Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Rule 054.00.94-006 - Reg. 36 - Investments in Medium Grade and Lower Grade Obligations for Domestic Arkansas Insurers

Current through Register Vol. 49, No. 6, June, 2024
SECTION 1.
		  PURPOSE. The purposes of this Regulation include protecting the interests of
		  the Arkansas insurance-buying public by establishing limitations on the
		  concentration of medium grade and lower grade obligations in which a domestic
		  Arkansas insurer and others can invest; and implementing Ark. Code Ann.
		  §§
							23-63-801, et seq.
		  in pertinent part, by specifying certain allowable investments of domestic
		  Arkansas insurers and others as to investments in medium and lower grade
		  obligations.
The Rule and Regulation is necessary to avoid undesirable results
			 when market conditions and other market variables adversely affect domestic
			 insurers having a high concentration of these investments. Accordingly, a
			 limitation on the percentage of total admitted assets that a domestic insurer
			 may prudently invest in such obligations is reasonable, necessary and required
			 in order to carry out the Department's solvency responsibilities under the
			 Insurance Code. While this Regulation will leave all affected domestic insurers
			 and others with authority to invest a substantial portion of their assets in
			 medium grade and lower grade obligations, the prudent management of the
			 attendant risks will remain an essential element of such investing.
SECTION 2. AUTHORITY AND SCOPE.
		  The Commissioner is promulgating this Rule pursuant to his authority under Ark.
		  Code Ann. §
							23-61-108;
		  §§
							23-63-601,
		  et seq. as to insurer assets generally; §§
							23-63-801, et seq.
		  as to insurer investments generally; and including but not limited to the
		  following types of domestic insurers or corporations: §§
							23-70-101,
		  et seq. as to reciprocal insurers; §§
							23-71-101,
		  et seq. as to stipulated premium plan insurers; §§
							23-72-101,
		  et seq. as to mutual assessment life and disability insurers; §§
							23-73-101,,
		  et seq. as to farmers' mutual aid associations; §
							23-75-113,
		  as to hospital and medical service corporations; §
							23-76-117
		  and §
							23-76-125, as to
		  health maintenance organizations; §§ 23-94-101, et seq. as to risk
		  retention groups; §§
							25-15-201, et
		  seq. under the Administrative Procedure act and; other applicable laws or
		  rules. This Rule is intended to apply to and authiorized domestic insurers
		  holding an Arkansas Certificate of Authority, including domestic stock and
		  mutual insurers, domestic risk retention groups, domestic hospital and medical
		  service corporations, domestic health maintenance organizations, domestic
		  farmers' mutual aid associations, and domestic reciprocal and stipulated
		  premium plan insurers.
This Rule is not intended to apply to foreign farmers' mutual aid
			 associations; domestic or foreign fraternal benefit societies; foreign
			 reciprocal or stipulated premium plan insurers; foreign or alien insurers;
			 foreign or alien hospital or medical service corporations; foreign or alien
			 health maintenance organizations; or foreign or alien risk retention
			 groups.
SECTION 3.
		  EFFECTIVE DATE. The effective date of this Rule and Regulation shall be August
		  1, 1994, after filing with the Arkansas Secretary of State and the Arkansas
		  State Library, pursuant to Ark. Code Ann. §§
							25-15-201, et
		  seq., as amended by Act 1106 of 1993.
SECTION
		  4. DEFINITIONS. As used in this Regulation:
A. "Medium grade obligations" means
		  obligations which are rated three (3) by the Securities Valuation Office of the
		  National Association of Insurance Commissioners ("NAIC").
B. "Lower grade obligations" means
		  obligations which are rated four (4), five (5) or six (6) by the Securities
		  Valuation Office of the NAIC.
C.
		  "Admitted assets" means the amount thereof as of the last day of the most
		  recently concluded annual statement year, computed in the same manner as
		  "admitted assets" in Ark. Code Ann. §§
								23-63-601,
		  et seq., as reported in the insurer's annual statement, per the NAIC convention
		  blank.
D. "Aggregate amount" of
		  medium grade and lower grade obligations means the aggregate statutory
		  statement value thereof.
E.
		  "Institution" means a corporation, a joint-stock company, an association, a
		  trust, a business partnership, a business joint venture or similar
		  entity.