2006 Utah Code - 31A-18-106 — Investment limitations generally applicable.

     31A-18-106.   Investment limitations generally applicable.
     (1) The investment limitations listed in Subsections (1)(a) through (m) apply to each insurer.
     (a) (i) Except as provided in Subsection (1)(a)(ii), for investments authorized under Subsection 31A-18-105(1) that are not amortizable under applicable valuation rules, the limitation is 5% of assets.
     (ii) The limitation of Subsection (1)(a)(i) and the limitation of Subsection (2) do not apply to demand deposits and certificates of deposit in solvent banks and savings and loan institutions to the extent they are insured by a federal deposit insurance agency.
     (b) For investments authorized under Subsection 31A-18-105(2), the limitation is 10% of assets.
     (c) For investments authorized under Subsection 31A-18-105(3), the limitation is 50% of assets.
     (d) For investments authorized under Subsection 31A-18-105(4), that are considered to be investments in kinds of securities or evidences of debt pledged, those investments are subject to the class limitations applicable to the pledged securities or evidences of debt.
     (e) For investments authorized under Subsection 31A-18-105(5), the limitation is 35% of assets.
     (f) For investments authorized under Subsection 31A-18-105(6), the limitation is:
     (i) 20% of assets for life insurers; and
     (ii) 50% of assets for nonlife insurers.
     (g) For investments authorized under Subsection 31A-18-105(7), the limitation is:
     (i) 5% of assets; or
     (ii) for insurers organized and operating under Chapter 7, Nonprofit Health Service Insurance Corporations, 25% of assets.
     (h) For investments authorized under Subsection 31A-18-105(8), the limitation is:
     (i) 20% of assets, inclusive of home office and branch office properties; or
     (ii) for insurers organized and operating under Chapter 7, Nonprofit Health Service Insurance Corporations, 35% of assets, inclusive of home office and branch office properties.
     (i) For investments authorized under Subsection 31A-18-105(10), the limitation is 1% of assets.
     (j) For investments authorized under Subsection 31A-18-105(11), the limitation is the greater of that permitted or required for compliance with Section 31A-18-103.
     (k) Except as provided in Subsection (1)(l), an insurer's investments in subsidiaries is limited to 50% of the insurer's total adjusted capital. Investments by an insurer in its subsidiaries includes:
     (i) the insurer's loans, advances, and contributions to its subsidiaries; and
     (ii) the insurer's holding of bonds, notes, and stocks of its subsidiaries are included.
     (l) Under a plan of merger approved by the commissioner, the commissioner may allow an insurer any portion of its assets invested in an insurance subsidiary. The approved plan of merger shall require the acquiring insurer to conform its accounting for investments in subsidiaries to Subsection (1)(k) within a specified period that may not exceed five years.
     (m) For investments authorized under Subsections 31A-18-105(13) and (14), the aggregate limitation is 10% of assets.
     (2) The limits on investments listed in Subsections (2)(a) through (e) apply to each

insurer.
     (a) For all investments in a single entity, its affiliates, and subsidiaries, the limitation is 10% of assets, except that the limit imposed by this Subsection (2)(a) does not apply to:
     (i) investments in the government of the United States or its agencies;
     (ii) investments guaranteed by the government of the United States; or
     (iii) investments in the insurer's insurance subsidiaries.
     (b) Investments authorized by Subsection 31A-18-105(3) shall comply with the requirements listed in this Subsection (2)(b).
     (i) (A) Except as provided in this Subsection (2)(b)(i), the amount of any loan secured by a mortgage or deed of trust may not exceed 80% of the value of the real estate interest mortgaged, unless the excess over 80%:
     (I) is insured or guaranteed by the United States, any state of the United States, any instrumentality, agency, or political subdivision of the United States, any of its states, or a combination of any of these; or
     (II) insured by an insurer approved by the commissioner and qualified to insure that type of risk in this state.
     (B) Mortgage loans representing purchase money mortgages acquired from the sale of real estate are not subject to the limitation of Subsection (2)(b)(i)(A).
     (ii) Subject to Subsection (2)(b)(v), loans or evidences of debt secured by real estate may only be secured by:
     (A) unencumbered real property that is located in the United States; or
     (B) an unencumbered interest in real property that is located in the United States.
     (iii) Evidence of debt secured by first mortgages or deeds of trust upon leasehold estates shall require that:
     (A) the leasehold estate exceed the maturity of the loan by not less than 10% of the lease term;
     (B) the real estate not be otherwise encumbered; and
     (C) the mortgagee is entitled to be subrogated to all rights under the leasehold.
     (iv) Subject to Subsection (2)(b)(v):
     (A) participation in any mortgage loan must:
     (I) be senior to other participants; and
     (II) give the holder substantially the rights of a first mortgagee; or
     (B) the interest of the insurer in the evidence of indebtedness must be of equal priority, to the extent of the interest, with other interests in the real property.
     (v) A fee simple or leasehold real estate or any interest in either of them is not considered to be encumbered within the meaning of this chapter by reason of any prior mortgage or trust deed held or assumed by the insurer as a lien on the property, if:
     (A) the total of the mortgages or trust deeds held does not exceed 70% of the value of the property; and
     (B) the security created by the prior mortgage or trust deed is a first lien.
     (c) Loans permitted under Subsection 31A-18-105(4) may not exceed 75% of the market value of the collateral pledged, except that loans upon the pledge of United States government bonds may be equal to the market values of the pledge.
     (d) For an equity interest in a single real estate property authorized under Subsection 31A-18-105(8), the limitation is 5% of assets.

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     (e) Investments authorized under Subsection 31A-18-105(10) shall be in connection with potential changes in the value of specifically identified:
     (i) assets which the insurer owns; or
     (ii) liabilities which the insurer has incurred.
     (3) The restrictions on investments listed in Subsections (3)(a) and (b) apply to each insurer.
     (a) Except for financial futures contracts and real property acquired and occupied by the insurer for home and branch office purposes, a security or other investment is not eligible for purchase or acquisition under this chapter unless it is:
     (i) interest bearing or income paying; and
     (ii) not then in default.
     (b) A security is not eligible for purchase at a price above its market value.
     (4) Computation of percentage limitations under this section:
     (a) is based only upon the insurer's total qualified invested assets described in Section 31A-18-105 and this section, as these assets are valued under Section 31A-17-401; and
     (b) excludes investments permitted under Section 31A-18-108 and Subsections 31A-17-203(2) and (3).
     (5) An insurer may not make an investment that, because the investment does not conform to Section 31A-18-105 and this section, has the result of rendering the insurer, under Chapter 17, Part 6, Risk-Based Capital, subject to proceedings under Chapter 27, Insurers Rehabilitation and Liquidation.
     (6) A pattern of persistent deviation from the investment diversification standards set forth in Section 31A-18-105 and this section may be grounds for a finding that the person or persons with authority to make the insurer's investment decisions are "incompetent" as used in Subsection 31A-5-410(3).
     (7) Section 77r-1 of the Secondary Mortgage Market Enhancement Act of 1984 does not apply to the purchase, holding, investment, or valuation limitations of assets of insurance companies subject to this chapter.

Amended by Chapter 176, 2006 General Session