Iowa Administrative Code › Agency 191 - Insurance Division › Life and Health Insurance › Chapter 32 - Deposits by a Domestic Life Company in a Custodian Bank or Clearing Corporation › Rule 191-32.3 - Requirements Upon Custodial Account and Custodial Agreement

Current through Register Vol. 47, No. 3, July 24, 2024
Custodied securities may be used to meet the legal reserve
				  deposit requirements of Iowa Code section
				  5118.,
				  subsection 16, provided such securities are held under written agreement with a
				  custodian which provides:
(1) That the
				custodial account is to be titled as follows: "_____________Insurance Company
				Account No.______in custody for and to vest in the Commissioner of Insurance of
				the State of Iowa in accordance with Iowa Code sections
				507C18. and
				50819. ".
(2) The commissioner shall notify the
				custodian, in writing, that a "Minimum Aggregate Value of Securities" must be
				held in the custodial account at all times. The commissioner's notice remains
				in full force and effect until amended or revoked in writing by the
				commissioner The company shall, on or before the fifteenth day of each month
				certify to the commissioner on a form provided by the commissioner that the
				aggregate value (determined as provided by Iowa Code section
				5118.,
				subsection 17) of securities on deposit with the commissioner in the manner
				specified by Iowa Code section
				5118.,
				subsection 16, and in the custodial account as of the last day of the preceding
				month was at least equal to the company's legal reserve (as defined in Iowa
				Code section
				5118.
				) as of the last day of the preceding year In the event the company fails or
				refuses to make the certification provided in this subrule, or in the event the
				commissioner is authorized or directed by reason of any determination,
				appointment, or order pursuant to Iowa Code section
				507C18.,
				50817.,
				50818., or
				50822.,
				the commissioner may acquire custody or otherwise assume control of the
				custodied securities, and may order reregistration, delivery, or other
				disposition which the commissioner deems appropriate under the circumstances.
				In addition, if the commissioner has reason to believe that a company may be
				insolvent, or that its condition is such as to render its further continuance
				in business hazardous to the public or holders of its policies, or that
				continued trading by the company in custodied securities may create a hazard to
				the public or policyholders, the commissioner may order the company to cease
				trading in custodied securities pending examination as provided in Iowa Code
				section
				50816.. The company
				may from time to time deposit or withdraw securities from the custodial
				account, subject to the stated "Minimum Aggregate Value of Securities" on
				deposit.
(3) That securities held
				in a fungible bulk by the custodian and securities in a clearing corporation or
				in the federal reserve book entry system shall be separately identified on the
				custodian's official records as being owned by the company. The custodian's
				records shall identify which custodied securities are held by the custodian and
				which securities are in a clearing corporation or in the federal reserve book
				entry system. If the securities are in a clearing corporation, such records
				shall also identify the name of the clearing corporation, the location of the
				securities, and, if held through an agent, the name of the agent.
(4) That all custodied securities that are
				registered must be registered in the name of the company, in the name of a
				nominee of a company, in the name of the custodian or its nominee, in the name
				of an agent of the custodian or its nominee, or, if held in a clearing
				corporation, in the name of the clearing corporation or its nominee.
(5) That during the course of the custodian's
				regular business hours, the commissioner or the commissioner's representative
				and authorized employees and representatives of the company, shall be entitled
				to examine on the premises of the custodian the custodian's records relating to
				custodied securities of the company.
(6) That the custodian or its agents shall be
				required to submit to the commissioner, at least annually, or more often as the
				commissioner may from time to time request, the opinion(s) of an auditor who
				shall be satisfactory to the commissioner specifically addressing the
				respective systems of internal account control and record keeping of the
				custodian or its agents.
(7) That
				the custodian shall maintain records sufficient to determine and verify
				information relating to custodied securities that may be reported in the
				company's annual statement and supporting schedules as filed with various
				regulatory authorities and in connection with any audit of the financial
				statements of the company. Copies of these records shall be delivered to the
				commissioner upon written request to the custodian.
(8) That the custodian is obligated to
				indemnify the company for any loss of securities while in its custody
				occasioned by negligence or dishonesty of the custodian's officers or
				employees, or burglary, robbery, holdup, theft, extortion, or mysterious
				disappearance, including loss by damage or destruction.
(9) That, in the event there is a loss of the
				securities for which the custodian is obligated to indemnify the company, the
				custodian shall promptly replace the same, or the value thereof, and the value
				of any loss of rights or privileges resulting from said loss of securities and
				the custodian shall make available to the company for inspection any and all
				securities or value amounts so replaced.
(10) That minimum levels of deposits of
				securities at face values totaling $100,000 shall be maintained at all
				times.
(11) The custodial agreement
				may contain additional specific operating instructions, controls and provisions
				concerning the operation of the custodial account provided such operating
				instructions, controls and provisions are not in conflict with these
				rules.
(12) Custodial agreements
				shall be submitted by a company to the commissioner for the commissioner's
				review prior to execution to ensure compliance with these rules.
(13) That the custodial agreement may be
				amended or terminated only with the prior approval of the commissioner
This rule is intended to implement Iowa Code section
				  511.8(21).