporated under the laws of
      Canada.
         (4)  A company shall not invest more than twenty percent of its
      admitted assets in foreign investments pursuant to this paragraph.
         j.  Personal property under lease.  Personal property for
      intended lease or rental by the company in the United States or
      Canada.  A company shall not invest more than five percent of its
      admitted assets under this paragraph.
         k.  Collateral loans.  Obligations secured by the pledge of an
      investment authorized by paragraphs "a" through "j", subject
      to the following conditions:
         (1)  The pledged investment shall be legally assigned or delivered
      to the company.
         (2)  The pledged investment shall at the time of purchase have a
      market value of at least one hundred ten percent of the amount of the
      unpaid balance of the obligations.
         (3)  The company shall reserve the right to declare the obligation
      immediately due and payable if at any time after purchase the
      security depreciates to the point where the investment would not
      qualify under subparagraph (2) of this paragraph.  However,
      additional qualifying security may be pledged to allow the investment
      to remain qualified.
         l.  Options transactions.
         (1)  A domestic fire and casualty company may only engage in the
      following transactions in options on an exchange and only when in
      accordance with the rules of the exchange on which the transactions
      take place:
         (a)  The sale of exchange-traded covered options.
         (b)  The purchase of exchange-traded covered options solely in
      closing purchase transactions.
         (2)  The commissioner shall adopt rules pursuant to chapter 17A
      regulating option sales under this subparagraph.
         m.  Venture capital funds.  Shares or equity interests in
      venture capital funds which agree to invest an amount equal to at
      least fifty percent of the investments by a company 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.  A
      company shall not invest more than five percent of its capital and
      surplus under this paragraph.  For purposes of this paragraph,
      "venture capital fund" means a corporation, partnership,
      proprietorship, or other entity formed under the laws of the United
      States, or a state, district, or territory of the United States,
      whose principal business is or will be the making of investments in,
      and the provision of significant managerial assistance to, small
      businesses which meet the small business administration definition of
      small business.  "Equity interests" means limited partnership
      interests and other equity interests in which liability is limited to
      the amount of the investment, but does not mean general partnership
      interests or other interests involving general liability.
         "Venture capital fund" includes an equity interest in the Iowa
      fund of funds as defined in section 15E.62.
         n.  Other investments.
         (1)  A company organized under this chapter may invest up to five
      percent of its admitted assets in securities or property of any kind,
      without restrictions or limitations except those imposed on business
      corporations in general.
         (2)  A company organized under this chapter may invest its assets
      in any additional forms not specifically included in paragraphs
      "a" through "o" when authorized by rules adopted by the
      commissioner.
         o.  Rules.  The commissioner may adopt rules pursuant to
      chapter 17A to carry out the purposes and provisions of this section.
      

         Section History: Early Form

         [C73, § 1130, 1137; C97, § 1699, 1703; S13, § 1699; C24, 27, 31,
      35, 39, § 8926, 8927; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77,
      79, 81, § 515.34, 515.35; 81 Acts, ch 169, § 1; 82 Acts, ch 1051, §
      1] 

         Section History: Recent Form

         85 Acts, ch 136, § 2; 88 Acts, ch 1112, § 402; 91 Acts, ch 26,
      §40; 96 Acts, ch 1138, § 2, 84; 97 Acts, ch 186, §10; 98 Acts, ch
      1014, §2; 99 Acts, ch 165, §13; 2001 Acts, ch 69, §29; 2003 Acts, ch
      91, §34; 2004 Acts, ch 1110, §52--54; 2007 Acts, ch 137, §12; 2009
      Acts, ch 41, §159--161
         Referred to in § 515.20, 518.14, 518A.12, 521G.6
         Similar provisions, § 511.8