The Florida Senate

625.305  Diversification.--

(1)  Every insurer must maintain an amount equal to its entire reserve, as required under part I of this chapter, and the minimum surplus as to policyholders required to be maintained by the insurer under this code invested in coin or currency of the United States, in assets allowed by s. 625.012, except loans or advances to affiliates to the extent unsecured and in investments as authorized under this part, other than the investments authorized under either of the following sections:

(a)  Section 625.331.

(b)  Section 625.333, except paragraph (1)(a).

(2)  Investments eligible under subsection (1), except investments acquired pursuant to s. 625.331, are subject to the following limitations:

(a)  The cost of investments made by insurers in stock authorized by s. 625.324 shall not exceed 15 percent of the insurer's admitted assets; the cost of such investment in common stocks shall not exceed 10 percent of the insurer's admitted assets; and the cost of such investment in stock of any one corporation shall not exceed 3 percent of the insurer's admitted assets. Notwithstanding any other provision in this chapter, the cost basis or market value, if lower, of all stock investment shall be used for the purpose of determining the asset value against which such percentage limitations are to be applied.

(b)  Such other limitations, if any, as may be expressly provided for in the section under which the investment is authorized.

(3)  The cost of investments made by insurers in a mortgage loan authorized by s. 625.327 shall not exceed the lesser of 5 percent of the insurer's admitted assets or 10 percent of the insurer's capital and surplus. An insurer shall not invest in additional mortgage loans without the consent of the department if the admitted value of all mortgage loans held by the insurer exceeds:

(a)  With respect to life and health insurers, 40 percent of the admitted assets of the insurer.

(b)  With respect to property and casualty insurers, 10 percent of the admitted assets of the insurer.

An insurer that, as of October 1, 1991, has mortgage investments that exceed the aggregate limitation specified in this subsection shall submit to the department no later than January 31, 1992, a plan to bring the amount of mortgage investments into compliance with such limitations by January 1, 2001.

(4)  The cost of investments in bonds, debentures, notes, commercial paper, or other debt obligations issued, assumed, or guaranteed by any solvent institution, which investments are classified as medium to lower quality obligations, other than obligations of subsidiaries or related corporations as that term is defined in s. 625.325, shall be limited to:

(a)  No more than 13 percent of an insurer's admitted assets.

(b)  No more than 5 percent of an insurer's admitted assets in obligations that have been given a rating of 4, 5, or 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(c)  No more than 1.5 percent of an insurer's admitted assets in obligations that have been given a rating of 5 or 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(d)  No more than 0.5 percent of an insurer's admitted assets in obligations that have been given a rating of 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(e)  No more than 10 percent of an insurer's admitted assets, if the investments are in issuers from any one industry.

(f)  No more than 2 percent of an insurer's admitted assets if the investment is in any one issuer.

(5)  For purposes of subsection (4), the following definitions shall apply:

(a)  "Medium to lower quality obligations" means obligations that have been given a rating of 3, 4, 5, or 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(b)  "Industry" means a distinct and recognized area of economic activity that consists of the production, manufacture, or distribution of common goods, products, commodities, or services.

(6)  Each insurer shall possess and maintain adequate documentation to establish that its investments in medium to lower quality obligations do not exceed the limitations under subsection (4).

(7)  Subsections (4), (5), and (6) apply to any investment made after September 30, 1991. If an insurer's investments in medium to lower quality obligations equal or exceed the maximum amounts permitted by subsection (4) as of October 1, 1991, the insurer may not acquire any additional medium to lower quality obligations. An insurer that was not in compliance with subsection (4) as of October 1, 1991, may hold until maturity or until January 1, 1996, whichever is sooner, only those medium to lower quality obligations it owned on that date if such obligations were obtained in compliance with the law in effect at the time the investments were made. If the insurer sells, transfers, or otherwise disposes of such securities prior to maturity, the insurer may not acquire any medium to lower quality obligations as substitutions or replacements, except replacement investments acquired for the purpose of supporting an unexpired life insurance or annuity product liability on the condition that the insurer filed with the department a schedule of such liabilities supported by the medium to lower quality investments. An insurer that was not in compliance with subsection (4) on December 31, 1991, shall file with its annual statement a separate schedule of the medium to lower quality obligations it owned on December 31, 1991. Until it is in compliance with subsection (4), the insurer shall file with each succeeding annual and quarterly statement a separate schedule of the medium to lower quality obligations it owns as of the reporting date of the filed statement.

(8)  Any investments in excess of those permitted by subsection (4) are not allowed as an asset of the insurer.

(9)  The department may limit the extent of an insurer's deposits with any financial institution which does not meet its regulatory capital requirement if the department determines that the financial solvency of the insurer is threatened by a deposit in excess of such limit.

(10)  The provisions of this section supersede any inconsistent provision of s. 106 of the Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C. s. 77r).

(11)  Every domestic life insurance company that issues variable annuity contracts may invest and reinvest amounts received in connection with such variable contracts in common stocks, subject to the following limitations:

(a)  All common stock investments must be in stock that is listed or admitted to trading on a securities exchange located in the United States, or which is publicly held and has been traded in the "over the counter market" for not less than 1 year preceding the date of purchase and for which stock market quotations have been readily available for that 1 year period.

(b)  A domestic life insurance company that issues variable annuity contracts may not invest more than 5 percent of all of the amounts received in connection with such contracts in the securities of one corporation or insurer.

(c)  A domestic life insurance company that issues variable annuity contracts may not, as a result of investing any funds received in connection with such contracts, beneficially own or hold, together with the investments permitted under paragraph (2)(a), more than 15 percent of the outstanding securities of any corporation or issuer. Any foreign life insurance company that issues variable annuity contracts in this state and which invests the funds received in connection with such contracts in accordance with the laws of its state of domicile, is in compliance with this section.

(d)  A domestic life insurance company may not invest in the common stock of any corporation if such investment creates a conflict of interest between officers and directors of the investing company and those of the corporation whose stock is purchased.

History.--s. 130, ch. 59-205; s. 2, ch. 70-188; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 1, 2, ch. 79-245; ss. 2, 3, ch. 81-318; ss. 101, 122, 809(1st), ch. 82-243; s. 2, ch. 87-250; s. 1, ch. 89-227; s. 45, ch. 89-360; ss. 50, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 10, ch. 93-410; s. 4, ch. 2000-370.