Terms Used In Montana Code > Title 33 > Chapter 12 - Insurer Investments

• Acceptable collateral: means :

  (a)(i) as to securities lending transactions and for the purpose of calculating the counterparty exposure amount, cash, cash equivalents, letters of credit, or direct obligations of or securities that are fully guaranteed as to principal and interest by the government of the United States, by any agency of the United States, by the federal national mortgage association, or by the federal home loan mortgage corporation; and

  (ii)as to lending foreign securities, sovereign debt rated 1 by the SVO;

  (b)as to repurchase transactions, cash, cash equivalents, and direct obligations of or securities that are fully guaranteed as to principal and interest by the government of the United States, by an agency of the United States, by the federal national mortgage association, or by the federal home loan mortgage corporation; and

  (c)as to reverse repurchase transactions, cash and cash equivalents. See Montana Code 33-12-102

• Acceptable private mortgage insurance: means insurance written by a private insurer protecting a mortgage lender against loss occasioned by a mortgage loan default and issued by a licensed mortgage insurance company, with an SVO 1 designation or a rating issued by a nationally recognized statistical rating organization equivalent to an SVO 1 designation, that covers losses up to an 80% loan-to-value ratio. See Montana Code 33-12-102
• Accident and health insurance: means insurance protection that provides payment of benefits for covered sickness or accidental injury, excluding credit insurance, disability insurance, accidental death and dismemberment insurance, and long-term care insurance. See Montana Code 33-12-102
• Accident and health insurer: means a licensed life or health insurer or health service corporation whose insurance premiums and required statutory reserves for accident and health insurance constitute at least 95% of total premium considerations or total statutorily required reserves. See Montana Code 33-12-102
• Adjourn: A motion to adjourn a legislative chamber or a committee, if passed, ends that day's session.
• Admitted assets: means , subject to subsection (5)(b), assets determined in accordance with the requirements of 33-2-501. See Montana Code 33-12-102
• Affiliate: has the meaning provided in 33-2-1101. See Montana Code 33-12-102
• Amortization: Paying off a loan by regular installments.
• 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:

  (i)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; and

  (ii)the assets of the trust or other business entity consist solely of interest-bearing obligations or other contractual obligations representing the right to receive payment from the cash flows from the assets or rights. See Montana Code 33-12-102

• Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
• Attorney-in-fact: A person who, acting as an agent, is given written authorization by another person to transact business for him (her) out of court.
• Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
• 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 Montana Code 33-12-102
• Cap: means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price or level or the performance or value of one or more underlying interests exceeds a predetermined number. See Montana Code 33-12-102
• Capital and surplus: means the sum of the capital and surplus of the insurer required to be shown on the most recent statutory financial statement of the insurer required to be filed with the commissioner. See Montana Code 33-12-102
• Cash equivalents: means short-term, highly rated, and highly liquid investments or securities readily convertible to known amounts of cash without penalty and so near maturity that they present insignificant risk of change in value. See Montana Code 33-12-102
• Class one bond mutual fund: means a mutual fund that at all times qualifies for investment using the bond class one reserve factor under the Purposes and Procedures of the Securities Valuation Office or any successor publication. See Montana Code 33-12-102
• Class one money market mutual fund: means a money market mutual fund that at all times qualifies for investment using the bond class one reserve factor under the Purposes and Procedures of the Securities Valuation Office or any successor publication. See Montana Code 33-12-102
• Control: means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract (other than a commercial contract for goods or nonmanagement services), or otherwise, unless the power is the result of an official position with a corporation or a corporate office held by the person. See Montana Code 33-12-102
• Counterparty exposure amount: means the net amount of credit risk attributable to a derivative instrument, pursuant to 33-12-109, entered into with a business entity other than through a qualified exchange or qualified foreign exchange or cleared through a qualified clearinghouse. See Montana Code 33-12-102
• Covered: means that an insurer:

  (a)owns or can immediately acquire, through the exercise of options, warrants, or already-owned conversion rights, the underlying interest in order to fulfill or secure its obligations under a call option, cap, or floor it has written; or

  (b)has set aside, under a custodial or escrow agreement, cash or cash equivalents with a market value equal to the amount required to fulfill its obligations under a put option it has written in an income generation transaction. See Montana Code 33-12-102

• Credit tenant loan: means a mortgage loan that is made primarily in reliance on the credit standing of a major tenant, structured with an assignment of the rental payments to the lender with real estate pledged as collateral in the form of a first lien. See Montana Code 33-12-102
• Customary: means according to usage. See Montana Code 1-1-206
• Derivative instrument: means an agreement, an option, an instrument, or a series or combination of agreements, options, or instruments:

  (i)to make or take delivery of or assume or relinquish a specified amount of one or more underlying interests or to make a cash settlement in lieu of delivery; or

  (ii)that has a price, level, performance, value, or cash flow based primarily upon the actual or expected price, level, performance, value, or cash flow of one or more underlying interests. See Montana Code 33-12-102

• Derivative transaction: means a transaction involving the use of one or more derivative instruments. See Montana Code 33-12-102
• directly: when used in connection with an obligation, means that the designated obligor is primarily liable on the instrument representing the obligation. See Montana Code 33-12-102
• Dollar roll transaction: means two simultaneous transactions with different settlement dates that are no more than 96 days apart, so that in the transaction with the earlier settlement date, an insurer sells to a business entity, and in the other transaction, the insurer is obligated to purchase from the same business entity, substantially similar securities of the following types:

  (a)asset-backed securities issued, assumed, or guaranteed by the government national mortgage association, the federal national mortgage association, or the federal home loan mortgage corporation or their successors; and

  (b)other asset-backed securities referred to in section 106 of Title I of the Secondary Mortgage Market Enhancement Act of 1984 (15 U. See Montana Code 33-12-102

• Domestic jurisdiction: means the United States, any state, Canada, any province of Canada, or any political subdivision of a state or province. See Montana Code 33-12-102
• Equity interest: means any of the following that are not rated credit instruments:

  (a)common stock;

  (b)preferred stock;

  (c)trust certificate;

  (d)equity investment in an investment company other than a money market mutual fund or a class one bond mutual fund;

  (e)investment in a common trust fund of a bank regulated by a federal or state agency;

  (f)an ownership interest in minerals, oil, or gas, the rights to which have been separated from the underlying fee interest in the real estate where the minerals, oil, or gas is located;

  (g)instruments that are mandatorily, or at the option of the issuer, convertible to equity;

  (h)limited partnership interests and those general partnership interests authorized under 33-12-104(4);

  (i)member interests in limited liability companies;

  (j)warrants or other rights to acquire equity interests that are created by the person that owns or would issue the equity to be acquired; or

  (k)instruments that would be rated credit instruments except for the provisions of subsection (70)(b). See Montana Code 33-12-102

• Equivalent securities: means :

  (a)in a securities lending transaction, securities that are identical to the loaned securities in all features including the amount of the loaned securities, except as to certificate number if held in physical form, but if any different security is exchanged for a loaned security by recapitalization, merger, consolidation, or other corporate action, the different security is considered to be the loaned security;

  (b)in a repurchase transaction, securities that are identical to the purchased securities in all features including the amount of the purchased securities, except as to the certificate number if held in physical form; or

  (c)in a reverse repurchase transaction, securities that are identical to the sold securities in all features including the amount of the sold securities, except as to the certificate number if held in physical form. See Montana Code 33-12-102

• Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
• Federal Reserve System: The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States. ^{Source: OCC}
• Floor: means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a price, level, performance, or value of one or more underlying interests. See Montana Code 33-12-102
• Foreign currency: means a currency other than that of a domestic jurisdiction. See Montana Code 33-12-102
• Foreign jurisdiction: means a jurisdiction other than a domestic jurisdiction. See Montana Code 33-12-102
• Future: means an agreement, traded on a qualified exchange or qualified foreign exchange, to make or take delivery of or effect a cash settlement based on the actual or expected price, level, performance, or value of one or more underlying interests. See Montana Code 33-12-102
• Government money market mutual fund: means a money market mutual fund that at all times:

  (a)invests only in obligations issued, guaranteed, or insured by the federal government of the United States or collateralized repurchase agreements composed of these obligations; and

  (b)qualifies for investment without a reserve under the Purposes and Procedures of the Securities Valuation Office or any successor publication. See Montana Code 33-12-102

• Government-sponsored enterprise: means a:

  (a)governmental agency; or

  (b)corporation, limited liability company, association, partnership, joint-stock company, joint venture, trust, or other entity or instrumentality organized under the laws of any domestic jurisdiction to accomplish a public policy or other governmental purpose. See Montana Code 33-12-102

• Guaranteed or insured: when used in connection with an obligation acquired under this chapter, means that the guarantor or insurer has agreed to:

  (a)perform or insure the obligation of the obligor or purchase the obligation; or

  (b)be unconditionally obligated until the obligation is repaid to maintain in the obligor a minimum net worth, fixed charge coverage, stockholders' equity, or sufficient liquidity to enable the obligor to pay the obligation in full. See Montana Code 33-12-102

• Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. ^{Source: OCC}
• Hedging transaction: means a derivative transaction that is entered into and maintained to reduce:

  (a)the risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or

  (b)the currency exchange rate risk or the degree of exposure as to assets or liabilities that an insurer has acquired or incurred or anticipates acquiring or incurring. See Montana Code 33-12-102

• Highly rated: means an investment rated "P-1" by Moody's investors service, inc. See Montana Code 33-12-102
• Income: means , as to a security, interest, accrual of discount, dividends, or other distributions, such as rights, tax or assessment credits, warrants, and distributions in kind. See Montana Code 33-12-102
• Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. ^{Source: FDIC}
• Insurance future: means a future relating to an index or pool that is based on insurance-related items. See Montana Code 33-12-102
• Insurance futures option: means an option on an insurance future. See Montana Code 33-12-102
• Investment company: means an investment company as defined in section 80a-3 of the Investment Company Act of 1940 (15 U. See Montana Code 33-12-102
• Investment company series: means an investment portfolio of an investment company that is organized as a series company and to which assets of the investment company have been specifically allocated. See Montana Code 33-12-102
• Investment practices: means transactions of the types described in 33-12-208, 33-12-210, 33-12-308, or 33-12-310. See Montana Code 33-12-102
• Investment strategies: means the techniques and methods used by an insurer to meet its investment objectives, such as active bond portfolio management, passive bond portfolio management, interest rate anticipation, growth investing, and value investing. See Montana Code 33-12-102
• Investment subsidiary: means a subsidiary of an insurer engaged or organized to engage exclusively in the ownership and management of assets authorized as investments 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 chapter applicable to the insurer. See Montana Code 33-12-102
• Joint tenancy: A form of property ownership in which two or more parties hold an undivided interest in the same property that was conveyed under the same instrument at the same time. A joint tenant can sell his (her) interest but not dispose of it by will. Upon the death of a joint tenant, his (her) undivided interest is distributed among the surviving joint tenants.
• Letter of credit: means a clean, irrevocable, and unconditional letter of credit issued or confirmed by and payable and presentable at a financial institution on the list of financial institutions meeting the standards for issuing letters of credit under the Purposes and Procedures of the Securities Valuation Office or any successor publication. See Montana Code 33-12-102
• Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
• 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 that limits the personal liability of investors to the equity investment of the investor in the business entity. See Montana Code 33-12-102
• Lower-grade investment: means a rated credit instrument rated 4, 5, or 6 by the SVO. See Montana Code 33-12-102
• Market value: means :

  (a)as to cash and letters of credit, the amounts of cash or a letter of credit; and

  (b)as to a security, as of any date, the price for the security on that date obtained from a generally recognized source or the most recent quotation from a generally recognized source or, to the extent that a generally recognized source does not exist, the price for the security as determined in good faith by the parties to a transaction, plus accrued but unpaid income on a security to the extent not included in the price as of that date. See Montana Code 33-12-102

• Medium-grade investment: means a rated credit instrument rated 3 by the SVO. See Montana Code 33-12-102
• Money market mutual fund: means a mutual fund that meets the conditions of 17 C. See Montana Code 33-12-102
• Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
• Mortgage loan: A loan made by a lender to a borrower for the financing of real property. ^{Source: OCC}
• Mortgage loan: means an obligation secured by a mortgage, deed of trust, trust deed, or other consensual lien on real estate. See Montana Code 33-12-102
• Multilateral development bank: means an international development organization of which the United States is a member. See Montana Code 33-12-102
• Mutual fund: means an investment company or an investment company series that is registered with the United States securities and exchange commission under the Investment Company Act of 1940 (15 U. See Montana Code 33-12-102
• NAIC: means the national association of insurance commissioners. See Montana Code 33-12-102
• National Bank: A bank that is subject to the supervision of the Comptroller of the Currency. The Office of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have "national" or "national association" in its name. ^{Source: OCC}
• Obligation: means a bond, note, debenture, trust certificate including an equipment certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance, credit tenant loan, loan secured by financing net leases, and other evidence of indebtedness for the payment of money (or participations, certificates, or other evidences of an interest in any of the foregoing), whether constituting a general obligation of the issuer or payable only out of certain revenue or certain funds pledged or otherwise dedicated for payment. See Montana Code 33-12-102
• Option: means an agreement giving the buyer the right to buy or receive (a "call option"), sell or deliver (a "put option"), enter into, extend or terminate, or effect a cash settlement based on the actual or expected price, level, performance, or value of one or more underlying interests. See Montana Code 33-12-102
• Person: has the meaning provided in 33-1-202. See Montana Code 33-12-102
• Personal property: All property that is not real property.
• Personal property: means money, goods, chattels, things in action, and evidences of debt. See Montana Code 1-1-205
• Potential exposure: means the amount determined in accordance with the NAIC Annual Statement Instructions. See Montana Code 33-12-102
• Preferred stock: means preferred, preference, or guaranteed stock of a business entity authorized to issue the stock that has a preference in liquidation over the common stock of the business entity. See Montana Code 33-12-102
• Qualified bank: means :

  (a)a national bank, state bank, or trust company that at all times is adequately capitalized as determined by standards adopted by United States banking regulators and that is either regulated by state banking laws or is a member of the federal reserve system; or

  (b)a bank or trust company incorporated or organized under the laws of a country other than the United States that is regulated as a bank or trust company by that country's government or an agency of that government and that at all times is adequately capitalized as determined by the standards adopted by international banking authorities. See Montana Code 33-12-102

• Qualified business entity: means a business entity that is:

  (a)an issuer of obligations or preferred stock that is rated 1 or 2 by the SVO or an issuer of obligations, preferred stock, or derivative instruments that are rated the equivalent of 1 or 2 by the SVO or by a nationally recognized statistical rating organization recognized by the SVO; or

  (b)a primary dealer in United States government securities recognized by the federal reserve bank of New York. See Montana Code 33-12-102

• Qualified clearinghouse: means a clearinghouse for, and subject to the rules of, a qualified exchange or a qualified foreign exchange, which provides clearing services, including acting as a counterparty to each of the parties to a transaction so that the parties no longer have a credit risk as to each other. See Montana Code 33-12-102
• Qualified exchange: means :

  (a)a securities exchange registered as a national securities exchange or a securities market regulated under the Securities Exchange Act of 1934 (15 U. See Montana Code 33-12-102

• Qualified foreign exchange: means a foreign exchange, board of trade, or contract market located outside the United States or its territories or possessions:

  (a)that has received regulatory comparability relief under commodity futures trading commission rule 30. See Montana Code 33-12-102

• Qualified guarantor: means a guarantor against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction. See Montana Code 33-12-102
• Qualified primary credit source: means the credit source to which an insurer looks for payment as to an investment and against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction. See Montana Code 33-12-102
• Rated credit instrument: means a contractual right to receive cash or another rated credit instrument from another entity if the instrument:

  (i)is rated or required to be rated by the SVO;

  (ii)in the case of an instrument with a maturity of 397 days or less, is issued, guaranteed, or insured by an entity that is rated by, or another obligation of the entity is rated by, the SVO or by a nationally recognized statistical rating organization recognized by the SVO;

  (iii)in the case of an instrument with a maturity of 90 days or less, is issued by a qualified bank;

  (iv)is a share of a class one bond mutual fund; or

  (v)is a share of a money market mutual fund. See Montana Code 33-12-102

• Real estate: means :

  (i)real property;

  (ii)interests in real property, such as leaseholds, minerals, oil, and gas, that have not been separated from the underlying fee interest;

  (iii)improvements and fixtures located on or in real property; and

  (iv)the seller's equity in a contract providing for a deed of real estate. See Montana Code 33-12-102

• Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
• Real property: means lands, tenements, hereditaments, and possessory title to public lands. See Montana Code 1-1-205
• 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}
• Replication transaction: means a derivative transaction that is intended to replicate the performance of one or more assets that an insurer is authorized to acquire under this chapter. See Montana Code 33-12-102
• Repurchase transaction: means a transaction in which an insurer purchases securities from a business entity that is obligated to repurchase the purchased securities or equivalent securities from the insurer at a specified price, either within a specified period of time or upon demand. See Montana Code 33-12-102
• Required liabilities: means total liabilities required to be reported on the statutory financial statement of the insurer most recently required to be filed with the commissioner. See Montana Code 33-12-102
• Residential mortgage loan: means a loan primarily secured by a mortgage on real estate improved with a residence for no more than four families. See Montana Code 33-12-102
• Reverse repurchase transaction: means a transaction in which an insurer sells securities to a business entity and is obligated to repurchase the sold securities or equivalent securities from the business entity at a specified price, either within a specified period of time or upon demand. See Montana Code 33-12-102
• Secured location: means the contiguous real estate owned by one person. See Montana Code 33-12-102
• Securities lending transaction: means a transaction in which securities are loaned by an insurer to a business entity that is obligated to return the loaned securities or equivalent securities to the insurer, either within a specified period of time or upon demand. See Montana Code 33-12-102
• Series company: means an investment company that is organized as a series company, as defined in rules adopted under the Investment Company Act of 1940 (15 U. See Montana Code 33-12-102
• Shell business entity: means a business entity having no economic substance, except as a vehicle for owning interests in assets issued, owned, or previously owned by a person domiciled in a foreign jurisdiction. See Montana Code 33-12-102
• Short-term: means investments with a remaining term to maturity of 90 days or less. See Montana Code 33-12-102
• Sinking fund stock: means preferred stock that:

  (a)is subject to a mandatory sinking fund or similar arrangement that will provide for the redemption or open market purchase of the entire issue over a period not longer than 40 years from the date of acquisition; and

  (b)provides for mandatory sinking fund installments or open market purchases commencing not more than 10 1/2 years from the date of issue, with the sinking fund installments providing for the purchase or redemption, on a cumulative basis commencing 10 years from the date of issue, of at least 2. See Montana Code 33-12-102

• Statute: A law passed by a legislature.
• Substantially similar securities: means securities that meet all criteria for substantially similar specified in the NAIC Accounting Practices and Procedures Manual, as amended, and in an amount that constitutes good delivery form as determined from time to time by the public securities administration. See Montana Code 33-12-102
• SVO: means the securities valuation office of the NAIC or any successor office established by the NAIC. See Montana Code 33-12-102
• Swap: means an agreement to exchange or to net payments at one or more times based on the actual or expected price, level, performance, or value of one or more underlying interests. See Montana Code 33-12-102
• Total investment of the insurer: includes :

  (a)direct investment by the insurer in an asset; and

  (b)the insurer's proportionate share of an investment in an asset by an investment subsidiary of the insurer, which must be calculated by multiplying the amount of the subsidiary's investment by the percentage of the insurer's ownership interest in the subsidiary. See Montana Code 33-12-102

• Underlying interest: means the assets, liabilities, other interests, or a combination of assets, liabilities, or other interests underlying a derivative instrument, such as any one or more securities, currencies, rates, indices, commodities, or derivative instruments. See Montana Code 33-12-102
• Unrestricted surplus: means the amount by which total admitted assets exceed 125% of the insurer's required liabilities. See Montana Code 33-12-102
• Variable Rate: Having a "variable" rate means that the APR changes from time to time based on fluctuations in an external rate, normally the Prime Rate. This external rate is known as the "index." If the index changes, the variable rate normally changes. Also see Fixed Rate.
• Warrant: means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement. See Montana Code 33-12-102