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

                            CHAPTER 131-S.F.No. 1610 
                  An act relating to insurance; regulating liquidations 
                  and investments of insurers; regulating consolidated 
                  or combined financial statements and annuities 
                  purchased to finance structured settlement agreements; 
                  authorizing domestic mutual life companies to be 
                  formed with or establish guaranty funds; regulating 
                  certain workers compensation rates and rating plans; 
                  amending Minnesota Statutes 2000, sections 60A.11, 
                  subdivision 10, by adding a subdivision; 60A.129, 
                  subdivision 5; 60B.44, subdivision 4; 60L.01, 
                  subdivision 14, by adding a subdivision; 60L.08, by 
                  adding a subdivision; 60L.10, subdivision 1; 61A.276, 
                  subdivision 2; 61A.28, subdivision 6, by adding a 
                  subdivision; 61A.29, subdivision 2; 79.56, subdivision 
                  3; proposing coding for new law in Minnesota Statutes, 
                  chapters 60A; 61A. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 2000, 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; 
           (d) "Clearing corporation" means The Depository Trust 
        Company or any other clearing agency registered with the 
        securities and exchange commission pursuant to the 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; 
           (e) "Control" has the meaning assigned to that term in, and 
        must be determined in accordance with, section 60D.15, 
        subdivision 4; 
           (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 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; 
           (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; 
           (l) "Member bank" means a national bank, state bank or 
        trust company which is a member of the Federal Reserve System; 
           (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; 
           (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; 
           (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.15, 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.15, 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; 
           (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; 
           (r) "Replicated investment position" means the statement 
        value of the position reported under the heading "Replicated 
        (Synthetic) Asset" on Schedule DB, Part F, of the annual 
        statement of the insurer, or any successor provision; 
           (s) "Replication transaction" means a derivative 
        transaction that is intended to replicate the performance of one 
        or more assets that an insurer is authorized to acquire under 
        this section.  A derivative transaction that either is 
        authorized by subdivision 18, clause (5), or by subdivision 24, 
        or is entered into as a hedging transaction shall not be 
        considered a replication transaction; 
           (t) "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; 
           (s) (u) "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) (v) "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 
           (u) (w) "Unrestricted surplus" means the amount by which 
        qualified assets exceed 110 percent of required liabilities. 
           Sec. 2.  Minnesota Statutes 2000, section 60A.11, is 
        amended by adding a subdivision to read: 
           Subd. 25a.  [REPLICATION TRANSACTIONS.] An insurer engaging 
        in replication transactions shall include all replicated 
        investment positions in calculating compliance with the 
        limitations on investments applicable to the insurer.  
        Replication transactions are permitted only under the authority 
        of subdivision 25.  An insurer may invest its unrestricted 
        surplus in a replication transaction only to the extent that the 
        replicated investment position does not cause the total 
        positions represented by the unrestricted surplus to be greater 
        than the total positions represented by the unrestricted surplus 
        as would be permitted in the absence of the replicated 
        investment position. 
           Sec. 3.  Minnesota Statutes 2000, section 60A.129, 
        subdivision 5, is amended to read: 
           Subd. 5.  [CONSOLIDATED FILING.] (a) The commissioner may 
        allow an insurer to file a consolidated loss reserve 
        certification required by subdivision 2, in lieu of separate 
        loss certifications and may allow an insurer to file 
        consolidated or combined audited financial statements required 
        by subdivision 3, paragraph (a), in lieu of separate annual 
        audited financial statements, where it can be demonstrated that 
        an insurer is part of a group of insurance companies that has a 
        pooling or 100 percent reinsurance agreement which substantially 
        affects the solvency and integrity of the reserves of the 
        insurer and the insurer cedes all of its direct and assumed 
        business to the pool.  An affiliated insurance company not 
        meeting these requirements may be included in the consolidated 
        or combined audited financial statements, if the company's total 
        admitted assets are less than five percent of the consolidated 
        group's total admitted assets.  If these circumstances exist, 
        then the company may file a written application to file a 
        consolidated loss reserve certification and/or consolidated or 
        combined audited financial statements.  This application shall 
        be for a specified period. 
           (b) Upon written application by a domestic insurer, the 
        commissioner may authorize the domestic insurer to include 
        additional affiliated insurance companies in the consolidated or 
        combined audited financial statements.  Foreign insurers must 
        obtain the prior written authorization of the commissioner of 
        their state of domicile in order to submit an application for 
        authority to file consolidated or combined audited financial 
        statements.  This application shall be for a specified period. 
           (c) A consolidated annual audit filing shall include a 
        columnar consolidated or combining worksheet.  Amounts shown on 
        the audited consolidated or combined financial statement shall 
        be shown on the worksheet.  Amounts for each insurer shall be 
        stated separately.  Noninsurance operations may be shown on the 
        worksheet on a combined or individual basis.  Explanations of 
        consolidating or eliminating entries shall be shown on the 
        worksheet.  A reconciliation of any differences between the 
        amounts shown in the individual insurer columns of the worksheet 
        and comparable amounts shown on the annual statement of the 
        insurers shall be included on the worksheet. 
           Sec. 4.  [60A.975] [DEFINITIONS.] 
           Subdivision 1.  [APPLICATION.] For purposes of sections 
        60A.975 and 60A.976, the definitions in this section have the 
        meanings given them. 
           Subd. 2.  [ANNUITY ISSUER.] "Annuity issuer" means an 
        insurer that issues an insurance contract used to fund periodic 
        payments under a structured settlement agreement. 
           Subd. 3.  [STRUCTURED SETTLEMENT.] "Structured settlement" 
        means an arrangement for periodic payment of damages entered on 
        behalf of a minor or incompetent person for personal injuries 
        established by settlement or judgment. 
           Subd. 4.  [STRUCTURED SETTLEMENT AGREEMENT.] "Structured 
        settlement agreement" means the agreement, judgment, 
        stipulation, or release embodying the terms of a structured 
        settlement. 
           Sec. 5.  [60A.976] [ANNUITY ISSUERS FINANCIAL 
        REQUIREMENTS.] 
           An annuity purchased to finance a structured settlement 
        agreement may be purchased only from an annuity issuer with a 
        financial rating equivalent to A.M. Best Company A+ Class 8 or 
        better; or a Standard & Poor's AA or better. 
           Sec. 6.  Minnesota Statutes 2000, section 60B.44, 
        subdivision 4, is amended to read: 
           Subd. 4.  [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 
        GUARANTY ASSOCIATION.] All claims under policies or contracts of 
        coverage for losses incurred including third party claims, and 
        all claims against the insurer for liability for bodily injury 
        or for injury to or destruction of tangible property which are 
        not under policies or contracts.  All claims under life 
        insurance and annuity policies, including funding agreements 
        issued pursuant to section 61A.276, whether for death proceeds, 
        annuity proceeds, or investment values, shall be treated as loss 
        claims.  That portion of any loss for which indemnification is 
        provided by other benefits or advantages recovered or 
        recoverable by the claimant shall not be included in this class, 
        other than benefits or advantages recovered or recoverable in 
        discharge of familial obligations of support or by way of 
        succession at death or as proceeds of life insurance, or as 
        gratuities.  No payment made by an employer to an employee shall 
        be treated as a gratuity.  Claims not covered by a guaranty 
        association are loss claims.  
           Sec. 7.  Minnesota Statutes 2000, section 60L.01, is 
        amended by adding a subdivision to read: 
           Subd. 13a.  [REPLICATED INVESTMENT POSITION.] "Replicated 
        investment position" means the statement value of the position 
        reported under the heading "Replicated (Synthetic) Asset" on 
        Schedule DB, Part F, of the annual statement of the insurer, or 
        any successor provision. 
           Sec. 8.  Minnesota Statutes 2000, section 60L.01, 
        subdivision 14, is amended to read: 
           Subd. 14.  [REPLICATION 
        TRANSACTION.] "Replication" "Replication transaction" means a 
        derivative transaction involving one or more derivative 
        instruments being used to modify the cash flow characteristics 
        of one or more investments held by an insurer in a manner so 
        that the aggregate cash flows of the derivative instruments and 
        investments reproduce the cash flows of another investment 
        having a higher risk-based capital charge than the risk-based 
        capital charge of the original investments or investments that 
        is intended to replicate the performance of one or more assets 
        that an insurer is authorized to acquire under sections 60L.01 
        to 60L.15.  A derivative transaction that is entered into as a 
        hedging transaction is not considered a replication transaction. 
           Sec. 9.  Minnesota Statutes 2000, section 60L.08, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [REPLICATION TRANSACTIONS.] (a) An insurer 
        engaging in replication transactions shall include all 
        replicated investment positions in calculating compliance with 
        the limitations on investments contained in this section.  So 
        long as the insurer so complies with the limitations on 
        investments contained in this section, then the insurer may 
        count a replication transaction and any related investment of 
        the insurer for the purposes specified in section 60L.11, to the 
        extent the insurer has appropriately assigned the transaction or 
        other investment to an investment class authorized in section 
        60L.07.  An insurer shall not otherwise count replicated 
        investment positions for the purposes specified in section 
        60L.11. 
           (b) If an investment position of the insurer includes a 
        replicated investment position and exceeds an applicable 
        limitation contained in this section, then the insurer may 
        allocate part or all of the replicated investment position as 
        follows for the purposes of calculating compliance with the 
        limitations on investments and other requirements contained in 
        sections 60L.01 to 60L.15:  to the extent an insurer owns assets 
        in excess of its minimum asset requirement, the insurer may deem 
        a replicated investment position to be among such excess assets, 
        but only to the extent that the replicated investment position 
        does not cause the total positions represented by such excess 
        assets to be greater than the total positions represented by 
        such excess assets as would be permitted in the absence of the 
        replicated investment position. 
           Sec. 10.  Minnesota Statutes 2000, section 60L.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [PROHIBITIONS.] An insurer may not invest 
        in investments that are prohibited for an insurer by law.  The 
        use of a derivative instrument for replication, or for any 
        purposes other than hedging or, income generation, or 
        replication is prohibited. 
           Sec. 11.  Minnesota Statutes 2000, section 61A.276, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ISSUANCE.] The funding agreements may be issued 
        to:  (1) individuals; or (2) persons authorized by a state or 
        foreign country to engage in an insurance business or 
        subsidiaries or affiliates of these persons; or (3) entities 
        other than individuals and other than persons authorized to 
        engage in an insurance business, and subsidiaries and affiliates 
        of these persons, for the following purposes:  (i) to fund 
        benefits under any employee benefit plan as defined in the 
        Employee Retirement Income Security Act of 1974, as now or 
        hereafter amended, maintained in the United States or in a 
        foreign country; (ii) to fund the activities of any organization 
        exempt from taxation under section 501(c) of the Internal 
        Revenue Code of 1986, as amended through December 31, 1992, or 
        of any similar organization in any foreign country; (iii) to 
        fund any program of any state, foreign country or political 
        subdivision thereof, or any agency or instrumentality thereof; 
        (iv) to fund any agreement providing for periodic payments in 
        satisfaction of a claim; or (v) to fund a program of a financial 
        an institution limited to banks, thrifts, credit unions, and 
        investment companies registered under the Investment Company Act 
        of 1940.  No funding agreement shall be issued in an amount less 
        than $1,000,000 that has assets in excess of $25,000,000.  No 
        funding agreement shall be issued in an amount less than 
        $1,000,000.  
           Sec. 12.  Minnesota Statutes 2000, section 61A.28, 
        subdivision 6, is amended to read: 
           Subd. 6.  [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] (a) 
        Common stocks, common stock equivalents, or securities 
        convertible into common stock or common stock equivalents 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 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.  
           (b) Preferred stock of, or common or preferred stock 
        guaranteed as to dividends by a business entity organized under 
        the laws of the United States or any state thereof, or the 
        Dominion of Canada or any province thereof, 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; (2) the company may not invest in stocks under this 
        paragraph and in common stocks under paragraph (a) if the 
        investment causes the company's aggregate investments in the 
        common or preferred stocks to exceed 25 percent of the 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 paragraph (a); and (3) 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.  
           (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), whichever is applicable.  A company shall 
        not invest in a warrant, option, or right to purchase 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).  
           (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 
        Investment Company Act of 1940 as from time to time amended.  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 ten 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. 
           (e) Investment grade obligations that are:  
           (1) bonds, obligations, notes, debentures, repurchase 
        agreements, or other evidences of indebtedness 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; 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; 
        (2) the lease or leases must be nonterminable by the lessee or 
        lessees upon foreclosure of any lien upon the leased property; 
        (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 
        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 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 call options against stocks or other 
        securities owned by the company and may purchase call options in 
        a closing transaction against a call option previously written 
        by the company.  In addition to the authority granted by 
        paragraph (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. 13.  Minnesota Statutes 2000, section 61A.28, is 
        amended by adding a subdivision to read: 
           Subd. 14.  [REPLICATION TRANSACTIONS.] An insurer engaging 
        in replication transactions shall include all replicated 
        investment positions in calculating compliance with the 
        limitations on investments applicable to the insurer.  
        Replication transactions are permitted only under the authority 
        of subdivision 12.  For these purposes, "replication 
        transaction" means a derivative transaction that is intended to 
        replicate the performance of one or more assets that an insurer 
        is authorized to acquire under applicable law.  A derivative 
        transaction that either is authorized by subdivision 6, 8, or 9a 
        or section 61A.29, subdivision 2, paragraph (d), or is entered 
        into as a hedging transaction shall not be considered a 
        replication transaction.  "Replicated investment position" means 
        the statement value of the position reported under the heading 
        "Replicated (Synthetic) Asset" on Schedule DB, Part F, of the 
        annual statement of the insurer, or any successor provision. 
           Sec. 14.  Minnesota Statutes 2000, section 61A.29, 
        subdivision 2, is amended to read: 
           Subd. 2.  [AUTHORIZED INVESTMENTS.] 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 regular trading occurs. 
           (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. 
           Sec. 15.  [61A.321] [GUARANTY FUNDS.] 
           (a) A domestic mutual life insurance company may be formed 
        with, or an existing domestic mutual life insurance company may 
        establish, a guaranty fund divided into certificates of $10 
        each, or multiples thereof, and this guaranty fund shall be 
        invested in the same manner as is provided for the investment of 
        capital stock of insurance companies. 
           (b) The certificate holders of the guaranty fund are 
        entitled to an annual dividend of not more than ten percent on 
        their respective certificates, if the net profits or unused 
        premiums left after all losses, expenses, or liabilities then 
        incurred, with reserves for reinsurance, are provided for, are 
        sufficient to pay the annual dividend.  If the dividends in any 
        one year are less than ten percent, the difference may be made 
        up in any subsequent year or years from the net profits.  
        Approval of the commissioner must be obtained before accrual for 
        or payment of the dividend, or any repayment of principal.  
           (c) The guaranty fund must be applied to the payment of 
        losses and expenses when necessary, and, if the guaranty fund is 
        impaired, the directors may make good the whole or any part of 
        the impairment from future profits of the company, but no 
        dividend shall be paid on guaranty fund certificates while the 
        guaranty fund is impaired.  The holder of the guaranty fund 
        certificate is not liable for any more than the amount of the 
        certificate which has not been paid in, and this amount must be 
        plainly and legibly stated on the face of the certificate. 
           (d) Notwithstanding any other provision of law, each 
        certificate holder of record is entitled to one vote in person 
        or by proxy in any meeting of the members of the company for 
        each $10 investment in guaranty fund certificates. 
           (e) The guaranty fund may be reduced or retired by vote of 
        the policyholders of the company and the assent of the 
        commissioner, if the net assets of the company above its 
        reinsurance reserve and all other claims and obligations and the 
        amount of its guaranty fund certificates and interest on the 
        certificates for two years last preceding and including the date 
        of its last annual statement are not less than 50 percent of the 
        premiums in force.  Due notice of this proposed action on the 
        part of the company shall be mailed to each policyholder of the 
        company not less than 30 days before the meeting when the action 
        may be taken. 
           (f) In domestic mutual life insurance companies with a 
        guaranty fund, the certificate holders shall be entitled to 
        choose and elect from among their own number or from among the 
        policyholders at least one-half or more of the total number of 
        directors. 
           (g) If any domestic mutual life insurance company with a 
        guaranty fund ceases to do business, it shall not divide among 
        its certificate holders any part of its assets or guaranty fund 
        until all its debts and obligations have been paid or canceled. 
           (h) Foreign mutual life insurance companies having a 
        guaranty fund shall not be required to make their certificate of 
        guaranty fund conform to the provisions of this section, but 
        when the certificates do not conform with this section, the 
        amount of the guaranty fund shall be charged as a liability. 
           Sec. 16.  Minnesota Statutes 2000, section 79.56, 
        subdivision 3, is amended to read: 
           Subd. 3.  [PENALTIES.] (a) Any insurer using a rate or a 
        rating plan which has not been filed shall be subject to a fine 
        of up to $100 for each day the failure to file continues.  The 
        commissioner may, after a hearing on the record, find that the 
        failure is willful.  A willful failure to meet filing 
        requirements shall be punishable by a fine of up to $500 for 
        each day during which a willful failure continues.  These 
        penalties shall be in addition to any other penalties provided 
        by law.  
           (b) Notwithstanding this subdivision, an employer that 
        generates $500,000 $250,000 in annual written workers' 
        compensation premium under the rates and rating plan of an 
        insurer before the application of any large deductible rating 
        plans, may be written by that insurer using rates or rating 
        plans that are not subject to disapproval but which have been 
        filed.  The $500,000 threshold shall be increased on January 1, 
        1996, and on each January 1 thereafter by the percentage 
        increase in the statewide average weekly wage, to the nearest 
        $1,000.  The commissioner shall advise insurers licensed to 
        write workers' compensation insurance in this state of the 
        annual threshold adjustment. 
           Presented to the governor May 17, 2001 
           Signed by the governor May 21, 2001, 10:40 a.m.