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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
]]]] 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
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