2009 Iowa Code
Title 13 - Commerce
Subtitle 1 - Insurance and Related Regulation
CHAPTER 518 - COUNTY MUTUAL INSURANCE ASSOCIATIONS
518.14 - INVESTMENTS.

        518.14  INVESTMENTS.
         1.  General considerations.  The following considerations
      apply in the interpretation of this section:
         a.  This section applies to the investments of county mutual
      insurance associations.
         b. (1)  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 associations organized
      under this chapter.  These standards, and the investment programs
      developed by associations, shall take into account the safety of the
      association's principal, investment yield and growth, stability in
      the value of the investment, and liquidity necessary to meet the
      association's expected business needs, and investment
      diversification.
         (2)  All investments made pursuant to this section shall have
      investment qualities and characteristics such that the speculative
      elements of the investments are not predominant.
         c.  Financial terms relating to county mutual insurance
      associations have the meanings assigned to them under statutory
      accounting methods.  Financial terms relating to companies or
      associations other than county mutual insurance associations 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,
      an association may elect to hold the investment under the subsection
      of its choice.  This section does not prevent an association 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 commissioner's annual
      statement blank as admitted assets as of the December 31 immediately
      preceding the date the association acquires the investment.
         b.  "Clearing corporation" means as defined in section
      554.8102.
         c.  "Custodian bank" means as defined in section 515.35.
         d.  "Issuer" means as defined in section 554.8201.
         e.  "Member bank" means a national bank, state bank, or trust
      company which is a member of the United States federal reserve
      system.
         f.  "National securities exchange" means an exchange
      registered under section 6 of the federal Securities Exchange Act of
      1934 or an exchange regulated under the laws of Canada.
         g.  "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.
         h.  "Surplus", for purposes of computing percentage
      limitations on particular types of investments, means the surplus
      that is authorized to be shown on the commissioner's annual statement
      blank as surplus as of the December 31 immediately preceding the date
      the association acquires the investment.
         3.  Investments in name of association or nominee and
      prohibitions.
         a.  An association'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 association 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 association provides that
      adequate evidence of the deposit is to be obtained and retained by
      the association or a custodian bank.
         (2)  An association 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 association or for specific accounts of the association.
         (3)  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 association, 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 association making the
      investment.
         (4)  Transfers of ownership of investments held as described in
      paragraph "a", subparagraph (1), subparagraph division (c), and
      subparagraphs (2) and (3), 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 a
      certificate evidencing the association's investment.
         b.  Except as provided in paragraph "a", subparagraph (4),
      if an investment is not evidenced by a certificate, adequate evidence
      of the association's investment shall be obtained from the issuer or
      its transfer or recording agent and retained by the association, 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 association.
         4.  Investments.  Except as otherwise permitted by this
      section, an association organized under this chapter shall only
      invest in the following:
         a.  United States government obligations.  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, including 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
      obligations described in this paragraph, 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.  An association 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, a political subdivision of a state, or an instrumentality of a
      state.
         d.  Canadian government obligations.  Obligations issued or
      guaranteed by Canada, by an agency or province of Canada, by a
      political subdivision of such 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, or the laws
      of Canada or a province of Canada, provided that an association shall
      not invest more than five percent of its admitted assets in the
      obligations of any one corporation or business trust.  Investments
      shall be made only in investment grade bonds.
         f.  Stocks.  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, or the laws of Canada or a province of Canada.  Aggregate
      investments in nondividend paying stocks shall not exceed five
      percent of surplus.
         (1)  Stocks purchased under this lettered paragraph shall not
      exceed fifty percent of surplus.
         (2)  With the approval of the commissioner, an association may
      invest in common stocks, preferred stocks, or other securities of one
      or more subsidiaries provided that both of the following occur:
         (a)  After such investments the association's surplus as regards
      policyholders will be reasonable in relation to the association's
      outstanding liabilities and adequate to its financial needs.
         (b)  The association owns one hundred percent of the stock of the
      subsidiary.
         (3)  An association shall not invest more than ten percent of its
      surplus in the stocks of any one corporation.
         g.  Home office real estate.  With the prior approval of the
      commissioner, funds may be invested in a home office real estate for
      the association or a subsidiary, at the direction of the board of
      directors.  The association or subsidiary shall obtain the approval
      of the commissioner prior to the sale or disposition of home office
      real estate owned by the association or subsidiary.  Effective as to
      home office real estate acquired on or after July 1, 2009, an
      association shall not invest more than twenty percent of its total
      admitted assets in such real estate.  With the prior approval of the
      commissioner, an association may exceed the real estate investment
      limitation to effectuate a merger with, or the acquisition of,
      another association.  

         Section History: Early Form

         [C66, 71, 73, 75, 77, 79, 81, § 518.14] 

         Section History: Recent Form

         95 Acts, ch 185, §26; 96 Acts, ch 1138, § 3, 84; 2005 Acts, ch 70,
      §45; 2006 Acts, ch 1010, §141; 2007 Acts, ch 137, §17; 2009 Acts, ch
      41, §263; 2009 Acts, ch 145, §29--31