Kentucky Statutes 304.7-403 – Limits on investments
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(1) (a) Except as otherwise specified in this subtitle, an insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under this subtitle if, as a result of and after giving effect to the investment, the insurer would hold more than three percent (3%) of its admitted assets in investments of all kinds issued, assumed, accepted, insured, or guaranteed by a single person.
(b) This three percent (3%) limitation 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.
(c) Asset-backed securities shall not be subject to the limitations of paragraph (a) of this subsection, however an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity, then held by the insurer would exceed three percent (3%) of its admitted assets.
(2) (a) An insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under KRS § 304.7-405, 304.7-411, and 304.7-417, or counterparty exposure under KRS § 304.7-419(4), if, as a a result of and after giving effect to the investment:
1. The aggregate amount of medium and lower grade investments then held by the insurer would exceed twenty percent (20%) of its admitted assets;
2. The aggregate amount of lower grade investments then held by the insurer would exceed ten percent (10%) of its admitted assets;
3. The aggregate amount of investments rated 5 or 6 by the SVO then held by the insurer would exceed three percent (3%) of its admitted assets;
4. The aggregate amount of investments rated 6 by the SVO then held by the insurer would exceed one percent (1%) of its admitted assets; or
5. The aggregate amount of medium and lower grade investments then held by the insurer that receive as cash income less than the equivalent yield for Treasury issues with a comparative average life, would exceed one percent (1%) of its admitted assets.
(b) An insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under KRS § 304.7-405, 304.7-411, and 304.7-417, or counterparty exposure under KRS § 304.7-419(4), if, as a result of and after giving effect to the investment:
1. The aggregate amount of medium and lower grade investments issued, assumed, guaranteed, accepted, or insured by any one (1) person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed one percent (1%) of its admitted assets; or
2. The aggregate amount of lower grade investments issued, assumed,
guaranteed, accepted, or insured by any one (1) person or, as to asset- backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed one-half of one percent (0.5%) of its admitted assets.
(c) If an insurer attains or exceeds the limit of any one (1) rating category referred to in this subsection, the insurer shall not thereby be precluded from acquiring investments in other rating categories subject to the specific multicategory limits applicable to those investments.
(3) (a) An insurer shall not acquire, directly or indirectly through an investment subsidiary, a Canadian investment authorized by this subtitle, if as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed forty percent (40%) of its admitted assets, or if the aggregate amount of Canadian investments not acquired under KRS § 304.7-405(2) then held by the insurer would exceed twenty-five percent (25%) of its admitted assets.
(b) However, as to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity, or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of paragraph (a) of this subsection shall be increased by the greater of:
1. The amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or
2. One hundred fifteen percent (115%) of the amount of its reserves and other obligations under contracts on lives or risks resident or located in Canada.
Effective: July 14, 2000
History: Created 2000 Ky. Acts ch. 388, sec. 8, effective July 14, 2000.
(b) This three percent (3%) limitation 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.
Terms Used In Kentucky Statutes 304.7-403
- Admitted assets: means assets permitted to be reported as admitted assets in accordance with Subtitle 6 of KRS Chapter 304 on the statutory financial statement of the insurer most recently required to be filed with the commissioner, but excluding assets of separate accounts. See Kentucky Statutes 304.7-012
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Asset-backed security: means a security or other instrument, excluding a mutual fund, evidencing an interest in, or the right to receive payments from, or payable from distributions on, an asset, a pool of assets, or specifically divisible cash flows that are legally transferred to a trust or another special purpose bankruptcy-remote business entity, on the following conditions:
(a) The trust or other business entity is established solely for the purpose of
acquiring specific types of assets or rights to cash flows, issuing securities and other instruments representing an interest in or right to receive cash flows from those assets or rights, and engaging in activities required to service the assets or rights and any credit enhancement or support features held by the trust, or other business entity. See Kentucky Statutes 304.7-012 - Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Business entity: includes a sole proprietorship, corporation, limited liability company, association, partnership, joint stock company, joint venture, mutual fund, trust, joint tenancy, or other similar form of business organization, whether organized for profit or not-for-profit. See Kentucky Statutes 304.7-012
- directly: when used in connection with an obligation, means that the designated obligor is primarily liable on the instrument representing the obligation. See Kentucky Statutes 304.7-012
- Income: means , as to a security, interest, accrual of discount, dividends, or other
distributions, such as rights, tax or assessment, or assessment credits, warrants, and
distributions in kind. See Kentucky Statutes 304.7-012 - Investment subsidiary: means a subsidiary of an insurer engaged or organized to
engage exclusively in the ownership and management of assets authorized as investment for the insurer if each subsidiary agrees to limit its investment in any asset so that its investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations or avoid any other provisions of this subtitle applicable to the insurer. See Kentucky Statutes 304.7-012 - Person: means an individual, a business entity, a multilateral development bank, or a government or quasi-governmental body, such as a political subdivision or a government sponsored enterprise. See Kentucky Statutes 304.7-012
- SVO: means the Securities Valuation Office of the NAIC or any successor office established by the NAIC. See Kentucky Statutes 304.7-012
(c) Asset-backed securities shall not be subject to the limitations of paragraph (a) of this subsection, however an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity, then held by the insurer would exceed three percent (3%) of its admitted assets.
(2) (a) An insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under KRS § 304.7-405, 304.7-411, and 304.7-417, or counterparty exposure under KRS § 304.7-419(4), if, as a a result of and after giving effect to the investment:
1. The aggregate amount of medium and lower grade investments then held by the insurer would exceed twenty percent (20%) of its admitted assets;
2. The aggregate amount of lower grade investments then held by the insurer would exceed ten percent (10%) of its admitted assets;
3. The aggregate amount of investments rated 5 or 6 by the SVO then held by the insurer would exceed three percent (3%) of its admitted assets;
4. The aggregate amount of investments rated 6 by the SVO then held by the insurer would exceed one percent (1%) of its admitted assets; or
5. The aggregate amount of medium and lower grade investments then held by the insurer that receive as cash income less than the equivalent yield for Treasury issues with a comparative average life, would exceed one percent (1%) of its admitted assets.
(b) An insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under KRS § 304.7-405, 304.7-411, and 304.7-417, or counterparty exposure under KRS § 304.7-419(4), if, as a result of and after giving effect to the investment:
1. The aggregate amount of medium and lower grade investments issued, assumed, guaranteed, accepted, or insured by any one (1) person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed one percent (1%) of its admitted assets; or
2. The aggregate amount of lower grade investments issued, assumed,
guaranteed, accepted, or insured by any one (1) person or, as to asset- backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed one-half of one percent (0.5%) of its admitted assets.
(c) If an insurer attains or exceeds the limit of any one (1) rating category referred to in this subsection, the insurer shall not thereby be precluded from acquiring investments in other rating categories subject to the specific multicategory limits applicable to those investments.
(3) (a) An insurer shall not acquire, directly or indirectly through an investment subsidiary, a Canadian investment authorized by this subtitle, if as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed forty percent (40%) of its admitted assets, or if the aggregate amount of Canadian investments not acquired under KRS § 304.7-405(2) then held by the insurer would exceed twenty-five percent (25%) of its admitted assets.
(b) However, as to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity, or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of paragraph (a) of this subsection shall be increased by the greater of:
1. The amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or
2. One hundred fifteen percent (115%) of the amount of its reserves and other obligations under contracts on lives or risks resident or located in Canada.
Effective: July 14, 2000
History: Created 2000 Ky. Acts ch. 388, sec. 8, effective July 14, 2000.