40-3303. Domestic insurer's acquisition of subsidiaries; authorized investments.
40-3303
40-3303. Domestic insurer's acquisition ofsubsidiaries; authorized investments.(a) Any domestic insurer, either by itself or in cooperation with one ormore persons, may organize or acquire one or more subsidiaries otherwisepermitted under Kansas law.
(b) In addition to investments in common stock, preferred stock, debtobligations and other securities permitted under all other sections of chapter40 of the Kansas Statutes Annotated, and amendments thereto, a domestic insurermay also:
(1) Invest in common stock, preferred stock, debt obligations and othersecurities of one or more subsidiaries, amounts which do not exceed the lesserof 10% of the insurer's assets or 50% of the insurer's surplus as regardspolicyholders, if after such investments, the insurer's surplus as regardspolicyholders will be reasonable in relation to the insurer's outstandingliabilities and adequate to meet its financial needs. In calculating the amountof such investments, investments in domestic or foreign insurance subsidiariesand health maintenance organizations shall be excluded, and there shall beincluded:
(A) Total net moneys or other consideration expended and obligations assumedin the acquisition or formation of a subsidiary, including all organizationalexpenses and contributions to capital and surplus of the subsidiary whether ornot represented by the purchase of capital stock or issuance of othersecurities; and
(B) all amounts expended in acquiring additional common stock, preferredstock, debt obligations and other securities; and all contributions to thecapital or surplus of a subsidiary subsequent to its acquisition or formation.
(2) Invest any amount in common stock, preferred stock, debt obligations andother securities of one or more subsidiaries engaged or organized to engageexclusively in the ownership and management of assets authorized as investmentsfor the insurer provided that each subsidiary agrees to limit its investmentsin any asset so that such investments will not cause the amount of the totalinvestment of the insurer to exceed any of the investment limitations specifiedin article 2a or article 2b of chapter 40 of the Kansas Statutes Annotated, andamendments thereto, applicable to the insurer. For the purpose of thisparagraph, "the total investment of the insurer" shall include:
(A) Any direct investment by the insurer in an asset; and
(B) the insurer's proportionate share of any investment in an asset by anysubsidiary of the insurer, which shall be calculated by multiplying the amountof the subsidiary's investment by the percentage of the ownership of thesubsidiary.
(3) With the approval of the commissioner, invest any greater amount incommon stock, preferred stock, debt obligations or other securities of one ormore subsidiaries; provided that after the investment the insurer's surplus asregards policyholders will be reasonable in relation to the insurer'soutstanding liabilities and adequate to its financial needs.
(c) Investments in common stock, preferred stock, debt obligations or othersecurities of subsidiaries made pursuant to subsection (b) shall not be subjectto any of the otherwise applicable restrictions or prohibitions contained inchapter 40 of the Kansas Statutes Annotated, and amendments thereto, applicableto such investments of insurers.
(d) Whether any investment made pursuant to subsection (b) meets theapplicable requirements of that subsection is to be determined before theinvestment is made, by calculating the applicable investment limitations asthough the investment had already been made, taking into account the thenoutstanding principal balance on all previous investments in debt obligations,and the value of all previous investments in equity securities as of the daythey were made, net of any return of capital invested, not including dividends.
(e) If an insurer ceases to control a subsidiary, it shall dispose of anyinvestment therein made pursuant to this section within three years from thetime of the cessation of control or within such further time as thecommissioner may prescribe, unless at any time after the investment shall havebeen made, the investment shall have met the requirements for investment underany other section of chapter 40 of the Kansas Statutes Annotated, andamendments thereto, including, without limitation, K.S.A. 40-2a16 or K.S.A.40-2b13 and amendments thereto.
History: L. 1974, ch. 183, § 3;L. 1991, ch. 138, § 1;L. 2007, ch. 79, § 1; July 1.