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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1991 

                         CHAPTER 325-H.F.No. 12 
           An act relating to insurance; regulating reinsurance 
          and other insurance practices, investments, guaranty 
          funds, and holding company systems; providing 
          examination authority and reporting requirements; 
          adopting various NAIC model acts and regulations; 
          prescribing penalties; amending Minnesota Statutes 
          1990, sections 60A.02, subdivision 6, and by adding 
          subdivisions; 60A.03, subdivision 5; 60A.031; 60A.07, 
          subdivision 5d, and by adding a subdivision; 60A.09, 
          subdivision 5, and by adding a subdivision; 60A.10, 
          subdivision 2a; 60A.11, subdivisions 9, 10, 11, 12, 
          13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 26, and by 
          adding subdivisions; 60A.12, by adding a subdivision; 
          60A.13, subdivision 1; 60A.14, subdivision 1; 60A.27; 
          60B.25; 60B.37, subdivision 2; 60C.02, subdivision 1; 
          60C.03, subdivisions 6, 8, and by adding a 
          subdivision; 60C.04; 60C.06, subdivision 1; 60C.09, 
          subdivision 1; 60C.13, subdivision 1; 60C.14, 
          subdivision 2; 60E.04, subdivision 7; 61A.25, 
          subdivisions 5, 6, and by adding subdivisions; 61A.28, 
          subdivisions 1, 2, 3, 6, 8, 11, 12, and by adding 
          subdivisions; 61A.281, by adding subdivisions; 
          61A.283; 61A.29; 61A.31; 61B.06, subdivision 9, and by 
          adding a subdivision; 61B.12, by adding subdivisions; 
          62D.044; 62D.045, subdivisions 1 and 2; 62E.14, by 
          adding a subdivision; 68A.01, subdivision 2; 72A.061, 
          subdivision 1; 79.34, subdivision 1; and 609.902, 
          subdivision 4; proposing coding for new law in 
          Minnesota Statutes, chapters 60A, 60D, 62A, and 72A; 
          proposing coding for new law as Minnesota Statutes, 
          chapters 60G, 60H, and 60J; repealing Minnesota 
          Statutes 1990, sections 60A.076; 60A.09, subdivision 
          4; 60A.12, subdivision 2; 60D.01 to 60D.08; 60D.10 to 
          60D.13; and 61A.28, subdivisions 4 and 5. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                ARTICLE 1 

                              REINSURANCE 
    Section 1.  Minnesota Statutes 1990, section 60A.02, 
subdivision 6, is amended to read: 
    Subd. 6.  [FOREIGN.] "Foreign," when used without 
limitations, shall designate those companies incorporated or 
organized in any other state or country. 
    Sec. 2.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 19.  [ALIEN.] "Alien" means an insurer domiciled 
outside of the United States, but conducting business within the 
United States. 
    Sec. 3.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 20.  [ASSUME.] "Assume" means to accept all or part 
of a ceding company's insurance or reinsurance on a risk or 
exposure. 
    Sec. 4.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 21.  [CEDE.] "Cede" means to pass on to another 
insurer all or part of the insurance written by an insurer for 
the purpose of reducing the possible liability of the insurer. 
    Sec. 5.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 22.  [CESSION.] "Cession" means the unit of insurance 
passed to a reinsurer by an insurer which issued a policy to the 
insured. 
    Sec. 6.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 23.  [FACULTATIVE REINSURANCE.] "Facultative 
reinsurance" means the reinsurance of part or all of the 
insurance provided by a single policy, with separate negotiation 
for each cession. 
    Sec. 7.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 24.  [REINSURER.] "Reinsurer" means an insurer which 
assumes the liability of another insurer through reinsurance. 
    Sec. 8.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 25.  [RETROCESSION.] "Retrocession" means a 
transaction in which a reinsurer cedes to another reinsurer all 
or part of the reinsurance that the reinsurer had previously 
assumed. 
    Sec. 9.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 26.  [UNITED STATES BRANCH.] "United States branch" 
means the business unit through which business is transacted 
within the United States by an alien insurer.  
    Sec. 10.  Minnesota Statutes 1990, section 60A.09, 
subdivision 5, is amended to read: 
    Subd. 5.  [REINSURANCE.] (1) [DEFINITIONS.] For the 
purposes of this subdivision, the word "insurer" shall be deemed 
to include the word "reinsurer," and the words "issue policies 
of insurance" shall be deemed to include the words "make 
contracts of reinsurance." 
    (2) [CONDITIONS AND REQUIREMENTS.] Every insurer authorized 
to issue policies in this state may reinsure in any other 
insurer any part or all of any risk or risks assumed by it; but 
such reinsurance, unless effected (1) with an insurer authorized 
to issue policies in this state, or (2) with an insurer 
similarly authorized in another state, territory, or district of 
the United States, and showing the same standards of solvency 
and meeting the same statutory and departmental rules which 
would be required of or prescribed for such insurer were it at 
the time of such reinsurance authorized in this state to issue 
policies covering risks of the same kind or kinds as those 
reinsured, shall not reduce the reserve or other liability to be 
charged to the ceding insurer; provided, that nothing in this 
subdivision shall be construed to permit to a ceding insurer any 
reduction of reserve or liability through reinsurance effected 
with an unauthorized insurer.  In case such reinsurance effected 
with an insurer so authorized or so recognized for reinsurance 
in this state, the ceding insurer shall thereafter be charged on 
the gross premium basis with an unearned premium liability 
representing the proportion of such obligation retained by it, 
and the insurer to which the business is ceded shall be charged 
with an unearned premium liability representing the proportion 
of such obligation ceded to it, calculated in the same way.  The 
two parties to the transaction shall together carry the same 
reserve as the ceding insurer would have carried had it retained 
the risk. 
    (3) [REINSURANCE OF MORE THAN 75 50 PERCENT OF INSURANCE 
LIABILITIES.] Any contract of reinsurance whereby an insurer 
cedes more than 75 50 percent of the total of its outstanding 
insurance liabilities shall, if such insurer is incorporated by 
or, if an insurer of a foreign country, has its principal office 
in this state, be subject to the approval, in writing, by the 
commissioner. 
    (4) (3) ACTUAL UNEARNED PREMIUM RESERVE TO BE CARRIED AS 
LIABILITY.] Nothing in this subdivision shall be deemed to 
permit the ceding insurer to receive, through the cession of the 
whole of any risk or risks, any advantage in respect to its 
unearned premium reserve that would reduce the same below the 
actual amount thereof. 
    (5) (4) (AIRCRAFT RISKS.] An insurer authorized to transact 
the business specified in section 60A.06, subdivision 1, clauses 
(4) and (5)(a), may through reinsurance assume any risk arising 
from, related to, or incident to the manufacture, ownership, or 
operation of aircraft and may retrocede any portion thereof; 
provided, however, that no insurer may undertake any such 
reinsurance business without the prior approval of the 
commissioner and such reinsurance business shall be subject to 
any regulations which may be promulgated by the commissioner.  
Any such reinsurance business may be provided through pooling 
arrangements with other insurers for purposes of spreading the 
insurance risk. 
    Sec. 11.  [60A.091] [QUALIFIED UNITED STATES FINANCIAL 
INSTITUTION.] 
    For purposes of sections 12 and 13, "qualified United 
States financial institution" means an institution that: 
    (1) is organized or, in the case of a United States office 
of a foreign banking organization, licensed, under the laws of 
the United States or any state; 
    (2) is regulated, supervised, and examined by federal or 
state authorities having regulatory authority over banks and 
trust companies; and 
    (3) is a member of the Federal Deposit Insurance 
Corporation, or the National Credit Union Administration. 
    Sec. 12.  [60A.092] [REINSURANCE CREDIT ALLOWED A DOMESTIC 
CEDING INSURER.] 
    Subdivision 1.  [CREDIT ALLOWED.] Credit for reinsurance 
shall be allowed a domestic ceding insurer as either an asset or 
a deduction from liability on account of reinsurance ceded only 
when the reinsurance is ceded to an assuming insurer which meets 
the requirements specified under this section. 
    Subd. 2.  [LICENSED ASSUMING INSURER.] Reinsurance is ceded 
to an assuming insurer if the assuming insurer is licensed to 
transact insurance or reinsurance in this state. 
    Subd. 3.  [ACCREDITED ASSUMING INSURER.] (a) Reinsurance is 
ceded to an assuming insurer if the assuming insurer is 
accredited as a reinsurer in this state.  An accredited 
reinsurer is one which: 
    (1) files with the commissioner evidence of its submission 
to this state's jurisdiction; 
    (2) submits to this state's authority to examine its books 
and records; 
    (3) is licensed to transact insurance or reinsurance in at 
least one state, or in the case of a United States branch of an 
alien assuming insurer is entered through and licensed to 
transact insurance or reinsurance in at least one state; 
    (4) files annually with the commissioner a copy of its 
annual statement filed with the insurance department of its 
state of domicile and a copy of its most recent audited 
financial statement; and 
    (5)(i) maintains a surplus as regards policyholders in an 
amount not less than $20,000,000 and whose accreditation has not 
been denied by the commissioner within 90 days of its 
submission, or maintains a surplus as regards policyholders in 
an amount less than $20,000,000 and whose accreditation has been 
approved by the commissioner; or 
    (ii) maintains a surplus as regards policyholders in an 
amount not less than $50,000,000 for long-tail casualty 
reinsurers.  For purposes of this section, "long-tail casualty 
reinsurance" means insurance for medical or legal malpractice, 
pollution liability, directors and officers liability, and 
products liability.  The commissioner may determine that an 
assuming insurer that maintains a surplus as regards 
policyholders in an amount not less than $20,000,000 is 
accredited as a reinsurer if there is no detriment to 
policyholders and the interest of the public, and to not allow 
accrediting would be a hardship or detriment to the reinsurer. 
The commissioner shall report to the legislature on any 
determination to allow accrediting to a long-term casualty 
reinsurer maintaining a surplus in an amount less than 
$50,000,000. 
    Clause (5) does not apply to reinsurance ceded and assumed 
pursuant to pooling arrangements among insurers in the same 
holding company system. 
    (b) No credit shall be allowed or continue to be allowed a 
domestic ceding insurer if the assuming insurer's accreditation 
has been revoked by the commissioner after receipt of a cease 
and desist order pursuant to section 45.027, subdivision 5. 
    Subd. 4.  [SIMILAR STATE STANDARDS.] Reinsurance is ceded 
to an assuming insurer if the assuming insurer is domiciled and 
licensed in, or in the case of a United States branch of an 
alien assuming insurer is entered through, a state which employs 
standards regarding credit for reinsurance substantially similar 
to those applicable under this chapter and the assuming insurer 
or United States branch of an alien assuming insurer (1) 
maintains a surplus as regards policyholders in an amount not 
less than $20,000,000 or maintains a surplus as regards 
policyholders in an amount not less than $50,000,000 for 
long-tail casualty reinsurers as provided under subdivision 3, 
paragraph (a), clause (5), and (2) submits to the authority of 
this state to examine its books and records.  
    Clause (1) does not apply to reinsurance ceded and assumed 
pursuant to pooling arrangements among insurers in the same 
holding company system. 
    Subd. 5.  [TRUST FUND MAINTAINED.] The reinsurance is ceded 
to an assuming insurer if the assuming insurer maintains a trust 
fund in a qualified United States financial institution for the 
payment of the valid claims, as determined by the commissioner 
for the purpose of determining the sufficiency of the trust 
fund, of its United States policyholders and ceding insurers, 
their assigns and successors in interest.  The assuming insurer 
shall report annually to the commissioner information 
substantially the same as that required to be reported on the 
National Association of Insurance Commissioners annual statement 
form by licensed insurers to enable the commissioner to 
determine the sufficiency of the trust fund.  
    Subd. 6.  [SINGLE ASSUMING INSURER; TRUST FUND 
REQUIREMENTS.] In the case of a single assuming insurer, the 
trust shall consist of a trusteed account representing the 
assuming insurer's liabilities attributable to business written 
in the United States and, in addition, the assuming insurer 
shall maintain a trusteed surplus of not less than $20,000,000 
or maintain a surplus as regards policyholders in an amount not 
less than $50,000,000 for long-tail casualty reinsurers as 
provided under subdivision 3, paragraph (a), clause (5). 
    Subd. 7.  [INDIVIDUAL UNINCORPORATED UNDERWRITERS GROUP; 
TRUST FUND REQUIREMENTS.] In the case of a group of individual 
unincorporated underwriters, the trust shall consist of a 
trusteed account representing the group's liabilities 
attributable to business written in the United States.  The 
group shall maintain a trusteed surplus of which $100,000,000 
shall be held jointly for the benefit of United States ceding 
insurers of any member of the group.  The group shall make 
available to the commissioner an annual certification by the 
group's domiciliary regulator and its independent public 
accountants of the solvency of each underwriter. 
    Subd. 8.  [INCORPORATED INSURERS GROUP; TRUST FUND 
REQUIREMENTS.] A group of incorporated insurers under common 
administration must: 
    (1) comply with the filing requirements specified in 
subdivision 7; 
    (2) be under the supervision of the Department of Trade and 
Industry of the United Kingdom; 
    (3) submit to this state's authority to examine its books 
and records; 
    (4) bear the expense of the examination; 
    (5) maintain an aggregate policyholders' surplus of 
$10,000,000,000; 
    (6) maintain the trust in an amount equal to the group's 
several liabilities attributable to business written in the 
United States; and 
    (7) maintain a joint trusteed surplus of which $100,000,000 
must be held jointly for the benefit of United States ceding 
insurers of any member of the group. 
     Each member of the group shall make available to the 
commissioner an annual certification by the member's domiciliary 
regulator and its independent accountant of the member's 
solvency. 
    Subd. 9.  [TRUST FUND GENERAL REQUIREMENTS.] (a) The trust 
must be established in a form approved by the commissioner of 
commerce.  The trust instrument shall provide that contested 
claims shall be valid and enforceable upon the final order of 
any court of competent jurisdiction in the United States.  The 
trust shall vest legal title to its assets in the trustees of 
the trust for its United States policyholders and ceding 
insurers, their assigns and successors in interest.  The trust 
and the assuming insurer shall be subject to examination as 
determined by the commissioner.  The trust must remain in effect 
for as long as the assuming insurer shall have outstanding 
obligations due under the reinsurance agreements subject to the 
trust. 
    (b) No later than February 28 of each year the trustees of 
the trust shall report to the commissioner in writing setting 
forth the balance of the trust and listing the trust's 
investments at the preceding year end and shall certify the date 
of termination of the trust, if so planned, or certify that the 
trust shall not expire prior to the next following December 31. 
    Subd. 10.  [OTHER JURISDICTIONS.] The reinsurance is ceded 
to an assuming insurer not meeting the requirements of 
subdivision 2, 3, 4, or 5, but only with respect to the 
insurance of risks located in jurisdictions where the 
reinsurance is required by applicable law or regulation of that 
jurisdiction. 
    Subd. 11.  [REINSURANCE AGREEMENT REQUIREMENTS.] (a) If the 
assuming insurer is not licensed or accredited to transact 
insurance or reinsurance in this state, the credit authorized 
under subdivisions 4 and 5 shall not be allowed unless the 
assuming insurer agrees in the reinsurance agreements: 
    (1) that in the event of the failure of the assuming 
insurer to perform its obligations under the terms of the 
reinsurance agreement, the assuming insurer shall submit to the 
jurisdiction of any court of competent jurisdiction in any state 
of the United States, comply with all requirements necessary to 
give the court jurisdiction, and abide by the final decision of 
the court or of any appellate court in the event of an appeal; 
and 
    (2) to designate the commissioner or a designated attorney 
as its true and lawful attorney upon whom may be served any 
lawful process in any action, suit, or proceeding instituted by 
or on behalf of the ceding company. 
    (b) Paragraph (a) is not intended to conflict with or 
override the obligation of the parties to a reinsurance 
agreement to arbitrate their disputes, if an obligation to do so 
is created in the agreement. 
    Sec. 13.  [60A.093] [REDUCTION FROM LIABILITY FOR 
REINSURANCE CEDED BY A DOMESTIC INSURER TO AN ASSUMING INSURER.] 
     Subdivision 1.  [REDUCTION ALLOWED.] A reduction from 
liability for reinsurance ceded by a domestic insurer to an 
assuming insurer not meeting the requirements of section 12 
shall be allowed in an amount not exceeding the liabilities 
carried by the ceding insurer.  Such reduction shall be in the 
amount of funds held by or on behalf of the ceding insurer, 
including funds held in trust for the ceding insurer, as 
security for the payment of obligations under the reinsurance 
contract with the assuming insurer.  Such security must be held 
in the United States subject to withdrawal solely by, and under 
the exclusive control of, the ceding insurer; or, in the case of 
a trust, held in a qualified United States financial 
institution.  The funds held as security may be in any form of 
security acceptable to the commissioner or in the form of: 
    (1) cash; 
    (2) securities listed by the securities valuation office of 
the National Association of Insurance Commissioners and 
qualifying as admitted assets and, with the exception of United 
States treasury notes, readily marketable over a national 
exchange or NASDAQ with maturity dates within one year; or 
    (3) clean, irrevocable, unconditional letters of credit 
issued or confirmed by a qualified United States financial 
institution no later than December 31 in respect of the year for 
which filing is being made, and in the possession of the ceding 
company on or before the filing date of its annual statement.  
The financial institution must meet the standards of financial 
condition and standing considered necessary and appropriate to 
regulate the quality of financial institutions as determined by 
either the commissioner or the securities valuation office of 
the National Association of Insurance Commissioners, and the 
financial institution's letters of credit must be acceptable to 
the commissioner. 
    Subd. 2.  [LETTERS OF CREDIT CONTINUED ACCEPTANCE.] Letters 
of credit meeting applicable standards of issuer acceptability 
as of the dates of their issuance or confirmation must, 
notwithstanding the issuing or confirming institution's 
subsequent failure to meet applicable standards of issuer 
acceptability, continue to be acceptable as security until their 
expiration, extension, renewal, modification, or amendment, 
whichever comes first, unless the issuing or confirming 
institution fails the following standards: 
    (1) fails to maintain a minimum ratio of three percent tier 
I capital to total risk adjusted assets, leverage ratio, as 
required by the Federal Reserve System as disclosed by the bank 
in any call report required by state or federal regulatory 
authority and available to the ceding insurer; or 
    (2) has its long-term deposit rating or long-term debt 
rating lowered to a rating below Aa2 as found in the current 
monthly publication of Moody's credit opinions or its equivalent.
The letter of credit of an institution failing the standards of 
clause (1) or this clause continues to be acceptable for no more 
than 30 days. 
    Sec. 14.  [60A.094] [RULES.] 
    The commissioner may adopt rules implementing the 
provisions of sections 11 to 13. 
    Sec. 15.  [60A.095] [REINSURANCE AGREEMENTS AFFECTED.] 
    Sections 11 to 13 apply to all cessions after the effective 
date of this act under reinsurance agreements that have had an 
inception, anniversary, or renewal date not less than six months 
after the effective date of this article. 
    Sec. 16.  [REPEALER.] 
    Minnesota Statutes 1990, section 60A.09, subdivision 4, is 
repealed. 

                               ARTICLE 2 

                  ADMINISTRATIVE SUPERVISION MODEL ACT 
    Section 1.  [60G.01] [DEFINITIONS.] 
    Subdivision 1.  [APPLICATION.] The definitions in this 
section apply to this chapter. 
    Subd. 2.  [COMMISSIONER.] "Commissioner" means the 
commissioner of commerce, except that "commissioner" means the 
commissioner of health for administrative supervision health 
maintenance organizations. 
    Subd. 3.  [CONSENT.] "Consent" means agreement to 
administrative supervision by the insurer. 
    Subd. 4.  [DEPARTMENT.] "Department" means the department 
of commerce, except that "department" means the department of 
health for administrative supervision of health maintenance 
organizations. 
    Subd. 5.  [INSURER.] "Insurer" means and includes every 
person engaged as indemnitor, surety, or contractor in the 
business of entering into contracts of insurance or of annuities 
as limited to: 
    (1) any insurer who is doing an insurer business, or has 
transacted insurance in this state, and against whom claims 
arising from that transaction may exist now or in the future; 
    (2) any fraternal benefit society which is subject to 
chapter 64B; 
    (3) nonprofit health service plan corporations subject to 
chapter 62C; 
    (4) cooperative life and casualty companies subject to 
sections 61A.39 to 61A.52; and 
     (5) health maintenance organizations regulated under 
chapter 62D. 
    Sec. 2.  [60G.02] [NOTICE TO COMPLY WITH WRITTEN 
REQUIREMENTS OF COMMISSIONER; NONCOMPLIANCE; ADMINISTRATIVE 
SUPERVISION.] 
    Subdivision 1.  [ADMINISTRATIVE SUPERVISION.] An insurer 
may be subject to administrative supervision by the commissioner 
if upon examination or at any other time it appears in the 
commissioner's discretion that: 
    (1) the insurer's condition renders the continuance of its 
business hazardous to the public or to its insureds; 
    (2) the insurer has refused to permit examination of its 
books, papers, accounts, records, or affairs by the 
commissioner, the commissioner's deputies, employees, or duly 
commissioned examiners; 
    (3) a domestic insurer has unlawfully removed from this 
state books, papers, accounts, or records necessary for an 
examination of the insurer; 
    (4) the insurer has failed to promptly comply with the 
applicable financial reporting statutes or rules and 
departmental requests relating thereto; 
    (5) the insurer has neglected or refused to observe an 
order of the commissioner to make good, within the time 
prescribed by law, any prohibited deficiency in its capital, 
capital stock, or surplus; 
    (6) the insurer is continuing to transact insurance or 
write business after its license has been revoked or suspended 
by the commissioner; 
    (7) the insurer, by contract or otherwise, has unlawfully 
or has in violation of an order of the commissioner or has 
without first having obtained written approval of the 
commissioner if approval is required by law: 
    (i) totally reinsured its entire outstanding business, or 
    (ii) merged or consolidated substantially its entire 
property or business with another insurer; 
    (8) the insurer engaged in any transaction in which it is 
not authorized to engage under the laws of this state; 
    (9) the insurer refused to comply with a lawful order of 
the commissioner; 
    (10) the insurer has failed to comply with the applicable 
provisions of the laws of this state; 
    (11) the business of the insurer is being conducted 
fraudulently; or 
    (12) the insurer gives its consent. 
    Subd. 2.  [NOTIFICATION.] If the commissioner determines 
that at least one of the conditions specified in subdivision 1 
exists and places the insurer under supervision, the 
commissioner may: 
    (1) notify the insurer of the commissioner's determination; 
    (2) furnish to the insurer a written list of the 
requirements to abate this determination; and 
    (3) notify the insurer that it is under the supervision of 
the commissioner and that the commissioner is applying and 
enforcing the provisions of this chapter.  If placed under 
administrative supervision, an insurer may request review as 
provided under chapter 14. 
    Subd. 3.  [REQUIREMENT COMPLIANCE.] If placed under 
administrative supervision, the insurer shall have 60 days, or 
another period of time as designated by the commissioner, to 
comply with the requirements of the commissioner as provided 
under this chapter.  If it is determined after notice and 
hearing that the insurer has not complied with the requirements 
of the commissioner at the end of the supervision period, the 
commissioner may extend the period.  If the insurer complies 
with the requirements of the commissioner, the commissioner 
shall release the insurer from supervision. 
    Sec. 3.  [60G.03] [CONFIDENTIALITY OF CERTAIN PROCEEDINGS 
AND RECORDS.] 
    Subdivision 1.  [CONFIDENTIALITY.] Notwithstanding any 
other provision of law and except as provided in this section, 
proceedings, hearings, notices, correspondence, reports, 
records, and other information in the possession of the 
commissioner or the department relating to the supervision of 
any insurer are confidential. 
    Subd. 2.  [ACCESS.] The personnel of the department shall 
have access to these proceedings, hearings, notices, 
correspondence, reports, records, or information as permitted by 
the commissioner. 
    Subd. 3.  [OPEN HEARINGS; DISCLOSURE.] The commissioner may 
open the proceedings or hearings or disclose the notices, 
correspondence, reports, records, or information to a 
department, agency, or instrumentality of this or another state 
or the United States if the commissioner determines that the 
disclosure is necessary or proper for the enforcement of the 
laws of this or another state or the United States. 
    Subd. 4.  [PUBLIC DISCLOSURE.] The commissioner may open 
the proceedings or hearings or make public the notices, 
correspondence, reports, records, or other information if the 
commissioner determines that it is in the best interest of the 
public or in the best interest of the insurer, its insureds, 
creditors, or the general public. 
    Subd. 5.  [EXEMPTION.] This section does not apply to 
hearings, notices, correspondence, reports, records, or other 
information obtained upon the appointment of a receiver for the 
insurer by a court of competent jurisdiction. 
    Sec. 4.  [60G.04] [PROHIBITED ACTS DURING PERIOD OF 
SUPERVISION.] 
    During the period of supervision, the commissioner shall 
serve as the administrative supervisor.  The commissioner may 
require that the insurer shall not do any of the following 
things during the period of supervision without the prior 
approval of the commissioner: 
    (1) dispose of, convey, or encumber its assets or its 
business in force; 
    (2) withdraw funds from its bank accounts; 
    (3) lend its funds; 
    (4) invest its funds; 
    (5) transfer its property; 
    (6) incur debt, obligation, or liability; 
    (7) merge or consolidate with another company; 
    (8) approve new premiums or renew policies; 
    (9) enter into a new reinsurance contract or treaty; 
    (10) terminate, surrender, forfeit, convert, or lapse an 
insurance policy, certificate, or contract, except for 
nonpayment of premiums due; 
    (11) release, pay, or refund premium deposits, accrued cash 
or loan values, unearned premiums, or other reserves on an 
insurance policy, certificate, or contract; 
    (12) make a material change in management; or 
    (13) increase salaries and benefits of officers or 
directors or make preferential payment of bonuses, dividends, or 
other payments determined preferential by the commissioner. 
    Sec. 5.  [60G.05] [REVIEW AND STAY OF ACTION.] 
    During the period of supervision, the insurer may contest 
an action taken or proposed to be taken by the commissioner as 
provided under chapter 14.  The insurer must show that the 
action being complained of is detrimental to the condition of 
the insurer.  
    Sec. 6.  [60G.06] [ADMINISTRATIVE ELECTION OF PROCEEDINGS.] 
    Nothing contained in this chapter precludes the 
commissioner from initiating judicial proceedings to place an 
insurer in rehabilitation or liquidation proceedings under the 
laws of this state, regardless of whether the commissioner has 
previously initiated administrative supervision proceedings 
under this chapter against the insurer. 
    Sec. 7.  [60G.07] [RULES.] 
    The commissioner may adopt rules necessary for the 
implementation of this chapter.  
    Sec. 8.  [60G.08] [IMMUNITY.] 
    There shall be no liability on the part of, and no cause of 
action may be brought against the commissioner or the department 
or its employees or agents for any action taken by them in the 
performance of their powers and duties under this chapter. 
     Sec. 9.  [60G.09] [APPLICATION.] 
    Sections 1 to 8 apply to domestic insurers and any other 
insurer doing business in this state whose state of domicile has 
requested the commissioner of commerce to apply sections 1 to 8. 

                               ARTICLE 3 

                 STANDARDS AND COMMISSIONER'S AUTHORITY 

                   FOR COMPANIES CONSIDERED TO BE IN 

                     HAZARDOUS FINANCIAL CONDITION 
    Section 1.  [60G.20] [STANDARDS.] 
    Subdivision 1.  [HAZARDOUS CONSIDERATION.] The following 
standards, either singly or a combination of two or more, may be 
considered by the commissioner to determine whether the 
continued operation of any insurer, whether domestic, foreign, 
or alien, transacting an insurance business in this state may be 
considered hazardous to the policyholders, creditors or the 
general public.  The commissioner may consider: 
    (1) an adverse finding reported in financial condition and 
market conduct examination reports; 
    (2) the National Association of Insurance Commissioners 
insurance regulatory information system and its related reports; 
    (3) the ratios of commission expense, general insurance 
expense, policy benefits, and reserve increases as to annual 
premium and net investment income which may lead to an 
impairment of capital and surplus; 
    (4) whether the insurer's asset portfolio when viewed in 
light of current economic conditions is not of sufficient value, 
liquidity, or diversity to assure the company's ability to meet 
its outstanding obligations as they mature; 
    (5) the ability of an assuming reinsurer to perform and 
whether the insurer's reinsurance program provides sufficient 
protection for the company's remaining surplus after taking into 
account the insurer's cash flow and the classes of business 
written as well as the financial condition of the assuming 
reinsurer; 
    (6) whether the insurer's operating loss in the last 
12-month period or any shorter period of time, including, but 
not limited to, net capital gain or loss, change in nonadmitted 
assets, and cash dividends paid to shareholders, is greater than 
50 percent of the insurer's remaining surplus as regards 
policyholders in excess of the minimum required; 
    (7) whether any affiliate, subsidiary, or reinsurer is 
insolvent, threatened with insolvency, or delinquent in payment 
of its monetary or other obligations; 
    (8) contingent liabilities, pledges, or guaranties which 
either individually or collectively involve a total amount which 
in the opinion of the commissioner may affect the solvency of 
the insurer; 
    (9) whether any "controlling person" of an insurer is 
delinquent in the transmitting to, or payment of, net premiums 
to the insurer; 
    (10) the age and collectability of receivables; 
    (11) whether the management of an insurer, including 
officers, directors, or any other person who directly or 
indirectly controls the operation of the insurer, fails to 
possess and demonstrate the competence, fitness, and reputation 
necessary to serve the insurer in the position; 
    (12) whether management of an insurer has failed to respond 
to inquiries relative to the condition of the insurer or has 
furnished false and misleading information concerning an 
inquiry; 
    (13) whether management of an insurer either has filed a 
false or misleading sworn financial statement, or has released a 
false or misleading financial statement to lending institutions 
or to the general public, or has made a false or misleading 
entry, or has omitted an entry of material amount in the books 
of the insurer; 
    (14) whether the insurer has grown so rapidly and to such 
an extent that it lacks adequate financial and administrative 
capacity to meet its obligations in a timely manner; or 
    (15) whether the company has experienced or will experience 
in the foreseeable future cash flow or liquidity problems. 
    Subd. 2.  [COMMISSIONER'S AUTHORITY.] For the purposes of 
making a determination of an insurer's financial condition under 
subdivision 1, the commissioner may: 
    (1) disregard any credit or amount receivable resulting 
from transactions with a reinsurer which is insolvent, impaired, 
or otherwise subject to a delinquency proceeding; 
    (2) make appropriate adjustments to asset values 
attributable to investments in or transactions with the 
corporation's parents, subsidiaries, or affiliates; 
    (3) refuse to recognize the stated value of accounts 
receivable if the ability to collect receivables is highly 
speculative in view of the age of the account or the financial 
condition of the debtor; or 
    (4) increase the insurer's liability in an amount equal to 
any contingent liability, pledge, or guarantee not otherwise 
included if there is a substantial risk that the insurer will be 
called upon to meet the obligation undertaken within the next 
12-month period. 
    Sec. 2.  [60G.21] [COMMISSIONER'S ORDER.] 
    Subdivision 1.  [AUTHORIZATION.] If the commissioner 
determines that the continued operation of the insurer licensed 
to transact business in this state may be hazardous to the 
policyholders or the general public, then the commissioner may, 
upon the commissioner's determination, issue an order requiring 
the insurer to: 
    (1) reduce the total amount of present and potential 
liability for policy benefits by reinsurance; 
    (2) reduce, suspend, or limit the volume of business being 
accepted or renewed; 
    (3) reduce general insurance and commission expenses by 
methods specified by the commissioner; 
    (4) increase the insurer's capital and surplus; 
    (5) suspend or limit the declaration and payment of 
dividend by an insurer to its stockholders or to its 
policyholders; 
    (6) file reports in a form acceptable to the commissioner 
concerning the market value of an insurer's assets; 
    (7) limit or withdraw from certain investments or 
discontinue certain investment practices to the extent the 
commissioner considers necessary; 
    (8) document the adequacy of premium rates in relation to 
the risks insured; or 
    (9) file, in addition to regular annual statements, interim 
financial reports on the form adopted by the National 
Association of Insurance Commissioners or in the format adopted 
by the commissioner. 
    Subd. 2.  [REVIEW.] An insurer subject to an order under 
subdivision 1 may request, within 30 days of issuance of the 
order, a hearing as provided under chapter 14 to review that 
order.  All hearings conducted under this section are closed and 
private.  
    Sec. 3.  [60G.22] [JUDICIAL REVIEW.] 
    Any order or decision of the commissioner is subject to 
review as provided under chapter 14 at the request of a party 
whose interests are substantially affected by the order or 
decision. 

                               ARTICLE 4 

                      MANAGING GENERAL AGENTS ACT 
    Section 1.  [60H.01] [SHORT TITLE.] 
    This chapter may be cited as the managing general agents 
act. 
    Sec. 2.  [60H.02] [DEFINITIONS.] 
    Subdivision 1.  [APPLICATION.] The terms defined in this 
section apply to this chapter. 
    Subd. 2.  [ACTUARY.] "Actuary" means a person who is a 
member in good standing of the American Academy of Actuaries. 
    Subd. 3.  [INSURER.] "Insurer" means a person, firm, 
association, or corporation duly licensed in this state as an 
insurance company. 
    Subd. 4.  [MANAGING GENERAL AGENT.] (a) "Managing general 
agent" means a person, firm, association or corporation who:  
(1) negotiates and binds ceding reinsurance contracts on behalf 
of an insurer, or (2) manages all or part of the insurance 
business of an insurer, including the management of a separate 
division, department, or underwriting office, and acts as an 
agent for the insurer whether known as a managing general agent, 
manager, or other similar term, who, with or without the 
authority, either separately or together with affiliates, 
produces, directly or indirectly, and underwrites an amount of 
gross direct written premium equal to or more than five percent 
of the policyholder surplus as reported in the last annual 
statement of the insurer in any one quarter or year, together 
with one or more of the following:  (i) adjusts or pays claims 
in excess of an amount determined by the commissioner, or (ii) 
negotiates reinsurance on behalf of the insurer. 
    (b) Notwithstanding paragraph (a), the following persons 
shall not be considered as managing general agents for the 
purposes of this chapter: 
    (1) an employee of the insurer; 
    (2) a United States manager of the United States branch of 
an alien insurer; 
    (3) an underwriting manager who, pursuant to contract, 
manages all of the insurance or reinsurance operation of the 
insurer, is under common control with the insurer, subject to 
the Insurance Holding Company Act, chapter 60D, and whose 
compensation is not based on the volume of premiums written; or 
    (4) an attorney in fact authorized by and acting for the 
subscribers of a reciprocal insurer or interinsurance exchange 
under powers of attorney.  
    Subd. 5.  [UNDERWRITE.] "Underwrite" means the authority to 
accept or reject risk on behalf of the insurer. 
    Sec. 3.  [60H.03] [LICENSURE.] 
    Subdivision 1.  [RISKS LOCATED IN STATE.] A managing 
general agent representing an insurer licensed in this state 
with respect to risks located in this state must be licensed in 
this state. 
    Subd. 2.  [RISKS LOCATED OUTSIDE OF STATE.] A managing 
general agent representing an insurer domiciled in this state 
with respect to risks located outside this state must be 
licensed in this state as a managing general agent.  The license 
may be a nonresident license.  
    Subd. 3.  [REQUIREMENTS.] The commissioner may require a 
bond in an amount acceptable for the protection of the insurer.  
The commissioner may require the managing general agent to 
maintain an errors and omissions policy. 
    Sec. 4.  [60H.04] [REQUIRED CONTRACT PROVISIONS.] 
    No person, firm, association, or corporation acting in the 
capacity of a managing general agent shall place business with 
an insurer unless there is in force a written contract between 
the parties.  The contract must specify the responsibilities of 
each party and, where both parties share responsibility for a 
particular function, must specify the division of the 
responsibilities.  The contract must include the following 
minimum provisions: 
    (a) The insurer may terminate the contract for cause upon 
written notice to the managing general agent.  The insurer may 
suspend the underwriting authority of the managing general agent 
during the pendency of any dispute regarding the cause for 
termination. 
    (b) The managing general agent must give accounts to the 
insurer detailing all transactions and remit all funds due under 
the contract to the insurer on not less than a monthly basis. 
    (c) All funds collected for the account of an insurer must 
be held by the managing general agent in the name of the insurer 
in a fiduciary capacity in a bank which is a member of the 
Federal Reserve System.  This account must be used for all 
payments on behalf of the insurer.  The managing general agent 
may retain no more than three months' estimated claims payments 
and allocated loss adjustment expenses.  A managing general 
agent shall deposit only trust funds in a trust account and 
shall not commingle personal funds or other funds in a trust 
account, except that a managing general agent may deposit and 
maintain a sum in a trust account from personal funds, which sum 
shall be specifically identified and used to pay service charges 
or satisfy the minimum balance requirements relating to the 
trust account.  
    (d) Separate records of business written by the managing 
general agent must be maintained.  The insurer shall have access 
to and the right to copy all accounts and records related to its 
business in a form usable by the insurer, and the commissioner 
shall have access to all books, bank accounts, and records of 
the managing general agent in a form usable to the 
commissioner.  The records shall be retained on a basis 
acceptable to the commissioner. 
    (e) The contract may not be assigned in whole or part by 
the managing general agent. 
    (f) Appropriate underwriting guidelines, including: 
    (1) the maximum annual premium volume; 
    (2) the basis of the rates to be charged; 
    (3) the types of risks which may be written; 
    (4) maximum limits of liability; 
    (5) applicable exclusions; 
    (6) territorial limitations; 
    (7) policy cancellation provisions; and 
    (8) the maximum policy period. 
    The insurer shall have the right to cancel or nonrenew any 
policy of insurance subject to the applicable laws and 
regulations concerning the cancellation and nonrenewal of 
insurance policies. 
    (g) If the contract permits the managing general agent to 
settle claims on behalf of the insurer: 
    (1) All claims must be reported to the insurer in a timely 
manner. 
    (2) A copy of the claim file must be sent to the insurer at 
its request or as soon as it becomes known that the claim: 
    (i) has the potential to exceed an amount determined by the 
commissioner or exceeds the limit set by the insurer, whichever 
is less; 
    (ii) involves a coverage dispute; 
    (iii) may exceed the managing general agent's claim 
settlement authority; 
    (iv) is open for more than six months; or 
    (v) is closed by payment of an amount set by the 
commissioner or an amount set by the insurer, whichever is less. 
    (3) All claim files are the joint property of the insurer 
and managing general agent.  However, upon an order of 
liquidation of the insurer the files become the sole property of 
the insurer or its estate.  The managing general agent shall 
have reasonable access to and the right to copy the files on a 
timely basis. 
    (4) Any settlement authority granted to the managing 
general agent may be terminated for cause upon the insurer's 
written notice to the managing general agent or upon the 
termination of the contract.  The insurer may suspend the 
settlement authority during the pendency of any dispute 
regarding the cause for termination. 
    (h) Where electronic claims files are in existence, the 
contract must address the timely transmission of the data. 
    (i) If the contract provides for a sharing of interim 
profits by the managing general agent, and the managing general 
agent has the authority to determine the amount of the interim 
profits by establishing loss reserves or controlling claim 
payments, or in any other manner, interim profits will not be 
paid to the managing general agent until one year after they are 
earned for property insurance business and five years after they 
are earned on casualty business and not until the profits have 
been verified as provided under section 5. 
    (j) The managing general agent shall not: 
    (1) bind reinsurance or retrocessions on behalf of the 
insurer, except that the managing general agent may bind 
facultative reinsurance contracts pursuant to obligatory 
facultative agreements if the contract with the insurer contains 
reinsurance underwriting guidelines including, for both 
reinsurance assumed and ceded, a list of reinsurers with which 
the automatic agreements are in effect, the coverage and amounts 
or percentages that may be reinsured, and commission schedules; 
    (2) commit the insurer to participate in insurance or 
reinsurance syndicates; 
    (3) appoint an agent without assuring that the agent is 
lawfully licensed to transact the type of insurance for which 
that person is appointed; 
    (4) without prior approval of the insurer, pay or commit 
the insurer to pay a claim over a specified amount, net of 
reinsurance, which shall not exceed one percent of the insurer's 
policyholder's surplus as of December 31 of the last completed 
calendar year; 
    (5) collect any payment from a reinsurer or commit the 
insurer to any claim settlement with a reinsurer, without prior 
approval of the insurer.  If prior approval is given, a report 
must be promptly forwarded to the insurer; 
    (6) permit its subagent to serve on the insurer's board of 
directors; 
    (7) jointly employ an individual who is employed with the 
insurer; or 
    (8) appoint a submanaging general agent. 
    (k) The contract term may not be for an unreasonable period 
of time, but in no circumstance may the term exceed five years. 
     (l) The insurer may not authorize the managing general 
agent to establish the amount of the loss reserves. 
    Sec. 5.  [60H.05] [DUTIES OF INSURERS.] 
    Subdivision 1.  [INDEPENDENT FINANCIAL EXAMINATION.] The 
insurer shall have on file an independent financial examination, 
in a form acceptable to the commissioner, of each managing 
general agent with which it has done business. 
    Subd.  2.  [ON-SITE REVIEW.] The insurer shall 
periodically, at least semiannually, conduct an on-site review 
of the underwriting and claims processing operation of the 
managing general agent and maintain on its records the results 
of that review. 
    Subd.  3.  [OFFICER OF INSURER.] Except as authorized under 
section 4, paragraph (j), clause (1), binding authority for all 
reinsurance contracts or participation in insurance or 
reinsurance syndicates shall rest with an officer of the insurer 
not affiliated with the managing general agent. 
    Subd.  4.  [WRITTEN NOTIFICATION.] Within 30 days of 
entering into or termination of a contract with a managing 
general agent, the insurer shall provide written notification of 
the appointment or termination to the commissioner.  Notices of 
appointment of a managing general agent must include a statement 
of duties which the managing general agent is expected to 
perform on behalf of the insurer, the lines of insurance for 
which the managing general agent is to be authorized to act, and 
any other information the commissioner may request. 
    Subd.  5.  [REVIEW OF BOOKS AND RECORDS.] An insurer shall 
review its books and records each quarter to determine if a 
licensed agent has become a managing general agent as defined in 
section 2, subdivision 4.  If the insurer determines that an 
agent has become a managing general agent, the insurer shall 
promptly notify the agent and the commissioner of the 
determination and the insurer and agent must fully comply with 
this chapter within 30 days. 
    Subd.  6.  [PROHIBITED APPOINTMENTS.] An insurer shall not 
appoint to its board of directors an officer, director, 
employee, subagent, or controlling shareholder of its managing 
general agents.  This section does not apply to relationships 
governed by the Insurance Holding Company Act, chapter 60D, or, 
if applicable, the Producer Controlled Insurer Act. 
    Sec. 6.  [60H.06] [EXAMINATION AUTHORITY.] 
    A managing general agent may be examined as if it were the 
insurer. 
    Sec. 7.  [60H.07] [ACTS OF MANAGING GENERAL AGENT.] 
    The acts of the managing general agent are considered to be 
the acts of the insurer on whose behalf it is acting.  
    Sec. 8.  [60H.08] [PENALTIES AND LIABILITIES.] 
    Subdivision 1.  [COMMISSIONER'S AUTHORITY.] If the 
commissioner finds pursuant to the procedural requirements of 
section 45.027 that a person has violated a provision of this 
chapter, the commissioner may take any action authorized under 
that section.  
    Subd. 2.  [ADDITIONAL PENALTY.] In addition to authority 
granted by section 45.027 for each separate violation, the 
commissioner may impose a penalty of up to $10,000 for each day 
the violation continues and order the managing general agent to 
reimburse the insurer, rehabilitator, or liquidator of the 
insurer for any losses incurred by the insurer caused by a 
violation of this chapter committed by the managing general 
agent. 
    Subd. 3.  [JUDICIAL REVIEW.] The decision, determination, 
or order of the commissioner under subdivision 1 is subject to 
judicial review as provided under chapter 14.  
    Subd. 4.  [IMPOSITION OF OTHER PENALTIES.] Nothing 
contained in this section shall affect the right of the 
commissioner to impose any other penalties provided for by law. 
    Subd. 5.  [POLICYHOLDER RIGHTS.] Nothing contained in this 
chapter is intended to or shall in any manner limit or restrict 
the rights of policyholders, claimants, and auditors. 
    Sec. 9.  [60H.09] [RULES.] 
    The commissioner of commerce may adopt rules for the 
implementation and administration of this chapter. 
    Sec. 10.  [REPEALER.] 
    Minnesota Statutes 1990, section 60A.076, is repealed. 
    Sec. 11.  [EFFECTIVE DATE.] 
    This article is effective August 1, 1991.  No insurer may 
continue to utilize the services of a managing general agent on 
and after that date unless the utilization is in compliance with 
this chapter. 

                                ARTICLE 5

                  LIFE AND HEALTH GUARANTY ASSOCIATION 
    Section 1.  Minnesota Statutes 1990, section 60B.25, is 
amended to read: 
    60B.25 [POWERS OF LIQUIDATOR.] 
    The liquidator shall report to the court monthly, or at 
other intervals specified by the court, on the progress of the 
liquidation in whatever detail the court orders.  The liquidator 
shall coordinate activities with those of each guaranty 
association having an interest in the liquidation and shall 
submit a report detailing how coordination will be achieved to 
the court for its approval within 30 days following appointment, 
or within the time which the court, in its discretion, may 
establish.  Subject to the court's control, the liquidator may: 
    (1) Appoint a special deputy to act under sections 60B.01 
to 60B.61 and determine the deputy's compensation.  The special 
deputy shall have all powers of the liquidator granted by this 
section.  The special deputy shall serve at the pleasure of the 
liquidator. 
    (2) Appoint or engage employees and agents, actuaries, 
accountants, appraisers, consultants, and other personnel deemed 
necessary to assist in the liquidation without regard to chapter 
14. 
    (3) Fix the compensation of persons under clause (2), 
subject to the control of the court. 
    (4) Defray all expenses of taking possession of, 
conserving, conducting, liquidating, disposing of, or otherwise 
dealing with the business and property of the insurer.  If the 
property of the insurer does not contain sufficient cash or 
liquid assets to defray the costs incurred, the liquidator may 
advance the costs so incurred out of the appropriation made to 
the department of commerce.  Any amounts so paid shall be deemed 
expense of administration and shall be repaid for the credit of 
the department of commerce out of the first available money of 
the insurer. 
     (5) Hold hearings, subpoena witnesses and compel their 
attendance, administer oaths, examine any person under oath and 
compel any person to subscribe to testimony after it has been 
correctly reduced to writing, and in connection therewith 
require the production of any books, papers, records, or other 
documents which the liquidator deems relevant to the inquiry. 
     (6) Collect all debts and money due and claims belonging to 
the insurer, wherever located, and for this purpose institute 
timely action in other jurisdictions, in order to forestall 
garnishment and attachment proceedings against such debts; do 
such other acts as are necessary or expedient to collect, 
conserve, or protect its assets or property, including sell, 
compound, compromise, or assign for purposes of collection, upon 
such terms and conditions as the liquidator deems best, any bad 
or doubtful debts; and pursue any creditor's remedies available 
to enforce claims. 
     (7) Conduct public and private sales of the property of the 
insurer in a manner prescribed by the court. 
     (8) Use assets of the estate to transfer coverage 
obligations to a solvent assuming insurer, if the transfer can 
be arranged without prejudice to applicable priorities under 
section 60B.44. 
     (9) Acquire, hypothecate, encumber, lease, improve, sell, 
transfer, abandon, or otherwise dispose of or deal with any 
property of the insurer at its market value or upon such terms 
and conditions as are fair and reasonable, except that no 
transaction involving property the market value of which exceeds 
$10,000 shall be concluded without express permission of the 
court.  The liquidator may also execute, acknowledge, and 
deliver any deeds, assignments, releases, and other instruments 
necessary or proper to effectuate any sale of property or other 
transaction in connection with the liquidation.  In cases where 
real property sold by the liquidator is located other than in 
the county where the liquidation is pending, the liquidator 
shall cause to be filed with the county recorder for the county 
in which the property is located a certified copy of the order 
of appointment. 
     (10) Borrow money on the security of the insurer's assets 
or without security and execute and deliver all documents 
necessary to that transaction for the purpose of facilitating 
the liquidation. 
     (11) Enter into such contracts as are necessary to carry 
out the order to liquidate, and affirm or disallow any contracts 
to which the insurer is a party. 
     (12) Continue to prosecute and institute in the name of the 
insurer or in the liquidator's own name any suits and other 
legal proceedings, in this state or elsewhere, and abandon the 
prosecution of claims the liquidator deems unprofitable to 
pursue further.  If the insurer is dissolved under section 
60B.23, the liquidator may apply to any court in this state or 
elsewhere for leave to be substituted for the insurer as 
plaintiff. 
     (13) Prosecute any action which may exist in behalf of the 
creditors, members, policyholders, or shareholders of the 
insurer against any officer of the insurer, or any other person. 
     (14) Remove any records and property of the insurer to the 
offices of the commissioner or to such other place as is 
convenient for the purposes of efficient and orderly execution 
of the liquidation. 
     (15) Deposit in one or more banks in this state such sums 
as are required for meeting current administration expenses and 
dividend distributions. 
     (16) Deposit with the state board of investment for 
investment pursuant to section 11A.24, all sums not currently 
needed, unless the court orders otherwise. 
     (17) File any necessary documents for record in the office 
of any county recorder or record office in this state or 
elsewhere where property of the insurer is located. 
     (18) Assert all defenses available to the insurer as 
against third persons, including statutes of limitations, 
statutes of frauds, and the defense of usury.  A waiver of any 
defense by the insurer after a petition for liquidation has been 
filed shall not bind the liquidator. 
     (19) Exercise and enforce all the rights, remedies, and 
powers of any creditor, shareholder, policyholder, or member, 
including any power to avoid any transfer or lien that may be 
given by law and that is not included within sections 60B.30 and 
60B.32. 
     (20) Intervene in any proceeding wherever instituted that 
might lead to the appointment of a receiver or trustee, and act 
as the receiver or trustee whenever the appointment is offered. 
     (21) Enter into agreements with any receiver or 
commissioner of any other state relating to the rehabilitation, 
liquidation, conservation, or dissolution of an insurer doing 
business in both states. 
     (22) Exercise all powers now held or hereafter conferred 
upon receivers by the laws of this state not inconsistent with 
sections 60B.01 to 60B.61. 
     (23) The enumeration in this section of the powers and 
authority of the liquidator is not a limitation, nor does it 
exclude the right to do such other acts not herein specifically 
enumerated or otherwise provided for as are necessary or 
expedient for the accomplishment of or in aid of the purpose of 
liquidation. 
     (24) The power of the liquidator of a health maintenance 
organization includes the power to transfer coverage obligations 
to a solvent and voluntary health maintenance organization, 
insurer, or nonprofit health service plan, and to assign 
provider contracts of the insolvent health maintenance 
organization to an assuming health maintenance organization, 
insurer, or nonprofit health service plan permitted to enter 
into such agreements.  The liquidator is not required to meet 
the notice requirements of section 62D.121.  Transferees of 
coverage obligations or provider contracts shall have no 
liability to creditors or obligees of the health maintenance 
organization except those liabilities expressly assumed. 
    Sec. 2.  Minnesota Statutes 1990, section 61B.06, is 
amended by adding a subdivision to read: 
    Subd. 8a.  [ADJUSTMENT OF LIABILITY LIMITS.] To the extent 
there are any limits for particular policies covered under this 
act, the dollar amounts stated in subdivision 8 shall be 
adjusted for inflation based upon the implicit price deflator 
for the gross national product compiled by the United States 
Department of Commerce and hereafter referred to as the index.  
The dollar amounts stated in subdivision 8 are based upon the 
value of the index for January 1990, which is the reference base 
index for purposes of this subdivision.  The dollar amounts in 
subdivision 8 shall change on October 1 of each year after 1992, 
based upon the percentage difference between the index for 
January of the preceding year and the reference base index, 
calculated to the nearest whole percentage point.  The 
commissioner shall announce and publish, on or before April 30 
of each year, the changes in the dollar amounts required by this 
clause to take effect on October 1 of that year. 
    Sec. 3.  Minnesota Statutes 1990, section 61B.06, 
subdivision 9, is amended to read: 
    Subd. 9.  [POWERS OF ASSOCIATION.] (a) The association may: 
    (a) (1) enter into contracts necessary or proper to carry 
out the provisions of sections 61B.01 to 61B.16 and their 
purpose; 
    (b) (2) sue or be sued, including the taking of legal 
actions necessary or proper for recovery of unpaid assessments 
under section 61B.07; 
    (c) (3) borrow money to effect the purposes of sections 
61B.01 to 61B.16.  Any notes or other evidence of indebtedness 
of the association not in default shall be legal investments for 
domestic insurers and may be carried as admitted assets; 
    (d) (4) employ or retain persons necessary to handle the 
financial transactions of the association, and perform other 
necessary or proper functions; 
    (e) (5) negotiate and contract with any liquidator, 
rehabilitator, conservator, or ancillary receiver to carry out 
the powers and duties of the association; 
    (f) (6) take legal action as may be necessary to avoid 
payment of improper claims; and 
    (g) (7) exercise, for the purposes of sections 61B.01 to 
61B.16 and to the extent approved by the commissioner, the 
powers of a domestic life or health insurer, but in no case may 
the association issue insurance policies or annuity contracts 
other than those issued to perform the contractual obligations 
of an impaired insurer. 
    (b) The association must borrow any money necessary to 
effect the purposes of sections 61B.01 to 61B.16.  Any notes or 
other evidence of indebtedness of the association not in default 
are legal investments for domestic insurers and may be carried 
as admitted assets. 
    Sec. 4.  Minnesota Statutes 1990, section 61B.12, is 
amended by adding a subdivision to read: 
    Subd. 6.  [NOTICE CONCERNING LIMITATIONS AND 
EXCLUSIONS.] On and after January 1, 1992, no person, including 
an insurer, agent, or affiliate of an insurer or agent, shall 
offer for sale in this state a covered life insurance, annuity, 
or health insurance policy or contract without delivering at the 
time of application for that policy or contract a separate 
notice in the form the commissioner from time to time may 
approve for use in this state relating to coverage provided by 
the Minnesota Life and Health Insurance Guaranty Association.  
The notice must be signed by the applicant and kept on file by 
the person offering the policy or contract for sale.  A copy of 
the signed notice must be given to the applicant. 
    Sec. 5.  Minnesota Statutes 1990, section 61B.12, is 
amended by adding a subdivision to read: 
    Subd. 7.  [EFFECT OF NOTICE.] The distribution, delivery, 
or contents or interpretation of the notice described in 
subdivision 6 shall not mean that either the policy or contract, 
or the owner or holder thereof, would be covered in the event of 
the impairment of a member insurer if coverage is not otherwise 
provided by this chapter.  Failure to receive the notice does 
not give the policyholder, contract holder, certificate holder, 
insured, owner, beneficiaries, assignees, or payees any greater 
rights than those provided by this chapter.  
    Sec. 6.  [EFFECTIVE DATE.] 
    Sections 2 and 3 are effective August 1, 1992. 

                               ARTICLE 6 

          MINNESOTA INSURANCE GUARANTY ASSOCIATION AMENDMENTS 
    Section 1.  Minnesota Statutes 1990, section 60B.37, 
subdivision 2, is amended to read: 
    Subd. 2.  [EXCUSED LATE FILINGS.] For a good cause shown, 
the liquidator shall recommend and the court shall permit a 
claimant making a late filing to share in dividends, whether 
past or future, as if the claimant were not late, to the extent 
that any such payment will not prejudice the orderly 
administration of the liquidation.  Good cause includes but is 
not limited to the following: 
    (a) That existence of a claim was not known to the claimant 
and that the claimant filed within 30 days after learning of it; 
    (b) That a claim for unearned premiums or for cash 
surrender values or other investment values in life insurance or 
annuities which was not required to be filed was omitted from 
the liquidator's recommendations to the court under section 
60B.45, and that it was filed within 30 days after the claimant 
learned of the omission; 
    (c) That a transfer to a creditor was avoided under 
sections 60B.30 to 60B.32 or was voluntarily surrendered under 
section 60B.33, and that the filing satisfies the conditions of 
section 60B.33; 
    (d) That valuation under section 60B.43 of security held by 
a secured creditor shows a deficiency, which is filed within 30 
days after the valuation; and 
    (e) That a claim was contingent and became absolute, and 
was filed within 30 days after it became absolute.; and 
    (f) That the claim is for workers' compensation benefits 
and the time limitations and other requirements of chapter 176 
have been met. 
    Sec. 2.  Minnesota Statutes 1990, section 60C.02, 
subdivision 1, is amended to read: 
    Subdivision 1.  [SCOPE.] This chapter applies to all kinds 
of direct insurance, except life, title, accident and sickness 
written by life insurance companies, credit, mortgage 
guaranty, financial guaranty or other forms of insurance 
offering protection against investment risks, and ocean marine. 
    Sec. 3.  Minnesota Statutes 1990, section 60C.03, 
subdivision 6, is amended to read: 
    Subd. 6.  "Member insurer" means any person, including 
reciprocals or interinsurance exchanges operating under chapter 
71A, township mutual fire insurance companies operating under 
sections 67A.01 to 67A.26, and farmers mutual fire insurance 
companies operating under sections 67A.27 to 67A.39, who (a) 
writes any kind of insurance not excepted from the scope of Laws 
1971, chapter 145 by section 60C.02, and (b) is licensed to 
transact insurance business in this state, except any nonprofit 
service plan incorporated or operating under sections 62C.01 to 
62C.23 and any health plan incorporated under chapter 317A, and 
includes an insurer whose license or certificate of authority in 
this state may have been suspended, revoked, not renewed, or 
voluntarily withdrawn. 
    Sec. 4.  Minnesota Statutes 1990, section 60C.03, is 
amended by adding a subdivision to read: 
    Subd. 10.  "Financial guaranty insurance" includes any 
insurance under which loss is payable upon proof of occurrence 
of any of the following events to the damage of an insured 
claimant or obligee: 
    (1) failure of any obligor or obligors on any debt 
instrument or other monetary obligation, including common or 
preferred stock, to pay when due the principal, interest, 
dividend or purchase price of such instrument or obligation, 
whether such failure is the result of a financial default or 
insolvency and whether or not such obligation is incurred 
directly or as guarantor by, or on behalf of, another obligor 
which has also defaulted; 
    (2) changes in the level of interest rates whether 
short-term or long-term, or in the difference between interest 
rates existing in various markets; 
    (3) changes in the rate of exchange or currency, or from 
the inconvertibility of one currency into another for any 
reason; and 
    (4) changes in the value of specific assets or commodities, 
or price levels in general.  
    Sec. 5.  Minnesota Statutes 1990, section 60C.04, is 
amended to read: 
    60C.04 [CREATION.] 
    All insurers subject to the provisions of Laws 1971, 
chapter 145 shall form an organization to be known as the 
Minnesota insurance guaranty association.  All insurers defined 
as member insurers in section 60C.03, subdivision 6, are and 
shall remain members of the association as a condition of their 
authority to transact insurance business or to execute surety 
bonds in this state.  An insurer's membership obligations under 
this chapter shall survive any merger, consolidation, 
restructuring, incorporation, or reincorporation.  The 
association shall perform its functions under a plan of 
operation established and approved under section 60C.07 and 
shall exercise its powers through a board of directors 
established under section 60C.08.  For purposes of 
administration and assessment the association shall be divided 
into five separate accounts:  (1) the automobile insurance 
account, (2) the township mutuals account, (3) the fidelity and 
surety bond account, (4) the account for all other insurance to 
which Laws 1971, this chapter 145 applies, and (5) the workers' 
compensation insurance account. 
    Sec. 6.  Minnesota Statutes 1990, section 60C.06, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DETERMINATION OF AMOUNT.] The assessments 
of each member insurer shall be in the proportion that the net 
direct written premiums of the member insurer for the preceding 
calendar year on the kinds of insurance in the account bear to 
the net direct written premiums of all member insurers for the 
preceding calendar year on the kinds of insurance in the 
account.  No member insurer may be assessed in any year on any 
account in an amount greater than two percent of that member 
insurer's net direct written premiums for the preceding calendar 
year on the kinds of insurance in the account.  All member 
insurers licensed to transact insurance business in this state 
on the date an insurer is placed in liquidation may be assessed 
as provided by section 60C.06 for necessary payments from the 
account. 
    Sec. 7.  Minnesota Statutes 1990, section 60C.09, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEFINITION.] A covered claim is any unpaid 
claim, including one for unearned premium, which: 
     (a)(1) Arises out of and is within the coverage of an 
insurance policy issued by a member insurer if the insurer 
becomes an insolvent insurer after April 30, 1979; or 
     (2) Would be within the coverage of an extended reporting 
endorsement to a claims-made insurance policy if insolvency had 
not prevented the member insurer from fulfilling its obligation 
to issue the endorsement, if: 
     (i) the claims-made policy contained a provision affording 
the insured the right to purchase a reporting endorsement; 
     (ii) coverage will be no greater than if a reporting 
endorsement had been issued; 
     (iii) the insured has not purchased other insurance which 
applies to the claim; and 
     (iv) the insured's deductible under the policy is increased 
by an amount equal to the premium for the reporting endorsement, 
as provided in the insured's claims-made policy, or if not so 
provided, then as established by a rate service organization. 
     (b) Arises out of a class of business which is not excepted 
from the scope of this chapter by section 60C.02; and 
     (c) Is made by: 
     (i) A policyholder, or an insured beneficiary under a 
policy, who, at the time of the insured event, was a resident of 
this state; or 
     (ii) A person designated in the policy as having an 
insurable interest in or related to property situated in this 
state at the time of the insured event; or 
     (iii) An obligee or creditor under any surety bond, who, at 
the time of default by the principal debtor or obligor, was a 
resident of this state; or 
    (iv) A third party claimant under a liability policy or 
surety bond, if:  (a) the insured or the third party claimant 
was a resident of this state at the time of the insured event; 
(b) the claim is for bodily or personal injuries suffered in 
this state by a person who when injured was a resident of this 
state; or (c) the claim is for damages to real property situated 
in this state at the time of damage; or 
    (v) A direct or indirect assignee of a person who except 
for the assignment might have claimed under item (i), (ii), or 
(iii). 
    For purposes of paragraph (c), item (ii), unit owners of 
condominiums, townhouses, or cooperatives are considered as 
having an insurable interest.  
    A covered claim also includes any unpaid claim which arises 
or exists within 30 days after the time of entry of an order of 
liquidation with a finding of insolvency by a court of competent 
jurisdiction unless prior thereto the insured replaces the 
policy or causes its cancellation or the policy expires on its 
expiration date.  A covered claim does not include claims filed 
with the guaranty fund after the final date set by the court for 
the filing of claims except for workers' compensation claims 
that have met the time limitations and other requirements of 
chapter 176 and excused late filings permitted under section 
60B.37. 
    Sec. 8.  Minnesota Statutes 1990, section 60C.13, 
subdivision 1, is amended to read: 
    Subdivision 1.  Any person having a claim against an 
insurer under any provision in an insurance policy other than a 
policy of an insurer in liquidation which is also a covered 
claim, is required to exhaust first any rights under another 
policy, which claim arises out of the same facts which give rise 
to the covered claim, shall be first required to exhaust the 
person's right under the other policy.  Any amount payable on a 
covered claim under Laws 1971, this chapter 145 shall be reduced 
by the amount of any recovery under such insurance policy.  For 
purposes of this subdivision, another insurance policy does not 
include a workers' compensation policy. 
    Sec. 9.  [EFFECTIVE DATE.] 
    Sections 1 to 7 are effective the day following final 
enactment.  Section 8 applies to all unsettled existing and 
future claims made after that date arising out of any past or 
future member insolvencies. 

                               ARTICLE 7 

                         STANDARD VALUATION LAW 
    Section 1.  Minnesota Statutes 1990, section 61A.25, is 
amended by adding a subdivision to read: 
    Subd. 2a.  [ACTUARIAL OPINION OF RESERVES; GENERAL.] (a) 
Every life insurance company doing business in this state shall 
annually submit the opinion of a qualified actuary as to whether 
the reserves and related actuarial items held in support of the 
policies and contracts specified by the commissioner by rule are 
computed appropriately, are based on assumptions which satisfy 
contractual provisions, are consistent with prior reported 
amounts, and comply with applicable laws of this state. The 
commissioner may by rule define the specifics of this opinion 
and add any other items considered to be necessary to its 
scope.  The opinion must be included in the company's annual 
statement. 
    (b) The requirement to annually submit the opinion of a 
qualified actuary applies to service plan corporations licensed 
under chapter 62C, to legal service plans licensed under chapter 
62G, and to all fraternal benefit societies except those 
societies paying only sick benefits not exceeding $250 in any 
one year, or paying funeral benefits of not more than $350, or 
aiding those dependent on a member not more than $350, nor any 
subordinate lodge or council which is, or whose members are, 
assessed for benefits which are payable by a grand body. 
    (c) The opinion applies to all business in force, including 
individual and group health insurance plans, and must be based 
on standards adopted by the Actuarial Standards Board.  The 
opinion must be acceptable to the commissioner in both form and 
substance.  
    (d) In the case of an opinion required to be submitted by a 
foreign or alien company, the commissioner may accept the 
opinion filed by that company with the insurance supervisory 
official of another state if the commissioner determines that 
the opinion reasonably meets the requirements applicable to a 
company domiciled in this state.  
    (e) For the purposes of this section, "qualified actuary"  
means a member in good standing of the American Academy of 
Actuaries who meets the requirements specified in the 
regulations. 
    (f) The board of directors of every insurer subject to this 
section shall appoint a qualified actuary to sign its actuarial 
opinion.  The appointment of the qualified actuary shall be 
approved by the commissioner.  The qualified actuary so 
appointed may be an employee of the insurer.  Notice of the 
appointment, including a copy of the board of directors' 
resolution, and the date of appointment shall be filed with the 
commissioner.  The notice may be filed before or at the time the 
actuarial opinion is submitted.  The notice shall state the 
qualifications of the actuary.  If the board appoints a new 
actuary to sign actuarial opinions during the year, the 
commissioner shall be notified of the new appointment and the 
reason for change.  
    (g) Except in cases of fraud or willful misconduct, the 
qualified actuary is not liable for damages to any person, other 
than the insurance company and the commissioner, for any act, 
error, omission, decision, or conduct with respect to the 
actuary's opinion. 
    (h) A memorandum, in form and substance acceptable to the 
commissioner based on standards adopted by the Actuarial 
Standards Board and on additional standards as the commissioner 
may by rule prescribe, must be prepared to support each 
actuarial opinion. 
    (i) If the insurance company fails to provide a supporting 
memorandum at the request of the commissioner within a period 
specified by the commissioner, or the commissioner determines 
that the supporting memorandum provided by the insurance company 
fails to meet the standards based on standards adopted by the 
Actuarial Standards Board and on additional standards as the 
commissioner may by rule prescribe or is otherwise unacceptable 
to the commissioner, the commissioner may engage a qualified 
actuary at the expense of the company to review the opinion and 
the basis for the opinion and prepare the required supporting 
memorandum.  
    (j) Any memorandum in support of the opinion, and any other 
material provided by the company to the commissioner in 
connection with the memorandum, must be kept confidential by the 
commissioner and must not be made public and is not subject to 
subpoena, other than for the purpose of defending an action 
seeking damages from any person by reason of any action required 
by this section or by rules promulgated under this section.  The 
memorandum or other material may otherwise be released by the 
commissioner (1) with the written consent of the company or (2) 
to the American Academy of Actuaries upon request stating that 
the memorandum or other material is required for the purpose of 
professional disciplinary proceedings and setting forth 
procedures satisfactory to the commissioner for preserving the 
confidentiality of the memorandum or other material.  Once any 
portion of the confidential memorandum is cited by the company 
in its marketing or is cited before any governmental agency 
other than a state insurance department or is released by the 
company to the news media, all portions of the confidential 
memorandum are no longer confidential.  
    Sec. 2.  Minnesota Statutes 1990, section 61A.25, is 
amended by adding a subdivision to read: 
    Subd. 2b.  [ACTUARIAL ANALYSIS.] (a) Every life insurance 
company, except as exempted by or pursuant to regulation, shall 
also annually include in the opinion required under subdivision 
2a, paragraph (a), an opinion of the same qualified actuary as 
to whether the reserves and related actuarial items, including 
page 3, line 10, of the annual statement, held in support of the 
policies and contracts specified by the commissioner, when 
considered in light of the assets held by the company with 
respect to the reserves and related actuarial items, including 
but not limited to the investment earnings on the assets and the 
considerations anticipated to be received and retained under the 
policies and contracts, make adequate provision for the 
company's obligations under the policies and contracts, 
including but not limited to the benefits under and expenses 
associated with the policies and contracts. 
    (b) The commissioner may provide by rule for a transition 
period for establishing any higher reserves which the qualified 
actuary may consider necessary in order to give the opinion 
required under section 1. 
    Sec. 3.  Minnesota Statutes 1990, section 61A.25, 
subdivision 5, is amended to read: 
    Subd. 5.  [MINIMUM AGGREGATE RESERVES.] A company's 
aggregate reserves for all life insurance policies, excluding 
disability and accidental death benefits, issued on or after the 
operative date of Laws 1947, chapter 182, shall not be less than 
the aggregate reserves calculated in accordance with the methods 
set forth in subdivisions 4, 4a, 7, and 8, and the mortality 
table or tables and rate or rates of interest used in 
calculating nonforfeiture benefits for the policies. 
    In no event shall the aggregate reserves for all policies, 
contracts, and benefits be less than the aggregate reserves 
determined by the qualified actuary to be necessary to render 
the opinion required under section 1. 
    Sec. 4.  Minnesota Statutes 1990, section 61A.25, 
subdivision 6, is amended to read: 
    Subd. 6.  [CALCULATION OF RESERVES.] (1) Reserves for all 
policies and contracts issued prior to the operative date of 
Laws 1947, chapter 182, may be calculated, at the option of the 
company, according to any standards which produce greater 
aggregate reserves for all such policies and contracts than the 
minimum reserves required by the laws in effect immediately 
prior to such date. 
    (2) Reserves for any category of policies, contracts or 
benefits as established by the commissioner, issued on or after 
the operative date of Laws 1947, chapter 182, may be calculated, 
at the option of the company, according to any standards which 
produce greater aggregate reserves for such category than those 
calculated according to the minimum standard herein provided, 
but the rate or rates of interest used for policies and 
contracts, other than annuity and pure endowment contracts, 
shall not be higher than the corresponding rate or rates of 
interest used in calculating any nonforfeiture benefits provided 
for therein. 
    (3) Any such company which at any time shall have adopted 
any standard of valuation producing greater aggregate reserves 
than those calculated according to the minimum standard herein 
provided may, with the approval of the commissioner, adopt any 
lower standard of valuation, but not lower than the minimum 
herein provided.  For purposes of this section, the holding of 
additional reserves previously determined by a qualified actuary 
to be necessary to give the opinion required under section 1 
shall not be considered the adoption of a higher standard of 
valuation. 
    Sec. 5.  Minnesota Statutes 1990, section 61A.25, is 
amended by adding a subdivision to read: 
    Subd. 9.  [MINIMUM STANDARDS FOR HEALTH, DISABILITY, 
ACCIDENT, AND SICKNESS PLANS.] The commissioner may adopt a rule 
containing the minimum standards applicable to the valuation of 
health, disability, accident, and sickness plans. 
     Sec. 6.  [REPORT.] 
    The commissioner of commerce shall review the standards for 
the appointment of qualified actuaries under sections 1 and 2 
and submit a report to the legislature relating to the 
effectiveness of the standards by January 1, 1994. 
    Sec. 7.  [COMPLEMENT.] 
    The complement of the department of commerce is increased 
by one position in the classified service for the purpose of 
reviewing actuarial opinions and analysis submitted under 
sections 1 and 2. 
    Sec.  8.  [EFFECTIVE DATE.] 
    Sections 1 to 5 are effective for reports submitted for 
1992 as required under section 60A.13. 

                               ARTICLE 8 

                   INVESTMENTS FOR DOMESTIC INSURERS 
    Section 1.  Minnesota Statutes 1990, section 60A.11, 
subdivision 10, is amended to read: 
    Subd. 10.  [DEFINITIONS.] The following terms have the 
meaning assigned in this subdivision for purposes of this 
section and section 60A.111: 
    (a) "Adequate evidence" means a written confirmation, 
advice, or other verification issued by a depository, issuer, or 
custodian bank which shows that the investment is held for the 
company; 
    (b) "Adequate security" means a letter of credit qualifying 
under subdivision 11, paragraph (f), cash, or the pledge of an 
investment authorized by any subdivision of this section; 
    (c) "Admitted assets," for purposes of computing percentage 
limitations on particular types of investments, means the assets 
as shown by the company's annual statement, required by section 
60A.13, as of the December 31 immediately preceding the date the 
company acquires the investment; 
    (b) (d) "Clearing corporation" means The Depository Trust 
Company or any other clearing agency registered with the federal 
securities and exchange commission pursuant to the Federal 
Securities Exchange Act of 1934, section 17A, Euro-clear 
Clearance System Limited and CEDEL S.A., and, with the approval 
of the commissioner, any other clearing corporation as defined 
in section 336.8-102; 
    (c) (e) "Control" has the meaning assigned to that term in, 
and must be determined in accordance with, section 60D.01, 
subdivision 4; 
    (d) (f) "Custodian bank" means a bank or trust company or a 
branch of a bank or trust company that is acting as custodian 
and is supervised and examined by state or federal authority 
having supervision over the bank or trust company or with 
respect to a company's foreign investments only by the 
regulatory authority having supervision over banks or trust 
companies in the jurisdiction in which the bank, trust company, 
or branch is located, and any banking institutions qualifying as 
an "Eligible Foreign Custodian" under the Code of Federal 
Regulations, section 270.17f-5, adopted under section 17(f) of 
the Investment Company Act of 1940, and specifically includes 
including Euro-clear Clearance System Limited and CEDEL S.A., 
acting as custodians; 
    (g) "Evergreen clause" means a provision that automatically 
renews a letter of credit for a time certain if the issuer of 
the letter of credit fails to affirmatively signify its 
intention to nonrenew upon expiration; 
    (h) "Government obligations" means direct obligations for 
the payment of money, or obligations for the payment of money to 
the extent guaranteed as to the payment of principal and 
interest by any governmental issuer where the obligations are 
payable from ad valorem taxes or guaranteed by the full faith, 
credit, and taxing power of the issuer and are not secured 
solely by special assessments for local improvements; 
    (i) "Noninvestment grade obligations" means obligations 
which, at the time of acquisition, were rated below Baa/BBB or 
the equivalent by a securities rating agency or which, at the 
time of acquisition, were not in one of the two highest 
categories established by the securities valuation office of the 
National Association of Insurance Commissioners; 
    (e) (j) "Issuer" means the corporation, business trust, 
governmental unit, partnership, association, individual, or 
other entity which issues or on behalf of which is issued any 
form of obligation; 
    (k) "Licensed real estate appraiser" means a person who 
develops and communicates real estate appraisals and who holds a 
current, valid license under chapter 82B or a substantially 
similar licensing requirement in another jurisdiction; 
    (f) (l) "Member bank" means a national bank, state bank or 
trust company which is a member of the Federal Reserve System; 
    (g) (m) "National securities exchange" means an exchange 
registered under section 6 of the Securities Exchange Act of 
1934 or an exchange regulated under the laws of the Dominion of 
Canada; 
    (n) "NASDAQ" means the reporting system for securities 
meeting the definition of National Market System security as 
provided under Part I to Schedule D of the National Association 
of Securities Dealers Incorporated bylaws; 
    (h) (o) "Obligations" include bonds, notes, debentures, 
transportation equipment certificates, repurchase agreements, 
bank certificates of deposit, time deposits, bankers' 
acceptances, and other obligations for the payment of money not 
in default as to payments of principal and interest on the date 
of investment, whether constituting general obligations of the 
issuer or payable only out of certain revenues or certain funds 
pledged or otherwise dedicated for payment.  Leases are 
considered obligations if the lease is assigned for the benefit 
of the company and is nonterminable by the lessee or lessees 
thereunder upon foreclosure of any lien upon the leased 
property, and rental payments are sufficient to amortize the 
investment over the primary lease term; 
    (i) (p) "Qualified assets" means the sum of (1) all 
investments qualified in accordance with this section other than 
investments in affiliates and subsidiaries, (2) investments in 
obligations of affiliates as defined in section 60D.01, 
subdivision 2 secured by real or personal property sufficient to 
qualify the investment under subdivision 19 or 23, (3) qualified 
investments in subsidiaries, as defined in section 60D.01, 
subdivision 9, on a consolidated basis with the insurance 
company without allowance for goodwill or other intangible 
value, and (4) cash on hand and on deposit, agent's balances or 
uncollected premiums not due more than 90 days, assets held 
pursuant to section 60A.12, subdivision 2, investment income due 
and accrued, funds due or on deposit or recoverable on loss 
payments under contracts of reinsurance entered into pursuant to 
section 60A.09, premium bills and notes receivable, federal 
income taxes recoverable, and equities and deposits in pools and 
associations; 
    (j) (q) "Qualified net earnings" means that the net 
earnings of the issuer after elimination of extraordinary 
nonrecurring items of income and expense and before income taxes 
and fixed charges over the five immediately preceding completed 
fiscal years, or its period of existence if less than five 
years, has averaged not less than 1-1/4 times its average annual 
fixed charges applicable to the period; 
    (k) (r) "Required liabilities" means the sum of (1) total 
liabilities as required to be reported in the company's most 
recent annual report to the commissioner of commerce of this 
state, (2) for companies operating under the stock plan, the 
minimum paid-up capital and surplus required to be maintained 
pursuant to section 60A.07, subdivision 5a, (3) for companies 
operating under the mutual or reciprocal plan, the minimum 
amount of surplus required to be maintained pursuant to section 
60A.07, subdivision 5b, and (4) the amount, if any, by which the 
company's loss and loss adjustment expense reserves exceed 350 
percent of its surplus as it pertains to policyholders as of the 
same date.  The commissioner may waive the requirement in clause 
(4) unless the company's written premiums exceed 300 percent of 
its surplus as it pertains to policyholders as of the same 
date.  In addition to the required amounts pursuant to clauses 
(1) to (4), the commissioner may require that the amount of any 
apparent reserve deficiency that may be revealed by one to five 
year loss and loss adjustment expense development analysis for 
the five years reported in the company's most recent annual 
statement to the commissioner be added to required liabilities; 
and 
    (s) "Revenue obligations" means obligations for the payment 
of money by a governmental issuer where the obligations are 
payable from revenues, earnings, or special assessments on 
properties benefited by local improvements of the issuer which 
are specifically pledged therefor; 
    (t) "Security" has the meaning given in section 5 of the 
Security Act of 1933 and specifically includes, but is not 
limited to, stocks, stock equivalents, warrants, rights, 
options, obligations, American Depository Receipts (ADR's), 
repurchase agreements, and reverse repurchase agreements; and 
    (l) (u) "Unrestricted surplus" means the amount by which 
qualified assets exceed 110 percent of required liabilities.  
    Sec. 2.  Minnesota Statutes 1990, section 60A.11, 
subdivision 11, is amended to read: 
    Subd. 11.  [INVESTMENTS IN NAME OF COMPANY OR NOMINEE AND 
PROHIBITIONS.] A company's investments shall be held in its own 
name or the name of its nominee, except that:  
    (a) Investments may be held in the name of a clearing 
corporation or of a custodian bank or in the name of the nominee 
of either on the following conditions:  
    (1) The clearing corporation, custodian bank, or nominee 
must be legally authorized to hold the particular investment for 
the account of others; 
    (2) Where the investment is evidenced by a certificate and 
held in the name of a custodian bank or the nominee by a 
custodian bank, a written agreement shall provide that 
certificates so deposited shall at all times be kept separate 
and apart from other deposits with the depository, so that at 
all times they may be identified as belonging solely to the 
company making the deposit; and 
    (3) Where a clearing corporation is to act as depository, 
the investment may be merged or held in bulk in the clearing 
corporation's or its nominee name with other investments 
deposited with the clearing corporation by any other person, if 
a written agreement provides that adequate evidence of the 
deposit is to be obtained and retained by the company or a 
custodian bank; and 
    (4) The company shall monitor current publicly available 
financial information and other pertinent data with respect to 
the custodian banks.  
    (b) A company may loan stocks or obligations securities 
held by it under this chapter to a broker-dealer registered 
under the Securities and Exchange Act of 1934 or a member bank.  
The loan must be evidenced by a written agreement which provides:
     (1) That the loan will be fully collateralized by cash or 
obligations issued or guaranteed by the United States or an 
agency or an instrumentality thereof, and that the collateral 
will be adjusted each business day during the term of the loan 
to maintain the required collateralization in the event of 
market value changes in the loaned securities or collateral; 
    (2) That the loan may be terminated by the company at any 
time, and that the borrower will return the loaned stocks or 
obligations securities or their equivalent within five business 
days after termination; 
    (3) That the company has the right to retain the collateral 
or use the collateral to purchase investments equivalent to the 
loaned securities if the borrower defaults under the terms of 
the agreement and that the borrower remains liable for any 
losses and expenses incurred by the company due to default that 
are not covered by the collateral;. 
    (c) A company may participate through a member bank in the 
Federal Reserve book-entry system, and the records of the member 
bank shall at all times show that the investments are held for 
the company or for specific accounts of the company; or. 
    (d) An investment may consist of an individual interest in 
a pool of obligations or a fractional interest in a single 
obligation if the certificate of participation or interest or 
the confirmation of participation or interest in the investment 
shall be issued in the name of the company or the name of the 
custodian bank or the nominee of either and if the certificate 
or confirmation must, if held by a custodian bank, be kept 
separate and apart from the investments of others so that at all 
times the participation may be identified as belonging solely to 
the company making the investment.  
    (e) Except as provided in paragraph (c), where an 
investment is not evidenced by a certificate, except as provided 
in paragraph (c), adequate evidence of the company's investment 
shall be obtained from the issuer or its transfer or recording 
agent and retained by the company, a custodian bank, or clearing 
corporation.  Adequate evidence, for purposes of this 
subdivision, shall mean a written receipt or other verification 
issued by the depository or issuer or a custodian bank which 
shows that the investment is held for the company.  Transfers of 
ownership of investments held as described in paragraphs (a), 
clause (3), (c) and (d) may be evidenced by bookkeeping entry on 
the books of the issuer of the investment or its transfer or 
recording agent or the clearing corporation without physical 
delivery of certificates, if any, evidencing the company's 
investment.  
    (f) A letter of credit may be accepted as a guaranty of 
other investments, as collateral to secure loans, or in lieu of 
cash to secure loans of securities, if it is issued by a member 
bank or any of the 100 largest banks in the world ranked by 
deposits in dollars or converted into dollar equivalents, as 
compiled annually by the American Bankers Association or listed 
in the annual publication of Moody's Bank & Finance Manual and 
meets the following requirements: 
    (1) has a long-term deposit rating or a long-term debt 
rating of at least Aa2 as found in the current monthly 
publication of Moody's Credit Opinions or its equivalent; and 
    (2) qualifies under the guidelines of the National 
Association of Insurance Commissioners as a clean, irrevocable 
letter of credit containing an evergreen clause or having a 
maturity date subsequent to the maturity date of the underlying 
investment or loan.  The company shall monitor current publicly 
available financial information and other pertinent data with 
respect to the banks issuing the letters of credit. 
     Sec. 3.  Minnesota Statutes 1990, section 60A.11, is 
amended by adding a subdivision to read: 
    Subd. 11a.  [ADDITIONAL LIMITATIONS.] Under the standards 
and procedures in article 3 for individual insurers, the 
commissioner may impose additional limitations on all insurers 
on the types and percentages of investments as the commissioner 
determines necessary to protect and ensure the safety of the 
general public. 
    Sec. 4.  Minnesota Statutes 1990, section 60A.11, 
subdivision 12, is amended to read: 
    Subd. 12.  [INVESTMENTS.] (a) A company must comply with 
section 60A.112. 
    (b) A company's investments must be so diversified that the 
securities of a single issuer, other than the United States of 
America or any agency or instrumentality of the United States of 
America backed by the full faith and credit of the issuer, shall 
comprise no more than five percent of the company's admitted 
assets, except where otherwise specified under this chapter.  In 
the case of insurance companies which are subsidiaries of a 
company, this diversification test must be applied to the assets 
of the insurance company subsidiary in determining the company's 
compliance. 
    (c) The investments authorized under the following 
subdivisions of this section 12 to 26 shall constitute admitted 
assets for a company.  
    Sec. 5.  Minnesota Statutes 1990, section 60A.11, 
subdivision 13, is amended to read: 
    Subd. 13.  [UNITED STATES GOVERNMENT OBLIGATIONS.] (a) 
Obligations issued or guaranteed by the United States of America 
or an any agency or instrumentality of the United States of 
America backed by the full faith and credit of the issuer, 
including rights to purchase or sell these obligations if those 
rights are traded upon a contract market designated and 
regulated by a federal agency.  
    (b) Obligations issued or guaranteed by an agency or 
instrumentality of the United States of America other than those 
backed by the full faith and credit thereof, including rights to 
purchase or sell these obligations if those rights are traded 
upon a contract market designated and regulated by a federal 
agency.  The securities of a single issuer under this paragraph 
shall comprise no more than 20 percent of the company's admitted 
assets. 
    Sec. 6.  Minnesota Statutes 1990, section 60A.11, 
subdivision 14, is amended to read: 
    Subd. 14.  [CERTAIN BANK OBLIGATIONS.] (a) Certificates of 
deposits, time deposits, and bankers' acceptances issued by and 
other obligations guaranteed by:  (i) any bank organized under 
the laws of the United States or any state, commonwealth, or 
territory thereof, including the District of Columbia, or of the 
Dominion of Canada or any province thereof or (ii) any of the 
100 largest banks, not a subsidiary or a holding company 
thereof, in the world ranked by deposits in dollars or converted 
into dollar equivalents, as compiled annually by the American 
Bankers Association or listed in the annual publication of 
Moody's Bank & Finance Manual, which also has a long-term 
deposit rating or a long-term debt rating of at least Aa2 as 
found in the current monthly publication of Moody's Credit 
Opinions or its equivalent.  A company may not invest more than 
five percent of its admitted assets in the obligations of any 
one bank and may not hold at any time more than ten percent of 
the outstanding obligations of any one bank.  A letter of credit 
issued by a member bank which qualifies under the guidelines of 
the National Association of Insurance Commissioners as a clean, 
irrevocable letter of credit which contains an "evergreen 
clause," may be accepted as a guaranty of other investments and 
in lieu of cash to secure loans of securities.  
    (b) Obligations issued or guaranteed by the International 
Bank for Reconstruction and Development, the Asian Development 
Bank, the Inter-American Development Bank, the African 
Development Bank, the Export-Import Bank, the World Bank or any 
United States government sponsored organization of which the 
United States is a member, if the principal and interest is 
payable in United States dollars.  A company may not invest more 
than five percent of its total admitted assets in the 
obligations of any one of these banks or organizations, and may 
not invest more than a total of 15 percent of its total admitted 
assets in the obligations of all these banks and organizations.  
    Sec. 7.  Minnesota Statutes 1990, section 60A.11, 
subdivision 15, is amended to read: 
    Subd. 15.  [STATE OBLIGATIONS.] (a) Government obligations 
issued or guaranteed by any state, commonwealth, or territory of 
the United States of America or by any political subdivision 
thereof, including the District of Columbia, or by any 
instrumentality of any state, commonwealth, territory, or 
political subdivision thereof.  The diversification requirement 
of subdivision 12, paragraph (b), does not apply to government 
obligations under this paragraph. 
    (b) Revenue obligations issued by any state, commonwealth, 
or territory of the United States of America or by any political 
subdivision thereof, including the District of Columbia, or by 
any instrumentality of any state, commonwealth, territory, or 
political subdivision thereof.  The diversification requirement 
of subdivision 12, paragraph (b), is applicable to revenue 
obligations under this paragraph. 
    Sec. 8.  Minnesota Statutes 1990, section 60A.11, 
subdivision 16, is amended to read: 
    Subd. 16.  [CANADIAN GOVERNMENT OBLIGATIONS.] (a) 
Obligations issued or guaranteed by the Dominion of Canada or by 
any agency or province thereof, or by any political subdivision 
of any province or by an instrumentality of any province or 
political subdivision thereof instrumentality of the Dominion of 
Canada backed by the full faith and credit of the issuer.  The 
diversification requirement of subdivision 12, paragraph (b), 
does not apply to government obligations under this paragraph. 
    (b) Obligations issued or guaranteed by an agency or 
instrumentality of the Dominion of Canada other than those 
backed by the full faith and credit of the issuer.  The 
securities of a single issuer under this paragraph shall 
comprise no more than 20 percent of the company's admitted 
assets. 
    (c) Government obligations issued or guaranteed by a 
province or territory of the Dominion of Canada or by a 
political subdivision thereof, or by an instrumentality of a 
province, territory, or political subdivision thereof.  The 
diversification requirement of subdivision 12, paragraph (b), 
does not apply to government obligations under this paragraph. 
    (d) Revenue obligations issued by a province or territory 
of the Dominion of Canada or by a political subdivision thereof, 
or by an instrumentality of a province, territory, or political 
subdivision thereof.  The diversification requirement of 
subdivision 12, paragraph (b), is applicable to revenue 
obligations under this paragraph. 
    Sec. 9.  Minnesota Statutes 1990, section 60A.11, 
subdivision 17, is amended to read: 
    Subd. 17.  [CORPORATE AND BUSINESS TRUST OBLIGATIONS.] 
Obligations issued, assumed or guaranteed by a corporation or 
business trust organized under the laws of the United States of 
America or any state, commonwealth, or territory of the United 
States, including the District of Columbia, or the laws of the 
Dominion of Canada or any province or territory of the Dominion 
of Canada, or obligations traded on a national securities 
exchange on the following conditions: 
    (a) A company may invest in any obligations traded on a 
national securities exchange; 
    (b) A company may also invest in any obligations which are 
secured by adequate security located in the United States or 
Canada; 
    (c) A company may also invest in previously outstanding or 
newly issued obligations not qualifying for investment under 
paragraph (a) or (b) if the corporation or business trust has 
qualified net earnings.  If the obligations are not newly 
issued, neither principal nor interest payments on the 
obligations shall have been in arrears (1) for an aggregate of 
90 days during the three-year period preceding the date of 
investment, or (2) where the obligations have been outstanding 
for less than 90 days, during the period the obligations have 
been outstanding; 
    (d) A company may invest no more than 15 percent of its 
total admitted assets in noninvestment grade obligations; 
    (e) A company may invest in federal farm loan bonds and may 
invest up to 20 percent of its total admitted assets in the 
obligations of farm mortgage debenture companies; and 
    (e) (f) A company may not invest more than five percent of 
its admitted assets in the obligations of any one corporation or 
business trust; provided, however, that a company may invest in 
the obligations of a corporation without regard to this 
paragraph or the subdivision 12, paragraph (b), diversification 
requirement if:  (1) the company is wholly owned by the issuer 
and affiliates of the issuer of the obligations; (2) the company 
insures solely the issuer of the obligations and its affiliates; 
(3) the issuer has a net worth, determined on a consolidated 
basis, which equals or exceeds $100,000,000; and (4) the issuer 
and its affiliates forego any and all claims they may have 
against the Minnesota insurance guaranty association pursuant to 
chapter 60C in the event of the insolvency of the company.  This 
does not affect the rights of any unaffiliated third party 
claimant under section 60C.09, subdivision 1. 
    Sec. 10.  Minnesota Statutes 1990, section 60A.11, 
subdivision 18, is amended to read: 
    Subd. 18.  [STOCKS AND LIMITED PARTNERSHIPS.] (a) Stocks 
issued or guaranteed by any corporation incorporated under the 
laws of the United States of America or any state, commonwealth, 
or territory of the United States, including the District of 
Columbia, or the laws of the Dominion of Canada or any province 
or territory of Canada, or stocks or stock equivalents, 
including American Depository Receipts or unit investment 
trusts, listed or regularly traded on a national securities 
exchange on the following conditions:  
    (1) A company may not invest more than a total of 25 
percent of its total admitted assets in stocks, stock 
equivalents, and convertible issues.  Not more than ten percent 
of a company's total admitted assets may be invested in stocks, 
stock equivalents, and convertible issues not traded or listed 
on a national securities exchange or designated or approved for 
designation upon notice of issuance on the NASDAQ/National 
Market System.  This limitation does not apply to investments 
under clause (4); 
    (a) (2) A company may not invest in more than two percent 
of its total admitted assets in preferred stocks of any 
corporation which are traded on a national securities exchange 
and may also invest in other preferred stocks if the issuer has 
qualified net earnings and if current or cumulative dividends 
are not then in arrears; 
    (b) (3) A company may not invest in more than two percent 
of its total admitted assets in common stocks, common stock 
equivalents, or securities convertible into common stock or 
common stock equivalents of any corporation or business trust, 
provided: which are traded on a national securities exchange or 
designated or approved for designation upon notice of issuance 
on the NASDAQ/National Market System, and may also invest in 
other common stocks, stock equivalents, and convertible issues 
subject to the limitations specified in clause (1); 
    (1) The common stock, common stock equivalent or 
convertible issue is publicly traded on a national securities 
exchange, or the corporation or business trust has qualified net 
earnings; 
    (2) A company may invest up to two percent of its admitted 
assets in common stock, common stock equivalents or convertible 
issues which do not meet the requirements of clause (1); 
    (3) At no time may (4) A company may organize or acquire or 
and hold voting control of a corporation or business trust 
through its ownership of common stock, common stock equivalents, 
or other securities, except that a company may organize and 
hold, or acquire and hold more than 50 percent of the common 
stock of provided the corporation or business trust is:  (a) a 
corporation providing investment advisory, banking, management 
or sale services to an investment company or to an insurance 
company, (b) a data processing or computer service company, (c) 
a mortgage loan corporation engaged in the business of making, 
originating, purchasing or otherwise acquiring or investing in, 
and servicing or selling or otherwise disposing of loans secured 
by mortgages on real property, (d) a corporation if its business 
is owning and managing or leasing personal property, (e) a 
corporation providing securities underwriting services or acting 
as a securities broker or dealer, (f) a real property holding, 
developing, managing, brokerage or leasing corporation, (g) any 
domestic or foreign insurance company, (h) any alien insurance 
company, if the organization or acquisition and the holding of 
the company is subject to the prior approval of the commissioner 
of commerce, which approval must be given upon good cause shown 
and is deemed to have been given if the commissioner does not 
disapprove of the organization or acquisition within 30 days 
after notification by the company, (i) an investment subsidiary 
to acquire and hold investments which the company could acquire 
and hold directly, if the investments of the subsidiary are 
considered direct investments for purposes of this chapter and 
are subject to the same percentage limitations, requirements and 
restrictions as are contained herein, or (j) any corporation 
whose business has been approved by the commissioner as 
complementary or supplementary to the business of the company.  
The percentage of common stock may be less than 50 percent if 
the prior approval of the commissioner is obtained.  A company 
may invest up to an aggregate of ten percent of its total 
admitted assets under subclauses (a) to (e) of this clause (3).  
The diversification requirement of subdivision 12, paragraph 
(b), does not apply to this clause; 
    (4) A company may invest in the common stock of any 
corporation owning investments in foreign companies used for 
purposes of legal deposit, when the insurance company transacts 
business therein direct or as reinsurance; 
    (c) (5) A company may invest in warrants and rights granted 
by an issuer to purchase stock securities of the issuer if the 
stock that security of the issuer, at the time of the 
acquisition of the warrant or right to purchase, would qualify 
as an investment under paragraph (a), clause (2) or 
(b) (3), whichever is applicable.  A company shall not invest 
more than two percent of its assets under this paragraph.  Any 
stock actually acquired through the exercise of a warrant or 
right to purchase may be included in paragraph (a) or (b), 
whichever is applicable, only if the stock, provided that 
security meets the standards prescribed in the clause at the 
time of acquisition of the stock securities; and 
    (d) (6)(i)  A company may invest in the securities of any 
face amount certificate company, unit investment trust, or 
management type investment company, registered or in the process 
of registration under the Federal Investment Company Act of 1940 
as from time to time amended, provided that the aggregate of all 
these investments other than in securities of money market 
mutual funds or mutual funds investing primarily in United 
States government securities, determined at cost, shall not 
exceed five percent of its total admitted assets; investments 
may be made under this clause without regard to the percentage 
limitations applicable to investments in voting securities. 
    (e) (ii) A company may invest in any proportion of the 
shares or investment units of an investment company or 
investment trust, whether or not registered under the Federal 
Investment Company Act of 1940, which is managed by an insurance 
company, member bank, trust company regulated by state or 
federal authority or an investment manager or adviser registered 
under the Federal Investment Advisers Act of 1940 or qualified 
to manage the investments of an investment company registered 
under the Federal Investment Company Act of 1940, provided that 
the investments of the investment company or investment trust 
are qualified investments made under this section and that the 
articles of incorporation, bylaws, trust agreement, investment 
management agreement, or some other governing instrument limits 
its investments to investments qualified under this section.  
    (b) A company may invest in or otherwise acquire and hold a 
limited partnership interest in any limited partnership formed 
under the laws of any state, commonwealth, or territory of the 
United States or under the laws of the United States of 
America.  No limited partnership interest shall be acquired if 
the investment, valued at cost, exceeds two percent of the 
admitted assets of the company or if the investment, plus the 
book value on the date of the investment of all limited 
partnership interests then held by the company and held under 
the authority of this subdivision, exceeds ten percent of the 
company's admitted assets.  Limited partnership interests traded 
on a national securities exchange must be classified as stock 
equivalents and are not subject to the percentage limitations 
contained in this paragraph. 
    Sec. 11.  Minnesota Statutes 1990, section 60A.11, 
subdivision 19, is amended to read: 
    Subd. 19.  [MORTGAGES ON REAL ESTATE.] Up to 25 percent of 
a company's total admitted assets may be invested in loans or 
obligations secured by a mortgage or a trust deed on real estate 
located in any state, commonwealth, or territory of the United 
States, including the District of Columbia, or in any province 
or territory of the Dominion of Canada, on the following 
conditions:  
    (a) A leasehold estate constitutes real estate under this 
section if its unexpired term on the date of investment is at 
least five years longer than the term of the obligation secured 
by it.  The obligation must be repayable within the leasehold 
term in annual or more frequent installments, except that 
obligations for commercial purposes may begin up to five years 
after the date of the obligations.  The mortgage must entitle 
the company upon default to be subrogated to all rights of the 
lessor under the leasehold; 
    (b) The real estate to which the mortgage applies must be 
(1) improved with permanent buildings, or (2) used for 
agriculture or pasture, or (3) income-producing, including but 
not limited to parking lots and leases, royalty or other mineral 
interests in properties producing oil, gas or other minerals and 
interests in properties for the harvesting of forest products, 
or (4) subject to a definite plan for the commencement of 
development within five years; 
    (c) The real estate to which the mortgage applies must be 
otherwise unencumbered when the mortgage loan is funded except 
as provided in paragraph (d) and except for encumbrances which 
do not unreasonably interfere with the intended use of the real 
estate as security; 
    (d) The real estate to which the mortgage applies may be 
subject to a prior mortgage or trust deed if (1) the amount of 
the obligation is equal to the sum of the company's loan and the 
other outstanding indebtedness and (2) the company has control 
over the payments under the prior mortgage or trust deed; 
    (e) The amount of the obligation may not exceed 80 percent 
of the real estate.  If the amount of the obligation exceeds 
66-2/3 percent of the market value of the real estate, principal 
payments must commence within five years after the date of the 
mortgage loan and principal and interest on the loan shall be 
fully amortized by regular installments payable during the term 
of the loan without irregular or balloon payments, unless the 
schedule of irregular or balloon payments is more favorable to 
the insurer than regular installments of equal amount would be.  
The market value shall be established by the written 
certification of a licensed real estate appraiser qualified to 
appraise the particular type of real estate involved.  The 
appraisal must be required at the time the loan is made; 
    (f) The maximum term of any obligation shall be 40 years, 
except as provided in paragraph (g) and except for obligations 
secured by a mortgage or trust deed which are or are to be 
insured by a private mortgage insurance company approved by the 
commissioner; 
    (g) The 25 percent of total admitted asset limitation in 
the preamble of this subdivision and the maximum amount and term 
limitations in paragraphs (e) and (f) shall not apply to 
obligations secured by mortgage or trust deed which are insured 
or guaranteed by the United States of America or any agency or 
instrumentality of the United States; 
    (h) A company may invest in collateralized mortgage 
obligations, mortgage participation certificates and pools 
issued or administered by a bank or banks and secured by first 
mortgages or trust deeds on improved real estate located in the 
United States provided the private placement memorandum, 
prospectus or other offering circular, or a written agreement 
with the issuer of the collateralized mortgage obligations, 
certificate or other pool interest provides that each loan meets 
the requirements of this subdivision; 
    (i) Notwithstanding the restrictions in paragraph (e), if a 
company disposes of real estate acquired by it under subdivision 
20, it may take back a purchase money mortgage from its vendee 
purchaser in an amount up to 90 percent of the purchase price 
appraised value; and 
    (j) The vendor's equity in a contract for deed shall be 
treated as a mortgage for purposes of this subdivision.  
    Sec. 12.  Minnesota Statutes 1990, section 60A.11, 
subdivision 20, is amended to read: 
    Subd. 20.  [REAL ESTATE.] (a) Except as provided in 
paragraphs (b) to (d), a company may only acquire, hold, and 
convey real estate which:  
    (1) has been mortgaged to it in good faith by way of 
security for loans previously contracted, or for money due; 
    (2) has been conveyed to it in satisfaction of debts 
previously contracted in the course of its dealings; 
    (3) has been purchased at sales on judgments, decrees or 
mortgages obtained or made for the debts; and 
    (4) is subject to a contract for deed under which the 
company holds the vendor's interest to secure the payments the 
vendee is required to make thereunder.  
    All the real estate specified in clauses (1) to (3) must be 
sold and disposed of within five years after the company has 
acquired title to it, or within five years after it has ceased 
to be necessary for the accommodation of the company's business, 
and the company must not hold this property for a longer period 
unless the company elects to hold the real estate under another 
section, or unless it procures a certificate from the 
commissioner of commerce that its interest will suffer 
materially by the forced sale thereof, in which event the time 
for the sale may be extended to the time the commissioner 
directs in the certificate.  The market value of real estate 
must be established by the written certification of a licensed 
real estate appraiser.  The appraisal is required at the time 
the company elects to hold the real estate under this 
subdivision.  
    (b) A company may acquire and hold real estate for the 
convenient accommodation of its business.  
    (c) A company may acquire real estate or any interest in 
real estate, including oil and gas and other mineral interests, 
as an investment for the production of income, and may hold, 
improve or otherwise develop, subdivide, lease, sell and convey 
real estate so acquired directly or as a joint venture or 
through a limited or general partnership in which the company is 
a partner.  
    (d) A company may also hold real estate (1) if the purpose 
of the acquisition is to enhance the sale value of real estate 
previously acquired and held by the company under this section, 
and (2) if the company expects the real estate so acquired to 
qualify under paragraph (b) or (c) above within five years after 
acquisition.  
    (e) A company may, after securing the approval of the 
commissioner, acquire and hold real estate for the purpose of 
providing necessary living quarters for its employees.  The 
company must dispose of the real estate within five years after 
it has ceased to be necessary for that purpose unless the 
commissioner agrees to extend the holding period upon 
application by the company.  
    (f) A company may not invest more than 25 percent of its 
total admitted assets in real estate.  The cost of any parcel of 
real estate held for both the accommodation of business and for 
the production of income must be allocated between the two uses 
annually.  No more than ten percent of a company's total 
admitted assets may be invested in real estate held under 
paragraph (b).  No more than 15 percent of a company's total 
admitted assets may be invested in real estate held under 
paragraph (c).  No more than three percent of its total admitted 
assets may be invested in real estate held under paragraph (e).  
Upon application by a company, the commissioner of commerce may 
increase any of these limits up to an additional five percent. 
    Sec. 13.  Minnesota Statutes 1990, section 60A.11, 
subdivision 21, is amended to read: 
    Subd. 21.  [FOREIGN INVESTMENTS.] Obligations of and 
investments in foreign countries, on the following conditions:  
     (a) a company may acquire and hold any foreign investments 
which are required as a condition of doing business in the 
foreign country or necessary for the convenient accommodation of 
its foreign business.  An investment is considered necessary for 
the convenient accommodation of the insurance company's foreign 
business only if it is demonstrably and directly related in size 
and purpose to the company's foreign insurance operations; and 
    (b) a company may also not invest not more than a total of 
two five percent of its total admitted assets in any combination 
of:  
    (1) the obligations of foreign governments, corporations, 
or business trusts; 
    (2) obligations of federal, provincial, or other political 
subdivisions backed by the full faith and credit of the foreign 
governmental unit; 
    (3) or in the stocks or stock equivalents or obligations of 
foreign corporations or business trusts not qualifying for 
investment under subdivision 12, if the obligations, stocks or 
stock equivalents are listed or regularly traded on the London, 
Paris, Zurich, or Tokyo stock exchange or any similar regular 
securities exchange not disapproved by the commissioner within 
30 days following notice from the company of its intention to 
invest in these securities. 
    Sec. 14.  Minnesota Statutes 1990, section 60A.11, 
subdivision 22, is amended to read: 
    Subd. 22.  [PERSONAL PROPERTY UNDER LEASE.] Personal 
property for intended lease or rental in the United States or 
Canada.  A company may not invest more than five percent of 
its total admitted assets under this subdivision. 
    Sec. 15.  Minnesota Statutes 1990, section 60A.11, 
subdivision 23, is amended to read: 
    Subd. 23.  [COLLATERAL LOANS.] Obligations adequately 
secured by a qualifying letter of credit issued by a member bank 
or by cash or by the pledge of any investment authorized by any 
of the preceding subdivisions having adequate security if:  
    (a) The collateral is legally assigned or delivered to the 
company; 
    (b) The company has the right to declare the obligation 
immediately due and payable if the security thereafter 
depreciates to the point where the investment would not qualify 
under paragraph (c); provided, that additional qualifying 
security may be pledged to allow the investment to remain 
qualified at its face value; 
    (c) The collateral must at the time of delivery or 
assignment have a market value of at least, in the case of cash, 
or a letter of credit meeting the requirements of subdivision 
11, paragraph (f), equal to and, in all other cases, 1-1/4 times 
the amount of the unpaid balance of the obligations.  
    A collateral loan made by a company to its parent 
corporation or an affiliated party must be secured by 
collateral:  (i) with a market value equal to the amount of the 
unpaid balance of the obligations, and (ii) which is issued or 
guaranteed by the United States of America or an agency or an 
instrumentality thereof, or any state or territory thereof, and 
is secured by the full faith and credit of the United States of 
America or any state or territory thereof.  A company may not 
invest more than five percent of its total admitted assets under 
this subdivision. 
    Sec. 16.  Minnesota Statutes 1990, section 60A.11, is 
amended by adding a subdivision to read: 
    Subd. 24a.  [DATA PROCESSING SYSTEMS.] Electronic computer 
or data processing machines or systems purchased for use in 
connection with the business of the company, provided that the 
machines or system must have an original cost of not less than 
$100,000 nor more than three percent of the admitted assets of 
the company and the cost must be amortized in full over a period 
not to exceed ten full calendar years. 
    Sec. 17.  Minnesota Statutes 1990, section 60A.11, 
subdivision 26, is amended to read: 
    Subd. 26.  [RULES.] (a) The commissioner may adopt 
appropriate rules to carry out the purpose and provisions of 
this section.  
    (b) A company may make qualified investments in any 
additional securities or property of any kind other type of 
investment or exceeding any limitations of quality, quantity, or 
percentage of admitted assets contained in this section with the 
written order of the commissioner.  This approval is at the 
discretion of the commissioner, provided that the additional 
investments allowed by the commissioner's written order may not 
exceed five percent of the company's admitted assets.  
    (c) Nothing authorized in this subdivision negates or 
reduces the investment authority granted in subdivisions 1 to 25.
    Sec. 18.  [REPEALER.] 
    Minnesota Statutes 1990, section 60A.12, subdivision 2, is 
repealed. 
    Sec. 19.  [EFFECTIVE DATE.] 
    Section 9, paragraph (d), is effective as follows:  
effective January 1, 1992, noninvestment grade obligations are 
limited to 20 percent of admitted assets; effective January 1, 
1993, noninvestment grade obligations are limited to 17.5 
percent of admitted assets; effective January 1, 1994, and 
thereafter, noninvestment grade obligations are limited to 15 
percent of admitted assets. 

                               ARTICLE 9 

                   LIFE INSURANCE COMPANY INVESTMENTS 
    Section 1.  Minnesota Statutes 1990, section 61A.28, 
subdivision 1, is amended to read: 
    Subdivision 1.  [FUNDS TO BE INVESTED INVESTMENT GUIDELINES 
AND PROCEDURES.] Each domestic life insurance company must 
comply with section 60A.112. 
    No investment or loan, except policy loans, shall be made 
by a domestic life insurance company unless authorized or 
approved by the board of directors or by a committee of 
directors, officers, or employees of the company designated by 
the board and charged with the duty of supervising the 
investment or loan.  Accurate records of all authorizations and 
approvals must be maintained. 
    The capital, surplus and other funds of every domestic life 
insurance company, whether incorporated by special act or under 
the general law (in addition to investments in real estate as 
otherwise permitted by law) may be invested only in one or more 
of the following kinds of securities or property.  An investment 
may not be made under this section if the required interest 
obligation is in default. 
    Sec. 2.  Minnesota Statutes 1990, section 61A.28, 
subdivision 2, is amended to read: 
    Subd. 2.  [GOVERNMENT OBLIGATIONS.] Bonds or other 
obligations of, or bonds or other obligations insured or 
guaranteed by,:  (a) the United States or any state thereof; (b) 
the Dominion of Canada or any province thereof; (c) any county, 
city, town, statutory city formerly a village, organized school 
district, municipality, or other civil or political subdivision 
of this state, or of any state of the United States or of any 
province of the Dominion of Canada; (d) any agency or 
instrumentality of the foregoing, including but not limited to, 
debentures issued by the federal housing administrator, 
obligations of national mortgage associations the Federal Home 
Loan Mortgage Corporation, the Federal National Mortgage 
Association, the Government National Mortgage Association; and 
(e) obligations payable in United States dollars issued or fully 
guaranteed by the International Bank for Reconstruction and 
Development, the Inter-American Development Bank, the Asian 
Development Bank, the African Development Bank, the 
Export-Import Bank, or any other United States government 
sponsored organization of which the United States is a member; 
provided, that.  The life insurance company may not invest more 
than five percent of its total admitted assets in the 
obligations of any one of these banks or organizations and may 
not invest more than 15 percent of its total admitted assets in 
the obligations of all banks or organizations described in 
paragraph (e). 
    As used in this subdivision with respect to the United 
States or any agency or instrumentality of the United States, 
"bonds or other obligations" shall include purchases or sales of 
rights or options to purchase the obligations if those rights or 
options are traded upon a contract market designated and 
regulated by a federal agency. if the investment causes the 
company's aggregate investments in the obligations of any one of 
these banks or organizations to exceed five percent of its 
admitted assets or if the investment causes the company's 
aggregate investments in the obligations of all banks or 
organizations described in clause (e) to exceed 15 percent of 
its admitted assets.  
    Sec. 3.  Minnesota Statutes 1990, section 61A.28, 
subdivision 3, is amended to read: 
    Subd. 3.  [LOANS OR OBLIGATIONS SECURED BY MORTGAGE.] Loans 
or obligations (hereinafter loans) secured by a first mortgage, 
or deed of trust (hereinafter mortgage), on improved real estate 
in the United States, if the amount of the loan secured thereby 
is not in excess of 66-2/3 percent of the market value of the 
real estate at the time of the loan, or, when the loan is to be 
fully amortized by installment payments of principal, which may 
begin up to five years from the date of the loan if the real 
estate is to be used for commercial purposes, and interest at 
least annually over a period of not to exceed 40 years, the 
amount of the loan does not exceed (a) 80 percent of the market 
value of the real estate at the time of the loan; (b) 90 percent 
of the market value of the real estate at the time of the loan 
if the loan is secured by a purchase money mortgage made in 
connection with the disposition of real estate acquired pursuant 
to section 61A.31, subdivision 1, or, if (1) the real estate is 
used for commercial purposes, and (2) the loan is additionally 
secured by an assignment of lease or leases, and (3) the lessee 
or lessees under the lease or leases, or a guarantor or 
guarantors of the lessee's obligations, is a corporation whose 
obligations would qualify as an investment under 
subdivision 6(f) 6, paragraph (e), and (4) the rents payable 
during the primary term of the lease or leases are sufficient to 
amortize at least 60 percent of the loan.  In calculating the 
ratio of the amount of the loan to the value of the property, no 
part of the amount of any loan is to be included which the 
United States or any agency or instrumentality thereof or other 
mortgage insurer as may be approved by the commissioner has 
insured or guaranteed or made a commitment to insure or 
guarantee; provided, in no event may the loan exceed the market 
value of the property.  No improvement may be included in 
estimating the market value of the real estate unless it is 
insured against fire by policies payable to the security holder 
or a trustee for its benefit.  This requirement may be met by a 
program of self-insurance established and maintained by a 
corporation whose debt obligations would qualify for purchase 
under subdivision 6, paragraph (g), clause (4).  Also loans 
secured by mortgage, upon leasehold estates in improved real 
property where at the date of investment the lease has an 
unexpired term of at least five years longer than the term of 
the loan secured thereby, and where the leasehold estate is 
unencumbered except by the lien reserved in the lease for the 
payment of rentals and the observance of the other covenants, 
terms and conditions of the lease and where the mortgagee, upon 
default, is entitled to be subrogated to, or to exercise, all 
the rights and to perform all the covenants of the lessee, 
provided that no loan on the leasehold estate may exceed (a) 
66-2/3 percent of the market value thereof at the time of the 
loan, or (b) 80 percent of the market value thereof at the time 
of the loan if the loan is to be fully amortized by installment 
payments of principal which begin within five years from the 
date of the loan if the leasehold estate is to be used for 
commercial purposes, interest is payable at least annually over 
the period of the loan which may not exceed 40 years and the 
market value of the leasehold estate is shown by the sworn 
certificate of a competent appraiser, or (c) 90 percent of the 
market value of the leasehold estate at the time of the loan if 
the loan is secured by a purchase money mortgage made in 
connection with the disposition of real estate acquired pursuant 
to section 61A.31, subdivision 1.  In calculating the ratio of 
the amount of the loan to the value of the leasehold estate, no 
part of the amount of any loan is to be included which the 
United States or any agency or instrumentality thereof or other 
mortgage insurer approved by the commissioner has insured or 
guaranteed or made a commitment to insure or guarantee; 
provided, in no event may the loan exceed the market value of 
the leasehold estate.  Also loans secured by mortgage, which the 
United States or any agency or instrumentality thereof or other 
mortgage insurer approved by the commissioner has insured or 
guaranteed or made a commitment to insure or guarantee.  Also 
loans secured by mortgage, on improved real estate in the 
Dominion of Canada if the amount of the loan is not in excess of 
66-2/3 percent of the market value of the real estate at the 
time of the loan, or, when the loan is to be fully amortized by 
installment payments of principal, which may begin up to five 
years from the date of the loan if the real estate is used for 
commercial purposes, and interest at least annually over a 
period of not to exceed 40 years, the amount of the loan does 
not exceed (a) 80 percent of the market value of the real estate 
at the time of the loan, or (b) 90 percent of the market value 
of the real estate at the time of the loan if the loan is 
secured by a purchase money mortgage made in connection with the 
disposition of real estate acquired pursuant to section 61A.31, 
subdivision 1.  In calculating the ratio of the amount of the 
loan to the value of the property, no part of the amount of any 
loan is to be included which the Dominion of Canada or any 
agency or instrumentality thereof has insured or guaranteed or 
made a commitment to insure or guarantee; provided in no event 
may the loan exceed the market value of the property.  Also 
loans secured by mortgage, on real estate in the United States 
which may be unimproved provided there exists a definite plan 
for commencement of development for commercial purposes within 
not more than five years where the amount of the loan does not 
exceed 80 percent of the market value of the unimproved real 
estate at the time of the loan and the loan is to be fully 
amortized by installment payments of principal, which may begin 
up to five years from the date of the loan, and interest at 
least annually over a period of not to exceed 40 years.  Also 
loans secured by second mortgage on improved or unimproved real 
estate used, or to be used, for commercial purposes; provided, 
that if unimproved real estate there exists a definite plan for 
commencement of development within not more than five years, in 
the United States or the Dominion of Canada under the following 
conditions:  (a) the amount of the loan secured by the second 
mortgage is equal to the sum of the amount disbursed by the 
company and the then outstanding indebtedness under the first 
mortgage loan; and (b) the company has control over the payments 
under the first mortgage indebtedness; and (c) the total amount 
of the loan does not exceed 66-2/3 percent of the market value 
of the real estate at the date of the loan or, when the note or 
bond is to be fully amortized by installment payments of 
principal, beginning not more than five years from the date of 
the loan, and interest at least annually over a period of not to 
exceed 40 years, the amount of the loan does not exceed 80 
percent of the market value of the real estate at the date of 
the loan. 
    A company may not invest in a mortgage loan authorized 
under this subdivision, if the investment causes the company's 
aggregate investments in mortgages secured by a single property 
to exceed one percent of its admitted assets.  
    For purposes of this subdivision, improved real estate 
includes real estate improved with permanent buildings, used for 
agriculture or pasture, or income producing real estate, 
including but not limited to, parking lots and leases, royalty 
or other mineral interests in properties producing oil, gas, or 
other minerals and interests in properties for the harvesting of 
forest products.  
    A loan or obligation otherwise permitted under this 
subdivision must be permitted notwithstanding the fact that it 
provides for a payment of the principal balance prior to the end 
of the period of amortization of the loan.  
    The vendor's equity in a contract for deed qualifies as a 
loan secured by mortgage for the purposes of this subdivision. 
    A mortgage participation certificate evidencing an interest 
in a loan secured by mortgage or pools of the same qualifies 
under this subdivision, if the loan secured by mortgage, and in 
the case of pools of the same that each loan, would otherwise 
qualify under this subdivision.  
    Sec. 4.  Minnesota Statutes 1990, section 61A.28, 
subdivision 6, is amended to read: 
    Subd. 6.  [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] 
Stocks, warrants or options to purchase stocks, bonds, notes, 
evidences of indebtedness, or other investments as set forth in 
this subdivision, provided that no investment may be made which 
will increase the aggregate investment in all common stocks 
under paragraphs (a) and (b) beyond 20 percent of admitted 
assets as of the end of the preceding calendar year.  In 
applying the standards prescribed in paragraphs (b), (c), and 
(d), (f) and (g) to the stocks, bonds, notes, evidences of 
indebtedness, or other obligations of a corporation which in the 
qualifying period preceding purchase of the stocks, bonds, 
notes, evidences of indebtedness, or other obligations acquired 
its property or a substantial part thereof through 
consolidation, merger, or purchase, the earnings of the several 
predecessors or constituent corporations must be consolidated.  
In applying any percentage limitations of this subdivision the 
value of the stock, or warrant or option to purchase stock, must 
be based on cost.  For purposes of this subdivision, National 
Securities Exchange means an exchange registered under section 6 
of the Securities Exchange Act of 1934 or an exchange regulated 
under the laws of the Dominion of Canada.  
    (a) Stocks of banks, insurance companies, and municipal 
corporations organized under the laws of the United States or 
any state thereof; but not more than 15 percent of the admitted 
assets of any domestic life insurance company may be invested in 
stocks of other insurance corporations and banks. 
    (b) Common stocks, common stock equivalents, or securities 
convertible into common stock or common stock equivalents of any 
corporation or a business trust not designated in paragraph (a) 
of this subdivision, entity organized under the laws of the 
United States or any state thereof, or of the Dominion of Canada 
or any province thereof, or those traded on a National 
Securities Exchange, if the net earnings of the corporation 
business entity after the elimination of extraordinary 
nonrecurring items of income and expense and before income taxes 
and fixed charges over the five immediately preceding completed 
fiscal years, or its period of existence if less than five 
years, has averaged not less than 1-1/4 times its average annual 
fixed charges applicable to the period.  
    (c) (b) Preferred stock of, or common or preferred stock 
guaranteed as to dividends by, any corporation not designated in 
paragraph (a), a business entity organized under the laws of the 
United States or any state thereof, or of the Dominion of Canada 
or any province thereof, or those traded on a National 
Securities Exchange, under the following conditions:  (1) No 
investment may be made under this paragraph in a stock upon 
which any dividend, current or cumulative, is in arrears; and 
(2) the aggregate investment company may not invest in stocks 
under this paragraph and in common stocks under paragraphs 
paragraph (a) and (b) may not if the investment causes the 
company's aggregate investments in the common or preferred 
stocks to exceed 25 percent of the life insurance company's 
total admitted assets, provided that no more than 20 percent of 
the company's admitted assets may be invested in common stocks 
under paragraphs paragraph (a) and (b); and (3) if the net 
earnings of the corporation after the elimination of 
extraordinary nonrecurring items of income and expenses and 
before income taxes and fixed charges over the five immediately 
preceding completed fiscal years, or its period of existence if 
less than five years, has averaged not less than 1-1/4 times its 
average annual fixed charges applicable to the period the 
company may not invest in any preferred stock or common stock 
guaranteed as to dividends, which is rated in the four lowest 
categories established by the securities valuation office of the 
National Association of Insurance Commissioners, if the 
investment causes the company's aggregate investment in the 
lower rated preferred or common stock guaranteed as to dividends 
to exceed five percent of its total admitted assets.  
    (d) (c) Warrants, options, and rights to purchase stock if 
the stock, at the time of the acquisition of the warrant, 
option, or right to purchase, would qualify as an investment 
under paragraph (a), or (b), or (c), whichever is applicable.  A 
domestic life insurance company shall not invest more than two 
percent of its assets under this paragraph.  Any stock actually 
acquired through the exercise of in a warrant or, option, or 
rights right to purchase may be included in paragraph (a), (b), 
or (c), whichever is applicable, only if the stock then meets 
the standards prescribed in the paragraph at the time of stock 
if, upon purchase and immediate exercise thereof, the 
acquisition of the stock violates any of the concentration 
limitations contained in paragraphs (a) and (b).  
    (e) (d) In addition to amounts that may be invested under 
subdivision 8 and without regard to the percentage limitation 
applicable to stocks, warrants, options, and rights to purchase, 
the securities of any face amount certificate company, unit 
investment trust, or management type investment company, 
registered or in the process of registration under the federal 
Investment Company Act of 1940 as from time to time amended, 
provided that the aggregate of the investments, determined at 
cost, by the life insurance company may not exceed five percent 
of its admitted assets, and the investments may be made without 
regard to the percentage limitations applicable to stocks, and 
warrants or options or rights to purchase stock.  In addition, 
the company may transfer assets into one or more of its separate 
accounts for the purpose of establishing, or supporting its 
contractual obligations under, the accounts in accordance with 
the provisions of sections 61A.13 to 61A.21.  A company may not 
invest in a security authorized under this paragraph if the 
investment causes the company's aggregate investments in the 
securities to exceed five percent of its total admitted assets, 
except that for a health service plan corporation operating 
under chapter 62C, and for a health maintenance organization 
operating under chapter 62D, the company's aggregate investments 
may not exceed 20 percent of its total admitted assets.  No more 
than five percent of the allowed investment by health service 
plan corporations or health maintenance organizations may be 
invested in funds that invest in assets not backed by the 
federal government.  When investing in money market mutual 
funds, nonprofit health service plans regulated under chapter 
62C, and health maintenance organizations regulated under 
chapter 62D, shall establish a trustee custodial account for the 
transfer of cash into the money market mutual fund. 
    (f) (e) Investment grade obligations that are:  
    (1) bonds, obligations, notes, debentures, repurchase 
agreements, or other evidences of indebtedness (1) secured by 
letters of credit issued by a national bank, state bank or trust 
company which is a member of the federal reserve system or by a 
bank organized under the laws of the Dominion of Canada or (2) 
traded on a national securities exchange or (3) issued, assumed, 
or guaranteed by a corporation or business trust, other than a 
corporation designated in subdivision 4 of a business entity, 
organized under the laws of the United States or any state 
thereof, or the Dominion of Canada or any province thereof, if 
the net earnings of the corporation after the elimination of 
extraordinary nonrecurring items of income and expense and 
before income taxes and fixed charges over the five immediately 
preceding completed fiscal years, or its period of existence if 
less than five years, has averaged not less than 1-1/4 times its 
average annual fixed charges applicable to the period.  No 
investment may be made under this paragraph upon which any 
interest obligation is in default.; and 
    (2) rated in one of the four highest rating categories by 
at least one nationally recognized statistical rating 
organization, or are rated in one of the two highest categories 
established by the securities valuation office of the National 
Association of Insurance Commissioners. 
    (f) Noninvestment grade obligations:  A company may acquire 
noninvestment grade obligations as defined in subclause (i) 
(hereinafter noninvestment grade obligations) which meet the 
earnings test set forth in subclause (ii).  A company may not 
acquire a noninvestment grade obligation if the acquisition will 
cause the company to exceed the limitations set forth in 
subclause (iii). 
    (i) A noninvestment grade obligation is an obligation of a 
business entity, organized under the laws of the United States 
or any state thereof, or the Dominion of Canada or any province 
thereof, that is not rated in one of the four highest rating 
categories by at least one nationally recognized statistical 
rating organization, or is not rated in one of the two highest 
categories established by the securities valuation office of the 
National Association of Insurance Commissioners. 
    (ii) Noninvestment grade obligations authorized by this 
subdivision may be acquired by a company if the business entity 
issuing or assuming the obligation, or the business entity 
securing or guaranteeing the obligation, has had net earnings 
after the elimination of extraordinary nonrecurring items of 
income and expense and before income taxes and fixed charges 
over the five immediately preceding completed fiscal years, or 
its period of existence of less than five years, has averaged 
not less than 1-1/4 times its average annual fixed charges 
applicable to the period; provided, however, that if a business 
entity issuing or assuming the obligation, or the business 
entity securing or guaranteeing the obligation, has undergone an 
acquisition, recapitalization, or reorganization within the 
immediately preceding 12 months, or will use the proceeds of the 
obligation for an acquisition, recapitalization, or 
reorganization, then such business entity shall also have, on a 
pro forma basis, for the next succeeding 12 months, net earnings 
averaging 1-1/4 times its average annual fixed charges 
applicable to such period after elimination of extraordinary 
nonrecurring items of income and expense and before taxes and 
fixed charges; no investment may be made under this section upon 
which any interest obligation is in default. 
    (iii) Limitation on aggregate interest in noninvestment 
grade obligations.  A company may not invest in a noninvestment 
grade obligation if the investment will cause the company's 
aggregate investments in noninvestment grade obligations to 
exceed the applicable percentage of admitted assets set forth in 
the following table:  
                                        Percentage of
            Effective Date              Admitted Assets
            January 1, 1992                  20
            January 1, 1993                  17.5
            January 1, 1994                  15
    Nothing in this paragraph limits the ability of a company 
to invest in noninvestment grade obligations as provided under 
subdivision 12. 
    (g) Obligations for the payment of money under the 
following conditions:  (1) The obligation must be secured, 
either solely or in conjunction with other security, by an 
assignment of a lease or leases on property, real or personal; 
and (2) the lease or leases must be nonterminable by the lessee 
or lessees upon foreclosure of any lien upon the leased 
property; and (3) the rents payable under the lease or leases 
must be sufficient to amortize at least 90 percent of the 
obligation during the primary term of the lease; and (4) the 
lessee or lessees under the lease or leases, or a governmental 
entity or corporation which business entity, organized under the 
laws of the United States or any state thereof, or the Dominion 
of Canada, or any province thereof, that has assumed or 
guaranteed any lessee's performance thereunder, must be a 
governmental entity or corporation business entity whose 
obligations would qualify as an investment under subdivision 2 
or paragraph (e) or (f).  A company may acquire leases assumed 
or guaranteed by a noninvestment grade lessee unless the value 
of the lease, when added to the other noninvestment grade 
obligations owned by the company, exceeds 15 percent of the 
company's admitted assets.  
    (h) A company may sell exchange-traded call options against 
stocks or other securities owned by the company and may purchase 
exchange-traded call options in a closing transaction against a 
call option previously written by the company.  In addition to 
the authority granted by paragraph (d) (c), to the extent and on 
the terms and conditions the commissioner determines to be 
consistent with the purposes of this chapter, a company may 
purchase or sell other exchange-traded call options, and may 
sell or purchase exchange-traded put options.  
    (i) A company may not invest in a security or other 
obligation authorized under this subdivision if the investment, 
valued at cost at the date of purchase, causes the company's 
aggregate investment in any one business entity to exceed two 
percent of the company's admitted assets.  
     (j) For nonprofit health service plan corporations 
regulated under chapter 62C, and for health maintenance 
organizations regulated under chapter 62D, a company may invest 
in commercial paper rated in one of the two highest rating 
categories by at least one nationally recognized statistical 
rating organization, or rated in one of the two highest 
categories established by the securities valuation office of the 
National Association of Insurance Commissioners, if the 
investment, valued at cost at the date of purchase, does not 
cause the company's aggregate investment in any one business 
entity to exceed six percent of the company's admitted assets. 
    Sec. 5.  Minnesota Statutes 1990, section 61A.28, 
subdivision 8, is amended to read: 
    Subd. 8.  [PROMISSORY NOTES SECURED BY WAREHOUSE 
RECEIPTS ASSET BACKED ARRANGEMENTS.] Promissory notes maturing 
within six months, secured by the pledge of registered terminal 
warehouse receipts issued against grain deposited in terminal 
warehouses, as defined in section 233.01.  At the time of 
investing in these notes, the market value of the grain shall 
exceed the indebtedness secured thereby, and the note or pledge 
agreement shall provide that the holder may call for additional 
like security or sell the grain without notice upon depreciation 
of the security; the insurance company may accept, in lieu of 
the deposit with it of the warehouse receipts, a trustee 
certificate issued by any national or state bank at a terminal 
point, certifying that the warehouse receipts have been 
deposited with it and are held as security for the notes; and 
the amount invested in the securities mentioned in this 
subdivision shall not, at any time, exceed 25 percent of the 
unassigned surplus and capital of the company.  Investments in 
asset backed arrangements that meet the definitions and credit 
criteria provided in this subdivision.  For purposes of this 
subdivision, "asset backed arrangement" means a loan 
participation or loan to or equity investment in a business 
entity that has as its primary business activity the acquisition 
and holding of financial assets for the benefit of its debt and 
equity holders.  
    In order to qualify for investment under this subdivision:  
    (a) the investment in the asset backed arrangement must be 
secured by or represent an undivided interest in a single 
financial asset or a pool of financial assets; and 
    (b) either (1) at least 90 percent of the dollar value of 
the financial assets held under the asset backed arrangement 
qualifies for direct investment under this section; (2) the 
investment in the asset backed arrangement is rated in one of 
the four highest rating categories by at least one nationally 
recognized statistical rating organization; or (3) the 
investment in the asset backed arrangement is rated in one of 
the two highest categories established by the securities 
valuation office of the National Association of Insurance 
Commissioners.  
     Examples of asset-backed arrangements authorized by this 
subdivision include, but are not limited to:  general and 
limited partnership interests; participations under unit 
investment trusts such as collateralized mortgage obligations 
and collateralized bond obligations; shares in, or obligations 
of, corporations formed for holding investment assets, and 
contractual participation interests in a loan or group of loans. 
    A company may not invest in an asset backed arrangement if 
the investment causes the company's aggregate investment in the 
financial assets held under the asset backed arrangement to 
exceed any of the concentration limits contained in this section.
    Sec. 6.  Minnesota Statutes 1990, section 61A.28, is 
amended by adding a subdivision to read: 
    Subd. 9a.  [HEDGING.] A domestic life insurance company may 
enter into financial transactions solely for the purpose of 
managing the interest rate risk associated with the company's 
assets and liabilities and not for speculative or other purposes.
For purposes of this subdivision, "financial transactions"  
include, but are not limited to, futures, options to buy or sell 
fixed income securities, repurchase and reverse repurchase 
agreements, and interest rate swaps, caps, and floors.  This 
authority is in addition to any other authority of the insurer.  
    Sec. 7.  Minnesota Statutes 1990, section 61A.28, 
subdivision 11, is amended to read: 
    Subd. 11.  [POLICY LOANS.] Loans on the security of 
insurance policies issued by itself to an amount not exceeding 
the loan value thereof; and loans on the pledge of any of the 
securities eligible for investment under the provisions of 
subdivisions 2 to 10, with the exception of noninvestment grade 
obligations as defined in subdivision 6, paragraph (f), but not 
exceeding 95 percent of the value of securities enumerated in 
subdivisions 2, 3, and 4 and 80 percent of the value of stocks 
and other securities; in case of securities enumerated in 
subdivisions 3, 5, and 10 "value" means principal amount unpaid 
thereon and in case of other securities market value thereof; in 
case of securities enumerated in subdivisions 3 and 10 the 
pledge agreement shall require principal payments by the pledgor 
at least equal to and concurrent with principal payments on the 
pledged security; in loans authorized by this subdivision, 
except as otherwise provided by law in regard to policy loans, 
the company shall reserve the right at any time to declare the 
indebtedness due and payable when in excess of such proportions 
of value or, in case of pledge of securities other than those 
enumerated in subdivisions 3 and 10, upon depreciation of 
security.  
    Sec. 8.  Minnesota Statutes 1990, section 61A.28, 
subdivision 12, is amended to read:  
    Subd. 12.  [ADDITIONAL INVESTMENTS.] Investments of any 
kind, without regard to the categories, conditions, standards, 
or other limitations set forth in the foregoing subdivisions and 
section 61A.31, subdivision 3, except that the prohibitions in 
clause (d) of subdivision 3 remains applicable, may be made by a 
domestic life insurance company in an amount not to exceed the 
lesser of the following: 
    (1) Five percent of the company's total admitted assets as 
of the end of the preceding calendar year, or 
    (2) Fifty percent of the amount by which its capital and 
surplus as of the end of the preceding calendar year exceeds 
$675,000.  Provided, however, that Except as provided in section 
61A.281, a company's total investment under this section in the 
common stock of any corporation, other than the stock of the 
types of corporations specified in subdivision 6(a), may not 
exceed ten percent of the common stock of the 
corporation.  Provided, further, that No investment may be made 
under the authority of this clause or clause (1) by a company 
that has not completed five years of actual operation since the 
date of its first certificate of authority.  
    If, subsequent to being made under the provisions of this 
subdivision, an investment is determined to have become 
qualified or eligible under any of the other provisions of this 
chapter, the company may consider the investment as being held 
under the other provision and the investment need no longer be 
considered as having been made under the provisions of this 
subdivision.  
    In addition to the investments authorized by this 
subdivision, a domestic life insurance company may make 
qualified investments in any additional securities or property 
of the type authorized by subdivision 6, paragraph (e), (f), or 
(g), with the written order of the commissioner.  This approval 
is at the discretion of the commissioner, provided that the 
additional investments allowed by the commissioner's written 
order may not exceed five percent of the company's admitted 
assets.  This authorization does not negate or reduce the 
investment authority granted in subdivision 6, 
paragraph (e), (f), or (g), or this subdivision. 
    Sec. 9.  Minnesota Statutes 1990, section 61A.28, is 
amended by adding a subdivision to read: 
    Subd. 13.  [ADDITIONAL LIMITATIONS.] Under the standards 
and procedures in article 3 for individual insurers, the 
commissioner may impose additional limitations on all insurers 
on the types and percentages of investments as the commissioner 
determines necessary to protect and ensure the safety of the 
general public. 
    Sec. 10.  Minnesota Statutes 1990, section 61A.281, is 
amended by adding a subdivision to read: 
    Subd. 5.  [CORPORATIONS ORGANIZED TO HOLD INVESTMENTS.] A 
domestic life insurance company may organize one or more 
corporations domiciled in the United States and hold the capital 
stock of them, provided that it shall continuously own all of 
the capital stock and that the corporations so organized shall 
limit their activities to acquiring and holding investments, 
other than under subdivisions 1 to 4, that a domestic life 
insurance company may acquire and hold.  The investments of 
these corporations are subject to the same restrictions and 
requirements as apply to domestic life insurance companies, 
including the applicable percentage limitations for investments 
in individual properties and entities and limitations on the 
aggregate amount to be invested in any investment category.  For 
the purposes of calculating the amount of an investment held by 
the life insurance company, investments in the same property, 
entity, or investment category that are owned by the company and 
all corporations qualifying under this subdivision must be 
aggregated. 
    Sec. 11.  Minnesota Statutes 1990, section 61A.29, is 
amended to read: 
    61A.29 [INVESTMENTS; AUTHORIZATION; FOREIGN INVESTMENTS.] 
    Subdivision 1.  [AUTHORIZATION.] No investment or loan, 
except policy loans, shall be made by any domestic life 
insurance company unless the same shall have been authorized or 
be approved by the board of directors or by a committee of 
directors, officers or employees of the company designated by 
the board charged with the duty of supervising the investment or 
loan, and in either case accurate records of all authorizations 
and approvals shall be maintained.  In addition to the Canadian 
investments permitted by this chapter, a domestic life insurance 
company may make foreign investments authorized by subdivision 
2, subject to the limitations contained in subdivision 3.  
Investments authorized by this section are restricted to 
countries where the obligations of the sovereign government are 
rated in one of the two highest rating categories by at least 
one nationally recognized statistical rating organization in the 
United States.  All investments must be made as provided under 
foreign investment guidelines established and maintained by the 
company under section 60A.112.  
    Subd. 2.  [FOREIGN AUTHORIZED INVESTMENTS.] Any domestic 
life insurance company may invest in obligations of and 
investments in foreign countries, other than the Dominion of 
Canada, on the following conditions:  
    (a) A company may acquire and hold any foreign investments 
which are required as a condition of doing business in the 
foreign country or necessary for the convenient accommodation of 
its foreign business.  An investment shall be considered 
necessary for the convenient accommodation of foreign business 
only if it is demonstrably and directly related in size and 
purpose to such company's foreign insurance operations; and 
    (b) A company may also invest not more than a total of two 
percent of its admitted assets in any combination of:  
    (1) the obligations of foreign governments, corporations, 
or business trusts; 
    (2) obligations of federal, provincial, or other political 
subdivisions backed by the full faith and credit of the foreign 
governmental unit; 
    (3) or in the stocks or stock equivalents or obligations of 
foreign corporations or business trusts not qualifying for 
investment under section 61A.28, subdivision 6, if the 
obligations, stocks, or stock equivalents are regularly traded 
on the London, Paris, Zurich, or Tokyo stock exchange or any 
similar regular securities exchange not disapproved by the 
commissioner within 30 days following notice from the company of 
its intention to invest in these securities.  A company may 
invest in (i) foreign assets denominated in United States 
dollars; (ii) foreign assets denominated in foreign currency; 
and (iii) United States assets denominated in foreign currency.  
The investments may be made in any combination of the following: 
    (a) Obligations of sovereign governments and political 
subdivisions thereof and obligations issued or fully guaranteed 
by a supranational bank or organization, other than those 
described in section 61A.28, subdivision 2, paragraph (e), 
provided that the obligations are rated in one of the two 
highest rating categories by at least one nationally recognized 
statistical rating organization in the United States.  For 
purposes of this section, "supranational bank" means a bank 
owned by a number of sovereign nations and engaging in 
international borrowing and lending.  
    (b) Obligations of a foreign business entity, provided that 
the obligation (i) is rated in one of the four highest rating 
categories by at least one nationally recognized statistical 
rating organization in the United States or by a similarly 
recognized statistical rating organization, as approved by the 
commissioner, in the country where the investment is made; or 
(ii) is rated in one of the two highest categories established 
by the securities valuation office of the National Association 
of Insurance Commissioners.  
    (c) Stock or stock equivalents issued by a foreign entity 
if the stock or stock equivalents are regularly traded on the 
Frankfurt, London, Paris, or Tokyo stock exchange or any similar 
securities exchange as may be approved from time to time by the 
commissioner and subject to oversight by the government of the 
country in which the exchange is located.  
    (d) Financial transactions for the sole purpose of managing 
the foreign currency risk of investments made under this 
subdivision, provided that the financial transactions are 
entered into under a detailed plan maintained by the company.  
For purposes of this paragraph, "financial transactions"  
include, but are not limited to, the purchase or sale of 
currency swaps, forward agreements, and currency futures.  
    Subd. 3.  [INVESTMENT LIMITATIONS.] Investments authorized 
by subdivision 2 are subject to the following limitations: 
    (a) A company shall not make an investment under this 
section if the investment causes the company's aggregate 
investments authorized under this section to exceed ten percent 
of its total admitted assets.  
    (b) Investments made under subdivision 2 must be aggregated 
with United States investments in determining compliance with 
percentage concentration limitations, if any, contained in this 
chapter.  
    (c) A company shall not invest in the obligations of one 
issuer under subdivision 2 in an amount greater than authorized 
for investments of the same class under this chapter.  A company 
shall not invest more than two percent of its total admitted 
assets in the direct or guaranteed obligations of a sovereign 
government or political subdivision thereof, or of a 
supranational bank. 
    Sec. 12.  Minnesota Statutes 1990, section 61A.31, is 
amended to read: 
    61A.31 [REAL ESTATE HOLDINGS.] 
    Subdivision 1.  [PURPOSES.] Except as provided in 
subdivisions 2, 3, and 4, every domestic life insurance company 
may acquire, hold and convey real property only for the 
following purposes and in the following manner: 
    (1) Such as shall have been mortgaged to it in good faith 
by way of security for loans previously contracted, or for 
moneys due; 
    (2) Such as shall have been conveyed to it in satisfaction 
of debts previously contracted in the course of its dealings; 
    (3) Such as shall have been purchased at sales on 
judgments, decrees or mortgages obtained or made for such debts; 
    (4) Such as shall have been subject to a contract for deed 
under which the company held the vendor's interest to secure the 
payment by the vendee.  
    All the real property specified in clauses (1), (2), (3), 
and (4), which shall not be necessary for its accommodation in 
the convenient transaction of its business, shall be sold and 
disposed of within five years after the company shall have 
acquired title to the same, or within five years after the same 
shall have ceased to be necessary for the accommodation of its 
business, and it shall not hold this property for a longer 
period unless it shall hold real property pursuant to 
subdivision 3, or shall procure a certificate from the 
commissioner of commerce that its interest will suffer 
materially by the forced sale thereof, in which event the time 
for the sale may be extended to such time as the commissioner 
shall direct in the certificate. 
    Subd. 2.  [BUILDING PROJECTS.] In order to promote and 
supplement public and private efforts to provide an adequate 
supply of decent, safe, and sanitary dwelling accommodations for 
persons of low and moderate income; to relieve unemployment; to 
alleviate the shortage of rental residences; and to assist in 
relieving the emergency in the housing situation in this country 
through investment of funds, any life insurance company may 
purchase or lease from any owner or owners (including states and 
political subdivisions thereof), real property in any state in 
which such company is licensed to transact the business of life 
insurance; and on any real property so acquired or on real 
property so located and acquired otherwise in the conduct of its 
business, such company may erect apartment, or other dwelling 
houses, not including hotels, but including accommodations for 
retail stores, shops, offices, and other community services 
reasonably incident to such projects; or, to provide such 
housing or accommodations, may construct, reconstruct, improve, 
or remove any buildings or other improvements thereon.  Such 
company may thereafter own, improve, maintain, manage, collect 
or receive income from, sell, lease, or convey any such real 
property and the improvements thereon.  The aggregate investment 
by any such domestic life insurance company in all such 
projects, including the cost of all real property so purchased 
or leased and the cost of all improvements to be made upon such 
real property and upon real property otherwise acquired, shall 
not, at the date of purchase or other acquisition of such real 
property, exceed ten percent of the total admitted assets of 
such company on the last day of the previous calendar year.  A 
company may not invest in the building projects if the 
investment causes the company's aggregate investments under this 
subdivision to exceed ten percent of its total admitted assets.  
    Subd. 3.  [ACQUISITION OF PROPERTY.] Any domestic life 
insurance company may: 
    (a) acquire real property or any interest in real property, 
including oil and gas and other mineral interests, in the United 
States or any state thereof, or in the Dominion of Canada or any 
province thereof, as an investment for the production of income, 
and hold, improve or otherwise develop, and lease, sell, and 
convey the same either directly or as a joint venturer or 
through a limited or general partnership in which the company is 
a partner, subject to the following conditions and limitations:  
(1) The cost to the company of each parcel of real property 
acquired pursuant to this paragraph, including the estimated 
cost to the company of the improvement or development thereof, 
when added to the book value of all other real property then 
held by it pursuant to this clause, may not exceed 15 percent of 
its admitted assets as of the end of the preceding calendar 
year, and (2) the cost to the company of each parcel of real 
property acquired pursuant to this paragraph, including the 
estimated costs to the company of the improvement or development 
thereof, may not exceed two percent of its admitted assets as of 
the end of the preceding calendar year;.  A company may not 
invest in any real property asset other than property held for 
the convenience and accommodation of its business if the 
investment causes:  (1) the company's aggregate investments in 
the real property assets to exceed ten percent of its admitted 
assets; or (2) the company's investment in any single parcel of 
real property to exceed one-half of one percent of its admitted 
assets; 
    (b) acquire personal property in the United States or any 
state thereof, or in the Dominion of Canada or any province 
thereof, under lease or leases or commitment for lease or leases 
if:  (1) either the fair value of the property exceeds the 
company's investment in it or the lessee, or at least one of the 
lessees, or a guarantor, or at least one of the guarantors, of 
the lease is a corporation with a net worth of $1,000,000 or 
more; and (2) the lease provides for rent sufficient to amortize 
the investment with interest over the primary term of the lease 
or the useful life of the property, whichever is less; and (3) 
in no event does the total investment in personal property under 
this paragraph exceed three percent of the domestic life 
insurance company's admitted assets.  A company may not invest 
in the personal property if the investment causes the company's 
aggregate investments in the personal property to exceed three 
percent of its admitted assets; 
    (c) acquire and hold real estate (1) if the purpose of the 
acquisition is to enhance the sale value of real estate 
previously acquired and held by the company under this section 
and (2) if the company expects the real estate so acquired to 
qualify and be held by the company under paragraph (a) within 
five years after acquisition; and 
    (d) not acquire real property under paragraphs (a) to (c) 
if the property is to be used primarily for agricultural, 
horticultural, ranch, mining, or church purposes. 
    All real property acquired or held under this subdivision 
must be carried at a value equal to the lesser of (1) cost plus 
the cost of capitalized improvements, less normal depreciation, 
or (2) market value. 
    Subd. 4.  [CONVENIENCE AND ACCOMMODATION OF BUSINESS.] The 
real estate acquired or held by any domestic life insurance 
company for the convenience and accommodation of its business 
shall not exceed in value 25 percent of its cash and invested 
assets, not including real estate acquired or held for the 
convenience and accommodation of its business.  Any domestic 
life insurance company, after having secured approval of the 
commissioner of commerce therefor, may also acquire and hold 
real estate for the sole purpose of providing necessary homes 
and living quarters for its employees.  Such real estate shall 
never exceed three percent of the company's cash assets as shown 
by its annual statement last filed with the commissioner of 
commerce.  All real property which shall not be necessary for 
its accommodation in the convenient transaction of its business, 
or the housing of its employees, shall be sold and disposed of 
within five years after the same shall have ceased to be 
necessary for the accommodation of its business, or the housing 
of its employees, and it shall not hold this property for a 
longer period unless, (a) it shall procure a certificate from 
the commissioner of commerce that its interest will suffer 
materially by the forced sale thereof, in which event the time 
for sale may be extended to such time as the commissioner shall 
direct in the certificate, or (b) such real property qualifies 
as an investment under the terms of subdivision 3 in which event 
the company may, at its option consider such real property as 
held under the provisions of said subdivision, subject to the 
conditions, standards, or other limitations of said subdivision 
as though it had been originally acquired thereunder.  A company 
may acquire and hold real estate for the convenience and 
accommodation of its business.  Without the prior approval of 
the department of commerce, a company may not invest in real 
estate authorized under this subdivision if the investment 
causes the company's aggregate investments under this 
subdivision to exceed five percent of its total admitted assets, 
except that a health service plan corporation operating under 
chapter 62C may not invest in real estate authorized under this 
subdivision if the investment causes the company's aggregate 
investments under this subdivision to exceed 25 percent of its 
total admitted assets. 
    Sec. 13.  [REPEALER.] 
    Minnesota Statutes 1990, section 61A.28, subdivisions 4 and 
5, are repealed. 

                               ARTICLE 10 

                             ADMINISTRATION 
    Section 1.  Minnesota Statutes 1990, section 60A.02, is 
amended by adding a subdivision to read: 
    Subd. 27.  [ADMITTED ASSETS.] "Admitted assets" means the 
assets as shown by the company's annual statement on December 31 
valued according to valuation regulations prescribed by the 
National Association of Insurance Commissioners and procedures 
adopted by the National Association of Insurance Commissioners' 
financial condition Ex 4 subcommittee if not addressed in 
another section, unless the commissioner requires or finds 
another method of valuation reasonable under the circumstances. 
   Sec. 2.  Minnesota Statutes 1990, section 60A.03, 
subdivision 5, is amended to read: 
    Subd. 5.  [EXAMINATION FEES AND EXPENSES.] When any 
visitation, examination, or appraisal is made by order of the 
commissioner, the company being examined, visited, or appraised, 
including fraternals, township mutuals, reciprocal exchanges, 
nonprofit service plan corporations, health maintenance 
organizations, vendors of risk management services licensed 
under section 60A.23, or self-insurance plans or pools 
established under section 176.181 or 471.982, shall pay to the 
department of commerce the necessary expenses of the persons 
engaged in the examination, visit, or appraisal, or desk audits 
of annual statements and records performed by the department 
other than on the company premises plus the per diem salary fees 
of the employees of the department of commerce who are 
conducting or participating in the examination, visitation, or 
appraisal, or desk audit.  The per diem salary fees may be based 
upon the approved examination fee schedules of the National 
Association of Insurance Commissioners or otherwise determined 
by the commissioner.  All of these fees and expenses must be 
paid into the department of commerce revolving fund. 
    Sec. 3.  Minnesota Statutes 1990, section 60A.031, is 
amended to read: 
    60A.031 [EXAMINATIONS.] 
    Subdivision 1.  [POWER TO EXAMINE.] (1) [INSURERS AND OTHER 
LICENSEES.] At any time and for any reason related to the 
enforcement of the insurance laws, or to ensure that companies 
are being operated in a safe and sound manner and to protect the 
public interest, the commissioner may examine the affairs and 
conditions of any foreign or domestic insurance or reinsurance 
company, including reciprocals and fraternals, licensee or 
applicant for a license under the insurance laws, or any other 
person or organization of persons doing or in the process of 
organizing to do any insurance business in this state, and of 
any licensed advisory organization serving any of the foregoing 
in this state. 
     The commissioner shall examine the affairs and conditions 
of every domestic insurance company at least once every five 
years. 
    (2) [WHO MAY BE EXAMINED.] The commissioner in making any 
examination of an insurance company as authorized by this 
section may, if in the commissioner's discretion, there is cause 
to believe the commissioner is unable to obtain relevant 
information from such insurance company or that the examination 
or investigation is, in the discretion of the commissioner, 
necessary or material to the examination of the company, examine 
any person, association, or corporation: 
    (a) transacting, having transacted, or being organized to 
transact the business of insurance in this state; 
    (b) engaged in or proposing to be engaged in the 
organization, promotion, or solicitation of shares or capital 
contributions to or aiding in the formation of a domestic 
insurance company; 
     (c) holding shares of capital stock of an insurance company 
for the purpose of controlling the management thereof as voting 
trustee or otherwise; 
     (d) having a contract, written or oral, pertaining to the 
management or control of an insurance company as general agent, 
managing agent, attorney-in-fact, or otherwise; 
     (e) which has substantial control directly or indirectly 
over an insurance company whether by ownership of its stock or 
otherwise, or owning stock in any domestic insurance company, 
which stock constitutes a substantial proportion of either the 
stock of the domestic insurance company or of the assets of the 
owner thereof; 
     (f) which is a subsidiary or affiliate of an insurance 
company; 
     (g) which is a licensed agent or solicitor or has made 
application for the licenses; 
     (h) engaged in the business of adjusting losses or 
financing premiums. 
     Nothing contained in this clause (2) shall authorize the 
commissioner to examine any person, association, or corporation 
which is subject to regular examination by another division of 
the commerce department of this state.  The commissioner shall 
notify the other division when an examination is deemed 
advisable.  
    Subd. 2a.  [PURPOSE, SCOPE, AND NOTICE OF EXAMINATION.] An 
examination may, but need not, cover comprehensively all aspects 
of the examinee's affairs, practices, and conditions.  The 
commissioner shall determine the nature and scope of each 
examination and in doing so shall take into account all 
available relevant factors concerning the financial and business 
affairs, practices and conditions of the examinee.  For 
examinations undertaken pursuant to this section, the 
commissioner shall issue an order stating the scope of the 
examination and designating the person responsible for 
conducting the examination.  A copy of the order shall be 
provided to the examinee.  
    In conducting the examination, the examiner shall observe 
the guidelines and procedures in the examiner's handbook adopted 
by the National Association of Insurance Commissioners.  The 
commissioner may also employ other guidelines or procedures that 
the commissioner may consider appropriate. 
    Subd. 3.  [ACCESS TO EXAMINEE.] (a) The commissioner, or 
the designated person, shall have timely, convenient, and free 
access during normal business at all reasonable hours to all 
books, records, securities, accounts, documents, and any or 
all computer or other records and papers relating to the 
property, assets, business, and affairs of any company, 
applicant, association, or person which may be examined pursuant 
to this act for the purpose of ascertaining, appraising, and 
evaluating the assets, conditions, affairs, operations, ability 
to fulfill obligations, and compliance with all the provisions 
of law of the company or person insofar as any of the above 
pertain to the business of insurance of a person, organization, 
or corporation transacting, having transacted, or being 
organized to transact business in this state.  Every company or 
person being examined, its officers, directors, and agents, 
shall provide to the commissioner or the designated 
person timely, convenient, and free access at all reasonable 
hours at its office to all its books, records, accounts, papers, 
securities, documents, any or all papers computer or other 
records relating to the property, assets, business, and affairs 
of the company or person.  The officers, directors, and agents 
of the company or person shall facilitate the examination and 
aid in the examination so far as it is in their power to do so.  
    The refusal of a company, by its officers, directors, 
employees, or agents, to submit to examination or to comply with 
a reasonable request of the examiners is grounds for suspension 
or refusal of, or nonrenewal of, a license or authority held by 
the company to engage in an insurance or other business subject 
to the commissioner's jurisdiction.  The proceedings for 
suspension, revocation, or refusal of a license or authority 
must be conducted as provided in section 45.027.  
    (b) The commissioner or any examiners may issue subpoenas, 
administer oaths, and examine under oath any person as to any 
matter pertinent to the examination.  If a person fails or 
refuses to obey a subpoena, the commissioner may petition a 
court of competent jurisdiction, and upon proper showing, the 
court may enter an order compelling the witness to appear and 
testify or produce documentary evidence.  Failure to obey the 
court order is punishable as contempt of court. 
    (c) When making an examination or audit under this section, 
the commissioner may retain attorneys, appraisers, independent 
actuaries, independent certified public accountants, or other 
professionals and specialists as examiners, the cost of which 
must be paid by the company that is the subject of the 
examination or audit. 
    (d) This section does not limit the commissioner's 
authority to terminate or suspend any examination in order to 
pursue other legal or regulatory action pursuant to the 
insurance laws of this state.  Findings of fact and conclusions 
made pursuant to an examination are prima facie evidence in a 
legal or regulatory action. 
    (e) Nothing contained in this section shall be construed to 
limit the commissioner's authority to use as evidence a final or 
preliminary examination report, examiner or company workpapers 
or other documents, or other information discovered or developed 
during the course of an examination in the furtherance of a 
legal or administrative action which the commissioner may, in 
the commissioner's sole discretion, consider appropriate. 
    Subd. 4.  [EXAMINATION REPORT; FOREIGN AND DOMESTIC 
COMPANIES.] (a) The commissioner shall make a full and true 
report of every examination conducted pursuant to this chapter, 
which shall include (1) a statement of findings of fact relating 
to the financial status and other matters ascertained from the 
books, papers, records, documents, and other evidence obtained 
by investigation and examination or ascertained from the 
testimony of officers, agents, or other persons examined under 
oath concerning the business, affairs, assets, obligations, 
ability to fulfill obligations, and compliance with all the 
provisions of the law of the company, applicant, organization, 
or person subject to this chapter and (2) a summary of important 
points noted in the report, conclusions, recommendations and 
suggestions as may reasonably be warranted from the facts so 
ascertained in the examinations.  The report of examination 
shall be verified by the oath of the examiner in charge thereof, 
and shall be prima facie evidence in any action or proceedings 
in the name of the state against the company, applicant, 
organization, or person upon the facts stated therein.  
    (b) No later than 60 days following completion of the 
examination, the examiner in charge shall file with the 
department a verified written report of examination under oath.  
Upon receipt of the verified report, the department shall 
transmit the report to the company examined, together with a 
notice which provides the company examined with a reasonable 
opportunity of not more than 30 days to make a written 
submission or rebuttal with respect to matters contained in the 
examination report. 
    (c) Within 30 days of the end of the period allowed for the 
receipt of written submissions or rebuttals, the commissioner 
shall fully consider and review the report, together with the 
written submissions or rebuttals and the relevant portions of 
the examiner's workpapers and enter an order: 
    (1) adopting the examination report as filed or with 
modification or corrections.  If the examination report reveals 
that the company is operating in violation of any law, rule, or 
prior order of the commissioner, the commissioner may order the 
company to take any action the commissioner considers necessary 
and appropriate to cure the violation; 
    (2) rejecting the examination report with directions to the 
examiners to reopen the examination for purposes of obtaining 
additional data, documentation, or information, and refiling the 
report as required under paragraph (b); or 
    (3) calling for an investigatory hearing with no less than 
20 days' notice to the company for purposes of obtaining 
additional documentation, data, information, and testimony. 
    (d)(1) All orders entered under paragraph (c), clause (1), 
must be accompanied by findings and conclusions resulting from 
the commissioner's consideration and review of the examination 
report, relevant examiner workpapers, and any written 
submissions or rebuttals.  The order is a final administrative 
decision and may be appealed as provided under chapter 14.  The 
order must be served upon the company by certified mail, 
together with a copy of the adopted examination report.  Within 
30 days of the issuance of the adopted report, the company shall 
file affidavits executed by each of its directors stating under 
oath that they have received a copy of the adopted report and 
related orders.  
    (2) A hearing conducted under paragraph (c), clause (3), by 
the commissioner or authorized representative, must be conducted 
as a nonadversarial confidential investigatory proceeding as 
necessary for the resolution of inconsistencies, discrepancies, 
or disputed issues apparent upon the face of the filed 
examination report or raised by or as a result of the 
commissioner's review of relevant workpapers or by the written 
submission or rebuttal of the company.  Within 20 days of the 
conclusion of the hearing, the commissioner shall enter an order 
as required under paragraph (c), clause (1).  
    (3) The commissioner shall not appoint an examiner as an 
authorized representative to conduct the hearing.  The hearing 
must proceed expeditiously.  Discovery by the company is limited 
to the examiner's workpapers which tend to substantiate 
assertions in a written submission or rebuttal.  The 
commissioner or the commissioner's representative may issue 
subpoenas for the attendance of witnesses or the production of 
documents considered relevant to the investigation whether under 
the control of the department, the company, or other persons.  
The documents produced must be included in the record.  
Testimony taken by the commissioner or the commissioner's 
representative must be under oath and preserved for the record. 
    This section does not require the department to disclose 
information or records which would indicate or show the 
existence or content of an investigation or activity of a 
criminal justice agency. 
    (4) The hearing must proceed with the commissioner or the 
commissioner's representative posing questions to the persons 
subpoenaed.  Thereafter, the company and the department may 
present testimony relevant to the investigation.  
Cross-examination may be conducted only by the commissioner or 
the commissioner's representative.  The company and the 
department shall be permitted to make closing statements and may 
be represented by counsel of their choice.  
    (e)(1) Upon the adoption of the examination report under 
paragraph (c), clause (1), the commissioner shall continue to 
hold the content of the examination report as private and 
confidential information for a period of 30 days except as 
otherwise provided in paragraph (b).  Thereafter, the 
commissioner may open the report for public inspection if a 
court of competent jurisdiction has not stayed its publication. 
    (2) Nothing contained in this subdivision prevents or shall 
be construed as prohibiting the commissioner from disclosing the 
content of an examination report, preliminary examination report 
or results, or any matter relating to the reports, to the 
commerce department or the insurance department of another state 
or country, or to law enforcement officials of this or another 
state or agency of the federal government at any time, if the 
agency or office receiving the report or matters relating to the 
report agrees in writing to hold it confidential and in a manner 
consistent with this subdivision.  
    (3) If the commissioner determines that regulatory action 
is appropriate as a result of an examination, the commissioner 
may initiate proceedings or actions as provided by law. 
    (f) All working papers, recorded information, documents and 
copies thereof produced by, obtained by, or disclosed to the 
commissioner or any other person in the course of an examination 
made under this subdivision must be given confidential treatment 
and are not subject to subpoena and may not be made public by 
the commissioner or any other person, except to the extent 
provided in paragraph (e).  Access may also be granted to the 
National Association of Insurance Commissioners.  The parties 
must agree in writing prior to receiving the information to 
provide to it the same confidential treatment as required by 
this section, unless the prior written consent of the company to 
which it pertains has been obtained. 
    Subd. 5.  [ORDER; FOREIGN AND DOMESTIC COMPANIES.] Within a 
reasonable time of receipt of an examination report the 
commissioner may issue an order to the examinee directing 
compliance within a time specified in the order or by law with 
one or more of the following: 
    (a) to restore within the time and extent prescribed by law 
or the commissioner's order any deficiency, whenever its 
capital, reserves or surplus have become impaired, 
    (b) to cease and desist from transaction of any business or 
from any business practice which if transacted or continued 
might result in the examinee's condition or further transaction 
of business being hazardous to its policyholders, its creditors, 
or the public, 
    (c) to cease and desist from any other violation of its 
charter or any law of the state.  
    Subd. 6.  [PENALTY.] Notwithstanding section 72A.05, any 
person who violates or aids and abets any violation of a written 
order issued pursuant to this section may be fined not more than 
$10,000 for each day the violation continues for each violation 
of the order in an action commenced in Ramsey county by the 
attorney general on behalf of the state of Minnesota and the 
money so recovered shall be paid into the general fund. 
    Subd. 7.  [ALTERNATIVES TO EXAMINATIONS.] (1) [AUDITS OR 
ACTUARIAL EVALUATIONS.] In lieu of all or part of an examination 
under this chapter, or in addition to it, the commissioner may 
require an independent audit by certified public accountants 
approved by the commissioner or an actuarial evaluation by 
actuaries approved by the commissioner of any persons subject to 
the examination requirement of subdivision 1. 
    (2) [REPORTS.] In lieu of all or part of an examination 
under this section, the commissioner may accept the report of an 
audit made by certified public accountants approved by the 
commissioner or actuarial evaluation by actuaries approved by 
the commissioner or the report of an examination made by the 
insurance department of another state, of the examination made 
by another government agency in this state, the federal 
government or another state. an examination under this section 
of a foreign or an alien insurer licensed in this state, the 
commissioner may accept an examination report on the company as 
prepared by the insurance department for the company's state of 
domicile or port of entry state until January 1, 1994.  After 
January 1, 1994, the reports may only be accepted if:  
    (1) the insurance department is accredited under the 
National Association of Insurance Commissioners Financial 
Regulation Standards and Accreditation Program at the time of 
the examination; or 
    (2) the examination is performed under the supervision of 
an accredited insurance department or with the participation of 
one or more examiners who are employed by an accredited state 
insurance department and who, after a review of the examination 
workpapers and report, state under oath that the examination was 
performed in a manner consistent with the standards and 
procedures required by their insurance department. 
    Subd. 7a.  [CONFLICT OF INTEREST.] The department shall 
establish reasonable procedures so that no examiner, either 
directly or indirectly, has a conflict of interest or is 
affiliated with the management of or owns a pecuniary interest 
in a person subject to examination under this chapter.  This 
section shall not be construed to automatically preclude an 
examiner from being: 
    (1) a policyholder or claimant under an insurance policy; 
    (2) a grantor of a mortgage or similar instrument on the 
examiner's residence to a regulated entity if done under 
customary terms and in the ordinary course of business; 
    (3) an investment owner in shares of regulated diversified 
investment companies; or 
    (4) a settlor or beneficiary of a "blind trust" into which 
any otherwise impermissible holdings have been placed. 
    Notwithstanding the requirements of this section, the 
commissioner may retain from time to time, on an individual 
basis, qualified actuaries, certified public accountants, or 
other similar individuals who are independently practicing their 
professions, even though the persons may from time to time be 
similarly employed or retained by persons subject to examination 
under this chapter. 
    Subd. 8.  [POWER TO MAKE RULES.] The commissioner may 
promulgate any rules which may be necessary to the 
administration of subdivisions 1 to 7 9.  
    Subd. 9.  [IMMUNITY FROM LIABILITY.] (a) No cause of action 
shall arise nor shall liability be imposed against the 
commissioner, the commissioner's authorized representatives, or 
an examiner appointed by the commissioner for statements made or 
conduct performed in good faith while carrying out the 
provisions of this section.  
    (b) No cause of action shall arise, nor shall liability be 
imposed against a person for the act of communicating or 
delivering information or data to the commissioner or the 
commissioner's authorized representative or examiner pursuant to 
an examination made under this section, if the act of 
communication or delivery is performed in good faith and without 
fraudulent intent or the intent to deceive. 
    (c) This section does not abrogate or modify a common law 
or statutory privilege or immunity enjoyed by a person 
identified in paragraph (a).  
    (d) A person identified in paragraph (a) may be awarded 
attorney fees and costs if the person is the prevailing party in 
a civil cause of action for libel, slander, or other relevant 
tort arising out of activities in carrying out the provisions of 
this section, and the party bringing the action was not 
substantially justified in doing so.  For purposes of this 
section, a proceeding is "substantially justified" if it had a 
reasonable basis in law or fact at the time that it was 
initiated. 
    Sec. 4.  Minnesota Statutes 1990, section 60A.07, is 
amended by adding a subdivision to read: 
    Subd. 5f.  [CAPITAL AND SURPLUS REQUIREMENTS.] (a) Capital 
and surplus requirements apply to all types of insurance 
transacted by the insurer, whether or not only a portion of the 
types of insurance are transacted in this state.  The 
commissioner may for the protection of the public require an 
insurer to maintain funds in excess of the amounts required 
under this section, due to the amount, kind, or combination of 
types of insurance transacted by the insurer.  Failure of an 
insurer to maintain funds as ordered by the commissioner is 
grounds for suspension or revocation of the insurer's 
certificate of authority.  
    (b) After June 30, 1991, an insurer may not renew and 
continue its certificate of authority unless the insurer 
possesses at least the basic capital and surplus, and additional 
surplus required by the commissioner under this section.  
    Sec. 5.  Minnesota Statutes 1990, section 60A.10, 
subdivision 2a, is amended to read: 
    Subd. 2a.  [SPECIAL DEPOSITS.] The commissioner may require 
a special deposit of an individual foreign insurer for the 
protection of its Minnesota policyholders or claimants.  The 
special deposit may be required, to a maximum amount of 
$500,000.  In the event of the filing of a delinquency petition 
against the insurer in Minnesota, the deposit is subject to 
chapters 60B, 60C, and 61A, and 61B. 
    Sec. 6.  Minnesota Statutes 1990, section 60A.11, 
subdivision 9, is amended to read: 
    Subd. 9.  [GENERAL CONSIDERATIONS.] The following 
considerations apply in the interpretation of this section: 
    (a) This section applies to the investments of insurance 
companies other than life insurance companies; 
    (b) The purpose of this section is to protect and further 
the interests of policyholders, claimants, creditors and the 
public by providing standards for the development and 
administration of programs for the investment of the assets of 
domestic companies.  These standards and the investment programs 
developed by companies must take into account the safety of 
company's principal, investment yield and growth, stability in 
the value of the investment, the liquidity necessary to meet the 
company's expected business needs, and investment 
diversification; 
    (c) All financial terms relating to insurance companies 
have the meanings assigned to them under statutory accounting 
methods.  All financial terms relating to noninsurance companies 
have the meanings assigned to them under generally accepted 
accounting principles; 
    (d) Investments must be valued in accordance with the 
valuation procedures established by the National Association of 
Insurance Commissioners, unless the commissioner requires or 
finds another method of valuation reasonable under the 
circumstances.  Other invested assets must be valued according 
to the procedures promulgated by the National Association of 
Insurance Commissioners', if not addressed in another section, 
unless the commissioner requires or finds another method of 
valuation reasonable under the circumstances; 
    (e) A company may elect to hold an investment which 
qualifies under more than one subdivision, under the subdivision 
of its choice.  Nothing herein prevents a company from electing 
to hold an investment under a subdivision different from the one 
in which it previously held the investment; and 
    (f) An investment which qualifies under any provision of 
the law governing investments of insurance companies when 
acquired will continue to be a qualified investment for as long 
as it is held by the insurance company. 
    Sec. 7.  Minnesota Statutes 1990, section 60A.13, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ANNUAL STATEMENTS REQUIRED.] Every 
insurance company, including fraternal beneficiary associations, 
and reciprocal exchanges, doing business in this state, shall 
transmit to the commissioner, annually, on or before March 
first, in the form prescribed by the commissioner, a verified 
statement of its entire business and condition during the 
preceding calendar year the appropriate verified National 
Association of Insurance Commissioners' annual statement blank, 
prepared in accordance with the association's instructions 
handbook and following those accounting procedures and practices 
prescribed by the association's accounting practices and 
procedures manual, unless the commissioner requires or finds 
another method of valuation reasonable under the circumstances.  
In addition, the commissioner may require the filing of any 
other information determined to be reasonably necessary for the 
continual enforcement of these laws.  The statement may be 
limited to the insurer's business and condition in the United 
States unless the commissioner finds that the business conducted 
outside the United States may detrimentally affect the interests 
of policyholders in this state.  The statements shall also 
contain a verified schedule showing all details required by law 
for assessment and taxation. The statement or schedules shall be 
in the form and shall contain all matters the commissioner may 
prescribe, and it may be varied as to different types of 
insurers so as to elicit a true exhibit of the condition of each 
insurer. 
    Sec. 8.  Minnesota Statutes 1990, section 60A.14, 
subdivision 1, is amended to read: 
    Subdivision 1.  [FEES OTHER THAN EXAMINATION FEES.] In 
addition to the fees and charges provided for examinations, the 
following fees must be paid to the commissioner for deposit in 
the general fund: 
    (a) by township mutual fire insurance companies: 
    (1) for filing certificate of incorporation $25 and 
amendments thereto, $10; 
    (2) for filing annual statements, $15; 
    (3) for each annual certificate of authority, $15; 
    (4) for filing bylaws $25 and amendments thereto, $10. 
    (b) by other domestic and foreign companies including 
fraternals and reciprocal exchanges: 
    (1) for filing certified copy of certificate of articles of 
incorporation, $100; 
    (2) for filing annual statement, $225; 
    (3) for filing certified copy of amendment to certificate 
or articles of incorporation, $100; 
    (4) for filing bylaws, $75 or amendments thereto, $75; 
    (5) for each company's certificate of authority, $575, 
annually. 
      (c) the following general fees apply: 
      (1) for each certificate, including certified copy of 
certificate of authority, renewal, valuation of life policies, 
corporate condition or qualification, $15; 
      (2) for each copy of paper on file in the commissioner's 
office 50 cents per page, and $2.50 for certifying the same; 
    (3) for license to procure insurance in unadmitted foreign 
companies, $575; 
    (4) for receiving and forwarding each notice, proof of 
loss, summons, complaint or other process served upon the 
commissioner of commerce, as attorney for service of process 
upon any nonresident agent or insurance company, including 
reciprocal exchanges, $15 plus the cost of effectuating service 
by certified mail, which amount must be paid by the party 
serving the notice and may be taxed as other costs in the 
action; 
    (5) for valuing the policies of life insurance companies, 
one cent per $1,000 of insurance so valued, provided that the 
fee shall not exceed $1,000 $13,000 per year for any company.  
The commissioner may, in lieu of a valuation of the policies of 
any foreign life insurance company admitted, or applying for 
admission, to do business in this state, accept a certificate of 
valuation from the company's own actuary or from the 
commissioner of insurance of the state or territory in which the 
company is domiciled; 
    (6) for receiving and filing certificates of policies by 
the company's actuary, or by the commissioner of insurance of 
any other state or territory, $50; 
    (7) for issuing an initial license to an individual agent, 
$20 per license, for issuing an initial agent's license to a 
partnership or corporation, $50, and for issuing an amendment 
(variable annuity) to a license, $20, and for renewal of 
amendment, $20; 
    (8) for each appointment of an agent filed with the 
commissioner, a domestic insurer shall remit $5 and all other 
insurers shall remit $3; 
    (9) for renewing an individual agent's license, $20 per 
year per license, and for renewing a license issued to a 
corporation or partnership, $50 per year; 
    (10) for issuing and renewing a surplus lines agent's 
license, $150; 
    (11) for issuing duplicate licenses, $5; 
    (12) for issuing licensing histories, $10; 
    (13) for filing forms and rates, $50 per filing; 
    (14) for annual renewal of surplus lines insurer license, 
$300. 
    The commissioner shall adopt rules to define filings that 
are subject to a fee. 
    Sec. 9.  Minnesota Statutes 1990, section 61A.283, is 
amended to read: 
    61A.283 [ADMITTED ASSETS.] 
    For the purpose of applying any investment limitation based 
on the amount of a domestic life insurance company's admitted 
assets, the term "admitted assets" shall mean such assets as 
shown by the company's annual statement, required by section 
60A.13, as of the December 31 immediately preceding the date the 
company acquires the investment has the meaning given in section 
1, with an adjustment in such the admitted asset figure to 
exclude amounts which on such the December 31 immediately 
preceding the date the company acquires an investment are 
allocated to separate accounts; and the value of stocks and 
warrants and options to purchase stocks owned by the company on 
such December 31 shall be based on cost.  For other purposes the 
term "admitted assets" shall mean such assets as shown by the 
company's annual statement on such December 31, valued in 
accordance with the valuation regulations prescribed by the 
National Association of Insurance Commissioners. 
    Sec. 10.  Minnesota Statutes 1990, section 72A.061, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ANNUAL STATEMENTS.] Any insurance company 
licensed to do business in this state, including fraternals, 
reciprocals and township mutuals, which neglects to file its 
annual statement in the form prescribed and within the time 
specified by law shall be subject to a penalty of $25 $100 for 
each day in default.  If, at the end of 90 45 days, the default 
has not been corrected, the company shall be given ten days in 
which to show cause to the commissioner why its license should 
not be suspended.  If the company has not made the requisite 
showing within the ten-day period, the license and authority of 
the company may, at the discretion of the commissioner, be 
suspended during the time the company is in default. 
    Any insurance company, including fraternals, reciprocals, 
and township mutuals, willfully making a false annual or other 
required statement shall pay a penalty to the state not to 
exceed $5,000.  Either or both of the monetary penalties imposed 
by this subdivision may be recovered in a civil action brought 
by and in the name of the state. 
    Sec. 11.  Minnesota Statutes 1990, section 62D.044, is 
amended to read: 
    62D.044 [ADMITTED ASSETS.] 
    "Admitted assets" includes the following: 
    (1) petty cash and other cash funds in the organization's 
principal or official branch office that are under the 
organization's control; 
    (2) immediately withdrawable funds on deposit in demand 
accounts, in a bank or trust company organized and regularly 
examined under the laws of the United States or any state, and 
insured by an agency of the United States government, or like 
funds actually in the principal or official branch office at 
statement date, and, in transit to a bank or trust company with 
authentic deposit credit given before the close of business on 
the fifth bank working day following the statement date; 
    (3) the amount fairly estimated as recoverable on cash 
deposited in a closed bank or trust company, if the assets 
qualified under this section before the suspension of the bank 
or trust company; 
     (4) bills and accounts receivable that are collateralized 
by securities in which the organization is authorized to invest; 
     (5) premiums due from groups or individuals that are not 
more than 90 days past due; 
     (6) amounts due under reinsurance arrangements from 
insurance companies authorized to do business in this state; 
      (7) tax refunds due from the United States or this state; 
    (8) principal and interest accrued on mortgage loans not 
exceeding in aggregate one year's total due and 
accrued principal and interest on an individual loan; 
      (9) the rents due to the organization on real and personal 
property, directly or beneficially owned, not exceeding the 
amount of one year's total due and accrued rent on each 
individual property; 
    (10) principal and interest or rents accrued on conditional 
sales agreements, security interests, chattel mortgages, and 
real or personal property under lease to other corporations that 
do not exceed the amount of one year's total due and accrued 
interest or rent on an individual investment; 
    (11) the fixed required principal and interest due and 
accrued on bonds and other evidences of indebtedness that are 
not in default; 
      (12) dividends receivable on shares of stock, provided that 
the market price for valuation purposes does not include the 
value of the dividend; 
      (13) the interest on dividends due and payable, but not 
credited, on deposits in banks and trust companies or on 
accounts with savings and loan associations; 
    (14) principal and interest accrued on secured loans that 
do not exceed the amount of one year's interest on any loan; 
     (15) interest accrued on tax anticipation warrants; 
     (16) the amortized value of electronic computer or data 
processing machines or systems purchased for use in the business 
of the organization, including software purchased and developed 
specifically for the organization's use; 
     (17) the cost of furniture, equipment, and medical 
equipment, less accumulated depreciation thereon, and medical 
and pharmaceutical supplies that are used to deliver health care 
and are under the organization's control, provided the assets do 
not exceed 30 percent of admitted assets; 
     (18) amounts currently due from an affiliate that has 
liquid assets with which to pay the balance and maintain its 
accounts on a current basis.  Any amount outstanding more than 
three months is not current; 
     (19) amounts on deposit under section 62D.041; 
     (20) accounts receivable from participating health care 
providers that are not more than 60 days past due; and 
    (21) investments allowed by section 62D.045, except for 
investments in securities and properties described under section 
61A.284. 
    Sec. 12.  Minnesota Statutes 1990, section 62D.045, 
subdivision 1, is amended to read: 
    Subdivision 1.  [RESTRICTIONS.] Funds of a health 
maintenance organization shall be invested only in securities 
and property designated by law for investment by domestic life 
insurance companies, except that money may be used to purchase 
real estate, including leasehold estates and leasehold 
improvements, for the convenient accommodation of the 
organization's business operations, including the home office, 
branch offices, medical facilities, and field office operations, 
on the following conditions: 
    (1) a parcel of real estate acquired under this subdivision 
may include excess space for rent to others if it is reasonably 
anticipated that the excess will be required by the organization 
for expansion or if the excess is reasonably required in order 
to have one or more buildings that will function as an economic 
unit; 
    (2) the real estate may be subject to a mortgage; and 
    (3) the purchase price of the asset, including capitalized 
permanent improvements, less depreciation spread evenly over the 
life of the property or less depreciation computed on any basis 
permitted under the Internal Revenue Code and its regulations, 
or the organization's equity, plus all encumbrances on the real 
estate owned by a company under this subdivision, whichever is 
greater, does not exceed 20 percent of its admitted assets, 
except if, when calculated in combination with the assets 
described in section 62D.044, clause (17), the total of said 
assets and the real estate assets described hereunder do not 
exceed the total combined percent limitations allowable under 
this section and section 62D.044, clause (17), or, if permitted 
by the commissioner upon a finding that the percentage of the 
health maintenance organization's admitted assets is 
insufficient to provide convenient accommodation for the 
organization's business.  However, a health maintenance 
organization that directly provides medical services owns 
property used in the delivery of medical services for its 
enrollees may invest an additional 20 percent of its admitted 
assets in real estate, not requiring the permission of the 
commissioner. 
    Sec. 13.  [REPORT.] 
    Subdivision 1.  [REPORT.] The commissioner of commerce 
shall submit a report on the overall effectiveness of the 
requirements imposed under this act to the legislature by 
January 1, 1994.  The report must include: 
    (1) the effectiveness and reliability of risk-adjusted 
capital formulas applied as broadly as possible to all insurers, 
including a recommendation whether the formula should be adopted 
by the state as a formal tool for measuring surplus adequacy; 
    (2) the accuracy and effectiveness of the internal 
appraisal procedure authorized for valuing real estate and 
mortgages, including recommendations on any necessary internal 
appraisal procedure modifications; 
    (3) the sufficiency of the department's insurance audit 
complement. 
    Subd. 2.  [INTERSTATE COMPACT AGREEMENT STUDY.] The 
commissioner of commerce shall conduct a study to determine the 
feasibility of entering interstate compact agreements for the 
purpose of enhancing the regulation of insurers.  The study must 
address the costs and benefits of state regulation and the 
financial and operational impact on domestic insurers.  The 
commissioner shall submit a report on the results of the study 
to the legislature by January 1, 1992. 
    Sec. 14.  [REPORT ON GUARANTY ASSOCIATIONS.] 
    The commissioner of commerce shall submit a report on the 
life and health guaranty association and the Minnesota insurance 
guaranty association to the legislature by January 1, 1992.  The 
report must include: 
    (1) the feasibility of prefunding each association; 
    (2) the capacity of each association to promptly pay 
benefits and continue coverages for large insolvencies; and 
    (3) the feasibility of using risk as a basis for 
establishing the amount to be assessed each member of each 
association. 
    Sec. 15.  [EXAMINATION AND SELECTION CRITERIA.] 
    The commissioner of employee relations shall authorize the 
commissioner of commerce to establish examination and selection 
criteria for the initial appointments for the department of 
commerce positions specified in section 16. 
    Sec. 16.  [APPROPRIATION.] 
    $1,718,000 is appropriated from the general fund to the 
commissioner of commerce for the purposes of this act.  $858,000 
is for fiscal year 1992 and $860,000 is for fiscal year 1993.  
The approved complement of the department of commerce is 
increased by 15 positions in fiscal year 1992 and 17 positions 
in fiscal year 1993. 
    $200,000 is appropriated from the general fund to the 
attorney general for the purposes of this act.  $100,000 is for 
fiscal year 1992 and $100,000 is for fiscal year 1993.  The 
approved complement of the office of attorney general is 
increased by two positions. 

                               ARTICLE 11 

                       REINSURANCE INTERMEDIARIES 
    Section 1.  [60A.70] [TITLE.] 
    Sections 60A.70 to 60A.756 may be cited as the reinsurance 
intermediary act. 
    Sec. 2.  [60A.705] [DEFINITIONS.] 
    Subdivision 1.  [TERMS.] For purposes of sections 60A.70 to 
60A.756, the terms defined in this section have the meanings 
given them. 
    Subd. 2.  [ACTUARY.] "Actuary" means a person who is a 
member in good standing of the American Academy of Actuaries. 
    Subd. 3.  [CONTROLLING PERSON.] "Controlling person" means 
a person, firm, association, or corporation who directly or 
indirectly has the power to direct or cause to be directed, the 
management, control, or activities of the reinsurance 
intermediary. 
    Subd. 4.  [INSURER.] "Insurer" means any person, firm, 
association, or corporation duly licensed in this state pursuant 
to the applicable provisions of the insurance law as an insurer. 
    Subd. 5.  [LICENSED PRODUCER.] "Licensed producer" means an 
agent, broker, or reinsurance intermediary licensed pursuant to 
the applicable provision of the insurance law. 
    Subd. 6.  [REINSURANCE INTERMEDIARY.] "Reinsurance 
intermediary" means a reinsurance intermediary-broker or a 
reinsurance intermediary-manager.  
    Subd. 7.  [REINSURANCE INTERMEDIARY-BROKER.] "Reinsurance 
intermediary-broker" or "RB" means any person, other than an 
officer or employee of the ceding insurer, firm, association, or 
corporation who solicits, negotiates, or places reinsurance 
cessions or retrocessions on behalf of a ceding insurer without 
the authority or power to bind reinsurance on behalf of this 
insurer. 
    Subd. 8.  [REINSURANCE INTERMEDIARY-MANAGER.] "Reinsurance 
intermediary-manager" or "RM" means any person, firm, 
association, or corporation who has authority to bind or manages 
all or part of the assumed reinsurance business of a reinsurer, 
including the management of a separate division, department, or 
underwriting office, and acts as an agent for that reinsurer 
whether known as a RM, manager, or other similar term.  However, 
the following persons are not considered a RM, with respect to 
that reinsurer, for the purposes of sections 60A.70 to 60A.756: 
    (1) an employee of the reinsurer; 
    (2) a United States manager of the United States branch of 
an alien reinsurer; 
    (3) an underwriting manager which, pursuant to contract, 
manages all the reinsurance operations of the reinsurer, is 
under common control with the reinsurer, subject to the holding 
company act, and whose compensation is not based on the volume 
of premiums written; or 
    (4) the manager of a group, association, pool, or 
organization of insurers which engage in joint underwriting or 
joint reinsurance and who are subject to examination by the 
insurance commissioner of the state in which the manager's 
principal business office is located. 
    Subd. 9.  [REINSURER.] "Reinsurer" means a person, firm, 
association, or corporation licensed in this state as an insurer 
with the authority to assume reinsurance. 
    Subd. 10.  [TO BE IN VIOLATION.] "To be in violation" means 
that the reinsurance intermediary, insurer, or reinsurer for 
whom the reinsurance intermediary was acting failed to 
substantially comply with the provisions of sections 60A.70 to 
60A.756. 
    Subd. 11.  [QUALIFIED UNITED STATES FINANCIAL 
INSTITUTION.] "Qualified United States financial institution" 
means an institution that: 
    (1) is organized, or in the case of a United States office 
of a foreign banking organization, is licensed, under the laws 
of the United States or any state; 
    (2) is regulated, supervised, and examined by United States 
federal or state authorities having regulatory authority over 
banks and trust companies; and 
    (3) has been determined by either the commissioner, or the 
securities valuation office of the National Association of 
Insurance Commissioners, to meet the standards of financial 
condition and standing considered necessary and appropriate to 
regulate the quality of financial institutions whose letters of 
credit will be acceptable to the commissioner. 
    Sec. 3.  [60A.71] [LICENSURE.] 
    Subdivision 1.  [REINSURANCE INTERMEDIARY-BROKER 
REQUIREMENTS.] No person, firm, association, or corporation 
shall act as a RB in this state if the RB maintains an office 
either directly or as a member or employee of a firm or 
association, or an officer, director, or employee of a 
corporation: 
    (1) in this state, unless the RB is a licensed producer in 
this state; or 
    (2) in another state, unless the RB is a licensed producer 
in this state or another state having a law substantially 
similar to this law or the RB is licensed in this state as a 
nonresident reinsurance intermediary. 
    Subd. 2.  [REINSURANCE INTERMEDIARY-MANAGER 
REQUIREMENTS.] No person, firm, association, or corporation 
shall act as a RM: 
    (1) for a reinsurer domiciled in this state, unless the RM 
is a licensed producer in this state; 
    (2) in this state, if the RM maintains an office either 
directly or as a member or employee of a firm or association, or 
an officer, director, or employee of a corporation in this 
state, unless the RM is a licensed producer in this state; or 
    (3) in another state for a nondomestic insurer, unless the 
RM is a licensed producer in this state or another state having 
a law substantially similar to this law or the person is 
licensed in this state as a nonresident reinsurance intermediary.
    Subd. 3.  [BOND AND INSURANCE REQUIREMENTS FOR REINSURANCE 
INTERMEDIARY-MANAGER.] The commissioner may require a RM subject 
to subdivision 2 to: 
    (1) file a bond in an amount from an insurer acceptable to 
the commissioner for the protection of the reinsurer; and 
    (2) maintain an errors and omissions policy in an amount 
acceptable to the commissioner. 
    Subd. 4.  [TERMS.] (a) The commissioner may issue a 
reinsurance intermediary license to any person, firm, 
association, or corporation who has complied with the 
requirements of sections 60A.70 to 60A.756.  The license issued 
to a firm or association will authorize all the members of the 
firm or association and any designated employees to act as 
reinsurance intermediaries under the license, and these persons 
shall be named in the application and any supplements to it.  
The license issued to a corporation shall authorize all of the 
officers, and any designated employees and directors of the 
corporation to act as reinsurance intermediaries on behalf of 
the corporation, and all these persons shall be named in the 
application and any supplements to it.  
    (b) If the applicant for a reinsurance intermediary license 
is a nonresident, the applicant, as a condition precedent to 
receiving or holding a license, shall designate the commissioner 
as agent for service of process in the manner, and with the same 
legal effect, provided for by this act for designation of 
service of process upon unauthorized insurers.  The applicant 
shall also furnish the commissioner with the name and address of 
a resident of this state upon whom notices or orders of the 
commissioner or process affecting the nonresident reinsurance 
intermediary may be served.  The licensee shall promptly notify 
the commissioner in writing of every change in its designated 
agent for service of process, and the change shall not become 
effective until acknowledged by the commissioner. 
    Subd. 5.  [REFUSAL TO ISSUE.] The commissioner may refuse 
to issue a reinsurance intermediary license if, in the 
commissioner's judgment, the applicant, anyone named on the 
application, or any member, principal, officer, or director of 
the applicant, is not trustworthy, or that any controlling 
person of the applicant is not trustworthy to act as a 
reinsurance intermediary, or that any of the foregoing has given 
cause for revocation or suspension of the license, or has failed 
to comply with any prerequisite for the issuance of the 
license.  Upon written request, the commissioner will furnish a 
summary of the basis for refusal to issue a license.  This 
document is privileged and not subject to chapter 13.  
    Subd. 6.  [ATTORNEYS EXEMPTION.] Licensed attorneys at law 
of this state when acting in their professional capacity as such 
are exempt from this section. 
    Sec. 4.  [60A.715] [REQUIRED CONTRACT PROVISIONS; 
REINSURANCE INTERMEDIARY-BROKERS.] 
    Transactions between a RB and the insurer it represents in 
this capacity shall only be entered into pursuant to a written 
authorization, specifying the responsibilities of each party.  
The authorization must, at a minimum, provide that: 
    (1) the insurer may terminate the RB's authority at any 
time; 
    (2) the RB will render accounts to the insurer accurately 
detailing all material transactions, including information 
necessary to support all commissions, charges, and other fees 
received by, or owing to the RB, and remit all funds due to the 
insurer within 30 days of receipt; 
    (3) all funds collected for the insurer's account will be 
held by the RB in a fiduciary capacity in a bank that is a 
qualified United States financial institution; 
    (4) the RB will comply with section 5; 
    (5) the RB will comply with the written standards 
established by the insurer for the cession or retrocession of 
all risks; and 
    (6) the RB will disclose to the insurer any relationship 
with any reinsurer to which business will be ceded or retroceded.
    Sec. 5.  [60A.72] [BOOKS AND RECORDS; REINSURANCE 
INTERMEDIARY-BROKERS.] 
    Subdivision 1.  [RECORDS OF TRANSACTIONS.] For at least ten 
years after expiration of each contract of reinsurance 
transacted by the RB, the RB will keep a complete record for 
each transaction showing: 
    (1) the type of contract, limits, underwriting 
restrictions, classes or risks, and territory; 
    (2) period of coverage, including effective and expiration 
dates, cancellation provisions, and notice required of 
cancellation; 
    (3) reporting and settlement requirements of balances; 
    (4) rate used to compute the reinsurance premium; 
    (5) names and addresses of assuming reinsurers; 
    (6) rates of all reinsurance commissioners, including the 
commissions on any retrocessions handled by the RB; 
    (7) related correspondence and memoranda; 
    (8) proof of placement; 
    (9) details regarding retrocessions handled by the RB 
including the identity of retrocessionaires and percentage of 
each contract assumed or ceded; 
    (10) financial records, including, but not limited to, 
premium and loss accounts; and 
    (11) when the RB procures a reinsurance contract on behalf 
of a licensed ceding insurer: 
    (i) directly from any assuming reinsurer, written evidence 
that the assuming reinsurer has agreed to assume the risk; or 
    (ii) if placed through a representative of the assuming 
reinsurer, other than an employee, written evidence that such 
reinsurer has delegated binding authority to the representative. 
    Subd. 2.  [ACCESS BY INSURER.] The insurer will have access 
and the right to copy and audit all accounts and records 
maintained by the RB related to its business in a form usable by 
the insurer. 
    Sec. 6.  [60A.725] [DUTIES OF INSURERS UTILIZING THE 
SERVICES OF A REINSURANCE INTERMEDIARY-BROKER.] 
    (a) An insurer shall not engage the services of a person, 
firm, association, or corporation to act as a RB on its behalf 
unless the person is licensed as required by section 3, 
subdivision 1.  
    (b) An insurer may not employ an individual who is employed 
by a RB with which it transacts business, unless the RB is under 
common control with the insurer and subject to chapter 60D. 
    (c) The insurer shall annually obtain a copy of statements 
of the financial condition of each RB with which it transacts 
business. 
    Sec. 7.  [60A.73] [REQUIRED CONTRACT PROVISIONS; 
REINSURANCE INTERMEDIARY-MANAGERS.] 
    Subdivision 1.  [APPROVAL BY COMMISSIONER.] Transactions 
between a RM and the reinsurer it represents in this capacity 
must only be entered into pursuant to a written contract, 
specifying the responsibilities of each party.  The contract 
shall be approved by the reinsurer's board of directors.  At 
least 30 days before the reinsurer assumes or cedes business 
through this producer, a true copy of the approved contract must 
be filed with the commissioner for approval.  The contract must, 
at a minimum, contain the provisions in subdivisions 2 to 14. 
    Subd. 2.  [TERMINATIONS.] The reinsurer may terminate the 
contract for cause upon written notice to the RM.  The reinsurer 
may immediately suspend the authority of the RM to assume or 
cede business during the pendency of any dispute regarding the 
cause for termination. 
    Subd. 3.  [PERIODIC ACCOUNTING.] The RM will render 
accounts to the reinsurer accurately detailing all material 
transactions, including information necessary to support all 
commissions, charges, and other fees received by, or owing to 
the RM, and remit all funds due under the contract to the 
reinsurer on not less than a monthly basis. 
    Subd. 4.  [HANDLING OF FUNDS.] All funds collected for the 
reinsurer's account will be held by the RM in a fiduciary 
capacity in a bank which is a qualified United States financial 
institution as defined herein.  The RM may retain no more than 
three months estimated claims payments and allocated loss 
adjustment expenses.  The RM shall maintain a separate bank 
account for each reinsurer that it represents. 
    Subd. 5.  [BUSINESS RECORDS.] For at least ten years after 
expiration of each contract of reinsurance transacted by the RM, 
the RM will keep a complete record for each transaction showing: 
    (1) the type of contract, limits, underwriting 
restrictions, classes or risks, and territory; 
    (2) period of coverage, including effective and expiration 
dates, cancellation provisions and notice required of 
cancellation, and disposition of outstanding reserves on covered 
risks; 
    (3) reporting and settlement requirements of balances; 
    (4) rate used to compute the reinsurance premium; 
    (5) names and addresses of reinsurers; 
    (6) rates of all reinsurance commissions, including the 
commissions on any retrocessions handled by the RM; 
    (7) related correspondence and memoranda; 
    (8) proof of placement; 
    (9) details regarding retrocessions handled by the RM, as 
permitted by section 9, subdivision 4, including the identity of 
retrocessionaires and percentage of each contract assumed or 
ceded; 
    (10) financial records, including, but not limited to, 
premium and loss accounts; and 
    (11) when the RM places a reinsurance contract on behalf of 
a ceding insurer: 
    (i) directly from any assuming reinsurer, written evidence 
that the assuming reinsurer has agreed to assume the risk; or 
    (ii) if placed through a representative of the assuming 
reinsurer, other than an employee, written evidence that the 
reinsurer has delegated binding authority to the representative. 
    Subd. 6.  [REINSURER ACCESS TO RECORDS.] The reinsurer will 
have access and the right to copy all accounts and records 
maintained by the RM related to its business in a form usable by 
the reinsurer. 
    Subd. 7.  [NONASSIGNMENT OF CONTRACT.] The contract cannot 
be assigned in whole or in part by the RM. 
    Subd. 8.  [UNDERWRITING AND RATING STANDARDS.] The RM will 
comply with the written underwriting and rating standards 
established by the insurer for the acceptance, rejection, or 
cession of all risks. 
    Subd. 9.  [CHARGES AND COMMISSIONS.] The rates, terms and 
purposes of commission, charges, and other fees which the RM may 
levy against the reinsurer will be specified in the contract. 
    Subd. 10.  [CLAIMS SETTLEMENT.] If the contract permits the 
RM to settle claims on behalf of the reinsurer, the contract 
will specify that: 
    (1) all claims will be reported to the reinsurer in a 
timely manner; 
    (2) a copy of the claim file will be sent to the reinsurer 
at its request or as soon as it becomes known that the claim: 
    (i) has the potential to exceed the lesser of an amount 
determined by the commissioner or the limit set by the 
reinsurer; 
    (ii) involves a coverage dispute; 
    (iii) may exceed the RM's claims settlement authority; 
    (iv) is open for more than six months; or 
    (v) is closed by payment of the lesser of an amount set by 
the commissioner or an amount set by the reinsurer; 
    (3) all claim files will be the joint property of the 
reinsurer and RM.  However, upon an order of liquidation of the 
reinsurer the files become the sole property of the reinsurer or 
its estate.  The RM shall have reasonable access to and the 
right to copy the files on a timely basis; and 
    (4) settlement authority granted to the RM may be 
terminated for cause upon the reinsurer's written notice to the 
RM or upon the termination of the contract.  The reinsurer may 
suspend the settlement authority during the pendency of the 
dispute regarding the cause of termination. 
    Subd. 11.  [INTERIM PROFITS.] If the contract provides for 
a sharing of interim profits by the RM, interim profits will not 
be paid until one year after the end of each underwriting period 
for property business and five years after the end of each 
underwriting period for casualty business, or a later period set 
by the commissioner for specified lines of insurance, and not 
until the adequacy of reserves on remaining claims has been 
verified pursuant to section 9, subdivision 3. 
    Subd. 12.  [CERTIFIED FINANCIAL STATEMENT.] The RM will 
annually provide the reinsurer with a statement of its financial 
condition prepared by an independent certified accountant. 
    Subd. 13.  [ON-SITE REVIEW BY REINSURER.] The reinsurer 
shall periodically, at least semiannually, conduct an on-site 
review of the underwriting and claims processing operations of 
the RM. 
    Subd. 14.  [DISCLOSURE OF INSURER RELATIONSHIP.] The RM 
will disclose to the reinsurer any relationship it has with any 
insurer before ceding or assuming any business with the insurer 
pursuant to this contract. 
    Subd. 15.  [RESPONSIBILITY OF REINSURER.] Within the scope 
of its actual or apparent authority, the acts of the RM are 
considered to be the acts of the reinsurer on whose behalf it is 
acting. 
    Sec. 8.  [60A.735] [PROHIBITED ACTS.] 
    The RM shall not: 
    (1) cede retrocessions on behalf of the reinsurer, except 
that the RM may cede facultative retrocessions pursuant to 
obligatory facultative agreements if the contract with the 
reinsurer contains reinsurance underwriting guidelines for these 
retrocessions.  These guidelines must include a list of 
reinsurers with which these automatic agreements are in effect, 
and for each reinsurer, the coverages and amounts or percentages 
that may be reinsured, and commission schedules; 
    (2) commit the reinsurer to participate in reinsurance 
syndicates; 
    (3) appoint any producer without assuring that the producer 
is lawfully licensed to transact the type of reinsurance for 
which the producer is appointed; 
    (4) without prior approval of the reinsurer, pay or commit 
the reinsurer to pay a claim, net of retrocessions, that exceeds 
the lesser of an amount specified by the reinsurer or one 
percent of the reinsurer's policyholder's surplus as of December 
31 of the last complete calendar year; 
    (5) collect any payment from a retrocessionaire or commit 
the reinsurer to any claim settlement with a retrocessionaire, 
without prior approval of the reinsurer.  If prior approval is 
given, a report must be promptly forwarded to the reinsurer; 
    (6) jointly employ an individual who is employed by the 
reinsurer unless such RM is under common control with the 
reinsurer subject to chapter 60D; 
    (7) appoint a sub-RM. 
    Sec. 9.  [60A.74] [DUTIES OF REINSURER UTILIZING THE 
SERVICES OF A REINSURANCE INTERMEDIARY-MANAGER.] 
    Subdivision 1.  [LICENSED PERSONS TO BE USED.] A reinsurer 
shall not engage the services of any person, firm, association, 
or corporation to act as a RM on its behalf unless the person is 
licensed as required by section 3, subdivision 2. 
    Subd. 2.  [ANNUAL FINANCIAL STATEMENTS TO BE OBTAINED.] The 
reinsurer shall annually obtain a copy of statements of the 
financial condition of each RM which the reinsurer has engaged 
prepared by an independent certified accountant in a form 
acceptable to the commissioner. 
    Subd. 3.  [LOSS RESERVE OPINIONS.] If a RM establishes loss 
reserves, the reinsurer shall annually obtain the opinion of an 
actuary attesting to the adequacy of loss reserves established 
for losses incurred and outstanding on business produced by the 
RM.  This opinion must be in addition to any other required loss 
reserve certification. 
    Subd. 4.  [BINDING AUTHORITY.] Binding authority for all 
retrocessional contracts or participation in reinsurance 
syndicates shall rest with an officer of the reinsurer who shall 
not be affiliated with the RM. 
    Subd. 5.  [NOTIFICATION OF TERMINATION.] Within 30 days of 
termination of a contract with a RM, the reinsurer shall provide 
written notification of the termination to the commissioner. 
    Subd. 6.  [RESTRICTION ON BOARD APPOINTMENTS.] A reinsurer 
shall not appoint to its board of directors, any officer, 
director, employee, controlling shareholder, or subproducer of 
its RM.  This subdivision does not apply to relationships 
governed by chapter 60D or, if applicable, the producer 
controlled property/casualty insurer act, article 13. 
    Sec. 10.  [60A.745] [EXAMINATION AUTHORITY.] 
    (a) A reinsurance intermediary is subject to examination by 
the commissioner.  The commissioner shall have access to all 
books, bank accounts, and records of the reinsurance 
intermediary in a form usable to the commissioner. 
    (b) A RM may be examined as if it were the reinsurer. 
    Sec. 11.  [60A.75] [VIOLATIONS.] 
    Subdivision 1.  [ADMINISTRATIVE AND CIVIL PENALTIES AND 
LIABILITIES.] A reinsurance intermediary, insurer, or reinsurer 
found by the commissioner, after a hearing conducted in 
accordance with chapter 14, to be in violation of any provision 
of sections 60A.70 to 60A.756, shall: 
    (1) for each separate violation, pay a penalty in an amount 
not exceeding $5,000; and 
    (2) be subject to revocation or suspension of its license. 
    Subd. 2.  [JUDICIAL REVIEW.] The decision, determination, 
or order of the commissioner pursuant to subdivision 1 is 
subject to judicial review pursuant to chapter 14.  
    Subd. 3.  [OTHER PENALTIES.] Nothing contained in this 
section affects the right of the commissioner to impose any 
other penalties provided in the insurance laws. 
    Sec. 12.  [60A.755] [SCOPE.] 
    Nothing contained in sections 60A.70 to 60A.756 is intended 
to or shall in any manner limit or restrict the rights of 
policyholders, claimants, creditors, or other third parties or 
confer any rights to these persons. 
    Sec. 13.  [60A.756] [RULES.] 
    The commissioner may adopt rules for the implementation and 
administration of sections 60A.70 to 60A.756. 
    Sec. 14.  [EFFECTIVE DATE.] 
    Sections 60A.70 to 60A.756 are effective August 1, 1991.  
No insurer or reinsurer may continue to utilize the services of 
a reinsurance intermediary on and after that date unless 
utilization is in compliance with this article. 

                               ARTICLE 12 

                INSURANCE REGULATORY INFORMATION SYSTEM 
    Section 1.  [60A.90] [SCOPE.] 
    Sections 60A.90 to 60A.94 apply to all domestic, foreign, 
and alien insurers who are authorized to transact business in 
this state. 
    Sec. 2.  [60A.91] [FILING REQUIREMENTS.] 
    (a) A domestic, foreign, and alien insurer who is 
authorized to transact insurance in this state shall annually on 
or before March 1 of each year, file with the National 
Association of Insurance Commissioners (NAIC) a copy of its 
annual statement convention blank, along with additional filings 
prescribed by the commissioner for the preceding year.  The 
information filed with the National Association of Insurance 
Commissioners must be in the same format and scope as that 
required by the commissioner and must include the signed jurat 
page and the actuarial certification.  Amendments and addenda to 
the annual statement filing subsequently filed with the 
commissioner must also be filed with the NAIC. 
    (b) Foreign insurers that are domiciled in a state that has 
a law substantially similar to paragraph (a) is considered to be 
in compliance with this section. 
    Sec. 3.  [60A.92] [IMMUNITY.] 
    In the absence of actual malice, members of the NAIC, their 
duly authorized committees, subcommittees, and task forces, 
their delegates, NAIC employees, and all others charged with the 
responsibility of collecting, reviewing, analyzing, and 
disseminating the information developed from the filing of the 
annual statement convention blanks are acting as agents of the 
commissioner under the authority of this act and are not subject 
to civil liability for libel, slander, or any other cause of 
action by virtue of their collection, review, and analysis or 
dissemination of the data and information collected from the 
filings required under sections 60A.90 to 60A.94. 
    Sec. 4.  [60A.93] [CONFIDENTIALITY.] 
    All financial analysis ratios and examination synopses 
concerning insurance companies that are submitted to the 
department by the National Association of Insurance 
Commissioners' Insurance Regulatory Information System are 
confidential and may not be disclosed by the department. 
    Sec. 5.  [60A.94] [REVOCATION OF CERTIFICATE OF AUTHORITY.] 
    The commissioner may suspend, revoke, or refuse to renew 
the certificate of authority of an insurer failing to file its 
annual statement when due or within any extension of time that 
the commissioner, for good cause, may have granted. 
    Sec. 6.  [EFFECTIVE DATE.] 
    Sections 60A.90 to 60A.94 are effective the day following 
final enactment. 

                               ARTICLE 13 

                   BUSINESS TRANSACTED WITH PRODUCER 
CONTROLLED PROPERTY/CASUALTY INSURER
    Section 1.  [60J.01] [TITLE.] 
    Sections 60J.01 to 60J.05 may be cited as the business 
transacted with producer controlled property/casualty insurer 
act. 
    Sec. 2.  [60J.02] [DEFINITIONS.] 
    Subdivision 1.  [TERMS.] For the purposes of sections 
60J.01 to 60J.05, the terms defined in this section have the 
meanings given them. 
    Subd. 2.  [PRODUCER.] "Producer" means an insurance broker 
or brokers or any other person, firm, association, or 
corporation, when, for any compensation, commission, or other 
thing of value, the person, firm, association, or corporation 
acts or aids in any manner in soliciting, negotiating, or 
procuring the making of any insurance contract on behalf of an 
insured other than himself, herself, or itself.  
    Subd. 3.  [REINSURANCE INTERMEDIARY.] "Reinsurance 
intermediary" means a person, firm, association, or corporation 
who acts as a producer in soliciting, negotiating, or procuring 
the making of a reinsurance contract or binder on behalf of a 
ceding insurer or acts as a producer in accepting any 
reinsurance contract or binder on behalf of an assuming insurer. 
    Subd. 4.  [CONTROL.] "Control" or "controlled" means the 
possession, direct or indirect, of the power to direct or cause 
the direction of the management and policies of a person, 
whether through the ownership of voting securities, by contract 
other than a contract for goods or nonmanagement services, or 
otherwise.  Control is presumed to exist if a person, directly 
or indirectly, owns, controls, holds with the powers to vote, or 
holds proxies representing a majority of the outstanding voting 
securities of any other person.  No person is considered to 
control another person solely by reason of being an officer or 
director of the other person. 
    Subd. 5.  [LICENSED PROPERTY/CASUALTY INSURER.] "Licensed 
property/casualty insurer" or "insurer" means a person, firm, 
association, or corporation licensed to transact a 
property/casualty insurance business in this state and that 
issues policies covered by chapter 60C.  The following are not 
licensed property/casualty insurers for the purposes of sections 
60J.01 to 60J.05: 
    (1) all nonadmitted insurers; 
    (2) all risk retention groups as defined in the Superfund 
Amendments Reauthorization Act of 1986, Public Law Number 
99-499, 100 Stat. 1613 (1986) and the Risk Retention Act, United 
States Code, title 15, section 3901 et seq. and chapter 60E; 
    (3) all residual market pools and joint underwriting 
authorities or associations; and 
    (4) all captive insurers.  This term includes insurance 
companies owned by another organization whose exclusive purpose 
is to insure risks of the parent organization and affiliated 
companies or, in the case of groups and associations, insurance 
organizations owned by the insureds whose exclusive purpose is 
to insure risks of member organizations and/or group members and 
their affiliates. 
    Subd. 6.  [INDEPENDENT CASUALTY ACTUARY.] "Independent 
casualty actuary" means a casualty actuary who is a member of 
the American Academy of Actuaries and who is not affiliated 
with, nor an employee, principal, nor the direct or indirect 
owner of, or in any way controlled by the insurer or producer. 
    Subd. 7.  [VIOLATION.] "Violation" means a finding by the 
commissioner that: 
    (1) the controlling producer did not materially comply with 
section 3; 
    (2) the controlled insurer, with respect to business placed 
by the controlling producer, engaged in a pattern of charging 
premiums that were lower than those being charged by the insurer 
or other insurers for similar risks written during the same 
period and placed by noncontrolling producers.  When determining 
whether premiums were lower than those prevailing in the market, 
the commissioner shall take into consideration applicable 
industry or actuarial standards at the time the business was 
written; 
    (3) the controlling producer failed to maintain records, 
sufficient: 
    (i) to demonstrate that the producer's dealings with its 
controlled insurer were fair and equitable and in compliance 
with chapter 60D; and 
    (ii) to accurately disclose the nature and details of its 
transactions with the controlled insurer, including information 
necessary to support the charges or fees to the respective 
parties; 
    (4) the controlled insurer, with respect to business placed 
by the controlling producer, either failed to establish or 
deviated from its underwriting procedures; 
    (5) the controlled insurer's capitalization at the time the 
business was placed by the controlling producer and with respect 
to this business was not in compliance with criteria established 
by the commissioner or with the insurance law or rules adopted 
under it; or 
    (6) the controlling producer or the controlled insurer 
failed to substantially comply with the insurance holding 
company act, chapter 60D and any rules adopted under it.  
    Sec. 3.  [60J.03] [LIMITATION ON BUSINESS PLACED WITH 
CONTROLLED INSURER.] 
    Subdivision 1.  [PRODUCER LIMITATION.] No producer that has 
control of a licensed property/casualty insurer may directly or 
indirectly place business with the insurer in any transaction in 
which the producer, at the time the business is placed, is 
acting as such on behalf of the insured for any compensation, 
commission, or other thing of value, unless: 
    (1) there is a written contract between the controlling 
producer and the insurer, which contract has been approved by 
the board of directors of the insurer; 
    (2) the producer, before the effective date of the policy, 
shall deliver written notice to the prospective insured 
disclosing the relationship between the producer and the 
controlled insurer.  The disclosure, signed by the insured, must 
be retained in the underwriting file until the filing of the 
report on examination covering the period in which the coverage 
is in effect.  Except that, if the business is placed through a 
subproducer who is not a controlling producer, the controlling 
producer shall retain in the producer's records a signed 
commitment from the subproducer that the subproducer is aware of 
the relationship between the insurer and the producer and that 
the subproducer has or will notify the insured; 
    (3) all funds collected for the account of the insurer by 
the controlling producer must be paid, net of commissions, 
cancellations, and other adjustments, to the insurer no less 
often that quarterly; 
    (4) in addition to any other required loss reserve 
certification, the controlled insurer shall annually, on April 1 
of each year, file with the commissioner an opinion of an 
independent casualty actuary, or other independent loss reserve 
specialist acceptable to the commissioner, reporting loss ratios 
for each line of business written and attesting to the adequacy 
of loss reserves established for losses incurred and outstanding 
as of year-end, including incurred but not reported, on business 
placed by the producer; 
    (5) the controlled insurer shall annually report to the 
commissioner the amount of commissions paid to the producer, the 
percentage the amount represents of the net premiums written and 
comparable amounts and percentage paid to noncontrolling 
producers for placements of the same kinds of insurance; and 
    (6) every controlled insurer shall have an audit committee 
of the board of directors composed of independent directors.  
Before approval of the annual financial statement, the audit 
committee shall meet with management, the insurer's independent 
certified public accountants, and an independent casualty 
actuary, or other independent loss reserve specialist acceptable 
to the commissioner, to review the adequacy of the insurer's 
loss reserves. 
    Subd. 2.  [REINSURANCE INTERMEDIARY LIMITATION.] No 
reinsurance intermediary that has control of an assuming insurer 
may directly or indirectly place business with the insurer in 
any transaction in which the reinsurance intermediary is acting 
as a broker on behalf of the ceding insurer.  No reinsurance 
intermediary that has control of a ceding insurer may directly 
or indirectly accept business from the insurer in any 
transaction in which the reinsurance intermediary is acting as a 
producer on behalf of the assuming insurer.  The prohibitions in 
this subdivision do not apply to a reinsurance intermediary that 
makes a full and complete written disclosure to the parties of 
its relationship with the assuming or ceding insurer before 
completion of the transaction. 
    Sec. 4.  [60J.04] [LIABILITY OF CONTROLLING PRODUCER IN THE 
EVENT OF INSOLVENCY OF CONTROLLED INSURER.] 
    Subdivision 1.  [INITIATION OF ACTION.] If the commissioner 
has reason to believe that a controlling producer has committed 
or is committing an act that could be determined to be a 
violation of sections 60J.01 to 60J.05, the commissioner shall 
serve upon the controlling producer, in the manner provided by 
chapter 14, a statement of the charges and notice of a hearing 
to be conducted in accordance with chapter 14, at a time not 
less than 30 days after the service of the notice and at a place 
fixed in the notice. 
    Subd. 2.  [HEARING.] At the hearing, the commissioner shall 
establish that the controlling producer engaged in a violation 
of sections 60J.01 to 60J.05.  The controlling producer shall 
have an opportunity to be heard and to present evidence 
rebutting the charges and to establish that the insolvency of 
the controlled insurer arose out of events not attributable to 
the violation.  The decision, determination, or order of the 
commissioner is subject to judicial review pursuant to chapter 
14.  
    Subd. 3.  [PENALTY.] Upon finding that the controlling 
producer committed a violation, and the controlling producer 
failed to establish that the violation did not substantially 
contribute to the insolvency, the controlling producer shall 
reimburse the state guaranty funds for all payments made for 
losses, loss adjustment, and administrative expenses on the 
business placed by the producer in excess of gross earned 
premiums and investment income earned on premiums and loss 
reserves for the business. 
    Subd. 4.  [OTHER PENALTIES.] Nothing contained in this 
section affects the right of the commissioner to impose any 
other penalties provided for in the insurance laws.  
    Sec. 5.  [60J.05] [SCOPE.] 
    Nothing contained in sections 60J.01 to 60J.05 is intended 
to or in any manner alters or affects the rights of 
policyholders, claimants, creditors, or other third parties. 
    Sec. 6.  [EFFECTIVE DATE.] 
    This article is effective August 1, 1992. 

                               ARTICLE 14 

                   INSURANCE HOLDING COMPANY SYSTEMS 
    Section 1.  Minnesota Statutes 1990, section 60A.07, 
subdivision 5d, is amended to read: 
    Subd. 5d.  [APPLICATION.] All insurance companies shall 
meet the requirements of subdivisions 5a to 5d, except as 
provided in this subdivision.  Any company authorized to 
transact a particular kind of insurance as specified in section 
60A.06, subdivision 1, on April 9, 1976 may continue until 
January 1, 1983 to conduct the same kind of insurance by meeting 
and maintaining the applicable capital, surplus, and guaranty 
fund requirements which were in effect immediately prior to 
April 9, 1976.  On and after January 1, 1983, all companies 
shall be required to meet the applicable capital, constantly 
maintained surplus, and guaranty fund requirements of 
subdivisions 5a, 5b, and 5c. 
    Notwithstanding the foregoing provisions of this 
subdivision with respect to the deferred date of compliance, 
after April 9, 1976: 
    (1) Any insurance company which seeks authority to transact 
an additional kind of insurance shall, as a condition to the 
granting of the authority, immediately comply with the 
applicable capital, constantly maintained surplus, and guaranty 
fund requirements of subdivisions 5a, 5b, and 5c for all of its 
authorized kinds of business. 
    (2) If any person acquires control of an insurance company, 
the insurance company shall as of the date of the acquisition of 
control comply with the applicable capital, constantly 
maintained surplus, and guaranty fund requirements of 
subdivisions 5a, 5b, and 5c for all of its authorized kinds of 
business.  For purposes of this clause, the term "control" shall 
be defined as provided in section 60D.01 60D.15, subdivision 4, 
and the term "person" shall be defined as provided in 
section 60D.01 60D.15, subdivision 7. 
    Sec. 2.  [60D.15] [DEFINITIONS.] 
    Subdivision 1.  [TERMS.] For purposes of this article, the 
terms in subdivisions 2 to 10 have the meanings given them, 
unless the context otherwise requires. 
    Subd. 2.  [AFFILIATE.] An "affiliate" of, or person 
"affiliated" with, a specific person, is a person that directly, 
or indirectly through one or more intermediaries, controls, or 
is controlled by, or is under common control with, the person 
specified. 
    Subd. 3.  [COMMISSIONER.] The term "commissioner" means the 
commissioner of commerce, the commissioner's deputies, or the 
commerce department, as appropriate. 
    Subd. 4.  [CONTROL.] The term "control," including the 
terms "controlling," "controlled by," and "under common control 
with," means the possession, direct or indirect, of the power to 
direct or cause the direction of the management and policies of 
a person, whether through the ownership of voting securities, by 
contract other than a commercial contract for goods or 
nonmanagement services, or otherwise, unless the power is the 
result of an official position with or corporate office held by 
the person.  Control is be presumed to exist if any person, 
directly or indirectly, owns, controls, holds with the power to 
vote, or holds proxies representing, ten percent or more of the 
voting securities of any other person.  This presumption may be 
rebutted by a showing made in the manner provided by section 6, 
subdivision 11, that control does not exist in fact.  The 
commissioner may determine, after furnishing all persons in 
interest notice and opportunity to be heard and making specific 
findings of fact to support such determination, that control 
exists in fact, notwithstanding the absence of a presumption to 
that effect. 
    Subd. 5.  [INSURANCE HOLDING COMPANY SYSTEM.] An "insurance 
holding company system" consists of two or more affiliated 
persons, one or more of which is an insurer. 
    Subd. 6.  [INSURER.] The term "insurer" means a company 
qualified and licensed by the commissioner to transact the 
business of insurance, but does not include an insurance 
solicitor, agent, or agency.  The term also does not include: 
    (1) agencies, authorities, or instrumentalities of the 
United States, its possessions and territories, the commonwealth 
of Puerto Rico, the District of Columbia, or a state or 
political subdivision of a state; or 
    (2) nonprofit medical and hospital service associations. 
    Subd. 7.  [PERSON.] A "person" is an individual, a 
corporation, a partnership, an association, a joint stock 
company, a trust, an unincorporated organization, any similar 
entity or any combination of the foregoing acting in concert, 
but does not include any joint venture partnership exclusively 
engaged in owning, managing, leasing, or developing real or 
tangible personal property. 
    Subd. 8.  [SECURITY HOLDER.] A "security holder" of a 
specified person is one who owns any security of the person, 
including common stock, preferred stock, debt obligations, and 
any other security convertible into or evidencing the right to 
acquire any security of the person. 
    Subd. 9.  [SUBSIDIARY.] A "subsidiary" of a specified 
person is an affiliate controlled by the person directly or 
indirectly through one or more intermediaries. 
    Subd. 10.  [VOTING SECURITY.] The term "voting security" 
includes any security convertible into or evidencing a right to 
acquire a voting security. 
    Sec. 3.  [60D.16] [SUBSIDIARIES OF INSURERS.] 
    Subdivision 1.  [AUTHORIZATION.] A domestic insurer, either 
by itself or in cooperation with one or more persons, may 
organize or acquire one or more subsidiaries engaged in the 
following kinds of business: 
    (1) any kind of insurance business authorized by the 
jurisdiction in which it is incorporated; 
    (2) acting as an insurance broker or as an insurance agent 
for its parent or for any of its parent's insurer subsidiaries; 
    (3) investing, reinvesting, or trading in securities for 
its own account, that of its parent, any subsidiary of its 
parent, or any affiliate or subsidiary; 
    (4) management of any investment company subject to or 
registered pursuant to the Investment Company Act of 1940, as 
amended, including related sales and services; 
    (5) acting as a broker-dealer subject to or registered 
pursuant to the Securities Exchange Act of 1934, as amended; 
    (6) rendering investment advice to governments, government 
agencies, corporations, or other organizations or groups; 
    (7) rendering other services related to the operations of 
an insurance business including, but not limited to, actuarial, 
loss prevention, safety engineering, data processing, 
accounting, claims, appraisal, and collection services; 
    (8) ownership and management of assets that the parent 
corporation could itself own or manage; 
    (9) acting as administrative agent for a governmental 
instrumentality which is performing an insurance function; 
    (10) financing of insurance premiums, agents, and other 
forms of consumer financing; 
    (11) any other business activity determined by the 
commissioner to be reasonably ancillary to an insurance 
business; and 
    (12) owning a corporation or corporations engaged or 
organized to engage exclusively in one or more of the businesses 
specified in this section. 
    Subd. 2.  [ADDITIONAL INVESTMENT AUTHORITY.] In addition to 
investments in common stock, preferred stock, debt obligations, 
and other securities otherwise permitted, a domestic insurer may 
also: 
    (a) Invest, in common stock, preferred stock, debt 
obligations, and other securities of one or more subsidiaries, 
amounts that do not exceed the lesser of ten percent of the 
insurer's assets or 50 percent of the insurer's surplus as 
regards policyholders, provided that after the investments, the 
insurer's surplus as regards policyholders will be reasonable in 
relation to the insurer's outstanding liabilities and adequate 
to its financial needs.  In calculating the amount of these 
investments, investments in domestic or foreign insurance 
subsidiaries must be excluded, and there must be included: 
    (1) total net money or other consideration expended and 
obligations assumed in the acquisition or formation of a 
subsidiary, including all organizational expenses and 
contributions to capital and surplus of the subsidiary whether 
or not represented by the purchase of capital stock or issuance 
of other securities; and 
    (2) all amounts expended in acquiring additional common 
stock, preferred stock, debt obligations, and other securities 
and all contributions to the capital or surplus, of a subsidiary 
subsequent to its acquisition or formation. 
    (b) Invest any amount in common stock, preferred stock, 
debt obligations, and other securities of one or more 
subsidiaries engaged or organized to engage exclusively in the 
ownership and management of assets authorized as investments for 
the insurer provided that the subsidiary agrees to limit its 
investments in any asset so that the investments will not cause 
the amount of the total investment of the insurer to exceed any 
of the investment limitations specified in paragraph (a) or 
other statutes applicable to the insurer.  For the purpose of 
this paragraph, "the total investment of the insurer" includes: 
    (1) any direct investment by the insurer in an asset; and 
    (2) the insurer's proportionate share of any investment in 
an asset by any subsidiary of the insurer, which must be 
calculated by multiplying the amount of the subsidiary's 
investment by the percentage of the ownership of the subsidiary. 
    (c) With the approval of the commissioner, invest any 
greater amount in common stock, preferred stock, debt 
obligations, or other securities of one or more subsidiaries, if 
after the investment the insurer's surplus as regards 
policyholders will be reasonable in relation to the insurer's 
outstanding liabilities and adequate to its financial needs. 
    Subd. 3.  [EXEMPTION FROM INVESTMENT 
RESTRICTIONS.] Investments in common stock, preferred stock, 
debt obligations, or other securities of subsidiaries made 
pursuant to subdivision 2 are not subject to any of the 
otherwise applicable restrictions or prohibitions applicable to 
these investments of insurers. 
    Subd. 4.  [QUALIFICATION OF INVESTMENT; WHEN 
DETERMINED.] Whether any investment pursuant to subdivision 2 
meets the applicable requirements is to be determined before the 
investment is made, by calculating the applicable investment 
limitations as though the investment had already been made, 
taking into account the then outstanding principal balance on 
all previous investments in debt obligations, and the value of 
all previous investments in equity securities as of the day they 
were made, net of any return of capital invested, not including 
dividends. 
    Subd. 5.  [CESSATION OF CONTROL.] If an insurer ceases to 
control a subsidiary, it shall dispose of any investment in it 
made pursuant to this section within three years from the time 
of the cessation of control or within any further time the 
commissioner prescribes, unless at any time after the investment 
has been made, the investment meets the requirements for 
investment under any other provision of law, and the insurer has 
notified the commissioner of this fact. 
    Sec. 4.  [60D.17] [ACQUISITION OF CONTROL OF OR MERGER WITH 
DOMESTIC INSURER.] 
    Subdivision 1.  [FILING REQUIREMENTS.] No person other than 
the issuer shall make a tender offer for or a request or 
invitation for tenders of, or enter into any agreement to 
exchange securities or, seek to acquire, or acquire, in the open 
market or otherwise, any voting security of a domestic insurer 
if, after the consummation thereof, the person would, directly 
or indirectly, or by conversion or by exercise of any right to 
acquire, be in control of the insurer.  No person shall enter 
into an agreement to merge with or otherwise to acquire control 
of a domestic insurer or any person controlling a domestic 
insurer unless, at the time the offer, request, or invitation is 
made or the agreement is entered into, or before the acquisition 
of the securities if no offer or agreement is involved, the 
person has filed with the commissioner and has sent to the 
insurer, a statement containing the information required by this 
section and the offer, request, invitation, agreement, or 
acquisition has been approved by the commissioner in the manner 
prescribed in this section. 
    For purposes of this section, a domestic insurer includes a 
person controlling a domestic insurer unless the person as 
determined by the commissioner is either directly or through its 
affiliates primarily engaged in business other than the business 
of insurance.  However, the person shall file a preacquisition 
notification with the commissioner containing the information 
set forth in section 5, subdivision 3, paragraph (b), 30 days 
before the proposed effective date of the acquisition.  Failure 
to file is subject to section 5, subdivision 5.  For the 
purposes of this section, "person" does not include any 
securities broker holding, in the usual and customary brokers 
function, less than 20 percent of the voting securities of an 
insurance company or of any person that controls an insurance 
company. 
    Subd. 2.  [CONTENT OF STATEMENT.] The statement to be filed 
with the commissioner shall be made under oath or affirmation 
and shall contain the following information: 
    (a) The name and address of each person by whom or on whose 
behalf the merger or other acquisition of control referred to in 
subdivision 1 is to be effected, hereinafter called "acquiring 
party"; and 
    (1) if the person is an individual, the principal 
occupation and all offices and positions held during the past 
five years, and any conviction of crimes other than minor 
traffic violations during the past ten years; and 
    (2) if the person is not an individual, a report of the 
nature of its business operations during the past five years or 
for a lesser period as the person and any predecessors have been 
in existence; an informative description of the business 
intended to be done by the person and the person's subsidiaries; 
and a list of all individuals who are or who have been selected 
to become directors or executive officers of such person, or who 
perform or will perform functions appropriate to such 
positions.  The list must include for each individual the 
information required by clause (1). 
    (b) The source, nature, and amount of the consideration 
used or to be used in effecting the merger or other acquisition 
of control, a description of any transaction in which funds were 
or are to be obtained for this purpose, including any pledge of 
the insurer's stock, or the stock of any of its subsidiaries or 
controlling affiliates, and the identity of persons furnishing 
the consideration, provided, however, that where a source of the 
consideration is a loan made in the lender's ordinary course of 
business, the identity of the lender shall remain confidential, 
if the person filing the statement so requests. 
    (c) Fully audited financial information as to the earnings 
and financial condition of each acquiring party for the 
preceding five fiscal years of each acquiring party, or for a 
lesser period as the acquiring party and any predecessors have 
been in existence, and similar unaudited information as of a 
date not earlier than 90 days before the filing of the statement.
    (d) Any plans or proposals that each acquiring party may 
have to liquidate the insurer, to sell its assets or merge or 
consolidate it with any person, or to make any other material 
change in its business or corporate structure or management. 
    (e) The number of shares of any security referred to in 
subdivision 1 that each acquiring party proposes to acquire, and 
the terms of the offer, request, invitation, agreement, or 
acquisition referred to in subdivision 1. 
    (f) The amount of each class of any security referred to in 
subdivision 1 that is beneficially owned or concerning which 
there is a right to acquire beneficial ownership by each 
acquiring party. 
    (g) A full description of any contracts, arrangements, or 
understandings with respect to any security referred to in 
subdivision 1 in which any acquiring party is involved, 
including but not limited to, transfer of any of the securities, 
joint ventures, loan or option arrangements, puts or calls, 
guarantees of loans, guarantees against loss or guarantees of 
profits, division of losses or profits, or the giving or 
withholding of proxies.  The description must identify the 
persons with whom the contracts, arrangements, or understandings 
have been entered into. 
    (h) A description of the purchase of any security referred 
to in subdivision 1 during the 12 calendar months preceding the 
filing of the statement, by any acquiring party, including the 
dates of purchase, names of the purchasers, and consideration 
paid or agreed to be paid for it. 
    (i) A description of any recommendations to purchase any 
security referred to in subdivision 1 made during the 12 
calendar months preceding the filing of the statement, by any 
acquiring party, or by anyone based upon interviews or at the 
suggestion of the acquiring party. 
    (j) Copies of all tender offers for, requests, or 
invitations for tenders of, exchange offers for, and agreements 
to acquire or exchange any securities referred to in subdivision 
1 and, if distributed, of additional soliciting material 
relating to them. 
    (k) The term of any agreement, contract, or understanding 
made with or proposed to be made with any broker-dealer as to 
solicitation of securities referred to in subdivision 1 for 
tender, and the amount of any fees, commissions, or other 
compensation to be paid to broker-dealers with regard to it. 
    (l) Additional information the commissioner may by rule 
prescribe as necessary or appropriate for the protection of 
policyholders of the insurer or in the public interest. 
    If the person required to file the statement referred to in 
subdivision 1 is a partnership, limited partnership, syndicate, 
or other group, the commissioner may require that the 
information called for by paragraphs (a) to (l) must be given 
with respect to each partner of the partnership or limited 
partnership, each member of the syndicate or group, and each 
person who controls the partner or member.  If a partner, 
member, or person is a corporation, or the person required to 
file the statement referred to in subdivision 1 is a corporation 
the commissioner may require that the information called for by 
paragraphs (a) to (l) be given with respect to the corporation, 
each officer and director of the corporation, and each person 
who is directly or indirectly the beneficial owner of more than 
ten percent of the outstanding voting securities of the 
corporation. 
    If any material change occurs in the facts set forth in the 
statement filed with the commissioner and sent to the insurer 
pursuant to this section, an amendment setting forth the change, 
together with copies of all documents and other material 
relevant to the change, must be filed with the commissioner and 
sent to the insurer within two business days after the person 
learns of the change. 
    Subd. 3.  [ALTERNATIVE FILING MATERIALS.] If any offer, 
request, invitation, agreement, or acquisition referred to in 
subdivision 1 is proposed to be made by means of a registration 
statement under the Securities Act of 1933, or in circumstances 
requiring the disclosure of similar information under the 
Securities Exchange Act of 1934, or under a state law requiring 
similar registration or disclosure, the person required to file 
the statement referred to in subdivision 1 may utilize these 
documents in furnishing the information called for by that 
statement. 
    Subd. 4.  [APPROVAL BY COMMISSIONER; HEARINGS.] (a) The 
commissioner shall approve any merger or other acquisition of 
control referred to in subdivision 1 unless, after a public 
hearing, the commissioner finds that: 
    (1) After the change of control, the domestic insurer 
referred to in subdivision 1 would not be able to satisfy the 
requirements for the issuance of a license to write the line or 
lines of insurance for which it is presently licensed; 
    (2) The effect of the merger or other acquisition of 
control would be substantially to lessen competition in 
insurance in this state or tend to create a monopoly therein in 
applying the competitive standard in this subdivision: 
    (i) the informational requirements of section 5, 
subdivision 3, paragraph (b), and the standards of section 5, 
subdivision 4, paragraph (c), shall apply; 
    (ii) the merger or other acquisition shall not be 
disapproved if the commissioner finds that any of the situations 
meeting the criteria provided by section 5, subdivision 4, 
paragraph (c), exist; and 
    (iii) the commissioner may condition the approval of the 
merger or other acquisition on the removal of the basis of 
disapproval within a specified period of time; 
    (3) The financial condition of any acquiring party is such 
as might jeopardize the financial stability of the insurer, or 
prejudice the interest of its policyholders; 
    (4) The plans or proposals that the acquiring party has to 
liquidate the insurer, sell its assets, or consolidate or merge 
it with any person, or to make any other material change in its 
business or corporate structure or management, are unfair and 
unreasonable to policyholders of the insurer and not in the 
public interest; 
    (5) The competence, experience, and integrity of those 
persons who would control the operation of the insurer are such 
that it would not be in the interest of policyholders of the 
insurer and of the public to permit the merger or other 
acquisition of control; or 
    (6) The acquisition is likely to be hazardous or 
prejudicial to the insurance buying public. 
    (b) The public hearing referred to in paragraph (a) must be 
held 30 days after the statement required by subdivision 1 is 
filed, and at least 20 days notice of it shall be given by the 
commissioner to the person filing the statement.  Not less than 
seven days notice of the public hearing shall be given by the 
person filing the statement to the insurer and to other persons 
designated by the commissioner.  The commissioner shall make a 
determination within 30 days after the conclusion of the 
hearing.  At the hearing, the person filing the statement, the 
insurer, any person to whom notice of hearing was sent, and any 
other person whose interest may be affected by it may present 
evidence, examine and cross-examine witnesses, and offer oral 
and written arguments and may conduct discovery proceedings in 
the same manner as is presently allowed in the district courts 
of this state.  All discovery proceedings must be concluded not 
later than three days before the start of the public hearing. 
    (c) The commissioner may retain at the acquiring person's 
expense any attorneys, actuaries, accountants, and other experts 
not otherwise a part of the commissioner's staff as may be 
reasonably necessary to assist the commissioner in reviewing the 
proposed acquisition of control. 
    Subd. 5.  [EXEMPTIONS.] This section does not apply to: 
    (1) Any transaction that is subject to section 60A.16, 
dealing with the merger or consolidation of two or more insurers.
    (2) Any offer, request, invitation, agreement, or 
acquisition that the commissioner by order exempts from this 
section as (i) not having been made or entered into for the 
purpose and not having the effect of changing or influencing the 
control of a domestic insurer, or (ii) as otherwise not 
comprehended within the purposes of this section. 
    Subd. 6.  [VIOLATIONS.] The following are violations of 
this section: 
    (1) the failure to file any statement, amendment, or other 
material required to be filed pursuant to subdivision 1 or 2; or 
    (2) the effectuation or any attempt to effectuate an 
acquisition of control of, or merger with, a domestic insurer 
unless the commissioner has approved it. 
    Subd. 7.  [JURISDICTION, CONSENT TO SERVICE OF 
PROCESS.] The courts of this state have jurisdiction over every 
person not resident, domiciled, or authorized to do business in 
this state who files a statement with the commissioner under 
this section, and overall actions involving the person arising 
out of violations of this section, and the person is deemed to 
have performed acts equivalent to and constituting an 
appointment by the person of the commissioner to be the person's 
true and lawful attorney upon whom may be served all lawful 
process in any action, suit, or proceeding arising out of 
violations of this section.  Copies of all lawful process shall 
be served on the commissioner and transmitted by registered or 
certified mail by the commissioner to the person at the person's 
last known address. 
    Sec. 5.  [60D.18] [ACQUISITIONS INVOLVING INSURERS NOT 
OTHERWISE COVERED.] 
    Subdivision 1.  [DEFINITIONS.] The following definitions 
apply for the purposes of this section only: 
    (a) "Acquisition" means an agreement, arrangement, or 
activity the consummation of which results in a person acquiring 
directly or indirectly the control of another person, and 
includes, but is not limited to, the acquisition of voting 
securities, the acquisition of assets, bulk reinsurance, and 
mergers. 
    (b) An "involved insurer" includes an insurer that either 
acquires or is acquired, is affiliated with an acquirer or 
acquired, or is the result of a merger. 
    Subd. 2.  [SCOPE.] (a) Except as exempted in paragraph (b), 
this section applies to any acquisition in which there is a 
change in control of an insurer authorized to do business in 
this state. 
    (b) This section does not apply to the following: 
    (1) an acquisition subject to approval or disapproval by 
the commissioner pursuant to section 4; 
    (2) a purchase of securities solely for investment purposes 
so long as such securities are not used by voting or otherwise 
to cause or attempt to cause the substantial lessening of 
competition in any insurance market in this state.  If a 
purchase of securities results in a presumption of control under 
section 2, subdivision 4, it is not solely for investment 
purposes unless the commissioner of the insurer's state of 
domicile accepts a disclaimer of control or affirmatively finds 
that control does not exist and such disclaimer action or 
affirmative finding is communicated by the domiciliary 
commissioner to the commissioner of this state; 
    (3) the acquisition of a person by another person when both 
persons are neither directly nor through affiliates primarily 
engaged in the business of insurance, if preacquisition 
notification is filed with the commissioner in accordance with 
subdivision 3, paragraph (a), 30 days before the proposed 
effective date of the acquisition.  However, the preacquisition 
notification is not required for exclusion from this section, if 
the acquisition would otherwise be excluded from this section by 
any other clause of this paragraph; 
    (4) the acquisition of already affiliated persons; 
    (5) an acquisition if, as an immediate result of the 
acquisition; 
    (i) in no market would the combined market share of the 
involved insurers exceed five percent of the total market; 
    (ii) there would be no increase in any market share; or 
    (iii) in no market would the combined market share of the 
involved insurers exceeds 12 percent of the total market; and 
the market share increases by more than two percent of the total 
market. 
    For the purpose of this clause, a market means direct 
written insurance premium in this state for a line of business 
as contained in the annual statement required to be filed by 
insurers licensed to do business in this state; 
    (6) an acquisition for which a preacquisition notification 
would be required pursuant to this section due solely to the 
resulting effect on the ocean marine insurance line of business; 
and 
    (7) an acquisition of an insurer whose domiciliary 
commissioner affirmatively finds that the insurer is in failing 
condition; there is a lack of feasible alternative to improving 
the condition; the public benefits of improving the insurer's 
condition through the acquisition exceed the public benefits 
that would arise from not lessening competition; and the 
findings are communicated by the domiciliary commissioner to the 
commissioner of this state. 
    Subd. 3.  [PREACQUISITION NOTIFICATION; WAITING 
PERIOD.] (a) An acquisition covered by subdivision 2 may be 
subject to an order pursuant to subdivision 4 unless the 
acquiring person files a preacquisition notification and the 
waiting period has expired.  The acquired person may file a 
preacquisition notification.  The commissioner shall give 
confidential treatment to information submitted under this 
section in the same manner as provided in section 9.  
    (b) The preacquisition notification must be in the form and 
contain the information as prescribed by the National 
Association of Insurance Commissioners relating to those markets 
that, under subdivision 2, paragraph (b), clause (5), cause the 
acquisition not to be exempted from the provisions of this 
section.  The commissioner may require the additional material 
and information as the commissioner deems necessary to determine 
whether the proposed acquisition, if consummated, would violate 
the competitive standard of subdivision 4.  The required 
information may include an opinion of an economist as to the 
competitive impact of the acquisition in this state accompanied 
by a summary of the education and experience of the person 
indicating that person's ability to render an informed opinion. 
    (c) The waiting period required begins on the date of 
receipt of the commissioner of a preacquisition notification and 
ends on the earlier of the 30th day after the date of its 
receipt, or termination of the waiting period by the 
commissioner.  Before the end of the waiting period, the 
commissioner on a one-time basis may require the submission of 
additional needed information relevant to the proposed 
acquisition, in which event the waiting period shall end on the 
earlier of the 30th day after receipt of the additional 
information by the commissioner or termination of the waiting 
period by the commissioner. 
    Subd. 4.  [COMPETITIVE STANDARD.] (a) The commissioner may 
enter an order under subdivision 5 with respect to an 
acquisition if there is substantial evidence that the effect of 
the acquisition may be substantially to lessen competition in 
any line of insurance in this state or tend to create a monopoly 
therein or if the insurer fails to file adequate information in 
compliance with subdivision 3. 
    (b) In determining whether a proposed acquisition would 
violate the competitive standard of paragraph (a), the 
commissioner shall consider the following: 
    (1) any acquisition covered under subdivision 2 involving 
two or more insurers competing in the same market is prima facie 
evidence of violation of the competitive standards: 
    (i) if the market is highly concentrated and the involved 
insurers possess the following shares of the market: 
           INSURER A             INSURER B
           4 percent             4 percent or more
           10 percent            2 percent or more
           15 percent            1 percent or more
    (ii) or, if the market is not highly concentrated and the 
involved insurers possess the following shares of the market: 
           INSURER A             INSURER B
           5 percent             5 percent or more
           10 percent            4 percent or more
           15 percent            3 percent or more
           19 percent            1 percent or more
    A highly concentrated market is one in which the share of 
the four largest insurers is 75 percent or more of the market.  
Percentages not shown in the tables are interpolated 
proportionately to the percentages that are shown.  If more than 
two insurers are involved, exceeding the total of the two 
columns in the table is prima facie evidence of violation of the 
competitive standard in paragraph (a).  For the purpose of this 
clause, the insurer with the largest share of the market shall 
be deemed to be insurer A. 
    (2) There is a significant trend toward increased 
concentration when the aggregate market share of any grouping of 
the largest insurers in the market, from the two largest to the 
eight largest, has increased by seven percent or more of the 
market over a period of time extending from any base year five 
to ten years prior to the acquisition up to the time of the 
acquisition.  Any acquisition or merger covered under 
subdivision 2 involving two or more insurers competing in the 
same market is prima facie evidence of violation of the 
competitive standard in clause (1) if: 
    (i) there is a significant trend toward increased 
concentration in the market; 
    (ii) one of the insurers involved is one of the insurers in 
a grouping of such large insurers showing the requisite increase 
in the market share; and 
    (iii) another involved insurer's market is two percent or 
more. 
    (3) For the purposes of paragraph (b): 
    (i) The term "insurer" includes any company or group of 
companies under common management, ownership, or control. 
    (ii) The term "market" means the relevant product and 
geographical markets.  In determining the relevant product and 
geographical markets, the commissioner shall give due 
consideration to, among other things, the definitions or 
guidelines, if any, promulgated by the National Association of 
Insurance Commissioners and to information, if any, submitted by 
parties to the acquisition.  In the absence of sufficient 
information to the contrary, the relevant product market is 
assumed to be the direct written insurance premium for a line of 
business, the line being that used in the annual statement 
required to be filed by insurers doing business in this state, 
and the relevant geographical market is assumed to be this state.
    (iii) The burden of showing prima facie evidence of 
violation of the competitive standard rests upon the 
commissioner. 
    (iv) Even though an acquisition is not prima facie 
violative of the competitive standard under paragraph (b), 
clauses (1) and (2), the commissioner may establish the 
requisite anticompetitive effect based upon other substantial 
evidence.  Even though an acquisition is prima facie violative 
of the competitive standard under paragraph (b), clauses (1) and 
(2), a party may establish the absence of the requisite 
anticompetitive effect based upon other substantial evidence.  
Relevant factors in making a determination under this paragraph 
include, but are not limited to, the following:  market shares, 
volatility of ranking of market leaders, number of competitors, 
concentration, trend of concentration in the industry, and ease 
of entry and exit into the market. 
    (c) An order may not be entered under subdivision 5 if: 
    (1) the acquisition will yield substantial economies of 
scale or economies in resource utilization that cannot be 
feasibly achieved in any other way, and the public benefits 
which would arise from such economies exceed the public benefits 
which would arise from not lessening competition; or 
    (2) the acquisition will substantially increase the 
availability of insurance, and the public benefits of such 
increase exceed the public benefits which would arise from not 
lessening competition. 
    Subd. 5.  [ORDERS AND PENALTIES.] If an acquisition 
violates the standards of this section, the commissioner may 
enter an order: 
    (1) requiring an involved insurer to cease and desist from 
doing business in this state with respect to the line or lines 
of insurance involved in the violation; or 
    (2) denying the application of an acquired or acquiring 
insurer for a license to do business in this state. 
    The order must not be entered unless there is a hearing, 
the notice of the hearing is issued before the end of the 
waiting period and not less than 15 days before the hearing, and 
the hearing is concluded and the order is issued no later than 
60 days after the end of the waiting period.  Every order must 
be accompanied by a written decision of the commissioner setting 
forth findings of fact and conclusions of law. 
    An order entered under this paragraph shall not become 
final earlier than 30 days after it is issued, during which time 
the involved insurer may submit a plan to remedy the 
anticompetitive impact of the acquisition within a reasonable 
time.  Based upon the plan or other information, the 
commissioner shall specify the conditions, if any, under the 
time period during which the aspects of the acquisition causing 
a violation of the standards of this section would be remedied 
and the order vacated or modified. 
    An order pursuant to this subdivision does not apply if the 
acquisition is not consummated. 
    Any person who violates a cease and desist order of the 
commissioner and while the order is in effect, may after notice 
and hearing and upon order of the commissioner, be subject at 
the discretion of the commissioner to any one or more of the 
following: 
    (1) a monetary penalty of not more than $10,000 for every 
day of violation; 
    (2) suspension or revocation of the person's license. 
    Any insurer or other person who fails to make any filing 
required by this section and who also fails to demonstrate a 
good faith effort to comply with the filing requirement, is be 
subject to a fine of not more than $50,000. 
    Subd. 6.  [INAPPLICABLE PROVISIONS.] Sections 11, 
paragraphs (b) and (c); and 13 do not apply to acquisitions 
covered under section 5, subdivision 2. 
    Sec. 6.  [60D.19] [REGISTRATION OF INSURERS.] 
    Subdivision 1.  [REGISTRATION.] Every insurer that is 
authorized to do business in this state and that is a member of 
an insurance holding company system shall register with the 
commissioner, except a foreign insurer subject to registration 
requirements and standards adopted by statute or regulation in 
the jurisdiction of its domicile that are substantially similar 
to those contained in: 
    (1) this section; 
    (2) section 7, subdivisions 1, paragraph (a), 2, and 4; and 
    (3) either section 7, subdivision 1, paragraph (b), or a 
provision such as the following: Each registered insurer shall 
keep current the information required to be disclosed in its 
registration statement by reporting all material changes or 
additions within 15 days after the end of the month in which it 
learns of each such change or addition. 
    Any insurer that is subject to registration under this 
section shall register within 15 days after it becomes subject 
to registration, and annually thereafter by March 1 of each year 
for the previous calendar year, unless the commissioner for good 
cause shown extends the time for registration, and then within 
such extended time.  The commissioner may require any insurer 
authorized to do business in the state that is a member of a 
holding company system, and that is not subject to registration 
under this section, to furnish a copy of the registration 
statement, the summary specified in subdivision 3 or other 
information filed by the insurance company with the insurance 
regulatory authority of domiciliary jurisdiction. 
    Subd. 2.  [INFORMATION AND FORM REQUIRED.] Every insurer 
subject to registration shall file the registration statement on 
a form prescribed by the National Association of Insurance 
Commissioners, which shall contain the following current 
information: 
    (1) the capital structure, general financial condition, 
ownership, and management of the insurer and any person 
controlling the insurer; 
    (2) the identity and relationship of every member of the 
insurance holding company system; 
    (3) the following agreements in force, and transactions 
currently outstanding or that have occurred during the last 
calendar year between the insurer and its affiliates: 
    (i) loans, other investments, or purchases, sales, or 
exchanges of securities of the affiliates by the insurer or of 
the insurer by its affiliates; 
    (ii) purchases, sales, or exchange of assets; 
    (iii) transactions not in the ordinary course of business; 
    (iv) guarantees or undertakings for the benefit of an 
affiliate which result in an actual contingent exposure of the 
insurer's assets to liability, other than insurance contracts 
entered into in the ordinary course of the insurer's business; 
    (v) all management agreements, service contracts, and all 
cost-sharing arrangements; 
    (vi) reinsurance agreements; 
    (vii) dividends and other distributions to shareholders; 
and 
    (viii) consolidated tax allocation agreements; 
    (4) any pledge of the insurer's stock, including stock of 
any subsidiary or controlling affiliate, for a loan made to any 
member of the insurance holding company system; and 
    (5) other matters concerning transactions between 
registered insurers and any affiliates as may be included from 
time to time in any registration forms adopted or approved by 
the commissioner. 
    Subd. 3.  [SUMMARY OF REGISTRATION STATEMENT.] All 
registration statements must contain a summary outlining all 
items in the current registration statement representing changes 
from the prior registration statement. 
    Subd. 4.  [MATERIALITY.] No information need be disclosed 
on the registration statement filed pursuant to subdivision 2 if 
the information is not material for the purposes of this section.
Unless the commissioner by rule or order provides otherwise; 
sales, purchases, exchanges, loans or extensions of credit, 
investments, or guarantees involving one-half of one percent or 
less of an insurer's admitted assets as of the 31st day of 
December next preceding shall not be deemed material for 
purposes of this section. 
    Subd. 5.  [REPORTING OF DIVIDENDS TO SHAREHOLDERS.] Subject 
to section 6, subdivision 2, each registered insurer shall 
report to the commissioner all dividends and other distributions 
to shareholders within 15 business days following the 
declaration thereof. 
    Subd. 6.  [INFORMATION OF INSURERS.] Any person within an 
insurance holding company system subject to registration shall 
be required to provide complete and accurate information to an 
insurer where such information is reasonably necessary to enable 
the insurer to comply with the provisions of this article. 
    Subd. 7.  [TERMINATION OF REGISTRATION.] The commissioner 
shall terminate the registration of any insurer which 
demonstrates that it no longer is a member of an insurance 
holding company system. 
    Subd. 8.  [CONSOLIDATED FILING.] The commissioner may 
require or allow two or more affiliated insurers subject to 
registration to file a consolidated registration statement. 
    Subd. 9.  [ALTERNATIVE REGISTRATION.] The commissioner may 
allow an insurer that is authorized to do business in this state 
and that is part of an insurance holding company system to 
register on behalf of any affiliated insurer that is required to 
register under subdivision 1 and to file all information and 
material required to be filed under this section. 
    Subd. 10.  [EXEMPTIONS.] The provisions of this section do 
not apply to any insurer, information, or transaction if and to 
the extent that the commissioner by rule or order shall exempt 
the same from the provisions of this section. 
    Subd. 11.  [DISCLAIMER.] Any person may file with the 
commissioner a disclaimer of affiliation with any authorized 
insurer or the disclaimer may be filed by the insurer or any 
member of an insurance holding company system.  The disclaimer 
shall fully disclose all material relationships and bases for 
affiliation between the person and the insurer as well as the 
basis for disclaiming the affiliation.  After a disclaimer has 
been filed, the insurer shall be relieved of any duty to 
register or report under this section that may arise out of the 
insurer's relationship with the person unless and until the 
commissioner disallows the disclaimer.  The commissioner shall 
disallow the disclaimer only after furnishing all parties in 
interest with notice and opportunity to be heard and after 
making specific findings of fact to support the disallowance. 
    Subd. 12.  [VIOLATIONS.] The failure to file a registration 
statement or any summary of the registration statement required 
by this section within the time specified for the filing is a 
violation of this section. 
    Sec. 7.  [60D.20] [STANDARDS AND MANAGEMENT OF AN INSURER 
WITHIN A HOLDING COMPANY SYSTEM.] 
    Subdivision 1.  [TRANSACTIONS WITHIN A HOLDING COMPANY 
SYSTEM.] (a) Transactions within a holding company system to 
which an insurer subject to registration is a party is subject 
to the following standards: 
    (1) the terms shall be fair and reasonable; 
    (2) charges or fees for services performed shall be 
reasonable; 
    (3) expenses incurred and payment received shall be 
allocated to the insurer in conformity with customary insurance 
accounting practices consistently applied; 
    (4) the books, accounts, and records of each party to all 
such transactions shall be so maintained as to clearly and 
accurately disclose the nature and details of the transactions 
including this accounting information as is necessary to support 
the reasonableness of the charges or fees to the respective 
parties; and 
    (5) the insurer's surplus as regards policyholders 
following any dividends or distributions to shareholder 
affiliates shall be reasonable in relation to the insurer's 
outstanding liabilities and adequate to its financial needs. 
    (b) The following transactions involving a domestic insurer 
and any person in its holding company system may not be entered 
into unless the insurer has notified the commissioner in writing 
of its intention to enter into the transaction at least 30 days 
prior thereto, or a shorter period the commissioner permits, and 
the commissioner has not disapproved it within this period. 
    (1) sales, purchases, exchanges, loans or extensions of 
credit, guarantees, or investments provided the transactions are 
equal to or exceed:  (i) with respect to nonlife insurers, the 
lesser of three percent of the insurer's admitted assets, or 25 
percent of surplus as regards policyholders; (ii) with respect 
to life insurers, three percent of the insurer's admitted 
assets; each as of the 31st day of December next preceding; 
    (2) loans or extensions of credit to any person who is not 
an affiliate, where the insurer makes the loans or extensions of 
credit with the agreement or understanding that the proceeds of 
the transactions, in whole or in substantial part, are to be 
used to make loans or extensions of credit to, to purchase 
assets of, or to make investments in, any affiliate of the 
insurer making such loans or extensions of credit provided the 
transactions are equal to or exceed:  (i) with respect to 
nonlife insurers, the lesser of three percent of the insurer's 
admitted assets or 25 percent of surplus as regards 
policyholders; (ii) with respect to life insurers, three percent 
of the insurer's admitted assets; each as of the 31st day of 
December next preceding; 
    (3) reinsurance agreements or modifications to those 
agreements in which the reinsurance premium or a change in the 
insurer's liabilities equals or exceeds five percent of the 
insurer's surplus as regards policyholders, as of the 31st day 
of December next preceding, including those agreements which may 
require as consideration the transfer of assets from an insurer 
to a nonaffiliate, if an agreement or understanding exists 
between the insurer and nonaffiliate that any portion of such 
assets will be transferred to one or more affiliates of the 
insurer; 
    (4) all management agreements, service contracts and all 
cost-sharing arrangements; and 
    (5) any material transactions, specified by regulation, 
which the commissioner determines may adversely affect the 
interests of the insurer's policyholders. 
    Nothing contained in this section authorizes or permits any 
transactions that, in the case of an insurer not a member of the 
same holding company system, would be otherwise contrary to law. 
    (c) A domestic insurer may not enter into transactions 
which are part of a plan or series of like transactions with 
persons within the holding company system if the purpose of 
those separate transactions is to avoid the statutory threshold 
amount and thus avoid the review that would occur otherwise.  If 
the commissioner determines that the separate transactions were 
entered into over any 12-month period for the purpose, the 
commissioner may exercise the authority under section 12. 
    (d) The commissioner, in reviewing transactions pursuant to 
paragraph (b), shall consider whether the transactions comply 
with the standards set forth in paragraph (a), and whether they 
may adversely affect the interests of policyholders. 
    (e) The commissioner shall be notified within 30 days of 
any investment of the domestic insurer in any one corporation if 
the total investment in the corporation by the insurance holding 
company system exceeds ten percent of the corporation's voting 
securities. 
    Subd. 2.  [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) No 
domestic insurer shall pay any extraordinary dividend or make 
any other extraordinary distribution to its shareholders until:  
(1) 30 days after the commissioner has received notice of the 
declaration of it and has not within the period disapproved the 
payment; or (2) the commissioner has approved the payment within 
the 30-day period. 
    (b) For purposes of this section, an extraordinary dividend 
or distribution includes any dividend or distribution of cash or 
other property, whose fair market value together with that of 
other dividends or distributions made within the preceding 12 
months exceeds the greater of (1) ten percent of the insurer's 
surplus as regards policyholders as of the 31st day of December 
next preceding; or (2) the net gain from operations of the 
insurer, if the insurer is a life insurer, or the net income, if 
the insurer is not a life insurer, not including realized 
capital gains, for the 12-month period ending the 31st day of 
December next preceding, but does not include pro rata 
distributions of any class of the insurer's own securities.  In 
determining whether a dividend or distribution is extraordinary, 
an insurer other than a life insurer may carry forward net 
income from the previous two calendar years that has not already 
been paid out as dividends.  This carry-forward is computed by 
taking the net income from the second and third preceding 
calendar years, not including realized capital gains, less 
dividends paid in the second and immediate preceding calendar 
years. 
    (c) Notwithstanding any other provision of law, an insurer 
may declare an extraordinary dividend or distribution that is 
conditional upon the commissioner's approval, and the 
declaration shall confer no rights upon shareholders until:  (1) 
the commissioner has approved the payment of such a dividend or 
distribution; or (2) the commissioner has not disapproved the 
payment within the 30-day period referred to above. 
    Subd. 3.  [MANAGEMENT OF DOMESTIC INSURERS SUBJECT TO 
REGISTRATION.] (a) Notwithstanding the control of a domestic 
insurer by any person, the officers and directors of the insurer 
shall not thereby be relieved of any obligation or liability to 
which they would otherwise be subject by law, and the insurer 
shall be managed so as to assure its separate operating identity 
consistent with this article. 
    (b) Nothing in this article precludes a domestic insurer 
from having or sharing a common management use of personnel, 
property, or services with one or more other persons under 
arrangements meeting the standards of section 7, paragraph (a), 
clause (1). 
    (c) Not less than one-third of the directors of a publicly 
traded domestic insurer, and not less than one-third of the 
members of each committee of the board of directors of any 
publicly traded domestic insurer shall be persons who are not 
officers or employees of the insurer or of any entity 
controlling, controlled by, or under common control with the 
insurer and who are not beneficial owners of a controlling 
interest in the voting stock of the insurer or any such entity.  
At least one such person must be included in any quorum for the 
transaction of business at any meeting of the board of directors 
or any committee of the board. 
    (d) The board of directors of a publicly traded domestic 
insurer shall establish an audit committee having a majority of 
directors who are not officers or employees of the insurer or of 
any entity controlling, controlled by, or under common control 
with the insurer and who are not beneficial owners of a 
controlling interest in the voting stock of the insurer or any 
such entity.  The committee shall have responsibility for 
selecting independent certified public accountants and reviewing 
the scope and results of the independent audit and any internal 
audit.  
    (e) Paragraphs (c) and (d) do not apply to a domestic 
insurer if the person controlling the insurer is an insurer, or 
a general business corporation the principal business of which 
is insurance, having a board of directors and committees of the 
board that meet the requirements of paragraphs (c) and (d). 
    Subd. 4.  [ADEQUACY OF SURPLUS.] For purposes of this 
article, in determining whether an insurer's surplus as regards 
policyholders is reasonable in relation to the insurer's 
outstanding liabilities and adequate to its financial needs, the 
following factors, among others, must be considered: 
    (1) the size of the insurer as measured by its assets, 
capital and surplus, reserves, premium writings, insurance in 
force and other appropriate criteria; 
    (2) the extent to which the insurer's business is 
diversified among the several lines of insurance; 
    (3) the number and size of risks insured in each line of 
business; 
    (4) the extent of the geographical dispersion of the 
insurer's insured risks; 
    (5) the nature and extent of the insurer's reinsurance 
program; 
    (6) the quality, diversification and liquidity of the 
insurer's investment portfolio; 
    (7) the recent past and projected future trend in the size 
of the insurer's investment portfolio; 
    (8) the surplus as regards policyholders maintained by 
other comparable insurers; 
    (9) the adequacy of the insurer's reserves; and 
    (10) the quality and liquidity of investments in affiliates.
The commissioner may treat any such investment as a disallowed 
asset for purposes of determining the adequacy of surplus as 
regards policyholders whenever in the commissioner's judgment 
the investment so warrants. 
    Sec. 8.  [60D.21] [EXAMINATION.] 
    Subdivision 1.  [POWER OF COMMISSIONER.] Subject to the 
limitation contained in this section and in addition to the 
powers that the commissioner has under chapter 60A relating to 
the examination of insurers, the commissioner shall also have 
the power to order any insurer registered under section 60D.19 
to produce records, books, or other information papers in the 
possession of the insurer or its affiliates as are reasonably 
necessary to ascertain the financial condition of the insurer or 
to determine compliance with this article.  In the event the 
insurer fails to comply with the order, the commissioner shall 
have the power to examine the affiliates to obtain the 
information. 
    Subd. 2.  [USE OF CONSULTANTS.] The commissioner may retain 
at the registered insurer's expense the attorneys, actuaries, 
accountants, and other experts not otherwise a part of the 
commissioner's staff that are reasonably necessary to assist in 
the conduct of the examination under subdivision 1.  Any person 
so retained shall be under the direction and control of the 
commissioner and shall act in a purely advisory capacity. 
    Subd. 3.  [EXPENSES.] Each registered insurer producing for 
examination records, books, and papers pursuant to subdivision 1 
is liable for and shall pay the expense of the examination in 
accordance with section 60A.03. 
    Sec. 9.  [60D.22] [CONFIDENTIAL TREATMENT.] 
    All information, documents, and copies of them obtained by 
or disclosed to the commissioner or any other person in the 
course of an examination or investigation made pursuant to 
section 7 and all information reported pursuant to sections 5 
and 6, shall be given confidential treatment and shall not be 
subject to subpoena and shall not be made public by the 
commissioner, the National Association of Insurance 
Commissioners, or any other person, except to insurance 
departments of other states, without the prior written consent 
of the insurer to which it pertains unless the commissioner, 
after giving the insurer and its affiliates who would be 
affected, notice and opportunity to be heard, determines that 
the interest of policyholders or the public will be served by 
the publication, in which event the commissioner may publish all 
or any part in the manner the commissioner considers appropriate.
    Sec. 10.  [60D.23] [RULES.] 
    The commissioner may adopt the rules and orders that are 
necessary to carry out the provisions of this article. 
    Sec. 11.  [60D.24] [INJUNCTIONS, PROHIBITIONS AGAINST 
VOTING SECURITIES, SEQUESTRATION OF VOTING SECURITIES.] 
    Subdivision 1.  [INJUNCTIONS.] Whenever it appears to the 
commissioner that any insurer or any director, officer, 
employee, or agent of the insurer has committed or is about to 
commit a violation of this article or of any rule or order 
issued by the commissioner, the commissioner may apply to the 
district court for the county in which the principal office of 
the insurer is located or if the insurer has no such office in 
this state then to the district court for Ramsey county for an 
order enjoining the insurer or the director, officer, employee, 
or agent of the insurer from violating or continuing to violate 
this article or any rule or order, and for other equitable 
relief as the nature of the case and the interest of the 
insurer's policyholders or the public requires. 
    Subd. 2.  [VOTING OF SECURITIES; WHEN PROHIBITED.] No 
security that is the subject of any agreement or arrangement 
regarding acquisition, or that is acquired or to be acquired, in 
contravention of the provisions of this article or of any rule 
or order issued by the commissioner may be voted at any 
shareholder's meeting, or may be counted for quorum purposes, 
and any action of shareholders requiring the affirmative vote of 
a percentage of shares may be taken as though the securities 
were not issued and outstanding.  No action taken at the meeting 
shall be invalidated by the voting of the securities, unless the 
action would materially affect control of the insurer or unless 
the courts of this state have so ordered.  If an insurer or the 
commissioner has reason to believe that any security of the 
insurer has been or is about to be acquired in contravention of 
the provisions of this article or of any rule or order issued by 
the commissioner, the insurer or the commissioner may apply to 
the district court for the county in which the insurer has its 
principal place of business to enjoin any offer, request, 
invitation, agreement, or acquisition made in contravention of 
section 3 or any rule or order issued by the commissioner to 
enjoin the voting of any security so acquired, to void any vote 
of the security already cast at any meeting of shareholders and 
for other equitable relief as the nature of the case and the 
interest of the insurer's policyholders or the public requires. 
    Subd. 3.  [SEQUESTRATION OF VOTING SECURITIES.] In any case 
where a person has acquired or is proposing to acquire any 
voting securities in violation of this article or any rule or 
order issued by the commissioner, the district court for Ramsey 
county or the district court for the county in which the insurer 
has its principal place of business may, on such notice as the 
court considers appropriate, upon the application of the insurer 
or the commissioner seize or sequester any voting securities of 
the insurer owned directly or indirectly by the person, and 
issue any order with respect thereto as may be appropriate to 
effectuate the provisions of this article. 
    Notwithstanding any other provisions of law, for the 
purposes of this article the sites of the ownership of the 
securities of domestic insurers shall be considered to be in 
this state. 
    Sec. 12.  [60D.25] [RECEIVERSHIP.] 
    Whenever it appears to the commissioner that any person has 
committed a violation of this article that so impairs the 
financial condition of a domestic insurer as to threaten 
insolvency or make the further transaction of business by it 
hazardous to its policyholders or the public, then the 
commissioner may proceed as provided in chapter 60B to take 
possessions of the property of the domestic insurer and to 
conduct the business of that insurer. 
    Sec. 13.  [60D.26] [RECOVERY.] 
    (a) If an order for liquidation or rehabilitation of a 
domestic insurer has been entered, the receiver appointed under 
the order shall have a right to recover on behalf of the 
insurer, (1) from any parent corporation or holding company or 
person or affiliate who otherwise controlled the insurer, the 
amount of distributions, other than distributions of shares of 
the same class of stock, paid by the insurer on its capital 
stock, or (2) any payment in the form of a bonus, termination 
settlement or extraordinary lump sum salary adjustment made by 
the insurer or its subsidiary(s) to a director, officer, or 
employee, where the distribution or payment pursuant to clause 
(1) or (2) is made at any time during the one year preceding the 
petition for liquidation, conservation, or rehabilitation, as 
the case may be, subject to the limitations of paragraphs (b), 
(c), and (d). 
    (b) No such distribution shall be recoverable if the parent 
or affiliate shows that when paid the distribution was lawful 
and reasonable, and that the insurer did not know and could not 
reasonably have known that the distribution might adversely 
affect the ability of the insurer to fulfill its contractual 
obligations. 
    (c) Any person who was a parent corporation or holding 
company or a person who otherwise controlled the insurer or 
affiliate at the time such distributions were paid shall be 
liable up to the amount of distributions or payments under 
paragraph (a), the person received.  Any person who otherwise 
controlled the insurer at the time the distributions were 
declared is liable up to the amount of distributions the person 
would have received if they had been paid immediately.  If two 
or more persons are liable with respect to the same 
distributions, they are jointly and severally liable. 
    (d) The maximum amount recoverable under this subsection 
shall be the amount needed in excess of all other available 
assets of the impaired or insolvent insurer to pay the 
contractual obligations of the impaired or insolvent insurer and 
to reimburse any guaranty funds. 
    (e) To the extent that any person liable under paragraph 
(c) is insolvent or otherwise fails to pay claims due from it 
pursuant to this paragraph, its parent corporation or holding 
company or person who otherwise controlled it at the time the 
distribution was paid, is jointly and severally liable for any 
resulting deficiency in the amount recovered from the parent 
corporation or holding company or person who otherwise 
controlled it. 
    Sec. 14.  [60D.27] [REVOCATION, SUSPENSION, OR NONRENEWAL 
OF INSURER'S LICENSE.] 
    Whenever it appears to the commissioner that any person has 
committed a violation of this article that makes the continued 
operation of an insurer contrary to the interests of 
policyholders or the public, the commissioner may, after giving 
notice and an opportunity to be heard, determine to suspend, 
revoke, or refuse to renew the insurer's license or authority to 
do business in this state for the period the commissioner finds 
is required for the protection of policyholders or the public.  
The determination must be accompanied by specific findings of 
fact and conclusions of law. 
    Sec. 15.  [60D.28] [JUDICIAL REVIEW, MANDAMUS.] 
    (a) Any person aggrieved by any act, determination, rule or 
order, or any other action of the commissioner pursuant to this 
article may appeal therefrom to the district court for Ramsey 
county.  The court shall conduct its review without a jury and 
by trial de novo, except that if all parties, including the 
commissioner, so stipulate, the review shall be confined to the 
record.  Portions of the record may be introduced by stipulation 
into evidence in a trial de novo as to those parties so 
stipulated. 
    (b) The filing of an appeal pursuant to this section shall 
stay the application of the rule, order, or other action of the 
commissioner to the appealing party unless the court, after 
giving the party notice and an opportunity to be heard, 
determines that the stay would be detrimental to the interest of 
policyholders or the public. 
    (c) Any person aggrieved by any failure of the commissioner 
to act or make a determination required by this article may 
petition the district court for Ramsey county for a writ in the 
nature of a mandamus or a peremptory mandamus directing the 
commissioner to act or make this determination immediately. 
    Sec. 16.  [60D.29] [CONFLICT WITH OTHER LAWS.] 
    All laws and parts of laws of this state inconsistent with 
this article are superseded with respect to matters covered by 
this article. 
    Sec. 17.  Minnesota Statutes 1990, section 79.34, 
subdivision 1, is amended to read: 
    Subdivision 1.  [CONDITIONS REQUIRING MEMBERSHIP.] The 
nonprofit association known as the workers' compensation 
reinsurance association may be incorporated under chapter 317A 
with all the powers of a corporation formed under that chapter, 
except that if the provisions of that chapter are inconsistent 
with sections 79.34 to 79.40, sections 79.34 to 79.40 govern.  
Each insurer as defined by section 79.01, subdivision 2, shall, 
as a condition of its authority to transact workers' 
compensation insurance in this state, be a member of the 
reinsurance association and is bound by the plan of operation of 
the reinsurance association; provided, that all affiliated 
insurers within a holding company system as defined in sections 
60D.01 to 60D.13 chapter 60D are considered a single entity for 
purposes of the exercise of all rights and duties of membership 
in the reinsurance association.  Each self-insurer approved 
under section 176.181 and each political subdivision that 
self-insures shall, as a condition of its authority to 
self-insure workers' compensation liability in this state, be a 
member of the reinsurance association and is bound by its plan 
of operation; provided that: 
    (1) all affiliated companies within a holding company 
system, as determined by the commissioner in a manner consistent 
with the standards and definitions in sections 60D.01 to 60D.13 
chapter 60D, are considered a single entity for purposes of the 
exercise of all rights and duties of membership in the 
reinsurance association; and 
     (2) all group self-insurers granted authority to 
self-insure pursuant to section 176.181 are considered single 
entities for purposes of the exercise of all the rights and 
duties of membership in the reinsurance association.  As a 
condition of its authority to self-insure workers' compensation 
liability, and for losses incurred after December 31, 1983, the 
state is a member of the reinsurance association and is bound by 
its plan of operation.  The commissioner of employee relations 
represents the state in the exercise of all the rights and 
duties of membership in the reinsurance association.  The state 
treasurer shall pay the premium to the reinsurance association 
from the state compensation revolving fund upon warrants of the 
commissioner of employee relations.  For the purposes of this 
section, "state" means the administrative branch of state 
government, the legislative branch, the judicial branch, the 
University of Minnesota, and any other entity whose workers' 
compensation liability is paid from the state revolving fund.  
The commissioner of finance may calculate, prorate, and charge a 
department or agency the portion of premiums paid to the 
reinsurance association for employees who are paid wholly or in 
part by federal funds, dedicated funds, or special revenue 
funds.  The reinsurance association is not a state agency.  
Actions of the reinsurance association and its board of 
directors and actions of the commissioner of labor and industry 
with respect to the reinsurance association are not subject to 
chapters 13, 14, and 15.  All property owned by the association 
is exempt from taxation.  The reinsurance association is not 
obligated to make any payments or pay any assessments to any 
funds or pools established pursuant to this chapter or chapter 
176 or any other law. 
    Sec. 18.  [REPEALER.] 
    Minnesota Statutes 1990, sections 60D.01; 60D.02; 60D.03; 
60D.04; 60D.05; 60D.06; 60D.07; 60D.08; 60D.10; 60D.11; 60D.12; 
and 60D.13, are repealed.  
    Sec. 19.  [EFFECTIVE DATE.] 
    Section 5 is effective August 1, 1992.  The remainder of 
this article is effective August 1, 1991. 

                               ARTICLE 15 

                      LIFE REINSURANCE AGREEMENTS 
    Section 1.  [60A.80] [ACCOUNTING REQUIREMENTS.] 
    Subdivision 1.  [STANDARDS.] No life insurer subject to 
this article shall, for reinsurance ceded, reduce any liability 
or establish any asset in any financial statement filed with the 
department if, by the terms of the reinsurance agreement, in 
substance or effect, any of the following conditions exist:  
    (1) the primary effect of the reinsurance agreement is to 
transfer deficiency reserves or excess interest reserves to the 
books of the reinsurer for a "risk charge" and the agreement 
does not provide for significant participation by the reinsurer 
in one or more of the following risks:  mortality, morbidity, 
investment, or surrender benefit; 
    (2) the reserve credit taken by the ceding insurer is not 
in compliance with the insurance law or rules, including 
actuarial interpretations or standards adopted by the 
department; 
    (3) the reserve credit taken by the ceding insurer is 
greater than the underlying reserve of the ceding company 
supporting the policy obligations transferred under the 
reinsurance agreement; 
    (4) the ceding insurer is required to reimburse the 
reinsurer for negative experience under the reinsurance 
agreement, except that neither offsetting experience refunds 
against prior years' losses nor payment by the ceding insurer of 
an amount equal to prior years' losses upon voluntary 
termination of in-force reinsurance by that ceding insurer shall 
be considered such a reimbursement to the reinsurer for negative 
experience; 
    (5) the ceding insurer can be deprived of surplus at the 
reinsurer's option or automatically upon the occurrence of some 
event, such as the insolvency of the ceding insurer, except that 
termination of the reinsurance agreement by the reinsurer for 
nonpayment of reinsurance premiums shall not be considered to be 
such a deprivation of surplus; 
    (6) the ceding insurer must, at specific points in time 
scheduled in the agreement, terminate or automatically recapture 
all or part of the reinsurance ceded; 
    (7) no cash payment is due from the reinsurer, throughout 
the lifetime of the reinsurance agreement, with all settlements 
prior to the termination date of the agreement made only in a 
"reinsurance account," and no funds in such account are 
available for the payment of benefits; or 
    (8) the reinsurance agreement involves the possible payment 
by the ceding insurer to the reinsurer of amounts other than 
from income reasonably expected from the reinsured policies.  
    Subd. 2.  [EXCEPTION.] Notwithstanding subdivision 1, a 
life insurer subject to this article may, with the prior 
approval of the commissioner of commerce take such reserve 
credit as the commissioner considers consistent with the 
insurance law or rules adopted under it, including actuarial 
interpretations or standards adopted by the department. 
    Sec. 2.  [60A.801] [WRITTEN AGREEMENTS.] 
    Subdivision 1.  [REINSURANCE AGREEMENTS AND AMENDMENTS.] No 
reinsurance agreement or amendment to any agreement may be used 
to reduce any liability or to establish any asset in any 
financial statement filed with the department, unless the 
agreement, amendment, or a letter of intent has been duly 
executed by both parties no later than the "as of date" of the 
financial statement. 
    Subd. 2.  [LETTERS OF INTENT.] In the case of a letter of 
intent, a reinsurance agreement, or an amendment to a 
reinsurance agreement must be executed within a reasonable 
period of time, not exceeding 90 days from the execution date of 
the letter of intent, in order for credit to be granted for the 
reinsurance ceded.  
    Sec. 3.  [60A.802] [EXISTING AGREEMENTS.] 
    Life insurers subject to this article may continue to 
reduce liabilities or establish assets in financial statements 
filed with the department for reinsurance ceded under types of 
reinsurance agreements that would violate section 60A.13, 
subdivision 1, relating to financial statements of insurers, 
thus, resulting in distorted financial statements which do not 
properly reflect the financial condition of the ceding life 
insurer; section 60A.09, relating to reinsurance reserve 
credits, thus, resulting in a ceding insurer improperly reducing 
liabilities or establishing assets for reinsurance ceded; and 
article 3, relating to creating a situation that may be 
hazardous to policyholders and the people of this state provided 
that:  
    (1) the agreements were executed and in force before the 
effective date of this article; 
    (2) no new business is ceded under the agreements after the 
effective date of this article; 
    (3) the reduction of the liability or the asset established 
for the reinsurance ceded is reduced to zero by December 31, 
1992, or a later date approved by the commissioner of commerce 
as a result of an application made by the ceding insurer prior 
to December 31 of the year in which this article becomes 
effective; 
    (4) the reduction of the liability or the establishment of 
the asset is otherwise permissible under all other applicable 
provisions of the insurance law or rules adopted under it, 
including actuarial interpretations or standards adopted by the 
department; and 
    (5) the department is notified, within 90 days after the 
effective date of this chapter, of the existence of these 
reinsurance agreements and all corresponding credits taken in 
the ceding insurer's 1990 annual statement.  
    Sec. 4.  [EFFECTIVE DATE.] 
    This article is effective January 1, 1992. 

                               ARTICLE 16 

                       LOSS RESERVE CERTIFICATION 
    Section 1.  Minnesota Statutes 1990, section 60A.12, is 
amended by adding a subdivision to read: 
    Subd. 10.  [LOSS RESERVE CERTIFICATION.] Each domestic 
company engaged in providing the types of coverage described in 
section 60A.06, subdivision 1, clause (1), (2), (3), (5)(b), 
(6), (8), (9), (10), (11), (12), (13), or (14), must have its 
loss reserves certified to annually by a qualified actuary.  The 
company must file the certification with the commissioner within 
30 days of completion of the certification.  The actuary 
providing the certification must not be an employee of the 
company.  This subdivision does not apply to township mutual 
companies. 

                               ARTICLE 17 

                                  RICO 
    Section 1.  Minnesota Statutes 1990, section 609.902, 
subdivision 4, is amended to read: 
    Subd. 4.  [CRIMINAL ACT.] "Criminal act" means conduct 
constituting, or a conspiracy or attempt to commit, a felony 
violation of chapter 152, or a felony violation of section 
297D.09; 299F.79; 299F.80; 299F.811; 299F.815; 299F.82; 609.185; 
609.19; 609.195; 609.20; 609.205; 609.221; 609.222; 609.223; 
609.2231; 609.228; 609.235; 609.245; 609.25; 609.27; 609.322; 
609.323; 609.342; 609.343; 609.344; 609.345; 609.42; 609.48; 
609.485; 609.495; 609.496; 609.497; 609.498; 609.52, subdivision 
2, if the offense is punishable under subdivision 3, clause 
(3)(b), or clause (4)(e) or (f) 3(d)(v) or (vi); 609.53; 
609.561; 609.562; 609.582, subdivision 1 or 2; 609.67; 609.687; 
609.713; 609.86; 624.713; or 624.74.  "Criminal act" also 
includes conduct constituting, or a conspiracy or attempt to 
commit, a felony violation of section 609.52, subdivision 2, 
clause (3), (4), (15), or (16) if the violation involves an 
insurance company as defined in section 60A.02, subdivision 4, a 
nonprofit health service plan corporation regulated under 
chapter 62C, a health maintenance organization regulated under 
chapter 62D, or a fraternal beneficiary association regulated 
under chapter 64B. 
    Sec. 2.  [EFFECTIVE DATE.] 
    Section 1 is effective August 1, 1991, and applies to 
crimes committed on or after that date. 

                               ARTICLE 18 

                           INVESTMENT POLICY 
    Section 1.  [60A.112] [INVESTMENT POLICY REQUIRED.] 
    Each domestic company must have a written investment 
policy, designed to provide guidance for investment decisions by 
management.  The policy must be approved by its board of 
directors.  The policy must be reviewed by the company's board 
of directors and reapproved no less often than once every 12 
months.  The investment policy must address asset type 
diversification, diversification within asset types, 
concentration risks, interest rate risk, liquidity, foreign 
investments, loans secured by real estate, and investment real 
estate.  The policy must set forth, in detail, company practices 
relating to internal controls regarding the delegation of 
investment authority within the company. 
    The board of directors must also determine at least 
annually the extent to which the company has complied with its 
investment policy within the preceding 12 months and shall adopt 
a written determination.  
    The company must file, as an attachment to its annual 
statement, a certification that: 
    (1) the company has a written investment policy meeting the 
requirements of this section; 
    (2) the company's board of directors has reviewed and 
approved or reapproved the policy within the period covered by 
the annual statement; and 
    (3) the company's board of directors performed the 
compliance review and made the written determination required by 
this section within the period covered by the annual statement. 
    A company's failure to meet the requirements of this 
section does not affect its ability to enforce its legal or 
equitable rights with respect to its investments. 
    Sec. 2.  Minnesota Statutes 1990, section 62D.045, 
subdivision 2, is amended to read: 
    Subd. 2.  [AUTHORIZATION AND WRITTEN INVESTMENT POLICY 
REQUIRED.] A health maintenance organization shall not make or 
engage in a loan or investment unless the loan or investment has 
been authorized or ratified by the board of directors or by a 
committee supervising investments and loans.  In addition, a 
health maintenance organization must comply with section 60A.112.

                               ARTICLE 19 

             VALUATION OF REAL ESTATE LOANS AND INVESTMENTS 
    Section 1.  [60A.121] [DEFINITIONS.] 
    Subdivision 1.  [APPLICATION.] The definitions in this 
section apply to sections 60A.121 to 60A.127. 
    Subd. 2.  [COMMERCIAL MORTGAGE LOAN.] "Commercial mortgage 
loan" means a loan by an insurer secured by a mortgage on 
commercial real estate.  "Commercial mortgage loan" does not 
include loans secured by residential real estate containing four 
or fewer dwelling units or agricultural real estate. 
    Subd. 3.  [DELINQUENT MORTGAGE LOAN.] "Delinquent mortgage 
loan" means a loan 90 days delinquent on a required payment of 
principal or interest. 
    Subd. 4.  [DISTRESSED MORTGAGE LOAN.] "Distressed mortgage 
loan" means a loan, other than a delinquent loan, that is 
determined by the management of the insurer, in the exercise of 
its prudent investment judgment, to involve circumstances that 
create a reasonable probability that the loan may become a 
delinquent mortgage loan or a mortgage loan in foreclosure. 
    Subd. 5.  [INDEPENDENT APPRAISER.] "Independent appraiser" 
means a person not employed by the insurer, by an affiliate of 
the insurer, or by an investment advisor to the insurer who 
develops and communicates real estate appraisals and holds a 
current, valid license issued under section 82B.02, or a similar 
law enacted by another state. 
    Subd. 6.  [INTERNAL APPRAISAL.] "Internal appraisal" means 
an appraisal to determine current market value made by an 
internal appraiser and based upon an evaluation of: 
    (1) the property based upon a physical inspection of the 
premises; 
    (2) the current and expected stabilized cash flow generated 
by the property; 
    (3) the current and expected stabilized market rents in the 
geographic market where the property is located; and 
    (4) the current and stabilized occupancy rates for the 
geographic market where the property is located. 
    Subd. 7.  [INTERNAL APPRAISER.] "Internal appraiser" means 
an individual: 
    (1) employed by an insurer, by an affiliate of the insurer, 
or by an investment advisor to an insurer; 
    (2) who has training and experience qualifying the 
individual to appraise the value of commercial real estate; 
    (3) whose direct or indirect compensation is not dependent 
upon the outcome of the appraisals performed under sections 
60A.121 to 60A.126; and 
    (4) who has direct reporting access to the chief investment 
officer of the insurer. 
    Subd. 8.  [INSURER.] "Insurer" means a domestic insurance 
company. 
    Subd. 9.  [MORTGAGE LOAN IN FORECLOSURE.] "Mortgage loan in 
foreclosure" means (1) a loan in the process of foreclosure 
including the time required for expiration of any equitable or 
statutory redemption rights; (2) a loan to a mortgagor who is 
the subject of a bankruptcy petition and who is not making 
regular monthly payments; or (3) a loan secured by a mortgage on 
real estate that is subject to a senior mortgage or other lien 
that is being foreclosed. 
    Subd. 10.  [PERFORMING MORTGAGE LOAN.] "Performing mortgage 
loan" means a mortgage loan current in payment and not in 
distress. 
    Subd. 11.  [REAL ESTATE OWNED.] "Real estate owned" means 
real property owned and acquired by an insurer through or in 
lieu of foreclosure and as to which all equitable or statutory 
rights of redemption have expired. 
    Subd. 12.  [RESTRUCTURED MORTGAGE LOAN.] "Restructured 
mortgage loan" means a loan where: 
    (1) material delinquent payments or accrued interest are 
capitalized and added to the balance of an outstanding loan; or 
    (2) the insurer has abated or reduced interest payments 
below market rates existing at the date of restructuring. 
    Sec. 2.  [60A.122] [REQUIRED WRITTEN PROCEDURES.] 
    An insurer shall establish written procedures, approved by 
the company's board of directors, for the valuation of 
commercial mortgage loans and real estate owned.  The procedures 
must be made available to the commissioner upon request.  The 
commissioner shall review the insurer's compliance with the 
procedures in any examination of the insurer under section 
60A.031. 
    Sec. 3.  [60A.123] [VALUATION PROCEDURE.] 
    Subdivision 1.  [REQUIREMENT.] An insurer shall value its 
commercial mortgage loans and real estate acquired through 
foreclosure of commercial mortgage loans as provided in this 
section for the purpose of establishing reserves or carrying 
values of the investments and for statutory accounting purposes. 
    Subd. 2.  [PERFORMING MORTGAGE LOAN.] A performing mortgage 
loan must be carried at its amortized acquisition cost. 
    Subd. 3.  [DISTRESSED MORTGAGE LOAN.] (a) The insurer shall 
make an evaluation of the appropriate carrying value of its 
commercial mortgage loans which it classifies as distressed 
mortgage loans.  The carrying value must be based upon one or 
more of the following procedures: 
    (1) an internal appraisal; 
    (2) an appraisal made by an independent appraiser; 
    (3) the value of guarantees or other credit enhancements 
related to the loan. 
    (b) The insurer may determine the carrying value of its 
distressed mortgage loans through either an evaluation of each 
specific distressed mortgage loan or by a sampling methodology.  
Insurers using a sampling methodology shall identify a sampling 
of its distressed mortgage loans that represents a cross section 
of all of its distressed mortgage loans.  The insurer shall make 
an evaluation of the appropriate carrying value for each sample 
loan.  The carrying value of all of the insurer's distressed 
mortgage loans must be the same percentage of their amortized 
acquisition cost as the sample loans.  The carrying value must 
be based upon an internal appraisal or an appraisal conducted by 
an independent appraiser. 
    (c) The insurer shall either take a charge against its 
surplus or establish a reserve for the difference between the 
carrying value and the amortized acquisition cost of its 
distressed mortgage loans. 
    Subd. 4.  [DELINQUENT MORTGAGE LOAN.] (a) The insurer shall 
make an evaluation of the appropriate carrying value of each 
delinquent mortgage loan.  The carrying value must be based upon 
one or more of the following procedures: 
    (1) an internal appraisal; 
    (2) an appraisal by an independent appraiser; 
    (3) the value of guarantees or other credit enhancements 
related to the loan. 
    (b) The insurer shall either take a charge against its 
surplus or establish a reserve for the difference between the 
carrying value and the amortized acquisition cost of its 
delinquent mortgage loans. 
    Subd. 5.  [RESTRUCTURED MORTGAGE LOAN.] (a) The insurer 
shall make an evaluation of the appropriate carrying value of 
each restructured mortgage loan.  The carrying value must be 
based upon one or more of the following procedures: 
    (1) an internal appraisal; 
    (2) an appraisal by an independent appraiser; 
    (3) the value of guarantees or other credit enhancements 
related to the loan. 
    (b) The insurer shall either take a charge against its 
surplus or establish a reserve for the difference between the 
carrying value and the amortized acquisition cost of its 
restructured mortgage loans. 
    Subd. 6.  [MORTGAGE LOAN IN FORECLOSURE.] (a) The insurer 
shall make an evaluation of the appropriate carrying value of 
each mortgage loan in foreclosure.  The carrying value must be 
based upon an appraisal made by an independent appraiser. 
    (b) The insurer shall take a charge against its surplus for 
the difference between the carrying value and the amortized 
acquisition cost of its mortgage loans in the process of 
foreclosure. 
    Subd. 7.  [REAL ESTATE OWNED.] (a) The insurer shall make 
an evaluation of the appropriate carrying value of real estate 
owned.  The carrying value must be based upon an appraisal made 
by an independent appraiser. 
    (b) The insurer shall take a charge against its surplus for 
the difference between the carrying value and the amortized 
acquisition cost of real estate owned. 
    Sec. 4.  [60A.124] [INDEPENDENT AUDIT.] 
    The audit report of the independent certified public 
accountant which prepares the audit of an insurer's annual 
statement as required under section 60A.13, subdivision 3, 
paragraph (a), must contain findings by the auditor that: 
    (1) the insurer has adopted valuation procedures meeting 
the minimum standards required in section 60A.123; 
    (2) the procedures adopted by the board of directors have 
been uniformly applied by the insurer in conformance with this 
section; and 
     (3) the management of the insurer has an adequate system of 
internal controls. 
    Sec. 5.  [60A.125] [APPRAISAL BY INDEPENDENT APPRAISER.] 
    Subdivision 1.  [MORTGAGE LOANS IN THE PROCESS OF 
FORECLOSURE.] An insurer may rely upon an appraisal by an 
independent appraiser to determine the carrying value of 
mortgage loans in the process of foreclosure only if the date of 
the appraisal is within six months of the date the foreclosure 
procedure is begun.  If no appraisal exists, the insurer shall 
acquire an appraisal within six months after the foreclosure 
proceeding has begun. 
    Subd. 2.  [REAL ESTATE OWNED.] An insurer may rely upon an 
appraisal by an independent appraiser to determine the carrying 
value of real estate owned only if the date of the appraisal is 
within six months of the date when title to the property was 
acquired.  If no appraisal exists, the insurer shall acquire an 
appraisal within six months after title to the property is 
acquired. 
    Subd. 3.  [CHARGE TAKEN.] An insurer shall take a charge 
against the surplus for mortgage loans in the process of 
foreclosure and real estate owned in the first calendar year in 
which it holds a current appraisal made by an independent 
appraiser as provided in this section. 
    Sec. 6.  [60A.126] [BOARD REPORT.] 
    The management of the insurer shall make periodic reports, 
at least annually, to its board of directors, or an appropriate 
committee of the board, as to the application of the insurer's 
valuation procedures adopted under sections 60A.121 to 60A.127. 
    Sec. 7.  [60A.127] [INDEPENDENT APPRAISALS OF CERTAIN 
PROPERTIES.] 
    Subdivision 1.  [RANDOM SAMPLE APPRAISAL REQUIREMENT.] Each 
domestic insurer that does not obtain independent appraisals of 
all distressed, delinquent, and restructured mortgage loans and 
use such appraisals to determine the carrying values for its 
annual statement shall obtain independent appraisals of a random 
sample of those loans for which it did not obtain and use such 
appraisals.  The independent appraisals must be obtained by the 
insurer no later than 60 days after the filing of the insurer's 
annual statement.  The loans to be sampled do not include loans 
for which the insurer determined the carrying value on the basis 
of guarantees or other credit enhancements.  
    Subd. 2.  [SAMPLING PROCEDURE; RULES.] The commissioner may 
adopt rules specifying the percentage of distressed, delinquent, 
and restructured loans for which the insurer must obtain an 
independent appraisal.  The percentage may vary between insurers 
or types of loans and may apply to the number of loans, the 
dollar value of loans, or both.  The rules may also specify a 
procedure for determining how to identify the specific loans for 
which an appraisal is required.  The commissioner may adopt 
under this subdivision only rules that would require sampling no 
less extensive than that required by subdivision 3.  
    Subd. 3.  [STATUTORY SAMPLING PROCEDURE.] (a) Unless and 
until rules authorized by subdivision 2 are adopted, each 
domestic insurer must: 
    (1) obtain an independent appraisal of five percent of its 
distressed, delinquent, or restructured loans required to be 
sampled under subdivision 1; and 
    (2) establish a uniform system of assigning sequential 
numbers to its distressed, delinquent, or restructured loans 
based upon the date on which a loan first enters one of those 
categories, and then obtain an independent appraisal of every 
twentieth loan required to be sampled under subdivision 1, 
beginning with the tenth loan or with the loan having another 
number that the commissioner may announce on or within five 
business days after the due date for filing of the annual 
statement. 
    (b) A domestic insurer may use a sampling procedure 
different from that described in paragraph (a) with the prior 
approval of the commissioner.  The commissioner may grant such 
approval only if the different procedure would result in a 
sampling that is at least as accurate and as extensive under the 
circumstances as the method required by paragraph (a). 
    Subd. 4.  [RECORDKEEPING; REPORTING.] The independent 
appraisals must be kept in the insurer's records and must be 
available to the commissioner upon request.  Each insurer must 
file with the commissioner an annual report listing each 
mortgage loan for which the insurer obtained an independent 
appraisal under this section and showing for each of those loans 
the appraisal value, the carrying value determined by the 
insurer, and other information required by the commissioner.  
The report must be filed with the commissioner no later than 120 
days after the filing of the annual report.  
    Subd. 5.  [ADDITIONAL REQUIREMENTS.] If the commissioner 
determines, on the basis of the report of independent appraisals 
required by subdivision 4, that the carrying values shown on the 
annual statement, determined by methods other than an 
independent appraisal, overstate the market value of the loans 
required to be sampled, the commissioner may require any of the 
following procedures: 
    (1) independent appraisals of additional loans from the 
loans required to be sampled; 
    (2) filing of a supplement to, or a revision of, the annual 
statement, showing revised carrying values for all or any 
appropriate portion of the loans required to be sampled; and 
    (3) a second independent appraisal for any loan for which 
an independent appraisal was obtained under this section. 
    Subd. 6.  [SELECTION OF INDEPENDENT APPRAISER.] The insurer 
shall not obtain more than one-third of the independent 
appraisals required under this section from any one appraiser or 
from any one firm.  
    Subd. 7.  [POWERS IN THIS SECTION NOT LIMITING.] This 
section does not limit any powers otherwise available to the 
commissioner. 
    Sec. 8.  [60A.128] [RESERVE ACCOUNT.] 
    In computing reserves required to be held by an insurer 
under the provisions of section 3, subdivisions 3, 4, and 5, the 
commissioner may allow an insurer to take credit for any 
reserves held by the insurer attributable to the assets as an 
"asset valuation reserve" pursuant to the accounting and 
reserving requirements of the National Association of Insurance 
Commissioners.  Any charges against surplus taken under section 
3, subdivisions 3, 4, 5, 6, or 7, may be taken against the asset 
valuation reserve to the extent the asset valuation reserve is 
sufficient and the charge is permitted by the NAIC.  To the 
extent the asset valuation reserve is not sufficient, or if the 
charge is not permitted by the NAIC, the insurer shall take a 
charge against its surplus. 

                               ARTICLE 20 

                        ASSUMPTION TRANSACTIONS 
    Section 1.  Minnesota Statutes 1990, section 60A.09, is 
amended by adding a subdivision to read: 
    Subd. 4a.  [ASSUMPTION TRANSACTIONS REGULATED.] No life 
company, whether domestic, foreign, or alien, shall perform an 
assumption transaction, including an assumption reinsurance 
agreement, with respect to a policy issued to a Minnesota 
resident, unless: 
    (1) the assumption agreement has been filed with the 
commissioner; 
    (2) the assumption agreement specifically provides that the 
original insurer remains liable to the insured in the event the 
assuming insurer is unable to fulfill its obligations or the 
original insurer acknowledges in writing to the commissioner 
that it remains liable to the insured in the event the assuming 
insurer is unable to fulfill its obligations; 
    (3) the proposed certificate of assumption to be provided 
to the policyholder has been filed with the commissioner for 
review and approval as provided in section 61A.02; and 
    (4) the proposed certificate of assumption contains, in 
bold face type, the following language: 
    "Policyholder:  Please be advised that you retain all 
rights with respect to your policy against your original insurer 
in the event the assuming insurer is unable to fulfill its 
obligations.  In such event, your original insurer remains 
liable to you notwithstanding the terms of its assumption 
agreement." 
    With respect to residents of Minnesota, the notice to 
policyholders shall also include a statement as to the effect on 
guaranty fund coverage, if any, that will result from the 
transfer. 
    Clauses (2) and (4) above do not apply if the policyholder 
consents in a signed writing to a release of the original 
insurer from liability and to a waiver of the protections 
provided in clauses (2) and (4) after being informed in writing 
by the insurer of the circumstances relating to and the effect 
of the assumption, provided that the consent form signed by the 
policyholder has been filed with and approved by the 
commissioner. 
    If a company is deemed by the commissioner to be in a 
hazardous condition or is under a court ordered supervision, 
rehabilitation, liquidation, conservation or receivership, and 
the transfer of policies is in the best interest of the 
policyholders, as determined by the commissioner, a transfer may 
be effected notwithstanding the provisions in this subdivision 
by using a different form of consent by policyholders.  This may 
include a form of implied consent and adequate notification to 
the policyholder of the circumstances requiring the transfer as 
approved by the commissioner.  This paragraph does not apply 
when a policy is transferred to the Minnesota life and health 
guaranty association. 

                               ARTICLE 21 

                             MISCELLANEOUS 
    Section 1.  Minnesota Statutes 1990, section 60A.27, is 
amended to read: 
    60A.27 [DISCIPLINE OF INSURER BY ANOTHER STATE; NOTICE TO 
COMMISSIONER.] 
    Subdivision 1.  An insurance company licensed to transact 
business in this state is hereby required to notify the 
commissioner of commerce within 30 ten business days of the 
happening of any one or more of the following: 
    (1) the suspension or revocation of its right to transact 
business in another state; 
    (2) the receipt by the insurance company of an order to 
show why its license should not be suspended or revoked; or 
    (3) the imposition of a penalty by any other state for any 
violation of the insurance laws of such other state.  
    Subd. 2.  Any insurance company which fails to notify the 
commissioner of commerce within 30 days of the happening of any 
of the foregoing shall be the time period specified in 
subdivision 1 is subject to a penalty of not more than $500, or 
suspension, or both. 
    Sec. 2.  Minnesota Statutes 1990, section 60C.03, 
subdivision 8, is amended to read: 
    Subd. 8.  "Insolvent insurer" means an insurer licensed to 
transact insurance in this state, either at the time the policy 
was issued, or when the insured event occurred, and against whom 
an order of liquidation with a finding of insolvency has been 
entered after April 30, 1979 by a court of competent 
jurisdiction, in the insurer's state of domicile or of this 
state, under the provisions of chapter 60B, and which order of 
liquidation has not been stayed or been the subject of a writ of 
supersedeas or other comparable order.  An insurer placed under 
administrative supervision under article 2 or determined to be 
in hazardous financial condition under article 3 is not an 
insolvent insurer as a result of that placement or determination.
    Sec. 3.  Minnesota Statutes 1990, section 60C.14, 
subdivision 2, is amended to read: 
    Subd. 2.  [OPTIONAL POWERS AND DUTIES.] The commissioner 
may: 
    (a) Require the association to notify the insureds of any 
insurer undergoing liquidation and any other interested parties 
of their possible rights under Laws 1971, chapter 145.  
Notification shall be by mail at their last known address, where 
available, but if sufficient information for notification by 
mail is not available, notice by publication in a newspaper of 
general circulation shall be sufficient. 
    (b) Suspend or revoke, after notice and hearing, the 
certificate of authority to transact insurance or to execute 
surety bonds in this state of any member insurer which fails to 
pay an assessment when due or fails to comply with the plan of 
operation.  As an alternative, the commissioner may levy a fine 
on any member insurer which fails to pay an assessment when 
due.  The fine shall not exceed five percent of the unpaid 
assessment per month, except that no fine shall be less than 
$100 per month. 
    (c) Revoke the designation of any servicing facility if the 
commissioner finds claims are being handled unsatisfactorily. 
    (d) Disclose to the board of directors information 
regarding any member insurer, or any company seeking admission 
to transact insurance business in this state, whose financial 
condition may be hazardous to policyholders or to the public.  
This disclosure does not violate any data privacy requirement or 
any obligation to treat the information as privileged.  This 
disclosure does not change the data privacy or privileged status 
of the information.  Board members shall not disclose the 
information to anyone else or use the information for any 
purpose other than their duties as board members. 
    Sec. 4.  Minnesota Statutes 1990, section 60E.04, 
subdivision 7, is amended to read: 
    Subd. 7.  [EXAMINATION REGARDING FINANCIAL CONDITION.] A 
risk retention group must submit to an examination by the 
commissioner to determine its financial condition if the 
commissioner of the jurisdiction in which the group is chartered 
has not initiated an examination or does not initiate an 
examination within 60 ten business days after a request by the 
commissioner of commerce.  The examination must be coordinated 
to avoid unjustified repetition and conducted in an expeditious 
manner and in accordance with the National Association of 
Insurance Commissioner's Examiner Handbook. 
    Sec. 5.  [62A.135] [NONCOMPREHENSIVE POLICIES; MINIMUM LOSS 
RATIOS.] 
    (a) This section applies to individual or group policies, 
certificates, or other evidence of coverage designed primarily 
to provide coverage for hospital or medical expenses on a per 
diem, fixed indemnity, or nonexpense incurred basis offered, 
issued, or renewed, to provide coverage to a Minnesota resident. 
    (b) Notwithstanding section 62A.02, subdivision 3, relating 
to loss ratios, policies must return to Minnesota policyholders 
in the form of aggregate benefits under the policy, for each 
year, on the basis of incurred claims experience and earned 
premiums in Minnesota and in accordance with accepted actuarial 
principles and practices:  
    (1) at least 75 percent of the aggregate amount of premiums 
earned in the case of group policies; and 
    (2) at least 65 percent of the aggregate amount of premiums 
earned in the case of individual policies.  
    (c) An insurer may only issue or renew an individual policy 
on a guaranteed renewable or noncancelable basis. 
    (d) Noncomprehensive policies, certificates, or other 
evidence of coverage subject to the provisions of this section 
are also subject to the requirements, penalties, and remedies 
applicable to medicare supplement policies, as set forth in 
section 62A.36, subdivisions 1a, 1b, and 2. 
    The first supplement to the annual statement required to be 
filed pursuant to this paragraph must be for the annual 
statement required to be submitted on or after January 1, 1993. 
    Sec. 6.  Minnesota Statutes 1990, section 62E.14, is 
amended by adding a subdivision to read: 
    Subd. 4d.  [INSURER INSOLVENCY; WAIVER OF PREEXISTING 
CONDITIONS.] A Minnesota resident who is otherwise eligible may 
enroll in the comprehensive health insurance plan with a waiver 
of the preexisting condition limitation described in subdivision 
3, if that person applies for coverage within 90 days of 
termination of prior coverage due to the insolvency of the 
insurer.  
    Coverage in the comprehensive insurance plan is effective 
on the date of termination of prior coverage.  The availability 
of conversion rights does not affect a person's rights under 
this subdivision. 
    Sec. 7.  Minnesota Statutes 1990, section 68A.01, 
subdivision 2, is amended to read: 
    Subd. 2.  [GUARANTY FUND AND INVESTMENT THEREOF.] Before 
issuing any policy or other contract of guaranty or insurance, 
every real estate title insurance company shall set apart and 
keep separate a guaranty fund of $100,000 or an amount equal to 
two-fifths of its capital stock whichever is the greater, but in 
no event shall a company be required to deposit in excess of 
$2,500,000.  The guaranty fund shall be invested according to 
law.  
    Sec. 8.  [72A.206] [IMPAIRMENT OR INSOLVENCY; NOTICE OF 
LIMITATIONS AND EXCLUSIONS OF PROTECTION.] 
    (a) No person, including an insurer, agent, or affiliate of 
an insurer or agent shall sell, or offer for sale, a policy or 
contract of insurance of any kind unless a separate notice 
conforming to the requirements of paragraph (b) is delivered 
with the application for that policy or contract.  The notice is 
considered part of the policy or contract and must be signed by 
the applicant and kept on file by the insurer.  A copy of the 
signed notice must be given to the applicant.  This section does 
not apply to renewals, unless the renewal increases the dollar 
amount of a coverage by more than 100 percent. 
    (b) The notice must clearly state the limitations and 
exclusions relating to the protection afforded the policy or 
contract holder should the insurer become financially impaired 
or insolvent, including coverages afforded by any guaranty fund. 
    (c) The notice requirements of section 61B.12, subdivision 
6, supersede the requirements of this section.  With respect to 
combination fixed-variable policies, the notice requirement of 
section 61B.12, subdivision 6, supersedes the requirements of 
this section, provided that the notice provided under section 
61B.12, subdivision 6, clearly describes what portions of the 
policy are not covered by the guaranty fund. 
    (d) This section does not apply to fraternal benefit 
societies regulated under chapter 64B. 
    Sec. 9.  [NONCOMPREHENSIVE POLICIES; RESERVES AND 
INVESTMENTS STUDY.] 
    The department of commerce shall review the adequacy of 
reserves of companies selling noncomprehensive policies subject 
to Minnesota Statutes, section 62A.135.  The department shall 
also review the earnings generated from the investment of the 
premium dollars paid for these policies.  The review under this 
section shall be treated as an examination for purposes of 
applying the requirements of Minnesota Statutes, section 60A.031.
    The department shall report the results of its review to 
the chairs of the house financial institutions and insurance 
committee and the senate commerce committee by January 1, 1992. 
    Sec. 10.  [EFFECTIVE DATE.] 
    Section 5 is effective for policies, certificates, or other 
evidence of coverage issued or offered to a Minnesota resident 
on or after August 1, 1991. 
    Presented to the governor May 30, 1991 
    Signed by the governor June 3, 1991, 9:45 a.m.