§ 515.35

515.35 Investments. 1. General considerations. The following considerations apply in the interpretation of this section: a. This section applies to the investments of insurance companies other than life insurance companies. b. The purpose of this section is to protect and further the interests of policyholders, claimants, creditors, and the public by providing standards for the development andadministration of programs for the investment of the assets of companies organized underthis chapter. These standards, and the investment programs developed by companies, shall take into account the safety of the company’s principal, investment yield and growth,stability in the value of the investment, and liquidity necessary to meet the company’sexpected business needs, and investment diversification. c. Financial terms relating to insurance companies have the meanings assigned to them under statutory accounting methods. Financial terms relating to companies otherthan insurance companies have the meanings assigned to them under generally acceptedaccounting principles. d. Investments shall be valued in accordance with the valuation procedures established by the national association of

have the meanings assigned to them under generally acceptedaccounting principles. d. Investments shall be valued in accordance with the valuation procedures established by the national association of insurance commissioners, unless the commissioner requires orfinds another method of valuation reasonable under the circumstances. e. If an investment qualifies under more than one subsection, a company may elect to hold the investment under the subsection of its choice. This section does not prevent a companyfrom electing to hold an investment under a subsection different from the one under whichit previously held the investment. 2. Definitions. For purposes of this section:a. 'Admitted assets', for purposes of computing percentage limitations on particular types of investments, means the assets which are authorized to be shown on the national associationof insurance commissioner’s annual statement blank as admitted assets as of the December31 immediately preceding the date the company acquires the investment. b. 'Capital and surplus', for purposes of computing percentage limitations on particular types of investments, means the capital and surplus that is authorized to be shown as

acquires the investment. b. 'Capital and surplus', for purposes of computing percentage limitations on particular types of investments, means the capital and surplus that is authorized to be shown as capitaland surplus on the national association of insurance commissioners’ annual statement blankas of the December 31 immediately preceding the date the company acquires the investment. c. 'Clearing corporation' means as defined in section 554.8102.d. 'Custodian bank' means a bank or trust company that is supervised and examined by state or federal authority having supervision over banks and is acting as custodian for aclearing corporation. e. 'Issuer' means as defined in section 554.8201.f. 'Member bank' means a national bank, state bank, or trust company which is a member of the United States federal reserve system. g. 'National securities exchange' means an exchange registered under section 6 of the Securities Exchange Act of 1934 or an exchange regulated under the laws of the Dominionof Canada. h. 'Obligations' includes bonds, notes, debentures, transportation equipment certificates, domestic repurchase agreements, and obligations for the payment of money not in default asto

inionof Canada. h. 'Obligations' includes bonds, notes, debentures, transportation equipment certificates, domestic repurchase agreements, and obligations for the payment of money not in default asto payments of principal and interest on the date of investment, which constitute generalobligations of the issuer or payable only out of certain revenues or certain funds pledgedor otherwise dedicated for payment of principal and interest on the obligations. A leaseis an obligation if the lease is assigned to the insurer and is nonterminable by the lesseeupon foreclosure of any lien upon the leased property, and if rental payments are sufficientto amortize the investment over the primary lease term. 3. Investments in name of company or nominee and prohibitions.a. A company’s investments shall be held in its own name or the name of its nominee, except as follows: (1) Investments may be held in the name of a clearing corporation or of a custodian bank or in the name of the nominee of either on the following conditions: Sat Dec 23 00:46:45 2023 Iowa Code 2024, Section 515.35 (31, 0) §515.35, INSURANCE OTHER THAN LIFE 2 (a) The clearing corporation, custodian bank, or nominee must be

ther on the following conditions: Sat Dec 23 00:46:45 2023 Iowa Code 2024, Section 515.35 (31, 0) §515.35, INSURANCE OTHER THAN LIFE 2 (a) The clearing corporation, custodian bank, or nominee must be legally authorized to hold the particular investment for the account of others. (b) When the investment is evidenced by a certificate and held in the name of a custodian bank or the nominee of a custodian bank, a written agreement shall provide that certificates sodeposited shall at all times be kept separate and apart from other deposits with the depository,so that at all times they may be identified as belonging solely to the company making thedeposit. (c) If a clearing corporation is to act as depository, the investment may be merged or held in bulk in the name of the clearing corporation or its nominee with other investmentsdeposited with the clearing corporation by any other person, if a written agreement betweenthe clearing corporation and the company provides that adequate evidence of the deposit isto be obtained and retained by the company or a custodian bank. (2) A company may loan securities held by it to a broker-dealer registered under the Securities Exchange Act of 1934,

of the deposit isto be obtained and retained by the company or a custodian bank. (2) A company may loan securities held by it to a broker-dealer registered under the Securities Exchange Act of 1934, a national bank, or a state bank, foreign bank, or trustcompany that is a member of the United States federal reserve system, and the loanedsecurities shall continue to be allowable investments of the company. (a) The loan shall be fully collateralized by cash, cash equivalents, or obligations issued or guaranteed by the United States or an agency or instrumentality of the United States.The company shall take delivery of the collateral either directly or through an authorizedcustodian. (b) If the loan is collateralized by cash or cash equivalents, the cash or cash equivalent collateral may be reinvested by the company in either individual securities which areallowable investments of the company or in repurchase agreements fully collateralized bysuch securities if the company takes delivery of the collateral either directly or throughan authorized custodian or a pooled fund comprised of individual securities which areallowable investments of the company.

es if the company takes delivery of the collateral either directly or throughan authorized custodian or a pooled fund comprised of individual securities which areallowable investments of the company. If such reinvestment is made in individual securitiesor in repurchase agreements, the individual securities or the securities which collateralizethe repurchase agreements shall mature in less than two hundred seventy days. If suchreinvestment is made in a pooled fund, the average maturity of the securities comprisingsuch pooled fund must be less than two hundred seventy days. Individual securities andsecurities comprising the pooled fund shall be investment grade. (c) The loan shall be evidenced by a written agreement which provides all of the following:(i) That the loan will be fully collateralized at all times during the term of the loan, and that the collateral will be adjusted as necessary each business day during the term of the loanto maintain the required collateralization in the event of market value changes in the loanedsecurities or collateral. (ii) If the loan is fully collateralized by cash or cash equivalents, the cash or cash equivalent collateral may be reinvested by

event of market value changes in the loanedsecurities or collateral. (ii) If the loan is fully collateralized by cash or cash equivalents, the cash or cash equivalent collateral may be reinvested by the company as provided in subparagraphdivision (b). (iii) That the loan may be terminated by the company at any time, and that the borrower shall return the loaned stocks and obligations or equivalent stocks or obligations within fivebusiness days after termination. (iv) That the company has the right to retain the collateral or use the collateral to purchase investments equivalent to the loaned securities if the borrower defaults under the terms ofthe agreement, and that the borrower remains liable for any losses and expenses incurred bythe company due to default that are not covered by the collateral. (d) Securities loaned pursuant to this subparagraph (2) are not eligible for investment of the company in excess of twenty percent of admitted assets. (3) A company may participate through a member bank in the United States federal reserve book-entry system, and the records of the member bank shall at all times show thatthe investments are held for the company or for specific accounts

a member bank in the United States federal reserve book-entry system, and the records of the member bank shall at all times show thatthe investments are held for the company or for specific accounts of the company. (4) An investment may consist of an individual interest in a pool of obligations or a fractional interest in a single obligation if the certificate of participation or interest or theconfirmation of participation or interest in the investment is issued in the name of thecompany or the name of the custodian bank or the nominee of either and if the interest asevidenced by the certificate or confirmation is, if held by a custodian bank, kept separate and Sat Dec 23 00:46:46 2023 Iowa Code 2024, Section 515.35 (31, 0) apart from the investments of others so that at all times the participation may be identifiedas belonging solely to the company making the investment. (5) Transfers of ownership of investments held as described in paragraph 'a', subparagraph (1), subparagraph division (c), and subparagraphs (3) and (4) may beevidenced by bookkeeping entry on the books of the issuer of the investment, its transfer orrecording agent, or the clearing corporation without physical

sion (c), and subparagraphs (3) and (4) may beevidenced by bookkeeping entry on the books of the issuer of the investment, its transfer orrecording agent, or the clearing corporation without physical delivery of certificate, if any,evidencing the company’s investment. b. Except as provided in paragraph 'a', subparagraph (5), if an investment is not evidenced by a certificate, adequate evidence of the company’s investment shall be obtainedfrom the issuer or its transfer or recording agent and retained by the company, a custodianbank, or clearing corporation. Adequate evidence, for purposes of this paragraph, means awritten receipt or other verification issued by the depository or issuer or a custodian bankwhich shows that the investment is held for the company. 4. Investments. Except as otherwise permitted by this section, a company organized under this chapter may invest in the following and no other: a. United States government obligations. Obligations issued or guaranteed by the United States or an agency or instrumentality of the United States. Bonds or other evidencesof indebtedness issued, assumed, or guaranteed by the United States of America, or byany agency or

d by the United States or an agency or instrumentality of the United States. Bonds or other evidencesof indebtedness issued, assumed, or guaranteed by the United States of America, or byany agency or instrumentality of the United States of America include investments in anopen-end management investment company registered with the federal securities andexchange commission under the federal Investment Company Act of 1940, 15 U.S.C. §80a-1et seq., and operated in accordance with 17 C.F.R. §270.2a-7, the portfolio of which is limitedto the United States government obligations described in this paragraph 'a', and which areincluded in the national association of insurance commissioners’ securities valuation office’sUnited States direct obligation – full faith and credit list. b. Certain development bank obligations. Obligations issued or guaranteed by the international bank for reconstruction and development, the Asian development bank, theinter-American development bank, the export-import bank, the world bank, or any UnitedStates government-sponsored organization of which the United States is a member, if theprincipal and interest is payable in United States dollars.

the export-import bank, the world bank, or any UnitedStates government-sponsored organization of which the United States is a member, if theprincipal and interest is payable in United States dollars. A company shall not invest morethan five percent of its total admitted assets in the obligations of any one of these banksor organizations, and shall not invest more than a total of ten percent of its total admittedassets in the obligations authorized by this paragraph. c. State obligations. Obligations issued or guaranteed by a state of the United States, or a political subdivision of a state, or an instrumentality of a state or political subdivision of astate. d. Canadian government obligations. Obligations issued or guaranteed by the Dominion of Canada, or by an agency or province of Canada, or by a political subdivision of a province,or by an instrumentality of any of those provinces or political subdivisions. e. Corporate and business trust obligations. Obligations issued, assumed, or guaranteed by a corporation or business trust organized under the laws of the United States or a state ofthe United States, or the laws of Canada or a province of Canada, provided that a

assumed, or guaranteed by a corporation or business trust organized under the laws of the United States or a state ofthe United States, or the laws of Canada or a province of Canada, provided that a companyshall not invest more than five percent of its admitted assets in the obligations of any onecorporation or business trust. Aggregate investments in below investment grade bonds shallnot exceed five percent of assets. f. Stocks, limited partnership interests, and limited liability company interests. (1) A company may invest in common stocks, common stock equivalents, mutual fund shares, securities convertible into common stocks or common stock equivalents, or preferredstocks issued or guaranteed by a corporation incorporated under the laws of the United Statesor a state of the United States, or the laws of Canada or a province of Canada. (a) Stocks purchased under this section shall not exceed one hundred percent of capital and surplus. With the approval of the commissioner, a company may invest any amount incommon stocks, preferred stocks, or other securities of one or more subsidiaries providedthat after such investments the insurer’s surplus as regards policyholders will be

any may invest any amount incommon stocks, preferred stocks, or other securities of one or more subsidiaries providedthat after such investments the insurer’s surplus as regards policyholders will be reasonablein relation to the insurer’s outstanding liabilities and adequate to its financial needs. Sat Dec 23 00:46:46 2023 Iowa Code 2024, Section 515.35 (31, 0) §515.35, INSURANCE OTHER THAN LIFE 4 (b) A company shall not invest more than ten percent of its capital and surplus in the stocks of any one corporation. (2) In addition to those investments permitted under subparagraph (1), a company may invest in or otherwise acquire and hold a limited partnership interest in any limitedpartnership formed under the laws of any state, commonwealth, or territory of the UnitedStates, or under the laws of the United States. A company may invest in or otherwiseacquire and hold a member interest in any limited liability company formed under the lawsof any state, commonwealth, or territory of the United States or under the laws of the UnitedStates. A limited partnership or limited liability company interest shall not be acquired if theinvestment, valued at cost, exceeds two percent of the

the United States or under the laws of the UnitedStates. A limited partnership or limited liability company interest shall not be acquired if theinvestment, valued at cost, exceeds two percent of the capital and surplus of the company orif the investment, plus the book value on the date of the investment of all limited partnershipor limited liability company interests then held by the company and held under the authorityof this subparagraph, exceeds ten percent of the capital and surplus of the company. Alimited partnership or limited liability company interest shall not be acquired under thissubparagraph unless the limited partnership or limited liability company is audited annuallyby an independent auditor. g. Real estate mortgages. Mortgages and other interest-bearing securities that are first liens upon real estate located within this state or any other state of the United States.However, a mortgage or other security does not qualify as an investment under thisparagraph if at the date of acquisition the total indebtedness secured by the lien exceedsseventy-five percent of the value of the property that is subject to the lien.

ify as an investment under thisparagraph if at the date of acquisition the total indebtedness secured by the lien exceedsseventy-five percent of the value of the property that is subject to the lien. Improvementsshall not be considered in estimating value unless the owner contracts to keep them insuredduring the life of the loan in one or more reliable fire insurance companies authorized totransact business in this state and for a sum at least equal to the excess of the loan aboveseventy-five percent of the value of the ground, exclusive of improvements, and unless thisinsurance is payable in case of loss to the company investing its funds as its interest mayappear at the time of loss. For the purpose of this section, a lien upon real estate shallnot be held or construed to be other than a first lien by reason of the fact that drainage orother improvement assessments have been levied against the real estate covered by the lien,whether or not the installment of the assessments have matured, but in determining thevalue of the real estate for loan purposes the amount of drainage or other assessment taxthat is unpaid shall be first deducted. h.

installment of the assessments have matured, but in determining thevalue of the real estate for loan purposes the amount of drainage or other assessment taxthat is unpaid shall be first deducted. h. Real estate.(1) (a) Except as provided in subparagraphs (2), (3), and (4) of this paragraph, a company may acquire, hold, and convey real estate only as follows: (i) Real estate mortgaged to it in good faith as security for loans previously contracted, or for moneys due. (ii) Real estate conveyed to it in satisfaction of debts previously contracted in the course of its dealings. (iii) Real estate purchased at sales on judgments, decrees, or mortgages obtained or made for debts previously contracted in the course of its dealings. (iv) Real estate subject to a contract for deed under which the company holds the vendor’s interest to secure the payments the vendee is required to make under the contract. (b) All real estate specified in subparagraph division (a), subparagraph subdivisions (i), (ii), and (iii) shall be sold and disposed of within three years after the company acquires titleto it, or within three years after the real estate ceases to be necessary for the accommodationof the

(ii), and (iii) shall be sold and disposed of within three years after the company acquires titleto it, or within three years after the real estate ceases to be necessary for the accommodationof the company’s business, and the company shall not hold any of those properties for alonger period unless the company elects to hold the property under another paragraph ofthis section, or unless the company procures a certificate from the commissioner of insurancethat its interest will suffer materially by the forced sale of those properties and that the timefor the sale is extended to the time the commissioner directs in the certificate. (2) A company may acquire, hold, and convey real estate as required for the convenient accommodation and transaction of its business. (3) A company may acquire real estate or an interest in real estate as an investment for the production of income, and may hold, improve, or otherwise develop, subdivide, lease, Sat Dec 23 00:46:46 2023 Iowa Code 2024, Section 515.35 (31, 0) sell, and convey real estate so acquired directly or as a joint venture or through a limited orgeneral partnership in which the company is a partner.

46:46 2023 Iowa Code 2024, Section 515.35 (31, 0) sell, and convey real estate so acquired directly or as a joint venture or through a limited orgeneral partnership in which the company is a partner. (4) A company may also acquire and hold real estate if the purpose of the acquisition is to enhance the sale value of real estate previously acquired and held by the companyunder this paragraph, and if the company expects the real estate so acquired to qualify undersubparagraph (2) or (3) of this paragraph within three years after acquisition. (5) A company may, after securing the written approval of the commissioner, acquire and hold real estate for the purpose of providing necessary living quarters for its employees.However, the company shall dispose of the real estate within three years after it has ceased tobe necessary for that purpose unless the commissioner agrees to extend the holding periodupon application by the company. (6) A company shall not invest more than twenty-five percent of its total admitted assets in real estate. The cost of a parcel of real estate held for both the accommodation of business andfor the production of income shall be allocated between the two uses

nt of its total admitted assets in real estate. The cost of a parcel of real estate held for both the accommodation of business andfor the production of income shall be allocated between the two uses annually. A companyshall not invest more than ten percent of its total admitted assets in real estate held undersubparagraph (3) of this paragraph. (7) A company is not required to divest itself of real estate assets owned or contracted for prior to July 1, 1982, in order to comply with the limitations established under this paragraph. i. Foreign investments. Obligations of and investments in foreign countries, as follows:(1) A company may acquire and hold other investments in foreign countries that are required to be held as a condition of doing business in those countries, so long as suchinvestments are of substantially the same types as those eligible for investment under thissection. (2) A company shall not invest more than two percent of its admitted assets in the stocks or stock equivalents of foreign corporations or business trusts, other than the stocks or stockequivalents of foreign corporations or business trusts incorporated or formed under the lawsof Canada, and then only

ivalents of foreign corporations or business trusts, other than the stocks or stockequivalents of foreign corporations or business trusts incorporated or formed under the lawsof Canada, and then only if the stocks or stock equivalents of such foreign corporations orbusiness trusts are regularly traded on the New York, London, Paris, Zurich, Hong Kong,Toronto, or Tokyo stock exchange, or a similar exchange approved by the commissioner byrule or order. (3) A company may invest in the obligations of a foreign government other than Canada or of a corporation incorporated under the laws of a foreign government other than Canada.Any such governmental obligation must be valid, legally authorized and issued, and onthe date of acquisition have predominantly investment qualities and characteristics asprovided by rule. Any such corporate obligation must on the date of acquisition have investment qualities and characteristics, and must not have speculative elements which arepredominant, as provided by rule. A company shall not invest more than two percent of itsadmitted assets in the obligations of a foreign government other than Canada and the UnitedKingdom.

s which arepredominant, as provided by rule. A company shall not invest more than two percent of itsadmitted assets in the obligations of a foreign government other than Canada and the UnitedKingdom. Investments in obligations of the United Kingdom are not eligible in excess offour percent of admitted assets. A company shall not invest more than two percent of itsadmitted assets in the obligations of a corporation incorporated under the laws of a foreigngovernment other than a corporation incorporated under the laws of Canada. (4) A company shall not invest more than twenty percent of its admitted assets in foreign investments pursuant to this paragraph. j. Personal property under lease. Personal property for intended lease or rental by the company in the United States or Canada. A company shall not invest more than five percentof its admitted assets under this paragraph. k. Collateral loans. Obligations secured by the pledge of an investment authorized by paragraphs 'a' through 'j', subject to the following conditions: (1) The pledged investment shall be legally assigned or delivered to the company.(2) The pledged investment shall at the time of purchase have a market value of at

ubject to the following conditions: (1) The pledged investment shall be legally assigned or delivered to the company.(2) The pledged investment shall at the time of purchase have a market value of at least one hundred ten percent of the amount of the unpaid balance of the obligations. (3) The company shall reserve the right to declare the obligation immediately due and payable if at any time after purchase the security depreciates to the point where theinvestment would not qualify under subparagraph (2) of this paragraph. However, additionalqualifying security may be pledged to allow the investment to remain qualified. Sat Dec 23 00:46:46 2023 Iowa Code 2024, Section 515.35 (31, 0) §515.35, INSURANCE OTHER THAN LIFE 6 l. Options transactions.(1) A domestic fire and casualty company may only engage in the following transactions in options on an exchange and only when in accordance with the rules of the exchange onwhich the transactions take place: (a) The sale of exchange-traded covered options.(b) The purchase of exchange-traded covered options solely in closing purchase transactions.

rules of the exchange onwhich the transactions take place: (a) The sale of exchange-traded covered options.(b) The purchase of exchange-traded covered options solely in closing purchase transactions. (2) The commissioner shall adopt rules pursuant to chapter 17A regulating option sales under this subparagraph. m. Venture capital funds. Shares or equity interests in venture capital funds which agree to invest an amount equal to at least fifty percent of the investments by a company in smallbusinesses having their principal offices within this state and having either more than one-halfof their assets within this state or more than one-half of their employees employed withinthis state. A company shall not invest more than five percent of its capital and surplus underthis paragraph. For purposes of this paragraph, 'venture capital fund' means a corporation,partnership, proprietorship, or other entity formed under the laws of the United States, ora state, district, or territory of the United States, whose principal business is or will be themaking of investments in, and the provision of significant managerial assistance to, smallbusinesses which meet the small business administration

ted States, whose principal business is or will be themaking of investments in, and the provision of significant managerial assistance to, smallbusinesses which meet the small business administration definition of small business. 'Equityinterests' means limited partnership interests and other equity interests in which liability islimited to the amount of the investment, but does not mean general partnership interests orother interests involving general liability. 'Venture capital fund' includes an equity interestin the Iowa fund of funds as defined in section 15E.62 and an equity interest in an innovationfund as defined in section 15E.52. n. Other investments.(1) A company organized under this chapter may invest up to five percent of its admitted assets in securities or property of any kind, without restrictions or limitations except thoseimposed on business corporations in general. (2) A company organized under this chapter may invest its assets in any additional forms not specifically included in paragraphs 'a' through 'm' and this paragraph when authorizedby rules adopted by the commissioner. 5. Rules.

er this chapter may invest its assets in any additional forms not specifically included in paragraphs 'a' through 'm' and this paragraph when authorizedby rules adopted by the commissioner. 5. Rules. The commissioner may adopt rules pursuant to chapter 17A to carry out the purposes and provisions of this section. [C73, §1130, 1137; C97, §1699, 1703; S13, §1699; C24, 27, 31, 35, 39, §8926, 8927; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §515.34, 515.35; 81 Acts, ch 169, §1; 82 Acts, ch 1051, §1] 85 Acts, ch 136, §2; 88 Acts, ch 1112, §402; 91 Acts, ch 26, §40; 96 Acts, ch 1138, §2, 84; 97 Acts, ch 186, §10; 98 Acts, ch 1014, §2; 99 Acts, ch 165, §13; 2001 Acts, ch 69, §29; 2003 Acts,ch 91, §34; 2004 Acts, ch 1110, §52 – 54; 2007 Acts, ch 137, §12; 2009 Acts, ch 41, §159 – 161;2012 Acts, ch 1023, §120 – 122; 2013 Acts, ch 124, §17; 2014 Acts, ch 1092, §116, 117, 185;2015 Acts, ch 128, §22, 50, 51 Referred to in §515.20, 518.14, 518A.12, 521G.6Similar provisions, §511.8 Sat Dec 23 00:46:46 2023 Iowa Code 2024, Section 515.35 (31, 0)