OAR 836-033-0130
Investments in Medium Grade and Lower Grade Obligations
(1)
An insurer may acquire or hold obligations that are not investment grade only as provided in this rule. For purposes of this rule, an obligation is not investment grade if the obligation is either of the following:(a)
A “medium grade obligation,” which means an obligation that is rated three by the Securities Valuation Office of the National Association of Insurance Commissioners;(b)
A “lower grade obligation,” which means an obligation that is rated four, five or six by the Securities Valuation Office of the National Association of Insurance Commissioners.(2)
An insurer shall not acquire, directly or indirectly, any medium grade or lower grade obligation of any person if, after given effect to the acquisition, the aggregate amount of all medium grade and lower grade obligations then held by the insurer would exceed 20 percent of its allowed assets. For purposes of this section, the aggregate amount of medium grade and lower grade obligations shall be the aggregate value of the obligations as set forth in the most recent financial statement required by and filed with the Director.(3)
In addition to the prohibition in section (2) of this rule on the aggregate amount of medium grade and lower grade obligations, an insurer shall not acquire or hold:(a)
More than ten percent of its allowed assets in obligations rated four, five or six by the Securities Valuation Office of the National Association of Insurance Commissioners;(b)
More than three percent of its allowed assets in obligations rated five or six by the Securities Valuation Office of the National Association of Insurance Commissioners;(c)
More than one percent of its allowed assets in obligations rated six by the Securities Valuation Office of the National Asociation of Insurance Commissioners.(4)
Attaining the limit of any one category under section (3) of this rule does not preclude an insurer from acquiring or holding obligations in other categories, subject to the specific and multi-category limits of this rule.(5)
The following prohibitions apply to investments in lower grade obligations and medium grade obligations issued, guaranteed or insured by any one person:(a)
An insurer shall not acquire or hold more than an aggregate of one percent of its allowed assets in medium grade obligations issued, guaranteed or insured by any one person;(b)
An insurer shall not acquire or hold more than one-half of one percent of its allowed assets in lower grade obligations issued, guaranteed or insured by any one person;(c)
In addition to the prohibitions in subsections (a) and (b) of this section, an insurer shall not acquire or hold more than one percent of its allowed assets in any medium or lower grade obligations issued, guaranteed or insured by any one person.(6)
This rule does not prohibit an insurer from doing any of the following:(a)
Acquiring any obligation that the insurer committed prior to the effective date of this rule to acquire if the insurer would have been permitted to acquire the obligation when the insurer made the commitment;(b)
Acquiring an obligation as a result of a restructuring of a medium or lower grade obligation already held.(7)
An insurer may acquire a medium or lower grade obligation of a person in which the insurer already has one or more medium or lower grade obligations if the obligation is acquired in order to protect an investment previously made in the obligations of the person. All such acquired obligations, however, shall not exceed one-half of one percent of the insurer’s allowed assets.(8)
The board of directors of a domestic insurer that acquires, hold or invests, directly or indirectly, more than two percent of its allowed assets in medium grade and lower grade obligations shall adopt a written plan for the making of such investments. The plan shall contain guidelines with respect to the quality of the issues invested in as well as diversification standards. The diversification standards shall at least include standards regarding the issuer, industry, duration, liquidity and geographic location.(9)
An insurer shall not acquire any lower grade or medium grade obligation that in whole or in part exceed the applicable limitation established in this rule. The requirement under this section does not apply to the acquisition of an obligation to which section (6) of this rule applies.(10)
On and after January 1, 1995, an insurer shall not claim as an allowed asset any portion of lower grade or medium grade obligations acquired by the insurer prior to the effective date of this rule or as authorized by subsection (6)(a) of this rule that exceed the applicable limitation established in this rule, except with the consent of the Director.(11)
If an obligation held by an insurer is of investment grade when acquired but subsequently becomes a medium grade or lower grade obligation, and that event causes the obligations of the insurer to exceed an applicable limit established under this rule, the insurer shall not count the excess as an allowed asset. An insurer shall not hold any excess ascribable to deterioration of an obligation as described in this section longer than a continuous period of three years during which the obligation is a medium or lower grade obligation, except with the consent of the Director.(12)
A foreign or alien insurer is subject to this rule as provided in ORS 733.510 (Investments of insurers)(2).
Source:
Rule 836-033-0130 — Investments in Medium Grade and Lower Grade Obligations, https://secure.sos.state.or.us/oard/view.action?ruleNumber=836-033-0130.