Bill Text: IA HSB606 | 2023-2024 | 90th General Assembly | Introduced

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Bill Title: A bill for an act relating to the investment of funds by life insurance companies and associations.(See HF 2405.)

Spectrum: Committee Bill

Status: (Introduced - Dead) 2024-02-08 - Committee report approving bill, renumbered as HF 2405. [HSB606 Detail]

Download: Iowa-2023-HSB606-Introduced.html

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House Study Bill 606 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE
ON COMMERCE BILL BY
CHAIRPERSON LUNDGREN)
A BILL FOR
An Act relating to the investment of funds by life insurance
companies and associations.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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Section 1. Section 508.33A, subsection 8, Code 2024, is
amended to read as follows:
8. The provisions of sections 508.5 , 508.6 , and 511.8 ,
section 521.2, subsection 4 , sections 521A.4 and 521A.5 , and
chapter 521E shall not be applicable to a limited purpose
subsidiary life insurance company organized pursuant to this
section .
Sec. 2. Section 511.8, subsection 1, paragraphs f, o, and p,
Code 2024, are amended to read as follows:
f. “Collateral loan” means an unconditional obligation
for the payment of money that is secured by the pledge of
any assets or investments permitted under this section . A
collateral loan cannot be a mortgage loan, rated credit
instrument, or other debt security as defined in this
subsection .
o. “Lower grade investment” means a rated credit instrument
that is designated 4, 5, or 6 by the SVO.
p. “Medium grade investment” means a rated credit instrument
that is designated 3 by the SVO.
Sec. 3. Section 511.8, subsection 1, Code 2024, is amended
by adding the following new paragraph:
NEW PARAGRAPH . 0h. “Credit instrument” means an investment
that is qualified as a bond under the accounting practices
and procedures manual, such as evidence of indebtedness of a
governmental unit or the instrumentality of the governmental
unit, or of a private business entity. “Credit instrument”
includes asset-backed securities, bank loans, and SVO-listed
funds that have an SVO designation, and that qualify as a bond
under the manual.
Sec. 4. Section 511.8, subsection 1, paragraph v, Code 2024,
is amended by striking the paragraph.
Sec. 5. Section 511.8, subsection 9, Code 2024, is amended
to read as follows:
9. Rated credit Credit instruments and short-term
investments. An insurer may acquire the following rated credit
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instruments and short-term investments subject to all of the
following:
a. The following credit instruments acquired under this
subsection shall be subject to subsection 6 , paragraphs “b” and
“c” , and to subsection 7 , but shall not be subject to subsection
6, paragraph “a” :
(1) Credit instruments issued, assumed, guaranteed, or
insured by the United States or Canada.
(2) Credit instruments issued, assumed, guaranteed, or
insured by a government-sponsored enterprise of the United
States or Canada, if the credit instruments are assumed,
guaranteed, or insured by the United States or Canada, or are
otherwise backed or supported by the full faith and credit of
the United States or Canada.
(3) Credit instruments, excluding asset-backed securities
that are any of the following:
(a) Issued, assumed, guaranteed, or insured by a
government-sponsored enterprise of a government other than the
United States or Canada.
(b) Issued, assumed, guaranteed, or insured by a state, if
the instruments are general obligations of the state.
b. Short-term investments acquired under this subsection
shall be subject to subsection 6 .
c. All other rated credit instruments acquired under this
subsection shall be subject to subsections 6 and 7 .
d. Foreign investments acquired under this subsection shall
be subject to subsection 15 .
Sec. 6. Section 511.8, subsection 10, paragraph a, Code
2024, is amended to read as follows:
a. (1) An insurer shall not acquire an investment under
this subsection , if, as a result of and after giving effect to
the investment the aggregate amount of investments then held by
the insurer will exceed ten percent of the insurer’s admitted
assets.
(2) Notwithstanding subparagraph (1), an insurer that
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files an annual statement pursuant to section 508.11 and
completes the NAIC’s health statement test shall not acquire
an investment under this subsection, if, as a result of and
after giving effect to the investment, the aggregate amount of
investments then held by the insurer will exceed twenty-five
percent of the insurer’s admitted assets.
Sec. 7. Section 511.8, subsection 12, paragraph a,
unnumbered paragraph 1, Code 2024, is amended to read as
follows:
An insurer may acquire obligations secured by a mortgage or
deed of trust that is a first or second lien upon otherwise
unencumbered real estate, or upon leasehold estates in real
property if fifty years or more of the term including renewals
is unexpired, or other similar instruments, including mezzanine
loans , either directly or through a business entity where
the business entity’s sole purpose is to hold mortgages that
qualify for investment under this subsection, provided all of
the following apply:
Sec. 8. Section 511.8, subsection 13, Code 2024, is amended
to read as follows:
13. Real estate.
a. An insurer may acquire real estate either directly
or through certificates evidencing participation with other
investors.
a. b. An insurer may acquire real estate required for the
insurer’s home offices, or to be otherwise occupied by the
insurer or the insurer’s employees in transacting the insurer’s
business, and the insurer may lease any unused space to
other occupants. The value of an insurer’s investments under
this paragraph shall not exceed ten percent of the insurer’s
admitted assets.
b. c. Excluding investments under paragraph “a” “b” , an
insurer’s investments under this subsection shall not exceed
fifteen percent of the insurer’s admitted assets.
c. d. An insurer’s aggregate investments under this
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subsection and subsection 12 shall not exceed forty-five
percent of the insurer’s admitted assets.
Sec. 9. Section 511.8, subsection 19, Code 2024, is amended
to read as follows:
19. Collateral loans and other debt securities secured by
collateral. An insurer may acquire collateral loans or other
debt securities secured by collateral consisting of any assets
or investments permitted under this section , provided that
the amount of the loan is not in excess of ninety percent of
the value of the collateral at the time of acquisition . For
the purpose of determining compliance with the quantitative
limits in this subsection section , the collateral pledged to
the insurer shall be aggregated with the insurer’s direct
investments.
Sec. 10. REPEAL. Section 508.6, Code 2024, is repealed.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
This bill relates to the investment of funds by life
insurance companies and associations.
“Credit instrument” is defined in the bill as an investment
that is qualified as a bond under the accounting practices and
procedures manual, and includes asset-backed securities, bank
loans, and SVO-listed funds that have an SVO designation, and
that qualify as a bond under the manual. The bill amends Code
section 511.8(1) and (9) to conform with that definition.
The bill prohibits an insurer that files an annual statement
and completes the NAIC health statement test from acquiring an
investment if, as a result of the investment, the aggregate
amount of investments held by the insurer will exceed 25
percent of the insurer’s assets.
Under current law, an insurer may acquire obligations
secured by a mortgage or deed of trust that is a first or second
lien upon otherwise unencumbered real estate, or upon leasehold
estates in real property if 50 years or more of the term
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including renewals is unexpired, or other similar instruments,
including mezzanine loans, subject to the requirements of
Code section 511.8(12)(a). Under the bill, an insurer may
acquire such obligations either directly or through a business
entity where the sole purpose of the business entity is to hold
mortgages that qualify for investment.
The bill permits an insurer to acquire collateral loans
or other debt securities secured by collateral consisting of
any permitted assets or investments provided that the amount
of the loan is not in excess of 90 percent of the value of the
collateral at the time of acquisition.
The bill repeals Code section 508.6 and makes conforming
changes to Code section 508.33A.
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