(a) The following definitions apply throughout this section:

1. (1) "Acceptable collateral" means the following:

   1. (A) As to securities lending transactions and for the purpose of calculating counterparty exposure:

      1. (i) cash;
      2. (ii) cash equivalents;
      3. (iii) letters of credit; and
      4. (iv) direct obligations of, or securities that are fully guaranteed as to principal and interest by, the government of the United States or any agency of the United States, including the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
   2. (B) As to lending foreign securities, sovereign debt rated 1 by the Securities Valuation Office.

   3. (C) As to repurchase transactions:

      1. (i) cash;
      2. (ii) cash equivalents; and
      3. (iii) direct obligations of, or securities that are fully guaranteed as to principal and interest by, the government of the United States or any agency of the United States, including the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

   4. (D) As to reverse repurchase transactions:

      1. (i) cash; and
      2. (ii) cash equivalents.
2. (2) "Admitted assets" means assets permitted to be reported as admitted assets on the statutory financial statement of the insurer most recently required to be filed with the commissioner.

3. (3) "Business entity" means any of the following:

   1. (A) A sole proprietorship.
   2. (B) A corporation.
   3. (C) A limited liability company.
   4. (D) An association.
   5. (E) A general partnership.
   6. (F) A limited partnership.
   7. (G) A limited liability partnership.
   8. (H) A joint stock company.
   9. (I) A joint venture.
   10. (J) A trust.
   11. (K) A joint tenancy.
   12. (L) Any other similar form of business organization, whether for profit or nonprofit.

4. (4) "Cash" means any of the following:

   1. (A) United States denominated paper currency and coins.
   2. (B) Negotiable money orders and checks.
   3. (C) Funds held in any time or demand deposit in any depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation.

5. (5) "Cash equivalent" means any of the following:

   1. (A) A certificate of deposit issued by a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation.
   2. (B) A banker's acceptance issued by a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation.
   3. (C) A government money market mutual fund.
   4. (D) A class one (1) money market mutual fund.
6. (6) "Class one (1) money market mutual fund" means a money market mutual fund that at all times qualifies for investment using the bond class one (1) reserve factor pursuant to the Purposes and Procedures Manual of the NAIC Investment Analysis Office.
7. (7) "Derivative transaction" has the meaning set forth in IC 27-1-12-2.2 (a)(14).

8. (8) "Government money market mutual fund" means a money market mutual fund that at all times:

   1. (A) invests only in obligations issued, guaranteed, or insured by the United States or collateralized repurchase agreements composed of these obligations; and
   2. (B) qualifies for investment without a reserve pursuant to the Purposes and Procedures Manual of the NAIC Investment Analysis Office.
9. (9) "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.).

10. (10) "Mutual fund" means:

    1. (A) an investment company; or

    2. (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.).

11. (11) "Obligation" means any of the following:

    1. (A) A bond.
    2. (B) A note.
    3. (C) A debenture.
    4. (D) Any other form of evidence of debt.

12. (12) "Qualified business entity" means a business entity that is:

    1. (A) an issuer of obligations or preferred stock that is rated one
    2. (1) or two (2) or is rated the equivalent of one (1) or two (2) by the Securities Valuation Office or by a nationally recognized statistical rating organization recognized by the Securities Valuation Office; or
    3. (B) a primary dealer in United States government securities, recognized by the Federal Reserve Bank of New York.
13. (13) "Securities Valuation Office" refers to the Securities Valuation Office of the NAIC.

(b) Any company, other than one organized as a life insurance company, organized under the provisions of IC 27-1 or any other law of this state and authorized to make any or all kinds of insurance described in class 2 or class 3 of IC 27-1-5-1 shall invest its capital or guaranty fund as follows and not otherwise:

1. (1) In cash.

2. (2) In:

   1. (A) direct obligations of the United States; or
   2. (B) obligations secured or guaranteed as to principal and interest by the United States.

3. (3) In:

   1. (A) direct obligations; or

   2. (B) obligations secured by the full faith and credit;

      of any state of the United States or the District of Columbia.

4. (4) In obligations of any county, township, city, town, village, school district, or other municipal district within the United States which are a direct obligation of the county, township, city, town, village, or district issuing the same.
5. (5) In obligations secured by mortgages or deeds of trust or unencumbered real estate or perpetual leases thereon in the United States not exceeding 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 the United States, any state, territory, or possession of the United States, the District of Columbia, Canada, any province of Canada, or by an administration, agency, authority, or instrumentality of any such governmental units. Where improvements on the land constitute a part of the value on which the loan is made, the improvements shall be insured against fire and tornado for the benefit of the mortgagee. For the purposes of this section, real estate may not be deemed to be encumbered by reason of the existence of taxes or assessments that are not delinquent, instruments creating or reserving mineral, oil, or timber rights, rights-of-way, joint driveways, sewer rights, rights-in-walls, nor by reason of building restrictions, or other restrictive covenants, nor when such real estate is subject to lease in whole or in part whereby rents or profits are reserved to the owner. The restrictions contained in this subdivision do not apply to loans or investments made under section 5 of this chapter.

(c) Any company organized under the provisions of this article or any other law of this state and authorized to make any or all of the kinds of insurance described in class 2 or class 3 of IC 27-1-5-1 shall invest its funds over and above its required capital stock or required guaranty fund as follows, and not otherwise:

1. (1) In cash or cash equivalents. However, not more than ten percent (10%) of admitted assets may be invested in any single government money market mutual fund or class one (1) money market mutual fund.
2. (2) In direct obligations of the United States or obligations secured or guaranteed as to principal and interest by the United States.

3. (3) In obligations issued, guaranteed, or insured as to principal and interest by a city, county, drainage district, road district, school district, tax district, town, township, village or other civil administration, agency, authority, instrumentality or subdivision of a state, territory, or possession of the United States, the District of Columbia, Canada, or any province of Canada, providing such obligations are authorized by law and are either:

   1. (A) direct and general obligations of the issuing, guaranteeing, or insuring governmental unit, administration, agency, authority, district, subdivision, or instrumentality;
   2. (B) payable from designated revenues pledged to the payment of the principal and interest of the obligations; or

   3. (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 the improvement bonds or other obligations under clause (C) relate must be situated within the limits of a town or city and at least fifty percent (50%) of the properties within that area must be improved with business buildings or residences.

4. (4) In:

   1. (A) direct obligations; or

   2. (B) obligations secured by the full faith and credit;

      of any state of the United States, the District of Columbia, or Canada or any province thereof.

5. (5) In obligations guaranteed, supported, or insured as to principal and interest by the United States, any state, territory, or possession of the United States, the District of Columbia, Canada, any province of Canada, or by an administration, agency, authority, or instrumentality of any of the political units listed in this subdivision. An obligation is "supported" for the purposes of this subdivision when repayment of the obligation is secured by real or personal property of value at least equal to the principal amount of the indebtedness 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 the property for the benefit of the holder of the obligation, and one (1) of the political units listed in this subdivision, or an administration, agency, authority, or instrumentality listed in this subdivision, has entered into a firm agreement to rent or use the property pursuant to which entity is obligated to pay money as rental or for the use of the property in amounts and at times that are sufficient, after provision for taxes upon and for other expenses of the use of the property, to repay in full the indebtedness, both principal and interest, and when the firm agreement and the money obligated to be paid under the agreement are assigned, pledged, or secured for the benefit of the holder of the obligation. However, where the security consists of a first mortgage lien or deed of trust on a fee interest in real property, the obligation may provide for the amortization, during the initial fixed period of the lease or contract of less than one hundred percent (100%) of the indebtedness if there is pledged or assigned, as additional security for the obligation, sufficient rentals payable under the lease, or of contract payments, to secure the amortized obligation payments required during the initial, fixed period of the lease or contract, including but not limited to payments of principal, interest, and taxes other than the income taxes of the borrower, and if there is to be left unamortized at the end of the period an amount not greater than the original appraised value of the land only, exclusive of all improvements, as prescribed by law.
6. (6) In obligations secured by mortgages or deeds of trust or unencumbered real estate or perpetual leases thereon, in any state in the United States, the District of Columbia, Canada, or any province of Canada, not exceeding 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 that the excess is guaranteed or insured by the United States, any state, territory, or possession of the United States, the District of Columbia, Canada, any province of Canada, or by an administration, agency, authority, or instrumentality of any of such governmental units. The value of the real estate must be determined by a method and in a manner satisfactory to the department. The restrictions contained in this subdivision do not apply to loans or investments made under section 5 of this chapter.
7. (7) In obligations issued under or pursuant to the Farm Credit Act of 1971 (12 U.S.C. 2001 through 2279aa-14) as in effect on December 31, 1990, or the Federal Home Loan Bank Act (12 U.S.C. 1421 through 1449) as in effect on December 31, 1990, interest bearing obligations of the FSLIC Resolution Fund and shares of any institution that is insured by the Federal Deposit Insurance Corporation to the extent that the shares are insured, obligations issued or guaranteed by the International Bank for Reconstruction and Development, obligations issued or guaranteed by the Inter-American Development Bank, and obligations issued or guaranteed by the African Development Bank.

8. (8) In any mutual fund that:

   1. (A) has been registered with the Securities and Exchange Commission for a period of at least five (5) years immediately preceding the date of purchase;
   2. (B) has net assets of at least twenty-five million dollars ($25,000,000) on the date of purchase; and

   3. (C) invests substantially all of its assets in investments permitted under this subsection.

      The amount invested in any single mutual fund shall not exceed ten percent (10%) of admitted assets. The aggregate amount of investments under this subdivision may be limited by the commissioner if the commissioner finds that investments under this subdivision may render the operation of the company hazardous to the company's policyholders, to the company's creditors, or to the general public. This subdivision in no way limits or restricts investments that are otherwise specifically permitted under this section.

9. (9) In obligations payable in United States dollars and issued, guaranteed, assumed, insured, or accepted by a foreign government or by a solvent business entity existing under the laws of a foreign government, if the obligations of the foreign government or business entity meet at least one (1) of the following criteria:

   1. (A) The obligations carry a rating of at least A3 conferred by Moody's Investor Services, Inc.
   2. (B) The obligations carry a rating of at least A- conferred by Standard & Poor's Corporation.

   3. (C) 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 the average fixed charges of the business entity applicable to the period, and if during either of the last two (2) years of the period, the earnings available for fixed charges were at least three (3) times the fixed charges of the business entity for the year. As used in this subdivision, the terms "earnings available for fixed charges" and "fixed charges" have the meanings set forth in IC 27-1-12-2 (a).

      Foreign investments authorized by this subdivision shall not exceed twenty percent (20%) of the company's admitted assets. This subdivision in no way limits or restricts investments that are otherwise specifically permitted under this section. Canada is not a foreign government for purposes of this subdivision.

10. (10) In the obligations of any solvent business entity existing under the laws of the United States, any state of the United States, the District of Columbia, Canada, or any province of Canada, provided that interest on the obligations is not in default.
11. (11) In the preferred or guaranteed shares of any solvent business entity, so long as the business entity is not and has not been for the preceding five (5) years in default in the payment of interest due and payable on its outstanding debt or in arrears in the payment of dividends on any issue of its outstanding preferred or guaranteed stock.
12. (12) In the shares, other than those specified in subdivision (7), of any solvent business entity existing under the laws of any state of the United States, the District of Columbia, Canada, or any province of Canada, and in the shares of any institution wherever located which has the insurance protection provided by the Federal Deposit Insurance Corporation. Except for the purpose of mutualization 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 insurance company's officers, employees, or agents, or for the elimination of fractional shares, no company subject to the provisions of this section may invest in its own stock.
13. (13) In loans upon the pledge of any mortgage, stocks, bonds, or other evidences of indebtedness, acceptable as investments under the terms of this chapter, if the current value of the mortgage, stock, bond, or other evidences of indebtedness is at least twenty-five percent (25%) more than the amount loaned on it.
14. (14) In real estate, subject to subsections (d) and (e).

15. (15) In securities lending, repurchase, and reverse repurchase transactions with business entities, subject to the following requirements:

    1. (A) The company's board of directors shall adopt a written plan that specifies guidelines and objectives to be followed, such as:

       1. (i) a description of how cash received will be invested or used for general corporate purposes of the company;
       2. (ii) operational procedures to manage interest rate risk, counterparty default risk, and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction; and
       3. (iii) the extent to which the company may engage in these transactions.

    2. (B) The company shall enter into a written agreement for all transactions authorized in this subdivision. The written agreement shall require the termination of each transaction not more than one (1) year from its inception or upon the earlier demand of the company. The agreement shall be with the counterparty business entity but, for securities lending transactions, the agreement may be with an agent acting on behalf of the company if the agent is a qualified business entity and if the agreement:

       1. (i) requires the agent to enter into separate agreements with each counterparty that are consistent with the requirements of this section; and
       2. (ii) prohibits securities lending transactions under the agreement with the agent or its affiliates.

    3. (C) Cash received in a transaction under this section shall be invested in accordance with this section and in a manner that recognizes the liquidity needs of the transaction or used by the company for its general corporate purposes. For as long as the transaction remains outstanding, the company or its agent or custodian shall maintain, as to acceptable collateral received in a transaction under this section, either physically or through book entry systems of the Federal Reserve, Depository Trust Company, Participants Trust Company, or other securities depositories approved by the commissioner:

       1. (i) possession of the acceptable collateral;
       2. (ii) a perfected security interest in the acceptable collateral; or
       3. (iii) in the case of a jurisdiction outside the United States, title to, or rights of a secured creditor to, the acceptable collateral.

    4. (D) For purposes of calculations made to determine compliance with this subdivision, no effect may be given to the company's future obligation to resell securities in the case of a repurchase transaction, or to repurchase securities in the case of a reverse repurchase transaction. A company shall not enter into a transaction under this subdivision if, as a result of and after giving effect to the transaction:

       1. (i) the aggregate amount of securities then loaned, sold to, or purchased from any one (1) business entity pursuant to this subdivision would exceed five percent (5%) of its admitted assets (but, in calculating the amount sold to or purchased from a business entity pursuant to repurchase or reverse repurchase transactions, effect may be given to netting provisions under a master written agreement); or
       2. (ii) the aggregate amount of all securities then loaned, sold to, or purchased from all business entities under this subdivision would exceed forty percent (40%) of its admitted assets.
    5. (E) In a securities lending transaction, the company shall receive acceptable collateral having a market value as of the transaction date at least equal to one hundred two percent (102%) of the market value of the securities loaned by the company in the transaction as of that date. If at any time the market value of the acceptable collateral is less than the market value of the loaned securities, the business entity shall be obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral then held in connection with the transaction, at least equals one hundred two percent (102%) of the market value of the loaned securities.
    6. (F) In a reverse repurchase transaction, the company shall receive acceptable collateral having a market value as of the transaction date at least equal to 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 is less than ninety-five percent (95%) of the market value of the securities so transferred, the business entity shall be obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral then held in connection with the transaction, equals at least ninety-five percent (95%) of the market value of the transferred securities.
    7. (G) In a repurchase transaction, the company shall receive as acceptable collateral transferred securities 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 is less than one hundred percent (100%) of the purchase price paid by the company, the business entity shall be obligated to provide additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral then held in connection with the transaction, equals at least one hundred two percent (102%) of the purchase price. Securities acquired by a company in a repurchase transaction shall not be sold in a reverse repurchase transaction, loaned in a securities lending transaction, or otherwise pledged.
16. (16) In mortgage backed securities, including collateralized mortgage obligations, mortgage pass through securities, mortgage backed bonds, and real estate mortgage investment conduits, adequately secured by a pool of mortgages, which mortgages are fully guaranteed or insured by the government of the United States or any agency of the United States, including the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.

17. (17) In mortgage backed securities, including collateralized mortgage obligations, mortgage pass through securities, mortgage backed bonds, and real estate mortgage investment conduits, adequately secured by a pool of mortgages, if the securities carry a rating of at least:

    1. (A) Baa3 conferred by Moody's Investor Services, Inc.; or

    2. (B) BBB- conferred by Standard & Poor's Corporation.

       The amount invested in any one (1) obligation or pool of obligations described in this subdivision shall not exceed five percent (5%) of admitted assets. The aggregate amount of all investments under this subdivision shall not exceed ten percent (10%) of admitted assets.

18. (18) Any other investment acquired in good faith as payment on account of existing indebtedness or in connection with the refinancing, restructuring, or workout of existing indebtedness, if taken to protect the interests of the company in that investment.
19. (19) In obligations or interests in trusts or partnerships in which a life insurance company may invest as described in paragraph 31 of IC 27-1-12-2 (b). Investments authorized by this paragraph may not exceed twenty percent (20%) of the company's admitted assets.

20. (20) In any other investment. The total of all investments under this subdivision, except for investments in subsidiary companies under IC 27-1-23-2.6 , may not exceed the greater of ten percent (10%) of the insurer's admitted assets or fifty percent (50%) of the insurer's capital and surplus. Investments are not permitted under this subdivision:

    1. (A) if expressly prohibited by statute; or
    2. (B) in an insolvent organization or an organization in default with respect to the payment of principal or interest on its obligations.

(d) Any company subject to the provisions of this section shall have power to acquire, hold, or convey real estate, or an interest therein, as described below, and no other:

1. (1) Leaseholds, provided the mortgage term shall not exceed four-fifths (4/5) of the unexpired lease term, including enforceable renewable options, remaining at the time of the loan, such real estate or leaseholds to be located in the United States, any territory or possession of the United States, or Canada, the value of such leasehold for statement purposes shall be determined in a manner and form satisfactory to the department. At the time the leasehold is acquired and approved by the department, a schedule of annual depreciation shall be set up by the department in which the value of said leasehold is to be depreciated, and said depreciation is to be averaged out over not exceeding a period of fifty (50) years.
2. (2) The building in which it has its principal office and the land on which it stands.
3. (3) Such as shall be necessary for the convenient transaction of its business.
4. (4) Such as shall have been acquired for the accommodation of its business.
5. (5) Such as shall have been mortgaged to it in good faith by way of security for loans previously contracted or for money due.
6. (6) Such as shall have been conveyed to it in connection with its investments in real estate contracts or its investments in real estate under lease or for the purpose of leasing or such as shall have been acquired for the purpose of investment under any law, order, or regulation authorizing such investment, for statement purposes, the value of such real estate shall be determined in a manner satisfactory to the department.
7. (7) Such as shall have been conveyed to it in satisfaction of debts previously contracted in the course of its dealings, or in exchange for real estate so conveyed to it.
8. (8) Such as it shall have purchased at sales on judgments, decrees, or mortgages obtained or made for such debts.

(f) The board of directors of a company, other than a company organized as a life insurance company, shall do all the following:

1. (1) Before engaging in derivatives transactions, approve a written plan that specifies guidelines, systems, and objectives to be followed, such as:

   1. (A) investment of or, if applicable, underwriting objectives and risk constraints, such as credit risk limits;
   2. (B) permissible transactions and the relationship of those transactions to the insurer's operations;
   3. (C) internal control procedures;
   4. (D) a system for determining whether a derivative instrument used for hedging has been effective;
   5. (E) a credit risk management system for over-the-counter derivatives transactions that measures credit risk exposure using the counterparty exposure amount; and
   6. (F) a mechanism for reviewing and auditing compliance with the guidelines, systems, and objectives specified in the written plan.
2. (2) Before engaging in derivatives transactions, 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.
3. (3) Review whether derivatives transactions have been made in accordance with the approved guidelines and are consistent with stated objectives.

4. (4) Take action to correct any deficiencies in internal controls relating to derivatives transactions.

   Formerly: Acts 1935, c.162, s.172; Acts 1937, c.288, s.3; Acts 1939, c.63, s.4; Acts 1949, c.206, s.1; Acts 1971, P.L.384, SEC.1; Acts 1973, P.L.277, SEC.1. As amended by Acts 1981, P.L.241, SEC.1; P.L.159-1986, SEC.3; P.L.161-1986, SEC.1; P.L.121-1990, SEC.2; P.L.8-1991, SEC.9; P.L.184-1996, SEC.2; P.L.186-1997, SEC.7; P.L.1-2002, SEC.104; P.L.40-2004, SEC.2; P.L.89-2011, SEC.30; P.L.81-2012, SEC.3; P.L.124-2018, SEC.30; P.L.130-2020, SEC.4.