31A-18 - Investments
Title 31A > 31A-18
Sections (17)
Investments
31A-18-101 - Definitions.
31A-18-101(1) “Derivative instrument” means an asset appropriately reported in Schedule DB or a Schedule DC of an insurer’s statutory financial statement or successor schedules, in accordance with applicable annual statement instructions or statutory accounting guidelines. 31A-18-101(2) “Derivative transaction” means a transaction involving the use of one or more derivative instruments. 31A-18-101(3) “Income generation” means a derivative transaction involving the writing of covered options, caps, or floors that is intended to generate income or enhance return. 31A-18-101(4) “Lower grade investment” means a rated credit instrument or debt-like preferred stock rated 4, 5, or 6 by the Securities Valuation Office of the NAIC or any successor office. 31A-18-101(5) “Medium grade investment” means a rated credit instrument or debt-like preferred stock rated 3 by the Securities Valuation Office of the NAIC or any successor office. 31A-18-101(6) “Minimum asset requirement” means the sum of an insurer’s liabilities and the insurer’s minimum financial security benchmark. 31A-18-101(7) “Minimum financial security benchmark” means the amount of financial security an insurer is required to have under Section 31A-18-102. 31A-18-101(8) “Modern Portfolio Theory” means a mathematical framework for assembling a portfolio of assets to maximize the expected return for a given level of risk, taking into consideration a portfolio’s overall risk and return. 31A-18-101(9) “NAIC” means the National Association of Insurance Commissioners. 31A-18-101(10) “Replication” means a derivative transaction in which at least one derivative instrument is used to modify the cash flow characteristics of one or more investments held by an insurer so that the aggregate cash flow of the derivative instruments and investments reproduce the cash flow of another investment that has a higher risk-based capital charge than the risk-based capital charge of the original investment or investments. 31A-18-101(11) “Securities valuation office listed mutual fund” means a money market mutual fund or short-term bond fund that:is registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940; andthe NAIC’s Securities Valuation Office deems eligible for special reserve and reporting treatment other than as common stock.
31A-18-102 - Minimum financial security benchmark.
31A-18-102(1) Except as provided in Subsections (2) and (3), the commissioner shall set a minimum financial security benchmark for an insurer that is the greater of:the authorized control level risk-based capital applicable to the insurer as set forth in Sections 31A-17-601 through 31A-17-613; orthe minimum capital or minimum surplus required by statute or regulation for maintenance of an insurer’s certificate of authority. 31A-18-102(2) If an insurer falls below three and one-half times the authorized control level risk capital applicable to the insurer, the commissioner may issue an order, in accordance with the factors described in Subsection (5)(b), specifying a minimum financial security benchmark to apply to the insurer provided the financial security benchmark is at least the applicable amount described in Subsection (1). 31A-18-102(3) The commissioner may establish by rule a minimum financial security benchmark that is a multiple of authorized control level risk-based capital to apply to any class of insurers provided the amount established by the regulation is at least the greater of the applicable amount described in Subsection (1). 31A-18-102(4) The commissioner, when setting an insurer’s minimum financial security benchmark as described in Subsection (1), shall set the minimum financial security benchmark at an amount that will provide reasonable security against contingencies affecting the insurer’s financial position that are not fully covered by reserves or by reinsurance. 31A-18-102(5) In setting an insurer’s minimum financial security benchmark as described in Subsection (1), the commissioner shall consider:the risks of:increases in the frequency or severity of losses beyond the levels contemplated by the rates charged;increases in expenses beyond those contemplated by the rates charged;decreases in the value of or the return on invested assets below the expected values or returns in the insurer’s investment plan;changes in economic conditions that would modify the insurer’s assessment of the need for liquidity and force untimely sale of assets or prevent timely investments;currency devaluation to which the insurer may be subject; andany other contingencies the commissioner identifies that may affect the insurer’s operations; andthe following factors:the most reliable information available regarding the magnitude of the risks described in Subsection (5)(a);the extent to which the risks in Subsection (5)(a) are related and whether any dependency is direct or inverse;the insurer’s recent history of profits or losses;the extent of the insurer’s protections against the contingencies in other ways than the establishment of surplus, including:redundancy of premiums;adjustability of contracts under the insurer’s terms;investment valuation reserves, whether voluntary or mandatory;appropriate reinsurance;the use of conservative actuarial assumptions to provide a margin of security;reserve adjustments in recognition of previous rate inadequacies;contingency or catastrophe reserves;diversification of assets; andunderwriting risks;independent judgment of the soundness of the insurer’s operations, as evidenced by the ratings of reliable professional financial reporting services; andany other factors the commissioner deems relevant.
31A-18-103 - Authorized investments.
31A-18-103(1) Subject to the provisions of this chapter, an insurer may, to the same extent as any other person under the laws of this state and the United States:loan or invest the insurer’s funds; and buy, sell, hold title to, possess, occupy, pledge, convey, manage, protect, insure, and deal with the insurer’s investments, property, and other assets. 31A-18-103(2) The board of directors, in handling an insurer’s investments, shall:exercise the judgment and care of a reasonable person in the management of a similar enterprise, not in the context of speculating, but in the context of the permanent disposition of the insurer’s funds;consider the probable income of an investment as well as the probable security of the insurer’s capital;ensure the insurer’s investments are of sufficient value, liquidity, and diversity for the insurer to meet the insurer’s outstanding obligations based on reasonable assumptions regarding new business production for the insurer’s current lines of business; andconsider the prudence evaluation criteria described in Section 31A-18-105. 31A-18-103(3) An insurer shall establish and implement internal controls and procedures that ensure:compliance with the insurer’s investment policies;the insurer’s investment staff and any consultant the insurer uses are reputable and capable;a periodic evaluation and monitoring process occurs for assessing the effectiveness of investment policy and strategies;the insurer’s management’s performance is assessed based on the stated objectives within the investment policy;the insurer undertakes appropriate analyses of the degree to which asset cash flows adequately meet liability cash flows under different economic environments; andthe insurer conducts the analyses described in Subsection (3)(e) at least annually and makes specific reference to economic conditions.
31A-18-105 - Prudence evaluation criteria.
31A-18-105(1) An insurer shall consider the following factors to determine whether an investment portfolio or investment policy is prudent:general economic conditions;the possible effect of inflation or deflation;the expected tax consequences of investment decisions or strategies;the fairness or reasonableness of the terms of an investment considering the investment’s:probable risk and reward characteristics; andrelationship to the investment portfolio as a whole;the extent of the diversification of the insurer’s investments among:individual investments;classes of investments;industry concentrations;dates of maturity; andgeographic areas;the quality and liquidity of investments in the insurer’s affiliates;the investment exposure to:liquidity risk;credit and default risk;systemic risk;interest rate risk;call, prepayment, and extension risk;exchange rate risk; andforeign sovereign risk;the amount of the insurer’s:assets;capital and surplus;premium writings;insurance in force; andother appropriate characteristics;the insurer’s reported liabilities;the matching of the expected cash flows of the insurer’s assets and liabilities;the risk of adverse changes in the insurer’s assets and liabilities; andthe adequacy of the insurer’s capital and surplus to secure the risks and liabilities of the insurer. 31A-18-105(2) The commissioner shall consider the factors described in Subsection (1) before making a determination that an insurer’s investment portfolio or investment policy is not prudent.
31A-18-106 - Insurer investment policy.
31A-18-106(1) An insurer shall establish and follow a written investment policy for exchanging, holding, selling, or managing an investment. 31A-18-106(2) An insurer’s board of directors shall review the written investment policy described in Subsection (1) at least once annually. 31A-18-106(3) The insurer shall include, in the written investment policy described in Subsection (1), at least the following:policies, procedures, and controls covering all aspects of the investing functions;quantified goals and objectives regarding the composition of classes of investments, including maximum internal limits;a method for periodic evaluation of the investment portfolio regarding the investment portfolio’s risk and reward characteristics;professional standards for the individuals making day-to-day investment decisions to ensure that those individuals make those decisions in an ethical and capable manner;the types of investments an insurer will make and avoid, based on:the investments’ risk and reward characteristics; andthe insurer’s level of experience with the investments;the relationship of classes of investments to the insurer’s insurance products and liabilities;the manner in which the insurer intends to implement the prudence evaluation criteria described in Section 31A-18-105; andthe level of risk appropriate for the insurer given the level of capitalization and expertise available to the insurer. 31A-18-106(4) Nothing in this section precludes an insurer from the use of modern portfolio theory to manage the insurer’s investments.
31A-18-107 - Protection against currency fluctuations.
31A-18-107(1) An insurer that, in the ordinary course of business, makes payments in more than one currency shall have an investment in securities:in each of the currencies with which the insurer makes payments; andin an amount that, independent of all other investments, meets the requirements of this chapter as applied separately to the insurer’s obligation in each currency. 31A-18-107(2) The commissioner may exempt an insurer, or a class of insurers, from the requirement described in Subsection (1), if the commissioner determines the obligations an insurer or class of insurers maintains in other currencies are small enough that there is not a significant risk to the financial security of the insurer or the class of insurers from substantial fluctuation in relative currency values.
31A-18-108 - Prohibited investments.
31A-18-108(1) As used in this section, “government insurer” means a governmental entity that is authorized by statute or rule to provide an arrangement, contract, or plan:for the transfer of a risk or risks from one or more persons to one or more other persons; orfor the distribution of a risk or risks among a group of persons that includes the person seeking to distribute that person’s risk. 31A-18-108(2) An insurer may not:invest in:an investment prohibited by a department rule or statute of this state;securities issued by a corporation if one or more of the insurer’s officers or directors owns, directly or indirectly, a majority of the corporation’s stock with voting power;securities issued by an insolvent corporation; orany instrument or security that the commissioner finds is designed to evade a limitation or prohibition in this chapter; oruse a derivative instrument for:replication; orany purpose other than hedging or income generation. 31A-18-108(3) A government insurer may not invest public funds in an investment where the sole purpose of the investment is a purpose other than maximizing the risk-adjusted return on the investment. 31A-18-108(4) The commissioner shall allow an insurer a reasonable time, not to exceed five years, to divest of prohibited investments if:the insurer demonstrates the investment was not prohibited at the time the insurer made the investment;the insurer made a good faith mistake in making the investment; orthe commissioner determines that the sale of the investment is contrary to the interests of insureds, creditors, or the general public.
31A-18-109 - Effect of investment restrictions.
31A-18-109(1) An insurer may count an invested asset towards the satisfaction of the minimum asset requirement only to the extent that the insurer invests the invested asset in compliance with this chapter, applicable department rules, and orders issued by the commissioner in compliance with this chapter.An insurer may count assets other than invested assets towards the satisfaction of the minimum asset requirement at admitted annual statement value. 31A-18-109(2) An investment held as an admitted asset by an insurer and that qualified under this chapter as an admitted asset on May 7, 2025, remains an admitted asset under this chapter. 31A-18-109(3) For purposes of Subsection (1), an insurer may count assets that would not otherwise qualify under this chapter if an insurer acquires the assets in the bona fide enforcement of creditors’ rights or in a bona fide workout or settlement of disputed claims for five years after acquisition of the asset.
31A-18-110 - Authorized classes of investments.
31A-18-109 , whether the insurer makes these investments directly or as a participant in a partnership, joint venture, or limited liability company: 31A-18-110(1) cash in the direct possession of the insurer or on deposit with a financial institution regulated by a federal or state agency; 31A-18-110(2) a bond, debt-like preferred stock, and other evidence of indebtedness to:a government unit in the United States or Canada;an instrumentality of a government unit in the United States or Canada; ora private business entity domiciled in the United States or Canada, including asset-backed securities and mutual funds listed by the Securities Valuation Office of the NAIC; 31A-18-110(3) a loan secured by:a mortgage, trust deed, or other security interest in real property located in the United States or Canada; orinsurance against default issued by:a government insurance corporation of the United States or Canada; oran insurer authorized to do business in this state; 31A-18-110(4) common stock, equity-like preferred stock, or equity interests in any United States or Canadian business entity; ora share of mutual funds registered with the Securities and Exchange Commission of the United States under the Investment Company Act of 1940, 15 U.S.C. Sec. 80a-1 et seq., other than any mutual fund listed by the Securities Valuation Office of the NAIC; 31A-18-110(5) real property necessary for the convenient transaction of the insurer’s business; 31A-18-110(6) real property, including the fixtures, furniture, furnishings, and equipment pertaining to the real property that:is located in the United States or Canada; andproduces, or after suitable improvement can reasonably be expected to produce substantial income; 31A-18-110(7) a loan, security, or other investment described in Subsections (1) through (6) in a country other than the United States or Canada; 31A-18-110(8) a bond or other evidence of indebtedness to an international development organization of which the United States is a member; 31A-18-110(9) a loan upon the security of the insurer’s own policies:in an amount that is adequately secured by the policies; andthat does not exceed the surrender values of the policies; 31A-18-110(10) tangible personal property under contract of sale or lease with a contractual payment that may be reasonably expected to return the principal of, and provide earnings on, the investments within the tangible personal property’s anticipated useful life; 31A-18-110(11) a loan secured by a pledged security or evidence of debt eligible for investment under this section; 31A-18-110(12) other investments the commissioner authorizes by rule; and 31A-18-110(13) for an investment not otherwise permitted by this section, and not specifically prohibited by statute, the lesser of:excess surplus as that term is defined in Section 31A-1-301; or5% of the first 500,000,000.
31A-18-111 - Limitations generally applicable.
31A-18-111(1) For purposes of determining compliance with Section 31A-18-109:securities of a single issuer and the single issuer’s affiliates, other than the government of the United States and subsidiaries authorized under Section 31A-16-102.5, may not exceed:5% of admitted assets; or10% of admitted assets, if the securities are secured by real property and the insurer demonstrates a prudent investment policy regarding the investments described in Section 31A-18-105; andinvestments in the voting securities of a depository institution, or any company that controls a depository institution, may not exceed 5% of the insurer’s admitted assets. 31A-18-111(2) For purposes of Section 31A-18-109, the following limitations on classes of investments apply:for an investment authorized under Subsection 31A-18-110(2), and an investment authorized by Subsection 31A-18-110(7) that is a type of investment described in Subsection 31A-18-110(2), the aggregate amount of:medium and lower grade investments may not exceed 20% of the insurer’s admitted assets;lower grade investments may not exceed 10% of the insurer’s admitted assets;investments rated 5 or 6 by the Securities Valuation Office of the NAIC, may not exceed 5% of the insurer’s admitted assets;investments rated 6 by the Securities Valuation Office of the NAIC, may not exceed 1% of the insurer’s admitted assets; ormedium and lower grade investments that receive, as cash income, less than the equivalent yield for Treasury issues with a comparative average life, may not exceed 1% of the insurer’s admitted assets;for an investment authorized under Subsection 31A-18-110(3):50% of admitted assets, if the insurer is a life insurer; and25% of admitted assets if the insurer is a non-life insurer;for an investment authorized under Subsection 31A-18-110(4), other than subsidiaries of the type authorized in Section 31A-16-102.5:20% of admitted assets, if the insurer is a life insurer; and35% of admitted assets, if the insurer is a non-life insurer;for an investment authorized under Subsection 31A-18-110(5), 10% of admitted assets;for an investment authorized under Subsection 31A-18-110(6):20% of admitted assets, if the insurer is a life insurer; and10% of admitted assets, if the insurer is a non-life insurer;for an investment authorized under Subsection 31A-18-110(7), 20% of admitted assets;for an investment authorized under Subsection 31A-18-110(8), 2% of admitted assets;for an investment authorized under Subsection 31A-18-110(10), 2% of admitted assets; andfor an investment authorized under Subsection 31A-18-110(11), that is considered an investment in a kind of security or evidence of debt pledged, the investment is subject to the class limitations applicable to the pledged security or evidence of debt. 31A-18-111(3) For purposes of determining compliance with the limitations of this section, the admitted portion of assets of subsidiaries under Section 31A-15-102.5 are deemed to be owned directly by the insurer and any other investors in proportion to the market value, or, if there is no market, the reasonable value of the investors’ interest in the subsidiaries. 31A-18-111(4) To the extent an investment exceeds the limitations described in Subsections (1) and (2), the insurer may assign the excess to the investment class authorized in Subsection 31A-18-110(13), until that limit is exhausted. 31A-18-111(5) If the commissioner determines necessary to get a proper evaluation of an insurer’s investment portfolio, the commissioner may require that an investment in a mutual fund, pooled investment vehicle, or other investment company be treated, for purposes of this chapter, as if the investor directly owned the investor’s proportional share of the assets owned by the mutual fund, pooled investment vehicle, or investment company. 31A-18-111(6) Unless otherwise specified, an investment limitation computed on the basis of an insurer’s admitted assets or capital and surplus is the amount the insurer stated on the insurer’s statutory balance sheet that the insurer most recently filed with the commissioner.
31A-18-112 - Reports and replies.
31A-18-112(1) The commissioner may require:any of the following from a person subject to regulation under this chapter:statements, reports, and responses to or other information gathered from questionnaires issued by the commissioner;evidence corroborating any statement, report, or response provided in accordance with Subsection (1)(a)(i), in a form that the commissioner designates and at reasonable intervals that the commissioner chooses; anda full explanation of the programming of any data storage or communication system that the person subject to regulation uses; andthat a person subject to regulation under this chapter make information from any book, record, electronic data processing system, computer, or any other information storage system the person subject to regulation uses available to the commissioner at a reasonable time and in a reasonable manner. 31A-18-112(2) The commissioner may provide forms for a statement, report, or response described in Subsection (1) and specify how to execute or certify the statement, report, or response.The commissioner shall ensure that forms for a statement, report, or response required by Subsection (1) are consistent, to the extent practicable, with forms required by other jurisdictions. 31A-18-112(3) The commissioner may provide reasonable minimum standards and techniques of accounting and data handling to ensure:timely and reliable information exist; and the commissioner’s access to the information described in Subsection (3)(a). 31A-18-112(4) The following shall reply promptly, in writing or in another reasonable manner, to a written inquiry from the commissioner in which the commissioner requests a reply:an officer of an insurer;a manager or general agent of an insurer subject to this chapter;an individual controlling or having a contract under which the person has a right to control the insurer, whether exclusively or otherwise; oran individual with executive authority over or in charge of any segment of the insurer’s affairs. 31A-18-112(5) The commissioner may require that any communication made to the commissioner under this section be verified. 31A-18-112(6) A person making a communication to the commissioner, or to an expert or consultant retained by the commissioner, required by this chapter is not subject to damages for the communication in the absence of actual malice. 31A-18-112(7) Notwithstanding Subsection (6), the commissioner may bring an action against any person that provides information required under this chapter that is not truthful or accurate.
31A-18-113 - Retention of experts.
31A-18-113(1) The commissioner may retain, if the commissioner deems necessary to assist in reviewing the insurer’s investments, experts including:attorneys;actuaries;accountants; andinvestment specialists. 31A-18-113(2) The commissioner shall:direct and maintain control of the individuals retained under Subsection (1); andensure that the individuals described in Subsection (1) operate in solely an advisory capacity for the commissioner.
31A-18-114 - Commissioner’s orders.
31A-18-114(1) If the commissioner determines that an insurer’s practices do not meet the provisions of this chapter, the commissioner may order, after notification to the insurer of the commissioner’s findings, the insurer to make changes necessary to comply with the provisions in this chapter. 31A-18-114(2) If the commissioner determines that due to the financial condition, current investment practice, or current investment plan of an insurer, the interests of insureds, creditors, or the general public are or may be endangered, the commissioner may:impose reasonable additional restrictions on the admissibility or valuation of investments; orimpose restrictions on the investment practices of an insurer, including prohibition or divestment. 31A-18-114(3) If an insurer demonstrates that a law of a country other than the United States requires the insurer to invest in an asset as a condition for doing business in that country, the commissioner may count that asset towards the insurer’s compliance with the minimum asset requirement if the commissioner finds that counting the asset does not endanger the interests of the insureds, creditors, or the general public. 31A-18-114(4) If an insurer demonstrates the financial security of an insurer and the competence of the insurer’s management and advisor in a way that satisfies the commissioner, the commissioner may issue an order, after a hearing, adjusting the limitations of classes of investment described in Section 31A-18-111 for that insurer if the commissioner is satisfied that the interests of the insureds, creditors, and the public are sufficiently protected in other ways.The increase authorized by the commissioner to the amount an insurer may invest in any or all asset classes may not exceed, in value, 10% of the insurer’s liabilities.
31A-18-115 - Administrative hearings.
31A-18-116 - Confidentiality of information.
31A-16-105 and 31A-16-107.5 , Chapter 27a, Part 3, Rehabilitation, and Chapter 27a, Part 4, Liquidation.
31A-18-117 - Conflicts of laws and other standards.
31A-18-117(1) Except as provided in Subsection (2), the provisions of this chapter apply if there is a conflict between this chapter and another provision of state statute. 31A-18-117(2) Chapter 16, Insurance Holding Companies, purporting to authorize an insurer to make a particular investment, supersedes this chapter. 31A-18-117(3) An insurer shall value the insurer’s assets in accordance with the valuation standards of the NAIC to the extent those standards remain consistent with the statutes of this state or the rules or orders of the commissioner.