Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 2001, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 131-S.F.No. 1610
An act relating to insurance; regulating liquidations
and investments of insurers; regulating consolidated
or combined financial statements and annuities
purchased to finance structured settlement agreements;
authorizing domestic mutual life companies to be
formed with or establish guaranty funds; regulating
certain workers compensation rates and rating plans;
amending Minnesota Statutes 2000, sections 60A.11,
subdivision 10, by adding a subdivision; 60A.129,
subdivision 5; 60B.44, subdivision 4; 60L.01,
subdivision 14, by adding a subdivision; 60L.08, by
adding a subdivision; 60L.10, subdivision 1; 61A.276,
subdivision 2; 61A.28, subdivision 6, by adding a
subdivision; 61A.29, subdivision 2; 79.56, subdivision
3; proposing coding for new law in Minnesota Statutes,
chapters 60A; 61A.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 2000, section 60A.11,
subdivision 10, is amended to read:
Subd. 10. [DEFINITIONS.] The following terms have the
meaning assigned in this subdivision for purposes of this
section and section 60A.111:
(a) "Adequate evidence" means a written confirmation,
advice, or other verification issued by a depository, issuer, or
custodian bank which shows that the investment is held for the
company;
(b) "Adequate security" means a letter of credit qualifying
under subdivision 11, paragraph (f), cash, or the pledge of an
investment authorized by any subdivision of this section;
(c) "Admitted assets," for purposes of computing percentage
limitations on particular types of investments, means the assets
as shown by the company's annual statement, required by section
60A.13, as of the December 31 immediately preceding the date the
company acquires the investment;
(d) "Clearing corporation" means The Depository Trust
Company or any other clearing agency registered with the
securities and exchange commission pursuant to the Securities
Exchange Act of 1934, section 17A, Euro-clear Clearance System
Limited and CEDEL S.A., and, with the approval of the
commissioner, any other clearing corporation as defined in
section 336.8-102;
(e) "Control" has the meaning assigned to that term in, and
must be determined in accordance with, section 60D.15,
subdivision 4;
(f) "Custodian bank" means a bank or trust company or a
branch of a bank or trust company that is acting as custodian
and is supervised and examined by state or federal authority
having supervision over the bank or trust company or with
respect to a company's foreign investments only by the
regulatory authority having supervision over banks or trust
companies in the jurisdiction in which the bank, trust company,
or branch is located, and any banking institutions qualifying as
an "Eligible Foreign Custodian" under the Code of Federal
Regulations, section 270.17f-5, adopted under section 17(f) of
the Investment Company Act of 1940, and specifically including
Euro-clear Clearance System Limited and CEDEL S.A., acting as
custodians;
(g) "Evergreen clause" means a provision that automatically
renews a letter of credit for a time certain if the issuer of
the letter of credit fails to affirmatively signify its
intention to nonrenew upon expiration;
(h) "Government obligations" means direct obligations for
the payment of money, or obligations for the payment of money to
the extent guaranteed as to the payment of principal and
interest by any governmental issuer where the obligations are
payable from ad valorem taxes or guaranteed by the full faith,
credit, and taxing power of the issuer and are not secured
solely by special assessments for local improvements;
(i) "Noninvestment grade obligations" means obligations
which, at the time of acquisition, were rated below Baa/BBB or
the equivalent by a securities rating agency or which, at the
time of acquisition, were not in one of the two highest
categories established by the securities valuation office of the
National Association of Insurance Commissioners;
(j) "Issuer" means the corporation, business trust,
governmental unit, partnership, association, individual, or
other entity which issues or on behalf of which is issued any
form of obligation;
(k) "Licensed real estate appraiser" means a person who
develops and communicates real estate appraisals and who holds a
current, valid license under chapter 82B or a substantially
similar licensing requirement in another jurisdiction;
(l) "Member bank" means a national bank, state bank or
trust company which is a member of the Federal Reserve System;
(m) "National securities exchange" means an exchange
registered under section 6 of the Securities Exchange Act of
1934 or an exchange regulated under the laws of the Dominion of
Canada;
(n) "NASDAQ" means the reporting system for securities
meeting the definition of National Market System security as
provided under Part I to Schedule D of the National Association
of Securities Dealers Incorporated bylaws;
(o) "Obligations" include bonds, notes, debentures,
transportation equipment certificates, repurchase agreements,
bank certificates of deposit, time deposits, bankers'
acceptances, and other obligations for the payment of money not
in default as to payments of principal and interest on the date
of investment, whether constituting general obligations of the
issuer or payable only out of certain revenues or certain funds
pledged or otherwise dedicated for payment. Leases are
considered obligations if the lease is assigned for the benefit
of the company and is nonterminable by the lessee or lessees
thereunder upon foreclosure of any lien upon the leased
property, and rental payments are sufficient to amortize the
investment over the primary lease term;
(p) "Qualified assets" means the sum of (1) all investments
qualified in accordance with this section other than investments
in affiliates and subsidiaries, (2) investments in obligations
of affiliates as defined in section 60D.15, subdivision 2,
secured by real or personal property sufficient to qualify the
investment under subdivision 19 or 23, (3) qualified investments
in subsidiaries, as defined in section 60D.15, subdivision 9, on
a consolidated basis with the insurance company without
allowance for goodwill or other intangible value, and (4) cash
on hand and on deposit, agent's balances or uncollected premiums
not due more than 90 days, assets held pursuant to section
60A.12, subdivision 2, investment income due and accrued, funds
due or on deposit or recoverable on loss payments under
contracts of reinsurance entered into pursuant to section
60A.09, premium bills and notes receivable, federal income taxes
recoverable, and equities and deposits in pools and
associations;
(q) "Qualified net earnings" means that the net earnings of
the issuer after elimination of extraordinary nonrecurring items
of income and expense and before income taxes and fixed charges
over the five immediately preceding completed fiscal years, or
its period of existence if less than five years, has averaged
not less than 1-1/4 times its average annual fixed charges
applicable to the period;
(r) "Replicated investment position" means the statement
value of the position reported under the heading "Replicated
(Synthetic) Asset" on Schedule DB, Part F, of the annual
statement of the insurer, or any successor provision;
(s) "Replication transaction" means a derivative
transaction that is intended to replicate the performance of one
or more assets that an insurer is authorized to acquire under
this section. A derivative transaction that either is
authorized by subdivision 18, clause (5), or by subdivision 24,
or is entered into as a hedging transaction shall not be
considered a replication transaction;
(t) "Required liabilities" means the sum of (1) total
liabilities as required to be reported in the company's most
recent annual report to the commissioner of commerce of this
state, (2) for companies operating under the stock plan, the
minimum paid-up capital and surplus required to be maintained
pursuant to section 60A.07, subdivision 5a, (3) for companies
operating under the mutual or reciprocal plan, the minimum
amount of surplus required to be maintained pursuant to section
60A.07, subdivision 5b, and (4) the amount, if any, by which the
company's loss and loss adjustment expense reserves exceed 350
percent of its surplus as it pertains to policyholders as of the
same date. The commissioner may waive the requirement in clause
(4) unless the company's written premiums exceed 300 percent of
its surplus as it pertains to policyholders as of the same
date. In addition to the required amounts pursuant to clauses
(1) to (4), the commissioner may require that the amount of any
apparent reserve deficiency that may be revealed by one to five
year loss and loss adjustment expense development analysis for
the five years reported in the company's most recent annual
statement to the commissioner be added to required liabilities;
(s) (u) "Revenue obligations" means obligations for the
payment of money by a governmental issuer where the obligations
are payable from revenues, earnings, or special assessments on
properties benefited by local improvements of the issuer which
are specifically pledged therefor;
(t) (v) "Security" has the meaning given in section 5 of
the Security Act of 1933 and specifically includes, but is not
limited to, stocks, stock equivalents, warrants, rights,
options, obligations, American Depository Receipts (ADR's),
repurchase agreements, and reverse repurchase agreements; and
(u) (w) "Unrestricted surplus" means the amount by which
qualified assets exceed 110 percent of required liabilities.
Sec. 2. Minnesota Statutes 2000, section 60A.11, is
amended by adding a subdivision to read:
Subd. 25a. [REPLICATION TRANSACTIONS.] An insurer engaging
in replication transactions shall include all replicated
investment positions in calculating compliance with the
limitations on investments applicable to the insurer.
Replication transactions are permitted only under the authority
of subdivision 25. An insurer may invest its unrestricted
surplus in a replication transaction only to the extent that the
replicated investment position does not cause the total
positions represented by the unrestricted surplus to be greater
than the total positions represented by the unrestricted surplus
as would be permitted in the absence of the replicated
investment position.
Sec. 3. Minnesota Statutes 2000, section 60A.129,
subdivision 5, is amended to read:
Subd. 5. [CONSOLIDATED FILING.] (a) The commissioner may
allow an insurer to file a consolidated loss reserve
certification required by subdivision 2, in lieu of separate
loss certifications and may allow an insurer to file
consolidated or combined audited financial statements required
by subdivision 3, paragraph (a), in lieu of separate annual
audited financial statements, where it can be demonstrated that
an insurer is part of a group of insurance companies that has a
pooling or 100 percent reinsurance agreement which substantially
affects the solvency and integrity of the reserves of the
insurer and the insurer cedes all of its direct and assumed
business to the pool. An affiliated insurance company not
meeting these requirements may be included in the consolidated
or combined audited financial statements, if the company's total
admitted assets are less than five percent of the consolidated
group's total admitted assets. If these circumstances exist,
then the company may file a written application to file a
consolidated loss reserve certification and/or consolidated or
combined audited financial statements. This application shall
be for a specified period.
(b) Upon written application by a domestic insurer, the
commissioner may authorize the domestic insurer to include
additional affiliated insurance companies in the consolidated or
combined audited financial statements. Foreign insurers must
obtain the prior written authorization of the commissioner of
their state of domicile in order to submit an application for
authority to file consolidated or combined audited financial
statements. This application shall be for a specified period.
(c) A consolidated annual audit filing shall include a
columnar consolidated or combining worksheet. Amounts shown on
the audited consolidated or combined financial statement shall
be shown on the worksheet. Amounts for each insurer shall be
stated separately. Noninsurance operations may be shown on the
worksheet on a combined or individual basis. Explanations of
consolidating or eliminating entries shall be shown on the
worksheet. A reconciliation of any differences between the
amounts shown in the individual insurer columns of the worksheet
and comparable amounts shown on the annual statement of the
insurers shall be included on the worksheet.
Sec. 4. [60A.975] [DEFINITIONS.]
Subdivision 1. [APPLICATION.] For purposes of sections
60A.975 and 60A.976, the definitions in this section have the
meanings given them.
Subd. 2. [ANNUITY ISSUER.] "Annuity issuer" means an
insurer that issues an insurance contract used to fund periodic
payments under a structured settlement agreement.
Subd. 3. [STRUCTURED SETTLEMENT.] "Structured settlement"
means an arrangement for periodic payment of damages entered on
behalf of a minor or incompetent person for personal injuries
established by settlement or judgment.
Subd. 4. [STRUCTURED SETTLEMENT AGREEMENT.] "Structured
settlement agreement" means the agreement, judgment,
stipulation, or release embodying the terms of a structured
settlement.
Sec. 5. [60A.976] [ANNUITY ISSUERS FINANCIAL
REQUIREMENTS.]
An annuity purchased to finance a structured settlement
agreement may be purchased only from an annuity issuer with a
financial rating equivalent to A.M. Best Company A+ Class 8 or
better; or a Standard & Poor's AA or better.
Sec. 6. Minnesota Statutes 2000, section 60B.44,
subdivision 4, is amended to read:
Subd. 4. [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A
GUARANTY ASSOCIATION.] All claims under policies or contracts of
coverage for losses incurred including third party claims, and
all claims against the insurer for liability for bodily injury
or for injury to or destruction of tangible property which are
not under policies or contracts. All claims under life
insurance and annuity policies, including funding agreements
issued pursuant to section 61A.276, whether for death proceeds,
annuity proceeds, or investment values, shall be treated as loss
claims. That portion of any loss for which indemnification is
provided by other benefits or advantages recovered or
recoverable by the claimant shall not be included in this class,
other than benefits or advantages recovered or recoverable in
discharge of familial obligations of support or by way of
succession at death or as proceeds of life insurance, or as
gratuities. No payment made by an employer to an employee shall
be treated as a gratuity. Claims not covered by a guaranty
association are loss claims.
Sec. 7. Minnesota Statutes 2000, section 60L.01, is
amended by adding a subdivision to read:
Subd. 13a. [REPLICATED INVESTMENT POSITION.] "Replicated
investment position" means the statement value of the position
reported under the heading "Replicated (Synthetic) Asset" on
Schedule DB, Part F, of the annual statement of the insurer, or
any successor provision.
Sec. 8. Minnesota Statutes 2000, section 60L.01,
subdivision 14, is amended to read:
Subd. 14. [REPLICATION
TRANSACTION.] "Replication" "Replication transaction" means a
derivative transaction involving one or more derivative
instruments being used to modify the cash flow characteristics
of one or more investments held by an insurer in a manner so
that the aggregate cash flows of the derivative instruments and
investments reproduce the cash flows of another investment
having a higher risk-based capital charge than the risk-based
capital charge of the original investments or investments that
is intended to replicate the performance of one or more assets
that an insurer is authorized to acquire under sections 60L.01
to 60L.15. A derivative transaction that is entered into as a
hedging transaction is not considered a replication transaction.
Sec. 9. Minnesota Statutes 2000, section 60L.08, is
amended by adding a subdivision to read:
Subd. 7. [REPLICATION TRANSACTIONS.] (a) An insurer
engaging in replication transactions shall include all
replicated investment positions in calculating compliance with
the limitations on investments contained in this section. So
long as the insurer so complies with the limitations on
investments contained in this section, then the insurer may
count a replication transaction and any related investment of
the insurer for the purposes specified in section 60L.11, to the
extent the insurer has appropriately assigned the transaction or
other investment to an investment class authorized in section
60L.07. An insurer shall not otherwise count replicated
investment positions for the purposes specified in section
60L.11.
(b) If an investment position of the insurer includes a
replicated investment position and exceeds an applicable
limitation contained in this section, then the insurer may
allocate part or all of the replicated investment position as
follows for the purposes of calculating compliance with the
limitations on investments and other requirements contained in
sections 60L.01 to 60L.15: to the extent an insurer owns assets
in excess of its minimum asset requirement, the insurer may deem
a replicated investment position to be among such excess assets,
but only to the extent that the replicated investment position
does not cause the total positions represented by such excess
assets to be greater than the total positions represented by
such excess assets as would be permitted in the absence of the
replicated investment position.
Sec. 10. Minnesota Statutes 2000, section 60L.10,
subdivision 1, is amended to read:
Subdivision 1. [PROHIBITIONS.] An insurer may not invest
in investments that are prohibited for an insurer by law. The
use of a derivative instrument for replication, or for any
purposes other than hedging or, income generation, or
replication is prohibited.
Sec. 11. Minnesota Statutes 2000, section 61A.276,
subdivision 2, is amended to read:
Subd. 2. [ISSUANCE.] The funding agreements may be issued
to: (1) individuals; or (2) persons authorized by a state or
foreign country to engage in an insurance business or
subsidiaries or affiliates of these persons; or (3) entities
other than individuals and other than persons authorized to
engage in an insurance business, and subsidiaries and affiliates
of these persons, for the following purposes: (i) to fund
benefits under any employee benefit plan as defined in the
Employee Retirement Income Security Act of 1974, as now or
hereafter amended, maintained in the United States or in a
foreign country; (ii) to fund the activities of any organization
exempt from taxation under section 501(c) of the Internal
Revenue Code of 1986, as amended through December 31, 1992, or
of any similar organization in any foreign country; (iii) to
fund any program of any state, foreign country or political
subdivision thereof, or any agency or instrumentality thereof;
(iv) to fund any agreement providing for periodic payments in
satisfaction of a claim; or (v) to fund a program of a financial
an institution limited to banks, thrifts, credit unions, and
investment companies registered under the Investment Company Act
of 1940. No funding agreement shall be issued in an amount less
than $1,000,000 that has assets in excess of $25,000,000. No
funding agreement shall be issued in an amount less than
$1,000,000.
Sec. 12. Minnesota Statutes 2000, section 61A.28,
subdivision 6, is amended to read:
Subd. 6. [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] (a)
Common stocks, common stock equivalents, or securities
convertible into common stock or common stock equivalents of a
business entity organized under the laws of the United States or
any state thereof, or the Dominion of Canada or any province
thereof, if the net earnings of the business entity after the
elimination of extraordinary nonrecurring items of income and
expense and before income taxes and fixed charges over the five
immediately preceding completed fiscal years, or its period of
existence if less than five years, has averaged not less than
1-1/4 times its average annual fixed charges applicable to the
period.
(b) Preferred stock of, or common or preferred stock
guaranteed as to dividends by a business entity organized under
the laws of the United States or any state thereof, or the
Dominion of Canada or any province thereof, under the following
conditions: (1) No investment may be made under this paragraph
in a stock upon which any dividend, current or cumulative, is in
arrears; (2) the company may not invest in stocks under this
paragraph and in common stocks under paragraph (a) if the
investment causes the company's aggregate investments in the
common or preferred stocks to exceed 25 percent of the company's
total admitted assets, provided that no more than 20 percent of
the company's admitted assets may be invested in common stocks
under paragraph (a); and (3) the company may not invest in any
preferred stock or common stock guaranteed as to dividends,
which is rated in the four lowest categories established by the
securities valuation office of the National Association of
Insurance Commissioners, if the investment causes the company's
aggregate investment in the lower rated preferred or common
stock guaranteed as to dividends to exceed five percent of its
total admitted assets.
(c) Warrants, options, and rights to purchase stock if the
stock, at the time of the acquisition of the warrant, option, or
right to purchase, would qualify as an investment under
paragraph (a) or (b), whichever is applicable. A company shall
not invest in a warrant, option, or right to purchase stock if,
upon purchase and immediate exercise thereof, the acquisition of
the stock violates any of the concentration limitations
contained in paragraphs (a) and (b).
(d) In addition to amounts that may be invested under
subdivision 8 and without regard to the percentage limitation
applicable to stocks, warrants, options, and rights to purchase,
the securities of any face amount certificate company, unit
investment trust, or management type investment company,
registered or in the process of registration under the
Investment Company Act of 1940 as from time to time amended. In
addition, the company may transfer assets into one or more of
its separate accounts for the purpose of establishing, or
supporting its contractual obligations under, the accounts in
accordance with the provisions of sections 61A.13 to 61A.21. A
company may not invest in a security authorized under this
paragraph if the investment causes the company's aggregate
investments in the securities to exceed five ten percent of its
total admitted assets, except that for a health service plan
corporation operating under chapter 62C, and for a health
maintenance organization operating under chapter 62D, the
company's aggregate investments may not exceed 20 percent of its
total admitted assets. No more than five percent of the allowed
investment by health service plan corporations or health
maintenance organizations may be invested in funds that invest
in assets not backed by the federal government. When investing
in money market mutual funds, nonprofit health service plans
regulated under chapter 62C, and health maintenance
organizations regulated under chapter 62D, shall establish a
trustee custodial account for the transfer of cash into the
money market mutual fund.
(e) Investment grade obligations that are:
(1) bonds, obligations, notes, debentures, repurchase
agreements, or other evidences of indebtedness of a business
entity, organized under the laws of the United States or any
state thereof, or the Dominion of Canada or any province
thereof; and
(2) rated in one of the four highest rating categories by
at least one nationally recognized statistical rating
organization, or are rated in one of the two highest categories
established by the securities valuation office of the National
Association of Insurance Commissioners.
(f) Noninvestment grade obligations: A company may acquire
noninvestment grade obligations as defined in subclause (i)
(hereinafter noninvestment grade obligations) which meet the
earnings test set forth in subclause (ii). A company may not
acquire a noninvestment grade obligation if the acquisition will
cause the company to exceed the limitations set forth in
subclause (iii).
(i) A noninvestment grade obligation is an obligation of a
business entity, organized under the laws of the United States
or any state thereof, or the Dominion of Canada or any province
thereof, that is not rated in one of the four highest rating
categories by at least one nationally recognized statistical
rating organization, or is not rated in one of the two highest
categories established by the securities valuation office of the
National Association of Insurance Commissioners.
(ii) Noninvestment grade obligations authorized by this
subdivision may be acquired by a company if the business entity
issuing or assuming the obligation, or the business entity
securing or guaranteeing the obligation, has had net earnings
after the elimination of extraordinary nonrecurring items of
income and expense and before income taxes and fixed charges
over the five immediately preceding completed fiscal years, or
its period of existence of less than five years, has averaged
not less than 1-1/4 times its average annual fixed charges
applicable to the period; provided, however, that if a business
entity issuing or assuming the obligation, or the business
entity securing or guaranteeing the obligation, has undergone an
acquisition, recapitalization, or reorganization within the
immediately preceding 12 months, or will use the proceeds of the
obligation for an acquisition, recapitalization, or
reorganization, then such business entity shall also have, on a
pro forma basis, for the next succeeding 12 months, net earnings
averaging 1-1/4 times its average annual fixed charges
applicable to such period after elimination of extraordinary
nonrecurring items of income and expense and before taxes and
fixed charges; no investment may be made under this section upon
which any interest obligation is in default.
(iii) Limitation on aggregate interest in noninvestment
grade obligations. A company may not invest in a noninvestment
grade obligation if the investment will cause the company's
aggregate investments in noninvestment grade obligations to
exceed the applicable percentage of admitted assets set forth in
the following table:
Percentage of
Effective Date Admitted Assets
January 1, 1992 20
January 1, 1993 17.5
January 1, 1994 15
Nothing in this paragraph limits the ability of a company
to invest in noninvestment grade obligations as provided under
subdivision 12.
(g) Obligations for the payment of money under the
following conditions: (1) The obligation must be secured,
either solely or in conjunction with other security, by an
assignment of a lease or leases on property, real or personal;
(2) the lease or leases must be nonterminable by the lessee or
lessees upon foreclosure of any lien upon the leased property;
(3) the rents payable under the lease or leases must be
sufficient to amortize at least 90 percent of the obligation
during the primary term of the lease; and (4) the lessee or
lessees under the lease or leases, or a governmental entity or
business entity, organized under the laws of the United States
or any state thereof, or the Dominion of Canada, or any province
thereof, that has assumed or guaranteed any lessee's performance
thereunder, must be a governmental entity or business entity
whose obligations would qualify as an investment under
subdivision 2 or paragraph (e) or (f). A company may acquire
leases assumed or guaranteed by a noninvestment grade lessee
unless the value of the lease, when added to the other
noninvestment grade obligations owned by the company, exceeds 15
percent of the company's admitted assets.
(h) A company may sell call options against stocks or other
securities owned by the company and may purchase call options in
a closing transaction against a call option previously written
by the company. In addition to the authority granted by
paragraph (c), to the extent and on the terms and conditions the
commissioner determines to be consistent with the purposes of
this chapter, a company may purchase or sell other
exchange-traded call options, and may sell or purchase
exchange-traded put options.
(i) A company may not invest in a security or other
obligation authorized under this subdivision if the investment,
valued at cost at the date of purchase, causes the company's
aggregate investment in any one business entity to exceed two
percent of the company's admitted assets.
(j) For nonprofit health service plan corporations
regulated under chapter 62C, and for health maintenance
organizations regulated under chapter 62D, a company may invest
in commercial paper rated in one of the two highest rating
categories by at least one nationally recognized statistical
rating organization, or rated in one of the two highest
categories established by the securities valuation office of the
National Association of Insurance Commissioners, if the
investment, valued at cost at the date of purchase, does not
cause the company's aggregate investment in any one business
entity to exceed six percent of the company's admitted assets.
Sec. 13. Minnesota Statutes 2000, section 61A.28, is
amended by adding a subdivision to read:
Subd. 14. [REPLICATION TRANSACTIONS.] An insurer engaging
in replication transactions shall include all replicated
investment positions in calculating compliance with the
limitations on investments applicable to the insurer.
Replication transactions are permitted only under the authority
of subdivision 12. For these purposes, "replication
transaction" means a derivative transaction that is intended to
replicate the performance of one or more assets that an insurer
is authorized to acquire under applicable law. A derivative
transaction that either is authorized by subdivision 6, 8, or 9a
or section 61A.29, subdivision 2, paragraph (d), or is entered
into as a hedging transaction shall not be considered a
replication transaction. "Replicated investment position" means
the statement value of the position reported under the heading
"Replicated (Synthetic) Asset" on Schedule DB, Part F, of the
annual statement of the insurer, or any successor provision.
Sec. 14. Minnesota Statutes 2000, section 61A.29,
subdivision 2, is amended to read:
Subd. 2. [AUTHORIZED INVESTMENTS.] A company may invest in
(i) foreign assets denominated in United States dollars; (ii)
foreign assets denominated in foreign currency; and (iii) United
States assets denominated in foreign currency. The investments
may be made in any combination of the following:
(a) Obligations of sovereign governments and political
subdivisions thereof and obligations issued or fully guaranteed
by a supranational bank or organization, other than those
described in section 61A.28, subdivision 2, paragraph (e),
provided that the obligations are rated in one of the two
highest rating categories by at least one nationally recognized
statistical rating organization in the United States. For
purposes of this section, "supranational bank" means a bank
owned by a number of sovereign nations and engaging in
international borrowing and lending.
(b) Obligations of a foreign business entity, provided that
the obligation (i) is rated in one of the four highest rating
categories by at least one nationally recognized statistical
rating organization in the United States or by a similarly
recognized statistical rating organization, as approved by the
commissioner, in the country where the investment is made; or
(ii) is rated in one of the two highest categories established
by the securities valuation office of the National Association
of Insurance Commissioners.
(c) Stock or stock equivalents issued by a foreign entity
if the stock or stock equivalents are regularly traded on the
Frankfurt, London, Paris, or Tokyo stock exchange or any similar
securities exchange as may be approved from time to time by the
commissioner and subject to oversight by the government of the
country in which the exchange is located regular trading occurs.
(d) Financial transactions for the sole purpose of managing
the foreign currency risk of investments made under this
subdivision, provided that the financial transactions are
entered into under a detailed plan maintained by the company.
For purposes of this paragraph, "financial transactions"
include, but are not limited to, the purchase or sale of
currency swaps, forward agreements, and currency futures.
Sec. 15. [61A.321] [GUARANTY FUNDS.]
(a) A domestic mutual life insurance company may be formed
with, or an existing domestic mutual life insurance company may
establish, a guaranty fund divided into certificates of $10
each, or multiples thereof, and this guaranty fund shall be
invested in the same manner as is provided for the investment of
capital stock of insurance companies.
(b) The certificate holders of the guaranty fund are
entitled to an annual dividend of not more than ten percent on
their respective certificates, if the net profits or unused
premiums left after all losses, expenses, or liabilities then
incurred, with reserves for reinsurance, are provided for, are
sufficient to pay the annual dividend. If the dividends in any
one year are less than ten percent, the difference may be made
up in any subsequent year or years from the net profits.
Approval of the commissioner must be obtained before accrual for
or payment of the dividend, or any repayment of principal.
(c) The guaranty fund must be applied to the payment of
losses and expenses when necessary, and, if the guaranty fund is
impaired, the directors may make good the whole or any part of
the impairment from future profits of the company, but no
dividend shall be paid on guaranty fund certificates while the
guaranty fund is impaired. The holder of the guaranty fund
certificate is not liable for any more than the amount of the
certificate which has not been paid in, and this amount must be
plainly and legibly stated on the face of the certificate.
(d) Notwithstanding any other provision of law, each
certificate holder of record is entitled to one vote in person
or by proxy in any meeting of the members of the company for
each $10 investment in guaranty fund certificates.
(e) The guaranty fund may be reduced or retired by vote of
the policyholders of the company and the assent of the
commissioner, if the net assets of the company above its
reinsurance reserve and all other claims and obligations and the
amount of its guaranty fund certificates and interest on the
certificates for two years last preceding and including the date
of its last annual statement are not less than 50 percent of the
premiums in force. Due notice of this proposed action on the
part of the company shall be mailed to each policyholder of the
company not less than 30 days before the meeting when the action
may be taken.
(f) In domestic mutual life insurance companies with a
guaranty fund, the certificate holders shall be entitled to
choose and elect from among their own number or from among the
policyholders at least one-half or more of the total number of
directors.
(g) If any domestic mutual life insurance company with a
guaranty fund ceases to do business, it shall not divide among
its certificate holders any part of its assets or guaranty fund
until all its debts and obligations have been paid or canceled.
(h) Foreign mutual life insurance companies having a
guaranty fund shall not be required to make their certificate of
guaranty fund conform to the provisions of this section, but
when the certificates do not conform with this section, the
amount of the guaranty fund shall be charged as a liability.
Sec. 16. Minnesota Statutes 2000, section 79.56,
subdivision 3, is amended to read:
Subd. 3. [PENALTIES.] (a) Any insurer using a rate or a
rating plan which has not been filed shall be subject to a fine
of up to $100 for each day the failure to file continues. The
commissioner may, after a hearing on the record, find that the
failure is willful. A willful failure to meet filing
requirements shall be punishable by a fine of up to $500 for
each day during which a willful failure continues. These
penalties shall be in addition to any other penalties provided
by law.
(b) Notwithstanding this subdivision, an employer that
generates $500,000 $250,000 in annual written workers'
compensation premium under the rates and rating plan of an
insurer before the application of any large deductible rating
plans, may be written by that insurer using rates or rating
plans that are not subject to disapproval but which have been
filed. The $500,000 threshold shall be increased on January 1,
1996, and on each January 1 thereafter by the percentage
increase in the statewide average weekly wage, to the nearest
$1,000. The commissioner shall advise insurers licensed to
write workers' compensation insurance in this state of the
annual threshold adjustment.
Presented to the governor May 17, 2001
Signed by the governor May 21, 2001, 10:40 a.m.
Official Publication of the State of Minnesota
Revisor of Statutes