Louisiana Administrative Code › Title 37 - INSURANCE › Part XI - Rules › Chapter 3 - Rule 4 - Interlocal Risk Management Agency › Section XI-311 - Solvency or Risk Management Agencies; Trustee Responsibilities

Current through Register Vol. 50, No. 6, June 20, 2024
A. In order to
				insure the financial stability of the operations of each interlocal risk
				management agency, the board of trustees of each fund shall be responsible for
				all operations of the fund. The board of trustees of each agency shall take all
				necessary precautions to safeguard the assets of the fund or funds of such
				agency including:
1. the designation of a
				fiscal agent or administrator, if not otherwise provided for by Act 462 of the
				1979 Regular Session of the Louisiana Legislature to administer the financial
				affairs of the fund, which as obligee, shall furnish a fidelity bond, or
				acceptable substitute, to protect the fund against misappropriation or misuse
				of any monies or securities. The amount of the bond, or substitution therefor,
				shall be determined by the interlocal risk management agency subject to
				approval by the insurance department. Such fiscal agent or administrator shall
				not be an owner, officer, or employee of the service agent;
2. retain control of all monies collected or
				disbursed from the fund or funds and shall segregate all monies into a claims
				fund and trustee fund. The amount allocated to the claims fund will be
				sufficient to cover payment of the entire aggregate loss fund, as defined in
				the aggregate excess insurance policy. Only disbursements that are credited
				toward the loss fund, as defined in the aggregate excess policy, will be made
				from the claims fund. All administration costs and other disbursements will be
				made from the trustee fund. The administrator of the fund shall establish a
				revolving fund for use by the authorized service agent, which will be
				replenished from time to time from the claims fund. The service agent and its
				employees shall be covered by a fidelity bond, with the interlocal risk
				management agency named as obligee in an amount sufficient to protect all
				monies placed in the revolving fund. Such bond and its amount shall be subject
				to approval by the insurance department;
3. audit of the accounts and records are
				provided for in Act 462 of the 1979 Regular Session of the Louisiana
				Legislature;
4. the board of
				trustees or its fiscal agent or administrator shall not utilize any of the
				monies collected as premiums for any purpose unrelated to workmen's
				compensation or public liability purposes. Further, it shall not borrow any
				monies from the fund, or in the name of the fund, without advising the
				Department of Insurance of the nature and purpose of the loan and obtaining
				approval. The board of trustees may, at its discretion, invest any surplus
				monies not needed for current obligations, but such investments shall be
				limited to:
a. direct United States Treasury
				obligations, the principal and interest of which are fully guaranteed by the
				government of the United States;
b.
				bonds, debentures, notes, or other evidence of the indebtedness issued or
				guaranteed by federal agencies and provided such obligations are backed by the
				full faith and credit of the United States of America, which obligations
				include but are not limited to:
i.  U.S.
				Export-Import Bank;
ii. Farmers Home
				Administration;
iii. Federal
				Financing Bank;
iv Federal Housing
				Administration Debentures;
v.
				General Services Administration;
vi.
				Government National Mortgage Association- guaranteed mortgage-backed bonds and
				guaranteed pass-through obligations;
vii. U.S. Maritime Administration-guaranteed
				Title XI financing;
viii. U.S.
				Department of Housing and Urban Development.
c. Bonds, debentures, notes, or other
				evidence of the indebtedness issued or guaranteed by U.S. government
				instrumentalities, which are federally sponsored, and such obligations include
				but are not limited to:
i. Federal Home Loan
				Bank System;
ii. Federal Home Loan
				Mortgage Corporation;
iii. Federal
				National Mortgage Association;
iv.
				Student Loan Marketing Association;
v. Resolution Funding Corporation.
d. In no instance shall an
				interlocal risk management agency invest in obligations in Subparagraphs b and
				c of this Paragraph which are collateralized mortgage obligations that have
				been stripped into interest only or principal only obligations, inverse
				floaters, or structured notes. For the purposes of this Item,
structured notes
shall mean securities of U.S. government
				agencies, instrumentalities, or government-sponsored enterprises, which have
				been restructured, modified, and/or reissued by private entities.
e. Bonds, debentures, notes, or other
				evidence of indebtedness issued by the state of Louisiana or any of its
				political subdivisions provided that the indebtedness shall have a long-term
				rating of Baa or higher by Moody's Investors Service, a long-term rating of
				BBB- or higher by Standard and Poor's or a long-term rating of BBB- or higher
				by Fitch, Inc. or a short-term rating of MIGI or VMIGI by Moody's Investors
				Service, a short-term rating of A-l or A-1+ by Standard and Poor's, or a
				short-term rating of Fl of Fl+by Fitch, Inc.
f. Direct security repurchase agreements of
				any federal book entry only securities enumerated in Subparagraphs a, b, and c
				of this Paragraph.
Direct security repurchase agreement
means
				an agreement under which political subdivision buys, holds for a specified
				time, and then sells back those securities and obligations enumerated in
				Subparagraphs a, b, and c of this Paragraph.
g. Time certificates of deposit of any bank
				domiciled or having a branch office in the state of Louisiana, savings accounts
				or shares of savings and loan associations and savings band, as defined by
				R.S. 6:703(16) or
				(17), or share accounts and share certificate
				accounts of federally or state-chartered credit unions issuing time
				certificates of deposit. Funds invested herein shall not exceed at any time the
				amount insured by the Federal Deposit Insurance Corporation in any one banking
				institution, or in any one savings and loan association, or National Credit
				Union Administration.
h. Deposits
				in savings and loan associations and commercial banks shall be limited in this
				state, except in those instances where higher interest rates paid on deposits
				by such institutions in other states will provide better investment income and
				such deposits shall not exceed the federally insured amount in any one account,
				except that the federally insured amount on any one account may be exceeded if
				the amount involved in such an account does not exceed the greater of either of
				the two factors:
i. 5 percent of the
				combination of surplus and undivided profits and reserves, as currently
				reported for each bank in this state of in the banking division annual report
				of the Financial Institution Office of the Department of Commerce (banking
				control) or financial reports filed with the Office of the Comptroller of the
				Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve
				Bank of Atlanta;
ii. $500,000 per
				institution.
i. Mutual
				or trust fund institutions which are registered with the Securities and
				Exchange Commission under the Securities Act of 1933 and the Investment Act of
				1940, and which have underlying investments consisting solely of and limited to
				securities of the United States government or its agencies. Investment of funds
				in such mutual or trust fund institutions shall be limited to 25 percent of the
				monies considered available for investment as provided by this
				Section.
j. Guaranteed investment
				contracts issued by a bank, financial institution, insurance company, or other
				entity having one of the two highest short-term rating categories of either
				Standard and Poor's Corporation or Moody's Investors Service, provided that no
				such investment may be made except in connection with a financing program for
				political subdivisions which financing program is approved by the state Bond
				Commission and offered by a public trust having the state as its beneficiary,
				provided further that no such investment shall be for a term longer than 18
				months, and provided further that any such guaranteed investment contract shall
				contain a provision providing that in the event the issuer of the guaranteed
				investment contract is at any time no longer rated in either of the two highest
				short-term rating categories of Standard and Poor's Corporation or Moody's
				Investors Service, the investing unit of local government may either be
				released from the guaranteed investment contract without penalty, or be
				entitled to require that the guaranteed investment provider collateralize the
				guaranteed investment contract with any bonds or other obligations which as to
				principal and interest constitute direct general obligations of, or are
				unconditionally guaranteed by, the United States of America, including
				obligations set forth in Subparagraphs a and b of this Paragraph to the extent
				unconditionally guaranteed by the United States of America.
k. Investment grade commercial paper issued
				in the United States, traded in the United States markets, denominated in
				United States dollars, with a short-term rating of at least A-l by Standard and
				Poor's Financial Services LLC or P-lby Moody's Investor Service, Inc. or the
				equivalent rating by a Nationally Recognized Statistical Rating Organization
				(NRSRO).
l. Pre-approved first
				mortgage loans on commercial real estate owned by the fund administrator,
				located with the state of Louisiana, and occupied by the Fund or its trustees,
				administrator, or third [arty administrator.
m. Bonds, debentures, notes, or other
				indebtedness issued by a state of the United States of America other than
				Louisiana or any such state's political subdivisions provided that all of the
				following conditions are met.
i. The
				indebtedness shall have a long-term rating of A3 or higher by Moody's Investors
				Service, a long-term rating of A- or higher by Standard and Poor's or a
				long-term rating of A- or higher by Fitch, Inc., or a short-term rating of M1G1
				of VM1G1 by Moody's Investor's Service, a short-term rating of A-l or A-l + by
				Standard & Poor's, or a short-term rating of F1 or F1 + by Fitch,
				Inc.
ii. Prior to purchase of any
				such indebtedness and at all times during which such indebtedness is owned, the
				purchasing interlocal risk management agency retains the services of an
				investment advisor registered with the United States Securities and Exchange
				Commission; a trust department of an institution that is insured by the Federal
				Deposit Insurance Corporation, that exercised trust powers in Louisiana, and
				that has a main office or a bank branch in Louisiana; or a trust company that
				has offices in Louisiana, that is regulated by the Office of Financial
				Institutions or the applicable federal agency, and that owes a fiduciary duty
				to act solely in the best interest of the political subdivision.
n. Bonds, debentures, notes or
				other indebtedness issued by domestic United States corporations provided that
				all of the following conditions are met.
i.
				The indebtedness shall have a long-term rating of Aa3 or higher by Moody's
				Investors Service, a long-term rating of AA- or higher by Standard and Poor's,
				or a long-term rating of AA- or higher by Fitch Ratings, Inc.
ii. Prior to purchase of any such
				indebtedness and at all times during which such indebtedness is owned, the
				purchasing interlocal risk management agency retains the services of an
				investment advisor registered with the United States Securities and Exchange
				Commission; a trust department of an institution that is insured by the Federal
				Deposit Insurance Corporation, that exercised trust powers in Louisiana, and
				that has a main office or a bank branch in Louisiana; or a trust company that
				has offices in Louisiana, that is regulated by the Office of Financial
				Institutions or the applicable federal agency, and that owes a fiduciary duty
				to act solely in the best interest of the political subdivision.
o. All interlocal risk management
				agencies shall develop and adopt an investment policy that details and
				clarifies investment objectives and the procedures and constraints necessary to
				reach those objectives. All such investment policies should:
i. reflect the mandate to manage funds
				prudently;
ii. place appropriate
				emphasis on the goals of safety of principal first, liquidity second, and yield
				third.