SF 3032

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 investments of 
  1.3             certain insurers; proposing coding for new law as 
  1.4             Minnesota Statutes, chapter 60L. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6                     INVESTMENTS OF INSURERS ACT 
  1.7      Section 1.  [60L.01] [DEFINITIONS.] 
  1.8      Subdivision 1.  [APPLICATION.] For purposes of sections 
  1.9   60L.01 to 60L.16, the definitions in subdivisions 2 to 12 have 
  1.10  the meanings given them. 
  1.11     Subd. 2.  [COMMISSIONER.] "Commissioner" means the 
  1.12  commissioner of commerce. 
  1.13     Subd. 3.  [DERIVATIVE INSTRUMENT.] "Derivative instrument" 
  1.14  means an item appropriately reported in schedule DB, derivative 
  1.15  instruments, or schedule DC, insurance futures, and insurance 
  1.16  futures options, of an insurer's statutory financial statement, 
  1.17  or successor schedules, as provided under applicable annual 
  1.18  statement instructions or statutory accounting guidelines. 
  1.19     Subd. 4.  [DERIVATIVE TRANSACTION.] "Derivative transaction"
  1.20  means a transaction involving the use of one or more derivative 
  1.21  instruments. 
  1.22     Subd. 5.  [INCOME GENERATION.] "Income generation" means a 
  1.23  derivative transaction involving the writing of covered options, 
  1.24  caps, or floors that is intended to generate income or enhance 
  1.25  return. 
  2.1      Subd. 6.  [INSURER.] "Insurer" means a domestic insurance 
  2.2   company and a United States branch of an alien insurance company 
  2.3   entered through this state. 
  2.4      Subd. 7.  [LOWER GRADE INVESTMENT.] "Lower grade investment"
  2.5   means a rated credit instrument or debt-like preferred stock 
  2.6   rated 4, 5, or 6 by the Securities Valuation Office of the 
  2.7   National Association of Insurance Commissioners or any successor 
  2.8   office. 
  2.9      Subd. 8.  [MEDIUM GRADE INVESTMENT.] "Medium grade 
  2.10  investment" means a rated credit instrument or debt-like 
  2.11  preferred stock rated 3 by the Securities Valuation Office of 
  2.12  the National Association of Insurance Commissioners or any 
  2.13  successor office. 
  2.14     Subd. 9.  [MINIMUM ASSET REQUIREMENT.] "Minimum asset 
  2.15  requirement" means the sum of an insurer's liabilities and its 
  2.16  minimum financial security benchmark. 
  2.17     Subd. 10.  [MINIMUM FINANCIAL SECURITY BENCHMARK.] "Minimum 
  2.18  financial security benchmark" means the amount an insurer is 
  2.19  required to have under section 60L.03. 
  2.20     Subd. 11.  [REPLICATION.] "Replication" means a derivative 
  2.21  transaction involving one or more derivative instruments being 
  2.22  used to modify the cash flow characteristics of one or more 
  2.23  investments held by an insurer in a manner so that the aggregate 
  2.24  cash flows of the derivative instruments and investments 
  2.25  reproduce the cash flows of another investment having a higher 
  2.26  risk-based capital charge than the risk-based capital charge of 
  2.27  the original investments or investments. 
  2.28     Subd. 12.  [SVO LISTED MUTUAL FUND.] "SVO listed mutual 
  2.29  fund" means a money market mutual fund or short-term bond fund 
  2.30  that is registered with the United States Securities and 
  2.31  Exchange Commission under the Investment Company Act of 1940, 
  2.32  and that has been determined by the National Association of 
  2.33  Insurance Commissioners Securities Valuation Office (SVO) to be 
  2.34  eligible for special reserve and reporting treatment other than 
  2.35  as common stock. 
  2.36     Sec. 2.  [60L.02] [REQUIREMENTS.] 
  3.1      Subdivision 1.  [LIFE INSURERS.] Sections 60L.01 to 60L.16 
  3.2   apply to life insurers that meet the following requirements: 
  3.3      (1) total admitted assets as provided under section 61A.283 
  3.4   of at least $2,000,000,000; 
  3.5      (2) a total amount of surplus plus capital of at least 
  3.6   $200,000,000; and 
  3.7      (3) at least five years of operating history. 
  3.8      Subd. 2.  [OTHER INSURERS.] Sections 60L.01 to 60L.16 apply 
  3.9   to insurers, other than life insurers, that meet the following 
  3.10  requirements: 
  3.11     (1) admitted assets as defined under section 60A.02 of at 
  3.12  least $2,000,000,000; 
  3.13     (2) a total amount of capital plus policyholder surplus of 
  3.14  at least $200,000,000; and 
  3.15     (3) at least five years of operating history. 
  3.16     Subd. 3.  [RESOLUTION.] Before an insurer may exercise the 
  3.17  investment authority authorized under sections 60L.01 to 60L.16, 
  3.18  the board of directors of the company must adopt a resolution 
  3.19  electing that sections 60L.01 to 60L.16 govern the investments 
  3.20  and investment practices of the insurer. 
  3.21     Subd. 4.  [ELECTION.] (a) After making an election to be 
  3.22  governed by sections 60L.01 to 60L.16, sections 60L.01 to 60L.16 
  3.23  apply to the insurer's investments and investment practices 
  3.24  unless: 
  3.25     (1) the insurer's board of directors adopts a resolution 
  3.26  electing that sections 60L.01 to 60L.16 no longer apply to its 
  3.27  investments and investment practices; 
  3.28     (2) the insurer has notified the commissioner in writing of 
  3.29  its intention that sections 60L.01 to 60L.16 no longer apply to 
  3.30  the insurer's investments and investment practices; and 
  3.31     (3) the commissioner has not issued an order under section 
  3.32  60L.14, subdivision 2, within 30 days of receipt of the notice 
  3.33  prohibiting the insurer from ceasing to comply with sections 
  3.34  60L.01 to 60L.16. 
  3.35     (b) An insurer may not elect more than once in a 12-month 
  3.36  period that sections 60L.01 to 60L.16 do not apply to the 
  4.1   insurer's investments and investment practices. 
  4.2      Subd. 5.  [CONFLICT OF LAWS.] Sections 60L.01 to 60L.16 
  4.3   prevail over any other law, except section 60D.15, that 
  4.4   authorizes an insurer to make a particular investment if the 
  4.5   other law was enacted before August 1, 1998. 
  4.6      Sec. 3.  [60L.03] [MINIMUM FINANCIAL SECURITY BENCHMARK.] 
  4.7      Subdivision 1.  [AMOUNT.] (a) Except as otherwise provided 
  4.8   in subdivisions 2 and 3, the amount of the minimum financial 
  4.9   security benchmark for an insurer, other than life insurers, is 
  4.10  the greater of: 
  4.11     (1) the authorized control level risk-based capital 
  4.12  applicable to the insurer as defined under section 60A.60, 
  4.13  subdivision 11, clause (3); or 
  4.14     (2) the minimum capital or minimum surplus required for 
  4.15  maintenance of an insurer's certificate of authority. 
  4.16     (b) Except as otherwise provided in subdivisions 2 and 3, 
  4.17  the amount of the minimum financial security benchmark for a 
  4.18  life insurer is the greater of: 
  4.19     (1) the authorized control level risk-based capital 
  4.20  applicable to the insurer as defined under section 60A.60, 
  4.21  subdivision 11, clause (3), less the asset valuation reserve and 
  4.22  voluntary investment reserves as defined under section 60A.60; 
  4.23  or 
  4.24     (2) the minimum capital or minimum surplus required for 
  4.25  maintenance of an insurer's certificate of authority. 
  4.26     Subd. 2.  [AUTHORIZATION BY ORDER.] The commissioner may, 
  4.27  according to the controlling factors specified in subdivision 6, 
  4.28  establish by order a minimum financial security benchmark to 
  4.29  apply to a specific insurer provided it is not less than the 
  4.30  amount determined under subdivision 1. 
  4.31     Subd. 3.  [ADDITIONAL AUTHORIZATION.] The commissioner may 
  4.32  establish a minimum financial security benchmark that is a 
  4.33  multiple of authorized control level risk-based capital to apply 
  4.34  to any class of insurers provided the amount established is not 
  4.35  less than the amount specified under subdivision 1. 
  4.36     Subd. 4.  [SURPLUS.] The commissioner shall determine the 
  5.1   amount of surplus that constitutes an insurer's minimum 
  5.2   financial security benchmark as an amount that will provide 
  5.3   reasonable security against contingencies affecting the 
  5.4   insurer's financial position that are not fully covered by 
  5.5   reserves or by reinsurance. 
  5.6      Subd. 5.  [TYPES OF CONTINGENCIES.] The commissioner shall 
  5.7   consider the risks of: 
  5.8      (1) increases in the frequency or severity of losses beyond 
  5.9   the levels contemplated by the rates charged; 
  5.10     (2) increases in expenses beyond those contemplated by the 
  5.11  rates charged; 
  5.12     (3) decreases in the value of or the return on invested 
  5.13  assets below those planned on; 
  5.14     (4) changes in economic conditions that would make 
  5.15  liquidity more important than contemplated and would force 
  5.16  untimely sale of assets or prevent timely investments; 
  5.17     (5) currency devaluation to which the insurer may be 
  5.18  subject; and 
  5.19     (6) any other contingencies the commissioner can identify 
  5.20  that may affect the insurer's operations. 
  5.21     Subd. 6.  [CONTROLLING FACTORS.] In making the 
  5.22  determination under subdivision 4, the commissioner shall take 
  5.23  into account the following factors: 
  5.24     (1) the most reliable information available as to the 
  5.25  magnitude of the various risks under subdivision 5; 
  5.26     (2) the extent to which the risks specified under 
  5.27  subdivision 5 are independent of each other or are related, and 
  5.28  whether any dependency is direct or inverse; 
  5.29     (3) the insurer's recent history of profits or losses; 
  5.30     (4) the extent to which the insurer has provided protection 
  5.31  against the contingencies in other ways than the establishment 
  5.32  of surplus, including redundancy of premiums, adjustability of 
  5.33  contracts under their terms, investment valuation reserves 
  5.34  whether voluntary or mandatory, appropriate reinsurance, the use 
  5.35  of conservative actuarial assumptions to provide a margin of 
  5.36  security, reserve adjustments in recognition of previous rate 
  6.1   inadequacies, contingency or catastrophe reserves, 
  6.2   diversification of assets, and underwriting risks; 
  6.3      (5) independent judgments of the soundness of the insurer's 
  6.4   operations, as evidenced by the ratings of reliable professional 
  6.5   financial reporting services; and 
  6.6      (6) any other relevant factors. 
  6.7      Sec. 4.  [60L.04] [AUTHORIZED INVESTMENTS.] 
  6.8      Subdivision 1.  [AUTHORIZATION.] An insurer may loan or 
  6.9   invest its funds, and may buy, sell, hold title to, possess, 
  6.10  occupy, pledge, convey, manage, protect, insure, and deal with 
  6.11  its investments, property, and other assets to the same extent 
  6.12  as any other corporation or other person under the laws of this 
  6.13  state or the United States. 
  6.14     Subd. 2.  [BOARD OF DIRECTORS; DUTIES.] With respect to all 
  6.15  of the insurer's investments, the board of directors of an 
  6.16  insurer shall exercise the judgment and care, under the 
  6.17  circumstances then prevailing, that persons of reasonable 
  6.18  prudence, discretion, and intelligence exercise in the 
  6.19  management of a like enterprise, not in regard to speculating 
  6.20  but in regard to the permanent disposition of their funds, 
  6.21  considering the probable income as well as the probable safety 
  6.22  of their capital.  Investments must be of sufficient value, 
  6.23  liquidity, and diversity to ensure the insurer's ability to meet 
  6.24  its outstanding obligations based on reasonable assumptions as 
  6.25  to new business production for current lines of business.  As 
  6.26  part of its exercise of judgment and care, the board of 
  6.27  directors shall take into account the prudence evaluation 
  6.28  criteria specified under section 60L.05. 
  6.29     Subd. 3.  [INTERNAL CONTROLS.] The insurer shall establish 
  6.30  and implement internal controls and procedures to ensure 
  6.31  compliance with investment policies and procedures to ensure 
  6.32  that: 
  6.33     (1) the insurer's investment staff and any consultants used 
  6.34  are reputable and capable; 
  6.35     (2) a periodic evaluation and monitoring process occurs for 
  6.36  assessing the effectiveness of investment policy and strategies; 
  7.1      (3) management's performance is assessed in meeting the 
  7.2   stated objectives within the investment policy; and 
  7.3      (4) appropriate analyses are undertaken of the degree to 
  7.4   which asset cash flows are adequate to meet liability cash flows 
  7.5   under different economic environments.  The analyses must be 
  7.6   conducted at least annually and make specific reference to 
  7.7   economic conditions. 
  7.8      Sec. 5.  [60L.05] [PRUDENCE EVALUATION CRITERIA.] 
  7.9      Subdivision 1.  [FACTORS.] The factors in clauses (1) to 
  7.10  (12) shall be evaluated by the insurer and considered along with 
  7.11  its business in determining whether an investment portfolio or 
  7.12  investment policy is prudent.  The commissioner shall consider 
  7.13  the factors in clauses (1) to (12) before making a determination 
  7.14  that an insurer's investment portfolio or investment policy is 
  7.15  not prudent.  In determining whether an investment portfolio or 
  7.16  investment policy is prudent, the insurer and the commissioner 
  7.17  shall consider the insurer's business and shall evaluate the 
  7.18  following factors: 
  7.19     (1) general economic conditions; 
  7.20     (2) the possible effect of inflation or deflation; 
  7.21     (3) the expected tax consequences of investment decisions 
  7.22  or strategies; 
  7.23     (4) the fairness and reasonableness of the terms of an 
  7.24  investment considering its probable risk and reward 
  7.25  characteristics and relationship to the investment portfolio as 
  7.26  a whole; 
  7.27     (5) the extent of the diversification of the insurer's 
  7.28  investments among individual investments, classes of 
  7.29  investments, industry concentrations, dates of maturity, and 
  7.30  geographic areas; 
  7.31     (6) the quality and liquidity of investments in affiliates; 
  7.32     (7) the investment exposure to the following risks, 
  7.33  quantified in a manner consistent with the insurer's acceptable 
  7.34  risk level identified in section 60L.06:  liquidity; credit and 
  7.35  default; systemic (market); interest rate; call, prepayment and 
  7.36  extension; currency; and foreign sovereign; 
  8.1      (8) the amount of the insurer's assets, capital and 
  8.2   surplus, premium writings, insurance in force, and other 
  8.3   appropriate characteristics; 
  8.4      (9) the amount and adequacy of the insurer's reported 
  8.5   liabilities; 
  8.6      (10) the relationship of the expected cash flows of the 
  8.7   insurer's assets and liabilities, and the risk of adverse 
  8.8   changes in the insurer's assets and liabilities; 
  8.9      (11) the adequacy of the insurer's capital and surplus to 
  8.10  secure the risks and liabilities of the insurer; and 
  8.11     (12) any other factors relevant to whether an investment is 
  8.12  prudent. 
  8.13     Sec. 6.  [60L.06] [INSURER INVESTMENT POLICY.] 
  8.14     In acquiring, investing, exchanging, holding, selling, and 
  8.15  managing investments, an insurer shall establish and follow a 
  8.16  written investment policy that must be reviewed and approved by 
  8.17  the insurer's board of directors at least annually.  The content 
  8.18  and format of an insurer's investment policy are at the 
  8.19  insurer's discretion, but must include written guidelines 
  8.20  appropriate to the insurer's business as to the following: 
  8.21     (1) the general investment policy of the insurer containing 
  8.22  policies, procedures, and controls covering all aspects of the 
  8.23  investing function; 
  8.24     (2) quantified goals and objectives regarding the 
  8.25  composition of classes of investments, including maximum 
  8.26  internal limits; 
  8.27     (3) periodic evaluation of the investment portfolio as to 
  8.28  its risk and reward characteristics.  This clause does not 
  8.29  preclude an insurer from the use of "modern portfolio theory" to 
  8.30  manage its investments; 
  8.31     (4) professional standards for the individuals making 
  8.32  day-to-day investment decisions to ensure that investments are 
  8.33  managed in an ethical and capable manner; 
  8.34     (5) the types of investments to be made and those to be 
  8.35  avoided, based on their risk and reward characteristics and the 
  8.36  insurer's level of experience with the investments; 
  9.1      (6) the relationship of classes of investments to the 
  9.2   insurer's insurance products and liabilities; 
  9.3      (7) the manner in which the insurer intends to implement 
  9.4   section 60L.05; and 
  9.5      (8) the level of risk, based on quantitative measures, 
  9.6   appropriate for the insurer given the level of capitalization 
  9.7   and expertise available to the insurer. 
  9.8      Sec. 7.  [60L.07] [AUTHORIZED CLASSES OF INVESTMENTS.] 
  9.9      The following classes of investments may be counted for the 
  9.10  purposes specified in section 60L.11, whether they are made 
  9.11  directly or as a participant in a partnership, joint venture, or 
  9.12  limited liability company: 
  9.13     (1) cash in the direct possession of the insurer or on 
  9.14  deposit with a financial institution regulated by any federal or 
  9.15  state agency of the United States; 
  9.16     (2) bonds, debt, debt-like preferred stock, and other 
  9.17  evidences of indebtedness of governmental units in the United 
  9.18  States or Canada, or the instrumentalities of the governmental 
  9.19  units, or private business entities domiciled in the United 
  9.20  States or Canada, including asset-backed securities and SVO 
  9.21  listed mutual funds; 
  9.22     (3) loans secured by mortgages, trust deeds, or other 
  9.23  security interests in real property located in the United States 
  9.24  or Canada or secured by insurance against default issued by a 
  9.25  government insurance corporation of the United States or Canada 
  9.26  or by an insurer authorized to do business in this state; 
  9.27     (4) common stock or equity-like preferred stock, or equity 
  9.28  interests in any United States or Canadian business entity, or 
  9.29  shares of mutual funds registered with the Securities and 
  9.30  Exchange Commission of the United States under the Investment 
  9.31  Company Act of 1940, other than SVO listed mutual funds; 
  9.32     (5) real property necessary for the convenient transaction 
  9.33  of the insurer's business; 
  9.34     (6) real property and its fixtures, furniture, furnishings, 
  9.35  and equipment in the United States or Canada, which produces or 
  9.36  after suitable improvement can reasonably be expected to produce 
 10.1   substantial income; 
 10.2      (7) loans, securities, or other investments of the types 
 10.3   described in clauses (1) to (6) in countries other than the 
 10.4   United States and Canada; 
 10.5      (8) bonds or other evidences of indebtedness of 
 10.6   international development organizations of which the United 
 10.7   States is a member; 
 10.8      (9) loans upon the security of the insurer's own policies 
 10.9   in amounts that are adequately secured by the policies and that 
 10.10  in no case exceed the surrender values of the policies; 
 10.11     (10) tangible personal property under contract of sale or 
 10.12  lease under which contractual payments may reasonably be 
 10.13  expected to return the principal of and provide earnings on the 
 10.14  investment within its anticipated useful life; 
 10.15     (11) other investments the commissioner authorizes by rule; 
 10.16  and 
 10.17     (12) investments not otherwise permitted by this section, 
 10.18  and not specifically prohibited by other law, to the extent of 
 10.19  not more than five percent of the first $500,000,000 of the 
 10.20  insurer's admitted assets plus ten percent of the insurer's 
 10.21  admitted assets exceeding $500,000,000. 
 10.22     Sec. 8.  [60L.08] [LIMITATIONS GENERALLY APPLICABLE.] 
 10.23     Subdivision 1.  [CLASS LIMITATIONS.] For the purposes of 
 10.24  section 60L.11, the following limitations on classes of 
 10.25  investments apply: 
 10.26     (a) For investments authorized under section 60L.07, clause 
 10.27  (2), and investments authorized under section 60L.07, clause 
 10.28  (7), that are of the types described in section 60L.07, clause 
 10.29  (2), the following restrictions apply: 
 10.30     (1) the aggregate amount of medium and lower grade 
 10.31  investments may not exceed 20 percent of its admitted assets; 
 10.32     (2) the aggregate amount of lower grade investments may not 
 10.33  exceed ten percent of its admitted assets; 
 10.34     (3) the aggregate amount of investments rated 5 or 6 by the 
 10.35  SVO may not exceed five percent of its admitted assets; 
 10.36     (4) the aggregate amount of investments rated 6 by the SVO 
 11.1   may not exceed one percent of its admitted assets; or 
 11.2      (5) the aggregate amount of medium and lower grade 
 11.3   investments that receive as cash income less than the equivalent 
 11.4   yield for treasury issues with a comparative average life, may 
 11.5   not exceed one percent of its admitted assets. 
 11.6      (b) Investments authorized under section 60L.07, clause 
 11.7   (3), may not exceed 45 percent of admitted assets in the case of 
 11.8   life insurers and 25 percent of admitted assets in the case of 
 11.9   nonlife insurers. 
 11.10     (c) Investments authorized under section 60L.07, clause 
 11.11  (4), other than subsidiaries of the types authorized under 
 11.12  chapter 60D, may not exceed 20 percent of admitted assets in the 
 11.13  case of life insurers and 25 percent of admitted assets in the 
 11.14  case of nonlife insurers. 
 11.15     (d) Investments authorized under section 60L.07, clause 
 11.16  (5), may not exceed ten percent of admitted assets. 
 11.17     (e) Investments authorized under section 60L.07, clause 
 11.18  (6), may not exceed 20 percent of admitted assets in the case of 
 11.19  life insurers, and ten percent of admitted assets in the case of 
 11.20  nonlife insurers. 
 11.21     (f) Investments authorized under section 60L.07, clause 
 11.22  (7), may not exceed 20 percent of admitted assets. 
 11.23     (g) Investments authorized under section 60L.07, clause 
 11.24  (8), may not exceed two percent of admitted assets. 
 11.25     (h) Investments authorized under section 60L.07, clause 
 11.26  (9), may not exceed two percent of admitted assets. 
 11.27     Subd. 2.  [INDIVIDUAL LIMITATIONS.] For purposes of 
 11.28  determining compliance with section 60L.11, securities of a 
 11.29  single issuer and its affiliates, other than the government of 
 11.30  the United States and subsidiaries authorized under section 
 11.31  60A.11, subdivision 18, paragraph (a), clause (4); 60D.16; or 
 11.32  61A.281, may not exceed three percent of admitted assets in the 
 11.33  case of life insurers, and five percent in the case of nonlife 
 11.34  insurers.  For purposes of this subdivision, in the case of 
 11.35  asset-backed securities secured by or evidencing an interest in 
 11.36  a single asset or single pool of assets held by a trust or other 
 12.1   business entity, the issuer is considered to be the asset or 
 12.2   pool of assets. 
 12.3      Subd. 3.  [INVESTMENT SUBSIDIARIES.] For purposes of 
 12.4   determining compliance with this section, the admitted portion 
 12.5   of assets of subsidiaries under section 60A.11, subdivision 18, 
 12.6   paragraph (a) clause (4); 60D.16; or 61A.281, subdivision 5, are 
 12.7   considered to be owned directly by the insurer and any other 
 12.8   investors in proportion to the market value or if there is no 
 12.9   market, the reasonable value, of their interest in the 
 12.10  subsidiaries. 
 12.11     Subd. 4.  [EFFECT OF QUANTITY LIMITATIONS.] To the extent 
 12.12  that investments exceed the limitations specified under 
 12.13  subdivisions 1 and 2, the excess may be assigned to the 
 12.14  investment class authorized in section 60L.07, clause (11), 
 12.15  until that limit is exhausted. 
 12.16     Subd. 5.  [MUTUAL FUNDS, POOLED INVESTMENT VEHICLES, AND 
 12.17  OTHER INVESTMENT COMPANIES.] If the commissioner considers it 
 12.18  desirable in order to get a proper evaluation of the investment 
 12.19  portfolio of an insurer, the commissioner may require that 
 12.20  investments in mutual funds, pooled investment vehicles, or 
 12.21  other investment companies be treated for purposes of sections 
 12.22  60L.01 to 60L.16, as if the investor owned directly its 
 12.23  proportional share of the assets owned by the mutual fund, 
 12.24  pooled investment vehicle, or investment company. 
 12.25     Subd. 6.  [INVESTMENT LIMITATION COMPUTATION.] Unless 
 12.26  otherwise specified, an investment limitation computed on the 
 12.27  basis of an insurer's admitted assets or capital and surplus 
 12.28  must relate to the amount required to be shown on the statutory 
 12.29  balance sheet of the insurer most recently required to be filed 
 12.30  with the commissioner. 
 12.31     Sec. 9.  [60L.09] [PROTECTION AGAINST CURRENCY 
 12.32  FLUCTUATIONS.] 
 12.33     An insurer doing business that requires it to make payments 
 12.34  in different currencies shall have investments in securities in 
 12.35  each of these currencies in an amount that independently of all 
 12.36  other investments meets the requirements of sections 60L.01 to 
 13.1   60L.16 as applied separately to the insurer's obligations in 
 13.2   each currency.  The commissioner may by order exempt an insurer, 
 13.3   or by rule a class of insurers, from this requirement if the 
 13.4   obligations in other currencies are small enough that no 
 13.5   significant problem for financial solidity would be created by 
 13.6   substantial fluctuations in relative currency values. 
 13.7      Sec. 10.  [60A.10] [PROHIBITED INVESTMENTS.] 
 13.8      Subdivision 1.  [PROHIBITIONS.] An insurer may not invest 
 13.9   in investments that are prohibited for an insurer by law.  The 
 13.10  use of a derivative instrument for replication, or for any 
 13.11  purposes other than hedging or income generation, is prohibited. 
 13.12     Subd. 2.  [DISPOSAL OF PROHIBITED ASSET.] A reasonable 
 13.13  time, not to exceed five years, must be allowed for disposal of 
 13.14  a prohibited investment in hardship cases if the investment is 
 13.15  demonstrated by the insurer to have been legal when made, or the 
 13.16  result of a mistake made in good faith, or if the commissioner 
 13.17  determines that the sale of the asset would be contrary to the 
 13.18  interests of insureds, creditors, or the general public. 
 13.19     Sec. 11.  [60L.11] [EFFECT OF INVESTMENT RESTRICTIONS.] 
 13.20     Subdivision 1.  [INVESTED ASSETS.] Invested assets may be 
 13.21  counted toward satisfaction of the minimum asset requirement 
 13.22  only so far as they are invested in compliance with sections 
 13.23  60L.01 to 60L.16 and applicable rules adopted and orders issued 
 13.24  by the commissioner.  Assets other than invested assets may be 
 13.25  counted toward satisfaction of the minimum asset requirement at 
 13.26  admitted annual statement value. 
 13.27     Subd. 2.  [ADMITTED ASSET.] An investment held as an 
 13.28  admitted asset by an insurer on the effective date of sections 
 13.29  60L.01 to 60L.16 which qualified as an admitted asset 
 13.30  immediately before the effective date remain qualified as an 
 13.31  admitted asset under sections 60L.01 to 60L.16. 
 13.32     Subd. 3.  [ACQUIRED ASSETS.] Assets necessarily acquired in 
 13.33  the bona fide enforcement of creditors' rights or in bona fide 
 13.34  workouts or settlements of disputed claims may be counted for 
 13.35  the purposes of subdivision 1 for five years after acquisition 
 13.36  if real property and three years if not real property, even if 
 14.1   they could not otherwise be counted under sections 60L.01 to 
 14.2   60L.16.  The commissioner may allow reasonable extensions of 
 14.3   these periods if replacement of the assets within the periods 
 14.4   would not be possible without substantial loss. 
 14.5      Subd. 4.  [LIQUIDATION AND REHABILITATION.] If an insurer 
 14.6   does not own, or is unable to apply toward compliance with 
 14.7   sections 60L.01 to 60L.16, an amount of assets equal to its 
 14.8   minimum asset requirement, the commissioner may consider it to 
 14.9   be financially hazardous under section 60B.15 or 60B.20. 
 14.10     Sec. 12.  [60L.12] [REPORTS AND REPLIES.] 
 14.11     Subdivision 1.  [REQUIREMENTS.] The commissioner may 
 14.12  require any of the following from a person subject to regulation 
 14.13  under sections 60L.01 to 60L.16: 
 14.14     (1) statements, reports, answers to questionnaires and 
 14.15  other information, and evidence in whatever reasonable form the 
 14.16  commissioner designates, and at reasonable intervals as the 
 14.17  commissioner chooses; 
 14.18     (2) full explanation of the programming of any data storage 
 14.19  or communication system in use; or 
 14.20     (3) that information from any books, records, electronic 
 14.21  data processing systems, computers, or any other information 
 14.22  storage system be made available to the commissioner at a 
 14.23  reasonable time and in a reasonable manner. 
 14.24     Subd. 2.  [FORMS.] The commissioner may prescribe forms for 
 14.25  the reports required under subdivision 1 and specify who shall 
 14.26  execute or certify the reports.  The forms for the reports 
 14.27  required under subdivision 1 must be consistent, so far as 
 14.28  practicable, with those prescribed by other jurisdictions. 
 14.29     Subd. 3.  [ACCOUNTING.] The commissioner may prescribe 
 14.30  reasonable minimum standards and techniques of accounting and 
 14.31  data handling to ensure that timely and reliable information 
 14.32  will exist and will be available to the commissioner. 
 14.33     Subd. 4.  [PROMPT REPLY.] Any officer, manager, or general 
 14.34  agent of an insurer subject to sections 60L.01 to 60L.16, any 
 14.35  person controlling or having a contract under which the person 
 14.36  has a right to control the insurer, whether exclusively or 
 15.1   otherwise, or a person with executive authority over or in 
 15.2   charge of any segment of the insurer's affairs, shall reply 
 15.3   promptly in writing or in other reasonably designated form, to a 
 15.4   written inquiry from the commissioner requesting a reply. 
 15.5      Subd. 5.  [VERIFIED COMMUNICATION.] The commissioner may 
 15.6   require that any communication made to the commissioner under 
 15.7   this section be verified. 
 15.8      Subd. 6.  [NO ACTION FOR DAMAGES.] A communication to the 
 15.9   commissioner, or to an expert or consultant retained by the 
 15.10  commissioner, required under sections 60L.01 to 60L.16, may not 
 15.11  subject the person making it to an action for damages for the 
 15.12  communication in the absence of actual malice. 
 15.13     Subd. 7.  [INFORMATION.] Notwithstanding subdivision 6, the 
 15.14  commissioner may bring suit against any person providing 
 15.15  information required under sections 60L.01 to 60L.16 that is not 
 15.16  truthful and accurate. 
 15.17     Sec. 13.  [60L.13] [RETENTION OF EXPERTS.] 
 15.18     The commissioner may retain at the insurer's expense 
 15.19  attorneys, actuaries, accountants, and other experts not 
 15.20  otherwise a part of the commissioner's staff as may be 
 15.21  reasonably necessary to assist in reviewing the insurer's 
 15.22  investments.  Persons so retained are under the direction and 
 15.23  control of the commissioner and shall act in a purely advisory 
 15.24  capacity. 
 15.25     Sec. 14.  [60L.14] [COMMISSIONER'S ORDERS.] 
 15.26     Subdivision 1.  [NECESSARY CHANGES.] If the commissioner 
 15.27  determines that an insurer's investment practices do not meet 
 15.28  the requirements of sections 60L.01 to 60L.16, the commissioner 
 15.29  may, after notification to the insurer of the commissioner's 
 15.30  findings, order the insurer to make changes necessary to comply 
 15.31  with the requirements of sections 60L.01 to 60L.16. 
 15.32     Subd. 2.  [ADDITIONAL RESTRICTIONS.] If the commissioner 
 15.33  determines that by reason of the financial condition, current 
 15.34  investment practice, or current investment plan of an insurer, 
 15.35  the interests of insureds, creditors, or the general public are 
 15.36  or may be endangered, the commissioner may impose reasonable 
 16.1   additional restrictions upon the admissibility or valuation of 
 16.2   investments or may impose restrictions on the investment 
 16.3   practices of an insurer, including prohibition or divestment. 
 16.4      Subd. 3.  [ADDITIONAL ASSETS.] The commissioner may count 
 16.5   toward satisfaction of the minimum asset requirement any assets 
 16.6   in which an insurer is required to invest under the laws of a 
 16.7   country other than the United States as a condition for doing 
 16.8   business in that country if the commissioner finds that counting 
 16.9   them does not endanger the interests of insureds, creditors, or 
 16.10  the general public. 
 16.11     Subd. 4.  [ADJUSTMENTS.] If the commissioner is satisfied 
 16.12  by evidence of the solidity of an insurer and the competence of 
 16.13  management and its investment advisors, the commissioner, after 
 16.14  a hearing, may by order adjust the class limitations under 
 16.15  section 60L.08, for that insurer, to the extent that the 
 16.16  commissioner is satisfied that the interests of insureds, 
 16.17  creditors, and the public are sufficiently protected in other 
 16.18  ways.  Adjustments granted under section 60L.08, in aggregate, 
 16.19  are limited to an amount equal to ten percent of the insurer's 
 16.20  liabilities. 
 16.21     Sec. 15.  [60L.15] [ADMINISTRATIVE HEARINGS.] 
 16.22     Subdivision 1.  [AUTHORIZATION.] An insurer aggrieved by an 
 16.23  order or any other act or failure to act of the commissioner 
 16.24  regarding compliance with sections 60L.01 to 60L.16 may request 
 16.25  a hearing by following the procedures of chapter 14. 
 16.26     Subd. 2.  [PRIVATE HEARING.] The commissioner shall hold 
 16.27  hearings under this section privately unless the insurer 
 16.28  requests a public hearing, in which case the hearing is public. 
 16.29     Sec. 16.  [60L.16] [CONFIDENTIALITY OF INFORMATION.] 
 16.30     The investment policy, or information related to the 
 16.31  investment policy provided to the commissioner for review under 
 16.32  sections 60L.01 to 60L.16, is confidential and is not a public 
 16.33  record or subject to subpoena, except as otherwise permitted by 
 16.34  statute.