Section 1401. Definitions and rules of general application. 1402. Minimum capital or minimum surplus to policyholder investments. 1403. Reserve and other investments; certain requirements. 1404. Types of reserve investments permitted for non-life insurers. 1405. Investments of life insurers. 1406. Policy loans. 1407. Non-reserve and prohibited investments for property/casualty and certain other insurers. 1408. Acquisition of insurance company shares; limitations thereon. 1409. Limitation of investments. 1410. Derivative transactions and derivative instruments. 1411. Authorization of, and restrictions on, investments. 1412. Disposal or deduction of investments unlawfully acquired. 1413. Investments of foreign and alien insurers. 1414. Valuation of investments. S 1401. Definitions and rules of general application. (a) In this article: (1) "Invested assets" means the admitted assets of an insurer that conform to the requirements of paragraphs one and two of subsection (a) of section one thousand three hundred one of this chapter, but excluding the income due or accrued thereon. (2) "Mortgage-related security" means an obligation that is rated AA or higher (or the equivalent thereto) by a nationally recognized securities rating agency and either: (A) represents ownership of one or more promissory notes or certificates of interest or participation in such notes (including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of such notes, certificates, or participation of amounts payable under, such notes, certificates, or participation), which notes: (i) are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or on a residential manufactured home as defined in section 5402(6) of Title 42 of the U.S.C.A., whether such manufactured home is considered real or personal property under the laws of the state in which it is to be located; and (ii) were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution which is supervised and examined by a federal or state authority, or by a mortgage approved by the secretary of housing and urban development pursuant to sections 1709 and 1715-b of Title 12 of the U.S.C.A., or, where such notes involve a lien on the manufactured home, by any such institution or by any financial institution approved for insurance by the secretary of housing and urban development pursuant to section 1703 of Title 12 of the U.S.C.A.; or (B) is secured by one or more promissory notes or certificates of interest or participations in such notes (with or without recourse to the issuer thereof) and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, or notes meeting the requirements of items (i) and (ii) of subparagraph (A) of this paragraph or certificates of interest or participation in promissory notes meeting such requirements. For the purpose of this paragraph the term "promissory note", when used in connection with a manufactured home, shall also include a loan, advance or credit sale as evidence by a retail installment sales contract or other instrument. (3) "Partnership interests" when used in connection with the permissible types of investments made by any domestic insurer, other than a domestic life insurer, means, an interest as a limited partner in a limited partnership. A "limited partnership" means a partnership formed by two or more persons pursuant to the provisions of the applicable law, having as members one or more general partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the partnership. (4) "United States" means, when used to signify place, only the states of the United States, the Commonwealth of Puerto Rico, the District of Columbia and includes lands and waters adjacent to the foregoing and under the jurisdiction of the United States. * (5) "Cap" means an agreement obligating the seller to make payments to the buyer with each payment based on the amount by which a reference price or level or the performance or value of one or more underlying interests exceeds a predetermined number, sometimes called the strike rate or strike price. * NB Repealed June 30, 2003 * (6) "Collar" means an agreement to receive payments as the buyer of an option, cap or floor and to make payments as the seller of a different option, cap or floor. * NB Repealed June 30, 2003 * (7) "Derivative instrument" means an agreement, option, instrument or a series or combination thereof: (A) to make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests, or to make a cash settlement in lieu thereof; or (B) that has a price, performance, value or cash flow based primarily upon the actual or expected price, level, performance, value or cash flow of one or more underlying interests. The term "derivative instrument" includes options, warrants, caps, floors, collars, swaps, swaptions, forwards, and futures. * NB Repealed June 30, 2003 * (8) "Derivative transaction" means a transaction involving the use of one or more derivative instruments. * NB Repealed June 30, 2003 * (9) "Floor" means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a reference price, level, performance or value of one or more underlying interests. * NB Repealed June 30, 2003 * (10) "Forward" means an agreement (other than a future) to make or take delivery in the future of one or more underlying interests, or effect a cash settlement, based on the actual or expected price, level, performance or value of such underlying interests, but shall not mean or include spot transactions effected within customary settlement periods, when-issued purchases, or other similar cash market transactions. * NB Repealed June 30, 2003 * (11) "Future" means agreement traded on a futures exchange, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one or more underlying interests. * NB Repealed June 30, 2003 * (12) "Hedging transaction" means a derivative transaction which is entered into and at all times maintained to reduce: (A) the risk of economic loss due to a change in the value, yield, price, cash flow or quantity of assets or liabilities which the insurer has acquired or incurred or anticipates acquiring or incurring; or (B) the risk of economic loss due to changes in the currency exchange rate or the degree of exposure as to assets or liabilities denominated in a foreign currency which an insurer has acquired or incurred or anticipates acquiring or incurring. * NB Repealed June 30, 2003 * (13) "Option" means an agreement giving the buyer the right to buy or receive (a "call option"), sell or deliver (a "put option"), enter into, extend or terminate or effect a cash settlement based on the actual or expected price, spread, level, performance or value of one or more underlying interests. * NB Repealed June 30, 2003 * (14) "Swap" means an agreement to exchange or to net payments at one or more times based on the actual or expected price, yield, level, performance or value of one or more underlying interests. * NB Repealed June 30, 2003 * (15) "Swaption" means an option to purchase or sell a swap at a given price and time or at a series of prices and times. A swaption does not mean a swap with an embedded option. * NB Repealed June 30, 2003 * (16) "Underlying interest" means the assets, liabilities, other interests, or a combination thereof, underlying a derivative instrument, such as any one or more securities, currencies, rates, indices, commodities or derivative instruments. * NB Repealed June 30, 2003 * (17) "Warrant" means an instrument that gives the holder the right to purchase or sell the underlying interest at a given price and time or at a series of prices and times outlined in the warrant agreement. * NB Repealed June 30, 2003 (18) "Replication transaction" means a derivative transaction or combination of derivative transactions effected either separately or in conjunction with cash market investments included in the insurer`s investment portfolio in order to replicate the investment characteristic of another authorized transaction, investment or instrument and/or operate as a substitute for cash market transactions. A derivative transaction entered into by the insurer as a hedging transaction or income generation transaction authorized pursuant to this section shall not be considered a replication transaction. (b) All financial tests and other requirements for the making of any investment are satisfied if complied with on the date of acquisition by the insurer, except as otherwise permitted by this chapter or by regulation. (c) None of the financial tests or other requirements for the making of any investment under this article, or as otherwise required by this chapter or by regulation promulgated pursuant thereto, are preempted by the provisions of section 106 of Title I of the Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C. S 77r-1)("SMMEA"). The provisions of this chapter and any regulation promulgated pursuant thereto that pertain to investments in the categories of securities specified in paragraphs one and two of subsection (a) of section 106 of such act shall remain in full force and effect notwithstanding the enactment of SMMEA. S 1402. Minimum capital or minimum surplus to policyholder investments. (a) Before investing its funds in any other investments, every domestic insurer shall invest and maintain an amount equal to the greater of the minimum capital required by law or the minimum surplus to policyholders required to be maintained by law for a domestic stock corporation authorized to transact the same kinds of insurance, only in investments of the types specified in this section which are not in default as to principal or interest. Investments equal in value, determined pursuant to section one thousand four hundred fourteen of this article, to such amount and of such types shall at all times be maintained free and clear from any security interest other than as impressed upon a deposit with any government within the United States for the security of all policyholders or all policyholders and creditors of the insurer or upon trusteed assets held in trust for the security of all policyholders and creditors of the insurer. (b) Not less than sixty percent of the amount of the required minimum capital or surplus to policyholder investments shall consist of the types specified in paragraphs one and two hereof: (1) Obligations of the United States or of any agency thereof provided such agency obligations are guaranteed as to principal and interest by the United States. (2) Direct obligations of this state or of any county, district or municipality thereof. (3) Direct obligations of any state of the United States. (4) Obligations secured by first mortgage loans which meet the standards specified in paragraph four of subsection (a) of section one thousand four hundred four of this article on property located in this state. S 1403. Reserve and other investments; certain requirements. (a) If the requirements of section one thousand four hundred two of this article are met: * (1) any domestic life insurance company may invest its funds in, or otherwise acquire, or loan upon, only the types of investments specified in section one thousand four hundred two, this section, sections one thousand four hundred five, one thousand four hundred six, one thousand four hundred ten, four thousand two hundred forty and article seventeen of this chapter, subject to the limitations therein contained. The provisions of section one thousand four hundred four of this article shall not have any application to investments of life insurance companies, except to the extent provided in paragraph four of subsection (b) of section one thousand four hundred two of this article; * NB Effective until June 30, 2003 * (1) any domestic life insurance company may invest its funds in, or otherwise acquire, or loan upon, only the types of investments specified in section one thousand four hundred two, this section, sections one thousand four hundred five, one thousand four hundred six, four thousand two hundred forty and article seventeen of this chapter, subject to the limitations therein contained. The provisions of section one thousand four hundred four of this article shall not have any application to investments of life insurance companies, except to the extent provided in paragraph four of subsection (b) of section one thousand four hundred two of this article; * NB Effective June 30, 2003 (2) any domestic corporation subject to article forty-three or sixty-four of this chapter and any domestic fraternal benefit society subject to article forty-five of this chapter may invest its funds in, or otherwise acquire, or loan upon, only the types of investments specified in section one thousand four hundred two, this section and section one thousand four hundred four of this article, except as may be modified by said article forty-three or sixty-four of this chapter as to corporations organized thereunder or by article forty-five of this chapter as to societies organized thereunder. Any such corporation subject to article forty-three or any such society governed by subsection (a) of section forty-five hundred twenty-nine of this chapter may also invest in, or otherwise acquire, subsidiaries to the extent permitted by subsection (b) of section one thousand seven hundred one of this chapter. Any such fraternal benefit society may also make policy loans under section one thousand four hundred six of this article. (b) A domestic charitable annuity society, the investments of which are subject to the provisions of section eleven hundred ten of this chapter, may invest such of its assets (the investment of which is controlled by section eleven hundred ten) in, or otherwise acquire, or loan upon, only the types of securities specified in section one thousand four hundred two, this section and section one thousand four hundred four of this article. A retirement system subject to the provisions of article forty-six of this chapter may invest its funds only as provided in article forty-six of this chapter. In addition, a retirement system subject to article forty-six may acquire subsidiaries under article seventeen of this chapter and may establish separate accounts under section four thousand two hundred forty of this chapter, in each case to the extent permitted by article forty-six of this chapter. * (c) If the requirements of section one thousand four hundred two of this article are met, any domestic insurer, other than an insurer subject to subsection (a) or (b) of this section, may, except as set forth below, invest its funds in, or otherwise acquire, or loan upon, only the types of investments specified in such section, this section and subsection (a) of section one thousand four hundred four of this article (except paragraphs eight and ten of subsection (a) of such section); provided that any such domestic insurer may also invest its funds in, or otherwise acquire or loan upon investments permitted under sections one thousand four hundred seven (including investments of the classes described in paragraphs eight and ten of subsection (a) of section one thousand four hundred four), section one thousand four hundred eight of this article and article sixteen of this chapter, so long as it maintains cash, investments required by section one thousand four hundred two of this article and reserve investments under subsection (a) of section one thousand four hundred four of this article, free from any lien or pledge, which, when valued in accordance with the provisions of this chapter, shall at least equal fifty percent of the aggregate amount of its unearned premium, loss and loss adjustment expense reserves as shown by its last sworn statement, annual or quarterly, on file with the superintendent. If an insurer, other than an accident and health insurance company, maintains cash, investments required by section one thousand four hundred two of this article and reserve investments under subsection (a) of section one thousand four hundred four of this article, free from any lien or pledge, which, when valued in accordance with the provisions of this chapter, shall at least equal the aggregate of seventy percent of its loss and loss adjustment expense reserves and fifty percent of its unearned premium reserves as shown by its last sworn statement, annual or quarterly, on file with the superintendent, then such insurer, other than an accident and health insurance company, may in addition enter into the types of transactions set forth in section one thousand four hundred ten of this article, subject to the limitations set forth in such section. The term "lien or pledge" as used in this subsection shall not include any deposit of securities or cash with any government, nor trusteed assets, held in trust for the benefit or protection of all or any class of the policyholders, or policyholders and creditors, of such insurer. * NB Effective until June 30, 2003 * (c) If the requirements of section one thousand four hundred two of this article are met, any domestic insurer, other than an insurer subject to subsection (a) or (b) above, may, except as set forth below, invest its funds in, or otherwise acquire, or loan upon, only the types of investments specified in such section, this section and subsection (a) of section one thousand four hundred four of this article (except paragraphs eight and ten of subsection (a) of such section); provided that any such domestic insurer may also invest its funds in, or otherwise acquire or loan upon investments permitted under sections one thousand four hundred seven (including investments of the classes described in paragraphs eight and ten of subsection (a) of section one thousand four hundred four), section one thousand four hundred eight of this article and article sixteen of this chapter, so long as it maintains cash, investments required by section one thousand four hundred two of this article and reserve investments under subsection (a) of section one thousand four hundred four of this article, free from any lien or pledge, which, when valued in accordance with the provisions of this chapter, shall at least equal fifty percent of the aggregate amount of its unearned premium, loss and loss adjustment expense reserves as shown by its last sworn statement, annual or quarterly, on file with the superintendent. If the insurer maintains cash, investments required by section one thousand four hundred two of this article and reserve investments under subsection (a) of section one thousand four hundred four of this article, free from any lien or pledge, which, when valued in accordance with the provisions of this chapter, shall at least equal the aggregate of seventy percent of its loss and loss adjustment expense reserves and fifty percent of its unearned premium reserves as shown by its last sworn statement, annual or quarterly, on file with the superintendent, then such insurer may in addition enter into the types of transactions set forth in paragraph seven of subsection (d) of this section, subject to the limitations set forth in such paragraph. The term "lien or pledge" as used in this subsection shall not include any deposit of securities or cash with any government, nor trusteed assets, held in trust for the benefit or protection of all or any class of the policyholders, or policyholders and creditors, of such insurer. * NB Effective June 30, 2003 (d) (1) Except for investments referred to in subsection (e) of this section, investments that are neither interest bearing nor income paying shall be purchased or acquired only under, and to the extent permitted by, subsection (b) of section one thousand four hundred four of this article (in the case of insurers that make investments under section one thousand four hundred four of this article other than insurers making investments under the authority of subsection (c) of this section), paragraph eight of subsection (a) of section one thousand four hundred five of this article (in the case of insurers that make investments under section one thousand four hundred five) or section one thousand four hundred seven of this article (in the case of insurers that make investments under the authority of subsection (c) of this section), however, a default in interest or income occurring subsequent to the purchase or other acquisition of an investment shall not affect the allowance thereof as an admitted asset at the market value thereof. * (2)(A) Notwithstanding any other provision of this article, a domestic insurer making investments pursuant to paragraph two of subsection (a) of this section, a domestic charitable annuity society and a retirement system making investments pursuant to subsection (b) of this section, and a domestic accident and health insurer making investments pursuant to subsection (c) of this section may sell call options on securities, provided that: (i) such options are traded on a securities exchange registered under the laws of the United States, and (ii) the insurer holds, or can immediately acquire through the exercise of warrants or conversion rights already owned at a contractually specified price, the underlying securities during the entire period the option is outstanding. (B) An insurer selling call options on securities pursuant to subparagraph (A) of this paragraph may purchase any such option to offset an outstanding option previously sold by the insurer for the same kind and amount of securities. * NB Repealed June 30, 2003 (e) * (1) Nothing contained in this chapter shall prohibit the acquisition by any insurer of other securities or property (i) received as a dividend or pursuant to a judicial or lawful non-judicial plan of reorganization or dissolution or pursuant to a lawful and bona fide agreement of bulk reinsurance or consolidation; or (ii) received through the exercise of rights of conversion, stock warrants or stock options acquired by it in accordance with this subsection or section one thousand four hundred four, one thousand four hundred five, one thousand four hundred seven or one thousand four hundred ten of this article. Nor shall anything in this chapter prohibit acquisition of (1) an investment permitted under section one thousand four hundred four, one thousand four hundred five, one thousand four hundred seven or one thousand four hundred ten of this article because such investment is convertible into other securities in which such insurer is not permitted to invest under this chapter, or because such insurer receives in connection with such investment stock warrants, whether detachable or non-detachable, stock options, stock, property interests or other assets of any kind or (2) securities or property (real or personal) or any interest therein received in satisfaction of a debt previously owing to such insurer. If any securities or other property received by any insurer in accordance with the first sentence of this paragraph shall consist in whole or in part of shares of any institution or of obligations or other property not meeting the requirements specified in section one thousand four hundred four (in the case of insurers making investments under the authority of section one thousand four hundred four) or section one thousand four hundred five (in the case of insurers making investments under the authority of section one thousand four hundred five) of this article, then any such shares and any such obligations or property so received shall be disposed of within five years from the time of acquisition or before the expiration of such further period or periods of time as may be prescribed in writing by the superintendent, unless at any time after such acquisition such shares, obligations or property shall have met such requirements and the insurer has notified the superintendent thereof. * NB Effective until June 30, 2003 * (1) Nothing contained in this chapter shall prohibit the acquisition by any insurer of other securities or property (i) received as a dividend or pursuant to a judicial or lawful non-judicial plan of reorganization or dissolution or pursuant to a lawful and bona fide agreement of bulk reinsurance or consolidation; or (ii) received through the exercise of rights of conversion, stock warrants or stock options acquired by it in accordance with this subsection or section one thousand four hundred four, one thousand four hundred five or one thousand four hundred seven of this article. Nor shall anything in this chapter prohibit acquisition of (1) an investment permitted under section one thousand four hundred four, one thousand four hundred five or one thousand four hundred seven of this article because such investment is convertible into other securities in which such insurer is not permitted to invest under this chapter, or because such insurer receives in connection with such investment stock warrants, whether detachable or non-detachable, stock options, stock, property interests or other assets of any kind or (2) securities or property (real or personal) or any interest therein received in satisfaction of a debt previously owing to such insurer. If any securities or other property received by any insurer in accordance with the first sentence of this paragraph shall consist in whole or in part of shares of any institution or of obligations or other property not meeting the requirements specified in section one thousand four hundred four (in the case of insurers making investments under the authority of section one thousand four hundred four) or section one thousand four hundred five (in the case of insurers making investments under the authority of section one thousand four hundred five) of this article, then any such shares and any such obligations or property so received shall be disposed of within five years from the time of acquisition or before the expiration of such further period or periods of time as may be prescribed in writing by the superintendent, unless at any time after such acquisition such shares, obligations or property shall have met such requirements and the insurer has notified the superintendent thereof. * NB Effective June 30, 2003 (2) Except as otherwise specifically provided in this chapter, investments in subsidiaries are not subject to the provisions of this section, section one thousand four hundred four (except paragraph nine of subsection (a) thereof) or one thousand four hundred five of this article. (f) (1) Subsidiaries of domestic life insurance companies, whether acquired under subsection (e) of this section, sections one thousand four hundred five, four thousand two hundred forty, or otherwise, shall be subject to the provisions of article seventeen of this chapter to the extent therein provided. (2) Subsidiaries of domestic corporations subject to article forty-three of this chapter and of domestic retirement systems, whether acquired under subsection (e) of this section, section one thousand four hundred four, four thousand two hundred forty (in the case of retirement systems), or otherwise, shall be subject to the provisions of article seventeen of this chapter to the extent therein provided. (g) This section does not prohibit any domestic insurance company from acquiring shares under article seventy-one of this chapter or any domestic life insurance company from acquiring shares of its own capital stock pursuant to section seven thousand three hundred two of this chapter. (h) With respect to all transactions between a domestic insurer and any person, five percent or more of whose voting securities are held, directly or indirectly, by such insurer, but which is not a subsidiary, the insurer shall maintain books, accounts and records that disclose clearly and accurately the nature and detail of such transactions. (i) (1) Except as provided in subparagraph (A) of paragraph two of subsection (a) of section four thousand two hundred forty of this chapter, investments made for separate accounts under the provisions of section four thousand two hundred forty of this chapter shall be disregarded, and shall be excluded from admitted assets, in applying the quantitative investment limitations contained in this chapter to other investments. (2) Except as provided in subparagraph (A) of paragraph two of subsection (a) or paragraph four of subsection (a) of section four thousand two hundred forty of this chapter, the restrictions, limitations and other provisions relating to investments specified in this chapter shall not apply to investments made for separate accounts under the provisions of section four thousand two hundred forty of this chapter. S 1404. Types of reserve investments permitted for non-life insurers. (a) In addition to the investments specified in subsection (b) hereof, but excluding any investment prohibited by the provisions of paragraph one, three, four, six, eight, nine or ten of subsection (a) of section one thousand four hundred seven of this article, the reserve investments of a domestic insurer authorized to make investments under the authority of this section shall consist of the following: (1) Government obligations. Obligations which are not in default as to principal or interest, which are valid and legally authorized, and which are issued, assumed, guaranteed or insured by: (A) the United States or by any agency or instrumentality thereof, (B) any state of the United States, (C) any territory or possession of the United States or any other governmental unit in the United States, or (D) any agency or instrumentality of any governmental unit referred to in subparagraphs (B) and (C) of this paragraph, provided that obligations to be eligible under this paragraph shall be by law (statutory or otherwise) payable, as to both principal and interest, from taxes levied or by law required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but in no event shall obligations be eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements. (2) Obligations of American institutions. (A) Obligations which are issued by any solvent American institution or which are assumed or guaranteed by any solvent American institution (other than an insurance company) and which are not in default as to principal or interest provided such obligations: (i) are adequately secured by collateral security having a market value not less than the principal amount thereof and have investment qualities and characteristics wherein the speculative elements are not predominant, or (ii) are rated A or higher (or the equivalent thereto) by a securities rating agency recognized by the superintendent, or if not so rated, are similar in structure and in all material respects to other obligations of the same institution which are so rated, or (iii) are insured by one or more authorized insurance companies (other than the investing insurer or any parent, subsidiary or affiliate of such insurer) who are licensed to insure obligations in this state and, after considering such insurance, are rated Aaa (or the equivalent thereto) by a securities rating agency recognized by the superintendent, or (iv) have been given the highest quality designation by the Securities Valuation Office of the National Association of Insurance Commissioners. (B) No investment in or loan upon the obligations of any institution, other than an institution which issues mortgage related securities, and no investment in any one mortgage related security, made pursuant to the provisions of this paragraph shall exceed five per centum of the admitted assets of such insurer as shown by its last statement on file with the superintendent. (3) Preferred or guaranteed shares of American institutions. (A) Preferred or guaranteed shares issued or guaranteed by a solvent American institution if all of the institution`s obligations are eligible as investments under item (ii) or (iv) of subparagraph (A) of paragraph two of this subsection. (B) No investment in the preferred or guaranteed shares of any institution made pursuant to the provisions of this paragraph shall exceed two percent of such insurer`s admitted assets as shown by its last statement on file with the superintendent. (4) Loans secured by real property. (A) Loans secured by first or second mortgages which are liens on improved real property in the United States (including leasehold estates having an unexpired term of not less than twenty years, inclusive of the term or terms which may be provided by enforceable terms of renewal) meeting the following requirements: (i) Priority of mortgages. The mortgaged property shall be subject to no prior lien, except a first mortgage and liens for non-delinquent ground rents, taxes, assessments and similar charges. There shall be no condition or right of re-entry or forfeiture not insured against under which the mortgage can be cut off, subordinated or otherwise disturbed. No loan secured by a second mortgage shall be made if the principal amount secured by a prior first mortgage can be increased without the insurer`s consent unless the amount of increase is applied to reduce the second mortgage. (ii) Leaseholds. If the mortgaged property is a leasehold: (I) the lease shall provide for a term of at least twenty-one years, (II) the property underlying the leasehold shall be subject to no prior lien except for liens for non-delinquent ground rents, taxes, assessments and similar charges and there shall be no condition or right of re-entry or forfeiture not insured against under which the insurer is unable to continue the lease in force for the duration of the loan, and (III) the loan shall provide for such payments that at any time during the period of the loan the aggregate payments of principal to be made will be sufficient to repay the loan within the lesser of forty years or a period equal to eighty percent of the term of the lease, through payments of interest only for five years and equal payments applicable first to interest and then to principal at the end of each year thereafter. "Term", as used in this paragraph six with reference to a lease, means its unexpired term at the date of the loan, plus any term which may be provided by options of the lessee to renew. (iii) Participations. If the investment is a participation in a loan: (I) all participations shall be held by the insurer, or (II) the participation held by the insurer shall give it substantially the rights of a first or second mortgagee, and shall be prior to those of the holders of the other participations, or (III) each participation shall be of equal rank, and (aa) the loan shall comply with items (i), (ii), and (iv) of this subparagraph (A) and with any regulations prescribed by the superintendent for investments under this clause (III), and (bb) if, when the participation is acquired by the insurer, there are more than five holders of participations in the loan, or more than three such holders and such loan is less than five million dollars in original principal amount, the mortgagee shall be (and, in the case of a participation in an obligation, the obligation shall be held by) a bank or trust company duly authorized and licensed to act as a corporate trustee (with or without a co-trustee). "Participation", as used in this paragraph four, means an obligation forming part of an issue of bonds, notes or other evidences of indebtedness which are secured by the same mortgage and also an instrument evidencing a participating interest in any such bond, note or other evidence of indebtedness. (iv) Amount of loan. The amount of the loan (excluding any part guaranteed or insured under title three of the Servicemen`s Readjustment Act of 1944, 38 U.S.C. SS 1801-1827), when added to the amount unpaid on any prior first mortgage, shall not exceed the following percentages of the value of the real property or leasehold securing the loan, as determined by an appraisal made by an appraiser for the purpose of the investment: (I) sixty-six and two-thirds percent, (II) seventy-five percent, if the mortgage provides for such payments of principal that at no time during the period of the loan shall the aggregate payments of principal required to be made be less than would have been necessary to reduce the amount of the loan (plus the amount secured by any such prior mortgage) to sixty-six and two-thirds percent of such value by the end of thirty-five years, through payments of interest only for five years and equal payments applicable first to interest and then to principal at the end of each year thereafter, or (III) ninety percent, if the loan is secured by a first mortgage on real property improved primarily with a residential building, which may be a condominium unit, for not more than four families and provides for monthly payments of principal and interest sufficient to repay the loan within the lesser of forty years or the remaining useful life of the building as estimated in the appraisal. (v) Investment limitations. (I) Investments held by an insurer, except a fraternal benefit society, under this subparagraph (A) shall not exceed: (aa) in the aggregate twenty-five percent of its admitted assets as shown by its last statement on file with the superintendent excluding any amount guaranteed or insured under the Servicemen`s Readjustment Act of 1944, 38 U.S.C. SS 1801-1827, or (bb) in the aggregate two percent of its admitted assets as shown by its last statement on file with the superintendent in loans secured by other than first mortgages. (II) Investments held by a fraternal benefit society under this paragraph shall not exceed: (aa) in the aggregate fifty percent of its admitted assets as shown by its last statement on file with the superintendent, excluding any amount guaranteed or insured under the Servicemen`s Readjustment Act of 1944, 38 U.S.C. SS 1801-1827, or (bb) in the aggregate two percent of its admitted assets as shown by its last statement on file with the superintendent in loans secured by other than first mortgages. (III) No insurer or society shall invest in or lend upon the security of any one property more than the greater of thirty thousand dollars or two percent of its admitted assets as shown by its last statement on file with the superintendent. (IV) Separate evidences of indebtedness which are separately transferable shall be deemed to constitute separate loans which may be separately qualified under this paragraph whether or not secured by a single mortgage. (B) Purchase money mortgages. Purchase money mortgages or like securities received by the insurer on the sale or exchange of real property held under paragraph five hereof. (5) Real property or interests therein. (A) The following investments in real property (including incidental equipment thereto) located in the United States, if acquired and held directly or through partnership interests engaged exclusively in the business of acquiring, owing and managing such property: (i) The land and the building thereon in which the insurer has its principal office. (ii) Real property requisite for the insurer`s convenient accommodation in the transaction of its business. (iii) Real property acquired in total or partial satisfaction of mortgages, liens, judgments, claims or indebtedness held by the insurer in the course of its business. (iv) Real property acquired as an investment for the production of income or to be improved or developed for such investment purpose. (B) Investments under this paragraph shall be subject to the following limitations: (i) The cost of each parcel acquired under item (iv) of subparagraph (A) of this paragraph, including the estimated cost to the insurer of the improvement or development thereof, shall not exceed one percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent, and when added to the book value of all other real property then held by it pursuant to such item (iv), shall not exceed twelve and one-half percent of such admitted assets. Unless otherwise required by the superintendent under subsection (b) of section one thousand four hundred fourteen of this article, each parcel of real property held under such item (iv) together with each capital improvement or development thereof existing at acquisition or made subsequently shall be valued on the insurer`s books as of each last year-end so as to write down the cost of such improvement or development, at a rate averaging at least two percent per annum commencing on the date of acquisition or completion, as the case may be, of such improvement or development. (ii) The acquisition of real property serving as the residence of an employee, except a director or trustee of such insurer, if acquired in connection with the relocation by the insurer of the employee`s place of employment, including any relocation in connection with his initial employment, at a purchase price not exceeding the property`s value as determined by an independent appraiser for the purpose of such acquisition, provided such employee has made reasonable efforts otherwise to dispose of such property during the month before such acquisition. Such property must be acquired under item (ii) of subparagraph (A) hereof, and, in the case of a non-director officer, such acquisition is subject to the provisions of subsection (h) of section one thousand four hundred eleven of this article. (iii) Real property acquired pursuant to items (i) and (ii) of subparagraph (A) hereof shall be disposed of within five years after it shall have ceased to be necessary for the convenient accommodation of such insurer in the transaction of its business, and real property acquired pursuant to item (iii) of subparagraph (A) hereof shall be disposed of within five years after the date of acquisition, unless the superintendent certifies that the interests of the insurer will suffer materially by the forced sale thereof and extends the time in such certificate. (iv) No real property shall be acquired by any domestic insurer pursuant to items (i) and (ii) of subparagraph (A) hereof if its cost, together with the book value of all real property then held pursuant to such items (i) and (ii), exceeds ten percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent. (v) Except with the superintendent`s approval, no domestic insurer shall: (I) acquire any real property pursuant to items (i) and (ii) of subparagraph (A) of this paragraph, if the real property being acquired is greater than one percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent, or (II) with respect to any building which was acquired under items (i) and (ii) of subparagraph (A) of this paragraph, make any improvement which should be capitalized according to generally accepted accounting principles if the annual expenditure for such improvements for any such building will exceed the greater of ten percent of its book value or one percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent. (6) Foreign investments. (A) Investments in a foreign country or in a possession of the United States which are substantially of the same kinds, classes and investment grades as those eligible for investment under other provisions of this subsection. The aggregate amount of foreign investments including cash in the currency of such country or possession, obligations of American institutions payable outside of the United States and cash deposited in a bank, trust company or thrift institution located outside of the United States held at any time pursuant to the provisions of this section shall not exceed ten percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent. (B) Investments in any one possession of the United States or in any one foreign country, other than Canada, made pursuant to this paragraph shall not exceed (i) in the case of any possession or country having the highest sovereign debt rating, as established by a securities rating agency recognized by the superintendent, three percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent, or (ii) in the case of any other possession or country one percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent. (7) Development bank obligations. Obligations issued or guaranteed by the international bank for reconstruction and development, the inter-American development bank, the Asian development bank, the African development bank or the international finance corporation; provided that (i) obligations of such banks and the international finance corporation are rated AA or higher (or the equivalent thereto) by a securities rating agency recognized by the superintendent, or if not so rated are similar in structure and in all material respects to other obligations of the same institution which are so rated, and (ii) the aggregate investment made pursuant to the provisions of this paragraph in each such bank and the international finance corporation at any time, shall not exceed five percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent, and (iii) the aggregate investment made pursuant to the provisions of this paragraph in all such banks and the international finance corporation shall not exceed fifteen percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent. (8) Equity interests. (A) Investments in common shares or partnership interests of any solvent American institution, if: (i) all its obligations and preferred shares, if any, are eligible as investments under this subsection and (ii) such equity interests of any such institution except an insurance company are registered on a national securities exchange, as provided in the Securities Exchange Act of 1934, 15 U.S.C. SS78a-78kk or otherwise registered pursuant to said act and, if so otherwise registered, price quotations therefor are furnished through a nationwide automated quotations system approved by the National Association of Securities Dealers, Inc., provided that an insurer may invest under this paragraph an amount not exceeding one percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent even though such equity interests are not so registered and are not issued by an insurance company. (B) Investment limitations. (i) No insurer subject to the provisions of paragraph two of subsection (a) or subsection (b) of section one thousand four hundred three of this article shall invest in or loan upon any one institution`s outstanding equity interests an amount exceeding one percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent, and (ii) the cost of any investment in equity interests, made pursuant to this paragraph, when added to the aggregate cost of all other investments in equity interests then held pursuant to this paragraph, paragraph six and clause (ii) of subparagraph (A) of paragraph ten of this subsection shall not exceed: (I) in the case of an insurer authorized to make investments under item (i) of this subparagraph except a retirement system organized pursuant to article forty-six of this chapter, the lesser of its surplus to policyholders or ten percent of its admitted assets as shown by its last statement on file with the superintendent, and (II) in the case of a retirement system organized pursuant to article forty-six of this chapter, thirty percent of its admitted assets as shown by its last statement on file with the superintendent. (9) Investments made by subsidiaries. The net investment in real property and loans secured by real property made by subsidiaries engaged or organized to engage exclusively in the acquisition, ownership and management of such investments. Such loans and real property must qualify as a reserve investment under paragraph four or five of this subsection. The subsidiary`s net investment in such real property and loans shall be included under such paragraph when computing any limitations applicable to such real property and loans and excluded when computing the limitations applicable to equity interests under paragraph eight of this subsection. In order to qualify, a subsidiary must be wholly-owned either by the insurer or by two or more insurance companies domiciled in the United States who are members of the same holding company system, as such term is defined in article fifteen of this chapter, and each individual insurer`s share of the net investments made by such subsidiary shall be computed in proportion to its equity interest in such subsidiary. (10) Investment companies. (A) Securities of any investment company registered pursuant to the federal Investment Company Act of 1940, 15 U.S.C. S 802, if such company: (i) invests at least ninety percent of its assets in the types of securities which qualify as a reserve investment pursuant to the provisions of paragraph one, two or three of this subsection or which invest in securities which are determined by the superintendent to be substantively similar to the types of securities set forth in such paragraphs; or (ii) invests at least ninety percent of its assets in the types of equity interests which qualify as a reserve investment pursuant to the provisions of paragraph eight of this subsection. (B) Investment limitations. Investments made by an insurer subject to the provisions of paragraph two of subsection (a) or subsection (b) of section one thousand four hundred three of this article shall not exceed the following limitations: (i) in any investment company qualifying under item (i) of subparagraph (A) hereof, ten percent of such insurer`s admitted assets as shown by its last statement on file with the superintendent and the aggregate amount of investment in such qualifying investment companies shall not exceed twenty-five percent of such insurer`s admitted assets as shown by its last statement on file with the superintendent; and (ii) in any investment company qualifying under item (ii) of subparagraph (A) hereof, five percent of such insurer`s admitted assets as shown by its last statement on file with the superintendent and the aggregate amount of investment in such qualifying investment companies shall be included when calculating the permissible aggregate value of equity interests pursuant to the provisions of subparagraph (B) of paragraph eight of this subsection. (b) Leeway provision. Investments which do not qualify or are not permitted under subsection (a) hereof, but excluding any investment prohibited by the provisions of paragraph six of subsection (a) of this section or by the provisions of paragraph one, two, three, four, six, eight, nine or ten of subsection (a) of section one thousand four hundred seven of this article, provided that: (1) the aggregate cost of such investments shall not exceed five percent of the admitted assets of the insurer as shown by its last statement on file with the superintendent, and (2) investments that are neither interest-bearing nor income-paying, made under this subsection as provided in paragraph one of subsection (d) of section one thousand four hundred three of this article shall not in the aggregate exceed three percent of the admitted assets of the insurer as shown by its last statement on file with the superintendent. S 1405. Investments of life insurers. (a) The assets of a domestic insurer that is authorized to make investments under this section may be invested in the following types of investments, in addition to investments otherwise authorized, subject in the case of investments made under this section to the limitations set forth below and the provisions of subsections (c), (d) and (e) of this section: (1) Governmental obligations. Obligations, not in default, issued, assumed, guaranteed or insured by (i) the United States of America or by any agency or instrumentality thereof, (ii) any state of the United States of America, (iii) the District of Columbia, (iv) any territory or possession of the United States of America or any other governmental unit in the United States, or (v) any agency or instrumentality of any governmental unit referred to in items (ii), (iii) and (iv) above, provided that, in the case of obligations issued, assumed, guaranteed or insured by any governmental unit referred to in item (iv) above or any agency or instrumentality referred to in item (v) above, such obligations are by law (statutory or otherwise) payable, as to both principal and interest, from taxes levied or by law required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but in no event shall obligations be eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements. (2) Obligations and preferred shares of American institutions. (i) Obligations, not in default, whether or not secured and with or without recourse, issued, assumed, guaranteed, insured or accepted by American institutions (or trustees or receivers therefor) and (ii) preferred shares of any such institution, provided, however, that after giving effect to any such investment in preferred shares of any institution, the aggregate amount of investments in preferred shares of such institution made under this section shall not exceed two percent of the insurer`s admitted assets. (3) Obligations secured by real property or interests therein. Obligations, or participations therein, secured by liens on real property or interests therein located within the United States and not eligible under paragraph one or two of this subsection, provided that no insurer making investments under the authority of this section shall invest in or loan upon the security of any one property, under the authority of this paragraph, more than thirty thousand dollars or two percent of admitted assets, whichever is the greater. (4) Real property or interests therein. Investments in real property or interests therein located in the United States, held directly or evidenced by partnership interests, stock of corporations (including, without limitation, subsidiaries engaged or organized to engage exclusively in the ownership and management of real property or interests therein), trust certificates or other instruments, and acquired (i) as an investment for the production of income or to be improved or developed for such investment purpose, or (ii) for the convenient accommodation of the insurer`s business; provided that, after giving effect to any such investment, (I) the aggregate amount of such investments made under this paragraph and then held by such insurer shall not exceed twenty-five percent of the insurer`s admitted assets, (II) the aggregate amount of investments made under item (i) of this paragraph and then held by such insurer shall not exceed twenty percent of the insurer`s admitted assets, and (III) investments held under item (i) above in each property constituting such investment (including improvements thereon) shall not in the aggregate exceed two percent of the insurer`s admitted assets, and provided, further, that no investment in real property may be made under item (ii) herein, (aa) if, after giving effect thereto, the aggregate amount of such investments then held by the insurer would exceed ten percent of the insurer`s admitted assets, (bb) without the prior approval of the superintendent, if, after giving effect thereto, the aggregate amount of such investments in each property constituting such investment (including improvements thereon) then held by such insurer would exceed two percent of the insurer`s admitted assets, and (cc) without the prior approval of the superintendent, in the case of an investment by a domestic insurer in real property located outside this state, if, after giving effect thereto, the aggregate amount of such investments in the property constituting such investment (including improvements thereon) would exceed one-fifth of one percent of the insurer`s admitted assets. (5) Personal property or interests therein. Investments in personal property or interests therein located or used wholly or in part within the United States, held directly or evidenced by partnership interests, stock of corporations (including, without limitation, subsidiaries engaged or organized to engage exclusively in the ownership and management of personal property or interests therein), trust certificates or other instruments, provided that, after giving effect to any such investment, (i) the aggregate amount of such investments made under this paragraph and then held by such insurer shall not exceed ten percent of the insurer`s admitted assets and (ii) investments held under this paragraph in the item of personal property constituting such investment shall not in the aggregate exceed one percent of the insurer`s admitted assets. (6) Equity interests. Investments (in addition to investments of the types described in this paragraph but made or acquired under article seventeen, section one thousand four hundred three, paragraphs four and five of this subsection or section four thousand two hundred forty of this chapter) in common shares, partnership interests, trust certificates or other equity interests (other than preferred shares) of American institutions, provided that, after giving effect to any investment made under this paragraph, (i) the aggregate amount of investments made under this paragraph in the institution in which such investment is then being made and then held by such insurer shall not exceed two percent of the insurer`s admitted assets and (ii) the aggregate amount of all investments made under this paragraph and then held by such insurer shall not exceed twenty percent of the insurer`s admitted assets. (7) Foreign investments. (A) Canadian investments substantially of the same types as those eligible for investment under paragraphs one through six of this subsection, provided that, after giving effect to any investment made under this subparagraph, the aggregate amount of investments made under this subparagraph and then held by such insurer shall not exceed ten percent of the insurer`s admitted assets, except where a greater amount is permitted under subparagraph (B) below (in which case the provisions of this subparagraph shall not be applicable). (B) In the case of any domestic insurer that is authorized to do business in a foreign country or possession of the United States of America or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in such foreign country or possession, investments in such foreign country or possession that are substantially of the same types as those eligible for investment under paragraphs one through six of this subsection; provided that, except where a greater amount is permitted under subparagraph (A) above, after giving effect to any investment in such foreign country or possession made under this subparagraph, the aggregate amount of cash in the currency of such foreign country or possession and of investments in such foreign country or possession made under this subparagraph and then held by such insurer shall not exceed one and one-half times the amount of such insurer`s reserves and other obligations under such contracts or the amount which such insurer is required by law to invest in such country or possession, whichever shall be greater. (C) Investments in foreign countries, in addition to Canadian investments and investments permitted by subparagraph (B) of this paragraph, that are substantially of the same types as those eligible for investment under paragraphs one through six of this subsection, provided that, after giving effect to any investment made under this subparagraph, the aggregate amount of investments qualified under this subparagraph and then held by such insurer shall not exceed eight percent of the insurer`s admitted assets; and
(i) the issuer or obligor is (I) a jurisdiction, which is rated in one of the three highest rating categories by an independent, nationally recognized United States rating agency, (II) any political subdivision or other governmental unit of any such jurisdiction, or any agency or instrumentality of any such jurisdiction, political subdivision or other governmental unit or (III) an institution which is organized under the laws of any such jurisdiction or, in the case of such paragraphs three and four of this subsection, the real property is located in any such jurisdiction; and (ii) if the investment is denominated in any currency other than United States dollars, the investment is effectively hedged, substantially in its entirety, against the United States dollar pursuant to contracts or agreements which are: (I) issued by or traded on a securities exchange or board of trade regulated under the laws of the United States or Canada or a province thereof; (II) entered into with a United States banking institution which has assets in excess of five billion dollars and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in one of the two highest rating categories by an independent, nationally recognized, United States rating agency, or with a broker-dealer registered with the Securities and Exchange Commission which has net capital in excess of two hundred fifty million dollars; or (III) entered into with any other banking institution which has assets in excess of five billion dollars and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in one of the two highest rating categories by an independent, nationally recognized, United States rating agency and which is organized under the laws of a jurisdiction which is rated in one of the two highest rating categories by an independent, nationally recognized, United States rating agency; and (iii) provided that an insurer shall not make any investment in any foreign country pursuant to this subparagraph, if such investment, together with all other investments in the same foreign country so made and then held by such insurer, would exceed six percent of the insurer`s admitted assets. (D) In addition to the foreign investments permitted under the preceding subparagraphs of this paragraph, foreign investments that are substantially of the same types as those eligible for investment under paragraphs one through six of this subsection, provided that, after giving effect to any investment made under this subparagraph, the aggregate amount of investments made under this subparagraph and then held by such insurer shall not exceed four percent of the insurer`s admitted assets, and provided further that an insurer shall not make any investment in any foreign country pursuant to this subparagraph, if such investment, together with all other investments in the same foreign country so made and then held by such insurer, would exceed two percent of the insurer`s admitted assets. * (8) Other investments. Investments that do not qualify or are not permitted under any other paragraph of this subsection, provided that, after giving effect to any such investment, (i) if such investment is of a type described in paragraph three or five or item (i) of paragraph four or paragraph six of this subsection, the aggregate amount of investments of such type made under this paragraph and then held by such insurer shall not exceed five percent of the insurer`s admitted assets, (ii) if such investment is of a type described in paragraph six of this subsection, the aggregate amount of such investments made under this paragraph in the institution in which such investment is then being made and then held by such insurer shall not exceed two percent of the insurer`s admitted assets, (iii) if such investment is of a type described in paragraph seven of this subsection, the aggregate amount of investments of all types described in said paragraph seven and made under this paragraph and then held by such insurer shall not exceed two percent of the insurer`s admitted assets, and (iv) the aggregate amount of all investments made under this paragraph and then held by such insurer shall not exceed fourteen percent (but not more than ten percent in investments in institutions not having their principal operations in this state and in real and personal property and interests therein located outside this state and in mortgages and security interests with respect to real and personal property located outside this state) of the insurer`s admitted assets. Investments that are neither interest bearing nor income paying, made under this paragraph as provided in paragraph one of subsection (d) of section one thousand four hundred three of this article, shall be subject to all the provisions of this paragraph and may not be acquired if the aggregate amount thereof immediately after such acquisition would exceed three percent of the insurer`s admitted assets. * NB Effective until June 30, 2003 * (8) Other investments. Investments that do not qualify or are not permitted under any other paragraph of this subsection, provided that, after giving effect to any such investment, (i) if such investment is of a type described in paragraph three or five or item (i) of paragraph four or paragraph six of this subsection, the aggregate amount of investments of such type made under this paragraph and then held by such insurer shall not exceed five percent of the insurer`s admitted assets, (ii) if such investment is of a type described in paragraph six of this subsection, the aggregate amount of such investments made under this paragraph in the institution in which such investment is then being made and then held by such insurer shall not exceed two percent of the insurer`s admitted assets, (iii) if such investment is of a type described in paragraph seven of this subsection, the aggregate amount of investments of all types described in said paragraph seven and made under this paragraph and then held by such insurer shall not exceed two percent of the insurer`s admitted assets, and (iv) the aggregate amount of all investments made under this paragraph and then held by such insurer shall not exceed fourteen percent (but not more than ten percent in investments in institutions not having their principal operations in this state and in real and personal property and interests therein located outside this state and in mortgages and security interests with respect to real and personal property located outside this state) of the insurer`s admitted assets. Contracts and options of the types described in paragraph two of subsection (d) of section one thousand four hundred three of this article may be acquired under this paragraph only to the extent permitted by subsection (d) or subsection (e) of section one thousand four hundred three of this article. Investments that are neither interest bearing nor income paying (including options and other rights to purchase securities), made under this paragraph as provided in paragraph one of said subsection (d), shall be subject to all the provisions of this paragraph and may not be acquired if the aggregate amount thereof immediately after such acquisition (including the amount of initial margin deposits made with respect to contracts and payments made to purchase options as provided in paragraph five of said subsection (d)) would exceed three percent of the insurer`s admitted assets. * NB Effective June 30, 2003 (b) (1) For the purposes of this section, article seventeen of this chapter and section one thousand four hundred three of this article, (A) "aggregate amount" of investments means, subject to the provisions of the final sentence of this subsection, the aggregate depreciated cost thereof, in the case of investments of the types described in paragraphs four and five of subsection (a) of this section, and the aggregate cost thereof in the case of investments of other types; (B) "admitted assets" means the amount thereof as of the last day of the most recently concluded annual statement year subject to the following adjustments; (i) assets held in separate accounts established under section four thousand two hundred forty of this chapter shall be included only to the extent of amounts allocated to such separate accounts pursuant to paragraph three of subsection (a) of said section four thousand two hundred forty; and (ii) investments in subsidiaries referred to in subsection (c) of section one thousand seven hundred four of this chapter shall be excluded; and (C) the eligibility of any investment under any paragraph of subsection (a) of this section shall be determined at the time of acquisition thereof, except that (i) any investment qualified pursuant to item (ii) of subparagraph (C) of paragraph seven of such subsection (a) shall remain so qualified only at such time or times as the hedging requirements of such item (ii) are met with respect thereto; and (ii) investments qualified under paragraph eight of said subsection (a) may be requalified at a later date under another paragraph of said subsection (a), if the relevant conditions are satisfied at the time of such requalification. In computing depreciated cost of investments of the types described in paragraphs four and five of subsection (a) of this section, depreciation may be computed at a rate no greater than that permitted for federal income tax purposes and, in the case of investments described in said paragraph four, in no event at a rate greater than two and one-half percent per annum. (2) In computing the "aggregate amount" of investments, as provided in the first sentence of paragraph one of this subsection, (A) valuation of investments acquired under paragraph four of subsection (a) of this section shall also be subject to any regulation with respect to such valuation that the superintendent may prescribe and (B) investments of investment subsidiaries as defined in section one thousand seven hundred two of this chapter shall be valued as though the parent corporation owned the assets of such subsidiaries directly instead of the stock of such subsidiaries and shall be subject to the provisions of subsection (d) of section one thousand seven hundred four of this chapter. (c) In addition to other requirements of law (statutory or otherwise) that affect the standard of care of directors and officers of corporations, in making investments under this section, directors and officers shall perform their duties in good faith and with that degree of care that an ordinarily prudent individual in a like position would use under similar circumstances. In the case of investments made under paragraphs two and six of subsection (a) of this section and investments that are substantially of the same types as those eligible for investment under such paragraphs, but are made under paragraph seven of such subsection, the institution that determines the eligibility of any such investment shall be a solvent institution whose obligations, if any, are not in default as to principal or interest, unless such investment is necessary to protect an investment theretofore made in the securities of such institution. (d) After giving effect to any investment of a type described in item (i), (ii) or (iii) below, the aggregate amount of (i) investments in subsidiaries charged against the limit contained in paragraph one of subsection (a) of section one thousand seven hundred five of this chapter, (ii) investments made under item (i) of paragraph four and paragraphs five and six of subsection (a) of this section, and (iii) investments of the types described in said item (i) of paragraph four and such paragraphs five and six but made under paragraph seven or eight of subsection (a) of this section, shall not exceed forty percent of the insurer`s admitted assets plus, to the extent permitted by the superintendent, investments (not exceeding five percent of the insurer`s admitted assets) of the types referred to above in (I) new business enterprises located in the state; (II) technologically oriented businesses located in the state; (III) minority-owned businesses located in the state; (IV) businesses located in areas in the state that have experienced a high rate of chronic unemployment; and (V) development of housing in the state for families and persons of low income. If, at the time of the making of any investment of a type described in item (i), (ii) or (iii) of the first sentence of this subsection, the aggregate amount of investments of the types described in clauses (I), (II), (III), (IV) and (V) of such sentence made by the insurer on or after the date on which this subdivision becomes effective and then held by the insurer is one percent or more of its admitted assets, then the forty percent figure in such sentence shall be deemed to be increased by an equal amount up to a maximum of forty-five percent, thus providing for a maximum of investments described in items (i), (ii) and (iii) herein of fifty percent of total admitted assets. (e) No domestic life insurer shall hold a direct or indirect ownership interest in a risk retention group, as defined in article fifty-nine of this chapter, other than in a risk retention group all of whose members are insurance companies. S 1406. Policy loans. (a) Any life insurance company may lend to any policyholder upon the security of the value of his policy a sum not exceeding the legal reserve which it is required to maintain thereon. (b) A fraternal benefit society may make similar loans subject to the provisions of article forty-five of this chapter. S 1407. Non-reserve and prohibited investments for property/casualty and certain other insurers. (a) Any insurer that makes investments under the authority of subsection (c) of section one thousand four hundred three of this article and meets the requirements of such subsection (c) and section one thousand four hundred two of this article may invest in, or otherwise acquire or loan upon, directly or indirectly, any of the types of investments described in section one thousand four hundred four of this article, but without having to meet the applicable qualitative standards or quantitative limitations which are set forth in subsection (a) of section one thousand four hundred four of this article, except the following prohibited investments: (1) Obligations, shares or other securities of any institution which is insolvent at the time of the investment. (2) Obligations secured by real property or real property or interest therein, which are either not eligible under or which exceed the investment limitations under paragraph four or five of subsection (a) of section one thousand four hundred four of this article. (3) Shares of stock of the investing insurer, except to the extent permitted by the provisions of subsection (d) of section one thousand four hundred eleven of this article. (4) Obligations, shares or other securities (including certificates of deposit) issued by a parent corporation or a corporation which is an affiliate or will be an affiliate after direct or indirect acquisition by the insurer. Nothing in this paragraph shall be deemed to prevent any investment in obligations, shares or other securities of: (A) another insurance corporation within the limitations prescribed in section one thousand four hundred eight of this article, (B) a subsidiary organized to engage exclusively in the acquisition, ownership or management of investments of the type described in paragraphs one, two, three, six, seven, eight or ten of subsection (a) of section one thousand four hundred four of this article, provided such subsidiary is wholly-owned by two or more insurance companies domiciled in the United States who are members of the same holding company system, as such term is defined in article fifteen of this chapter. Furthermore, each individual insurer`s share of the net investment made by such subsidiary shall be: (i) computed in proportion to its equity interests in such subsidiary, and (ii) included when computing any applicable investment limitations, or (C) subsidiaries subject to and within the limitations prescribed in article sixteen of this chapter. * (5) Investments made under the leeway provision, as set forth in subsection (b) of section one thousand four hundred four of this article, if the aggregate amount of such investments exceed twelve percent of the insurer`s invested assets as shown by its last statement on file with the superintendent; or if the aggregate amount of investments that are neither interest-bearing nor income-paying exceed three percent of the insurer`s invested assets as shown by its last statement on file with the superintendent. * NB Effective until June 30, 2003 * (5) Investments made under the leeway provision, as set forth in subsection (b) of section one thousand four hundred four of this article, if the aggregate amount of such investments exceed twelve percent of the insurer`s invested assets as shown by its last statement on file with the superintendent; or if the aggregate amount of investments that are neither interest-bearing nor income-paying including the amount of initial margin deposits made with respect to contracts and payments made to purchase options as provided in paragraph seven of subsection (d) of section one thousand four hundred three of this article, exceed three percent of the insurer`s invested assets as shown by its last statement on file with the superintendent. * NB Effective June 30, 2003 (6) Obligations, shares or other securities issued by a corporation, if a majority of the shares having voting powers of such issuing corporation is owned directly or indirectly by or for the benefit of one or more officers or directors of the insurer. (7) Foreign investments, meaning obligations, shares or other securities of any person or governmental or business unit of or in a foreign country or of any person or business unit of or in a possession of the United States, except such as conform substantially with the limitations imposed by this section upon like domestic investments; but the aggregate amount of foreign investments including obligations of American institutions payable outside of the United States and cash deposited in a bank, trust company or thrift institution located outside of the United States held at any time by such insurer under this paragraph and under paragraph six of subsection (a) of section one thousand four hundred four of this article shall not exceed the greatest of (i) twelve percent of the insurer`s admitted assets as shown by its last statement on file with the superintendent, (ii) fifteen percent of the insurer`s invested assets as shown by its last statement on file with the superintendent, or (iii) one and one-half times the amount of its reserves and other obligations under its insurance and reinsurance contracts on risks resident or located in such foreign countries and subdivisions thereof. An investment in the shares of an alien insurer, which results in the control of such insurer by the investing insurer, shall not be included when calculating the limitations under this paragraph, but such an investment shall only be subject to the limitations of section one thousand four hundred eight of this article. (8) A direct or indirect ownership interest in a risk retention group, as defined in article fifty-nine of this chapter, other than in a risk retention group all of whose members are insurance companies, in which case any investment in such a risk retention group shall be subject to the limitations prescribed in section one thousand four hundred eight of this article. (9) Acquiring any interest in an investment through a partnership, other than an interest acquired as a limited partner in a limited partnership. (10) Any investment found by the superintendent to be against public policy or designed to evade any prohibition of this chapter. (b) This section shall not prohibit any such insurer from accepting securities, otherwise ineligible, which may be distributed pursuant to any judicial or lawful non-judicial plan of reorganization or dissolution. (c) Any investment pursuant to the provisions of this section shall be subject to other requirements of law (statutory or otherwise) that affect the standard of care of directors and officers of corporations, and in making investments under this section the insurer`s directors and officers shall perform their duties in good faith and with that degree of care that an ordinarily prudent individual in a like position would use under similar circumstances. S 1408. Acquisition of insurance company shares; limitations thereon. (a) Any insurer which makes investments under the authority of subsection (c) of section one thousand four hundred three of this article and which meets the requirements of such subsection and section one thousand four hundred two of this article, may invest in, or otherwise acquire, the shares, including voting trust certificates, certificates of deposit, interim receipts and other similar instruments representing such shares, of any other insurance companies, including for purposes of this section any corporation having a majority of its assets invested in one or more insurance companies, in an amount which, together with its present holdings and with any indirect or proportionate interest in insurance company shares held by it through any intermediate subsidiary, shall not exceed in value thirty-five percent of the surplus to policyholders of such acquiring insurer, or fifty percent of its surplus over and above its liabilities and capital, whichever is greater. No United States branch of an alien insurer shall be permitted to acquire or hold any shares of any alien insurance corporation. (b) This section shall not prohibit the acquisition of insurance company shares by the acceptance of a stock dividend nor prohibit the owner of previously lawfully acquired shares of an insurance company from making a contribution, with the approval of the superintendent, to such other insurance company`s surplus. Notwithstanding any other provisions of this chapter, any domestic insurer or United States branch of an alien insurer, which, prior to January first, nineteen hundred forty, acquired shares of other insurance companies in accordance with law in force at the time of such acquisition, may continue to hold them. In determining the financial condition of a domestic insurer shares of other insurance companies shall be valued in accordance with subsection (c) of section one thousand four hundred fourteen of this article but in no event shall their aggregate value be allowed as an admitted asset in excess of fifty per centum of the surplus to policyholders or sixty per centum of the surplus of such insurer, whichever is greater. (c) In applying the formulas of this section, the initial calculation of surplus shall include voluntary reserves not required by law and the value of insurance company shares before adjustment for any excess holdings thereof. (d) A United States branch of an alien insurer, other than one licensed to do in this state the business of life insurance, shall be subject to the foregoing limitations, except that its trusteed surplus statement shall be used in determining compliance. For the purpose of this section the surplus to policyholders of a United States branch shall be deemed to be its trusteed surplus and its surplus shall be deemed to be its trusteed surplus less an amount equal to the paid-in-capital specified in table one of paragraph one of subsection (a) of section four thousand one hundred three of this chapter for a domestic stock property/casualty insurance company licensed to do the same kinds of insurance except as such amount may be modified by paragraph five of subsection (a) of section four thousand one hundred three of this chapter. S 1409. Limitation of investments. (a) Except as more specifically provided in this chapter, no domestic insurer shall have more than ten percent of its admitted assets as shown by its last statement on file with the superintendent invested in, or loaned upon, the securities (including for this purpose certificates of deposit, partnership interests and other equity interests) of any one institution. (b) The restriction of subsection (a) hereof shall not apply to the classes of governmental obligations (including obligations secured by mortgages upon real property guaranteed or insured under the National Housing Act, 12 U.S.C. SS 1701-1750) eligible for minimum capital or surplus to policyholder investments pursuant to the provisions of section one thousand four hundred two of this article nor to investments in shares of other insurance companies pursuant to the provisions of section one thousand four hundred eight of this article. (c) The limitations of investments set forth in this section shall not apply to mortgage-related securities or securities issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association; provided, however, that for an insurer maintaining an aggregate investment in excess of seventy percent of its admitted assets as shown by its last statement on file with the superintendent in such securities, the balance of such investments greater than seventy percent thereon shall be limited by and apportioned according to a ratio of one to two respectively, between investment in such securities and investment in government obligations, as that term is defined in paragraph one of subsection (a) of section fourteen hundred four of this chapter. (d) The superintendent shall not promulgate any rules or regulations to limit or otherwise alter the provisions of paragraph two of subsection (a) of section fourteen hundred one of this article or subsection (c) of this section. The superintendent shall not promulgate any rules or regulations that limit the authority of any insurer to invest in mortgage related securities. * S 1410. Derivative transactions and derivative instruments. (a) For purposes of this section, except subsection (k) of this section, an insurer shall mean a domestic life insurer, a domestic property/casualty insurer, a domestic reciprocal insurer, a domestic mortgage guaranty insurer, a domestic co-operative property/casualty insurance corporation or a domestic financial guaranty insurer. (b) (1) An insurer may only engage in derivative transactions pursuant to and in compliance with the requirements of this section. Any insurer subject to the provisions of subsection (c) of section one thousand four hundred three of this article shall also comply with the requirements set forth in such subsection relative to derivative transactions authorized by this section. (2) An insurer may use derivative instruments under this section to engage in hedging transactions, replication transactions, and for certain limited income generation transactions authorized pursuant to this section. (3) Prior to entering into any derivative transaction authorized pursuant to this section: (A) the board of directors of the insurer or a committee thereof charged with the responsibility for supervising investments shall: (i) authorize such transactions, (ii) assure that all individuals conducting, monitoring, controlling and auditing derivative transactions are suitably qualified and have appropriate levels of knowledge and experience, and (iii) approve a derivative use plan for such transactions or an amendment to a previously adopted derivative use plan. If such determinations are made by a committee of such a board, the minutes of the committee reflecting such determinations shall be recorded and a report thereon shall be submitted to the board of directors for its review at such board`s next meeting; (B) the insurer shall submit a written derivative use plan or amendment thereto to the superintendent for approval; and (C) the superintendent shall approve the insurer`s written derivative plan for engaging in derivative transactions and investment practices related to derivative transactions. The plan shall specify guidelines as to the quality, maturity and diversification of derivative investments and other specifications, including investment strategies, asset/liability management practices, its liquidity needs and its capital and surplus as they relate to the derivative use plan. The board of directors or a committee thereof charged with the responsibility for supervising investments shall determine at least quarterly whether all derivative transactions have been made in accordance with delegations, standards, limitations and investment objectives prescribed in the insurer`s derivatives use plan. If such determinations are made by a committee of such a board, the minutes of the committee reflecting such determinations shall be recorded and a report thereon shall be submitted to the board of directors for its review at such board`s next meeting. (D) (i) Within ninety days of receipt of a derivative use plan application, the superintendent shall, in writing, approve, submit a detailed list to the insurer requesting all additional information necessary to make a determination on the plan, or deny such plan; otherwise, such plan shall be deemed approved. Any denial issued by the superintendent shall state the reasons for such disapproval. If an insurer does not provide the additional information requested by the superintendent, within forty-five days of receipt of such request, then such plan shall be deemed denied. Such forty-five day limit for providing such additional information may be extended at the option of the superintendent. (ii) In the event that an insurer properly submits the additional information requested by the superintendent, then such plan shall be deemed approved sixty days after receipt of such information by the superintendent, unless the insurer is notified in writing prior to such date that the filing has been denied. Such denial shall state the reasons for such disapproval. Notwithstanding anything to the contrary in this section, the superintendent may, at any time, before a plan is approved, affirmatively approved or denied, raise objections to the plan that is based on the requirements of this chapter. (iii) The superintendent shall, as soon as practicable, but no later than sixty days after receipt of a plan, notify the insurer if its filing is incomplete or fails to comply with applicable statutory or regulatory requirements. Such notice shall indicate that the filing is being returned with no action by the superintendent and that the period for the superintendent`s substantive review has not commenced. (4) An insurer which engages in hedging transactions or replication transactions as authorized pursuant to this section shall: (A) only maintain its position in any outstanding derivative instrument used as part of a hedging transaction or replication transaction for as long as the hedging transaction or replication transaction, as the case may be, continues to be effective; and (B) be able to demonstrate to the superintendent, upon request, that any derivative transaction entered into and involving a hedging transaction or replication transaction, at the point of inception is and, for as long as the derivative transaction remains outstanding, continues to be, an effective hedging or replication transaction. (5) An insurer which enters into derivative transactions as authorized pursuant to this section shall be required to include, as part of the evaluation of accounting procedures and internal controls required to be filed pursuant to subsection (b) of section three hundred seven of this chapter, a statement describing the assessment by the independent certified public accountant of the internal controls relative to derivative transactions. If the internal controls relative to derivative transactions are determined to be deficient, the insurer shall require the accountant to include in the evaluation a description of such deficiencies and the insurer shall append to the evaluation a description of any remedial actions taken or proposed to be taken to correct these deficiencies, if such actions are not already described in the accountant`s report. (c)(1) An insurer may enter into hedging transactions pursuant to this section if, as a result of and after giving effect to the transaction: (A) the aggregate statement value of options, swaptions, caps, floors and warrants purchased pursuant to this section does not exceed seven and one-half percent of its admitted assets; (B) the aggregate statement of value of options, swaptions, caps and floors written pursuant to this section does not exceed three percent of its admitted assets; and (C) the aggregate potential exposure of collars, swaps, forwards and futures entered into and options, swaptions, caps and floors written pursuant to this section does not exceed six and one-half percent of its admitted assets. (2) Transactions entered into to effectively hedge the currency risk of investments denominated in a currency other than United States dollars, pursuant to subparagraph (C) of paragraph seven of subsection (a) of section one thousand four hundred five of this article, shall not be included in the limits under paragraph one of this subsection. (d) An insurer may enter into income generation transactions under this section only through the sale of call options on securities, provided that the insurer holds, or can immediately acquire through the exercise of options, warrants or conversion rights already owned, the underlying securities during the entire period the option is outstanding. (e) An insurer may purchase or sell one or more derivative instruments to offset any derivative instrument previously purchased or sold, as the case may be, without regard to the quantitative limitations of subsection (c) of this section provided that such derivative instrument is an exact offset to the original derivative instrument being offset. (f)(1) The counterparty exposure under a derivative instrument entered into by an insurer authorized to engage in transactions pursuant to this section shall be deemed to be an obligation of the institution to which the insurer is exposed to credit risk and shall be included in determining compliance with any single or aggregate quantitative limitation on investments made by an insurer under this chapter. (2) Notwithstanding any single or aggregate quantitative limitation on investments made by an insurer under this chapter, the aggregate counterparty exposure under one or more derivative transactions to: (A) any single counterparty, other than a "qualified counterparty", shall be limited to one percent of an insurer`s admitted assets; and (B) all counterparties, other than qualified counterparties, are limited to three percent of an insurer`s admitted assets. (3) For purposes of this section: (A) a "qualified counterparty" is a "qualified broker or dealer" or a "qualified bank" or other counterparty rated AA-/Aa3 or higher by a nationally recognized statistical rating organization if it is also approved by the superintendent; (B) a "qualified broker or dealer" means a broker or dealer that is organized under the laws of a state and is registered under the Securities Exchange Act of 1934, 15 U.S.C. SS 78a-78kk, and has net capital in excess of two hundred fifty million dollars; (C) a "qualified bank" means a bank or trust company that: (i) is organized and existing, or in the case of a branch or agency of a foreign banking organization is licensed, under the laws of the United States or any state thereof; (ii) is regulated, supervised and examined by United States federal or state authorities having regulatory authority over banks and trust companies; (iii) has assets in excess of five billion dollars; (iv) has senior obligations outstanding, or has a parent corporation that has senior obligations outstanding, rated AA or better (or the equivalent thereto) by two independent nationally recognized statistical rating organizations; and (v) has a ratio of primary capital to total assets of at least five and one-half percent and a ratio of total capital to total assets of at least six percent; and (D) "aggregate counterparty exposure" means the sum of: (i) the aggregate statement value of options, swaptions, caps, floors, and warrants purchased; and (ii) the aggregate potential exposure of collars, swaps, forwards and futures entered into. (g) For the purposes of this section, "admitted assets" means the assets, as shown on the insurer`s last annual statement filed with the superintendent, which conform to the requirements of section one thousand three hundred one of this chapter, except that a domestic life insurer shall include assets held in separate accounts established under section four thousand two hundred forty of this chapter to the extent of amounts allocated to such separate accounts pursuant to paragraph three of subsection (a) of section four thousand two hundred forty of this chapter, and shall exclude investments in subsidiaries referred to in subsection (c) of section one thousand seven hundred four of this chapter. (h) The superintendent shall promulgate regulations to: (1) define terms used in this section that are not otherwise defined; (2) establish the content of the derivative use plan to be submitted by an insurer to the superintendent pursuant to this section; (3) establish effective management oversight standards, including quarterly reporting to the board of directors or a committee thereof charged with the responsibility for supervising investments, for transactions authorized pursuant to this section; (4) require that the insurer establish adequate systems of internal control and reporting to ensure that derivative transactions are properly supervised and that transactions are in accordance with the insurer`s authorized policies and procedures; (5) establish documentation and reporting requirements for transactions authorized pursuant to this section; (6) establish appropriate accounting standards for derivative transactions authorized pursuant to this section; and (7) the provisions of this section shall not be deemed to authorize the superintendent to promulgate any rule or regulation, circular letter or directive, that in any way expands the superintendent`s authority to (i) approve or regulate an insurer`s entire investment portfolio or investment strategy, or (ii) impose standards on corporate governance that are either stricter or contrary to the provisions contained in this article or the business corporation law. (i) For purposes of other provisions of this chapter, derivative instruments and derivative transactions entered into under this section shall be deemed to be investments, provided that if this section conflicts with any other provisions of this chapter, the provisions of this section shall prevail. (j) The superintendent may order an insurer to cease effecting and maintaining transactions authorized by this section upon a finding that continued operations hereunder could be detrimental to the best interests of the policyholders or the public. (k) Any foreign insurer engaging in derivative transactions and derivative instruments shall be subject to and comply with all the provisions of this section. However, a foreign insurer may engage in derivative transactions not authorized by this section provided that: (1) such insurer is authorized to engage in such transactions pursuant to its domestic state law; (2) such insurer includes the intent to engage in such derivative transactions in the derivative use plan submitted to and approved by the superintendent pursuant to paragraph three of subsection (b) of this section; (3) the transactions are not deemed, by the superintendent, to be potentially detrimental to the policy holders or the public in this state; and (4) the insurer complies with subsection (a) of section one thousand four hundred thirteen of this article after the surplus to policyholders is reduced by the amount of all derivative transactions not authorized by this section in accordance with the measurement standards of paragraph one of subsection (c) of this section. For purposes of this subsection, a foreign insurer shall include foreign insurers as defined in paragraph twenty-one of subsection (a) of section one hundred seven of this chapter, foreign fraternal benefit societies, and accredited reinsurers. (l) An insurer may enter into replication transactions provided that: (1) the insurer would otherwise be authorized to invest its funds under this chapter in the asset being replicated; (2) the asset being replicated is subject to all provisions and limitations (including quantitative limits) on the making thereof specified in this chapter with respect to investments by the insurer, as if the transaction constituted a direct investment by the insurer in the asset being replicated; and (3) as a result of giving effect to the replication transaction, the aggregate statement value of all assets being replicated does not exceed ten percent of the insurer`s admitted assets. * NB Repealed June 30, 2003 S 1411. Authorization of, and restrictions on, investments. (a) No domestic insurer shall make any loan or investment, except as provided in subsection (h) hereof, unless authorized or approved by its board of directors or a committee thereof responsible for supervising or making such investment or loan. The committee`s minutes shall be recorded and a report submitted to the board of directors at its next meeting. (b) No such insurer shall participate in any underwriting of the purchase or sale of securities in advance of their issuance. Any such insurer may enter into any agreement to sell or withhold from sale any of its property as long as the insurer is not participating in an underwriting. The disposition of its property shall be the responsibility of its board of directors, in accordance with its charter and by-laws. (c) Except as otherwise specifically provided in this chapter, no domestic insurer shall pledge or transfer any securities as collateral for a loan (including a sale of securities subject to an unconditional obligation to repurchase the same) if such loan and all other outstanding loans secured by pledge or deposit of its securities will exceed, when the loan is made, five percent of its admitted assets as shown by its last sworn statement to the superintendent, unless the superintendent shall first give his permission for such loan as necessary in the conduct of the insurer`s business. No pledge or transfer of securities for a loan shall be made if the insurer does not receive the loan`s proceeds. Nothing in this section shall be construed as prohibiting an insurer from selling or purchasing individually or on its account jointly with one or more of its subsidiaries the securities of any investment company to which the insurer or any of its subsidiaries renders management, investment advisory or sales services, nor from participating in such sales or purchases jointly with any person in the insurer`s holding company system, as defined in section one thousand five hundred one of this chapter. (d) No domestic stock insurer shall purchase its own capital shares except pursuant to section seven thousand three hundred two of this chapter or pursuant to a plan of stock redemption and retirement approved by the superintendent as reasonable and equitable. No domestic insurer shall enter into any agreement in connection with the sale of any property to repurchase such property or any part thereof, except that such an insurer may (subject to the provisions of subsection (b) of this section) sell securities subject to an unconditional obligation to repurchase the same on a date not more than one year from the date of sale. This subsection shall not apply to the purchase or sale of directors` qualifying shares. (e) No director or officer of an insurer doing business in this state shall receive, in addition to his fixed salary or compensation, any money or valuable thing, directly or indirectly, or through any substantial interest in any other corporation or business unit, for negotiating, procuring, recommending or aiding in any purchase or sale of property, or loan, made by such insurer or any affiliate or subsidiary thereof; nor shall he be pecuniarily interested, as principal, co-principal, agent or beneficiary, directly or indirectly, or through any substantial interest in any other corporation or business unit, in any such purchase, sale or loan. This subsection shall not prohibit: (1) a member of the board of directors of an insurer, other than life, from receiving his share of the usual commission earnings of a stock exchange firm of which he is a partner; (2) an insurer, other than life, or any life insurer all of whose shares (except directors` qualifying shares) is owned by any corporation organized primarily for, and engaged primarily in the business of, providing support, relief, pensions, annuities or insurance for the priests, clergy or ministers of any religious denomination or their dependents, from paying any corporation or partnership in which any director of the insurer has an interest or is an officer or director or partner, a reasonable fee for investment advice, provided such compensation is not in excess of the amounts customarily charged for the same type of service; or (3) any transaction or class of transactions which comply with section one thousand five hundred five or article sixteen of this chapter. (f) (1) No insurer doing business in this state shall, except as provided in subsection (h) hereof, make any loan to any of its directors or officers, directly or indirectly, or through its subsidiaries; nor shall any such director or officer accept any such loan directly or indirectly. (2) No such insurer shall make any advance to any of its directors or officers for future services to be performed beyond a period of one year from the date of making such advance. (g) No insurer doing business in this state, nor any affiliate or subsidiary thereof, shall directly or indirectly guarantee the financial obligation of any director or officer of such insurer, affiliate or subsidiary, and any such guaranty shall be void. In this subsection, "guarantee" shall not include the making of a contract of insurance of the kind specified in paragraphs thirteen, fourteen, fifteen or sixteen of subsection (a) of section one thousand one hundred thirteen of this chapter. (h) Nothing contained in this chapter shall prohibit a life insurance company from making a policy loan upon its policy or contract in an amount not exceeding the net reserve value of the policy or contract, or any insurer from: (1) Acquiring (i) in the case of an insurer making investments under the authority of section one thousand four hundred four of this article, such real property serving as the residence of a non-director officer as may be acquired under the provisions of paragraph five of subsection (a) of section one thousand four hundred four of this article, or (ii) in the case of an insurer making investments under the authority of section one thousand four hundred five of this article, real property serving as the residence of a non-director officer, under the provisions of paragraph four of subsection (a) of section one thousand four hundred five of this article and with the approval of the superintendent in the case of domestic insurers, in connection with the relocation by the insurer of the place of employment of such officer (including any relocation in connection with initial employment), at a purchase price not exceeding the lesser of the value of such property as determined by an independent appraiser for the purpose of such acquisition or one hundred fifty thousand dollars, provided such officer has made reasonable efforts otherwise to dispose of such property for a period of not less than one month immediately prior to such acquisition; or (2) Making a loan to a non-director officer secured by real property owned by such officer and improved with a one-family dwelling, which is to serve as such officer`s residence, provided that (i) such loan qualifies under paragraph four of subsection (a) of section one thousand four hundred four (in the case of an insurer that makes investments under the authority of section one thousand four hundred four) or paragraph three of subsection (a) of section one thousand four hundred five (in the case of an insurer that makes investments under the authority of section one thousand four hundred five) of this article, (ii) such loan is made in connection with the relocation by the insurer of the place of employment of such officer (including any relocation in connection with initial employment), and (iii) in the case of a domestic insurer, such loan is approved by the superintendent. For the purposes of paragraphs one and two of this subsection, paragraphs four and five of subsection (a) of section one thousand four hundred four and paragraphs three and four of subsection (a) of section one thousand four hundred five of this article, real property shall include a condominium unit and stock of a cooperative apartment corporation, if such stock entitles the holder thereof to a proprietary lease of a one-family apartment serving as the residence of the officer. S 1412. Disposal or deduction of investments unlawfully acquired. (a) Every domestic insurer shall forthwith dispose of any investment acquired in violation of the law in force at the date of acquisition. (b) In determining the financial condition of any such insurer, the value of any wholly ineligible investments, and the value of any investment in excess of any limitation prescribed in this chapter, shall be deducted as a non-admitted asset of such insurer. S 1413. Investments of foreign and alien insurers. * (a) The superintendent may refuse a new or renewal license to any foreign insurer, if he finds that its investments do not comply in substance with the investment requirements and limitations imposed by this chapter upon like domestic insurers hereafter organized to do the same kind or kinds of insurance business. For the purposes of this subsection, except for derivative transactions authorized pursuant to section one thousand four hundred ten of this article, a foreign insurer`s investments shall be deemed to comply in substance with such requirements and limitations if, after disallowing as admitted assets in whole or in part any investments not in compliance therewith, the superintendent finds that such foreign insurer`s adjusted surplus to policyholders is not less than an amount which is reasonable in relation to its outstanding liabilities and adequate to its financial needs, and at least equal to the minimum surplus to policyholders required on organization of a domestic insurer to do the same kind or kinds of insurance business. The superintendent may recognize like securities of a foreign insurer`s home state as minimum capital or minimum surplus to policyholder investments in lieu of the securities specified in paragraphs two and four of subsection (b) of section one thousand four hundred two of this article. Foreign insurers engaging in derivative transactions pursuant to section one thousand four hundred ten of this article shall comply with subsection (k) of such section for the purposes of substantial compliance. * NB Effective until June 30, 2003 * (a) The superintendent may refuse a new or renewal license to any foreign insurer, if he finds that its investments do not comply in substance with the investment requirements and limitations imposed by this chapter upon like domestic insurers hereafter organized to do the same kind or kinds of insurance business. For the purposes of this subsection, a foreign insurer`s investments shall be deemed to comply in substance with such requirements and limitations if, after disallowing as admitted assets in whole or in part any investments not in compliance therewith, the superintendent finds that such foreign insurer`s adjusted surplus to policyholders is not less than an amount which is reasonable in relation to its outstanding liabilities and adequate to its financial needs, and at least equal to the minimum surplus to policyholders required on organization of a domestic insurer to do the same kind or kinds of insurance business. The superintendent may recognize like securities of a foreign insurer`s home state as minimum capital or minimum surplus to policyholder investments in lieu of the securities specified in paragraphs two and four of subsection (b) of section one thousand four hundred two of this article. * NB Effective June 30, 2003 (b) No alien insurer shall be authorized to do business in this state unless its general state deposits and its trusteed assets comply with the requirements and limitations of this chapter applicable to like foreign insurers hereafter licensed to do the same kind or kinds of insurance business, except that foreign investments shall be allowed to the following extent only: (1) Obligations issued or guaranteed by the government of the country in which the alien insurer was organized or by any province or other major political subdivision thereof and not in default as to principal or interest, may be recognized as reserve investments under section one thousand four hundred four of this article (in the case of insurers making investments under section one thousand four hundred four of this article) or as investments under section one thousand four hundred five (in the case of insurers making investments under section one thousand four hundred five of this article) in an amount not exceeding the statutory deposit required by the provisions of section one thousand three hundred twenty of this chapter. (2) Except as provided in paragraph one hereof, for an alien non-life insurer foreign investments that qualify as a reserve investment pursuant to the provisions of paragraph six of subsection (a) of section one thousand four hundred four of this article may be included in such alien insurer`s trusteed assets in an aggregate amount not exceeding ten percent of the admitted assets of such insurer`s United States branch as shown by its last statement on file with the superintendent, or, for an alien life insurer, foreign investments that qualify pursuant to the provisions of paragraph seven of subsection (a) of section one thousand four hundred five of this article may be included in such alien insurer`s trusteed assets in an aggregate amount not exceeding the applicable quantitative limitations, as set forth in such paragraph seven. (c) The superintendent may refuse a new or renewal license to any foreign or alien insurer which holds a direct or indirect ownership interest in a risk retention group, as defined in article fifty-nine of this chapter, other than in a risk retention group all of whose members are insurance companies. (d) This section shall not relieve any foreign or alien insurer from compliance with any other provision of this chapter. S 1414. Valuation of investments. (a) (1) All obligations having a fixed term and rate of interest and held by any life insurance company or fraternal benefit society authorized to do business in this state, if amply secured and not in default as to principal or interest, shall be valued as follows: (A) if purchased at par, at the par value; (B) if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and yield in the meantime the effective rate of interest at which the purchase was made, or, in the superintendent`s discretion, on the basis of the method of calculation commonly known as the pro rata method. (2) The purchase price shall in no case be taken at a higher figure than the actual market value at the time of acquisition. (3) The superintendent shall have the power to determine the eligibility of any such investments for valuation on the basis of amortization, and may by regulation prescribe or limit the types of securities so eligible for amortization. All obligations which in the judgment of the superintendent are not amply secured shall not be eligible for amortization and shall be valued in accordance with subsection (b) hereof. (4) The superintendent may, if he finds that the interests of policyholders so permit or require, by regulation permit or require any class of insurers, other than life insurance companies or fraternal benefit societies, authorized to do business in this state, to value their obligations in accordance with the foregoing rule. (b) (1) Except securities subject to amortization and except as otherwise provided in this chapter, the investments (including any investments in an investment company) of all insurers authorized to do business in this state shall be valued, in the discretion of the superintendent, at their market value, or at their appraised value, or at prices determined by him as representing their fair market value. (2) If the superintendent finds that in view of the character of investments of the insurer it would be prudent for such insurer to establish a special reserve for possible losses or fluctuations in the values of its investments, he may require that a reserve, reasonable in amount, be established and maintained and that it be reported in any statement or report of the financial condition of such insurer. (3) The superintendent may, in connection with any examination or required financial statement of the insurer, require it to furnish him a complete financial statement and audited report of the financial condition of any corporation whose securities are owned wholly or partly by such insurer and may cause an examination to be made of any subsidiary or affiliate of such insurer. (c) (1) The shares of an insurance company which is not a subsidiary, including for purposes of this subsection any corporation having a majority of its assets invested in one or more insurance companies, shall be valued in accordance with subsection (b) of this section if such shares are registered on a national securities exchange, as provided in the federal Securities Exchange Act of 1934, 15 U.S.C. SS 78a-78kk. (2) Except as otherwise provided in section four thousand two hundred forty of this chapter, shares of an insurance company which is a subsidiary and the shares of an insurance company not so registered shall be valued at the lesser of its market value or book value as shown by its last annual statement or the last report on examination, whichever is more recent. (3) The book value of common shares of an insurance company shall be ascertained by dividing (i) the amount of the insurer`s capital and surplus less the value of all its preferred shares, if any, outstanding, by (ii) the number of common shares outstanding. (4) Notwithstanding the foregoing provisions, an insurer may, at its option, value its shares in a subsidiary insurance company in an amount not less than acquisition cost if it is less than the value determined as hereinbefore provided. (d) Real property acquired by foreclosure or by deed in lieu thereof, in the absence of a recent appraisal deemed reliable by the superintendent, shall not be valued at an amount greater than the unpaid principal of the defaulted loan at the date of such acquisition, together with any taxes and expenses paid or incurred by such insurer at such time in connection with such acquisition (but not including any uncollected interest on such loan), and the cost of additions or improvements thereafter made by such insurer and any amounts thereafter paid by such insurer on any assessments levied for improvements in connection with the property. (e) Purchase money mortgages received on dispositions of real property shall be valued in an amount not exceeding ninety percent of the value of such real property as determined by an appraisal made by an appraiser at or about the time of the disposition; provided that purchase money mortgages received on dispositions of real property acquired or held pursuant to paragraph five of subsection (a) of section one thousand four hundred four of this article or on dispositions of real property acquired or held under section one thousand four hundred five of this article in satisfaction of loans, mortgages, liens, judgments, decrees or other debts previously owing to such insurer in the course of its business shall in no event be valued in an amount exceeding its acquisition costs. (f) The stock of a subsidiary of an insurer shall be valued on the basis of the greater of: (i) the value of only such assets of such subsidiary as would constitute lawful investments if acquired or held directly by the insurer; or (ii) such other value as may be determined pursuant to standards and cumulative limitations in regulations promulgated by the superintendent. (g) Notwithstanding any provision contained in this section or elsewhere in this chapter, if the superintendent finds that the interests of policyholders so permit or require, he may permit or require any class of insurers authorized to do business in this state to value their investments or any class thereof as of any date heretofore or hereafter in accordance with any applicable valuation or method approved by the National Association of Insurance Commissioners.