Kentucky Statutes 304.24-300 – Borrowed surplus
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(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, which interest shall or shall not constitute a liability of the insurer as to its funds other than such excess of surplus, as stipulated in the agreement. No commission or promotion expense shall be paid in connection with any such loan, except that if public offering and sale is made of the loan securities, the insurer may pay the reasonable costs thereof approved by the commissioner.
(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. A surplus note shall be reported as surplus and not as debt only if the surplus note contains the following provisions:
(a) Subordination to policyholder;
(b) Subordination to claimant and beneficiary claims;
(c) Subordination to all other classes of creditors other than surplus note holders;
and
(d) Interest payments and principal repayments require prior approval of the state of domicile.
(3) Any such loan shall be subject to the commissioner’s approval. The insurer shall in advance of the loan, file with the commissioner 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 date of such filing the insurer is notified of the commissioner’s disapproval and the reasons therefor. The commissioner shall disapprove any proposed loan or agreement if he or she 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 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 unless approved in advance by the commissioner.
(5) This section shall not apply to other kinds of loans obtained by the insurer in ordinary course of business, nor to loans secured by pledge or mortgage of assets.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1339, effective July 15, 2010. — Amended 2004 Ky. Acts ch. 24, sec. 30, effective July 13, 2004. — Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 30, effective June 18, 1970.
(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. A surplus note shall be reported as surplus and not as debt only if the surplus note contains the following provisions:
Terms Used In Kentucky Statutes 304.24-300
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- 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
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- State: when applied to a part of the United States, includes territories, outlying possessions, and the District of Columbia. See Kentucky Statutes 446.010
(a) Subordination to policyholder;
(b) Subordination to claimant and beneficiary claims;
(c) Subordination to all other classes of creditors other than surplus note holders;
and
(d) Interest payments and principal repayments require prior approval of the state of domicile.
(3) Any such loan shall be subject to the commissioner’s approval. The insurer shall in advance of the loan, file with the commissioner 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 date of such filing the insurer is notified of the commissioner’s disapproval and the reasons therefor. The commissioner shall disapprove any proposed loan or agreement if he or she 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 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 unless approved in advance by the commissioner.
(5) This section shall not apply to other kinds of loans obtained by the insurer in ordinary course of business, nor to loans secured by pledge or mortgage of assets.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1339, effective July 15, 2010. — Amended 2004 Ky. Acts ch. 24, sec. 30, effective July 13, 2004. — Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 30, effective June 18, 1970.