Mass. Gen. Laws ch. 175, sec. 63 — MA Code / Part I / Title XXII / Chapter 175 / Section 63
Capital and reserve; payment; investment
Status: reserved

Section 63. The capital stock and, in the case of a domestic stock life company, the net cash surplus required by section forty-eight shall be paid in cash within twelve months after the date of the charter or certificate of organization, but no certificates of full shares and no policies shall be issued until the whole capital and net cash surplus as aforesaid is paid in. A majority of the directors shall certify on oath that the money has been paid by the stockholders for their respective shares, and that the same is held as the capital of the company, invested and to be invested as required by this section. The capital of any domestic company, other than life, and three fourths of the reserve of any domestic stock or mutual life company, shall be invested only as follows:-- 1. In the public funds of the United States or of the District of Columbia or of any state of the United States; or in bonds, notes, evidences of indebtedness, or contractual obligations for the payment of money made, issued, assumed or guaranteed by the United States of America or any instrumentality thereof, or by any state of the United States, including, notwithstanding other provisions of this chapter, joint, undivided or participating interests therein pursuant to agreement with the obligor, other investors or a trustee. 2. (a) In the legally authorized bonds or notes of any county, city, town, school or water district in the commonwealth. (b) In the bonds or notes of any county, city, school or water district, or other political subdivision, located in any other state in the United States, and having a population, according to the last national census preceding the date of such investment, of more than twenty-five thousand inhabitants, provided that such notes or bonds are legally authorized and are a direct obligation of the county, city, school or water district or political subdivision issuing the same. (c) In the bonds or notes of any county, city, town, school or water district, or other political subdivision, located in any other state of the United States and having an indebtedness, after deducting the amount of its water debt and securities in the sinking funds available for payment of its bonds, not in excess of five per cent of the valuation of property therein as assessed for taxation next preceding the date of such investment, provided that such bonds or notes are legally authorized and are a direct obligation of the county, city, town, school or water district or other political subdivision issuing the same. (d) In the bonds or notes of any county, city, town, district, authority or political subdivision located in any state of the United States, if, by statutory or other requirements applicable thereto, such bonds or notes are payable as to both principal and interest from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but not including any obligations payable solely out of special assessments on properties benefited by local improvements. 3. In securities of the same classes as those described in paragraph one and clauses (b), (c) and (d) of paragraph two, and subject to the limitations therein expressed, issued by the Dominion of Canada or any province thereof, or by any municipality or political subdivision thereof. 3A. In bonds, notes or obligations, issued, assumed or guaranteed by the International Bank for Reconstruction and Development, the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank or the African Development Bank. 4. In the bonds, notes or other evidences of indebtedness of any corporation primarily engaged in public transportation which is incorporated or located wholly or in part in the commonwealth, or in the bonds, notes or other evidences of indebtedness of any corporation primarily engaged in public transportation which is located wholly or in part in any state of the United States, whose capital stock equals at least one third of its funded indebtedness, which has paid regularly for the five years next preceding the date of such investment all interest charges on said funded indebtedness, and which has paid regularly for such period dividends of at least four per cent per annum upon all its issues of capital stock, or whose net earnings available for fixed charges during each of any three, including the last two, of the five fiscal years next preceding the date of investment, have been for such years not less than one and one half times the total of its present fixed charges, or in the bonds, notes or other evidences of indebtedness of any corporation which have been, both as to principal and interest, assumed or guaranteed by any such corporation primarily engaged in public transportation. "Net earnings available for fixed charges'', as used in this paragraph, shall mean net income after deducting operating and maintenance expenses, taxes other than federal, state, dominion and provincial income taxes, depreciation and depletion, but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statements of the issuing corporation. "Fixed charges'', as used in this paragraph, shall include interest on debt, annual apportionment of debt discount or premium and rentals for leased properties. 5. In the mortgage bonds of any railroad corporation located wholly or in part in any state of the United States whose liens junior to such mortgage bonds equal at least one third of the funded indebtedness secured by such mortgage bonds and bonds prior thereto which has paid regularly for the five years next preceding the date of such investment all interest charges on the said funded indebtedness, and which has paid regularly for such period at least four per cent interest on such junior securities. 5A. In securities of the same classes as those described in paragraphs four and five, and subject to the limitations therein expressed, issued by corporations located wholly or in part in any province of the Dominion of Canada. 6. In equipment trust obligations or certificates which are adequately secured or other adequately secured instruments evidencing an interest in transportation equipment to be used wholly or in part within the United States or the Dominion of Canada and a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such equipment. 7. In loans upon improved and unencumbered real property in any state of the United States or in the District of Columbia or Puerto Rico, and upon leasehold estates in improved unencumbered real property where twenty-one years or more of the term is unexpired and where unencumbered except by rentals accruing therefrom to the owner of the fee, and where the mortgagee is entitled to be subrogated to all the rights under the leasehold. No loan on such real property or such leasehold estate shall exceed seventy-five per cent of the fair market value thereof at the time of making such loan, except that loans in excess of seventy-five per cent of such fair market value, but not in excess of ninety per cent thereof, may be made under this paragraph if such loan is secured by a first mortgage upon residential real property designed for occupancy by not more than four families and if the terms of such loan provide for monthly payments of principal and interest sufficient to effect full repayment of the loan within the remaining useful life of the residential structure as estimated in the appraisal for the loan or forty years, whichever is less, provided that no company shall invest in such one to four family residential loans in excess of seventy-five per cent of fair market value if the aggregate balance of all such outstanding loans held under this paragraph would thereby exceed ten per cent of the assets of such company. Nothing in this paragraph shall affect or restrict such company in investing in loans under the provisions of the National Housing Act of the United States, the National Housing Act, Nineteen Hundred and Fifty-Four of Canada or the Servicemen's Readjustment Act of 1944. A certificate of the value of such real property or such leasehold estate shall be executed before the making of such loan by an officer elected by the board of directors of the company which certificate shall be recorded on the books of the company. The commissioner may from time to time establish a schedule of minimum payments which the company shall require to be made on the principal of any such loan made in an amount in excess of sixty per cent of such value; provided, however, that such schedule shall permit payments of interest only for a period not to exceed five years and shall require payments applicable first to interest and then to principal during each year thereafter. Any such schedule shall apply to all such loans for which a company makes a commitment after thirty days from its receipt of a written notice of such schedule from the commissioner. Real property and leasehold estates shall not be deemed to be encumbered within the meaning of this paragraph by reason of the existence of instruments reserving mineral, oil or timber rights, rights of way, parking rights, sewer rights, or rights in walls, nor by reason of an option to purchase, nor by reason of any liens for taxes or assessments not delinquent, nor by reason of building restrictions or other restrictive covenants, nor by the reason that it is subject to lease under which rents or profits are reserved to the owner; provided, that the security for such loan is a first lien upon such real property and that there is no condition or right of re-entry or forfeiture under which such lien can be cut off, subordinated or otherwise disturbed. No mortgage loan upon a leasehold shall be made or acquired by a company pursuant to this paragraph unless the terms thereof shall provide for such payments of principal, whatever the period of the loan, so that at no time during the term of the loan shall the aggregate payments of principal theretofore required to be made under the terms of the loan be less than would be necessary for a loan payable completely by the end of four-fifths of the period of the leasehold which is unexpired at the time the loan is made, and payments of interest only may be made for a period not to exceed five years, provided, that payments applicable first to interest and then to principal are made during each year thereafter. Nothing in this paragraph shall be construed to prohibit the making of a loan under section twenty-eight A of chapter one hundred and eighty-three. No loan on such real property or such leasehold estate which is a participation or a part of a series or issue secured by the same mortgage instrument shall be authorized by this paragraph unless (1) the entire series or issue, which is secured by the same mortgage instrument, is held by the company, (2) the company holds a senior participation in such mortgage instrument giving it substantially the rights of a first mortgagee, or a mortgagee under paragraph 7B or (3) the loan is evidenced by one or more bonds, notes or other evidences of indebtedness held by such company or such company holds a participating interest therein and such bonds, notes or other evidences of indebtedness form part of a series or issue of obligations secured by a mortgage instrument to a domestic or foreign insurer admitted and qualified to transact business in the commonwealth or in trust to a bank or trust company or other corporation, with or without a co-trustee, competent to act as trustee in the state of its domicile, provided that (i) all of such series or issue is of equal rank, (ii) the total amount of each series or issue complies with the restrictions of this paragraph respecting the ratio of loan to fair market value, and (iii) the security for such loan complies with all other provisions of this paragraph. 7A. In loans of the same classes as those described in paragraph seven and subject to the provisions therein expressed located in any province of the Dominion of Canada; provided, however, that nothing in this paragraph shall authorize such loans in the Dominion of Canada in amounts in excess of premiums received on insurance issued by the company on Canadian lives and amounts received by the company from Canadian investments authorized by this chapter; and provided, further, that no company shall invest in the aggregate an amount in excess of three per cent of its reserve liability in loans authorized by this provision. 7B. In loans of the same classes as those described in paragraphs 7 and 7A and subject to the provisions therein expressed except that the security for any such loan may be a junior lien upon the real property or leasehold estate securing such loan if the sum of the amounts unpaid on loans secured by prior mortgage liens and the amount of such loan does not exceed (i) seventy-five per cent of the fair market value of such real property or leasehold estate at the time of making such loan if clause (ii) of this paragraph 7B is not applicable or, (ii) ninety per cent of the fair market value thereof if such loan is secured by a junior lien upon residential real property designed for occupancy by not more than four families and if the terms of such loan otherwise meet the requirements of the second sentence of said paragraph 7. Real property and leasehold estates shall not be deemed to be encumbered within the meaning of said paragraph 7 by reason of the existence of prior mortgage liens permitted by this paragraph; provided, however, that, other than such prior mortgage liens, there is no condition or right of re-entry or forfeiture under which such junior lien can be cut off, subordinated or otherwise disturbed. 8. In such real property as shall be required for the convenient accommodation in the transaction of its business, subject to section sixty-four. 8A. In improved real property, or any interest therein, consisting of apartment buildings, office buildings, store buildings, shopping centers, hotels, motels, warehouse and industrial buildings and other similarly improved commercial and industrial real estate acquired under sections sixty-six A and sixty-six B. 9. In the bonds, notes or other evidences of indebtedness of the American Telephone and Telegraph Company or its subsidiary or affiliated operating companies. 10. In banker's acceptances and bills of exchange of the kinds and maturities made eligible by law for rediscount with federal reserve banks, provided that the same are accepted by a bank or trust company incorporated under the laws of the United States or this commonwealth or any other bank or trust company which is a member of the Federal Reserve System. 11. In the first mortgage bonds of companies engaged directly and primarily in the production, distribution, transmission or sale of electricity or gas, or in the operation of telephone or telegraph systems or water works located wholly or in part in any state of the United States or in any province of the Dominion of Canada, the issue of which is subject to the jurisdiction of a federal, state, dominion, or provincial commission or other regulatory body, the net earnings available for fixed charges of the issuing company during each of any three, including the last two, of the five fiscal years next preceding the date of investment, having been for telephone and telegraph systems and electric light or power companies not less than twice the fixed charges, for gas companies not less than two and one half times the fixed charges and for water companies not less than one and one half times the fixed charges. "Net earnings available for fixed charges'', as used in this paragraph, shall mean net income after deducting operating and maintenance expenses, taxes other than federal, state, dominion and provincial income taxes, depreciation and depletion, but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statements of the issuing company. "Fixed charges'', as used in this paragraph, shall include interest on all debt and annual apportionment of debt discount or premium. 12. In loans upon the security of its own policies not exceeding at the time of making the loan the legal reserve on the policy. 13. In the capital stock of companies organized under the fourteenth clause of section forty-seven; provided that the above specified proportionate part of the reserve of any domestic stock or mutual life company shall not be invested in such capital stock. 14. In farm loan bonds lawfully issued by federal land banks incorporated under the act of congress approved July seventeenth, nineteen hundred and sixteen, entitled "An Act to provide capital for agricultural development, to create standard forms of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create government depositaries and financial agents for the United States, and for other purposes.'' 14A. In the bonds, notes or other evidences of indebtedness issued, assumed or guaranteed by companies incorporated under the laws of the United States, or any state thereof, or of the Dominion of Canada or any province thereof, or of associations or trusts as defined in section one of chapter one hundred and eighty-two, whose net earnings during either of the last two fiscal years next preceding the date of investment and whose average net earnings during the five fiscal years next preceding the date of investment, have been not less than (1) one and one-half times the average fixed charges for said period if such company, association or trust is not engaged in wholesale, retail, installment, commercial or consumer financing, factoring or the small loan business, or is not a bank chartered or incorporated under the laws of the United States or any state thereof; or (2) one and fifteen one-hundredths times the average fixed charges for said period if such company, association or trust is so engaged or is a bank chartered or incorporated under the laws of the United States or any state thereof. No more than one-half of the capital of any domestic company, other than life, and not more than one-half of the reserve of any domestic stock or mutual life company may be invested under this paragraph, and not more than thirty-five per cent of the assets of a life company may be invested under clause (2). "Net earnings'', as used in this paragraph, shall mean net income after deducting operating and maintenance expenses, taxes other than federal, state, dominion and provincial income taxes, depreciation and depletion, but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statements of the issuing company or such association or trust, as the case may be. "Fixed charges'', as used in this paragraph, shall include interest on all debt and annual apportionment of debt discount or premium, but in the case of a bank or trust company interest paid by such institution upon any deposit or any certificate or other evidence of a deposit shall not be deemed a fixed charge of such institution. 14B. In the shares or savings deposits of federal savings and loan associations having a usual place of business within the commonwealth, but not exceeding ten thousand dollars and accrued dividends thereon in the shares or savings deposits of any such association. 14C. In bonds, notes or other evidences of indebtedness secured by assignment of a lease or leases, or the rentals payable under such leases, of real or personal property to (1) the United States of America or any instrumentality thereof or any state of the United States or any county, city, town, school or water district, authority or other political subdivision in any such state; or (2) one or more companies incorporated under the laws of the United States or any state thereof, or of the Dominion of Canada or any province thereof, or one or more associations or trusts as defined in section one of chapter one hundred and eighty-two; provided, however, that (a) the fixed rentals assigned shall be sufficient to repay the indebtedness within the unexpired term of the lease, exclusive of the term which may be provided by an enforceable option of renewal; (b) the net earnings of any lessee under clause (2), or of any such company, association or trust assuming or guaranteeing said lease, during either of the last two fiscal years next preceding the date of investment and the average net earnings of such lessee, or company, association or trust assuming or guaranteeing said lease, during the five fiscal years next preceding the date of investment, have been not less than (1) one and one-half times the average fixed charges for said period if such company, association or trust is not engaged in wholesale, retail, installment, commercial or consumer financing, factoring or the small loan business, or is not a bank chartered or incorporated under the laws of the United States or any state thereof: or (2) one and fifteen one-hundredths times the average fixed charges for said period if such company, association or trust is so engaged or is a bank chartered or incorporated under the laws of the United States or any state thereof; (c) any county, city, town, school or water district or political subdivision located outside the commonwealth to qualify as a lessee under clause (1) must satisfy requirements as to either population or debt limitation as provided in subclauses (b) and (c) of clause (2) of this section; (d) a first lien on the interest of the lessor in the unencumbered property so leased shall be obtained as additional security for the indebtedness; and (e) no company shall invest in such indebtedness if the aggregate balance of all outstanding investments held under this paragraph would thereby exceed ten per cent of the assets of such company. As used in this paragraph "net earnings'' and "fixed charges'' shall have the same meanings as set forth in paragraph 14A, and "unencumbered'' shall have the same meaning as set forth in paragraph 7. 14D. In the consolidated debentures of the federal intermediate credit banks. 14E. In the consolidated debentures of the banks for co-operatives organized under the laws of the United States. 14F. In equipment or chattels or in instruments evidencing interests therein, or in obligations secured thereby; provided, that (a) any such property or property interest is acquired for or subject to lease, installment sale or other similar disposition to (1) the United States of America or any instrumentality thereof of any state of the United States or any county, city, town, school or water district, authority or other political subdivision in any such state, or (2) one or more companies incorporated under the laws of the United States or any state thereof, or of the Dominion of Canada or a province thereof, or one or more associations or trusts as defined in section one of chapter one hundred and eighty-two, whose average net earnings during the five fiscal years next preceding the date of investment have been not less than two times the average fixed charges for said period if such company, association or trust is not engaged in wholesale, retail, installment, commercial or consumer financing, factoring or the small loan business, or is not a bank chartered or incorporated under the laws of the United States, or any state thereof, or one and one-quarter times the average fixed charges for said period if such company, association or trust is so engaged or, is such a bank, or (3) one or more companies engaged directly and primarily in the production, distribution, transmission or sale of electricity or gas, or in the operation of telephone or telegraph systems or water works located wholly or in part in any state of the United States or in any province of the Dominion of Canada, the issue of which is subject to the jurisdiction of a federal, state, dominion, or provincial commission or other regulatory body, the net earnings available for fixed charges of the issuing company during each of any three, including the last two, of the five fiscal years next preceding the date of investment, having been for telephone and telegraph systems and electric light or power companies not less than twice the fixed charges, for gas companies not less than two and one-half times the fixed charges and for water companies not less than one and one-half times the fixed charges, (b) any county, city, town, school or water district or political subdivision located outside the commonwealth, as set forth under clause (1), shall satisfy the requirements as to population or debt limitation as set forth in subclauses (b) and (c) of clause (2) of this section; (c) any right to receive rental, purchase or other fixed obligatory payments for the use or purchase of such equipment of chattels shall be for a period of not less than five years; and (d) no company shall acquire such property or property interest if the cost thereof plus the aggregate book value of all such property or property interests held under this paragraph at the time of any such acquisition exceeds five per cent of the assets of such company. As used in this paragraph, "net earnings'' and "fixed charges'' shall have the same meanings as set forth in paragraph 14A. [ Introduction of paragraph 14G effective until August 5, 2025. For text effective August 5, 2025, see below.] 14G. In bonds, notes, evidences of indebtedness or contractual obligations for the payment of money issued, assumed or guaranteed by institutions as defined in paragraph (1) of section 63A organized under the laws of the United States, or any state thereof, or of the Dominion of Canada or any province thereof; if the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or the long-term debt of the institution or institutions issuing, assuming or guaranteeing the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money are either: [ Introduction of paragraph 14G as amended by 2025, 14, Secs. 46 and 47 effective August 5, 2025. For text effective until August 5, 2025, see above.] 14G. In bonds, notes, evidences of indebtedness or contractual obligations for the payment of money issued, assumed or guaranteed by institutions as defined in paragraph (1) of section 63A organized under the laws of the United States, or any state thereof, or of the Dominion of Canada or any province thereof or shares of an exchange-traded fund; if the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or the long-term debt of the institution or institutions issuing, assuming or guaranteeing the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or shares of an exchange-traded fund are either: (1) initially rated at least BBB- or Baa3 or the equivalent thereof by any of the nationally recognized statistical rating organizations recognized by the Securities Valuation Office of the National Association of Insurance Commissioners hereinafter referred to as NAIC-SVO; (2) initially rated NAIC 1 or NAIC 2 subsequent to such acquisition, either by the NAIC-SVO or by the insurer pursuant to a filing exemption in accordance with the requirements of the NAIC-SVO; (3) are provisionally rated NAIC 1Z or NAIC 2Z by the insurer in accordance with the requirements of the NAIC-SVO; provided, however, that in the event that the provisionally rated bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or the long-term debt of the institution or institutions issuing, assuming or guaranteeing the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money subsequently fail to qualify under clause (1) or (2) after any appeal by the insurer within the applicable time periods specified by the NAIC-SVO, the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money shall no longer qualify as permitted investments under this paragraph; provided further, that no company may invest more than an aggregate of 2 per cent of its admitted assets in bonds, notes, evidences of indebtedness or contractual obligations for the payment of money issued, guaranteed or insured by any one institution pursuant to this paragraph; or (4) are of an exchange-traded fund registered pursuant to the Investment Company Act of 1940; provided, that: (i) the exchange-traded fund is solvent and reported not less than $100,000,000 of net assets in its latest annual or more recent certified audited financial statement; (ii) the exchange-traded fund operates as a corporation, trust or other substantially similar legal structure registered with the Securities and Exchange Commission pursuant to the Investment Company Act of 1940, and the offered shares of the exchange-traded fund are registered under the Securities Act of 1933; provided, however, that each exchange-traded fund shall be treated as the issuer of the securities issued by the fund for the purposes of this paragraph; (iii) the NAIC-SVO has designated the exchange-traded fund as meeting the criteria to be placed on the list promulgated by the NAIC-SVO of exchange-traded funds eligible for reporting as a long-term bond in the purposes and procedures manual of the NAIC-SVO or a successor publication; and (iv) the amount of the domestic stock or mutual life company's investment in the exchange-traded fund does not exceed 15 per cent of said company's capital and surplus. Subclause (iii) shall not authorize a domestic stock or mutual life company to invest in a bond exchange-traded fund that has embedded structural features designed to deliver performance that does not track the full unlevered and positive return of the underlying index or exposure, including a leverage or inverse exchange-traded fund. An insurer may deposit with the department shares of a bond exchange-traded fund described by clause (4) as a statutory deposit if state law requires a statutory deposit from the insurer. 15. In loans secured by collateral security consisting of any of the above. 16. In any of the following investments; provided, however, that each such investment matures in two years or less from the date of acquisition: (1) obligations, including certificates of deposit and bankers acceptances, of banks or trust companies incorporated and doing business under the laws of the United States or one of the states thereof which at the date of the investment have capital, surplus and undivided profits, as of the date of their most recent published financial statements, in excess of one hundred million dollars, including obligations of foreign branches of United States banks and United States branches or agencies of foreign banks if such banks meet the stated qualifications; (2) commercial paper which at the date of the investment is rated, or guaranteed by a company whose commercial paper is rated, A-1 by Standard & Poor's Corporation, P-1 by Moody's Investors Service, Inc., or F-1 by Fitch's Investors Service or, if not rated, is issued by a company which at the date of the investment has an outstanding debt issue rated AAA or AA by Standard & Poor's or Aaa or Aa by Moody's; (3) corporate obligations maturing in one year or less which at the date of the investment are rated A or higher by Standard & Poor's or A or higher by Moody's; and (4) repurchase agreements with respect to any of the foregoing obligations.

Section 63. The capital stock and, in the case of a domestic stock life company, the net cash surplus required by section forty-eight shall be paid in cash within twelve months after the date of the charter or certificate of organization, but no certificates of full shares and no policies shall be issued until the whole capital and net cash surplus as aforesaid is paid in. A majority of the directors shall certify on oath that the money has been paid by the stockholders for their respective shares, and that the same is held as the capital of the company, invested and to be invested as required by this section.

The capital of any domestic company, other than life, and three fourths of the reserve of any domestic stock or mutual life company, shall be invested only as follows:--

1. In the public funds of the United States or of the District of Columbia or of any state of the United States; or in bonds, notes, evidences of indebtedness, or contractual obligations for the payment of money made, issued, assumed or guaranteed by the United States of America or any instrumentality thereof, or by any state of the United States, including, notwithstanding other provisions of this chapter, joint, undivided or participating interests therein pursuant to agreement with the obligor, other investors or a trustee.

2. (a) In the legally authorized bonds or notes of any county, city, town, school or water district in the commonwealth.

(b) In the bonds or notes of any county, city, school or water district, or other political subdivision, located in any other state in the United States, and having a population, according to the last national census preceding the date of such investment, of more than twenty-five thousand inhabitants, provided that such notes or bonds are legally authorized and are a direct obligation of the county, city, school or water district or political subdivision issuing the same.

(c) In the bonds or notes of any county, city, town, school or water district, or other political subdivision, located in any other state of the United States and having an indebtedness, after deducting the amount of its water debt and securities in the sinking funds available for payment of its bonds, not in excess of five per cent of the valuation of property therein as assessed for taxation next preceding the date of such investment, provided that such bonds or notes are legally authorized and are a direct obligation of the county, city, town, school or water district or other political subdivision issuing the same.

(d) In the bonds or notes of any county, city, town, district, authority or political subdivision located in any state of the United States, if, by statutory or other requirements applicable thereto, such bonds or notes are payable as to both principal and interest from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but not including any obligations payable solely out of special assessments on properties benefited by local improvements.

3. In securities of the same classes as those described in paragraph one and clauses (b), (c) and (d) of paragraph two, and subject to the limitations therein expressed, issued by the Dominion of Canada or any province thereof, or by any municipality or political subdivision thereof.

3A. In bonds, notes or obligations, issued, assumed or guaranteed by the International Bank for Reconstruction and Development, the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank or the African Development Bank.

4. In the bonds, notes or other evidences of indebtedness of any corporation primarily engaged in public transportation which is incorporated or located wholly or in part in the commonwealth, or in the bonds, notes or other evidences of indebtedness of any corporation primarily engaged in public transportation which is located wholly or in part in any state of the United States, whose capital stock equals at least one third of its funded indebtedness, which has paid regularly for the five years next preceding the date of such investment all interest charges on said funded indebtedness, and which has paid regularly for such period dividends of at least four per cent per annum upon all its issues of capital stock, or whose net earnings available for fixed charges during each of any three, including the last two, of the five fiscal years next preceding the date of investment, have been for such years not less than one and one half times the total of its present fixed charges, or in the bonds, notes or other evidences of indebtedness of any corporation which have been, both as to principal and interest, assumed or guaranteed by any such corporation primarily engaged in public transportation. "Net earnings available for fixed charges'', as used in this paragraph, shall mean net income after deducting operating and maintenance expenses, taxes other than federal, state, dominion and provincial income taxes, depreciation and depletion, but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statements of the issuing corporation. "Fixed charges'', as used in this paragraph, shall include interest on debt, annual apportionment of debt discount or premium and rentals for leased properties.

5. In the mortgage bonds of any railroad corporation located wholly or in part in any state of the United States whose liens junior to such mortgage bonds equal at least one third of the funded indebtedness secured by such mortgage bonds and bonds prior thereto which has paid regularly for the five years next preceding the date of such investment all interest charges on the said funded indebtedness, and which has paid regularly for such period at least four per cent interest on such junior securities.

5A. In securities of the same classes as those described in paragraphs four and five, and subject to the limitations therein expressed, issued by corporations located wholly or in part in any province of the Dominion of Canada.

6. In equipment trust obligations or certificates which are adequately secured or other adequately secured instruments evidencing an interest in transportation equipment to be used wholly or in part within the United States or the Dominion of Canada and a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such equipment.

7. In loans upon improved and unencumbered real property in any state of the United States or in the District of Columbia or Puerto Rico, and upon leasehold estates in improved unencumbered real property where twenty-one years or more of the term is unexpired and where unencumbered except by rentals accruing therefrom to the owner of the fee, and where the mortgagee is entitled to be subrogated to all the rights under the leasehold. No loan on such real property or such leasehold estate shall exceed seventy-five per cent of the fair market value thereof at the time of making such loan, except that loans in excess of seventy-five per cent of such fair market value, but not in excess of ninety per cent thereof, may be made under this paragraph if such loan is secured by a first mortgage upon residential real property designed for occupancy by not more than four families and if the terms of such loan provide for monthly payments of principal and interest sufficient to effect full repayment of the loan within the remaining useful life of the residential structure as estimated in the appraisal for the loan or forty years, whichever is less, provided that no company shall invest in such one to four family residential loans in excess of seventy-five per cent of fair market value if the aggregate balance of all such outstanding loans held under this paragraph would thereby exceed ten per cent of the assets of such company. Nothing in this paragraph shall affect or restrict such company in investing in loans under the provisions of the National Housing Act of the United States, the National Housing Act, Nineteen Hundred and Fifty-Four of Canada or the Servicemen's Readjustment Act of 1944. A certificate of the value of such real property or such leasehold estate shall be executed before the making of such loan by an officer elected by the board of directors of the company which certificate shall be recorded on the books of the company. The commissioner may from time to time establish a schedule of minimum payments which the company shall require to be made on the principal of any such loan made in an amount in excess of sixty per cent of such value; provided, however, that such schedule shall permit payments of interest only for a period not to exceed five years and shall require payments applicable first to interest and then to principal during each year thereafter. Any such schedule shall apply to all such loans for which a company makes a commitment after thirty days from its receipt of a written notice of such schedule from the commissioner. Real property and leasehold estates shall not be deemed to be encumbered within the meaning of this paragraph by reason of the existence of instruments reserving mineral, oil or timber rights, rights of way, parking rights, sewer rights, or rights in walls, nor by reason of an option to purchase, nor by reason of any liens for taxes or assessments not delinquent, nor by reason of building restrictions or other restrictive covenants, nor by the reason that it is subject to lease under which rents or profits are reserved to the owner; provided, that the security for such loan is a first lien upon such real property and that there is no condition or right of re-entry or forfeiture under which such lien can be cut off, subordinated or otherwise disturbed. No mortgage loan upon a leasehold shall be made or acquired by a company pursuant to this paragraph unless the terms thereof shall provide for such payments of principal, whatever the period of the loan, so that at no time during the term of the loan shall the aggregate payments of principal theretofore required to be made under the terms of the loan be less than would be necessary for a loan payable completely by the end of four-fifths of the period of the leasehold which is unexpired at the time the loan is made, and payments of interest only may be made for a period not to exceed five years, provided, that payments applicable first to interest and then to principal are made during each year thereafter. Nothing in this paragraph shall be construed to prohibit the making of a loan under section twenty-eight A of chapter one hundred and eighty-three. No loan on such real property or such leasehold estate which is a participation or a part of a series or issue secured by the same mortgage instrument shall be authorized by this paragraph unless (1) the entire series or issue, which is secured by the same mortgage instrument, is held by the company, (2) the company holds a senior participation in such mortgage instrument giving it substantially the rights of a first mortgagee, or a mortgagee under paragraph 7B or (3) the loan is evidenced by one or more bonds, notes or other evidences of indebtedness held by such company or such company holds a participating interest therein and such bonds, notes or other evidences of indebtedness form part of a series or issue of obligations secured by a mortgage instrument to a domestic or foreign insurer admitted and qualified to transact business in the commonwealth or in trust to a bank or trust company or other corporation, with or without a co-trustee, competent to act as trustee in the state of its domicile, provided that (i) all of such series or issue is of equal rank, (ii) the total amount of each series or issue complies with the restrictions of this paragraph respecting the ratio of loan to fair market value, and (iii) the security for such loan complies with all other provisions of this paragraph.

7A. In loans of the same classes as those described in paragraph seven and subject to the provisions therein expressed located in any province of the Dominion of Canada; provided, however, that nothing in this paragraph shall authorize such loans in the Dominion of Canada in amounts in excess of premiums received on insurance issued by the company on Canadian lives and amounts received by the company from Canadian investments authorized by this chapter; and provided, further, that no company shall invest in the aggregate an amount in excess of three per cent of its reserve liability in loans authorized by this provision.

7B. In loans of the same classes as those described in paragraphs 7 and 7A and subject to the provisions therein expressed except that the security for any such loan may be a junior lien upon the real property or leasehold estate securing such loan if the sum of the amounts unpaid on loans secured by prior mortgage liens and the amount of such loan does not exceed (i) seventy-five per cent of the fair market value of such real property or leasehold estate at the time of making such loan if clause (ii) of this paragraph 7B is not applicable or, (ii) ninety per cent of the fair market value thereof if such loan is secured by a junior lien upon residential real property designed for occupancy by not more than four families and if the terms of such loan otherwise meet the requirements of the second sentence of said paragraph 7. Real property and leasehold estates shall not be deemed to be encumbered within the meaning of said paragraph 7 by reason of the existence of prior mortgage liens permitted by this paragraph; provided, however, that, other than such prior mortgage liens, there is no condition or right of re-entry or forfeiture under which such junior lien can be cut off, subordinated or otherwise disturbed.

8. In such real property as shall be required for the convenient accommodation in the transaction of its business, subject to section sixty-four.

8A. In improved real property, or any interest therein, consisting of apartment buildings, office buildings, store buildings, shopping centers, hotels, motels, warehouse and industrial buildings and other similarly improved commercial and industrial real estate acquired under sections sixty-six A and sixty-six B.

9. In the bonds, notes or other evidences of indebtedness of the American Telephone and Telegraph Company or its subsidiary or affiliated operating companies.

10. In banker's acceptances and bills of exchange of the kinds and maturities made eligible by law for rediscount with federal reserve banks, provided that the same are accepted by a bank or trust company incorporated under the laws of the United States or this commonwealth or any other bank or trust company which is a member of the Federal Reserve System.

11. In the first mortgage bonds of companies engaged directly and primarily in the production, distribution, transmission or sale of electricity or gas, or in the operation of telephone or telegraph systems or water works located wholly or in part in any state of the United States or in any province of the Dominion of Canada, the issue of which is subject to the jurisdiction of a federal, state, dominion, or provincial commission or other regulatory body, the net earnings available for fixed charges of the issuing company during each of any three, including the last two, of the five fiscal years next preceding the date of investment, having been for telephone and telegraph systems and electric light or power companies not less than twice the fixed charges, for gas companies not less than two and one half times the fixed charges and for water companies not less than one and one half times the fixed charges. "Net earnings available for fixed charges'', as used in this paragraph, shall mean net income after deducting operating and maintenance expenses, taxes other than federal, state, dominion and provincial income taxes, depreciation and depletion, but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statements of the issuing company. "Fixed charges'', as used in this paragraph, shall include interest on all debt and annual apportionment of debt discount or premium.

12. In loans upon the security of its own policies not exceeding at the time of making the loan the legal reserve on the policy.

13. In the capital stock of companies organized under the fourteenth clause of section forty-seven; provided that the above specified proportionate part of the reserve of any domestic stock or mutual life company shall not be invested in such capital stock.

14. In farm loan bonds lawfully issued by federal land banks incorporated under the act of congress approved July seventeenth, nineteen hundred and sixteen, entitled "An Act to provide capital for agricultural development, to create standard forms of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create government depositaries and financial agents for the United States, and for other purposes.''

14A. In the bonds, notes or other evidences of indebtedness issued, assumed or guaranteed by companies incorporated under the laws of the United States, or any state thereof, or of the Dominion of Canada or any province thereof, or of associations or trusts as defined in section one of chapter one hundred and eighty-two, whose net earnings during either of the last two fiscal years next preceding the date of investment and whose average net earnings during the five fiscal years next preceding the date of investment, have been not less than (1) one and one-half times the average fixed charges for said period if such company, association or trust is not engaged in wholesale, retail, installment, commercial or consumer financing, factoring or the small loan business, or is not a bank chartered or incorporated under the laws of the United States or any state thereof; or (2) one and fifteen one-hundredths times the average fixed charges for said period if such company, association or trust is so engaged or is a bank chartered or incorporated under the laws of the United States or any state thereof. No more than one-half of the capital of any domestic company, other than life, and not more than one-half of the reserve of any domestic stock or mutual life company may be invested under this paragraph, and not more than thirty-five per cent of the assets of a life company may be invested under clause (2). "Net earnings'', as used in this paragraph, shall mean net income after deducting operating and maintenance expenses, taxes other than federal, state, dominion and provincial income taxes, depreciation and depletion, but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statements of the issuing company or such association or trust, as the case may be. "Fixed charges'', as used in this paragraph, shall include interest on all debt and annual apportionment of debt discount or premium, but in the case of a bank or trust company interest paid by such institution upon any deposit or any certificate or other evidence of a deposit shall not be deemed a fixed charge of such institution.

14B. In the shares or savings deposits of federal savings and loan associations having a usual place of business within the commonwealth, but not exceeding ten thousand dollars and accrued dividends thereon in the shares or savings deposits of any such association.

14C. In bonds, notes or other evidences of indebtedness secured by assignment of a lease or leases, or the rentals payable under such leases, of real or personal property to (1) the United States of America or any instrumentality thereof or any state of the United States or any county, city, town, school or water district, authority or other political subdivision in any such state; or (2) one or more companies incorporated under the laws of the United States or any state thereof, or of the Dominion of Canada or any province thereof, or one or more associations or trusts as defined in section one of chapter one hundred and eighty-two; provided, however, that (a) the fixed rentals assigned shall be sufficient to repay the indebtedness within the unexpired term of the lease, exclusive of the term which may be provided by an enforceable option of renewal; (b) the net earnings of any lessee under clause (2), or of any such company, association or trust assuming or guaranteeing said lease, during either of the last two fiscal years next preceding the date of investment and the average net earnings of such lessee, or company, association or trust assuming or guaranteeing said lease, during the five fiscal years next preceding the date of investment, have been not less than (1) one and one-half times the average fixed charges for said period if such company, association or trust is not engaged in wholesale, retail, installment, commercial or consumer financing, factoring or the small loan business, or is not a bank chartered or incorporated under the laws of the United States or any state thereof: or (2) one and fifteen one-hundredths times the average fixed charges for said period if such company, association or trust is so engaged or is a bank chartered or incorporated under the laws of the United States or any state thereof; (c) any county, city, town, school or water district or political subdivision located outside the commonwealth to qualify as a lessee under clause (1) must satisfy requirements as to either population or debt limitation as provided in subclauses (b) and (c) of clause (2) of this section; (d) a first lien on the interest of the lessor in the unencumbered property so leased shall be obtained as additional security for the indebtedness; and (e) no company shall invest in such indebtedness if the aggregate balance of all outstanding investments held under this paragraph would thereby exceed ten per cent of the assets of such company. As used in this paragraph "net earnings'' and "fixed charges'' shall have the same meanings as set forth in paragraph 14A, and "unencumbered'' shall have the same meaning as set forth in paragraph 7.

14D. In the consolidated debentures of the federal intermediate credit banks.

14E. In the consolidated debentures of the banks for co-operatives organized under the laws of the United States.

14F. In equipment or chattels or in instruments evidencing interests therein, or in obligations secured thereby; provided, that (a) any such property or property interest is acquired for or subject to lease, installment sale or other similar disposition to (1) the United States of America or any instrumentality thereof of any state of the United States or any county, city, town, school or water district, authority or other political subdivision in any such state, or (2) one or more companies incorporated under the laws of the United States or any state thereof, or of the Dominion of Canada or a province thereof, or one or more associations or trusts as defined in section one of chapter one hundred and eighty-two, whose average net earnings during the five fiscal years next preceding the date of investment have been not less than two times the average fixed charges for said period if such company, association or trust is not engaged in wholesale, retail, installment, commercial or consumer financing, factoring or the small loan business, or is not a bank chartered or incorporated under the laws of the United States, or any state thereof, or one and one-quarter times the average fixed charges for said period if such company, association or trust is so engaged or, is such a bank, or (3) one or more companies engaged directly and primarily in the production, distribution, transmission or sale of electricity or gas, or in the operation of telephone or telegraph systems or water works located wholly or in part in any state of the United States or in any province of the Dominion of Canada, the issue of which is subject to the jurisdiction of a federal, state, dominion, or provincial commission or other regulatory body, the net earnings available for fixed charges of the issuing company during each of any three, including the last two, of the five fiscal years next preceding the date of investment, having been for telephone and telegraph systems and electric light or power companies not less than twice the fixed charges, for gas companies not less than two and one-half times the fixed charges and for water companies not less than one and one-half times the fixed charges, (b) any county, city, town, school or water district or political subdivision located outside the commonwealth, as set forth under clause (1), shall satisfy the requirements as to population or debt limitation as set forth in subclauses (b) and (c) of clause (2) of this section; (c) any right to receive rental, purchase or other fixed obligatory payments for the use or purchase of such equipment of chattels shall be for a period of not less than five years; and (d) no company shall acquire such property or property interest if the cost thereof plus the aggregate book value of all such property or property interests held under this paragraph at the time of any such acquisition exceeds five per cent of the assets of such company. As used in this paragraph, "net earnings'' and "fixed charges'' shall have the same meanings as set forth in paragraph 14A.

[ Introduction of paragraph 14G effective until August 5, 2025. For text effective August 5, 2025, see below.]

14G. In bonds, notes, evidences of indebtedness or contractual obligations for the payment of money issued, assumed or guaranteed by institutions as defined in paragraph (1) of section 63A organized under the laws of the United States, or any state thereof, or of the Dominion of Canada or any province thereof; if the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or the long-term debt of the institution or institutions issuing, assuming or guaranteeing the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money are either:

[ Introduction of paragraph 14G as amended by 2025, 14, Secs. 46 and 47 effective August 5, 2025. For text effective until August 5, 2025, see above.]

14G. In bonds, notes, evidences of indebtedness or contractual obligations for the payment of money issued, assumed or guaranteed by institutions as defined in paragraph (1) of section 63A organized under the laws of the United States, or any state thereof, or of the Dominion of Canada or any province thereof or shares of an exchange-traded fund; if the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or the long-term debt of the institution or institutions issuing, assuming or guaranteeing the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or shares of an exchange-traded fund are either:

(1) initially rated at least BBB- or Baa3 or the equivalent thereof by any of the nationally recognized statistical rating organizations recognized by the Securities Valuation Office of the National Association of Insurance Commissioners hereinafter referred to as NAIC-SVO;

(2) initially rated NAIC 1 or NAIC 2 subsequent to such acquisition, either by the NAIC-SVO or by the insurer pursuant to a filing exemption in accordance with the requirements of the NAIC-SVO;

(3) are provisionally rated NAIC 1Z or NAIC 2Z by the insurer in accordance with the requirements of the NAIC-SVO; provided, however, that in the event that the provisionally rated bonds, notes, evidences of indebtedness or contractual obligations for the payment of money or the long-term debt of the institution or institutions issuing, assuming or guaranteeing the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money subsequently fail to qualify under clause (1) or (2) after any appeal by the insurer within the applicable time periods specified by the NAIC-SVO, the bonds, notes, evidences of indebtedness or contractual obligations for the payment of money shall no longer qualify as permitted investments under this paragraph; provided further, that no company may invest more than an aggregate of 2 per cent of its admitted assets in bonds, notes, evidences of indebtedness or contractual obligations for the payment of money issued, guaranteed or insured by any one institution pursuant to this paragraph; or

(4) are of an exchange-traded fund registered pursuant to the Investment Company Act of 1940; provided, that:

(i) the exchange-traded fund is solvent and reported not less than $100,000,000 of net assets in its latest annual or more recent certified audited financial statement;

(ii) the exchange-traded fund operates as a corporation, trust or other substantially similar legal structure registered with the Securities and Exchange Commission pursuant to the Investment Company Act of 1940, and the offered shares of the exchange-traded fund are registered under the Securities Act of 1933; provided, however, that each exchange-traded fund shall be treated as the issuer of the securities issued by the fund for the purposes of this paragraph;

(iii) the NAIC-SVO has designated the exchange-traded fund as meeting the criteria to be placed on the list promulgated by the NAIC-SVO of exchange-traded funds eligible for reporting as a long-term bond in the purposes and procedures manual of the NAIC-SVO or a successor publication; and

(iv) the amount of the domestic stock or mutual life company's investment in the exchange-traded fund does not exceed 15 per cent of said company's capital and surplus.

Subclause (iii) shall not authorize a domestic stock or mutual life company to invest in a bond exchange-traded fund that has embedded structural features designed to deliver performance that does not track the full unlevered and positive return of the underlying index or exposure, including a leverage or inverse exchange-traded fund.

An insurer may deposit with the department shares of a bond exchange-traded fund described by clause (4) as a statutory deposit if state law requires a statutory deposit from the insurer.

15. In loans secured by collateral security consisting of any of the above.

16. In any of the following investments; provided, however, that each such investment matures in two years or less from the date of acquisition:

(1) obligations, including certificates of deposit and bankers acceptances, of banks or trust companies incorporated and doing business under the laws of the United States or one of the states thereof which at the date of the investment have capital, surplus and undivided profits, as of the date of their most recent published financial statements, in excess of one hundred million dollars, including obligations of foreign branches of United States banks and United States branches or agencies of foreign banks if such banks meet the stated qualifications;

(2) commercial paper which at the date of the investment is rated, or guaranteed by a company whose commercial paper is rated, A-1 by Standard & Poor's Corporation, P-1 by Moody's Investors Service, Inc., or F-1 by Fitch's Investors Service or, if not rated, is issued by a company which at the date of the investment has an outstanding debt issue rated AAA or AA by Standard & Poor's or Aaa or Aa by Moody's;

(3) corporate obligations maturing in one year or less which at the date of the investment are rated A or higher by Standard & Poor's or A or higher by Moody's; and

(4) repurchase agreements with respect to any of the foregoing obligations.