2nd Engrossment - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to insurance; solvency; regulating 1.3 disclosures, reinsurance, capital stock, managing 1.4 general agents, and contracts issued on a variable 1.5 basis; amending Minnesota Statutes 1994, sections 1.6 13.71, by adding a subdivision; 60A.03, subdivision 9; 1.7 60A.07, subdivision 10; 60A.093, subdivision 2; 1.8 60A.11, subdivisions 18 and 20; 60A.705, subdivision 1.9 8; 60A.75; 60H.02, subdivision 4; 60H.08; 61A.19; 1.10 61A.31, subdivision 3; and 67A.231; proposing coding 1.11 for new law in Minnesota Statutes, chapter 60A. 1.12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.13 Section 1. Minnesota Statutes 1994, section 13.71, is 1.14 amended by adding a subdivision to read: 1.15 Subd. 18. [MATERIAL TRANSACTION REPORTS.] Reports required 1.16 to be filed by insurers regarding certain material transactions 1.17 are classified under section 60A.135, subdivision 4. 1.18 Sec. 2. Minnesota Statutes 1994, section 60A.03, 1.19 subdivision 9, is amended to read: 1.20 Subd. 9. [CONFIDENTIALITY OF INFORMATION.] The 1.21 commissioner may not be required to divulge any information 1.22 obtained in the course of the supervision of insurance 1.23 companies, or the examination of insurance companies, including 1.24 examination related correspondence and workpapers, until the 1.25 examination report is finally accepted and issued by the 1.26 commissioner, and then only in the form of the final public 1.27 report of examinations. Nothing contained in this subdivision 1.28 prevents or shall be construed as prohibiting the commissioner 2.1 from disclosing the content of this information to the insurance 2.2 department of another state or the National Association of 2.3 Insurance Commissioners if the recipient of the information 2.4 agrees in writing to hold it as nonpublic data as defined in 2.5 section 13.02, in a manner consistent with this subdivision. 2.6 This subdivision does not apply to the extent the commissioner 2.7 is required or permitted by law, or ordered by a court of law to 2.8 testify or produce evidence in a civil or criminal proceeding. 2.9 For purposes of this subdivision, a subpoena is not an order of 2.10 a court of law. 2.11 Sec. 3. Minnesota Statutes 1994, section 60A.07, 2.12 subdivision 10, is amended to read: 2.13 Subd. 10. [SPECIAL PROVISIONS AS TO LIFE COMPANIES.] (1) 2.14 [PREREQUISITES OF LIFE COMPANIES.] No mutual life company shall 2.15 be qualified to issue any policy until applications for at least 2.16 $200,000 of insurance, upon lives of at least 200 separate 2.17 residents, have been actually and in good faith made, accepted, 2.18 and entered upon its books and at least one full annual premium 2.19 thereunder, based upon the authorized table of mortality, 2.20 received in cash or in absolutely payable and collectible 2.21 notes. A duplicate receipt for each premium, conditioned for 2.22 the return thereof unless the policy be issued within one year 2.23 thereafter, shall be issued, and one copy delivered to the 2.24 applicant and the other filed with the commissioner, together 2.25 with the certificate of a solvent authorized bank in the state, 2.26 of the deposit therein of such cash and notes, aggregating the 2.27 amount aforesaid, specifying the maker, payee, date, maturity, 2.28 and amount of each. Such cash and notes shall be held by it not 2.29 longer than one year, and at or before the expiration thereof to 2.30 be by it paid or delivered, upon the written order of the 2.31 commissioner, to such company or applicants, respectively. 2.32 (2) [FOREIGN COMPANIES MAY BECOME DOMESTIC.] Any company 2.33 organized under the laws of any other state or country, which 2.34 might have been originally incorporated under the laws of this 2.35 state, and which has been admitted to do business therein for 2.36 either or both the purpose of life or accident insurance, upon 3.1 complying with all the requirements of law relative to the 3.2 execution, filing, recording and publishing of original 3.3 certificates and payment of incorporation fees by like domestic 3.4 corporations, therein designating its principal place of 3.5 business at a place in this state, may become a domestic 3.6 corporation, and be entitled to like certificates of its 3.7 corporate existence and license to transact business in this 3.8 state, and be subject in all respects to the authority and 3.9 jurisdiction thereof. 3.10 (3) [TEMPORARY CAPITAL STOCK OF MUTUAL LIFE COMPANIES.] A 3.11 new mutual life insurance company which has complied with the 3.12 provisions of clause (1) or an existing mutual life insurance 3.13 company may establish, a temporary capital of, such amount not 3.14 less than $100,000, as may be approved by the commissioner. 3.15 Such temporary capital shall be invested by the company in the 3.16 same manner as is provided for the investment of its other 3.17 funds. Out of the net surplus of the company the holders of the 3.18 temporary capital stock may receive a dividend
of not more than3.19 eight percent per annum,which may be cumulative. This capital 3.20 stock shall not be a liability of the company but shall be 3.21 retired within a reasonable time and according to terms approved 3.22 by the commissioner. At the time for the retirement of this 3.23 capital stock, the holders shall be entitled to receive from the 3.24 company the par value thereof and any dividends thereon due and 3.25 unpaid, and thereupon the stock shall be surrendered and 3.26 canceled. In the event of the liquidation of the company, the 3.27 holders of temporary capital stock shall have the same 3.28 preference in the assets of the company as shareholders have in 3.29 a stock insurance company. Dividends on this stock are subject 3.30 to section 60D.20, subdivision 2. 3.31 Temporary capital stock may be issued with or without 3.32 voting rights. If issued with voting rights, the holders shall, 3.33 at all meetings, be entitled to one vote for each $10 of 3.34 temporary capital stock held. 3.35 Sec. 4. Minnesota Statutes 1994, section 60A.093, 3.36 subdivision 2, is amended to read: 4.1 Subd. 2. [LETTERS OF CREDIT CONTINUED ACCEPTANCE.] Letters 4.2 of credit meeting applicable standards of issuer acceptability 4.3 as of the dates of their issuance or confirmation must ,4.4 notwithstanding the issuing or confirming institution's4.5 subsequent failure to meet applicable standards of issuer4.6 acceptability,continue to be acceptable as security until their 4.7 expiration, extension, renewal, modification, or amendment, 4.8 whichever comes first , unless the issuing or confirming4.9 institution fails the following standards:. 4.10 (1) fails to maintain a minimum ratio of three percent tier4.11 I capital to total risk adjusted assets, leverage ratio, as4.12 required by the Federal Reserve System as disclosed by the bank4.13 in any call report required by state or federal regulatory4.14 authority and available to the ceding insurer; or4.15 (2) has its long-term deposit rating or long-term debt4.16 rating lowered to a rating below Aa2 as found in the current4.17 monthly publication of Moody's credit opinions or its equivalent.4.18 The letter of credit of an institution failing the standards of 4.19 subdivision 1, clause (1) or this clause(3) continues to be 4.20 acceptable for no more than 30 days. 4.21 Sec. 5. Minnesota Statutes 1994, section 60A.11, 4.22 subdivision 18, is amended to read: 4.23 Subd. 18. [STOCKS AND LIMITED PARTNERSHIPS.] (a) Stocks 4.24 issued or guaranteed by any corporation incorporated under the 4.25 laws of the United States of America or any state, commonwealth, 4.26 or territory of the United States, including the District of 4.27 Columbia, or the laws of the Dominion of Canada or any province 4.28 or territory of Canada, or stocks or stock equivalents, 4.29 including American Depository Receipts or unit investment 4.30 trusts, listed or regularly traded on a national securities 4.31 exchange on the following conditions: 4.32 (1) A company may not invest more than a total of 25 4.33 percent of its total admitted assets in stocks, stock 4.34 equivalents, and convertible issues. Not more than ten percent 4.35 of a company's total admitted assets may be invested in stocks, 4.36 stock equivalents, and convertible issues not traded or listed 5.1 on a national securities exchange or designated or approved for 5.2 designation upon notice of issuance on the NASDAQ/National 5.3 Market System. This limitation does not apply to investments 5.4 under clause (4); 5.5 (2) A company may not invest in more than two percent of 5.6 its total admitted assets in preferred stocks of any corporation 5.7 which are traded on a national securities exchange and may also 5.8 invest in other preferred stocks if the issuer has qualified net 5.9 earnings and if current or cumulative dividends are not then in 5.10 arrears; 5.11 (3) A company may not invest in more than two percent of 5.12 its total admitted assets in common stocks, common stock 5.13 equivalents, or securities convertible into common stock or 5.14 common stock equivalents of any corporation or business trust 5.15 which are traded on a national securities exchange or designated 5.16 or approved for designation upon notice of issuance on the 5.17 NASDAQ/National Market System, and may also invest in other 5.18 common stocks, stock equivalents, and convertible issues subject 5.19 to the limitations specified in clause (1); 5.20 (4) A company may organize or acquire and hold voting 5.21 control of a corporation or business trust through its ownership 5.22 of common stock, common stock equivalents, or other securities, 5.23 provided the corporation or business trust is: (a) a 5.24 corporation providing investment advisory, banking, management 5.25 or sale services to an investment company or to an insurance 5.26 company, (b) a data processing or computer service company, (c) 5.27 a mortgage loan corporation engaged in the business of making, 5.28 originating, purchasing or otherwise acquiring or investing in, 5.29 and servicing or selling or otherwise disposing of loans secured 5.30 by mortgages on real property, (d) a corporation if its business 5.31 is owning and managing or leasing personal property, (e) a 5.32 corporation providing securities underwriting services or acting 5.33 as a securities broker or dealer, (f) a real property holding, 5.34 developing, managing, brokerage or leasing corporation, (g) any 5.35 domestic or foreign insurance company, (h) any alien insurance 5.36 company, if the organization or acquisition and the holding of 6.1 the company is subject to the prior approval of the commissioner 6.2 of commerce, which approval must be given upon good cause shown 6.3 and is deemed to have been given if the commissioner does not 6.4 disapprove of the organization or acquisition within 30 days 6.5 after notification by the company, (i) an investment subsidiary 6.6 to acquire and hold investments which the company could acquire 6.7 and hold directly, if the investments of the subsidiary are 6.8 considered direct investments for purposes of this chapter and 6.9 are subject to the same percentage limitations, requirements and 6.10 restrictions as are contained herein, or (j) any corporation 6.11 whose business has been approved by the commissioner as 6.12 complementary or supplementary to the business of the company. 6.13 A company may invest up to an aggregate of ten percent of its 6.14 total admitted assets under subclauses (a) to (e) of this clause. 6.15 The diversification requirement of subdivision 12, paragraph 6.16 (b), does not apply to this clause; 6.17 (5) A company may invest in warrants and rights granted by 6.18 an issuer to purchase securities of the issuer if that security 6.19 of the issuer, at the time of the acquisition of the warrant or 6.20 right to purchase, would qualify as an investment under 6.21 paragraph (a), clause (2) or (3), whichever is applicable, 6.22 provided that security meets the standards prescribed in the 6.23 clause at the time of acquisition of the securities; and 6.24 (6)(i) A company may invest in the securities of any face 6.25 amount certificate company, unit investment trust, or management 6.26 type investment company, registered or in the process of 6.27 registration under the Investment Company Act of 1940 as from 6.28 time to time amended, provided that the aggregate of all these 6.29 investments other than in securities of money market mutual 6.30 funds or mutual funds investing primarily in United States 6.31 government securities, determined at cost, shall not exceed five 6.32 percent of its total admitted assets; investments may be made 6.33 under this clause without regard to the percentage limitations 6.34 applicable to investments in voting securities. 6.35 (ii) A company may invest in any proportion of the shares 6.36 or investment units of an investment company or investment 7.1 trust, whether or not registered under the Investment Company 7.2 Act of 1940, which is managed by an insurance company, member 7.3 bank, trust company regulated by state or federal authority or 7.4 an investment manager or adviser registered under the Investment 7.5 Advisers Act of 1940 or qualified to manage the investments of 7.6 an investment company registered under the Investment Company 7.7 Act of 1940, provided that the investments of the investment 7.8 company or investment trust are qualified investments made under 7.9 this section and that the articles of incorporation, bylaws, 7.10 trust agreement, investment management agreement, or some other 7.11 governing instrument limits its investments to investments 7.12 qualified under this section. 7.13 (b) A company may invest in or otherwise acquire and hold a 7.14 limited partnership interest in any limited partnership formed 7.15 under the laws of any state, commonwealth, or territory of the 7.16 United States or under the laws of the United States of 7.17 America. A company may invest in or otherwise acquire and hold 7.18 a member interest in any limited liability company formed under 7.19 the laws of any state, commonwealth, or territory of the United 7.20 States or under the laws of the United States. No limited 7.21 partnership or limited liability company member interest shall 7.22 be acquired if the investment, valued at cost, exceeds two 7.23 percent of the admitted assets of the company or if the 7.24 investment, plus the book value on the date of the investment of 7.25 all limited partnership and limited liability company interests 7.26 then held by the company and held under the authority of this 7.27 subdivision, exceeds ten percent of the company's admitted 7.28 assets. Limited partnership and limited liability company 7.29 interests traded on a national securities exchange must be 7.30 classified as stock equivalents and are not subject to the 7.31 percentage limitations contained in this paragraph. 7.32 Sec. 6. Minnesota Statutes 1994, section 60A.11, 7.33 subdivision 20, is amended to read: 7.34 Subd. 20. [REAL ESTATE.] (a) Except as provided in 7.35 paragraphs (b) to (d), a company may only acquire, hold, and 7.36 convey real estate which: 8.1 (1) has been mortgaged to it in good faith by way of 8.2 security for loans previously contracted, or for money due; 8.3 (2) has been conveyed to it in satisfaction of debts 8.4 previously contracted in the course of its dealings; 8.5 (3) has been purchased at sales on judgments, decrees or 8.6 mortgages obtained or made for the debts; and 8.7 (4) is subject to a contract for deed under which the 8.8 company holds the vendor's interest to secure the payments the 8.9 vendee is required to make thereunder. 8.10 All the real estate specified in clauses (1) to (3) must be 8.11 sold and disposed of within five years after the company has 8.12 acquired title to it, or within five years after it has ceased 8.13 to be necessary for the accommodation of the company's business, 8.14 and the company must not hold this property for a longer period 8.15 unless the company elects to hold the real estate under another 8.16 section, or unless it procures a certificate from the 8.17 commissioner of commerce that its interest will suffer 8.18 materially by the forced sale thereof, in which event the time 8.19 for the sale may be extended to the time the commissioner 8.20 directs in the certificate. The market value of real estate 8.21 specified in clauses (1) to (3) must be established by the 8.22 written certification of a licensed real estate appraiser. The 8.23 appraisal is required at the time the company elects to hold the 8.24 real estate under clauses (1) to (3). 8.25 (b) A company may acquire and hold real estate for the 8.26 convenient accommodation of its business. 8.27 (c) A company may acquire real estate or any interest in 8.28 real estate, including oil and gas and other mineral interests, 8.29 as an investment for the production of income, and may hold, 8.30 improve or otherwise develop, subdivide, lease, sell and convey 8.31 real estate so acquired directly or as a joint venture or 8.32 through a limited, limited liability, or general partnership in 8.33 which the company is a partner or through a limited liability 8.34 company in which the company is a member. 8.35 (d) A company may also hold real estate (1) if the purpose 8.36 of the acquisition is to enhance the sale value of real estate 9.1 previously acquired and held by the company under this section, 9.2 and (2) if the company expects the real estate so acquired to 9.3 qualify under paragraph (b) or (c) above within five years after 9.4 acquisition. 9.5 (e) A company may, after securing the approval of the 9.6 commissioner, acquire and hold real estate for the purpose of 9.7 providing necessary living quarters for its employees. The 9.8 company must dispose of the real estate within five years after 9.9 it has ceased to be necessary for that purpose unless the 9.10 commissioner agrees to extend the holding period upon 9.11 application by the company. 9.12 (f) A company may not invest more than 25 percent of its 9.13 total admitted assets in real estate. The cost of any parcel of 9.14 real estate held for both the accommodation of business and for 9.15 the production of income must be allocated between the two uses 9.16 annually. No more than ten percent of a company's total 9.17 admitted assets may be invested in real estate held under 9.18 paragraph (b). No more than 15 percent of a company's total 9.19 admitted assets may be invested in real estate held under 9.20 paragraph (c). No more than three percent of its total admitted 9.21 assets may be invested in real estate held under paragraph (e). 9.22 Upon application by a company, the commissioner of commerce may 9.23 increase any of these limits up to an additional five percent. 9.24 Sec. 7. [60A.135] [REPORT.] 9.25 Subdivision 1. [REQUIREMENT.] Every insurer domiciled in 9.26 this state shall file a report with the commissioner disclosing 9.27 material acquisitions and dispositions of assets or material 9.28 nonrenewals, cancellations, or revisions of ceded reinsurance 9.29 agreements unless the acquisitions and dispositions of assets or 9.30 material nonrenewals, cancellations, or revisions of ceded 9.31 reinsurance agreements have been submitted to the commissioner 9.32 for review, approval, or information purposes pursuant to other 9.33 provisions of law, rule, or other requirements. 9.34 Subd. 2. [DATE DUE.] The report required in subdivision 1 9.35 is due within 15 days after the end of the calendar month in 9.36 which the transactions occur. 10.1 Subd. 3. [FILING.] One complete copy of the report, 10.2 including exhibits or other attachments filed as part of it, 10.3 must be filed with the National Association of Insurance 10.4 Commissioners. 10.5 Subd. 4. [CONFIDENTIALITY.] Reports filed with the 10.6 commissioner pursuant to sections 60A.135 to 60A.137 must be 10.7 held as nonpublic data as defined in section 13.02, are not 10.8 subject to subpoena, and may not be made public by the 10.9 commissioner, the National Association of Insurance 10.10 Commissioners, or other person, except to insurance departments 10.11 of other states, without the prior written consent of the 10.12 insurer to which it pertains. However, the commissioner may 10.13 publish all or part of a report in the manner the commissioner 10.14 considers appropriate if, after giving the affected insurer 10.15 notice and an opportunity to be heard, the commissioner 10.16 determines that the interest of policyholders, shareholders, or 10.17 the public will be served by the publication. 10.18 Sec. 8. [60A.136] [ACQUISITIONS AND DISPOSITIONS OF 10.19 ASSETS.] 10.20 Subdivision 1. [MATERIALITY.] No acquisitions or 10.21 dispositions of assets need be reported pursuant to section 10.22 60A.135 if the acquisitions or dispositions are not material. 10.23 For purposes of sections 60A.135 to 60A.137, a material 10.24 acquisition (or the aggregate of any series of related 10.25 acquisitions during any 30-day period) or disposition (or the 10.26 aggregate of any series of related dispositions during any 10.27 30-day period) is one that is nonrecurring and not in the 10.28 ordinary course of business and involves more than five percent 10.29 of the reporting insurer's total admitted assets as reported in 10.30 its most recent statutory statement filed with the commissioner 10.31 of commerce. 10.32 Subd. 2. [SCOPE.] (a) Asset acquisitions subject to 10.33 sections 60A.135 to 60A.137 include every purchase, lease, 10.34 exchange, merger, consolidation, succession, or other 10.35 acquisition other than the construction or development of real 10.36 property by or for the reporting insurer or the acquisition of 11.1 materials for this purpose. 11.2 (b) Asset dispositions subject to sections 60A.135 to 11.3 60A.137 include every sale, lease, exchange, merger, 11.4 consolidation, mortgage, hypothecation, assignment (whether for 11.5 the benefit of creditors or otherwise), abandonment, 11.6 destruction, or other disposition. 11.7 Subd. 3. [INFORMATION TO BE REPORTED.] (a) The following 11.8 information is required to be disclosed in a report of a 11.9 material acquisition or disposition of assets: 11.10 (1) date of the transaction; 11.11 (2) manner of acquisition or disposition; 11.12 (3) description of the assets involved; 11.13 (4) nature and amount of the consideration given or 11.14 received; 11.15 (5) purpose of, or reason for, the transaction; 11.16 (6) manner by which the amount of consideration was 11.17 determined; 11.18 (7) gain or loss recognized or realized by the insurer as a 11.19 result of the transaction; and 11.20 (8) name of each person from whom the assets were acquired 11.21 or to whom they were disposed. 11.22 (b) Insurers are required to report material acquisitions 11.23 and dispositions on a nonconsolidated basis unless the insurer 11.24 is part of a consolidated group of insurers that uses a pooling 11.25 arrangement or 100 percent reinsurance agreement that affects 11.26 the solvency and integrity of the insurer's reserves and the 11.27 insurer ceded substantially all of its direct and assumed 11.28 business to the pool. An insurer is considered to have ceded 11.29 substantially all of its direct and assumed business to a pool 11.30 if the insurer has less than $1,000,000 total direct plus 11.31 assumed written premiums during a calendar year that are not 11.32 subject to a pooling arrangement and the net income of the 11.33 business not subject to the pooling arrangement represents less 11.34 than five percent of the insurer's capital and surplus. 11.35 Sec. 9. [60A.137] [NONRENEWALS, CANCELLATIONS, OR 11.36 REVISIONS OF CEDED REINSURANCE AGREEMENTS.] 12.1 Subdivision 1. [MATERIALITY.] (a) No nonrenewals, 12.2 cancellations, or revisions of ceded reinsurance agreements need 12.3 be reported pursuant to section 60A.135 if the nonrenewals, 12.4 cancellations, or revisions are not material. For purposes of 12.5 sections 60A.135 to 60A.137, a material nonrenewal, 12.6 cancellation, or revision for: 12.7 (1) property and casualty business, including accident and 12.8 health business when written by a property and casualty insurer 12.9 is one that affects: 12.10 (i) more than 50 percent of an insurer's ceded written 12.11 premium; or 12.12 (ii) more than 50 percent of the insurer's total ceded 12.13 indemnity and loss adjustment reserves; and 12.14 (2) life, annuity, and accident and health business, is one 12.15 that affects more than 50 percent of the total reserve credit 12.16 taken for business ceded, on an annualized basis as indicated in 12.17 the insurer's most recently filed statutory statement. 12.18 (b) With respect to either property and casualty or life, 12.19 annuity, and accident and health business, either of the 12.20 following events constitute a material revision that must be 12.21 reported under section 60A.135: 12.22 (1) an authorized reinsurer representing more than ten 12.23 percent of a total cession is replaced by one or more 12.24 unauthorized reinsurers; or 12.25 (2) previously established collateral requirements have 12.26 been reduced or waived for one or more unauthorized reinsurers 12.27 representing collectively more than ten percent of a total 12.28 cession. 12.29 (c) Notwithstanding paragraphs (a) and (b), no filing is 12.30 required: 12.31 (1) for property and casualty business, including accident 12.32 and health business written by a property and casualty insurer 12.33 if the insurer's total ceded written premium represents, on an 12.34 annualized basis, less than ten percent of its total written 12.35 premium for direct and assumed business; or 12.36 (2) for life, annuity, and accident and health business if 13.1 the total reserve credit taken for business ceded represents, on 13.2 an annualized basis, less than ten percent of the statutory 13.3 reserve requirement before any cession. 13.4 Subd. 2. [INFORMATION TO BE REPORTED.] (a) The following 13.5 information is required to be disclosed in a report of a 13.6 material nonrenewal, cancellation, or revision of ceded 13.7 reinsurance agreements: 13.8 (1) effective date of the nonrenewal, cancellation, or 13.9 revision; 13.10 (2) the description of the transaction with an 13.11 identification of the initiating entity; 13.12 (3) purpose of, or reason for, the transaction; and 13.13 (4) if applicable, the identity of the replacement 13.14 reinsurers. 13.15 (b) Insurers are required to report all material 13.16 nonrenewals, cancellations, or revisions of ceded reinsurance 13.17 agreements on a nonconsolidated basis unless the insurer is part 13.18 of a consolidated group of insurers that utilizes a pooling 13.19 arrangement or 100 percent reinsurance agreement that affects 13.20 the solvency and integrity of the insurer's reserves and the 13.21 insurer ceded substantially all of its direct and assumed 13.22 business to the pool. An insurer is considered to have ceded 13.23 substantially all of its direct and assumed business to a pool 13.24 if the insurer has less than $1,000,000 total direct plus 13.25 assumed written premiums during a calendar year that are not 13.26 subject to a pooling arrangement and the net income of the 13.27 business not subject to the pooling arrangement represents less 13.28 than five percent of the insurer's capital and surplus. 13.29 Sec. 10. Minnesota Statutes 1994, section 60A.705, 13.30 subdivision 8, is amended to read: 13.31 Subd. 8. [REINSURANCE INTERMEDIARY-MANAGER.] "Reinsurance 13.32 intermediary-manager" or "RM" means any person, firm, 13.33 association, or corporation who has authority to bind or manages 13.34 all or part of the assumed reinsurance business of a reinsurer, 13.35 including the management of a separate division, department, or 13.36 underwriting office, and acts as an agent for that reinsurer 14.1 whether known as an RM, manager, or other similar term. 14.2 However, the following persons are not considered an RM, with 14.3 respect to that reinsurer, for the purposes of sections 60A.70 14.4 to 60A.756: 14.5 (1) an employee of the reinsurer; 14.6 (2) a United States manager of the United States branch of 14.7 an alien reinsurer; 14.8 (3) an underwriting manager which, pursuant to contract, 14.9 manages all or part of the reinsurance operations of the 14.10 reinsurer, is under common control with the reinsurer, subject 14.11 to the holding company act, and whose compensation is not based 14.12 on the volume of premiums written; or 14.13 (4) the manager of a group, association, pool, or 14.14 organization of insurers which engage in joint underwriting or 14.15 joint reinsurance and who are subject to examination by the 14.16 insurance commissioner of the state in which the manager's 14.17 principal business office is located. 14.18 Sec. 11. Minnesota Statutes 1994, section 60A.75, is 14.19 amended to read: 14.20 60A.75 [VIOLATIONS.] 14.21 Subdivision 1. [ADMINISTRATIVE AND CIVIL PENALTIES AND 14.22 LIABILITIES.] A reinsurance intermediary, insurer, or reinsurer 14.23 found by the commissioner, after a hearing conducted in 14.24 accordance with chapter 14, to be in violation of any provision 14.25 of sections 60A.70 to 60A.756, shall: 14.26 (1) for each separate violation, pay a penalty in an amount 14.27 not exceeding $5,000; and 14.28 (2) be subject to revocation or suspension of its license. 14.29 Subd. 2. [CIVIL REMEDIES.] (a) If it was found that 14.30 because of the violation the insurer or reinsurer has suffered 14.31 loss or damage, the commissioner may maintain a civil action for 14.32 recovery of compensatory damages for the benefit of the 14.33 reinsurer or insurer and its policyholders and creditors or seek 14.34 other appropriate relief. 14.35 (b) If an order of rehabilitation or liquidation of the 14.36 insurer has been entered pursuant to chapter 60B, and the 15.1 receiver appointed under that order determines that the 15.2 reinsurance intermediary or any other person has violated 15.3 sections 60A.70 to 60A.756, or any rule or order adopted under 15.4 those sections, and the insurer suffered any loss or damage, the 15.5 receiver may maintain a civil action for recovery of damages or 15.6 other appropriate sanctions for the benefit of the insurer. 15.7 Subd. 3. [JUDICIAL REVIEW.] The decision, determination, 15.8 or order of the commissioner pursuant to subdivision 1 is 15.9 subject to judicial review pursuant to chapter 14. 15.10 Subd. 3.4. [OTHER PENALTIES.] Nothing contained in this 15.11 section affects the right of the commissioner to impose any 15.12 other penalties provided in the insurance laws. 15.13 Sec. 12. Minnesota Statutes 1994, section 60H.02, 15.14 subdivision 4, is amended to read: 15.15 Subd. 4. [MANAGING GENERAL AGENT.] (a) "Managing general 15.16 agent" means a person, firm, association or corporation who: 15.17 (1) negotiates and binds ceding reinsurance contracts on behalf15.18 of an insurer, or (2)manages all or part of the insurance 15.19 business of an insurer, including the management of a separate 15.20 division, department, or underwriting office, and (2) acts as an 15.21 agent for the insurer whether known as a managing general agent, 15.22 manager, or other similar term, who, with or without the 15.23 authority, either separately or together with affiliates, 15.24 produces, directly or indirectly, and underwrites an amount of 15.25 gross direct written premium equal to or more than five percent 15.26 of the policyholder surplus as reported in the last annual 15.27 statement of the insurer in any one quarter or year, together 15.28 with one or more of the following activities related to the 15.29 business produced: (i) adjusts or pays claims in excess of an 15.30 amount determined by the commissioner, or (ii) negotiates 15.31 reinsurance on behalf of the insurer. 15.32 (b) Notwithstanding paragraph (a), the following persons 15.33 shall not be considered as managing general agents for the 15.34 purposes of this chapter: 15.35 (1) an employee of the insurer; 15.36 (2) a United States manager of the United States branch of 16.1 an alien insurer; 16.2 (3) an underwriting manager who, pursuant to contract, 16.3 manages all or a part of the insurance or reinsurance operation 16.4 of the insurer, is under common control with the insurer, 16.5 subject to the Insurance Holding Company Act, chapter 60D, and 16.6 whose compensation is not based on the volume of premiums 16.7 written; or 16.8 (4) an attorney in fact authorized by and acting for the 16.9 subscribers of a reciprocal insurer or interinsurance exchange 16.10 under powers of attorney. 16.11 Sec. 13. Minnesota Statutes 1994, section 60H.08, is 16.12 amended to read: 16.13 60H.08 [PENALTIES AND LIABILITIES.] 16.14 Subdivision 1. [COMMISSIONER'S AUTHORITY.] If the 16.15 commissioner finds pursuant to the procedural requirements of 16.16 section 45.027 that a person has violated a provision of this 16.17 chapter, the commissioner may take any action authorized under 16.18 that section. 16.19 Subd. 2. [ADDITIONAL PENALTY.] In addition to authority 16.20 granted by section 45.027 for each separate violation, the 16.21 commissioner may impose a penalty of up to $10,000 for each day 16.22 the violation continues and order the managing general agent to 16.23 reimburse the insurer, rehabilitator, or liquidator of the 16.24 insurer for any losses incurred by the insurer caused by a 16.25 violation of this chapter committed by the managing general 16.26 agent. 16.27 Subd. 3. [CIVIL REMEDIES.] (a) If the commissioner finds 16.28 that because of the violation that the insurer has suffered loss 16.29 or damage, the commissioner may maintain a civil action for 16.30 recovery of compensatory damages for the benefit of the insurer 16.31 and its policyholders and creditors or other appropriate relief. 16.32 (b) If an order of rehabilitation or liquidation of the 16.33 insurer has been entered pursuant to chapter 60B, and the 16.34 receiver appointed under that order determines that the managing 16.35 general agent or any other person has violated this chapter, or 16.36 any rule or order adopted under this chapter, and the insurer 17.1 suffered loss or damage, the receiver may maintain a civil 17.2 action for recovery of damages or other appropriate sanctions 17.3 for the benefit of the insurer. 17.4 Subd. 4. [JUDICIAL REVIEW.] The decision, determination, 17.5 or order of the commissioner under subdivision 1 is subject to 17.6 judicial review as provided under chapter 14. 17.7 Subd. 4.5. [IMPOSITION OF OTHER PENALTIES.] Nothing 17.8 contained in this section shall affect the right of the 17.9 commissioner to impose any other penalties provided for by law. 17.10 Subd. 5.6. [POLICYHOLDER RIGHTS.] Nothing contained in 17.11 this chapter is intended to or shall in any manner limit or 17.12 restrict the rights of policyholders, claimants, and auditors. 17.13 Sec. 14. Minnesota Statutes 1994, section 61A.19, is 17.14 amended to read: 17.15 61A.19 [COMPANY REQUIREMENTS.] 17.16 No company shall deliver or issue for delivery within this 17.17 state contracts on a variable basis unless it is licensed or 17.18 organized to do a life insurance or annuity business in this 17.19 state, and the commissioner is satisfied that its condition or 17.20 method of operation in connection with the issuance of such 17.21 contracts will not render its operation hazardous to the public 17.22 or its policyholders in this state. In this connection, the 17.23 commissioner shall consider among other things: 17.24 (a) The history and financial condition of the company; 17.25 (b) The character, responsibility and fitness of the 17.26 officers and directors of the company; and 17.27 (c) The law and regulation under which the company is 17.28 authorized in the state of domicile to issue such contracts. 17.29 The state of entry of an alien company shall be deemed to be 17.30 state of domicile for this purpose. 17.31 A licensed company which issues contracts on a variable17.32 basis and which is a subsidiary of, or affiliated through common17.33 management or ownership with, another life insurance company17.34 authorized to do business in this state may be deemed to have17.35 met the provisions of this section if either it or the parent or17.36 affiliated company satisfies the aforementioned provisions.18.1 Sec. 15. Minnesota Statutes 1994, section 61A.31, 18.2 subdivision 3, is amended to read: 18.3 Subd. 3. [ACQUISITION OF PROPERTY.] Any domestic life 18.4 insurance company may: 18.5 (a) acquire real property or any interest in real property, 18.6 including oil and gas and other mineral interests, in the United 18.7 States or any state thereof, or in the Dominion of Canada or any 18.8 province thereof, as an investment for the production of income, 18.9 and hold, improve or otherwise develop, and lease, sell, and 18.10 convey the same either directly or as a joint venturer or 18.11 through a limited, limited liability, or general partnership in 18.12 which the company is a partner or through a limited liability 18.13 company in which the company is a member. A company may not 18.14 invest in any real property asset other than property held for 18.15 the convenience and accommodation of its business if the 18.16 investment causes: (1) the company's aggregate investments in 18.17 the real property assets to exceed ten percent of its admitted 18.18 assets; or (2) the company's investment in any single parcel of 18.19 real property to exceed one-half of one percent of its admitted 18.20 assets; 18.21 (b) acquire personal property in the United States or any 18.22 state thereof, or in the Dominion of Canada or any province 18.23 thereof, under lease or leases or commitment for lease or leases 18.24 if: (1) either the fair value of the property exceeds the 18.25 company's investment in it or the lessee, or at least one of the 18.26 lessees, or a guarantor, or at least one of the guarantors, of 18.27 the lease is a corporation with a net worth of $1,000,000 or 18.28 more; and (2) the lease provides for rent sufficient to amortize 18.29 the investment with interest over the primary term of the lease 18.30 or the useful life of the property, whichever is less. A 18.31 company may not invest in the personal property if the 18.32 investment causes the company's aggregate investments in the 18.33 personal property to exceed three percent of its admitted 18.34 assets; 18.35 (c) acquire and hold real estate (1) if the purpose of the 18.36 acquisition is to enhance the sale value of real estate 19.1 previously acquired and held by the company under this section 19.2 and (2) if the company expects the real estate so acquired to 19.3 qualify and be held by the company under paragraph (a) within 19.4 five years after acquisition; and 19.5 (d) not acquire real property under paragraphs (a) to (c) 19.6 if the property is to be used primarily for agricultural, 19.7 horticultural, ranch, mining, or church purposes. 19.8 All real property acquired or held under this subdivision 19.9 must be carried at a value equal to the lesser of (1) cost plus 19.10 the cost of capitalized improvements, less normal depreciation, 19.11 or (2) market value. 19.12 Sec. 16. Minnesota Statutes 1994, section 67A.231, is 19.13 amended to read: 19.14 67A.231 [DEPOSIT OF FUNDS; INVESTMENT; LIMITATIONS.] 19.15 The directors of any township mutual insurance company may 19.16 authorize the treasurer to invest any of its funds and 19.17 accumulations in: 19.18 (a) Bonds, notes, mortgages, or other obligations 19.19 guaranteed by the full faith and credit of the United States of 19.20 America and those for which the credit of the United States is 19.21 pledged to pay principal, interest or dividends, including 19.22 United States agency and instrumentality bonds, debentures, or 19.23 obligations; 19.24 (b) Bonds, notes, evidence of indebtedness, or other public 19.25 authority obligations guaranteed by this state; 19.26 (c) Bonds, notes, evidence of the indebtedness or other 19.27 obligations guaranteed by the full faith and credit of any 19.28 county, municipality, school district, or other duly authorized 19.29 political subdivision of this state; 19.30 (d) Bonds or other interest bearing obligations, payable 19.31 from revenues, provided that the bonds or other interest bearing 19.32 obligations are at the time of purchase rated among the highest 19.33 four quality categories used by a nationally recognized rating 19.34 agency for rating the quality of similar bonds or other interest 19.35 bearing obligations, and are not rated lower by any other such 19.36 agency; or obligations of a United States agency or 20.1 instrumentality that have been determined to be investment grade20.2 (as indicated by a "yes" rating)rated in one of the two highest 20.3 categories established by the Securities Valuation Office of the 20.4 National Association of Insurance Commissioners. A company may 20.5 not invest more than 20 percent of its admitted assets in the 20.6 obligations of any one corporation. This is not applicable to 20.7 bonds or other interest bearing obligations in default as to 20.8 principal; 20.9 (e) Investments in the obligations stated in paragraphs 20.10 (a), (b), (c), and (d), may be made either directly or in the 20.11 form of securities of, or other interests in, an investment 20.12 company registered under the Federal Investment Company Act of 20.13 1940. Investment company shares authorized pursuant to this 20.14 subdivision shall not exceed 20 percent of the company's 20.15 surplus. These obligations must be carried at the lower of cost 20.16 or market on the annual statement filed with the commissioner 20.17 and adjusted to market on an annual basis; 20.18 (f) Loans upon improved and unencumbered real property in 20.19 this state worth at least twice the amount loaned thereon, not 20.20 including buildings, unless insured by property insurance 20.21 policies payable to and held by the security holder; 20.22 (g) Real estate, including land, buildings and fixtures, 20.23 located in this state and used primarily as home office space 20.24 for the insurance company; 20.25 (h) Demand or time deposits or savings accounts in 20.26 federally insured depositories located in this state to the 20.27 extent that the deposit or investment is insured by the Federal 20.28 Deposit Insurance Corporation, Federal Savings and Loan 20.29 Corporation, or the National Credit Union Administration; 20.30 (i) Guarantee fund certificates of a mutual insurer which 20.31 reinsures the business of the township mutual insurance 20.32 company. The commissioner may by rule limit the amount of 20.33 guarantee fund certificates which the township mutual insurance 20.34 company may purchase and this limit may be a function of the 20.35 size of the township mutual insurance company; and 20.36 (j) Up to $1,500 in stock of an insurer which issues 21.1 directors and officers liability insurance to township mutual 21.2 insurance company directors and officers.