1. Property or liability domestic insurers shall maintain assets which meet both the following requirements:

(1) The assets shall be diversified both as to type and issue; and

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(2) The assets shall be reasonably liquid.

2. As used in this section, the following terms mean:

(1) “Insurer”, a property or liability domestic insurer;

(2) “Policyholder obligations”, those liabilities of the insurer to, or for, its policyholders arising out of its policies and to its creditors and includes the liabilities required to be included in the insurer’s annual statement, including, but not limited to:

(a) The unearned premium reserve;

(b) Claim or loss reserves, including incurred but not reported claims and including loss adjustment expense reserves;

(c) Minimum capital and minimum surplus or minimum policyholders surplus; and

(d) Ceded reinsurance balances payable.

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“Policyholder obligations” do not include that portion of the insurer’s capital and surplus, or policyholders surplus if a mutual, in excess of the minimum capital and surplus or minimum policyholders surplus required by law for such insurer.

3. An insurer’s assets covering policyholder obligations shall meet all of the following standards in order to be deemed diversified under subdivision (1) of subsection 1 of this section:

(1) An insurer may have assets consisting of ^* investments in, without limitation and notwithstanding the provisions of subdivision (2) of this subsection:

(a) Assets described in paragraphs (a), (b), (c) and (d) of subdivision (1) of subsection 1 of section 379.080;

(b) Bonds and other evidences of indebtedness issued by corporations organized under the laws of this state or of the United States or of any other state, if rated 1 or 2 by the Securities Valuation Office of the National Association of Insurance Commissioners; and

(c) Assets described in paragraphs (e) and (h) of subdivision (2) of subsection 1 of section 379.080, where such bonds, notes or evidences of indebtedness are:

a. Issued, guaranteed or insured by the United States or any agency, administration, authority or instrumentality of the United States; or

b. Rated 1 or 2 by the Securities Valuation Office of the National Association of Insurance Commissioners;

(2) No insurer may have assets to cover policyholder obligations or investments to cover policyholder obligations in:

(a) Subsidiaries in excess of the amount allowed by paragraph (o) of subdivision (2) of subsection 1 of section 379.080;

(b) The securities, including for this purpose partnership and other equity interests, in one institution in excess of five percent of policyholder obligations. For purposes of this paragraph, one institution includes all entities under common ownership or control as defined in subdivision (2) of section 382.010. This paragraph is an additional standard applicable to bonds and short term investments under paragraph (c) of this subdivision, common stocks under paragraph (d) of this subdivision, preferred stocks under paragraph (e) of this subdivision, and other invested assets and aggregate write-ins for invested assets under paragraph (f) of this subdivision;

(c) Investments in bonds and short term investments which violate the standards mandated by sections 375.1070 to 375.1075. No insurer shall be forced to liquidate or nonadmit bonds purchased before August 28, 1991;

(d) Common stocks in excess of ten percent of policyholder obligations;

(e) Preferred stocks in excess of ten percent of policyholder obligations;

(f) Other invested assets and aggregate write-ins for invested assets, and aggregate write-ins for other than invested assets, as described in the insurer’s filed annual statement, in excess of five percent of policyholder obligations;

(g) Mortgage loans on real estate, in excess of:

a. Ten percent of policyholder obligations, regarding the aggregate of such loans; and

b. One percent of policyholder obligations, regarding the amount loaned upon any one particular piece of real estate;

(h) Real estate occupied by the company and for other purposes, in excess of the standards set forth in section 375.330;

(i) Collateral loans on personal property in excess of:

a. Five percent of policyholder obligations, regarding the aggregate of such loans; and

b. One percent of policyholder obligations, regarding the amount loaned upon any one particular personal property;

(j) Receivables from parents, subsidiaries or affiliates, as described in the insurer’s filed annual statement, in excess of five percent of policyholder obligations;

(k) Assets other than cash and the assets described in paragraphs (c) to (j) of this subdivision, in excess of twenty-five percent of policyholder obligations.

(3) Assets may be invested or held in amounts in excess of the limitations provided by subdivision (2) of this subsection to the extent of that portion of the insurer’s capital and surplus, or policyholders surplus if a mutual, in excess of the minimum capital and surplus or minimum policyholders surplus required by law for such insurer.

4. Assets shall be deemed reasonably liquid under subdivision (2) of subsection 1 of this section, if the assets are convertible to cash within a reasonable period of time to discharge timely the insurer’s claims and other liabilities.