26.1-10-02. Subsidiaries of insurers

26.1-10-02. Subsidiaries of insurers

1. Any domestic insurer, either by itself or in cooperation with one or more persons, may

organize or acquire one or more subsidiaries. A subsidiary may conduct any kind of

business and its authority to do so is not limited because it is a subsidiary of a

domestic insurer.

2. In addition to investments in common stock, preferred stock, debt obligations, and

other securities permitted under all other sections of this chapter, a domestic insurer

may also:

a. Invest, in common stock, preferred stock, debt obligations, and other securities of

one or more subsidiaries, amounts which do not exceed the lesser of ten percent

of the insurer's assets or fifty percent of the insurer's surplus as regards

policyholders; provided, that after the investments the insurer's surplus as

regards policyholders will be reasonable in relation to the insurer's outstanding

liabilities and adequate to meet its financial needs. In calculating the amount of

the investments, investments in domestic or foreign insurance subsidiaries and

health maintenance organizations shall be excluded, and there must be included:

(1) Total net moneys or other consideration expended and obligations assumed

in the acquisition or formation of a subsidiary, including all organizational

expenses and contributions to capital and surplus of such subsidiary

whether or not represented by the purchase of capital stock or issuance of

other securities; and

(2) All amounts expended in acquiring additional common stock, preferred

stock, debt obligations, and other securities, and all contributions to the

capital or surplus of a subsidiary subsequent to its acquisition or formation.

b. Invest any amount in common stock, preferred stock, debt obligations, and other

securities of one or more subsidiaries engaged or organized to engage

exclusively in the ownership and management of assets authorized as

investments for the insurer, provided that each subsidiary agrees to limit its

investments in any asset so that the investments will not cause the amount of the

total investment of the insurer to exceed any of the investment limitations

specified in subdivision a. "The total investment of the insurer" includes:

(1) Any direct investment by the insurer in an asset; and

(2) The insurer's proportionate share of any investment in an asset by any

subsidiary of the insurer which must be calculated by multiplying the amount

of the subsidiary's investment by the percentage of the ownership of the

subsidiary.

c. With the approval of the commissioner, invest any greater amount in common

stock, preferred stock, debt obligations, or other securities of one or more

subsidiaries; provided, that after the investment the insurer's surplus as regards

policyholders will be reasonable in relation to the insurer's outstanding liabilities

and adequate to its financial needs.

3. Investments in common stock, preferred stock, debt obligations, or other securities of

subsidiaries made pursuant to subsection 2 are not subject to any of the otherwise

applicable restrictions or prohibitions applicable to such investments of an insurer.

4. Whether any investment pursuant to subsection 2 meets the applicable requirements

thereof is to be determined before the investment is made, by calculating the

applicable investment limitations as though the investment had already been made,

taking into account the then outstanding principal balance on all previous investments

in debt obligations, and the value of all previous investments in equity securities as of

the date they were made net of any return of capital invested, not including dividends.

5. If an insurer ceases to control a subsidiary, it shall dispose of any investment therein

made pursuant to this section within three years from the time of the cessation of

control or within such further time as the commissioner prescribes, unless at any time

revious investments in equity securities as of

the date they were made net of any return of capital invested, not including dividends.

5. If an insurer ceases to control a subsidiary, it shall dispose of any investment therein

made pursuant to this section within three years from the time of the cessation of

control or within such further time as the commissioner prescribes, unless at any time

after the investment has been made, the investment has met the requirements for

investment under any other section, and the insurer has so notified the commissioner.