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S1085..........................................by COMMERCE AND HUMAN RESOURCES
INSURANCE COMPANIES - Adds to and amends existing law to allow participation
interests in any bond, note or evidence of indebtedness if certain conditions
occur; to provide a sixty-five percent asset limitation for insurers investing
in mortgages; to allow insurers to issue more than one class of stock; and to
delete language stating that a director of a stock insurer shall be a
stockholder.
02/07 Senate intro - 1st rdg - to printing
02/10 Rpt prt - to Com/HuRes
02/24 Rpt out - rec d/p - to 2nd rdg
02/25 2nd rdg - to 3rd rdg
03/03 3rd rdg - PASSED - 35-0-0
AYES -- Andreason, Bailey, Brandt, Bunderson, Burkett, Burtenshaw,
Calabretta, Cameron, Compton, Darrington, Davis, Gannon, Geddes, Goedde,
Hill, Inram, Kennedy, Keough, Little, Lodge, Malepeai, Marley, McKenzie,
McWilliams, Noble, Noh, Pearce, Richardson, Schroeder, Sorensen,
Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- None
Floor Sponsor - Goedde
Title apvd - to House
03/04 House intro - 1st rdg - to Bus
03/12 Rpt out - rec d/p - to 2nd rdg
03/13 2nd rdg - to 3rd rdg
03/17 3rd rdg - PASSED - 69-1-0
AYES -- Andersen, Barraclough, Barrett, Bauer, Bedke, Bell, Bieter,
Black, Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins,
Crow, Cuddy, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth,
Eskridge, Field(18), Field(23), Gagner, Garrett, Harwood, Henbest,
Jaquet, Jones, Kellogg, Lake, Langford, Langhorst, Martinez, McGeachin,
McKague, Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen, Raybould,
Ridinger, Ring, Ringo, Roberts, Robison, Rydalch, Sali, Sayler,
Schaefer, Shepherd, Shirley, Skippen, Smith(30), Smith(24), Smylie,
Snodgrass, Stevenson, Tilman, Trail, Wills, Wood, Mr. Speaker
NAYS -- Kulczyk
Absent and excused -- None
Floor Sponsor - Collins
Title apvd - to Senate
03/19 To enrol
03/20 Rpt enrol - Pres signed
03/21 Sp signed
03/24 To Governor
03/27 Governor signed
Session Law Chapter 163
Effective: 07/01/03
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-seventh Legislature First Regular Session - 2003
IN THE SENATE
SENATE BILL NO. 1085
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO INSURANCE; AMENDING SECTION 41-721, IDAHO CODE, TO ALLOW PARTICI-
3 PATION INTERESTS IN ANY BOND, NOTE OR EVIDENCE OF INDEBTEDNESS IF CERTAIN
4 CONDITIONS OCCUR AND TO MAKE TECHNICAL CORRECTIONS; AMENDING CHAPTER 7,
5 TITLE 41, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 41-736, IDAHO CODE,
6 TO PROVIDE A SIXTY-FIVE PERCENT ASSET LIMITATION FOR INSURERS INVESTING IN
7 MORTGAGES; AMENDING SECTION 41-2804, IDAHO CODE, TO ALLOW INSURERS TO
8 ISSUE MORE THAN ONE CLASS OF STOCK AND TO MAKE TECHNICAL CORRECTIONS; AND
9 AMENDING SECTION 41-2835, IDAHO CODE, TO DELETE LANGUAGE STATING THAT A
10 DIRECTOR OF A STOCK INSURER SHALL BE A STOCKHOLDER.
11 Be It Enacted by the Legislature of the State of Idaho:
12 SECTION 1. That Section 41-721, Idaho Code, be, and the same is hereby
13 amended to read as follows:
14 41-721. MORTGAGE LOANS AND CONTRACTS. An insurer may invest any of its
15 funds in:
16 (1) Bonds or evidences of debt which are secured by first mortgages or
17 deeds of trust on improved unencumbered real property located in the United
18 States.
19 (2) The equity of the seller of any such property in the contract for a
20 deed, covering the entire balance due on a bona fide sale of such property, in
21 an amount not to exceed ten thousand dollars ($10,000) or the amount permissi-
22 ble under section 41-706, Idaho Code, whichever is greater, in any one (1)
23 such contract for deed; nor in any amount in excess of seventy-five per cent
24 percent (75%) of the actual sale price or fair value of the property, which-
25 ever is the smaller.
26 (3) Purchase money mortgages or like securities received by it upon the
27 sale or exchange of real property acquired pursuant to section 41-728, Idaho
28 Code.
29 (4) Bonds or notes secured by mortgage or trust deed guaranteed or
30 insured by the federal housing administration under the terms of an act of
31 Congress of the United States for June twenty-seventh, nineteen hundred
32 thirty-four, entitled the "National Housing Act," as amended.
33 (5) Bonds or notes secured by mortgage or trust deed guaranteed or
34 insured as to principal in whole or in part by the administrator of veterans'
35 affairs pursuant to the provisions of title III of an act of Congress of the
36 United States of June twenty-second, nineteen hundred forty-four, entitled the
37 "Servicemen's Readjustment Act of 1944," as amended, or by any other similar
38 agency of the government of the United States.
39 (6) Evidences of debt secured by first mortgages or deeds of trust upon
40 leasehold estates, running for a term of not less than fifteen (15) years
41 beyond the maturity of the loan as made or as extended, in improved real prop-
42 erty, otherwise unencumbered, and if the mortgagee is entitled to be subro-
43 gated to all the rights under the leasehold.
2
1 (7) Bonds or notes secured by mortgage and insured by mortgage guarantee
2 insurance as provided by chapter 26A, title 41, Idaho Code.
3 (8) Participation interests in any bond, note or evidence of indebtedness
4 if the entire indebtedness would qualify as an investment under subsections
5 (1) through (7) of this section, and:
6 (a) Such participation is senior and gives the holder substantially the
7 rights of a first mortgagee; or
8 (b) Such participation is of equal priority, to the extent of such inter-
9 est, with other interests therein.
10 SECTION 2. That Chapter 7, Title 41, Idaho Code, be, and the same is
11 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
12 ignated as Section 41-736, Idaho Code, and to read as follows:
13 41-736. PERMITTED INVESTMENTS. Subject to other limitation in chapter 7,
14 title 41, Idaho Code, an insurer shall not invest or have invested at any one
15 time more than sixty-five percent (65%) of its assets in investments described
16 in sections 41-721 and 41-728, Idaho Code. Any insurer which, on July 1, 2003,
17 has in excess of sixty-five percent (65%) of its assets so invested shall not
18 make any further such investments while the excess exists. The limitations
19 prescribed in this section shall not apply to mortgage-backed securities rated
20 one or two by the securities valuation office (SVO) of the national associa-
21 tion of insurance commissioners or to mortgage-backed securities which qualify
22 as provisionally exempt from filing with the SVO.
23 SECTION 3. That Section 41-2804, Idaho Code, be, and the same is hereby
24 amended to read as follows:
25 41-2804. INCORPORATION. (1) This section applies to stock and mutual
26 insurers hereafter incorporated in this state.
27 (2) Incorporators. Seven (7) or more individuals who are citizens of this
28 state may incorporate a stock insurer; ten (10) or more of such individuals
29 may incorporate a mutual insurer.
30 (3) Articles of incorporation. The incorporators shall prepare and exe-
31 cute in triplicate articles of incorporation in accordance with the applicable
32 provisions of chapters 1 and 3, title 30, Idaho Code, known as the "General
33 Business Corporation" Llaws of this state, but subject to the following
34 requirements:
35 (a) In addition to matters required or permitted under such Ggeneral
36 Bbusiness Ccorporation Llaws which are not inconsistent with this provi-
37 sion or this code, the articles of incorporation shall set forth:
38 (i) The name of the corporation, which shall comply with section
39 41-311, Idaho Code.
40 (ii) The kinds of insurance, as defined in this code, which the cor-
41 poration is formed to transact.
42 (iii) If a stock corporation, its authorized capital stock, the num-
43 ber of shares of stock into which divided and the par value of each
44 such share, which par value shall be at least one dollar ($1.00). The
45 articles shall provide for but one (1) class of stock, which class
46 must be voting common stock with uniform par value and rights
47 throughout such class. Shares without par value shall not be autho-
48 rized.
49 (iv) If a stock corporation, the extent, if any, to which shares of
50 its stock are subject to assessment.
51 (v) If a mutual corporation, the maximum contingent liability of
3
1 its members, for payment of losses and expenses incurred, other than
2 as to nonassessable policies issued as permitted under section
3 41-2849, Idaho Code; such liability shall be as stated in the arti-
4 cles of incorporation, but shall not be less than one (1) nor more
5 than six (6) annual premiums for the member's policy.
6 (vi) The name and residence address of each incorporator, and
7 whether each such incorporator is a citizen of this state.
8 (b) Articles of incorporation shall be filed as provided in section
9 41-2805, Idaho Code.
10 SECTION 4. That Section 41-2835, Idaho Code, be, and the same is hereby
11 amended to read as follows:
12 41-2835. DIRECTORS. (1) The affairs of every domestic insurer shall be
13 managed by a board of directors consisting of not less than five (5) directors
14 nor more than fifteen (15) directors.
15 (2) Directors shall be elected by the members or stockholders of a domes-
16 tic insurer at the annual meeting of stockholders or members. Directors may be
17 elected for terms of not more than five (5) years each and until their succes-
18 sors are elected and have qualified, and if to be elected for terms of more
19 than one (1) year the insurer's bylaws shall provide for a staggered term sys-
20 tem under which the terms of a proportionate part of the members of the board
21 of directors shall expire on the date of each annual meeting of stockholders
22 or members.
23 (3) A director of a stock insurer shall be a stockholder thereof, and a
24 director of a mutual insurer shall be a policyholder thereof.
25 (4) As to an insurer operating as an authorized insurer only in the state
26 of Idaho, a majority of the members of the insurer's board of directors shall
27 be citizens of and shall actually reside in this state.
28 (5) Notwithstanding the provisions of subsection (1) of this section, a
29 service corporation converted to a mutual insurer pursuant to section
30 41-2854A, Idaho Code, shall be managed by a board of directors consisting of
31 not less than five (5) directors nor more than twenty-five (25) directors. In
32 the case of a service corporation that was a professional service corporation
33 under chapter 34, title 41, Idaho Code, immediately prior to the effective
34 date of its plan of mutualization, the board of directors after the effective
35 date may include professionals of the kind or kinds designated in the
36 corporation's articles of incorporation as participant licensees immediately
37 prior to such effective date, so long as a majority of directors are not pro-
38 fessionals of the kind or kinds so designated. In the case of a service corpo-
39 ration that was a hospital service corporation under chapter 34, title 41,
40 Idaho Code, immediately prior to the effective date of its plan of mutualiza-
41 tion, the board of directors after the effective date shall include one (1) or
42 more individuals representing a hospital or hospitals, so long as a majority
43 of directors are not representing or employed by any hospital. In the case of
44 a service corporation that was a combined professional service and hospital
45 service corporation under chapter 34, title 41, Idaho Code, immediately prior
46 to the effective date of its plan of mutualization, the board of directors
47 after the effective date shall include one (1) or more individuals represent-
48 ing a hospital or hospitals, and one (1) or more professionals of the kind or
49 kinds designated in the corporation's articles of incorporation as participant
50 licensees immediately prior to such effective date, so long as a majority of
51 directors are neither such professionals nor representing or employed by any
52 hospital, nor any combination thereof; further, the number of directors who
53 are hospital representatives shall equal the number of directors who are pro-
4
1 fessionals of the kind or kinds designated as participant licensees in the
2 corporation's articles of incorporation in effect immediately prior to such
3 effective date. Notwithstanding the provisions of subsection (3) of this sec-
4 tion, a director elected as a hospital representative need not be a policy-
5 holder so long as the represented hospital is a policyholder.
STATEMENT OF PURPOSE
RS 12738C1
The purpose of this legislation is to modernize parts of the
Insurance Code. The first section authorizes participation
interests, which are not currently addressed by the Insurance
Code. Section 2 of the bill specifies certain investment
restrictions with certain limited mortgage-based exceptions. The
amendment to Section 3 will permit insurance companies to issue
stock other than one class of common stock. Finally, Section 4
eliminates the requirement that each corporate director of a
stock insurance company own at least one share of the company's
stock.
FISCAL NOTE
There should be no fiscal impact resulting from this proposed
legislation.
CONTACT:
Name: Woody Richards
Organization: Old Standard Life Insurance Company
Phone: 385-5451
S 108