Arkansas Code of 1987 (2023) › Title 23 - PUBLIC UTILITIES AND REGULATED INDUSTRIES (§§ 23-1-101 — 23-119-105) › Subtitle 3 - INSURANCE (§§ 23-60-101 — 23-103-417) › Chapter 69 - DOMESTIC STOCK AND MUTUAL INSURERS (§§ 23-69-101 — 23-69-512) › Subchapter 1 - GENERAL PROVISIONS (§§ 23-69-101 — 23-69-156) › Section 23-69-134 - Maintenance of home office and records - Definitions

(a)
Every domestic insurer shall have and maintain its principal place of business and home office in this state and shall keep therein complete records of its assets, transactions, and affairs in accordance with such methods and systems as are customary or suitable as to the kind or kinds of insurance transacted.
(b)
Every domestic insurer shall have and maintain its assets in this state, except as to:
(1)
Real property and personal property appurtenant thereto lawfully owned by the insurer and located outside this state;
(2)
Such property of the insurer as may be customary, necessary, and convenient to enable and facilitate the operation of its branch offices and regional home offices located outside this state as referred to in subsection (d) of this section;
(3)
Such securities of the insurer that are readily marketable and have a maturity of one (1) year or less from the date of purchase and that are kept in safekeeping in a federally chartered bank, bank and trust company, or national bank association domiciled outside the State of Arkansas, provided that:
(A)
The insurer shall maintain in its possession a safekeeping receipt for those securities evidencing uncontestable ownership; and
(B)
At no time shall the insurer hold pursuant to this subdivision (b)(3) securities in an aggregate amount in excess of the greater of:
(i)
Ten percent (10%) of its assets; or
(ii)
Forty percent (40%) of its surplus if a life or accident and health insurer or of its surplus to policyholders if other than a life or accident and health insurer; and
(4)
In the discretion of the Insurance Commissioner, custodied securities may be held or managed inside or outside the state by a bank custodian as defined by and subject to the requirements imposed on bank custodians by rules of the State Insurance Department governing the holding and transferring of securities through a clearing corporation. In addition, custodied securities may be held or managed inside or outside the state by a securities brokerage firm meeting the following qualifications:
(A)
The securities broker-dealer firm must be registered with and subject to jurisdiction of the United States Securities and Exchange Commission, maintain membership in the Securities Investor Protection Corporation, and demonstrate by its most recent audited financial statement and regulatory filings:
(i)
Tangible net worth that satisfies the capital and financial requirements of a custodian as defined by rules promulgated by the department and regulatory net capital in an amount determined by the commissioner; or
(ii)
Tangible net worth that satisfies the capital and financial requirements of a custodian as defined by rules promulgated by the department along with:
(a)
Regulatory net capital in an amount determined by the commissioner; and
(b)
Securities Investor Protection Corporation excess insurance coverage equal to or greater than the market value of the insurers' securities held by the custodian and in the form approved by the commissioner;
(B)
The deposited securities with the qualified broker-dealer must be governed by a written custodial agreement governing the insurer's deposit of the insurer's securities such that the qualified broker-dealer agrees that:
(i)
The qualified broker-dealer shall exercise the same due care that is expected of a fiduciary with the responsibility for the safeguarding of the insurer's custodied securities and for compliance with all provisions of the custodial agreement, whether the insurer's custodied securities are in the custodian's possession or have been deposited or redeposited by the custodian with a subcustodian;
(ii)
The qualified broker-dealer shall indemnify the insurer for any loss of custodied securities occasioned by the negligence or dishonesty of the custodian's officers and employees or burglary, robbery, hold-up, theft, or mysterious disappearance, including loss by damage or destruction. In the event of such a loss, the custodian must promptly replace the custodied securities or the value thereof and the value of any loss of rights or privileges resulting from the loss of custodied securities;
(iii)
Custodied securities shall be segregated at all times from the proprietary assets of the broker-dealer. The broker-dealer's official records shall separately identify custodied securities owned by the insurer;
(iv)
All custodied securities that are registered shall be registered in the name of the insurer or in the name of a nominee of the insurer or in the name of the custodian or its nominee or, if in a depository corporation, in the name of the depository corporation or its nominee;
(v)
All activities involving the insurer's custodied securities shall be subject to the insurer's instructions, and the custodied securities shall be withdrawable upon demand by the insurer or by the commissioner at any time;
(vi)
The custodian shall furnish upon request by the insurer or by the commissioner a confirmation of all purchases, sales, or transfers of custodied securities to or from the account of the insurer, reports of custodied securities sufficient to verify information reported in the insurer's annual statement filed with the department, and supporting schedules and information required in any audit of the insurer's financial statement;
(vii)
The insurer or its designee or the commissioner shall at all times be entitled to examine all records maintained by the broker-dealer relating to the insurer's custodied securities;
(viii)
The custodian shall not use any of the insurer's custodied securities for the broker-dealer's benefit, and none of the insurer's custodied securities shall be loaned, pledged, or hypothecated to any person or organization;
(ix)
The broker-dealer shall maintain securities all risks coverage or other insurance satisfactory to the commissioner at levels considered reasonable and customary for the custodian banking industry covering the broker-dealer's duties and activities as custodian for the insurer's assets and shall describe the nature and extent of the insurance protection. Any change in the insurance protection during the term of the custodial agreement shall be promptly disclosed to the insurer;
(x)
The broker-dealer is authorized and instructed by the insurer to honor any requests made by the department for information concerning the insurer's custodied securities. The department, from time to time, may request and the custodian shall furnish a detailed listing of the insurer's custodied securities and an affidavit by the broker-dealer certifying the custodian's safekeeping responsibilities relative to the custodied securities. The broker-dealer's response to such requests shall be made directly to the department and shall encompass all of the insurer's custodied securities; and
(xi)
Any other requirements provided by rules of the commissioner; and
(5)
(A)
Government money market mutual fund or class one money market mutual fund shares held or managed by a securities broker-dealer firm which meets the standards prescribed in subdivision (b)(4)(A) of this section, subject to any limitations on domestic insurer investments of this nature which may be otherwise contained in the Arkansas Insurance Code. Provided further that no such money market mutual fund shares owned by the insurer shall be required to be issued in certificated form, nor held by the insurer in a custodian account.
(B)
For purposes of this subsection:
(i)
"Class one money market mutual fund" means a money market mutual fund that at all times qualifies for investment using the bond class one reserve factor under the "Purposes and Procedures Manual of the NAIC Securities Valuation Office" or any successor publication;
(ii)
"Government money market mutual fund" means a money market mutual fund that at all times:
(a)
Invests only in obligations issued, guaranteed, or insured by the United States Government or collateralized repurchase agreements composed of these obligations; and
(b)
Qualifies for investment without a reserve under the Purposes and Procedures of the Securities Valuation Office of the National Association of Insurance Commissioners or any successor publication;
(iii)
"Money market mutual fund" means a mutual fund that meets the conditions of 17 C.F.R. Part 270.2a-7, under the Investment Company Act of 1940,
15 U.S.C. §§ 80a-1
et seq., as amended or renumbered; and
(iv)
"Mutual fund" means an investment company or, in the case of an investment company that is organized as a series company, an investment company series that, in either case, is registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940,
15 U.S.C. §§ 80a-1
et seq., as amended.
(c)
(1)
Removal of all or a material part of the records or assets of a domestic insurer from this state except pursuant to a plan of merger or consolidation approved by the commissioner under the Arkansas Insurance Code, or for such other reasonable purposes and periods of time as may be approved by the commissioner in writing in advance of the removal or concealment of the records or assets or material part thereof from the commissioner is prohibited.
(2)
Any person who removes or attempts to remove the records or assets or the material part thereof from the home office or other place of business or of safekeeping of the insurer in this state with the purpose of removing them from this state or who conceals or attempts to conceal them from the commissioner, in violation of this subsection, shall be guilty of a Class D felony.
(3)
Upon any removal or attempted removal of the records or assets, or upon retention of the records or assets or material part thereof outside this state beyond the period specified in the commissioner's consent under which the records were so removed, or upon concealment of or attempt to conceal records or assets in violation of this section, the commissioner may institute delinquency proceedings against the insurer pursuant to the provisions of §
23-68-101
et seq.
(d)
This section shall not be deemed to prohibit or prevent an insurer from:
(1)
Establishing and maintaining branch offices or regional home offices in other states when necessary or convenient to the transaction of its business and keeping in those offices the detailed records and assets customary and necessary for the servicing of its insurance in force and affairs in the territory served by the office, as long as the records and assets are made readily available at the office for examination by the commissioner at his or her request;
(2)
Having, depositing, or transmitting funds and assets of the insurer in or to jurisdictions outside this state as reasonably and customarily required in the regular course of its business; or
(3)
Maintaining its home office, records, and assets in another state if:
(A)
The insurer keeps in its home office complete records of its assets, transactions, and affairs according to the methods and systems as are customary or suitable as to the kinds of insurance transacted;
(B)
All records and assets of the insurer are made readily available at the home office for examination by the commissioner at his or her request; and
(C)
The insurer maintains a place of business in this state where service of process may be made under §§
23-79-204
and
23-79-205
.
Amended by Act 2023, No. 469,§ 7, eff. 8/1/2023.
Amended by Act 2019, No. 315,§ 2685, eff. 7/24/2019.
Acts 1959, No. 148, § 489; A.S.A. 1947, § 66-4237; Acts 1989, No. 772, § 12; 1999, No. 452, § 1; 2001, No. 1603, § 29; 2001, No. 1604, §§ 55, 56; 2005, No. 1994, § 451; 2007, No. 496, §§ 13, 14.