HF 3432

as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to insurance; regulating life insurance 
  1.3             company investments and financial transactions; 
  1.4             regulating qualified long-term care policies; 
  1.5             modifying the definition of chronically ill 
  1.6             individual; amending Minnesota Statutes 1996, section 
  1.7             61A.28, subdivisions 6, 9a, and 12; Minnesota Statutes 
  1.8             1997 Supplement, section 62S.01, subdivision 8. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 1996, section 61A.28, 
  1.11  subdivision 6, is amended to read: 
  1.12     Subd. 6.  [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] (a) 
  1.13  Common stocks, common stock equivalents, or securities 
  1.14  convertible into common stock or common stock equivalents of a 
  1.15  business entity organized under the laws of the United States or 
  1.16  any state thereof, or the Dominion of Canada or any province 
  1.17  thereof, if the net earnings of the business entity after the 
  1.18  elimination of extraordinary nonrecurring items of income and 
  1.19  expense and before income taxes and fixed charges over the five 
  1.20  immediately preceding completed fiscal years, or its period of 
  1.21  existence if less than five years, has averaged not less than 
  1.22  1-1/4 times its average annual fixed charges applicable to the 
  1.23  period.  
  1.24     (b) Preferred stock of, or common or preferred stock 
  1.25  guaranteed as to dividends by a business entity organized under 
  1.26  the laws of the United States or any state thereof, or the 
  1.27  Dominion of Canada or any province thereof, under the following 
  2.1   conditions:  (1) No investment may be made under this paragraph 
  2.2   in a stock upon which any dividend, current or cumulative, is in 
  2.3   arrears; (2) the company may not invest in stocks under this 
  2.4   paragraph and in common stocks under paragraph (a) if the 
  2.5   investment causes the company's aggregate investments in the 
  2.6   common or preferred stocks to exceed 25 percent of the company's 
  2.7   total admitted assets, provided that no more than 20 percent of 
  2.8   the company's admitted assets may be invested in common stocks 
  2.9   under paragraph (a); and (3) the company may not invest in any 
  2.10  preferred stock or common stock guaranteed as to dividends, 
  2.11  which is rated in the four lowest categories established by the 
  2.12  securities valuation office of the National Association of 
  2.13  Insurance Commissioners, if the investment causes the company's 
  2.14  aggregate investment in the lower rated preferred or common 
  2.15  stock guaranteed as to dividends to exceed five percent of its 
  2.16  total admitted assets.  
  2.17     (c) Warrants, options, and rights to purchase stock if the 
  2.18  stock, at the time of the acquisition of the warrant, option, or 
  2.19  right to purchase, would qualify as an investment under 
  2.20  paragraph (a) or (b), whichever is applicable.  A company shall 
  2.21  not invest in a warrant, option, or right to purchase stock if, 
  2.22  upon purchase and immediate exercise thereof, the acquisition of 
  2.23  the stock violates any of the concentration limitations 
  2.24  contained in paragraphs (a) and (b).  
  2.25     (d) In addition to amounts that may be invested under 
  2.26  subdivision 8 and without regard to the percentage limitation 
  2.27  applicable to stocks, warrants, options, and rights to purchase, 
  2.28  the securities of any face amount certificate company, unit 
  2.29  investment trust, or management type investment company, 
  2.30  registered or in the process of registration under the 
  2.31  Investment Company Act of 1940 as from time to time amended.  In 
  2.32  addition, the company may transfer assets into one or more of 
  2.33  its separate accounts for the purpose of establishing, or 
  2.34  supporting its contractual obligations under, the accounts in 
  2.35  accordance with the provisions of sections 61A.13 to 61A.21.  A 
  2.36  company may not invest in a security authorized under this 
  3.1   paragraph if the investment causes the company's aggregate 
  3.2   investments in the securities to exceed five percent of its 
  3.3   total admitted assets, except that for a health service plan 
  3.4   corporation operating under chapter 62C, and for a health 
  3.5   maintenance organization operating under chapter 62D, the 
  3.6   company's aggregate investments may not exceed 20 percent of its 
  3.7   total admitted assets.  No more than five percent of the allowed 
  3.8   investment by health service plan corporations or health 
  3.9   maintenance organizations may be invested in funds that invest 
  3.10  in assets not backed by the federal government.  When investing 
  3.11  in money market mutual funds, nonprofit health service plans 
  3.12  regulated under chapter 62C, and health maintenance 
  3.13  organizations regulated under chapter 62D, shall establish a 
  3.14  trustee custodial account for the transfer of cash into the 
  3.15  money market mutual fund. 
  3.16     (e) Investment grade obligations that are:  
  3.17     (1) bonds, obligations, notes, debentures, repurchase 
  3.18  agreements, or other evidences of indebtedness of a business 
  3.19  entity, organized under the laws of the United States or any 
  3.20  state thereof, or the Dominion of Canada or any province 
  3.21  thereof; and 
  3.22     (2) rated in one of the four highest rating categories by 
  3.23  at least one nationally recognized statistical rating 
  3.24  organization, or are rated in one of the two highest categories 
  3.25  established by the securities valuation office of the National 
  3.26  Association of Insurance Commissioners. 
  3.27     (f) Noninvestment grade obligations:  A company may acquire 
  3.28  noninvestment grade obligations as defined in subclause (i) 
  3.29  (hereinafter noninvestment grade obligations) which meet the 
  3.30  earnings test set forth in subclause (ii).  A company may not 
  3.31  acquire a noninvestment grade obligation if the acquisition will 
  3.32  cause the company to exceed the limitations set forth in 
  3.33  subclause (iii). 
  3.34     (i) A noninvestment grade obligation is an obligation of a 
  3.35  business entity, organized under the laws of the United States 
  3.36  or any state thereof, or the Dominion of Canada or any province 
  4.1   thereof, that is not rated in one of the four highest rating 
  4.2   categories by at least one nationally recognized statistical 
  4.3   rating organization, or is not rated in one of the two highest 
  4.4   categories established by the securities valuation office of the 
  4.5   National Association of Insurance Commissioners. 
  4.6      (ii) Noninvestment grade obligations authorized by this 
  4.7   subdivision may be acquired by a company if the business entity 
  4.8   issuing or assuming the obligation, or the business entity 
  4.9   securing or guaranteeing the obligation, has had net earnings 
  4.10  after the elimination of extraordinary nonrecurring items of 
  4.11  income and expense and before income taxes and fixed charges 
  4.12  over the five immediately preceding completed fiscal years, or 
  4.13  its period of existence of less than five years, has averaged 
  4.14  not less than 1-1/4 times its average annual fixed charges 
  4.15  applicable to the period; provided, however, that if a business 
  4.16  entity issuing or assuming the obligation, or the business 
  4.17  entity securing or guaranteeing the obligation, has undergone an 
  4.18  acquisition, recapitalization, or reorganization within the 
  4.19  immediately preceding 12 months, or will use the proceeds of the 
  4.20  obligation for an acquisition, recapitalization, or 
  4.21  reorganization, then such business entity shall also have, on a 
  4.22  pro forma basis, for the next succeeding 12 months, net earnings 
  4.23  averaging 1-1/4 times its average annual fixed charges 
  4.24  applicable to such period after elimination of extraordinary 
  4.25  nonrecurring items of income and expense and before taxes and 
  4.26  fixed charges; no investment may be made under this section upon 
  4.27  which any interest obligation is in default. 
  4.28     (iii) Limitation on aggregate interest in noninvestment 
  4.29  grade obligations.  A company may not invest in a noninvestment 
  4.30  grade obligation if the investment will cause the company's 
  4.31  aggregate investments in noninvestment grade obligations to 
  4.32  exceed the applicable percentage of admitted assets set forth in 
  4.33  the following table:  
  4.34                                          Percentage of
  4.35              Effective Date              Admitted Assets
  4.36              January 1, 1992                  20
  5.1               January 1, 1993                  17.5
  5.2               January 1, 1994                  15
  5.3      Nothing in this paragraph limits the ability of a company 
  5.4   to invest in noninvestment grade obligations as provided under 
  5.5   subdivision 12. 
  5.6      (g) Obligations for the payment of money under the 
  5.7   following conditions:  (1) The obligation must be secured, 
  5.8   either solely or in conjunction with other security, by an 
  5.9   assignment of a lease or leases on property, real or personal; 
  5.10  (2) the lease or leases must be nonterminable by the lessee or 
  5.11  lessees upon foreclosure of any lien upon the leased property; 
  5.12  (3) the rents payable under the lease or leases must be 
  5.13  sufficient to amortize at least 90 percent of the obligation 
  5.14  during the primary term of the lease; and (4) the lessee or 
  5.15  lessees under the lease or leases, or a governmental entity or 
  5.16  business entity, organized under the laws of the United States 
  5.17  or any state thereof, or the Dominion of Canada, or any province 
  5.18  thereof, that has assumed or guaranteed any lessee's performance 
  5.19  thereunder, must be a governmental entity or business entity 
  5.20  whose obligations would qualify as an investment under 
  5.21  subdivision 2 or paragraph (e) or (f).  A company may acquire 
  5.22  leases assumed or guaranteed by a noninvestment grade lessee 
  5.23  unless the value of the lease, when added to the other 
  5.24  noninvestment grade obligations owned by the company, exceeds 15 
  5.25  percent of the company's admitted assets.  
  5.26     (h) A company may sell exchange-traded call options against 
  5.27  stocks or other securities owned by the company and may purchase 
  5.28  exchange-traded call options in a closing transaction against a 
  5.29  call option previously written by the company.  In addition to 
  5.30  the authority granted by paragraph (c), to the extent and on the 
  5.31  terms and conditions the commissioner determines to be 
  5.32  consistent with the purposes of this chapter, a company may 
  5.33  purchase or sell other exchange-traded call options, and may 
  5.34  sell or purchase exchange-traded put options.  
  5.35     (i) A company may not invest in a security or other 
  5.36  obligation authorized under this subdivision if the investment, 
  6.1   valued at cost at the date of purchase, causes the company's 
  6.2   aggregate investment in any one business entity to exceed two 
  6.3   percent of the company's admitted assets.  
  6.4      (j) For nonprofit health service plan corporations 
  6.5   regulated under chapter 62C, and for health maintenance 
  6.6   organizations regulated under chapter 62D, a company may invest 
  6.7   in commercial paper rated in one of the two highest rating 
  6.8   categories by at least one nationally recognized statistical 
  6.9   rating organization, or rated in one of the two highest 
  6.10  categories established by the securities valuation office of the 
  6.11  National Association of Insurance Commissioners, if the 
  6.12  investment, valued at cost at the date of purchase, does not 
  6.13  cause the company's aggregate investment in any one business 
  6.14  entity to exceed six percent of the company's admitted assets. 
  6.15     Sec. 2.  Minnesota Statutes 1996, section 61A.28, 
  6.16  subdivision 9a, is amended to read: 
  6.17     Subd. 9a.  [HEDGING.] A domestic life insurance company may 
  6.18  enter into financial transactions solely for the purpose of 
  6.19  managing reducing the interest rate risk associated with the 
  6.20  company's assets and liabilities that the company has acquired 
  6.21  or incurred or has legally contracted to acquire or incur, and 
  6.22  not for speculative or other purposes.  For purposes of this 
  6.23  subdivision, "financial transactions"  include, but are not 
  6.24  limited to, futures, options to buy or sell fixed income 
  6.25  securities, repurchase and reverse repurchase agreements, and 
  6.26  interest rate swaps, caps, and floors.  This authority is in 
  6.27  addition to any other authority of the insurer.  
  6.28     Sec. 3.  Minnesota Statutes 1996, section 61A.28, 
  6.29  subdivision 12, is amended to read: 
  6.30     Subd. 12.  [ADDITIONAL INVESTMENTS.] Investments of any 
  6.31  kind, without regard to the categories, conditions, standards, 
  6.32  or other limitations set forth in the foregoing subdivisions and 
  6.33  section 61A.31, subdivision 3, except that the prohibitions in 
  6.34  clause (d) of subdivision 3 remains applicable, may be made by a 
  6.35  domestic life insurance company in an amount not to exceed the 
  6.36  lesser of the following: 
  7.1      (1) Five percent of the company's total admitted assets as 
  7.2   of the end of the preceding calendar year, or 
  7.3      (2) Fifty percent of the amount by which its capital and 
  7.4   surplus as of the end of the preceding calendar year exceeds 
  7.5   $675,000.  Except as provided in section 61A.281, a company's 
  7.6   total investment under this section in the common stock of any 
  7.7   corporation, other than the stock of the types of corporations 
  7.8   specified in section 61A.284, may not exceed ten percent of the 
  7.9   common stock of the corporation.  No investment may be made 
  7.10  under the authority of this clause or clause (1) by a company 
  7.11  that has not completed five years of actual operation since the 
  7.12  date of its first certificate of authority.  
  7.13     If, subsequent to being made under the provisions of this 
  7.14  subdivision, an investment is determined to have become 
  7.15  qualified or eligible under any of the other provisions of this 
  7.16  chapter, the company may consider the investment as being held 
  7.17  under the other provision and the investment need no longer be 
  7.18  considered as having been made under the provisions of this 
  7.19  subdivision.  
  7.20     In addition to the investments authorized by this 
  7.21  subdivision, with the written order of the commissioner, a 
  7.22  domestic life insurance company may make qualified investments 
  7.23  in any additional securities or property of the type authorized 
  7.24  by subdivision 6, paragraph (e), (f), or (g), with the written 
  7.25  order of the commissioner other type of investment or exceed any 
  7.26  limitations of quality, quantity, or percentage of admitted 
  7.27  assets contained in this section, section 61A.29 or 61A.31, or 
  7.28  other provision governing the investments of a domestic life 
  7.29  insurance company.  This approval is at the discretion of the 
  7.30  commissioner, provided that the additional investments allowed 
  7.31  by the commissioner's written order may not exceed five percent 
  7.32  of the company's admitted assets.  This authorization does not 
  7.33  negate or reduce the investment authority granted in subdivision 
  7.34  6, paragraph (e), (f), or (g), or this subdivision. 
  7.35     Sec. 4.  Minnesota Statutes 1997 Supplement, section 
  7.36  62S.01, subdivision 8, is amended to read: 
  8.1      Subd. 8.  [CHRONICALLY ILL INDIVIDUAL.] "Chronically ill 
  8.2   individual" means an individual who has been certified by a 
  8.3   licensed health care practitioner, within the preceding 12-month 
  8.4   period, as either: 
  8.5      (1) being unable to perform, without substantial assistance 
  8.6   from another individual, at least two activities of daily living 
  8.7   for a period of at least 90 days due to a loss of functional 
  8.8   capacity; or 
  8.9      (2) having a disability similar to the level of disability 
  8.10  described in clause (1); or 
  8.11     (3) requiring substantial supervision to protect the 
  8.12  individual from threats to health and safety due to severe 
  8.13  cognitive impairment.  
  8.14     Sec. 5.  [EFFECTIVE DATES.] 
  8.15     Sections 1 to 4 are effective the day following final 
  8.16  enactment.