Made available by Touch N' Go Systems, Inc., and the
Law Offices of James B. Gottstein.

You can also go to The Alaska Legal Resource Center or search the entire website search.

Touch N' Go, the DeskTop In-and-Out Board makes your office run smoother. Visit Touch N' Go's Website to see how.
Title 3 . Commerce, Community, and Economic Development
Chapter 21 . Miscellaneous
Section 660. Authorized assuming insurer maintaining a trust fund

3 AAC 21.660. Authorized assuming insurer maintaining a trust fund

(a) The director will allow credit for reinsurance ceded by a domestic insurer to an authorized assuming insurer that maintains a trust fund on or before the as of date of the ceding insurer's statutory financial statement. The director will allow this credit for as long as credit for reinsurance is claimed by the domestic insurer and the trust fund is maintained in an amount and location as required under AS 21.12.020 (a)(4).

(b) The trust agreement for the trust fund required under AS 21.12.020 must include the following provisions:

(1) if a trust fund contains an amount less than the amount required by AS 21.12.020 or if the grantor of the trust fund has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of the trust fund's domicile, the trustee shall comply with an order of the regulator with oversight over the trust fund or with an order of a court of competent jurisdiction directing the trustee to transfer the assets of the trust fund;

(2) the regulator with oversight over the trust fund shall distribute the assets of the trust fund in accordance with the laws of the state in which the trust fund is domiciled;

(3) any assets of the trust fund not necessary to satisfy the beneficiary of the trus fund must be returned to the trustee;

(4) the grantor shall waive any right under law that is inconsistent with this section.

(c) A claim is valid and enforceable against a trust fund to the extent it is unsatisfied 30 days after entry of a final order of any court of competent jurisdiction in the United States.

(d) Assets deposited in a trust fund established by an authorized assuming insurer must be valued according to fair market value and may only consist of

(1) cash in United States dollars;

(2) certificates of deposit issued by a qualified United States financial institution

(3) clean, irrevocable, unconditional letters of credit containing an evergreen clause, issued or confirmed by a qualified United States financial institution; or

(4) investments of a type specified in (f) of this section.

(e) An investment in or issued by an entity controlling, controlled by, or under common control with either the grantor or beneficiary of the trust fund may not exceed five percent of the total of the trust fund. No more than 20 percent of the total of the trust fund may be in foreign investments authorized in this section, and no more than 10 percent of the total of the trust fund may be in securities denominated in foreign currencies. A depository receipt denominated in United States dollars and representing rights conferred by a foreign security is classified as a foreign investment denominated in a foreign currency.

(f) The trust fund established by an authorized assuming insurer may only contain the following:

(1) a valid and legally authorized government obligation that is not in default as to principal or interest that is issued, assumed, or guaranteed by

(A) the United States or by any agency or instrumentality of the United States;

(B) a state of the United States;

(C) a territory, possession, or other governmental unit of the United States;

(D) an agency or instrumentality of a governmental unit referred to in (B) or (C) of this paragraph, if the obligation is payable by law, as to both principal and interest, from taxes levied or required by law to be levied, or from adequate special revenues pledged or otherwise appropriated, or required by law to be provided for making these payments; the obligation may not be an obligation eligible for investment under this paragraph if the obligation is payable solely out of a special assessment on properties benefited by local improvements; or

(E) the government of any other country that is a member of the Organization for Economic Cooperation and Development and whose government obligations are rated high grade investments or the equivalent by a rating agency recognized by the securities valuation office;

(2) an obligation that

(A) is issued in

(i) the United States by a solvent United States institution, other than an insurance company, or that is assumed or guaranteed by that institution; or

(ii) a non-United States market by a solvent United States institution, other than an insurance company, and that is dollar-denominated;

(B) is not in default as to principal or interest; and

(C) either

(i) is rated a high grade investment or the equivalent by a rating agency recognized by the securities valuation office or, if not rated, is similar in structure and other material respects to other obligations of the same institution that are rated equivalent to a high grade investment;

(ii) is insured by at least one authorized insurer that is licensed to insure obligations in this state if, after considering the insurance, a rating agency recognized by the securities valuation office rates the obligation a high grade investment or the equivalent; for purposes of this sub-subparagraph, an authorized insurer may not be the investing insurer or a parent, subsidiary, or affiliate of the investing insurer; or

(iii) has been designated as Class One or Class Two by the securities valuation office;

(3) an obligation issued, assumed, or guaranteed by a solvent non-United States institution chartered in a member country of the Organization for Economic Cooperation and Development or an obligation of a United States corporation issued in a non-United States currency, if in either case the obligation is rated a high grade investment or the equivalent by a rating agency recognized by the securities valuation office;

(4) an equity investment in common shares or a partnership interest as described in (A) or (B) of this paragraph, if the investment in or loan upon any one institution's outstanding equity interests does not exceed one percent of the assets of the trust fund, or if the cost of the investment in equity interest made under this paragraph, when added to the aggregate cost of other investments in equity interest then held under this paragraph, does not exceed 10 percent of the assets of the trust fund; the equity investment may be made in

(A) a solvent United States institution if the

(i) obligation and preferred shares of the institution, if any, are eligible as investments under this subsection; and

(ii) equity interests of the institution, except an insurance company, are registered on a national securities exchange registered under 15 U.S.C. 78e - 78f (secs. 5 - 6 of the Securities Act of 1934) and price quotations are furnished through a nationwide automated quotations system approved by the Securities and Exchange Commission or the National Association of Securities Dealers; or

(B) a solvent institution organized under the laws of a member country of the Organization for Economic Cooperation and Development if the

(i) obligation is rated a high grade investment or the equivalent by a rating agency recognized by the securities valuation office; and

(ii) equity interests of the institution are registered on a securities exchange regulated by the government of a member country of the Organization for Economic Cooperation and Development;

(5) if the obligation is rated a high grade investment or the equivalent by a rating agency recognized by the securities valuation office, an obligation issued, assumed, or guaranteed by a multinational development bank; for purposes of this paragraph, "multinational development bank" includes

(A) International Bank for Reconstruction and Development;

(B) European Bank for Reconstruction and Development;

(C) Inter-American Development Bank;

(D) Asian Development Bank;

(E) African Development Bank; and

(F) International Finance Corporation;

(6) a security of an investment company registered under 15 U.S.C. 80a-1 - 80a-64 (Investment Company Act of 1940) if the

(A) investment company invests at least 90 percent of its assets in the types of securities that qualify as an investment

(i) under (1), (2), or (3) of this subsection or invests in securities that are determined by the director to be substantially similar; or

(ii) under (4)(A) of this subsection; and

(B) total investment in securities qualifying

(i) under (A)(i) of this paragraph does not exceed 10 percent of the assets of the trust fund and the total investment in qualifying investment companies does not exceed 25 percent of the assets of the trust fund; and

(ii) under (A)(ii) of this paragraph does not exceed five percent of the assets of the trust fund and the total investment in qualifying investment companies are included when calculating the permissible aggregate value of equity interests under (4)(A) of this subsection;

(7) a letter of credit that has the right and obligation of the trustee in a binding agreement, as approved by the director, to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiary of the trust fund if the letter of credit will otherwise expire without being renewed or replaced.

(g) An investment made under (f)(1), (2), or (3) of this section may not exceed

(1) five percent of the trust fund for the total of investments in or loans upon the obligations of an institution other than an institution that issues mortgage-related securities;

(2) five percent of the trust fund for an investment in any one mortgage-related security;

(3) 25 percent of the trust fund for the total of investments in mortgage-related security; or

(4) two percent of the trust fund for preferred or guaranteed shares issued or guaranteed by a solvent United States institution; in addition, an investment in preferred or guaranteed shares issued or guaranteed by a solvent United States institution is permitted only if all obligations of the institution are eligible as investments under (f)(2)(C)(i) or (iii) of this section.

(h) in this section,

(1) "mortgage-related security" means an obligation that is rated a high grade investment or the equivalent by a rating agency recognized by the securities valuation office and that

(A) represents ownership of one or more promissory notes or certificates of interest or participation in the notes, including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of the notes, certificates, or participation of amounts payable under, the notes, certificates, or participation, that

(i) are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or are directly secured by a first lien on a residential manufactured home as defined in 42 U.S.C. 5402(6), whether the manufactured home is considered real or personal property under the laws of the state in which it is located; and

(ii) were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution that is supervised and examined by a federal or state housing authority, were originated by a mortgagee approved by the United States Secretary of Housing and Urban Development under 12 U.S.C. 1709 and 1715b, or, if the notes involve a lien on the manufactured home, were originated by an institution or by a financial institution approved for insurance by the United States Secretary of Housing and Urban Development under 12 U.S.C. 1703; or

(B) is secured by one or more promissory notes, certificates of deposit, or participation in the notes, with or without recourse to the insurer of the notes, and, by its terms, provides for payments of principal in relation to payments, reasonable projections of payments, or notes meeting the requirements of (A) of this paragraph; and

(2) "promissory note," when used in connection with a manufactured home, means a loan, an advance, or a credit sale as evidenced by a retail installment sales contract or other instrument.

History: Eff. 11/25/94, Register 132; am 11/21/2004, Register 172

Authority: AS 21.06.090

AS 21.12.020


Note to HTML Version:

The Alaska Administrative Code was automatically converted to HTML from a plain text format. Every effort has been made to ensure its accuracy, but neither Touch N' Go Systems nor the Law Offices of James B. Gottstein can be held responsible for any possible errors. This version of the Alaska Administrative Code is current through June, 2006.

If it is critical that the precise terms of the Alaska Administrative Code be known, it is recommended that more formal sources be consulted. Recent editions of the Alaska Administrative Journal may be obtained from the Alaska Lieutenant Governor's Office on the world wide web. If any errors are found, please e-mail Touch N' Go systems at E-mail. We hope you find this information useful. Copyright 2006. Touch N' Go Systems, Inc. All Rights Reserved.

Last modified 7/05/2006