(a) Except as provided in this section, a
life and health insurer may not, without first fulfilling the obligations
imposed under this section,
(1) invest in an
otherwise qualifying investment issued by or due from an affiliated
party;
(2) purchase from an
affiliated party an otherwise qualifying investment; or
(3) use the services of a broker or
commissioned sales agent who is an affiliated or controlling person in securing
an otherwise qualifying investment.
(b) Before completing an investment activity
with or through an affiliated or controlling person or completing a transaction
of the type listed in (f) of this section, a life and health insurer shall
fully disclose and document in writing to its board of directors and the
committee authorized by the board and charged with the supervision or making of
the investment or loan involved the material facts concerning the affiliation
or circumstances of control. A life and health insurer may not complete an
investment activity with or through an affiliated or controlling person unless
the board of directors, by specific board action, authorizes the transaction
and concludes that the transaction complies with (c) and (d) of this section.
The vote of the board authorizing the transaction must be recorded in the
minutes on a member-by-member basis and must indicate each vote approving,
disapproving, or abstaining on the transaction.
(c) A life and health insurer shall
consummate an investment or loan with an affiliated or controlling person at
current market transfer prices and under a fee structure and at interest or
discount rates that are commercially reasonable in the area in which the
transaction occurs.
(d) The life
and health insurer's board of directors is responsible for determining that a
transfer price is at current market and for determining the commercial
reasonableness of the transaction with an affiliated or controlling person. The
board of directors may rely on an independent third-party expert in making its
determination.
(e) This section
does not apply to a policy loan or to a circumstance in which the financial
interest of the affiliated or controlling party is only nominal or so remote as
not to give rise to a conflict of interest.
(f) A life and health insurer, either alone
or in cooperation with one or more persons, may organize or acquire one or more
subsidiaries engaged in the following kinds of business:
(1) insurance business authorized by AS
21;
(2) acting as an insurance
producer or as an insurance agent for the life and health insurer's parent or
for any of the life and health insurer's parent's insurer subsidiaries and
controlled affiliates;
(3)
investing, reinvesting, or trading in securities for the life and health
insurer's own account, or an account of the life and health insurer's parent, a
subsidiary of the life and health insurer's parent, an affiliate, or a
subsidiary;
(4) management of an
investment company subject to or registered under
15 U.S.C.
80a-1 -
80a-64 (Investment Company Act of
1940), including related sales and services;
(5) acting as a broker-dealer subject to or
registered under 15 U.S.C. 78 a - 78mm (Securities Exchange Act of
1934);
(6) rendering investment
advice to a government, government agency, corporation, or other organization
or group;
(7) rendering other
services related to the operations of an insurance business, including
actuarial, loss prevention, safety engineering, data processing, accounting,
claims, appraisal, and collection services;
(8) ownership and management of assets that
the parent corporation could own or manage;
(9) acting as administrative agent for a
governmental instrumentality that is performing an insurance
function;
(10) financing an
insurance premium, agent, or other form of consumer financing;
(11) any other business activity determined
by the director in writing using the standards set out in this section to be
reasonably ancillary to an insurance business;
(12) owning a corporation engaged or
organized to engage exclusively in one or more of the businesses specified in
this section.
(g) A life
and health insurer may also
(1) invest in
securities described in
3
AAC 21.236 -
3
AAC 21.261 of a subsidiary in an amount that, in the
aggregate with all other investments in subsidiaries, does not exceed the
lesser of 10 percent of the life and health insurer's assets or 50 percent of
the life and health insurer's policyholder surplus if, after the investment,
the life and health insurer's policyholder surplus is reasonable in relation to
the life and health insurer's outstanding liabilities and adequate to the life
and health insurer's financial needs; in calculating the amount of the
investment, a life and health insurer shall include the following:
(A) total net money or other consideration
expended and all obligations assumed in the acquisition or formation of a
subsidiary, including all organizational expenses and contributions to capital
and surplus of the subsidiary if represented or not represented by the purchase
of capital stock or issuance of other securities;
(B) all amounts expended in acquiring
additional securities described in
3
AAC 21.236 -
3
AAC 21.261 and all contributions to the capital or
surplus of a subsidiary subsequent to the subsidiary's acquisition or
formation;
(2) invest an
amount in a security described in
3
AAC 21.236 -
3
AAC 21.261 of a subsidiary engaged or organized to
engage exclusively in the ownership and management of assets authorized as an
investment for the life and health insurer if that subsidiary agrees to limit
the subsidiary's investment in an asset in a way that the investment does not
cause the amount of the total investment of the life and health insurer to
exceed the limitations specified in (1) of this subsection or in
3
AAC 21.231 - 21.286; for the purpose of this
paragraph, the total investment of the life and health insurer includes
(A) a direct investment by the life and
health insurer in an asset; and
(B)
the life and health insurer's proportionate share of an investment in an asset
by a subsidiary of the life and health insurer calculated by multiplying the
amount of the subsidiary's investment by the percentage of the ownership in the
subsidiary; or
(3) with
the prior written approval of the director, invest a greater amount in a
security described in
3
AAC 21.236 -
3
AAC 21.261 of a subsidiary if after the investment the
insurer's policyholder surplus is reasonable in relation to the life and health
insurer's outstanding liabilities and adequate to the life and health insurer's
financial needs.
(h) A
life and health insurer shall determine if an investment meets the applicable
requirements under (g) of this section before the investment is made by
calculating the applicable limitations under
3
AAC 21.231 as though the investment had already been
made and by taking into account the existing outstanding principal balance on
all previous investments under
3
AAC 21.236 -
3
AAC 21.261, calculated at admitted asset value, giving
effect to a return of capital invested and not giving effect to
dividends.
(i) If a life and health
insurer ceases to control a subsidiary, the life and health insurer shall
dispose of an investment in the subsidiary made under this section within three
years after cessation of control unless, at any time after the investment has
been made, the investment meets the requirements for investment under another
provision of
3
AAC 21.201 -
3
AAC 21.399 and the life and health insurer has
notified the director regarding the application of another provision of
3
AAC 21.201 -
3
AAC 21.399 to the investment.
