Kentucky Statutes 304.7-463 – Tangible personal property or equity interests acquired through partnerships, joint ventures, trust certificates, and similar instruments
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(1) (a) Subject to the limitations of KRS § 304.7-455, an insurer may acquire tangible personal property or equity interests therein located or used wholly or in part within a domestic jurisdiction either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by KRS § 304.7-363(4), joint ventures, stock of an investment subsidiary or membership interests in a limited liability company, trust certificates, or other similar instruments.
(b) Investments acquired under paragraph (a) of this subsection shall be eligible only if:
1. The property is subject to a lease or other agreement with a person whose rated credit instruments in the amount of the purchase price of the personal property the insurer could then acquire under KRS § 304.7-457; and
2. The lease or other agreement provides the insurer the right to receive rental, purchase, or other fixed payments for the use or purchase of the property, and the aggregate value of the payments, together with the estimated residual value of the property at the end of its useful life and the estimated tax benefits to the insurer resulting from ownership of the property, shall be adequate to return the cost of the insurer’s investment in the property, plus a return deemed adequate by the insurer.
(2) The insurer shall compute the amount of each investment under this section on the basis of the out-of-pocket purchase price and applicable related expenses paid by the insurer for the investment, net of each borrowing made to finance the purchase price and expenses, to the extent the borrowing is without recourse to the insurer.
(3) An insurer shall not acquire an investment under this section if, as a result of and after giving effect to the investment, the aggregate amount of all investments then held by the insurer under this section would exceed;
(a) Two percent (2%) of its admitted assets; or
(b) One-half of one percent (0.5%) of its admitted assets as to any single item of tangible personal property.
(4) For purposes of determining compliance with the limitations of KRS § 304.7-455, investments acquired by an insurer under this section shall be aggregated with those acquired under KRS § 304.7-457, and each lessee of the property under a lease referred to in this section shall be deemed the issuer of an obligation in the amount of the investment of the insurer in the property determined as provided in subsection (2) of this section.
(5) Nothing in this section is applicable to tangible personal property lease arrangements between an insurer and its subsidiaries and affiliates under a cost- sharing arrangement or agreement permitted under KRS § 304.37-030.
Effective: July 14, 2000
History: Created 2000 Ky. Acts ch. 388, sec. 25, effective July 14, 2000.
(b) Investments acquired under paragraph (a) of this subsection shall be eligible only if:
Terms Used In Kentucky Statutes 304.7-463
- 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
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- 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
- Domestic: when applied to a corporation, partnership, business trust, or limited liability company, means all those incorporated or formed by authority of this state. See Kentucky Statutes 446.010
- 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 - Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Limited liability company: means a business organization, excluding partnerships and ordinary business corporations, organized or operating under the laws of the United States or any state thereof that limits the personal liability of investors to the equity investment of the investor in the business entity. See Kentucky Statutes 304.7-012
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Partnership: includes both general and limited partnerships. See Kentucky Statutes 446.010
- 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
- Personal property: All property that is not real property.
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
1. The property is subject to a lease or other agreement with a person whose rated credit instruments in the amount of the purchase price of the personal property the insurer could then acquire under KRS § 304.7-457; and
2. The lease or other agreement provides the insurer the right to receive rental, purchase, or other fixed payments for the use or purchase of the property, and the aggregate value of the payments, together with the estimated residual value of the property at the end of its useful life and the estimated tax benefits to the insurer resulting from ownership of the property, shall be adequate to return the cost of the insurer’s investment in the property, plus a return deemed adequate by the insurer.
(2) The insurer shall compute the amount of each investment under this section on the basis of the out-of-pocket purchase price and applicable related expenses paid by the insurer for the investment, net of each borrowing made to finance the purchase price and expenses, to the extent the borrowing is without recourse to the insurer.
(3) An insurer shall not acquire an investment under this section if, as a result of and after giving effect to the investment, the aggregate amount of all investments then held by the insurer under this section would exceed;
(a) Two percent (2%) of its admitted assets; or
(b) One-half of one percent (0.5%) of its admitted assets as to any single item of tangible personal property.
(4) For purposes of determining compliance with the limitations of KRS § 304.7-455, investments acquired by an insurer under this section shall be aggregated with those acquired under KRS § 304.7-457, and each lessee of the property under a lease referred to in this section shall be deemed the issuer of an obligation in the amount of the investment of the insurer in the property determined as provided in subsection (2) of this section.
(5) Nothing in this section is applicable to tangible personal property lease arrangements between an insurer and its subsidiaries and affiliates under a cost- sharing arrangement or agreement permitted under KRS § 304.37-030.
Effective: July 14, 2000
History: Created 2000 Ky. Acts ch. 388, sec. 25, effective July 14, 2000.