or the Federal Home Loan Mortgage Corporation or the successor of an entity referred to in this item.
                (ii) Other asset-backed securities referred to in Section 106 of Title I of the Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C. 77r-1), as amended.
            (B) In the other transaction, the life insurance company is obligated to purchase from the same business entity securities that are substantially similar to the securities sold under clause (A).
        (11) "Domestic jurisdiction" means:
            (A) the United States;
            (B) any state, territory, or possession of the United States;
            (C) the District of Columbia;
            (D) Canada; or
            (E) any province of Canada.
        (12) "Earnings available for fixed charges" means income, after deducting:
            (A) operating and maintenance expenses other than expenses that are fixed charges;
            (B) taxes other than federal and state income taxes;
            (C) depreciation; and
            (D) depletion;
        but excluding extraordinary nonrecurring items of income or expense appearing in the regular financial statements of a business entity.
        (13) "Fixed charges" includes:
            (A) interest on funded and unfunded debt;
            (B) amortization of debt discount; and
            (C) rentals for leased property.
        (14) "Foreign currency" means a currency of a foreign jurisdiction.
        (15) "Foreign jurisdiction" means a jurisdiction other than a domestic jurisdiction.
        (16) "Government money market mutual fund" means a money market mutual fund that at all times:
            (A) invests only in:
                (i) obligations that are issued, guaranteed, or insured by the United States; or
                (ii) collateralized repurchase agreements composed of obligations that are issued, guaranteed, or insured by the United States; and
            (B) qualifies for investment without a reserve pursuant to the "Purposes and Procedures of the Securities Valuation Office" or any successor publication.
        (17) "Guaranteed or insured," when used in reference to an obligation acquired under this section, means that the guarantor or insurer has agreed to:
            (A) perform or insure the obligation of the obligor or purchase the obligation; or
            (B) be unconditionally obligated, until the obligation is

repaid, to maintain in the obligor a minimum net worth, fixed charge coverage, stockholders' equity, or sufficient liquidity to enable the obligor to pay the obligation in full.
        (18) "Investment company" means:
            (A) an investment company as defined in Section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), as amended; or
            (B) a person described in Section 3(c) of the Investment Company Act of 1940.
        (19) "Investment company series" means an investment portfolio of an investment company that is organized as a series company to which assets of the investment company have been specifically allocated.
        (20) "Letter of credit" means a clean, irrevocable, and unconditional letter of credit that is:
            (A) issued or confirmed by; and
            (B) payable and presentable at;
        a financial institution on the list of financial institutions meeting the standards for issuing letters of credit under the "Purposes and Procedures of the Securities Valuation Office" or any successor publication. To constitute acceptable collateral for the purposes of paragraph 29 of subsection (b), a letter of credit must have an expiration date beyond the term of the subject transaction.
        (21) "Market value" means the following:
            (A) As to cash, the amount of the cash.
            (B) As to cash equivalents, the amount of the cash equivalents.
            (C) As to letters of credit, the amount of the letters of credit.
            (D) As to a security as of any date:
                (i) the price for the security on that date obtained from a generally recognized source, or the most recent quotation from such a source; or
                (ii) if no generally recognized source exists, the price for the security as determined in good faith by the parties to a transaction;
            plus accrued but unpaid income on the security to the extent not included in the price as of that date.
        (22) "Money market mutual fund" means a mutual fund that meets the conditions of 17 CFR 270.2a-7, under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.).
        (23) "Multilateral development bank" means an international development organization of which the United States is a member.
        (24) "Mutual fund" means:
            (A) an investment company; or
            (B) in the case of an investment company that is organized as a series company, an investment company series;
        that 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.).
        (25) "Obligation" means any of the following:
            (A) A bond.
            (B) A note.
            (C) A debenture.
            (D) Any other form of evidence of debt.
        (26) "Person" means:
            (A) an individual;
            (B) a business entity;
            (C) a multilateral development bank; or
            (D) a government or quasi-governmental body, such as a political subdivision or a government sponsored enterprise.
        (27) "Repurchase transaction" means a transaction in which a life insurance company purchases securities from a business entity that is obligated to repurchase the purchased securities or equivalent securities from the life insurance company at a specified price, either within a specified period of time or upon demand.
        (28) "Reverse repurchase transaction" means a transaction in which a life insurance company sells securities to a business entity and is obligated to repurchase the sold securities or equivalent securities from the business entity at a specified price, either within a specified period of time or upon demand.
        (29) "Securities lending transaction" means a transaction in which securities are loaned by a life insurance company to a business entity that is obligated to return the loaned securities or equivalent securities to the life insurance company, either within a specified period of time or upon demand.
        (30) "Securities Valuation Office" refers to:
            (A) the Securities Valuation Office of the National Association of Insurance Commissioners; or
            (B) any successor of the office referred to in Clause (A) established by the National Association of Insurance Commissioners.
        (31) "Series company" means an investment company that is organized as a series company (as defined in Rule 18f-2(a) adopted under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), as amended).
        (32) "Supported", when used in reference to an obligation, by whomever issued or made, means that:
            (A) repayment of the obligation by:
                (i) a domestic jurisdiction or by an administration, agency, authority, or instrumentality of a domestic jurisdiction; or
                (ii) a business entity;
            as the case may be, is secured by real or personal property of value at least equal to the principal amount of the obligation by means of mortgage, assignment of vendor's interest in one (1) or more conditional sales contracts, other title retention device, or by means of other security interest in such property for the benefit of the holder of the obligation; and

a domestic jurisdiction, providing such obligations are authorized by law and are:
        (a) direct and general obligations of the issuing, guaranteeing or insuring governmental unit, administration, agency, authority, district, subdivision, or instrumentality;
        (b) payable from designated revenues pledged to the payment of the principal and interest thereof; or
        (c) improvement bonds or other obligations constituting a first lien, except for tax liens, against all of the real estate within the improvement district or on that part of such real estate not discharged from such lien through payment of the assessment. The area to which such improvement bonds or other obligations relate shall be situated within the limits of a town or city and at least fifty percent (50%) of the properties within such area shall be improved with business buildings or residences.
    5. Loans evidenced by obligations secured by first mortgage liens on otherwise unencumbered real estate or otherwise unencumbered leaseholds having at least fifty (50) years of unexpired term, such real estate, or leaseholds to be located in a domestic jurisdiction. Such loans shall not exceed eighty percent (80%) of the fair value of the security determined in a manner satisfactory to the department, except that the percentage stated may be exceeded if and to the extent such excess is guaranteed or insured by:
        (a) a domestic jurisdiction or by an administration, agency, authority, or instrumentality of any domestic jurisdiction; or
        (b) a private mortgage insurance corporation approved by the department.
If improvements constitute a part of the value of the real estate or leaseholds, such improvements shall be insured against fire for the benefit of the mortgagee in an amount not less than the difference between the value of the land and the unpaid balance of the loan.
For the purpose of this section, real estate or a leasehold shall not be deemed to be encumbered by reason of the existence in relation thereto of:
        (1) liens inferior to the lien securing the loan made by the life insurance company;
        (2) taxes or assessment liens not delinquent;
        (3) instruments creating or reserving mineral, oil, water or timber rights, rights-of-way, common or joint driveways, sewers, walls, or utility connections;
        (4) building restrictions or other restrictive covenants; or
        (5) an unassigned lease reserving rents or profits to the owner.
A loan that is authorized by this paragraph remains qualified under this paragraph notwithstanding any refinancing, modification, or extension of the loan. Investments authorized by this paragraph shall not in the aggregate exceed forty-five percent (45%) of the life insurance company's admitted assets.
    6. Loans evidenced by obligations guaranteed or insured, but only to the extent guaranteed or insured, by a domestic jurisdiction or by any agency, administration, authority, or instrumentality of any

domestic jurisdiction, and secured by second or subsequent mortgages or deeds of trust on real estate or leaseholds, provided the terms of the leasehold mortgages or deeds of trust shall not exceed four-fifths (4/5) of the unexpired lease term, including enforceable renewable options remaining at the time of the loan.
    7. Real estate contracts involving otherwise unencumbered real estate situated in a domestic jurisdiction, to be secured by the title to such real estate, which shall be transferred to the life insurance company or to a trustee or nominee of its choosing. For statement and deposit purposes, the value of a contract acquired pursuant to this paragraph shall be whichever of the following amounts is the least:
        (a) eighty percent (80%) of the contract price of the real estate;
        (b) eighty percent (80%) of the fair value of the real estate at the time the contract is purchased, such value to be determined in a manner satisfactory to the department; or
        (c) the amount due under the contract.
For the purpose of this paragraph, real estate shall not be deemed encumbered by reason of the existence in relation thereto of: (1) taxes or assessment liens not delinquent; (2) instruments creating or reserving mineral, oil, water or timber rights, rights-of-way, common or joint driveways, sewers, walls or utility connections; (3) building restrictions or other restrictive covenants; or (4) an unassigned lease reserving rents or profits to the owner. Fire insurance upon improvements constituting a part of the real estate described in the contract shall be maintained in an amount at least equal to the unpaid balance due under the contract or the fair value of improvements, whichever is the lesser.
    8. Improved or unimproved real property, whether encumbered or unencumbered, or any interest therein, held directly or evidenced by joint venture interests, general or limited partnership interests, trust certificates, or any other instruments, and acquired by the life insurance company as an investment, which real property, if unimproved, is developed within five (5) years. Real property acquired for investment under this paragraph, whether leased or intended to be developed for commercial or residential purposes or otherwise lawfully held, is subject to the following conditions and limitations:
        (a) The real estate shall be located in a domestic jurisdiction.
        (b) The admitted assets of the life insurance company must exceed twenty-five million dollars ($25,000,000).
        (c) The life insurance company shall have the right to expend from time to time whatever amount or amounts may be necessary to conform the real estate to the needs and purposes of the lessee and the amount so expended shall be added to and become a part of the investment in such real estate.
        (d) The value for statement and deposit purposes of an investment under this paragraph shall be reduced annually by amortization of the costs of improvement and development, less land costs, over the expected life of the property, which value

and amortization shall for statement and deposit purposes be determined in a manner satisfactory to the commissioner. In determining such value with respect to the calendar years in which an investment begins or ends with respect to a point in time other than the beginning or end of a calendar year, the amortization provided above shall be made on a proportional basis.
        (e) Fire insurance shall be maintained in an amount at least equal to the insurable value of the improvements or the difference between the value of the land and the value at which such real estate is carried for statement and deposit purposes, whichever amount is smaller.
        (f) Real estate acquired in any of the manners described and sanctioned under section 3 of this chapter, or otherwise lawfully held, except paragraph 5 of that section which specifically relates to the acquisition of real estate under this paragraph, shall not be affected in any respect by this paragraph unless such real estate at or subsequent to its acquisition fulfills the conditions and limitations of this paragraph, and is declared by the life insurance company in a writing filed with the department to be an investment under this paragraph. The value of real estate acquired under section 3 of this chapter, or otherwise lawfully held, and invested under this paragraph shall be initially that at which it was carried for statement and deposit purposes under that section.
        (g) Neither the cost of each parcel of improved real property nor the aggregate cost of all unimproved real property acquired under the authority of this paragraph may exceed two percent (2%) of the life insurance company's admitted assets. For purposes of this paragraph, "unimproved real property" means land containing no structures intended for commercial, industrial, or residential occupancy, and "improved real property" consists of all land containing any such structure. When applying the limitations of subparagraph (d) of this paragraph, unimproved real property becomes improved real property as soon as construction of any commercial, industrial, or residential structure is so completed as to be capable of producing income. In the event the real property is mortgaged with recourse to the life insurance company or the life insurance company commences a plan of construction upon real property at its own expense or guarantees payment of borrowed funds to be used for such construction, the total project cost of the real property will be used in applying the two percent (2%) test. Further, no more than ten percent (10%) of the life insurance company's admitted assets may be invested in all property, measured by the property value for statement and deposit purposes as defined in this paragraph, held under this paragraph at the same time.
    9. Deposits of cash in a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation, or

certificates of deposit issued by a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation.
    10. Bank and bankers' acceptances and other bills of exchange of kinds and maturities eligible for purchase or rediscount by federal reserve banks.
    11. Obligations that are issued, guaranteed, assumed, or supported by a business entity organized under the laws of a domestic jurisdiction and that are rated:
        (a) BBB- or higher by Standard & Poor's Corporation (or A-2 or higher in the case of commercial paper);
        (b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper);
        (c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper); or
        (d) 1 or 2 by the Securities Valuation Office.
    Investments may also be made under this paragraph in obligations that have not received a rating if the earnings available for fixed charges of the business entity for the period of its five (5) fiscal years next preceding the date of purchase shall have averaged per year not less than one and one-half (1 1/2) times its average annual fixed charges applicable to such period and if during either of the last two (2) years of such period such earnings available for fixed charges shall have been not less than one and one-half (1 1/2) times its fixed charges for such year. However, if the business entity is a finance company or other lending institution at least eighty percent (80%) of the assets of which are cash and receivables representing loans or discounts made or purchased by it, the multiple shall be one and one-quarter (1 1/4) instead of one and one-half (1 1/2).
    11.(A) Obligations issued, guaranteed, or assumed by a business entity organized under the laws of a domestic jurisdiction, which obligations have not received a rating or, if rated, have not received a rating that would qualify the obligations for investment under paragraph 11 of this section. Investments authorized by this paragraph may not exceed ten percent (10%) of the life insurance company's admitted assets.
    12. Preferred stock of, or common or preferred stock guaranteed as to dividends by, any corporation organized under the laws of a domestic jurisdiction, which over the period of the seven (7) fiscal years immediately preceding the date of purchase earned an average amount per annum at least equal to five percent (5%) of the par value of its common and preferred stock (or, in the case of stocks having no par value, of its issued or stated value) outstanding at date of purchase, or which over such period earned an average amount per annum at least equal to two (2) times the total of its annual interest charges, preferred dividends and dividends guaranteed by it, determined with reference to the date of purchase. No investment shall be made under this paragraph in a stock upon which any dividend is in arrears or has been in arrears for ninety (90) days within the immediately preceding five (5) year period.
    13. Common stock of any solvent corporation organized under the

laws of a domestic jurisdiction which over the seven (7) fiscal years immediately preceding purchase earned an average amount per annum at least equal to six percent (6%) of the par value of its capital stock (or, in the case of stock having no par value, of the issued or stated value of such stock) outstanding at date of purchase, but the conditions and limitations of this paragraph shall not apply to the special area of investment to which paragraph 23 of this section pertains.
    13.(A) Stock or shares of any mutual fund that:
        (a) has been in existence for a period of at least five (5) years immediately preceding the date of purchase, has assets of not less than twenty-five million dollars ($25,000,000) at the date of purchase, and invests substantially all of its assets in investments permitted under this section; or
        (b) is a class one money market mutual fund or a class one bond mutual fund.
Investments authorized by this paragraph 13(A) in mutual funds having the same or affiliated investment advisers shall not at any one (1) time exceed in the aggregate ten percent (10%) of the life insurance company's admitted assets. The limitations contained in paragraph 22 of this subsection apply to investments in the types of mutual funds described in subparagraph (a). For the purposes of this paragraph, "class one bond mutual fund" means a mutual fund that at all times qualifies for investment using the bond class one reserve factor under the "Purposes and Procedures of the Securities Valuation Office" or any successor publication.
    The aggregate amount of investments under this paragraph may be limited by the commissioner if the commissioner finds that investments under this paragraph may render the operation of the life insurance company hazardous to the company's policyholders or creditors or to the general public.
    14. Loans upon the pledge of any of the investments described in this section other than real estate and those qualifying solely under paragraph 20 of this subsection, but the amount of such a loan shall not exceed seventy-five percent (75%) of the value of the investment pledged.
    15. Real estate acquired or otherwise lawfully held under the provisions of IC 27-1, except under paragraph 7 or 8 of this subsection, which real estate as an investment shall also include the value of improvements or betterments made thereon subsequent to its acquisition. The value of such real estate for deposit and statement purposes is to be determined in a manner satisfactory to the department.
    15.(A) Tangible personal property, equipment trust obligations, or other instruments evidencing an ownership interest or other interest in tangible personal property when the life insurance company purchasing such property has admitted assets in excess of twenty-five million dollars ($25,000,000), and where there is a right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use of such personal property from a

corporation whose obligations would be eligible for investment under the provisions of paragraph 11 of this subsection, provided that the aggregate of such payments together with the estimated salvage value of such property at the end of its minimum useful life, to be determined in a manner acceptable to the insurance commissioner, and the estimated tax benefits to the insurer resulting from ownership of such property, is adequate to return the cost of the investment in such property, and provided further, that each net investment in tangible personal property for which any single private corporation is obligated to pay rental, purchase, or other obligatory payments thereon does not exceed one-half of one percent (1/2%) of the life insurance company's admitted assets, and the aggregate net investments made under the provisions of this paragraph do not exceed five percent (5%) of the life insurance company's admitted assets.
    16. Loans to policyholders of the life insurance company in amounts not exceeding in any case the reserve value of the policy at the time the loan is made.
    17. A life insurance company doing business in a foreign jurisdiction may, if permitted or required by the laws of such jurisdiction, invest funds equal to its obligations in such jurisdiction in investments legal for life insurance companies domiciled in such jurisdiction or doing business therein as alien companies.
    17.(A) Investments in (i) obligations issued, guaranteed, assumed, or supported by a foreign jurisdiction or by a business entity organized under the laws of a foreign jurisdiction and (ii) preferred stock and common stock issued by any such business entity, if the obligations of such foreign jurisdiction or business entity, as appropriate, are rated:
        (a) BBB- or higher by Standard & Poor's Corporation (or A-2 or higher in the case of commercial paper);
        (b) Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper);
        (c) BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper); or
        (d) 1 or 2 by the Securities Valuation Office.
If the obligations issued by a business entity organized under the laws of a foreign jurisdiction have not received a rating, investments may nevertheless be made under this paragraph in such obligations and in the preferred and common stock of the business entity if the earnings available for fixed charges of the business entity for a period of five (5) fiscal years preceding the date of purchase have averaged at least three (3) times its average fixed charges applicable to such period, and if during either of the last two (2) years of such period, the earnings available for fixed charges were at least three (3) times its fixed charges for such year. Investments authorized by this paragraph in a single foreign jurisdiction shall not exceed ten percent (10%) of the life insurance company's admitted assets. Subject to section 2.2(g) of this chapter, investments authorized by this paragraph denominated in foreign currencies shall not in the

aggregate exceed ten percent (10%) of a life insurance company's admitted assets, and investments in any one (1) foreign currency shall not exceed five percent (5%) of the life insurance company's admitted assets. Investments authorized by this paragraph and paragraph 17(B) shall not in the aggregate exceed twenty percent (20%) of the life insurance company's admitted assets. This paragraph in no way limits or restricts investments which are otherwise specifically eligible for deposit under this section.
    17.(B) Investments in:
        (a) obligations issued, guaranteed, or assumed by a foreign jurisdiction or by a business entity organized under the laws of a foreign jurisdiction; and
        (b) preferred stock and common stock issued by a business entity organized under the laws of a foreign jurisdiction;
which investments are not eligible for investment under paragraph 17.(A).
    Investments authorized by this paragraph 17(B) shall not in the aggregate exceed five percent (5%) of the life insurance company's admitted assets. Subject to section 2.2(g) of this chapter, if investments authorized by this paragraph 17(B) are denominated in a foreign currency, the investments shall not, as to such currency, exceed two percent (2%) of the life insurance company's admitted assets. Investments authorized by this paragraph 17(B) in any one (1) foreign jurisdiction shall not exceed two percent (2%) of the life insurance company's admitted assets.
    Investments authorized by paragraph 17(A) of this subsection and this paragraph 17(B) shall not in the aggregate exceed twenty percent (20%) of the life insurance company's admitted assets.
    18. To protect itself against loss, a company may in good faith receive in payment of or as security for debts due or to become due, investments or property which do not conform to the categories, conditions, limitations, and standards set out above.
    19. A life insurance company may purchase for its own benefit any of its outstanding annuity or insurance contracts or other obligations and the claims of holders thereof.
    20. A life insurance company may make investments although not conforming to the categories, conditions, limitations, and standards contained in paragraphs 1 through 11, 12 through 19, and 29 through 31 of this subsection, but limited in aggregate amount to the lesser of:
        (a) ten percent (10%) of the company's admitted assets; or
        (b) the aggregate of the company's capital, surplus, and contingency reserves reported on the statutory financial statement of the insurer most recently required to be filed with the commissioner.
    This paragraph 20 does not apply to investments authorized by paragraph 11.(A) of this subsection.
    20.(A) Investments under paragraphs 1 through 20 and paragraphs 29 through 31 of this subsection are subject to the general conditions, limitations, and standards contained in paragraphs 21 through 28 of

this subsection.
    21. Investments in obligations (other than real estate mortgage indebtedness) and capital stock of, and in real estate and tangible personal property leased to, a single corporation, shall not exceed two percent (2%) of the life insurance company's admitted assets, taking into account the provisions of section 2.2(h) of this chapter. The conditions and limitations of this paragraph shall not apply to investments under paragraph 13(A) of this subsection or the special area of investment to which paragraph 23 of this subsection pertains.
    22. Investments in:
        (a) preferred stock; and
        (b) common stock;
shall not, in the aggregate, exceed twenty percent (20%) of the life insurance company's admitted assets, exclusive of assets held in segregated accounts of the nature defined in class 1(c) of IC 27-1-5-1. These limitations shall not apply to investments for the special purposes described in paragraph 23 of this subsection nor to investments in connection with segregated accounts provided for in class 1(c) of IC 27-1-5-1.
    23. Investments in subsidiary companies must be made in accordance with IC 27-1-23-2.6.
    24. No investment, other than commercial bank deposits and loans on life insurance policies, shall be made unless authorized by the life insurance company's board of directors or a committee designated by the board of directors and charged with the duty of supervising loans or investments.
    25. No life insurance company shall subscribe to or participate in any syndicate or similar underwriting of the purchase or sale of securities or property or enter into any transaction for such purchase or sale on account of said company, jointly with any other corporation, firm, or person, or enter into any agreement to withhold from sale any of its securities or property, but the disposition of its assets shall at all times be within its control. Nothing contained in this paragraph shall be construed to invalidate or prohibit an agreement by two (2) or more companies to join and share in the purchase of investments for bona fide investment purposes.
    26. No life insurance company may invest in the stocks or obligations, except investments under paragraphs 9 and 10 of this subsection, of any corporation in which an officer of such life insurance company is either an officer or director. However, this limitation shall not apply with respect to such investments in:
        (a) a corporation which is a subsidiary or affiliate of such life insurance company; or
        (b) a trade association, provided such investment meets the requirements of paragraph 5 of this subsection.
    27. Except for the purpose of mutualization provided for in section 23 of this chapter, or for the purpose of retirement of outstanding shares of capital stock pursuant to amendment of its articles of incorporation, or in connection with a plan approved by the commissioner for purchase of such shares by the life insurance

company's officers, employees, or agents, no life insurance company shall invest in its own stock.
    28. In applying the conditions, limitations, and standards prescribed in paragraphs 11, 12, and 13 of this subsection to the stocks or obligations of a corporation which in the seven (7) year period preceding purchase of such stocks or obligations acquired its property or a substantial part thereof through consolidation, merger, or purchase, the earnings of the several predecessors or constituent corporations shall be consolidated.
    29. A. Before a life insurance company may engage in securities lending transactions, repurchase transactions, reverse repurchase transactions, or dollar roll transactions, the life insurance company's board of directors must adopt a written plan that includes guidelines and objectives to be followed, including the following:
        (1) A description of how cash received will be invested or used for general corporate purposes of the company.
        (2) Operational procedures for managing interest rate risk, counterparty default risk, and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction.
        (3) A statement of the extent to which the company may engage in securities lending transactions, repurchase transactions, reverse repurchase transactions, and dollar roll transactions.
    B. A life insurance company must enter into a written agreement for all transactions authorized by this paragraph, other than dollar roll transactions. The written agreement:
        (1) must require the termination of each transaction not more than one (1) year after its inception or upon the earlier demand of the company; and
        (2) must be with the counterparty business entity, except that, for securities lending transactions, the agreement may be with an agent acting on behalf of the life insurance company if:
            (A) the agent is:
                (i) a business entity, the obligations of which are rated BBB- or higher by Standard & Poor's Corporation (or A-2 or higher in the case of commercial paper), Baa3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper), BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper), or 1 or 2 by the Securities Valuation Office;
                (ii) a business entity that is a primary dealer in United States government securities, recognized by the Federal Reserve Bank of New York; or
                (iii) any other business entity approved by the commissioner; and
            (B) the agreement requires the agent to enter into with each counterparty separate agreements that are consistent with the requirements of this paragraph.
    C. Cash received in a transaction under this paragraph shall be:
        (1) invested:
            (A) in accordance with this section 2; and

the market value of the acceptable collateral received from a particular business entity is less than the market value of all securities loaned by the company to that business entity, the business entity shall be obligated to deliver additional acceptable collateral to the company, the market value of which, together with the market value of all acceptable collateral then held in connection with all securities lending transactions with that business entity, equals at least one hundred two percent (102%) of the market value of the loaned securities.
        (2) In a reverse repurchase transaction, other than a dollar roll transaction, the life insurance company must receive acceptable collateral having a market value as of the transaction date equal to at least ninety-five percent (95%) of the market value of the securities transferred by the company in the transaction as of that date. If at any time the market value of the acceptable collateral received from a particular business entity is less than ninety-five percent (95%) of the market value of all securities transferred by the company to that business entity, the business entity shall be obligated to deliver additional acceptable collateral to the company, the market value of which, together with the market value of all acceptable collateral then held in connection with all reverse repurchase transactions with that business entity, equals at least ninety-five percent (95%) of the market value of the transferred securities.
        (3) In a dollar roll transaction, the life insurance company must receive cash in an amount at least equal to the market value of the securities transferred by the company in the transaction as of the transaction date.
        (4) In a repurchase transaction, the life insurance company must receive acceptable collateral having a market value equal to at least one hundred two percent (102%) of the purchase price paid by the company for the securities. If at any time the market value of the acceptable collateral received from a particular business entity is less than one hundred percent (100%) of the purchase price paid by the life insurance company in all repurchase transactions with that business entity, the business entity shall be obligated to provide additional acceptable collateral to the company, the market value of which, together with the market value of all acceptable collateral then held in connection with all repurchase transactions with that business entity, equals at least one hundred two percent (102%) of the purchase price. Securities acquired by a life insurance company in a repurchase transaction shall not be:
            (A) sold in a reverse repurchase transaction;
            (B) loaned in a securities lending transaction; or
            (C) otherwise pledged.
    30. A life insurance company may invest in obligations or interests in trusts or partnerships regardless of the issuer, which are secured by:

Poor's Corporation (or A-2 or higher in the case of commercial paper), Baa 3 or higher by Moody's Investors Service, Inc. (or P-2 or higher in the case of commercial paper), BBB- or higher by Duff and Phelps, Inc. (or D-2 or higher in the case of commercial paper), or 1 or 2 by the Securities Valuation Office, and have:
            (A) a remaining maturity of three hundred ninety-seven (397) days or less or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding three hundred ninety-seven (397) days; or
            (B) a remaining maturity of three (3) years or less and a floating interest rate that resets not less frequently than quarterly on the basis of a current short-term index (for example, federal funds, prime rate, treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper) and is not subject to a maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
        (2) government money market mutual funds or class one money market mutual funds; or
        (3) securities lending, repurchase, and reverse repurchase and dollar roll transactions that meet the requirements of paragraph 29 of this subsection and any applicable regulations of the department;
provided that the investment pool shall not acquire investments in any one (1) business entity that exceed ten percent (10%) of the total assets of the investment pool.
    D. For an investment pool to be qualified under this paragraph, the investment pool shall not:
        (1) acquire securities issued, assumed, guaranteed, or insured by the life insurance company or an affiliate of the company; or
        (2) borrow or incur any indebtedness for borrowed money, except for securities lending, reverse repurchase, and dollar roll transactions that meet the requirements of paragraph 29 of this subsection.
    E. A life insurance company shall not participate in an investment pool qualified under this paragraph if, as a result of and after giving effect to the participation, the aggregate amount of participation then held by the company in all investment pools under this paragraph and section 2.4 of this chapter would exceed thirty-five percent (35%) of its admitted assets.
    F. For an investment pool to be qualified under this paragraph:
        (1) the manager of the investment pool must:
            (A) be organized under the laws of the United States, a state or territory of the United States, or the District of Columbia, and designated as the pool manager in a pooling agreement; and
            (B) be the life insurance company, an affiliated company, a business entity affiliated with the company, or a qualified

bank or a business entity registered under the Investment Advisors Act of 1940 (15 U.S.C. 80a-1 et seq.);
        (2) the pool manager or an entity designated by the pool manager of the type set forth in subdivision (1) of this subparagraph F shall compile and maintain detailed accounting records setting forth:
            (A) the cash receipts and disbursements reflecting each participant's proportionate participation in the investment pool;
            (B) a complete description of all underlying assets of the investment pool (including amount, interest rate, maturity date (if any) and other appropriate designations); and
            (C) other records which, on a daily basis, allow third parties to verify each participant's interest in the investment pool; and
        (3) the assets of the investment pool shall be held in one (1) or more accounts, in the name of or on behalf of the investment pool, under a custody agreement or trust agreement with a qualified bank, which must:
            (A) state and recognize the claims and rights of each participant;
            (B) acknowledge that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its participation in the investment pool; and
            (C) contain an agreement that the underlying assets of the investment pool shall not be commingled with the general assets of the qualified bank or any other person.
    G. The pooling agreement for an investment pool qualified under this paragraph must be in writing and must include the following provisions:
        (1) Insurers, subsidiaries, or affiliates of insurers holding interests in the pool, or any pension or profit sharing plan of such insurers or their subsidiaries or affiliates, shall, at all times, hold one hundred percent (100%) of the interests in the investment pool.
        (2) The underlying assets of the investment pool shall not be commingled with the general assets of the pool manager or any other person.
        (3) In proportion to the aggregate amount of each pool participant's interest in the investment pool:
            (A) each participant owns an undivided interest in the underlying assets of the investment pool; and
            (B) the underlying assets of the investment pool are held solely for the benefit of each participant.
        (4) A participant or (in the event of the participant's insolvency, bankruptcy, or receivership) its trustee, receiver, or other successor-in-interest may withdraw all or any portion of its participation from the investment pool under the terms of the pooling agreement.

instrument, if the liquidation of the instrument would result in a final cash payment to the insurer; or
            (2) zero (0), if the liquidation of the over-the-counter derivative instrument would not result in a final cash payment to the insurer.
        B. If a life insurance company enters into one (1) or more over-the-counter derivative instruments with another business entity under a written master agreement that provides for netting of payments owed by the respective parties, and the domiciliary jurisdiction of the counterparty is either within the United States or a foreign jurisdiction listed in the "Purposes and Procedures of the Securities Valuation Office" or any successor publication as eligible for netting, the net amount of credit risk attributable to the counterparty is the greater of zero (0) or the remainder of:
            (1) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment to the insurer by the business entity; minus
            (2) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment by the insurer to the business entity.
        C. For open transactions involving over-the-counter derivative instruments, market value:
            (1) shall be determined not less frequently than at the end of the most recent quarter of the insurer's fiscal year; and
            (2) shall be reduced by the market value of acceptable collateral that is:
                (A) held by the insurer; or
                (B) placed in escrow by one (1) or both parties.
        (10) "Covered" means, in the case of a call option, that:
            (A) the life insurance company owns the instrument underlying the call option it has written (a "written call") during the entire period that the written call is outstanding; or
            (B) pursuant to the exercise of options, warrants, or conversion rights already owned when the call option is written and held during the period that the written call is outstanding, the life insurance company can immediately acquire the instrument underlying the written call, if:
                (1) the price at which the underlying instrument can be acquired is less than or equal to the strike price of the written call; or
                (2) the life insurance company has placed in escrow or, pursuant to a custodian agreement, has segregated during the entire period that the written call is outstanding, cash, cash equivalents, or securities with a market value equal to the difference between the price at which the underlying instrument can be acquired and the strike price of the

written call.
        (11) "Covered" means, in the case of a put option, that the life insurance company has placed in escrow or, pursuant to a custodian agreement, has segregated during the entire period that the put option it has sold (a "written put") is outstanding, cash, cash equivalents, or securities with a market value equal to the amount of the insurer's obligation under the written put.
        (12) "Covered" means, in the case of a cap or floor, that the life insurance company holds in its portfolio, during the entire period that the cap or floor is outstanding, investments that generate sufficient cash flow to make all required payments under the cap or floor.
        (13) "Derivative instrument" means an agreement (in the nature of a bilateral contract, option, or otherwise), an instrument, or a series or combination of agreements and instruments:
            (A) to make or take delivery of, or assume or relinquish, a specified amount of one (1) or more of the interests underlying the derivative instrument, or to make a cash settlement in lieu thereof; or
            (B) that has a price, performance, value or cash flow based primarily upon the actual or expected price, level, performance, value or cash flow of one (1) or more of the interests underlying the derivative instrument.
        Derivative instruments include options, warrants used in a hedging transaction and not attached to another financial instrument, caps, floors, collars, swaps, swaptions, forwards, futures and any other agreements (in the nature of bilateral contracts, options, or otherwise) or substantially similar instruments, or any series or combination thereof, and any agreements (in the nature of bilateral contracts, options, or otherwise) or instruments permitted under rules adopted by the department.
        (14) "Derivative transaction" means a transaction involving the use of one (1) or more derivative instruments. For purposes of this section, a derivative transaction may involve a requirement that the insurer, a counterparty, or both, are required to post collateral with the other party (or a designated third party) pursuant to an agreement between the insurer and the counterparty.
        (15) "Domestic jurisdiction" means the United States, any state, territory, or possession of the United States, the District of Columbia, Canada or any province of Canada.
        (16) "Floor" means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a reference price or level or the performance or value of one or more underlying interests.
        (17) "Foreign currency" means a currency other than that of a domestic jurisdiction.
        (18) "Foreign jurisdiction" means a jurisdiction other than a

domestic jurisdiction.
        (19) "Forward" means an agreement (other than a future) to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one (1) or more underlying interests.
        (20) "Future" means an agreement, traded on a qualified exchange or qualified foreign exchange, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one or more underlying interests.
        (21) "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 or collateralized repurchase agreements composed of these obligations; and
            (B) qualifies for investment without a reserve pursuant to the "Purposes and Procedures of the Securities Valuation Office" or any successor publication.
        (22) "Guaranteed or insured," when used in connection with an obligation acquired under this section, means that the guarantor or insurer has agreed to:
            (A) perform or insure the obligation of the obligor or purchase the obligation; or
            (B) be unconditionally obligated until the obligation is repaid to maintain in the obligor a minimum net worth, fixed charge coverage, stockholders' equity or sufficient liquidity to enable the obligor to pay the obligation in full.
        (23) "Hedging transaction" means a derivative transaction that is entered into and maintained to manage:
            (A) the risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities (or a portfolio of assets, liabilities, or assets and liabilities) that the insurer has acquired or incurred or anticipates acquiring or incurring; or
            (B) currency exchange rate risk or the degree of exposure to assets or liabilities (or a portfolio of assets, liabilities, or assets and liabilities) that the insurer has acquired or incurred or anticipates acquiring or incurring.
        (24) "Income generation transaction" means a derivative transaction involving the writing of covered call options, covered put options, covered caps, or covered floors.
        (25) "Investment company" means an investment company as defined in Section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), as amended, and a person described in Section 3(c) of the Investment Company Act of 1940.
        (26) "Investment company series" means an investment portfolio of an investment company that is organized as a series company and to which assets of the investment company have been specifically allocated.
        (27) "Letter of credit" means a clean, irrevocable, and unconditional letter of credit issued or confirmed by, and

payable and presentable at, a financial institution on the list of financial institutions meeting the standards for issuing letters of credit under the "Purposes and Procedures of the Securities Valuation Office" or any successor publication.
        (28) "Market value" means:
            (A) as to cash, cash equivalents, and letters of credit, the amounts thereof;
            (B) as to a security (other than a security that is an over-the-counter derivative instrument) as of any date, the price for the security on that date obtained from a generally recognized source or the most recent quotation from such a source or, to the extent no generally recognized source exists, the price for the security as determined in good faith by the parties to a transaction, plus accrued but unpaid income on the security to the extent not included in the price as of that date; and
            (C) as to an over-the-counter derivative instrument as of any date, the amount that a life insurance company would have to pay or would receive for entering into an over-the-counter derivative transaction on substantially identical terms with another counterparty.
        (29) "Money market mutual fund" means a mutual fund that meets the conditions of 17 CFR 270.2a-7, under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.).
        (30) "Mutual fund" means:
            (A) an investment company; or
            (B) in the case of an investment company that is organized as a series company, an investment company series;
        that 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.).
        (31) "Obligation" means any of the following:
            (A) A bond.
            (B) A note.
            (C) A debenture.
            (D) Any other form of evidence of debt.
        (32) "Option" means an agreement giving the buyer the right to buy or receive (a "call option"), sell or deliver (a "put option"), enter into, extend or terminate or effect a cash settlement based on the actual or expected price, level, performance or value of one or more underlying interests.
        (33) "Qualified business entity" means a business entity that is:
            (A) an issuer of obligations, preferred stock, or derivative instruments that are rated 1 or 2 or are rated the equivalent of 1 or 2 by the Securities Valuation Office or by a nationally recognized statistical rating organization recognized by the Securities Valuation Office; or
            (B) a primary dealer in United States government securities, recognized by the Federal Reserve Bank of New York.
        (34) "Qualified clearinghouse" means a clearinghouse:

Commissioners.
        (39) "Swap" means an agreement to exchange or to net payments at one (1) or more times based on the actual or expected price, level, performance or value of one (1) or more underlying interests.
        (40) "Swaption" means an agreement giving the buyer the right (but not the obligation) to enter into a swap at a specified time in the future.
        (41) "Underlying interest" means the assets, liabilities, other interests or a combination thereof underlying a derivative instrument, such as any one (1) or more securities, currencies, rates, indices, commodities or derivative instruments.
        (42) "Warrant" means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement. Warrants may be issued alone or in connection with the sale of other securities, for example, as part of a merger or recapitalization agreement or to facilitate divestiture of the securities of another business entity.
    (b) Before a life insurance company engages in derivatives transactions, the insurer's board of directors must:
        (1) adopt a written plan that specifies guidelines, systems, and objectives to be followed, such as:
            (A) investment or, if applicable, underwriting objectives and risk constraints, such as credit risk limits;
            (B) permissible transactions and the relationship of those transactions to the insurer's operations;
            (C) internal control procedures;
            (D) a system for determining whether a derivative instrument used for hedging has been effective;
            (E) a credit risk management system for over-the-counter derivative transactions that measures credit risk exposure using the counterparty exposure amount; and
            (F) a mechanism for reviewing and auditing compliance with the guidelines, systems, and objectives specified in the written plan; and
        (2) make a determination that the insurer's investment managers have adequate professional personnel, technical expertise, and systems to implement the insurer's intended investment practices involving derivative instruments.
    (c) A life insurance company may use derivative instruments under this section to engage in hedging transactions, certain income generation transactions, and certain replication transactions, as these terms may be further defined in rules adopted by the department. For each hedging and replication transaction in which it engages, a life insurance company must be able to demonstrate to the commissioner:
        (1) the intended characteristics; and
        (2) the ongoing effectiveness;
of the derivative transaction or combination of the derivatives transactions through appropriate analyses.

the insurer against loss caused by diminution of the value of payments owed to the insurer due to future changes in currency exchange rates.
    (h) A life insurance company shall include all counterparty exposure amounts in determining compliance with the limitations set forth in section 2(b)(21) of this chapter.
    (i) Upon the request of a life insurance company, the commissioner may approve additional transactions involving the use of derivative instruments that:
        (1) exceed the limits set forth in subsections (d), (e), and (f); or
        (2) are for other risk management purposes.
    (j) A life insurance company shall maintain documentation and records relating to each derivative transaction. The documentation and records must record and include matters such as the following:
        (1) The purpose or purposes of the transaction.
        (2) The assets or liabilities to which the transaction relates.
        (3) The specific derivative instrument used in the transaction.
        (4) For collateralized derivatives transactions, a description of any collateral posted by the insurer or the counterparty, as well as records documenting any subsequent variations in the amount of the collateral.
        (5) For over-the-counter derivative transactions, the name of the counterparty and the counterparty exposure amount.
        (6) For exchange traded derivative instruments, the name of the exchange and the name of the firm that handled the trade.
    (k) Each derivative instrument shall be:
        (1) traded on a qualified exchange;
        (2) entered into with, or guaranteed by, a business entity;
        (3) issued or written by or entered into with the issuer of the underlying interest on which the derivative instrument is based; or
        (4) entered into on a qualified foreign exchange.
As added by P.L.186-1997, SEC.2.

of an investment company that is organized as a series company and to which assets of the investment company have been specifically allocated.
        (10) "Market value" means:
            (A) as to cash, cash equivalents, and letters of credit, the amounts thereof; and
            (B) as to a security as of any date, the price for the security on that date obtained from a generally recognized source or the most recent quotation from such a source or, to the extent no generally recognized source exists, the price for the security as determined in good faith by the parties to a transaction, plus accrued but unpaid income on the security to the extent not included in the price as of that date.
        (11) "Multilateral development bank" means an international development organization of which the United States is a member.
        (12) "Mutual fund" means:
            (A) an investment company; or
            (B) in the case of an investment company that is organized as a series company, an investment company series;
        that 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.).
        (13) "Obligation" means any of the following:
            (A) A bond.
            (B) A note.
            (C) A debenture.
            (D) Any other form of evidence of debt.
        (14) "Person" means an individual, a business entity, a multilateral development bank or a government or quasi-governmental body, such as a political subdivision or a government sponsored enterprise.
        (15) "Qualified bank" means a national bank, state bank, or trust company that:
            (A) at all times is not less than adequately capitalized, as determined by standards adopted by United States banking regulators; and
            (B) is regulated by state banking laws or is a member of the Federal Reserve System.
        (16) "Series company" means an investment company that is organized as a series company, as defined in Rule 18f-2(a) adopted under the Investment Company Act of 1940 (15 U.S.C. 80a-1, as amended).
    (b) In addition to the authority to participate in investment pools under section 2(b)(31) of this chapter, a life insurance company may participate in investment pools that:
        (1) are qualified under this section; and
        (2) invest only in investments that an insurer may acquire under section 2 of this chapter;
if the company's proportionate interest in the amount invested in

these investments does not exceed the applicable limits of section 2 of this chapter.
    (c) For an investment pool to be qualified under this section, the investment pool shall not:
        (1) acquire securities issued, assumed, guaranteed, or insured by the insurer or an affiliate of the insurer; or
        (2) borrow or incur any indebtedness for borrowed money, except for securities lending, reverse repurchase, and dollar roll transactions that meet the requirements of section 2(b)(29) of this chapter.
    (d) A life insurance company shall not participate in an investment pool qualified under this section if, as a result of the participation and after giving effect to the participation, the aggregate amount of participation then held by the insurer in all investment pools under this section and under section 2(b)(31) of this chapter would exceed thirty-five percent (35%) of the admitted assets of the insurer.
    (e) For an investment pool to be qualified under this section:
        (1) the manager of the investment pool:
            (A) must be organized under the laws of the United States, a state or territory of the United States, or the District of Columbia;
            (B) must be designated as the pool manager in a pooling agreement; and
            (C) must be:
                (i) the insurer;
                (ii) an affiliated insurer;
                (iii) a business entity affiliated with the insurer;
                (iv) a qualified bank; or
                (v) a business entity registered under the Investment Advisors Act of 1940 (15 U.S.C. 80a-1 et seq.);
        (2) the pool manager or an entity of the type referred to in subdivision (1)(C) that is designated by the pool manager must compile and maintain detailed accounting records setting forth:
            (A) the cash receipts and disbursements reflecting each participant's proportionate participation in the investment pool;
            (B) a complete description of all underlying assets of the investment pool (including the amount, interest rate, maturity date (if any) and other appropriate designations); and
            (C) other records that, on a daily basis, allow third parties to verify each participant's interest in the investment pool; and
        (3) the assets of the investment pool must be held in one (1) or more accounts, in the name of or on behalf of the investment pool, in a qualified bank under a custody agreement or trust agreement that:
            (A) states and recognizes the claims and rights of each participant;
            (B) acknowledges that the underlying assets of the

investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of the participant's participation in the investment pool; and
            (C) contains an agreement that the underlying assets of the investment pool shall not be commingled with the general assets of the qualified bank or the assets of any other person.
    (f) The pooling agreement for an investment pool that is qualified under this section must be in writing and must provide the following:
        (1) Insurers, subsidiaries, or affiliates of insurers holding interests in the pool, or any pension or profit sharing plan of the insurers or their subsidiaries or affiliates, must at all times hold one hundred percent (100%) of the interests in the investment pool.
        (2) The underlying assets of the investment pool must not be commingled with the general assets of the pool manager or any other person.
        (3) In proportion to the aggregate amount of each pool participant's interest in the investment pool:
            (A) each participant owns an undivided interest in the underlying assets of the investment pool; and
            (B) the underlying assets of the investment pool are held solely for the benefit of each participant.
        (4) A participant or (in the event of the participant's insolvency, bankruptcy, or receivership) its trustee, receiver, or other successor-in-interest may withdraw all or any portion of its participation from the investment pool under the terms of the pooling agreement.
        (5) Withdrawals may be made on demand without penalty or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter. Payments upon withdrawals under this paragraph shall be calculated in each case net of all then applicable fees and expenses of the investment pool. The pooling agreement shall provide for such payments to be made to the participants in one (1) of the following forms, at the discretion of the pool manager:
            (A) in cash, the then fair market value of the participant's pro rata share of each underlying asset of the investment pool;
            (B) in kind, a pro rata share of each underlying asset; or
            (C) in a combination of cash and in kind distributions, a pro rata share in each underlying asset.
        (6) The records of the investment pool shall be made available for inspection by the commissioner.
As added by P.L.186-1997, SEC.3.

as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1980 Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioners 1961 Industrial Extended Term Insurance Table for policies of industrial insurance.
        (E) For insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on appropriate modifications of the tables referred to in this subdivision.
        (F) Any ordinary mortality tables, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulation promulgated by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table.
        (G) Any industrial mortality tables, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulation promulgated by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table.
    (9) The nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to one hundred twenty-five percent (125%) of the calendar year statutory valuation interest rate for such policy as defined in IC 27-1-12-10, rounded to the nearer one quarter of one percent (1/4 of 1%).
    (10) Notwithstanding any other provision in this title to the contrary, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other provisions of that policy form.
    (11) After September 1, 1981, any company may file with the commissioner a written notice of its election to comply with the provisions of this subsection after a specified date before January 1, 1989, which shall be the operative date of this subsection for such company. If a company makes no such election, the operative date of this subsection for such company shall be January 1, 1989.
    (e) Any cash surrender value and any paid-up nonforfeiture benefit, available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary, shall be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in subsections (b), (c), (d), and (dd) may be calculated upon the assumption that any death benefit is payable at the end of the policy year of death. The net

value of any paid-up additions, other than paid-up term additions, shall be not less than the amounts used to provide such additions. Notwithstanding the provisions of subsection (b), additional benefits payable (1) in the event of death or dismemberment by accident or accidental means, (2) in the event of total and permanent disability, (3) as reversionary annuity or deferred reversionary annuity benefits, (4) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this section would not apply, (5) as term insurance on the life of a child or on the lives of children provided in a policy on the life of a parent of the child, if such term insurance expires before the child's age is twenty-six (26), is uniform in amount after the child's age is one (1), and has not become paid up by reason of the death of a parent of the child, and (6) as other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits, shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits.
    (f) This section shall not apply to any reinsurance, group insurance, pure endowment, annuity or reversionary annuity contract, nor to any term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of twenty (20) years or less expiring before age seventy-one (71), for which uniform premiums are payable during the entire term of the policy, nor to any term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in subsections (d) and (dd), is less than the adjusted premium so calculated on a term policy of uniform amount, or renewal of it, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance, and for a term of twenty (20) years or less expiring before age seventy-one (71), for which uniform premiums are payable during the entire term of the policy, nor to any policy which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in subsections (b), (c), (d), and (dd) of this section, exceeds two and one-half percent (2 1/2%) of the amount of insurance at the beginning of the same policy year, nor to any policy which shall be delivered outside this state through an agent or other representative of the company issuing the policy. For purposes of determining the applicability of this section, the age at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life.
    (g) This subsection, in addition to all other applicable subsections of this section, applies to all policies issued on or after January 1, 1985. Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary shall be an amount which does not differ by more than two tenths of

one percent (.2%) of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years, from the sum of (a) the greater of zero (0) and the basic cash value specified in this subsection and (b) the present value of any existing paid-up additions less the amount of any indebtedness to the company under the policy.
    The basic cash value shall be equal to the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the company, if there had been no default, less the then present value of the nonforfeiture factors, as defined in this subsection, corresponding to premiums which would have fallen due on and after such anniversary. However, the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in subsection (b) or (d) of this section, whichever is applicable, shall be the same as are the effects specified in that subsection on the cash surrender values defined in that subsection.
    The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in subsection (d) or (dd), whichever is applicable. Except as is required by the next succeeding sentence of this paragraph, such percentage:
        (1) must be the same percentage for each policy year between the second policy anniversary and the later of (i) the fifth policy anniversary and (ii) the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two tenths of one percent (.2%) of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years; and
        (2) must be such that no percentage after the later of the two (2) policy anniversaries specified in the preceding item (a) may apply to fewer than five (5) consecutive policy years. No basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in subsection (d) or (dd) of this section, whichever is applicable, were substituted for the nonforfeiture factors in the calculation of the basic cash value.
    All adjusted premiums and present values referred to in this subsection shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy's compliance with the other subsections of this section. The cash surrender values referred to in this subsection shall include any endowment benefits provided for by the policy.
    Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the

policy in the event of default in a premium payment shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in subsections (a), (b), (c), (dd), and (e) of this section. The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed as subdivisions (1) through (6) in subsection (e) of this section shall conform with the principles of this subsection.
    (h) In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in subsections (a), (b), (c), (d), or (dd) of this section then:
    (1) the commissioner must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by subsection (a), (b), (c), (d), or (dd) of this section;
    (2) the commissioner must be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds; and
    (3) the cash surrender values and paid-up nonforfeiture benefits provided by such plan must not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this section, as determined by regulations promulgated by the department.
(Formerly: Acts 1935, c.162, s.151B; Acts 1943, c.189, s.3; Acts 1949, c.8, s.1; Acts 1959, c.146, s.2; Acts 1963, c.212, s.1; Acts 1973, P.L.273, SEC.1.) As amended by Acts 1979, P.L.250, SEC.1; Acts 1981, P.L.237, SEC.1.

department a written notice of its election to invoke the provisions of this paragraph (i) after a specified date before January 1, 1979, which specified date shall be the operative date of this paragraph (i) for such company; provided, that any company may elect an operative date for ordinary annuity and pure endowment contracts different from that elected for group annuity and pure endowment contracts. If a company makes no such election, the operative date of this paragraph (i) for such company shall be January 1, 1979.
    (j)(A) Applicability of this Subsection
    (1) The interest rates used in determining the minimum standard for the valuation of:
    (a) all life insurance policies issued in a particular calendar year, on or after the operative date of IC 27-1-12-7(dd);
    (b) all ordinary annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982;
    (c) all annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and
    (d) the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts;
shall be the calendar year statutory valuation interest rates as defined in this subsection.
    (B) Calendar Year Statutory Valuation Interest Rates
        (1) The calendar year statutory valuation interest rates, 1, shall be determined as follows and the results rounded to the nearer one-quarter of one percent (1/4 of 1%):
    (a) For life insurance,
    I = .03 + W(R1 - .03) + W/2(R2 - .09)
    (b) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,
    I = .03 + W(R - .03)
where R1 is the lesser of R and .09,
    R2 is the greater of R and .09,
    R is the reference interest rate defined in this subsection, and W is the weighting factor defined in this subsection.
    (c) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in (b) above, the formula for life insurance stated in (a) above shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of ten (10) years and the formula for single premium immediate annuities stated in (b) above shall apply to annuities and guaranteed interest contracts with guarantee duration of ten (10) years or less.
    (d) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in (b) above shall not apply.
    (e) For other annuities with cash settlement options and

guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in (b) above shall apply.
    (2) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent (1/2 of 1%), the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 (using the reference interest rate defined for 1979) and shall be determined for each subsequent calendar year regardless of when IC 27-1-12-7(dd) becomes operative.
    (C) Weighting Factors
    (1) The weighting factors referred to in the formulas stated above are given in the following tables:
    (a) Weighting Factors for Life Insurance:
    Guarantee    Weighting
    Duration    Factors
    (Years)
    10 or less:     .50
    More than 10, but not more
        than 20:     .45
    More than 20:     .35
    For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy;
    (b) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options:
.80
    (c) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in (b) above, shall be as specified in tables (i), (ii), and (iii) below, according to the rules and definitions in (iv), (v) and (vi) below:
    (i) For annuities and guaranteed interest contracts valued on an issue year basis:
    Guarantee    Weighting Factor
    Duration    For Plan Type
    (Years)    A     B     C
    5 or less:     .80     .60     .50
    More than 5, but not
        more than 10:     .75     .60     .50

Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.
    (f) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in (b) above, the average over a period of twelve (12) months, ending on June 30 of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.
    (E) Alternative Method for Determining Reference Interest Rates
    In the event that Moody's Corporate Bond Yield Average-Monthly Average Corporates is no longer published by Moody's Investors Service, Inc., or in the event that the National Association of Insurance Commissioners determines that Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc., is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by rule promulgated by the department, may be substituted.
    (3) Reserves according to the commissioners' reserve valuation method, for life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such benefits shall be such uniform percentage of the respective contract premiums for such benefits, excluding any extra premiums charged because of impairments or special hazards, that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (a) over (b), as follows:
    (a) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one (1) per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided that such net level annual premium shall not exceed the net level annual premium on the nineteen (19) year premium whole life plan for insurance of the same amount at an age one (1) year higher than the age at issue of such policy.
    (b) A net one (1) year term premium for such benefits provided for in the first policy year.
    Provided that for any life insurance policy issued on or after January 1, 1985, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and

which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners' reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in subsection (6) of this section, be the greater of the reserve as of such policy anniversary calculated as described in the preceding paragraph and the reserve as of such policy anniversary calculated as described in that paragraph, but with (i) the value defined in subparagraph (a) of that paragraph being reduced by fifteen percent (15%) of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in paragraphs (a) through (h) and paragraph (j) of subsection (2) of this section shall be used.
    Reserves according to the commissioners' reserve valuation method for: (i) life insurance and endowment benefits of policies providing for a varying amount of insurance or requiring the payment of varying premiums; (ii) group annuity and pure endowment contracts, purchased under a retirement plan or a plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship), or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code; (iii) disability and accidental death benefits in all policies and contracts; and (iv) all other benefits, except life insurance and endowment benefits and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a valuation method consistent with the principles set forth in the preceding paragraph of this subsection.
    This paragraph applies to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code. Reserves according to the commissioners' annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in those contracts, is the greatest of the respective excesses of present values, at the date of valuation, of future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by the terms of those contracts at the end of each respective contract year, over the present value, at

the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of the contract, that become payable before the end of each contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in the contract for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of those contracts to determine nonforfeiture values.
    (4) In no event shall a company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, be less than the corresponding aggregate reserves calculated in accordance with the methods set forth in subsections (3), (6), and (7) of this section and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies, anything in subsections (2) and (5) to the contrary notwithstanding. In no event shall the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined to be necessary by the qualified actuary under IC 27-1-12-10.1.
    (5) Reserves for any category of policies, contracts, or benefits as may be determined by the company and approved by the department may be calculated at the option of the company according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard established by this section, but the rate or rates of interest used shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits in such policies, contracts, or benefits.
    Any company which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided for in this section may, with the approval of the department, adopt any standard of valuation producing lower aggregate reserves, but not lower in the aggregate than the reserves produced by the minimum standard specified in this section.
    (6) If in any contract year the gross premium charged by any life insurance company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for that policy or contract shall be the greater of:
        (A) the reserve calculated according to the mortality table, rate of interest, and method actually used for that policy; or
        (B) the reserve calculated by the method actually used for that policy or contract but using the minimum standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest

referred to in this subsection are those standards stated in paragraphs (a) through (h) and paragraph (j) of subsection (2) of this section.
    Provided that for any life insurance policy issued on or after January 1, 1985, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination of the two in an amount greater than such excess premium, the foregoing provisions of this section (6) shall be applied as if the method actually used in calculating the reserve for such policy were the method described in subsection (3) of this section, ignoring the second paragraph of subsection (3) of this section. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with subsection (3) of this section, including the second paragraph of that subsection, and the minimum reserve calculated in accordance with subsection (6) of this section.
    (7) In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in subsections (3) and (6) of this section, the reserves which are held under any such plan must:
    (a) be appropriate in relation to the benefits and the pattern of premiums for that plan, and
    (b) be computed by a method which is consistent with the principles of this section, as determined by rules promulgated by the department.
(Formerly: Acts 1935, c.162, s.153A; Acts 1943, c.189, s.5; Acts 1959, c.146, s.3; Acts 1963, c.212, s.2; Acts 1973, P.L.273, SEC.2.) As amended by Acts 1979, P.L.250, SEC.2; Acts 1980, P.L.22, SEC.16; Acts 1981, P.L.237, SEC.2; P.L.2-1987, SEC.35; P.L.5-1988, SEC.142; P.L.130-1994, SEC.17; P.L.116-1994, SEC.22.

received at the insurer's home office, written notice by or on behalf of a creditor of the policy owner that specifies the amount claimed against the policy owner.
(Formerly: Acts 1935, c.162, s.155; Acts 1973, P.L.274, SEC.1; Acts 1975, P.L.280, SEC.1.) As amended by Acts 1981, P.L.239, SEC.1; P.L.253-1995, SEC.1; P.L.82-1998, SEC.2.