(A)(1) Except as otherwise provided in this chapter, an insurer may not acquire, directly or indirectly through an investment affiliate, an investment pursuant to this chapter if as a result of and after giving effect to the investment the insurer holds more than three percent of its admitted assets in investments of all kinds issued, assumed, accepted, insured, or guaranteed by a single person.

(2) This three percent limitation does not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.

(3) Asset-backed securities are not subject to the limitations of item (1), however, except as permitted by item (4), an insurer may not acquire an asset-backed security if as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity then held by the insurer exceeds three percent of its admitted assets.

(4) An investment by an insurer in mortgage related securities, as defined by the Secondary Mortgage Market Enhancement Act of 1984 (United States Public Law 98-440) [12 U.S.C. Sections 24, 1451, 1454 et seq.], that is backed by a single pool of mortgages and made pursuant to the authority of that act, may not exceed five percent of its admitted assets.

(B) An insurer may not acquire, directly or indirectly through an investment affiliate, an investment pursuant to Section 38-12-230, 38-12-260, or 38-12-290 or counterparty exposure pursuant to Section 38-12-300(4) if as a result of and after giving effect to the investment the aggregate amount of:

(1) medium and lower grade investments then held by the insurer exceed twenty percent of its admitted assets;

(2) lower grade investments then held by the insurer exceed ten percent of its admitted assets;

(3) investments rated five or six by the SVO or an equivalent rating by a nationally recognized statistical rating organization recognized by the SVO then held by the insurer exceed three percent of its admitted assets;

(4) investments rated six by the SVO or an equivalent rating by a nationally recognized statistical rating organization recognized by the SVO then held by the insurer exceed one percent of its admitted assets; or

(5) medium and lower grade investments then held by the insurer that receive as cash income less than the equivalent yield for Treasury issues with a comparative average life, exceed one percent of its admitted assets;

(6) medium and lower grade investments issued, assumed, guaranteed, accepted, or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer exceed one percent of its admitted assets; or

(7) lower grade investments issued, assumed, guaranteed, accepted, or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer exceed one-half of one percent of its admitted assets.

(C) An insurer that attains or exceeds the limit of any one rating category in subsection (B) may acquire investments in other rating categories subject to the specific and multi-category limits applicable to those investments.

(D)(1) An insurer may not, directly or indirectly through an investment affiliate, acquire a Canadian investment or engage in a Canadian investment practice authorized by this chapter if as a result of and after giving effect to the investment the aggregate amount of these investments then held by the insurer exceeds forty percent of its admitted assets, or if the aggregate amount of Canadian investments not acquired pursuant to Section 38-12-230(A)(2) then held by the insurer exceeds twenty-five percent of its admitted assets.

(2) An insurer that is authorized to do business in Canada or that has outstanding insurance, annuity, or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, is subject to the limitations of item (1) as increased by the greater of:

(a) the amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or

(b) one hundred fifteen percent of the amount of its reserves and other obligations pursuant to contracts on lives or risks resident or located in Canada.

HISTORY: 2002 Act No. 319, Section 2, eff June 3, 2002.