Louisiana Administrative Code
Title 37 - INSURANCE Part
Part XI - Rules
Chapter 3 - Rule 4 - Interlocal Risk Management Agency
Section XI-311 - Solvency or Risk Management Agencies; Trustee Responsibilities
Universal Citation: LA Admin Code XI-311
Current through Register Vol. 50, No. 9, September 20, 2024
A. In order to insure the financial stability of the operations of each interlocal risk management agency, the board of trustees of each fund shall be responsible for all operations of the fund. The board of trustees of each agency shall take all necessary precautions to safeguard the assets of the fund or funds of such agency including:
1. the designation of a
fiscal agent or administrator, if not otherwise provided for by Act 462 of the
1979 Regular Session of the Louisiana Legislature to administer the financial
affairs of the fund, which as obligee, shall furnish a fidelity bond, or
acceptable substitute, to protect the fund against misappropriation or misuse
of any monies or securities. The amount of the bond, or substitution therefor,
shall be determined by the interlocal risk management agency subject to
approval by the insurance department. Such fiscal agent or administrator shall
not be an owner, officer, or employee of the service agent;
2. retain control of all monies collected or
disbursed from the fund or funds and shall segregate all monies into a claims
fund and trustee fund. The amount allocated to the claims fund will be
sufficient to cover payment of the entire aggregate loss fund, as defined in
the aggregate excess insurance policy. Only disbursements that are credited
toward the loss fund, as defined in the aggregate excess policy, will be made
from the claims fund. All administration costs and other disbursements will be
made from the trustee fund. The administrator of the fund shall establish a
revolving fund for use by the authorized service agent, which will be
replenished from time to time from the claims fund. The service agent and its
employees shall be covered by a fidelity bond, with the interlocal risk
management agency named as obligee in an amount sufficient to protect all
monies placed in the revolving fund. Such bond and its amount shall be subject
to approval by the insurance department;
3. audit of the accounts and records are
provided for in Act 462 of the 1979 Regular Session of the Louisiana
Legislature;
4. the board of
trustees or its fiscal agent or administrator shall not utilize any of the
monies collected as premiums for any purpose unrelated to workmen's
compensation or public liability purposes. Further, it shall not borrow any
monies from the fund, or in the name of the fund, without advising the
Department of Insurance of the nature and purpose of the loan and obtaining
approval. The board of trustees may, at its discretion, invest any surplus
monies not needed for current obligations, but such investments shall be
limited to:
a. direct United States Treasury
obligations, the principal and interest of which are fully guaranteed by the
government of the United States;
b.
bonds, debentures, notes, or other evidence of the indebtedness issued or
guaranteed by federal agencies and provided such obligations are backed by the
full faith and credit of the United States of America, which obligations
include but are not limited to:
i. U.S.
Export-Import Bank;
ii. Farmers Home
Administration;
iii. Federal
Financing Bank;
iv Federal Housing
Administration Debentures;
v.
General Services Administration;
vi.
Government National Mortgage Association- guaranteed mortgage-backed bonds and
guaranteed pass-through obligations;
vii. U.S. Maritime Administration-guaranteed
Title XI financing;
viii. U.S.
Department of Housing and Urban Development.
c. Bonds, debentures, notes, or other
evidence of the indebtedness issued or guaranteed by U.S. government
instrumentalities, which are federally sponsored, and such obligations include
but are not limited to:
i. Federal Home Loan
Bank System;
ii. Federal Home Loan
Mortgage Corporation;
iii. Federal
National Mortgage Association;
iv.
Student Loan Marketing Association;
v. Resolution Funding Corporation.
d. In no instance shall an
interlocal risk management agency invest in obligations in Subparagraphs b and
c of this Paragraph which are collateralized mortgage obligations that have
been stripped into interest only or principal only obligations, inverse
floaters, or structured notes. For the purposes of this Item,
structured notes shall mean securities of U.S. government
agencies, instrumentalities, or government-sponsored enterprises, which have
been restructured, modified, and/or reissued by private entities.
e. Bonds, debentures, notes, or other
evidence of indebtedness issued by the state of Louisiana or any of its
political subdivisions provided that the indebtedness shall have a long-term
rating of Baa or higher by Moody's Investors Service, a long-term rating of
BBB- or higher by Standard and Poor's or a long-term rating of BBB- or higher
by Fitch, Inc. or a short-term rating of MIGI or VMIGI by Moody's Investors
Service, a short-term rating of A-l or A-1+ by Standard and Poor's, or a
short-term rating of Fl of Fl+by Fitch, Inc.
f. Direct security repurchase agreements of
any federal book entry only securities enumerated in Subparagraphs a, b, and c
of this Paragraph. Direct security repurchase agreement means
an agreement under which political subdivision buys, holds for a specified
time, and then sells back those securities and obligations enumerated in
Subparagraphs a, b, and c of this Paragraph.
g. Time certificates of deposit of any bank
domiciled or having a branch office in the state of Louisiana, savings accounts
or shares of savings and loan associations and savings band, as defined by
R.S. 6:703(16) or
(17), or share accounts and share certificate
accounts of federally or state-chartered credit unions issuing time
certificates of deposit. Funds invested herein shall not exceed at any time the
amount insured by the Federal Deposit Insurance Corporation in any one banking
institution, or in any one savings and loan association, or National Credit
Union Administration.
h. Deposits
in savings and loan associations and commercial banks shall be limited in this
state, except in those instances where higher interest rates paid on deposits
by such institutions in other states will provide better investment income and
such deposits shall not exceed the federally insured amount in any one account,
except that the federally insured amount on any one account may be exceeded if
the amount involved in such an account does not exceed the greater of either of
the two factors:
i. 5 percent of the
combination of surplus and undivided profits and reserves, as currently
reported for each bank in this state of in the banking division annual report
of the Financial Institution Office of the Department of Commerce (banking
control) or financial reports filed with the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve
Bank of Atlanta;
ii. $500,000 per
institution.
i. Mutual
or trust fund institutions which are registered with the Securities and
Exchange Commission under the Securities Act of 1933 and the Investment Act of
1940, and which have underlying investments consisting solely of and limited to
securities of the United States government or its agencies. Investment of funds
in such mutual or trust fund institutions shall be limited to 25 percent of the
monies considered available for investment as provided by this
Section.
j. Guaranteed investment
contracts issued by a bank, financial institution, insurance company, or other
entity having one of the two highest short-term rating categories of either
Standard and Poor's Corporation or Moody's Investors Service, provided that no
such investment may be made except in connection with a financing program for
political subdivisions which financing program is approved by the state Bond
Commission and offered by a public trust having the state as its beneficiary,
provided further that no such investment shall be for a term longer than 18
months, and provided further that any such guaranteed investment contract shall
contain a provision providing that in the event the issuer of the guaranteed
investment contract is at any time no longer rated in either of the two highest
short-term rating categories of Standard and Poor's Corporation or Moody's
Investors Service, the investing unit of local government may either be
released from the guaranteed investment contract without penalty, or be
entitled to require that the guaranteed investment provider collateralize the
guaranteed investment contract with any bonds or other obligations which as to
principal and interest constitute direct general obligations of, or are
unconditionally guaranteed by, the United States of America, including
obligations set forth in Subparagraphs a and b of this Paragraph to the extent
unconditionally guaranteed by the United States of America.
k. Investment grade commercial paper issued
in the United States, traded in the United States markets, denominated in
United States dollars, with a short-term rating of at least A-l by Standard and
Poor's Financial Services LLC or P-lby Moody's Investor Service, Inc. or the
equivalent rating by a Nationally Recognized Statistical Rating Organization
(NRSRO).
l. Pre-approved first
mortgage loans on commercial real estate owned by the fund administrator,
located with the state of Louisiana, and occupied by the Fund or its trustees,
administrator, or third [arty administrator.
m. Bonds, debentures, notes, or other
indebtedness issued by a state of the United States of America other than
Louisiana or any such state's political subdivisions provided that all of the
following conditions are met.
i. The
indebtedness shall have a long-term rating of A3 or higher by Moody's Investors
Service, a long-term rating of A- or higher by Standard and Poor's or a
long-term rating of A- or higher by Fitch, Inc., or a short-term rating of M1G1
of VM1G1 by Moody's Investor's Service, a short-term rating of A-l or A-l + by
Standard & Poor's, or a short-term rating of F1 or F1 + by Fitch,
Inc.
ii. Prior to purchase of any
such indebtedness and at all times during which such indebtedness is owned, the
purchasing interlocal risk management agency retains the services of an
investment advisor registered with the United States Securities and Exchange
Commission; a trust department of an institution that is insured by the Federal
Deposit Insurance Corporation, that exercised trust powers in Louisiana, and
that has a main office or a bank branch in Louisiana; or a trust company that
has offices in Louisiana, that is regulated by the Office of Financial
Institutions or the applicable federal agency, and that owes a fiduciary duty
to act solely in the best interest of the political subdivision.
n. Bonds, debentures, notes or
other indebtedness issued by domestic United States corporations provided that
all of the following conditions are met.
i.
The indebtedness shall have a long-term rating of Aa3 or higher by Moody's
Investors Service, a long-term rating of AA- or higher by Standard and Poor's,
or a long-term rating of AA- or higher by Fitch Ratings, Inc.
ii. Prior to purchase of any such
indebtedness and at all times during which such indebtedness is owned, the
purchasing interlocal risk management agency retains the services of an
investment advisor registered with the United States Securities and Exchange
Commission; a trust department of an institution that is insured by the Federal
Deposit Insurance Corporation, that exercised trust powers in Louisiana, and
that has a main office or a bank branch in Louisiana; or a trust company that
has offices in Louisiana, that is regulated by the Office of Financial
Institutions or the applicable federal agency, and that owes a fiduciary duty
to act solely in the best interest of the political subdivision.
o. All interlocal risk management
agencies shall develop and adopt an investment policy that details and
clarifies investment objectives and the procedures and constraints necessary to
reach those objectives. All such investment policies should:
i. reflect the mandate to manage funds
prudently;
ii. place appropriate
emphasis on the goals of safety of principal first, liquidity second, and yield
third.
B. The board of trustees may delegate authority for specific functions to the administrator of the self-insurers' fund. The functions which may be delegated include, but are not limited to, such matters as contracting with a service agent, determining the premium charged to and refunds payable to members, investing surplus monies subject to the restrictions set forth in §311. A 4, and approving applications for membership. All delegated authority shall be specifically defined in the written minutes of the trustees' meetings and shall be subject to final approval.
AUTHORITY NOTE: Promulgated in accordance with R.S. 22:11, Title 22, Section 2 of 1950 and Act 462 of the 1979 Session of the Louisiana Legislature, R.S. 33:2955 and the Administrative Procedure Act, R.S. 49:950 et seq.
Disclaimer: These regulations may not be the most recent version. Louisiana may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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