US Laws, Codes, Statutes & Cases

                                  TITLE  41
                                  INSURANCE
                                  CHAPTER 28
                    ORGANIZATION AND CORPORATE PROCEDURES
                         OF STOCK AND MUTUAL INSURERS
    41-2841.  BORROWED SURPLUS. (1) A domestic stock or mutual insurer may
borrow money to defray the expenses of its organization, provide it with
surplus funds, or for any purpose of its business, upon a written agreement
that such money is required to be repaid only out of the insurer's surplus in
excess of that stipulated in such agreement. The agreement may provide for
interest at such rate or rates approved by the director, which interest shall
or shall not constitute a liability of the insurer as to its funds other than
such excess or surplus, as stipulated in the agreement. A commission or
promotion expense may be paid in connection with any such loan upon approval
of the director.
    (2)  Money so borrowed, together with the interest thereon if so
stipulated in the agreement, shall not form a part of the insurer's legal
liabilities except as to its surplus in excess of the amount thereof
stipulated in the agreement, or be the basis of any setoff, but until repaid,
financial statements filed or published by the insurer shall show as a
footnote thereto the amount thereof then unpaid together with any interest
thereon accrued but unpaid.
    (3)  Any such loan shall be subject to the director's approval. The
insurer shall, in advance of the loan, file with the director a statement of
the purpose of the loan and a copy of the proposed loan agreement. The loan
and agreement shall be deemed approved unless within fifteen (15) days after
the date of such filing the insurer is notified of the director's disapproval
and the reasons therefor. The director shall disapprove any proposed loan or
agreement if he finds the loan is unnecessary or excessive for the purpose
intended, or that the terms of the loan agreement are not fair and equitable
to the parties, and to other similar lenders, if any, to the insurer, or that
the information so filed by the insurer is inadequate.
    (4)  Any such loan to a mutual insurer or substantial portion thereof
shall be repaid by the insurer when no longer reasonably necessary for the
purpose originally intended. No repayment of such a loan shall be made by a
mutual insurer unless approved in advance by the director.
    (5)  This section shall not apply to loans obtained by the insurer in
ordinary course of business from banks and other financial institutions, nor
to loans secured by pledge or mortgage of assets.