2006 Legislation
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HOUSE BILL NO. 448 – Insurers, investments, Canada

HOUSE BILL NO. 448

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Bill Status



H0448...........................................................by BUSINESS
INSURERS - INVESTMENTS - Amends, repeals and adds to existing law to
provide for investment of funds by insurance companies in common and
preferred stocks of solvent institutions existing under the laws of the
government of Canada or any of its provinces; to delete authority for
investment in guaranteed stocks; and to provide for investments in foreign
securities.
                                                                        
01/24    House intro - 1st rdg - to printing
01/25    Rpt prt - to Bus
02/10    Rpt out - rec d/p - to 2nd rdg
02/13    2nd rdg - to 3rd rdg
02/15    3rd rdg - PASSED - 62-0-8
      AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer, Bell,
      Bilbao, Block, Boe, Bolz, Brackett, Bradford, Cannon, Chadderdon,
      Clark, Collins, Crow, Denney, Edmunson, Ellsworth, Eskridge,
      Field(18), Field(23), Garrett, Hart(Jacobson), Harwood, Henbest,
      Henderson, Jaquet, Kemp, Lake, Loertscher, Martinez, Mathews,
      McGeachin, McKague, Miller, Moyle, Nielsen, Nonini, Pasley-Stuart,
      Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sayler,
      Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30),
      Smith(24), Smylie, Snodgrass, Trail, Wills, Wood
      NAYS -- None
      Absent and excused -- Bedke, Black, Deal, LeFavour, Mitchell, Sali,
      Stevenson, Mr. Speaker
    Floor Sponsor - Rusche
    Title apvd - to Senate
02/16    Senate intro - 1st rdg - to Com/HuRes
02/22    Rpt out - rec d/p - to 2nd rdg
02/23    2nd rdg - to 3rd rdg
03/02    3rd rdg - PASSED - 35-0-0
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough,
      Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce,
      Richardson, Schroeder, Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- None
    Floor Sponsor - Goedde
    Title apvd - to House
03/03    To enrol
03/06    Rpt enrol - Sp signed
03/07    Pres signed
03/08    To Governor
03/11    Governor signed
         Session Law Chapter 27
         Effective: 07/01/06

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 448
                                                                        
                                   BY BUSINESS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO INVESTMENTS BY INSURANCE COMPANIES; AMENDING SECTION 41-713, IDAHO
  3        CODE, TO DELETE AUTHORITY FOR INVESTMENT IN GUARANTEED STOCKS, TO ALLOW AN
  4        INSURER TO INVEST FUNDS IN PREFERRED STOCKS OR SHARES OF SOLVENT  INSTITU-
  5        TIONS  EXISTING  UNDER  THE LAWS OF THE GOVERNMENT OF CANADA OR ANY OF ITS
  6        PROVINCES AND TO MAKE A TECHNICAL  CORRECTION;  AMENDING  SECTION  41-714,
  7        IDAHO CODE, TO ALLOW AN INSURER TO INVEST IN COMMON SHARES OF STOCK OF ANY
  8        SOLVENT INSTITUTION EXISTING UNDER THE LAWS OF THE GOVERNMENT OF CANADA OR
  9        ANY  OF ITS PROVINCES, AND TO REMOVE AUTHORITY FOR INVESTMENT IN A FOREIGN
 10        CORPORATION PUBLICLY TRADED ON UNITED STATES  STOCK  EXCHANGES;  REPEALING
 11        SECTION  41-727, IDAHO CODE; AND AMENDING CHAPTER 7, TITLE 41, IDAHO CODE,
 12        BY THE ADDITION OF A NEW  SECTION  41-727,  IDAHO  CODE,  TO  PROVIDE  FOR
 13        INVESTMENT  OF  FUNDS  BY INSURANCE COMPANIES IN FOREIGN SECURITIES AND TO
 14        PROVIDE DEFINITIONS.
                                                                        
 15    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 16        SECTION 1.  That Section 41-713, Idaho Code, be, and the  same  is  hereby
 17    amended to read as follows:
                                                                        
 18        41-713.  PREFERRED  AND  GUARANTEED  STOCKS -- DIVERSIFICATION. An insurer
 19    may invest any of its funds, in an aggregate amount not exceeding fifteen  per
 20    cent  percent (15%) of its assets in preferred or guaranteed stocks or shares,
 21    other than common stocks, of solvent institutions existing under the  laws  of
 22    the  United  States or of any state, district, or territory thereof, or of the
 23    government of Canada or any province thereof, if all of the prior  obligations
 24    and  prior preferred stocks, if any, of such institution at the date of acqui-
 25    sition by the insurer are not then in default as  to  principal,  interest  or
 26    dividends.
                                                                        
 27        SECTION  2.  That  Section  41-714, Idaho Code, be, and the same is hereby
 28    amended to read as follows:
                                                                        
 29        41-714.  COMMON STOCKS.  After  satisfying  the  requirements  of  section
 30    41-706(3)  and  (4), Idaho Code, (investment of capital and life reserves), an
 31    insurer may invest funds in an aggregate amount not in excess of fifteen  per-
 32    cent  (15%) of its assets in common shares of stock of any solvent institution
 33    existing under the laws of the United States or of any state, district or ter-
 34    ritory thereof, or a foreign corporation  publicly  traded  on  United  States
 35    stock  exchanges  of  the  government  of Canada or any province thereof, that
 36    qualify as a sound investment, in addition to the shares  of  a  substantially
 37    owned or wholly owned subsidiary corporation.
 38        For  the  purpose of determining the investment limitation imposed by this
 39    section, the insurer shall value securities subject to the provisions of  this
 40    section  at  the  cost of the security or at the market value of the security,
 41    whichever is lower. However, investments in the shares of subsidiaries or com-
                                                                        
                                           2
                                                                        
  1    panion insurance companies shall be governed by sections 41-715 and  41-3801B,
  2    Idaho Code.
  3        The limitations as to investment in common stocks as provided herein shall
  4    not apply to nor limit the right of investments in investment trust securities
  5    as provided for in section 41-716, Idaho Code.
                                                                        
  6        SECTION  3.  That  Section  41-727, Idaho Code, be, and the same is hereby
  7    repealed.
                                                                        
  8        SECTION 4.  That Chapter 7, Title 41, Idaho Code,  be,  and  the  same  is
  9    hereby  amended by the addition thereto of a NEW SECTION, to be known and des-
 10    ignated as Section 41-727, Idaho Code, and to read as follows:
                                                                        
 11        41-727.  FOREIGN SECURITIES. (1)  Notwithstanding the definitions in chap-
 12    ter 1, title 41, Idaho Code, for purposes of this section, the following defi-
 13    nitions shall apply:
 14        (a)  "Business entity" means a sole proprietorship,  corporation,  limited
 15        liability  company,  association,  partnership, joint stock company, joint
 16        venture, mutual fund, trust, joint tenancy or other similar form of  busi-
 17        ness organization, whether organized for-profit or not-for-profit.
 18        (b)  "Domestic  jurisdiction" means the United States, Canada, and a state
 19        or political subdivision of the United States or Canada.
 20        (c)  "Foreign currency" means a currency other than  that  of  the  United
 21        States or Canada.
 22        (d)  "Foreign investment" means an investment in a foreign jurisdiction or
 23        in  an  asset domiciled in a foreign jurisdiction. An investment shall not
 24        be deemed to be foreign if the issuing business entity, qualified  primary
 25        credit source or qualified guarantor is a domestic jurisdiction or a busi-
 26        ness entity domiciled in a domestic jurisdiction, unless:
 27             (i)   The issuing business entity is a shell business entity; and
 28             (ii)  The  investment is not assumed, accepted, guaranteed or insured
 29             or otherwise backed by a domestic jurisdiction or a  business  entity
 30             that is not a shell business entity domiciled in a domestic jurisdic-
 31             tion.
 32        (e)  "Foreign  jurisdiction"  means  a  jurisdiction outside of the United
 33        States or Canada.
 34        (f)  "Qualified guarantor" means a guarantor against which an insurer  has
 35        a  direct  claim  for  full  and timely payment evidenced by a contractual
 36        right for which an enforcement action can be brought in a domestic  juris-
 37        diction.
 38        (g)  "Qualified primary credit source" means the credit source to which an
 39        insurer looks for payment as to an investment and against which an insurer
 40        has  a direct claim for full and timely payment evidenced by a contractual
 41        right for which an enforcement action can be brought in a domestic  juris-
 42        diction.
 43        (h)  "Shell  business  entity"  means a business entity having no economic
 44        substance except as a vehicle for owning interests in assets issued, owned
 45        or previously owned by a business entity domiciled in a foreign  jurisdic-
 46        tion.
 47        (i)  "SVO"  means the securities valuation office of the national associa-
 48        tion of insurance commissioners or any successor office established by the
 49        national association of insurance commissioners.
 50        (2)  Any insurance company organized under  any  law  of  this  state  may
 51    invest,  by loans or otherwise, any of its funds, or any part thereof, in for-
 52    eign investments of the same types as those that an insurer  is  permitted  to
                                                                        
                                           3
                                                                        
  1    acquire  under  sections  41-707,  41-708,  41-711, 41-713, 41-714, 41-716 and
  2    41-721(1), Idaho Code, if:
  3        (a)  The aggregate amount of foreign investments then held by the  insurer
  4        does not exceed fifteen percent (15%) of its admitted assets; and
  5        (b)  The  aggregate amount of foreign investments then held by the insurer
  6        in a single foreign jurisdiction does not exceed ten percent (10%) of  its
  7        admitted assets for jurisdictions that have a sovereign debt rating of SVO
  8        1,  or  three  percent (3%) of its admitted assets for all other jurisdic-
  9        tions.
 10        (3)  Any insurance company organized under  any  law  of  this  state  may
 11    invest,  by  loans  or  otherwise,  any  of its funds, or any part thereof, in
 12    investments of the same types as those that an insurer is permitted to acquire
 13    under sections 41-707, 41-708, 41-711, 41-713, 41-714, 41-716  and  41-721(1),
 14    Idaho  Code,  which are denominated in foreign currencies, whether or not they
 15    are foreign investments acquired under subsection (2) of this section, if:
 16        (a)  The  aggregate  amount  of  investments  then  held  by  the  insurer
 17        denominated in foreign currencies does not exceed ten percent (10%) of its
 18        admitted assets; and
 19        (b)  The  aggregate  amount  of  investments  then  held  by  the  insurer
 20        denominated in the foreign currency of a single foreign jurisdiction  does
 21        not exceed five percent (5%) of its admitted assets for jurisdictions that
 22        have a sovereign debt rating of SVO 1, or three percent (3%) of its admit-
 23        ted assets for all other jurisdictions.
 24        (4)  The investment limitations in subsections (2) and (3) of this section
 25    computed  on  the  basis  of  an insurer's admitted assets shall relate to the
 26    amount as shown on the insurer's last annual report as filed with the  commis-
 27    sioner  of  insurance  or a more recent quarterly financial statement as filed
 28    with the commissioner, on a form prescribed by  the  national  association  of
 29    insurance  commissioners, within forty-five (45) days following the end of the
 30    calendar quarter to which the interim statement pertains.
 31        (5)  Investments acquired under this  section  shall  be  aggregated  with
 32    investments  of  the  same  types  made under sections 41-707, 41-708, 41-711,
 33    41-713, 41-714, 41-716 and 41-721(1), Idaho Code, and in a similar manner, for
 34    purposes of determining compliance with the limits, if any, contained in  this
 35    chapter.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE

                             RS 15470

Chapter 7, Title 41 of the Idaho Code currently allows domestic
insurance companies to make foreign investments, other than
investments in public obligations or corporate obligations in
Canada, only if the insurer is authorized to transact business in
a foreign country.  However, there are two reasons why these
statutes should be amended.  First, over the last several years,
many companies incorporated in the United States have moved their
sites of incorporation to Bermuda and other off-shore locations. 
The result of such a move is that the company's securities become
"foreign securities" under Idaho's current law.  However, the
securities of such companies continue to trade in United States
markets as if the company were still incorporated in the United
States.  The proposed amendment to this statute would allow for the
continued limited investment by an Idaho domestic insurance company
in common and preferred stocks and bonds issued by corporations
that have relocated overseas.  Second, this statute's current
restriction of foreign investment is not consistent with current
insurance industry investment practice.  Insurers now operate in
global investment markets and thus should be permitted to make
limited investments in the common and preferred stock of foreign
corporations, other than those incorporated in Canada, as well as
obligations issued by foreign corporations and foreign governments
other than Canada.  This limited expansion of the current statute
would allow Idaho's domestic insurers to compete in the current
global economy.


                           FISCAL NOTE

None




Contact
Name: John Mackey, United Heritage 
Phone: 322-2685


STATEMENT OF PURPOSE/FISCAL NOTE                         H 448