money as rental or for the use of such property in amounts and at times which shall be sufficient, after provision for taxes upon and other expenses of use of the property, to repay in full the obligation with interest and when such agreement and the money obligated to be paid thereunder are assigned, pledged, or secured for the benefit of the holder of the obligation. However, where the security for the repayment of the obligation consists of a first mortgage lien or deed of trust on a fee interest in real property, the obligation may provide for the amortization, during the initial, fixed period of the lease or contract, of less than one hundred percent (100%) of the obligation if there is pledged or assigned, as additional security for the obligation, sufficient rentals payable under the lease, or of contract payments, to secure the amortized obligation payments required during the initial, fixed period of the lease or contract, including but not limited to payments of principal, interest, and taxes other than the income taxes of the borrower, and if there is to be left unamortized at the end of such period an amount not greater than the original appraised value of the land only, exclusive of all improvements, as prescribed by law.
    (b) Investments of domestic life insurance companies at the time they are made shall conform to the following categories, conditions, limitations, and standards:
    1. Obligations of a domestic jurisdiction or of any administration, agency, authority, or instrumentality of a domestic jurisdiction.
    2. Obligations guaranteed, supported, or insured as to principal and interest by a domestic jurisdiction or by an administration, agency, authority, or instrumentality of a domestic jurisdiction.
    3. Obligations issued under or pursuant to the Farm Credit Act of 1971 (12 U.S.C. 2001 through 2279aa-14) as in effect on December 31, 1990, or the Federal Home Loan Bank Act (12 U.S.C. 1421 through 1449) as in effect on December 31, 1990, interest bearing obligations of the FSLIC Resolution Fund or shares of any institution whose deposits are insured by the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation to the extent that such shares are insured, obligations issued or guaranteed by a multilateral development bank, and obligations issued or guaranteed by the African Development Bank.
    4. Obligations issued, guaranteed, or insured as to principal and interest by a city, county, drainage district, road district, school district, tax district, town, township, village, or other civil administration, agency, authority, instrumentality, or subdivision of a domestic jurisdiction, providing such obligations are authorized by law and are:
        (a) direct and general obligations of the issuing, guaranteeing or insuring governmental unit, administration, agency, authority, district, subdivision, or instrumentality;
        (b) payable from designated revenues pledged to the payment

of the principal and interest thereof; or
        (c) improvement bonds or other obligations constituting a first lien, except for tax liens, against all of the real estate within the improvement district or on that part of such real estate not discharged from such lien through payment of the assessment. The area to which such improvement bonds or other obligations relate shall be situated within the limits of a town or city and at least fifty percent (50%) of the properties within such area shall be improved with business buildings or residences.
    5. Loans evidenced by obligations secured by first mortgage liens on otherwise unencumbered real estate or otherwise unencumbered leaseholds having at least fifty (50) years of unexpired term, such real estate, or leaseholds to be located in a domestic jurisdiction. Such loans shall not exceed eighty percent (80%) of the fair value of the security determined in a manner satisfactory to the department, except that the percentage stated may be exceeded if and to the extent such excess is guaranteed or insured by:
        (a) a domestic jurisdiction or by an administration, agency, authority, or instrumentality of any domestic jurisdiction; or
        (b) a private mortgage insurance corporation approved by the department.
If improvements constitute a part of the value of the real estate or leaseholds, such improvements shall be insured against fire for the benefit of the mortgagee in an amount not less than the difference between the value of the land and the unpaid balance of the loan.
For the purpose of this section, real estate or a leasehold shall not be deemed to be encumbered by reason of the existence in relation thereto of:
        (1) liens inferior to the lien securing the loan made by the life insurance company;
        (2) taxes or assessment liens not delinquent;
        (3) instruments creating or reserving mineral, oil, water or timber rights, rights-of-way, common or joint driveways, sewers, walls, or utility connections;
        (4) building restrictions or other restrictive covenants; or
        (5) an unassigned lease reserving rents or profits to the owner.
A loan that is authorized by this paragraph remains qualified under this paragraph notwithstanding any refinancing, modification, or extension of the loan. Investments authorized by this paragraph shall not in the aggregate exceed forty-five percent (45%) of the life insurance company's admitted assets.
    6. Loans evidenced by obligations guaranteed or insured, but only to the extent guaranteed or insured, by a domestic jurisdiction or by any agency, administration, authority, or instrumentality of any domestic jurisdiction, and secured by second or subsequent mortgages or deeds of trust on real estate or leaseholds, provided the terms of the leasehold mortgages or deeds of trust shall not exceed four-fifths (4/5) of the unexpired lease term, including enforceable renewable options remaining at the time of the loan.
    7. Real estate contracts involving otherwise unencumbered real

estate situated in a domestic jurisdiction, to be secured by the title to such real estate, which shall be transferred to the life insurance company or to a trustee or nominee of its choosing. For statement and deposit purposes, the value of a contract acquired pursuant to this paragraph shall be whichever of the following amounts is the least:
        (a) eighty percent (80%) of the contract price of the real estate;
        (b) eighty percent (80%) of the fair value of the real estate at the time the contract is purchased, such value to be determined in a manner satisfactory to the department; or
        (c) the amount due under the contract.
For the purpose of this paragraph, real estate shall not be deemed encumbered by reason of the existence in relation thereto of: (1) taxes or assessment liens not delinquent; (2) instruments creating or reserving mineral, oil, water or timber rights, rights-of-way, common or joint driveways, sewers, walls or utility connections; (3) building restrictions or other restrictive covenants; or (4) an unassigned lease reserving rents or profits to the owner. Fire insurance upon improvements constituting a part of the real estate described in the contract shall be maintained in an amount at least equal to the unpaid balance due under the contract or the fair value of improvements, whichever is the lesser.
    8. Improved or unimproved real property, whether encumbered or unencumbered, or any interest therein, held directly or evidenced by joint venture interests, general or limited partnership interests, trust certificates, or any other instruments, and acquired by the life insurance company as an investment, which real property, if unimproved, is developed within five (5) years. Real property acquired for investment under this paragraph, whether leased or intended to be developed for commercial or residential purposes or otherwise lawfully held, is subject to the following conditions and limitations:
        (a) The real estate shall be located in a domestic jurisdiction.
        (b) The admitted assets of the life insurance company must exceed twenty-five million dollars ($25,000,000).
        (c) The life insurance company shall have the right to expend from time to time whatever amount or amounts may be necessary to conform the real estate to the needs and purposes of the lessee and the amount so expended shall be added to and become a part of the investment in such real estate.
        (d) The value for statement and deposit purposes of an investment under this paragraph shall be reduced annually by amortization of the costs of improvement and development, less land costs, over the expected life of the property, which value and amortization shall for statement and deposit purposes be determined in a manner satisfactory to the commissioner. In determining such value with respect to the calendar years in which an investment begins or ends with respect to a point in time other than the beginning or end of a calendar year, the amortization provided above shall be made on a proportional

basis.
        (e) Fire insurance shall be maintained in an amount at least equal to the insurable value of the improvements or the difference between the value of the land and the value at which such real estate is carried for statement and deposit purposes, whichever amount is smaller.
        (f) Real estate acquired in any of the manners described and sanctioned under section 3 of this chapter, or otherwise lawfully held, except paragraph 5 of that section which specifically relates to the acquisition of real estate under this paragraph, shall not be affected in any respect by this paragraph unless such real estate at or subsequent to its acquisition fulfills the conditions and limitations of this paragraph, and is declared by the life insurance company in a writing filed with the department to be an investment under this paragraph. The value of real estate acquired under section 3 of this chapter, or otherwise lawfully held, and invested under this paragraph shall be initially that at which it was carried for statement and deposit purposes under that section.
        (g) Neither the cost of each parcel of improved real property nor the aggregate cost of all unimproved real property acquired under the authority of this paragraph may exceed two percent (2%) of the life insurance company's admitted assets. For purposes of this paragraph, "unimproved real property" means land containing no structures intended for commercial, industrial, or residential occupancy, and "improved real property" consists of all land containing any such structure. When applying the limitations of subparagraph (d) of this paragraph, unimproved real property becomes improved real property as soon as construction of any commercial, industrial, or residential structure is so completed as to be capable of producing income. In the event the real property is mortgaged with recourse to the life insurance company or the life insurance company commences a plan of construction upon real property at its own expense or guarantees payment of borrowed funds to be used for such construction, the total project cost of the real property will be used in applying the two percent (2%) test. Further, no more than ten percent (10%) of the life insurance company's admitted assets may be invested in all property, measured by the property value for statement and deposit purposes as defined in this paragraph, held under this paragraph at the same time.
    9. Deposits of cash in a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation, or certificates of deposit issued by a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation.
    10. Bank and bankers' acceptances and other bills of exchange of kinds and maturities eligible for purchase or rediscount by federal reserve banks.
    11. Obligations that are issued, guaranteed, assumed, or supported

by a business entity organized under the laws of a domestic jurisdiction and that are rated:
        (a) BBB- or higher by Standard & Poor's Corporation (or A-2 or higher in the case of commercial paper);
        (b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper);
        (c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper); or
        (d) 1 or 2 by the Securities Valuation Office.
    Investments may also be made under this paragraph in obligations that have not received a rating if the earnings available for fixed charges of the business entity for the period of its five (5) fiscal years next preceding the date of purchase shall have averaged per year not less than one and one-half (1 1/2) times its average annual fixed charges applicable to such period and if during either of the last two (2) years of such period such earnings available for fixed charges shall have been not less than one and one-half (1 1/2) times its fixed charges for such year. However, if the business entity is a finance company or other lending institution at least eighty percent (80%) of the assets of which are cash and receivables representing loans or discounts made or purchased by it, the multiple shall be one and one-quarter (1 1/4) instead of one and one-half (1 1/2).
    11.(A) Obligations issued, guaranteed, or assumed by a business entity organized under the laws of a domestic jurisdiction, which obligations have not received a rating or, if rated, have not received a rating that would qualify the obligations for investment under paragraph 11 of this section. Investments authorized by this paragraph may not exceed ten percent (10%) of the life insurance company's admitted assets.
    12. Preferred stock of, or common or preferred stock guaranteed as to dividends by, any corporation organized under the laws of a domestic jurisdiction, which over the period of the seven (7) fiscal years immediately preceding the date of purchase earned an average amount per annum at least equal to five percent (5%) of the par value of its common and preferred stock (or, in the case of stocks having no par value, of its issued or stated value) outstanding at date of purchase, or which over such period earned an average amount per annum at least equal to two (2) times the total of its annual interest charges, preferred dividends and dividends guaranteed by it, determined with reference to the date of purchase. No investment shall be made under this paragraph in a stock upon which any dividend is in arrears or has been in arrears for ninety (90) days within the immediately preceding five (5) year period.
    13. Common stock of any solvent corporation organized under the laws of a domestic jurisdiction which over the seven (7) fiscal years immediately preceding purchase earned an average amount per annum at least equal to six percent (6%) of the par value of its capital stock (or, in the case of stock having no par value, of the issued or stated value of such stock) outstanding at date of purchase, but the conditions and limitations of this paragraph shall not apply to the

special area of investment to which paragraph 23 of this section pertains.
    13.(A) Stock or shares of any mutual fund that:
        (a) has been in existence for a period of at least five (5) years immediately preceding the date of purchase, has assets of not less than twenty-five million dollars ($25,000,000) at the date of purchase, and invests substantially all of its assets in investments permitted under this section; or
        (b) is a class one money market mutual fund or a class one bond mutual fund.
Investments authorized by this paragraph 13(A) in mutual funds having the same or affiliated investment advisers shall not at any one (1) time exceed in the aggregate ten percent (10%) of the life insurance company's admitted assets. The limitations contained in paragraph 22 of this subsection apply to investments in the types of mutual funds described in subparagraph (a). For the purposes of this paragraph, "class one bond mutual fund" means a mutual fund that at all times qualifies for investment using the bond class one reserve factor under the "Purposes and Procedures of the Securities Valuation Office" or any successor publication.
    The aggregate amount of investments under this paragraph may be limited by the commissioner if the commissioner finds that investments under this paragraph may render the operation of the life insurance company hazardous to the company's policyholders or creditors or to the general public.
    14. Loans upon the pledge of any of the investments described in this section other than real estate and those qualifying solely under paragraph 20 of this subsection, but the amount of such a loan shall not exceed seventy-five percent (75%) of the value of the investment pledged.
    15. Real estate acquired or otherwise lawfully held under the provisions of IC 27-1, except under paragraph 7 or 8 of this subsection, which real estate as an investment shall also include the value of improvements or betterments made thereon subsequent to its acquisition. The value of such real estate for deposit and statement purposes is to be determined in a manner satisfactory to the department.
    15.(A) Tangible personal property, equipment trust obligations, or other instruments evidencing an ownership interest or other interest in tangible personal property when the life insurance company purchasing such property has admitted assets in excess of twenty-five million dollars ($25,000,000), and where there is a right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use of such personal property from a corporation whose obligations would be eligible for investment under the provisions of paragraph 11 of this subsection, provided that the aggregate of such payments together with the estimated salvage value of such property at the end of its minimum useful life, to be determined in a manner acceptable to the insurance commissioner, and the estimated tax benefits to the insurer resulting from ownership

of such property, is adequate to return the cost of the investment in such property, and provided further, that each net investment in tangible personal property for which any single private corporation is obligated to pay rental, purchase, or other obligatory payments thereon does not exceed one-half of one percent (1/2%) of the life insurance company's admitted assets, and the aggregate net investments made under the provisions of this paragraph do not exceed five percent (5%) of the life insurance company's admitted assets.
    16. Loans to policyholders of the life insurance company in amounts not exceeding in any case the reserve value of the policy at the time the loan is made.
    17. A life insurance company doing business in a foreign jurisdiction may, if permitted or required by the laws of such jurisdiction, invest funds equal to its obligations in such jurisdiction in investments legal for life insurance companies domiciled in such jurisdiction or doing business therein as alien companies.
    17.(A) Investments in (i) obligations issued, guaranteed, assumed, or supported by a foreign jurisdiction or by a business entity organized under the laws of a foreign jurisdiction and (ii) preferred stock and common stock issued by any such business entity, if the obligations of such foreign jurisdiction or business entity, as appropriate, are rated:
        (a) BBB- or higher by Standard & Poor's Corporation (or A-2 or higher in the case of commercial paper);
        (b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper);
        (c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper); or
        (d) 1 or 2 by the Securities Valuation Office.
If the obligations issued by a business entity organized under the laws of a foreign jurisdiction have not received a rating, investments may nevertheless be made under this paragraph in such obligations and in the preferred and common stock of the business entity if the earnings available for fixed charges of the business entity for a period of five (5) fiscal years preceding the date of purchase have averaged at least three (3) times its average fixed charges applicable to such period, and if during either of the last two (2) years of such period, the earnings available for fixed charges were at least three (3) times its fixed charges for such year. Investments authorized by this paragraph in a single foreign jurisdiction shall not exceed ten percent (10%) of the life insurance company's admitted assets. Subject to section 2.2(g) of this chapter, investments authorized by this paragraph denominated in foreign currencies shall not in the aggregate exceed ten percent (10%) of a life insurance company's admitted assets, and investments in any one (1) foreign currency shall not exceed five percent (5%) of the life insurance company's admitted assets. Investments authorized by this paragraph and paragraph 17(B) shall not in the aggregate exceed twenty percent (20%) of the life insurance company's admitted assets. This

paragraph in no way limits or restricts investments which are otherwise specifically eligible for deposit under this section.
    17.(B) Investments in:
        (a) obligations issued, guaranteed, or assumed by a foreign jurisdiction or by a business entity organized under the laws of a foreign jurisdiction; and
        (b) preferred stock and common stock issued by a business entity organized under the laws of a foreign jurisdiction;
which investments are not eligible for investment under paragraph 17.(A).
    Investments authorized by this paragraph 17(B) shall not in the aggregate exceed five percent (5%) of the life insurance company's admitted assets. Subject to section 2.2(g) of this chapter, if investments authorized by this paragraph 17(B) are denominated in a foreign currency, the investments shall not, as to such currency, exceed two percent (2%) of the life insurance company's admitted assets. Investments authorized by this paragraph 17(B) in any one (1) foreign jurisdiction shall not exceed two percent (2%) of the life insurance company's admitted assets.
    Investments authorized by paragraph 17(A) of this subsection and this paragraph 17(B) shall not in the aggregate exceed twenty percent (20%) of the life insurance company's admitted assets.
    18. To protect itself against loss, a company may in good faith receive in payment of or as security for debts due or to become due, investments or property which do not conform to the categories, conditions, limitations, and standards set out above.
    19. A life insurance company may purchase for its own benefit any of its outstanding annuity or insurance contracts or other obligations and the claims of holders thereof.
    20. A life insurance company may make investments although not conforming to the categories, conditions, limitations, and standards contained in paragraphs 1 through 11, 12 through 19, and 29 through 31 of this subsection, but limited in aggregate amount to the lesser of:
        (a) ten percent (10%) of the company's admitted assets; or
        (b) the aggregate of the company's capital, surplus, and contingency reserves reported on the statutory financial statement of the insurer most recently required to be filed with the commissioner.
    This paragraph 20 does not apply to investments authorized by paragraph 11.(A) of this subsection.
    20.(A) Investments under paragraphs 1 through 20 and paragraphs 29 through 31 of this subsection are subject to the general conditions, limitations, and standards contained in paragraphs 21 through 28 of this subsection.
    21. Investments in obligations (other than real estate mortgage indebtedness) and capital stock of, and in real estate and tangible personal property leased to, a single corporation, shall not exceed two percent (2%) of the life insurance company's admitted assets, taking into account the provisions of section 2.2(h) of this chapter.

The conditions and limitations of this paragraph shall not apply to investments under paragraph 13(A) of this subsection or the special area of investment to which paragraph 23 of this subsection pertains.
    22. Investments in:
        (a) preferred stock; and
        (b) common stock;
shall not, in the aggregate, exceed twenty percent (20%) of the life insurance company's admitted assets, exclusive of assets held in segregated accounts of the nature defined in class 1(c) of IC 27-1-5-1. These limitations shall not apply to investments for the special purposes described in paragraph 23 of this subsection nor to investments in connection with segregated accounts provided for in class 1(c) of IC 27-1-5-1.
    23. Investments in subsidiary companies must be made in accordance with IC 27-1-23-2.6.
    24. No investment, other than commercial bank deposits and loans on life insurance policies, shall be made unless authorized by the life insurance company's board of directors or a committee designated by the board of directors and charged with the duty of supervising loans or investments.
    25. No life insurance company shall subscribe to or participate in any syndicate or similar underwriting of the purchase or sale of securities or property or enter into any transaction for such purchase or sale on account of said company, jointly with any other corporation, firm, or person, or enter into any agreement to withhold from sale any of its securities or property, but the disposition of its assets shall at all times be within its control. Nothing contained in this paragraph shall be construed to invalidate or prohibit an agreement by two (2) or more companies to join and share in the purchase of investments for bona fide investment purposes.
    26. No life insurance company may invest in the stocks or obligations, except investments under paragraphs 9 and 10 of this subsection, of any corporation in which an officer of such life insurance company is either an officer or director. However, this limitation shall not apply with respect to such investments in:
        (a) a corporation which is a subsidiary or affiliate of such life insurance company; or
        (b) a trade association, provided such investment meets the requirements of paragraph 5 of this subsection.
    27. Except for the purpose of mutualization provided for in section 23 of this chapter, or for the purpose of retirement of outstanding shares of capital stock pursuant to amendment of its articles of incorporation, or in connection with a plan approved by the commissioner for purchase of such shares by the life insurance company's officers, employees, or agents, no life insurance company shall invest in its own stock.
    28. In applying the conditions, limitations, and standards prescribed in paragraphs 11, 12, and 13 of this subsection to the stocks or obligations of a corporation which in the seven (7) year period preceding purchase of such stocks or obligations acquired its

property or a substantial part thereof through consolidation, merger, or purchase, the earnings of the several predecessors or constituent corporations shall be consolidated.
    29. A. Before a life insurance company may engage in securities lending transactions, repurchase transactions, reverse repurchase transactions, or dollar roll transactions, the life insurance company's board of directors must adopt a written plan that includes guidelines and objectives to be followed, including the following:
        (1) A description of how cash received will be invested or used for general corporate purposes of the company.
        (2) Operational procedures for managing interest rate risk, counterparty default risk, and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction.
        (3) A statement of the extent to which the company may engage in securities lending transactions, repurchase transactions, reverse repurchase transactions, and dollar roll transactions.
    B. A life insurance company must enter into a written agreement for all transactions authorized by this paragraph, other than dollar roll transactions. The written agreement:
        (1) must require the termination of each transaction not more than one (1) year after its inception or upon the earlier demand of the company; and
        (2) must be with the counterparty business entity, except that, for securities lending transactions, the agreement may be with an agent acting on behalf of the life insurance company if:
            (A) the agent is:
                (i) a business entity, the obligations of which are rated BBB- or higher by Standard & Poor's Corporation (or A-2 or higher in the case of commercial paper), Baa3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper), BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper), or 1 or 2 by the Securities Valuation Office;
                (ii) a business entity that is a primary dealer in United States government securities, recognized by the Federal Reserve Bank of New York; or
                (iii) any other business entity approved by the commissioner; and
            (B) the agreement requires the agent to enter into with each counterparty separate agreements that are consistent with the requirements of this paragraph.
    C. Cash received in a transaction under this paragraph shall be:
        (1) invested:
            (A) in accordance with this section 2; and
            (B) in a manner that recognizes the liquidity needs of the transaction; or
        (2) used by the life insurance company for its general corporate purposes.
    D. For as long as a transaction under this paragraph remains outstanding, the life insurance company or its agent or custodian

shall maintain, as to acceptable collateral received in the transaction, either physically or through book entry systems of the Federal Reserve, the Depository Trust Company, the Participants Trust Company, or another securities depository approved by the commissioner:
        (1) possession of the acceptable collateral;
        (2) a perfected security interest in the acceptable collateral; or
        (3) in the case of a jurisdiction outside the United States:
            (A) title to; or
            (B) rights of a secured creditor to;
        the acceptable collateral.
    E. The limitations set forth in paragraphs 17 and 21 of this subsection do not apply to transactions under this paragraph 29. For purposes of calculations made to determine compliance with this paragraph, no effect may be given to the future obligation of the life insurance company to:
        (1) resell securities, in the case of a repurchase transaction; or
        (2) repurchase securities, in the case of a reverse repurchase transaction.
    F. A life insurance company shall not enter into a transaction under this paragraph if, as a result of the transaction, and after giving effect to the transaction:
        (1) the aggregate amount of securities then loaned, sold to, or purchased from any one (1) business entity under this paragraph would exceed five percent (5%) of the company's admitted assets (but in calculating the amount sold to or purchased from a business entity under repurchase or reverse repurchase transactions, effect may be given to netting provisions under a master written agreement); or
        (2) the aggregate amount of all securities then loaned, sold to, or purchased from all business entities under this paragraph would exceed forty percent (40%) of the admitted assets of the company (provided, however, that this limitation does not apply to a reverse repurchase transaction if the borrowing is used to meet operational liquidity requirements resulting from an officially declared catastrophe and is subject to a plan approved by the commissioner).
    G. The following collateral requirements apply to all transactions under this paragraph:
        (1) In a securities lending transaction, the life insurance company must receive acceptable collateral having a market value as of the transaction date at least equal to one hundred two percent (102%) of the market value of the securities loaned by the company in the transaction as of that date. If at any time the market value of the acceptable collateral received from a particular business entity is less than the market value of all securities loaned by the company to that business entity, the business entity shall be obligated to deliver additional acceptable collateral to the company, the market value of which, together with the market value of all acceptable

collateral then held in connection with all securities lending transactions with that business entity, equals at least one hundred two percent (102%) of the market value of the loaned securities.
        (2) In a reverse repurchase transaction, other than a dollar roll transaction, the life insurance company must receive acceptable collateral having a market value as of the transaction date equal to at least ninety-five percent (95%) of the market value of the securities transferred by the company in the transaction as of that date. If at any time the market value of the acceptable collateral received from a particular business entity is less than ninety-five percent (95%) of the market value of all securities transferred by the company to that business entity, the business entity shall be obligated to deliver additional acceptable collateral to the company, the market value of which, together with the market value of all acceptable collateral then held in connection with all reverse repurchase transactions with that business entity, equals at least ninety-five percent (95%) of the market value of the transferred securities.
        (3) In a dollar roll transaction, the life insurance company must receive cash in an amount at least equal to the market value of the securities transferred by the company in the transaction as of the transaction date.
        (4) In a repurchase transaction, the life insurance company must receive acceptable collateral having a market value equal to at least one hundred two percent (102%) of the purchase price paid by the company for the securities. If at any time the market value of the acceptable collateral received from a particular business entity is less than one hundred percent (100%) of the purchase price paid by the life insurance company in all repurchase transactions with that business entity, the business entity shall be obligated to provide additional acceptable collateral to the company, the market value of which, together with the market value of all acceptable collateral then held in connection with all repurchase transactions with that business entity, equals at least one hundred two percent (102%) of the purchase price. Securities acquired by a life insurance company in a repurchase transaction shall not be:
            (A) sold in a reverse repurchase transaction;
            (B) loaned in a securities lending transaction; or
            (C) otherwise pledged.
    30. A life insurance company may invest in obligations or interests in trusts or partnerships regardless of the issuer, which are secured by:
        (a) investments authorized by paragraphs 1, 2, 3, 4, or 11 of this subsection; or
        (b) collateral with the characteristics and limitations prescribed for loans under paragraph 5 of this subsection.
For the purposes of this paragraph 30, collateral may be substituted for other collateral if it is in the same amount with the same or

greater interest rate and qualifies as collateral under subparagraph (a) or (b) of this paragraph.
    31. A life insurance company may invest in obligations or interests in trusts or partnerships, regardless of the issuer, secured by any form of collateral other than that described in subparagraphs (a) and (b) of paragraph 30 of this subsection, which obligations or interests in trusts or partnerships are rated:
        (a) A- or higher by Standard & Poor's Corporation or Duff and Phelps, Inc.;
        (b) A 3 or higher by Moody's Investor Service, Inc.; or
        (c) 1 by the Securities Valuation Office.
Investments authorized by this paragraph may not exceed ten percent (10%) of the life insurance company's admitted assets.
    32. A. A life insurance company may invest in short-term pooling arrangements as provided in this paragraph.
    B. The following definitions apply throughout this paragraph:
        (1) "Affiliate" means, as to any person, another person that, directly or indirectly through one (1) or more intermediaries, controls, is controlled by, or is under common control with the person.
        (2) "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract (other than a commercial contract for goods or non-management services), or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote or holds proxies representing ten percent (10%) or more of the voting securities of another person. This presumption may be rebutted by a showing that control does not exist in fact. The commissioner may determine, after furnishing all interested persons notice and an opportunity to be heard and making specific findings of fact to support the determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.
        (3) "Qualified bank" means a national bank, state bank, or trust company that at all times is not less than adequately capitalized as determined by standards adopted by United States banking regulators and that is either regulated by state banking laws or is a member of the Federal Reserve System.
    C. A life insurer may participate in investment pools qualified under this paragraph that invest only in:
        (1) obligations that are rated BBB- or higher by Standard & Poor's Corporation (or A-2 or higher in the case of commercial paper), Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper), BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper), or 1 or 2 by the Securities Valuation Office, and have:

provide for such payments to be made to the participants in one (1) of the following forms, at the discretion of the pool manager:
            (A) in cash, the then fair market value of the participant's pro rata share of each underlying asset of the investment pool;
            (B) in kind, a pro rata share of each underlying asset; or
            (C) in a combination of cash and in kind distributions, a pro rata share in each underlying asset.
        (6) The records of the investment pool shall be made available for inspection by the commissioner.
(Formerly: Acts 1935, c.162, s.147; Acts 1937, c.288, s.1; Acts 1939, c.63, s.3; Acts 1941, c.115, s.9; Acts 1945, c.175, s.1; Acts 1947, c.43, s.1; Acts 1959, c.21, s.1; Acts 1961, c.138, s.1; Acts 1967, c.60, s.1; Acts 1969, c.184, s.1; Acts 1974, P.L.121, SEC.1; Acts 1975, P.L.44, SEC.2; Acts 1975, P.L.279, SEC.1.) As amended by Acts 1981, P.L.236, SEC.1; P.L.267-1987, SEC.1; P.L.49-1988, SEC.2; P.L.8-1991, SEC.8; P.L.26-1991, SEC.7; P.L.1-1992, SEC.145; P.L.186-1997, SEC.1; P.L.126-2001, SEC.1; P.L.40-2004, SEC.1.

entity under a written master agreement that provides for netting of payments owed by the respective parties, and the domiciliary jurisdiction of the counterparty is either within the United States or a foreign jurisdiction listed in the "Purposes and Procedures of the Securities Valuation Office" or any successor publication as eligible for netting, the net amount of credit risk attributable to the counterparty is the greater of zero (0) or the remainder of:
            (1) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment to the insurer by the business entity; minus
            (2) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment by the insurer to the business entity.
        C. For open transactions involving over-the-counter derivative instruments, market value:
            (1) shall be determined not less frequently than at the end of the most recent quarter of the insurer's fiscal year; and
            (2) shall be reduced by the market value of acceptable collateral that is:
                (A) held by the insurer; or
                (B) placed in escrow by one (1) or both parties.
        (10) "Covered" means, in the case of a call option, that:
            (A) the life insurance company owns the instrument underlying the call option it has written (a "written call") during the entire period that the written call is outstanding; or
            (B) pursuant to the exercise of options, warrants, or conversion rights already owned when the call option is written and held during the period that the written call is outstanding, the life insurance company can immediately acquire the instrument underlying the written call, if:
                (1) the price at which the underlying instrument can be acquired is less than or equal to the strike price of the written call; or
                (2) the life insurance company has placed in escrow or, pursuant to a custodian agreement, has segregated during the entire period that the written call is outstanding, cash, cash equivalents, or securities with a market value equal to the difference between the price at which the underlying instrument can be acquired and the strike price of the written call.
        (11) "Covered" means, in the case of a put option, that the life insurance company has placed in escrow or, pursuant to a custodian agreement, has segregated during the entire period that the put option it has sold (a "written put") is outstanding, cash, cash equivalents, or securities with a market value equal to the amount of the insurer's obligation under the written put.

delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one or more underlying interests.
        (21) "Government money market mutual fund" means a money market mutual fund that at all times:
            (A) invests only in obligations issued, guaranteed, or insured by the United States or collateralized repurchase agreements composed of these obligations; and
            (B) qualifies for investment without a reserve pursuant to the "Purposes and Procedures of the Securities Valuation Office" or any successor publication.
        (22) "Guaranteed or insured," when used in connection with an obligation acquired under this section, means that the guarantor or insurer has agreed to:
            (A) perform or insure the obligation of the obligor or purchase the obligation; or
            (B) be unconditionally obligated until the obligation is repaid to maintain in the obligor a minimum net worth, fixed charge coverage, stockholders' equity or sufficient liquidity to enable the obligor to pay the obligation in full.
        (23) "Hedging transaction" means a derivative transaction that is entered into and maintained to manage:
            (A) the risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities (or a portfolio of assets, liabilities, or assets and liabilities) that the insurer has acquired or incurred or anticipates acquiring or incurring; or
            (B) currency exchange rate risk or the degree of exposure to assets or liabilities (or a portfolio of assets, liabilities, or assets and liabilities) that the insurer has acquired or incurred or anticipates acquiring or incurring.
        (24) "Income generation transaction" means a derivative transaction involving the writing of covered call options, covered put options, covered caps, or covered floors.
        (25) "Investment company" means an investment company as defined in Section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), as amended, and a person described in Section 3(c) of the Investment Company Act of 1940.
        (26) "Investment company series" means an investment portfolio of an investment company that is organized as a series company and to which assets of the investment company have been specifically allocated.
        (27) "Letter of credit" means a clean, irrevocable, and unconditional letter of credit issued or confirmed by, and payable and presentable at, a financial institution on the list of financial institutions meeting the standards for issuing letters of credit under the "Purposes and Procedures of the Securities Valuation Office" or any successor publication.
        (28) "Market value" means:
            (A) as to cash, cash equivalents, and letters of credit, the amounts thereof;

exchange, or a securities market regulated under the Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.), as amended;
            (B) a board of trade or commodities exchange designated as a contract market by the Commodity Futures Trading Commission (CFTC) or any successor of the CFTC;
            (C) Private Offerings, Resales, and Trading through Automated Linkages (PORTAL);
            (D) a designated offshore securities market as defined in Securities Exchange Commission Regulation S (17 C.F.R. Part 230), as amended; or
            (E) a qualified foreign exchange.
        (36) "Qualified foreign exchange" means a foreign exchange, board of trade, or contract market located outside the United States or its territories or possessions:
            (A) that has received regulatory comparability relief under CFTC Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC's Regulations (17 C.F.R. Part 30));
            (B) that is, or whose members are, subject to the jurisdiction of a foreign futures authority that has received regulatory comparability relief under CFTC Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC's Regulations (17 C.F.R. Part 30)) as to futures transactions in the jurisdiction where the exchange, board of trade, or contract market is located; or
            (C) upon which are listed foreign stock index futures contracts that are the subject of no-action relief issued by the CFTC's Office of the General Counsel, provided that an exchange, board of trade, or contract market that qualifies as a qualified foreign exchange only under this clause is a qualified foreign exchange only as to foreign stock index futures contracts that are the subject of no-action relief.
        (37) "Replication transaction" means a derivative transaction that is intended to replicate the investment in one (1) or more assets that an insurer is authorized to acquire or sell under this section or section 2 of this chapter. A derivative transaction that is entered into as a hedging transaction shall not be considered a replication transaction.
        (38) "Securities Valuation Office" refers to:
            (A) the Securities Valuation Office of the National Association of Insurance Commissioners; or
            (B) any successor of the office referred to in Clause (A) established by the National Association of Insurance Commissioners.
        (39) "Swap" means an agreement to exchange or to net payments at one (1) or more times based on the actual or expected price, level, performance or value of one (1) or more underlying interests.
        (40) "Swaption" means an agreement giving the buyer the right (but not the obligation) to enter into a swap at a specified time

in the future.
        (41) "Underlying interest" means the assets, liabilities, other interests or a combination thereof underlying a derivative instrument, such as any one (1) or more securities, currencies, rates, indices, commodities or derivative instruments.
        (42) "Warrant" means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement. Warrants may be issued alone or in connection with the sale of other securities, for example, as part of a merger or recapitalization agreement or to facilitate divestiture of the securities of another business entity.
    (b) Before a life insurance company engages in derivatives transactions, the insurer's board of directors must:
        (1) adopt a written plan that specifies guidelines, systems, and objectives to be followed, such as:
            (A) investment or, if applicable, underwriting objectives and risk constraints, such as credit risk limits;
            (B) permissible transactions and the relationship of those transactions to the insurer's operations;
            (C) internal control procedures;
            (D) a system for determining whether a derivative instrument used for hedging has been effective;
            (E) a credit risk management system for over-the-counter derivative transactions that measures credit risk exposure using the counterparty exposure amount; and
            (F) a mechanism for reviewing and auditing compliance with the guidelines, systems, and objectives specified in the written plan; and
        (2) make a determination that the insurer's investment managers have adequate professional personnel, technical expertise, and systems to implement the insurer's intended investment practices involving derivative instruments.
    (c) A life insurance company may use derivative instruments under this section to engage in hedging transactions, certain income generation transactions, and certain replication transactions, as these terms may be further defined in rules adopted by the department. For each hedging and replication transaction in which it engages, a life insurance company must be able to demonstrate to the commissioner:
        (1) the intended characteristics; and
        (2) the ongoing effectiveness;
of the derivative transaction or combination of the derivatives transactions through appropriate analyses.
    (d) A life insurance company insurer may enter into a hedging transaction under this section if, as a result of the transaction, and after giving effect to the transaction:
        (1) the aggregate statement value of options, caps, floors, and warrants not attached to another financial instrument purchased and used in hedging transactions does not exceed seven and one half percent (7.5%) of the insurer's admitted assets;

commissioner may approve additional transactions involving the use of derivative instruments that:
        (1) exceed the limits set forth in subsections (d), (e), and (f); or
        (2) are for other risk management purposes.
    (j) A life insurance company shall maintain documentation and records relating to each derivative transaction. The documentation and records must record and include matters such as the following:
        (1) The purpose or purposes of the transaction.
        (2) The assets or liabilities to which the transaction relates.
        (3) The specific derivative instrument used in the transaction.
        (4) For collateralized derivatives transactions, a description of any collateral posted by the insurer or the counterparty, as well as records documenting any subsequent variations in the amount of the collateral.
        (5) For over-the-counter derivative transactions, the name of the counterparty and the counterparty exposure amount.
        (6) For exchange traded derivative instruments, the name of the exchange and the name of the firm that handled the trade.
    (k) Each derivative instrument shall be:
        (1) traded on a qualified exchange;
        (2) entered into with, or guaranteed by, a business entity;
        (3) issued or written by or entered into with the issuer of the underlying interest on which the derivative instrument is based; or
        (4) entered into on a qualified foreign exchange.
As added by P.L.186-1997, SEC.2.

on that date obtained from a generally recognized source or the most recent quotation from such a source or, to the extent no generally recognized source exists, the price for the security as determined in good faith by the parties to a transaction, plus accrued but unpaid income on the security to the extent not included in the price as of that date.
        (11) "Multilateral development bank" means an international development organization of which the United States is a member.
        (12) "Mutual fund" means:
            (A) an investment company; or
            (B) in the case of an investment company that is organized as a series company, an investment company series;
        that is registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.).
        (13) "Obligation" means any of the following:
            (A) A bond.
            (B) A note.
            (C) A debenture.
            (D) Any other form of evidence of debt.
        (14) "Person" means an individual, a business entity, a multilateral development bank or a government or quasi-governmental body, such as a political subdivision or a government sponsored enterprise.
        (15) "Qualified bank" means a national bank, state bank, or trust company that:
            (A) at all times is not less than adequately capitalized, as determined by standards adopted by United States banking regulators; and
            (B) is regulated by state banking laws or is a member of the Federal Reserve System.
        (16) "Series company" means an investment company that is organized as a series company, as defined in Rule 18f-2(a) adopted under the Investment Company Act of 1940 (15 U.S.C. 80a-1, as amended).
    (b) In addition to the authority to participate in investment pools under section 2(b)(31) of this chapter, a life insurance company may participate in investment pools that:
        (1) are qualified under this section; and
        (2) invest only in investments that an insurer may acquire under section 2 of this chapter;
if the company's proportionate interest in the amount invested in these investments does not exceed the applicable limits of section 2 of this chapter.
    (c) For an investment pool to be qualified under this section, the investment pool shall not:
        (1) acquire securities issued, assumed, guaranteed, or insured by the insurer or an affiliate of the insurer; or
        (2) borrow or incur any indebtedness for borrowed money,

except for securities lending, reverse repurchase, and dollar roll transactions that meet the requirements of section 2(b)(29) of this chapter.
    (d) A life insurance company shall not participate in an investment pool qualified under this section if, as a result of the participation and after giving effect to the participation, the aggregate amount of participation then held by the insurer in all investment pools under this section and under section 2(b)(31) of this chapter would exceed thirty-five percent (35%) of the admitted assets of the insurer.
    (e) For an investment pool to be qualified under this section:
        (1) the manager of the investment pool:
            (A) must be organized under the laws of the United States, a state or territory of the United States, or the District of Columbia;
            (B) must be designated as the pool manager in a pooling agreement; and
            (C) must be:
                (i) the insurer;
                (ii) an affiliated insurer;
                (iii) a business entity affiliated with the insurer;
                (iv) a qualified bank; or
                (v) a business entity registered under the Investment Advisors Act of 1940 (15 U.S.C. 80a-1 et seq.);
        (2) the pool manager or an entity of the type referred to in subdivision (1)(C) that is designated by the pool manager must compile and maintain detailed accounting records setting forth:
            (A) the cash receipts and disbursements reflecting each participant's proportionate participation in the investment pool;
            (B) a complete description of all underlying assets of the investment pool (including the amount, interest rate, maturity date (if any) and other appropriate designations); and
            (C) other records that, on a daily basis, allow third parties to verify each participant's interest in the investment pool; and
        (3) the assets of the investment pool must be held in one (1) or more accounts, in the name of or on behalf of the investment pool, in a qualified bank under a custody agreement or trust agreement that:
            (A) states and recognizes the claims and rights of each participant;
            (B) acknowledges that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of the participant's participation in the investment pool; and
            (C) contains an agreement that the underlying assets of the investment pool shall not be commingled with the general assets of the qualified bank or the assets of any other person.
    (f) The pooling agreement for an investment pool that is qualified

under this section must be in writing and must provide the following:
        (1) Insurers, subsidiaries, or affiliates of insurers holding interests in the pool, or any pension or profit sharing plan of the insurers or their subsidiaries or affiliates, must at all times hold one hundred percent (100%) of the interests in the investment pool.
        (2) The underlying assets of the investment pool must not be commingled with the general assets of the pool manager or any other person.
        (3) In proportion to the aggregate amount of each pool participant's interest in the investment pool:
            (A) each participant owns an undivided interest in the underlying assets of the investment pool; and
            (B) the underlying assets of the investment pool are held solely for the benefit of each participant.
        (4) A participant or (in the event of the participant's insolvency, bankruptcy, or receivership) its trustee, receiver, or other successor-in-interest may withdraw all or any portion of its participation from the investment pool under the terms of the pooling agreement.
        (5) Withdrawals may be made on demand without penalty or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter. Payments upon withdrawals under this paragraph shall be calculated in each case net of all then applicable fees and expenses of the investment pool. The pooling agreement shall provide for such payments to be made to the participants in one (1) of the following forms, at the discretion of the pool manager:
            (A) in cash, the then fair market value of the participant's pro rata share of each underlying asset of the investment pool;
            (B) in kind, a pro rata share of each underlying asset; or
            (C) in a combination of cash and in kind distributions, a pro rata share in each underlying asset.
        (6) The records of the investment pool shall be made available for inspection by the commissioner.
As added by P.L.186-1997, SEC.3.