Iowa Code § 511.8

Investment of funds

Redline — January 1, 2021 → current.View current text →

Current — January 1, 2026

As of January 1, 2021

A company organized under chapter 508 shall, at all times, have invested in the securities provided in this section, funds equivalent to its legal reserve. Legal reserve is the net present value of all outstanding policies and contracts involving life contingencies. This section does not prohibit a company or association from holding a portion of its legal reserve in cash. The investment programs developed by companies shall take into account the safety of the company’s principal, investment yield and return, stability in the value of the investment, and liquidity necessary to meet the company’s expected business needs and investment diversification.

1. United States government obligations.

a. Bonds or other evidences of indebtedness issued, assumed, or guaranteed by the United States of America, or by any agency or instrumentality of the United States of America.

b. Bonds or other evidences of indebtedness issued, assumed, or guaranteed by the United States of America, or by any agency or instrumentality of the United States of America include investments in an open-end management investment company registered with the federal securities and exchange commission under the federal Investment Company Act of 1940, 15 U.S.C. §80a-1 et seq., and operated in accordance with

, the portfolio of which is limited to the United States government obligations described in paragraph “a”, and which are included in the national association of insurance commissioners’ securities valuation office’s United States direct obligations – full faith and credit exempt list.

2. State, District of Columbia, territorial and municipal obligations. Bonds or other evidences of indebtedness issued, assumed, or guaranteed by the District of Columbia, or by any state, insular or territorial possession of the United States of America, or by any county, city, town, school, road, drainage, or other district located within any state, or insular or territorial possession of the United States of America, or by any civil subdivision or governmental authority of any such state, or insular or territorial possession, or by any instrumentality of any such state, or insular or territorial possession, civil subdivision, or governmental authority; provided that the obligations are valid, legally authorized and issued.

3. Canadian government, provincial and municipal obligations. Bonds or other evidences of indebtedness issued, assumed, or guaranteed by the Dominion of Canada, or by any province thereof, or by any municipality or district therein, provided that the obligations are valid, legally authorized and issued.

4. International Bank bonds. Bonds or other evidence of indebtedness issued, assumed or guaranteed by the International Bank for reconstruction and development, in an amount not to exceed two percent of its total assets as shown by the last annual report, or by the Inter-American Development Bank in an amount not to exceed two percent of its total assets as shown by the last annual report, by the Asian Development Bank in an amount not to exceed two percent of its total assets as shown by the last annual report or by the African Development Bank in an amount not to exceed two percent of its total assets as shown by the last annual report. However, the combined investment in bonds or evidences of indebtedness permitted by this subsection shall not exceed four percent of its total assets as shown by the last annual report.

5. Corporate obligations. Subject to the restrictions contained in subsection 8, bonds or other evidences of indebtedness issued, assumed, or guaranteed by a corporation incorporated under the laws of the United States of America, or of any state, district, or insular or territorial possession thereof; or of the Dominion of Canada, or any province thereof; and which meet the following qualifications:

a. (1) If fixed interest-bearing obligations, the net earnings of the issuing, assuming, or guaranteeing corporation available for its fixed charges for a period of five fiscal years next preceding the date of acquisition of the obligations by such insurance company shall have averaged per year not less than one and one-half times such average annual fixed charges of the issuing, assuming, or guaranteeing corporation applicable to such period, and, during at least one of the last two years of such period, its net earnings shall have been not less than one and one-half times its fixed charges for such year; or if, at the date of acquisition, the obligations are investment grade as defined by the commissioner by rule.

(2) However, with respect to fixed interest-bearing obligations which are issued, assumed, or guaranteed by a financial company, the net earnings by the financial company available for its fixed charges for the period of five fiscal years preceding the date of acquisition of the obligations by the insurance company shall have averaged per year not less than one and one-fourth times such average annual fixed charges of the issuing, assuming, or guaranteeing financial company applicable to such period, and, during at least one of the last two years of the period, its net earnings shall have been not less than one and one-fourth times its fixed charges for such year; or if, at the date of acquisition, the obligations are investment grade as defined by the commissioner by rule. As used in this subparagraph (2), “financial company” means a corporation which on the average over its last five fiscal years preceding the date of acquisition of its obligations by the insurer, has had at least fifty percent of its net income, including income derived from subsidiaries, derived from the business of wholesale, retail, installment, mortgage, commercial, industrial or consumer financing, or from banking or factoring, or from similar or related lines of business.

b. If adjustment, income, or other contingent interest obligations, the net earnings of the issuing, assuming, or guaranteeing corporation available for its fixed charges for a period of five fiscal years next preceding the date of acquisition of the obligations by such insurance company shall have averaged per year not less than one and one-half times such average annual fixed charges of the issuing, assuming, or guaranteeing corporation and its average annual maximum contingent interest applicable to such period and, during at least one of the last two years of such period, its net earnings shall have been not less than one and one-half times the sum of its fixed charges and maximum contingent interest for such year, or if, at the date of acquisition, the obligations are investment grade as defined by the commissioner by rule.

c. Are securities that at the date of acquisition are rated three by the securities valuation office of the national association of insurance commissioners or have the equivalent rating by a rating organization that is approved by the national association of insurance commissioners as an acceptable rating organization and are listed or admitted to trading on a securities exchange in the United States or are publicly held and actively traded in the over-the-counter market and market quotations are readily available. If a security acquired under this paragraph is subsequently downgraded from a three rating by the securities valuation office of the national association of insurance commissioners or from the equivalent rating by a national association of insurance commissioners’ acceptable rating organization, the security no longer qualifies as a legal reserve investment.

d. The term “net earnings available for fixed charges” as used in this section means the net income after deducting all operating and maintenance expenses, taxes other than any income taxes, depreciation, and depletion, but nonrecurring items of income or expense may be excluded.

e. The term “fixed charges” as used in this section includes interest on unfunded debt and funded debt on a parity with or having a priority to the obligation under consideration.

f. The term “corporation” as used in this chapter includes a joint stock association, a limited liability company, a partnership, or a trust.

g. The securities, real estate, and mortgages described in this section include participations, which means instruments evidencing partial or undivided collective interests in such securities, real estate, and mortgages.

6. Preferred and guaranteed stocks.

a. Subject to the restrictions contained in subsection 8 hereof, preferred stocks of, or stocks guaranteed by, a corporation incorporated under the laws of the United States of America, or of any state, district, insular or territorial possession thereof; or of the Dominion of Canada, or any province thereof; and which meet the following qualifications:

(1) Preferred stocks.

(a) All of the obligations and preferred stocks of the issuing corporation, if any, prior to the preferred stock acquired must be eligible as investments under this section as of the date of acquisition; and

(b) The net earnings available for fixed charges and preferred dividends of the issuing corporation shall have been, for each of the five fiscal years immediately preceding the date of acquisition, not less than one and one-half times the sum of the annual fixed charges and contingent interest, if any, and the annual preferred dividend requirements as of the date of acquisition; or at the date of acquisition the preferred stock is investment grade as defined by the commissioner by rule.

(i) The term “preferred dividend requirements” shall mean cumulative or noncumulative dividends whether paid or not.

(ii) The term “fixed charges” shall be construed in accordance with subsection 5.

(iii) The term “net earnings available for fixed charges and preferred dividends” as used herein shall mean the net income after deducting all operating and maintenance expenses, taxes, including any income taxes, depreciation and depletion, but nonrecurring items may be excluded.

(2) Guaranteed stocks.

(a) All of the fixed interest-bearing obligations of the guaranteeing corporation, if any, must be eligible under this section as of the date of acquisition; and

(b) The net earnings available for fixed charges of the guaranteeing corporation shall meet the requirements outlined in paragraph “a” of subsection 5, except that all guaranteed dividends shall be included in “fixed charges”.

b. Any investments in preferred stocks or guaranteed stocks made under the provisions of this subsection shall be considered as moneys and credits for purposes of taxation and their assessment shall be subject to deductions for indebtedness as provided by law in the case of assessment of moneys and credits in general. This provision shall be effective as to assessments made during the year 1947 and thereafter.

7. Equipment trust obligations. Subject to the restrictions contained in subsection 8, bonds, certificates, or other evidences of indebtedness secured by any transportation equipment used wholly or in part in the United States of America or Canada, that provide a right to receive determined rental, purchase or other fixed obligatory payments adequate to retire the obligations within twenty years from date of issue, and also provide:

a. For vesting of title to such equipment free from encumbrance in a corporate trustee, or

b. For creation of a first lien on such equipment.

8. Further restrictions. Securities included under subsections 5, 6, and 7, and subsection 9, paragraph “h”, shall not be eligible:

a. If the corporation is in default on fixed obligations as of the date of acquisition. Securities provided in subsection 6, paragraph “a”, subparagraph (1), shall not be eligible if the issuing corporation is in arrears with respect to the payment of any preferred dividends as of the date of acquisition.

b. The investments of any company or association in the securities of a corporation shall not exceed the following percentages of the legal reserve of such company or association:

(1) For any one corporation other than a public utility company, two percent of the legal reserve. For any one public utility company, five percent of the legal reserve.

(2) For securities described in subsection 5 issued by public utility companies, fifty percent of the legal reserve.

(3) Ten percent of the legal reserve in the securities described in subsection 6.

(4) Ten percent of the legal reserve in the securities described in subsection 7.

c. Statements adjusted to show the actual condition at the time of acquisition or the effect of new financing, known commercially as pro forma statements, may be used in determining whether investments under subsections 5 and 6 are in compliance with requirements. Statements so adjusted or consolidated statements may be used in order to include the earnings of all predecessor, merged, consolidated, or purchased companies.

d. In addition to the restrictions contained in paragraphs “a” and “b”, the investments of any company or association in securities included under subsection 5, paragraph “c”, are not eligible in excess of three percent of the legal reserve, but not more than one-half of one percent of the legal reserve shall be invested in the securities of any one corporation.

9. Real estate bonds and mortgages.

a. (1) Bonds, notes, obligations, or other evidences of indebtedness secured by mortgages or deeds of trust which are a first or second lien upon otherwise unencumbered real property and appurtenances thereto within the United States of America, or any insular or territorial possession of the United States, or the Dominion of Canada, and upon leasehold estates in real property where fifty years or more of the term including renewals is unexpired, provided that at the date of acquisition the total indebtedness secured by the first or second lien shall not exceed ninety percent of the value of the property upon which it is a lien. However, a company or organization shall not acquire an indebtedness secured by a first or second lien upon a single parcel of real property, or upon a leasehold interest in a single parcel of real property, in excess of two percent of its legal reserve. These limitations do not apply to obligations described in paragraphs “b”, “c”, “d”, “e”, “f”, and “g” of this subsection.

(2) Improvements and appurtenances to real property shall not be considered in estimating the value of the property unless the owner contracts to keep the property adequately insured during the life of the loan in some reliable fire insurance companies, or associations, the insurance to be made payable in case of loss to the mortgagee, trustee, or assignee as its interest appears at the time of the loss.

(3) For the purpose of this subsection a mortgage or deed of trust is not other than a first or second lien upon property 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 or by reason of building restrictions or other like restrictive covenants, or when the real estate is subject to lease in whole or in part whereby rents or profits are reserved to the owner.

b. Bonds, notes, or other evidences of indebtedness representing loans and advances of credit that have been issued, guaranteed, or insured, in accordance with the terms and provisions of an Act of Congress of the United States of America approved June 27, 1934, entitled the “National Housing Act”, 48 Stat. 1246, 12 U.S.C. §1701 et seq., as amended to and including January 1, 2008, or of an Act of Congress of the United States of America approved July 24, 1970, entitled the “Federal Home Loan Mortgage Corporation Act”, 84 Stat. 451, 12 U.S.C. §1451 et seq., as amended to and including January 1, 2008.

c. Bonds, notes, or other evidences of indebtedness representing loans and advances of credit that have been issued or guaranteed, in whole or in part, in accordance with the terms and provisions of Tit. III of an Act of Congress of the United States of America approved June 22, 1944, known as Public Law 346, Pub. L. No. 78-268, cited as the “Servicemen’s Readjustment Act of 1944”, 58 Stat. 284, recodified at 72 Stat. 1105, 1273, 38 U.S.C. §3701 et seq., as amended to and including January 1, 2008.

d. Contracts of sale, purchase money mortgages or deeds of trust secured by property obtained through foreclosure, or in settlement or satisfaction of any indebtedness, or in the acquisition or disposition of real property acquired pursuant to subsection 14.

e. Bonds, notes, or other evidences of indebtedness representing loans and advances of credit that have been issued or guaranteed, in whole or in part, in accordance with Tit. I of the Bankhead-Jones Farm Tenant Act, an Act of the Congress of the United States, cited as the “Farmers Home Administration Act of 1946”, 60 Stat. 1062, as amended to and including the effective date or dates of its repeal as set forth in 76 Stat. 318, or with Tit. III of an Act of Congress of the United States of America approved August 8, 1961, entitled the “Consolidated Farm and Rural Development Act”, 75 Stat. 307, 7 U.S.C. §1921 et seq., as amended to and including January 1, 2008.

f. Bonds, notes, obligations or other evidences of indebtedness secured by mortgages or deeds of trust which are a first lien upon unencumbered personal or real property or both personal and real property, including a leasehold of real estate, within the United States of America, or any insular or territorial possession of the United States of America, or the Dominion of Canada, under lease, purchase contract, or lease purchase contract to any governmental body or instrumentality whose obligations qualify under subsection 1, 2, or 3 of this section, or to a corporation whose obligations qualify under paragraph “a” of subsection 5 of this section, if the terms of the bond, note or other evidence of indebtedness provide for the amortization during the initial, fixed period of the lease or contract of one hundred percent of the indebtedness and there is pledged or assigned, as additional security for the loan, sufficient of the rentals payable under the lease, or of contract payments, to provide the required payments on the loan necessary to permit such amortization, including but not limited to payments of principal, interest, ground rents and taxes other than the income taxes of the borrower; provided, however, that where the security consists of a first mortgage or deed of trust lien on a fee interest in real property only, the bond, note or other evidence of indebtedness may provide for the amortization during the initial, fixed period of the lease or contract of less than one hundred percent of the indebtedness if there is to be left unamortized at the end of such period an amount not greater than the appraised value of the land only, exclusive of all improvements, and if there is pledged or assigned, as additional security for the loan, sufficient of the rentals payable under the lease, or of contract payments, to provide the required payments on the loan necessary to permit such amortization, including but not limited to payments of principal, interest, and taxes other than the income taxes of the borrower. Investments made in accordance with the provisions of this paragraph shall not be eligible in excess of twenty-five percent of the legal reserve, nor shall any one such investment in excess of five percent of the legal reserve be eligible.

g. Bonds, notes or other evidences of indebtedness representing loans and advances of credit that have been issued, guaranteed, or insured, in accordance with the terms and provisions of an Act of the federal Parliament of the Dominion of Canada, cited as the “National Housing Act”, R.S.C. 1985, c. N-11 as amended to and including January 1, 2008.

h. Mezzanine real estate loans subject to the following conditions:

1. Definitions. As used in this section unless the context otherwise requires:

a. “Accounting practices and procedures manual” means the most recent edition of the national association of insurance commissioner’s accounting practices and procedures manual.

b. “Admitted assets” means the assets permitted to be reported as admitted assets on an insurer’s most recent statutory financial statement required to be filed with the commissioner. “Admitted assets” shall include reinsurance funds withheld. “Admitted assets” shall not include assets held in nonguaranteed separate accounts.

c. “Affiliate of” means the same as defined in section 521A.1.

d. “Business entity” means a sole proprietorship, corporation, limited liability company, association, partnership, joint stock company, joint venture, mutual fund, trust, joint tenancy or other similar form of business organization, whether organized for profit or not for profit.

e. “Capital and surplus” means the sum of capital and surplus of an insurer that is required to be shown on an insurer’s most recent statutory financial statement required to be filed with the commissioner.

f. “Collateral loan” means an unconditional obligation for the payment of money that is secured by the pledge of any assets or investments permitted under this section. A collateral loan cannot be a mortgage loan, credit instrument, or other debt security as defined in this subsection.

g. “Commissioner” means the commissioner of insurance.

h. “Credit instrument” means an investment that is qualified as a bond under the accounting practices and procedures manual, such as evidence of indebtedness of a governmental unit or the instrumentality of the governmental unit, or of a private business entity. “Credit instrument” includes asset-backed securities, bank loans, and SVO-listed funds that have an SVO designation, and that qualify as a bond under the manual.

i. “Equity interest” means any of the following:

(1) A common stock.

(2) A trust certificate.

(3) An equity investment in an investment company other than an SVO-listed fixed income or preferred stock fund.

(4) An investment in a common trust fund with a bank that is regulated by a federal or state agency as trustee.

(5) An ownership interest in minerals, oil, or gas, the rights to which have been separated from the underlying fee interest in the real estate where the minerals, oil, or gas are located.

(6) An instrument that is mandatorily, or at the option of the issuer, convertible to equity.

(7) A limited partnership interest or a general partnership interest as authorized under subsection 4.

(8) An ownership interest in a limited liability company.

(9) A warrant or other right to acquire an ownership interest that is created by the person that either owns or will issue the ownership interest to be acquired.

(10) An investment categorized as an equity interest under subsection 5.

j. “Foreign investment” means an investment in a foreign jurisdiction, or an investment in an entity, real estate, or asset domiciled in a foreign jurisdiction. “Foreign investment” shall not include any of the following:

(1) An asset for which the issuing person or guarantor is the United States or Canada, or is domiciled in the United States or Canada.

(2) An asset for which the issuing person is domiciled in a foreign jurisdiction that has a sovereign debt rating of SVO 1, and the issuing person is a fund or other investment vehicle that invests, directly or indirectly, substantially all of its assets in investments which are not foreign investments. If an insurer invests in an asset under this subparagraph, the commissioner may require the insurer to disclose to the commissioner the investments held by the fund or other investment vehicle.

k. “Hedging transaction” means a derivative transaction entered into and maintained by an insurer to reduce any of the following:

(1) The risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities which the insurer has acquired or incurred, or anticipates acquiring or incurring.

(2) Currency exchange rate risk or the degree of exposure as to assets or liabilities that the insurer has acquired or incurred, or anticipates acquiring or incurring.

l. “Income generation transaction” means a derivative transaction that involves writing a covered call option, covered put option, covered cap, or covered floor, and that is intended to generate income or enhance return.

m. “Insurer” means a company organized as a life insurance company under chapter 508.

n. “Investment company” means an investment company as defined in section 3(a) of the federal Investment Company Act of 1940, as amended, and as codified at 15 U.S.C. §80a-3 et seq., and a person described in section 3(c) of the federal Investment Company Act.

o. “Investment subsidiary” means a subsidiary of an insurer that is engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer.

p. “Lower grade investment” means a credit instrument that is designated 4, 5, or 6 by the SVO.

q. “Medium grade investment” means a credit instrument that is designated 3 by the SVO.

r. “Mortgage loan” means an obligation secured by a mortgage, deed of trust, trust deed, or other consensual lien on real estate. “Mortgage loan” includes a leasehold estate in real property if fifty years or more of the term, including renewals, is unexpired.

s. “NAIC” means the national association of insurance commissioners.

t. “Nonguaranteed separate account” means a separate account for which the insurer’s general account bears no risk related to performance of the separate account assets.

u. “Other debt security” means an investment in the form of a debt security that does not qualify as a bond, however, the investment does qualify as an admissible asset under the accounting practices and procedures manual.

v. “Person” means an individual, a business entity, a multilateral development bank, or a governmental or quasi-governmental body such as a political subdivision or a government-sponsored enterprise.

w. “Real estate” means any of the following:

(1) Real property.

(2) Interests in real property such as leaseholds, and minerals, oil, and gas that have not been separated from the underlying fee interest.

(3) Improvements and fixtures located on or in the real property.

(4) The buyer’s equity in a contract providing for a sale of real estate.

(5) An investment categorized as real estate under subsection 5.

x. “Replication transaction” means a derivative transaction entered into in conjunction with other investments in order to reproduce the investment characteristics of otherwise permissible investments. “Replication transaction” does not include a derivative transaction that is entered into as a hedging transaction.

y. “Securities valuation office” or “SVO” means the securities valuation office of the NAIC, or a successor entity.

z. “Short-term investment” means a highly liquid investment or security that has a remaining term of maturity between ninety days and three hundred sixty-five days, and that is qualified as a short-term investment under the accounting practices and procedures manual.

2. Prudence evaluation criteria.

a. For all investments under this section, an insurer shall perform the insurer’s duties in good faith and with the degree of care that persons of reasonable prudence in a similar position exercise in a similar circumstance. The following factors shall be evaluated by the insurer and considered along with the insurer’s business to determine if an investment portfolio or an investment policy is prudent:

(1) General economic conditions.

(2) The expected tax consequences of an investment decision or strategy.

(3) The fairness and reasonableness of the terms of an investment in relation to the investment’s risk and reward characteristics.

(4) The effect of an investment on the characteristics of the insurer’s investment portfolio as a whole.

(5) The extent of the diversification of the insurer’s investments among all of the following:

(a) Individual investments.

(b) Classes of investments.

(d) Issuers.

(e) Geographic areas.

(6) The economic substance of investments in affiliates.

(7) The investment exposure to each of the following risks, consistent with the insurer’s acceptable risk level identified under subsection 3:

(a) Liquidity.

(b) Credit and default.

(d) Interest rate, including duration and convexity.

(e) Currency.

(8) The amount of the insurer’s assets, premium writings and insurance in force, level of capitalization, and other appropriate characteristics.

(9) The amount and adequacy of the insurer’s reported liabilities.

(10) The relationship, and the risk of adverse changes, of the expected cash flows of the insurer’s assets and liabilities.

(11) The relationship, and the risk of adverse changes, of the valuation of the insurer’s assets and liabilities.

(12) The insurer’s level of expertise with various types of investments.

(13) The ability of the insurer to model the underlying risks of an investment, with the modeling commensurate with the complexity of the investment.

(14) The overall maturity of the insurer’s enterprise risk management and investment risk management frameworks.

(15) The adequacy of the insurer’s capital and surplus to secure the liabilities of the insurer in consideration of the risk and potential magnitude of adverse experience or economic conditions.

(16) The professional standards required by the insurer for the individuals who make day-to-day investment decisions on behalf of the insurer.

(17) Any other factors relevant to whether an investment is prudent.

b. The commissioner shall consider each of the factors in paragraph “a”, subparagraphs (1) through (17), prior to making a determination that an insurer’s investment portfolio or investment policy is not prudent.

3. Insurer investment policies. In acquiring, investing, exchanging, holding, selling, and managing investments, an insurer shall establish and follow one or more written investment policies that shall be annually reviewed and approved by the insurer’s board of directors or the board of directors’ designee. The content and format of an insurer’s investment policies are at the insurer’s discretion; however, the investment policies must include written guidelines and controls appropriate to the insurer’s business. An insurer shall consider all of the following:

a. Permissible asset types, including maximum or minimum internal limits regarding the composition of classes of investments.

b. Periodic evaluation of the investment portfolio as to the portfolio’s risk and reward characteristics.

c. The relationship of investments to the insurer’s insurance products and liabilities.

d. The manner in which the insurer intends to implement subsection 2.

e. The appropriate level of risk, based on quantitative measures, given the level of capitalization and expertise available to the insurer.

4. Prohibited investments. An insurer shall not, directly or indirectly, do any of the following:

a. Except as provided in subsection 5, invest in an obligation or security, or make a guarantee for the benefit of or in favor of an officer or director of the insurer.

b. Except as provided in chapter 521A or subsection 5, invest in an obligation or security of, make a guarantee for the benefit of or in favor of, or make other investments in, a business entity in which ten percent or more of the voting securities or equity interests are owned directly or indirectly by or for the benefit of one or more officers or directors of the insurer.

c. Engage on the insurer’s own behalf, or through one or more affiliates, in a transaction or series of transactions intended to evade the prohibited investments under this subsection.

d. Act or invest as a general partner, with the following exceptions:

(1) If all other partners in the partnership are subsidiaries of the insurer.

~~(1) The terms of~~ the ~~mezzanine real estate loan agreement shall do all~~ of the following: (a) ~~Require that each pledgor abstain from granting additional security interests in the equity interest pledged. (b) Set forth techniques~~ to ~~minimize~~ the ~~likelihood~~ or ~~impact of a bankruptcy filing on the part~~ of the ~~real estate owner or the mezzanine real estate loan borrower consistent with~~ the ~~national association of insurance commissioners’ accounting practices~~ and ~~procedures manual.~~ (c) ~~Require the real estate owner or mezzanine real estate loan borrower~~ to do all of the following: (i) Hold no assets other than, in the case of the real estate owner, the real property, and in the case of the mezzanine real estate loan borrower, the equity interest of the real estate owner. (ii) Not engage in any business other than, in the case of the real estate owner, the ~~ownership and operation of~~ the ~~real estate,~~ and ~~in the case of the mezzanine real estate loan borrower, holding an ownership interest in the real estate owner. (iii) Not incur additional debt, other than limited trade payables,~~ a ~~first mortgage loan,~~ or ~~mezzanine real estate loans. (2) At the time of purchase, the sum~~ of ~~the first mortgage and the mezzanine real estate loans~~ shall not ~~exceed ninety percent of the value of the real estate evidenced by a current appraisal and the mezzanine real estate loan shall~~ be ~~classified as CM4~~ or ~~better~~ in ~~accordance with~~ the ~~national association~~ of ~~insurance commissioners’ rating methodology, or~~ an ~~equivalent or successor rating. (3) The value~~ of ~~a company’s or association’s total investments qualified under this paragraph “h” shall not exceed three percent~~ of the ~~legal reserve subject to the~~ following ~~conditions:~~ (a) ~~The value~~ of a ~~company’s~~ or association’s total investments qualified under this paragraph “h” in mezzanine real estate loans classified as CM3 in accordance with the national association of insurance commissioners’ rating methodology or ~~an equivalent~~ or ~~successor rating at the time of purchase shall not exceed three percent of the legal reserve. (b) The value of~~ a ~~company’s~~ or ~~association’s total investments qualified under this paragraph “h”~~ in ~~mezzanine real estate loans classified~~ as ~~CM4~~ in accordance with the ~~national association of insurance commissioners’ rating methodology or~~ an ~~equivalent or successor rating at the time of purchase~~ shall not ~~exceed one percent~~ of the ~~legal reserve. (4) For purposes of this paragraph “h”, “mezzanine real estate loan” means a loan secured by a pledge~~ of ~~a direct or indirect equity interest in an entity that owns real estate. 10. Real estate.~~ a. ~~Real estate~~ in this ~~state which is necessary for the accommodation of~~ the ~~company~~ or ~~association as a home office~~ or in the ~~transaction of its business. In~~ the ~~erection~~ of ~~buildings for such purposes, there may~~ be ~~added rooms~~ for ~~rent. Before the company or association invests any of its funds~~ in accordance with ~~this paragraph it shall first obtain~~ the ~~consent of the commissioner. The maximum amount which a company or association shall be permitted to invest in accordance with these provisions shall not exceed ten percent~~ of the ~~legal reserve. However, a stock company may invest such portion of its paid-up capital, in addition to ten percent~~ of the ~~legal reserve, as is not held to constitute a part of its legal reserve, under section 508.36,~~ and ~~the total legal reserve~~ of the ~~company shall be equal to~~ or ~~exceed~~ the ~~amount~~ of ~~its paid-up capital stock. b. Any real estate acquired through foreclosure, or in settlement~~ or ~~satisfaction of~~ any ~~indebtedness. Any company or association may improve real estate so acquired or remodel existing improvements~~ and ~~exchange such real estate for other real estate~~ or ~~securities,~~ and ~~real estate acquired~~ by ~~such exchange may be improved or~~ the ~~improvements remodeled. 11. Certificates of sale. Certificates of sale obtained through foreclosure of liens on real estate. 12. Policy loans. Loans upon the security of the policies of the company~~ or ~~association and constituting a lien thereon in an amount not exceeding~~ the ~~legal reserve thereon. 13. Collateral loans. Loans secured~~ by ~~collateral consisting of any assets or investments qualified under this section, provided~~ the ~~amount~~ of the ~~loan is not~~ in ~~excess of ninety percent of~~ the ~~value~~ of ~~the assets or investments. Provided further that subsection 8 shall apply~~ to ~~the collateral assets~~ or investments ~~pledged to the payment~~ of ~~loans qualified under this subsection. 14. Urban real estate and personal property. a. Personal or real property or both located within~~ the ~~United States or~~ the ~~Dominion of Canada, other than real property used or to be used primarily for agricultural, horticultural, ranching or mining purposes, which produces income~~ or ~~which by suitable improvement will produce income. However, personal property acquired under this subsection shall be acquired for the purpose~~ of ~~entering into a contract for~~ the ~~sale~~ or ~~for a use under which~~ the ~~contractual payments~~ may ~~reasonably~~ be ~~expected to result in the recovery of the investment and an investment return within the anticipated useful life of the property. Legal title~~ to ~~the real property may~~ be ~~acquired subject to a contract of sale. b. “Real property” as used in this subsection includes all of~~ the ~~following: (1) A leasehold of real estate. (2) An undivided interest~~ in ~~a leasehold~~ of ~~real estate. (3) An undivided interest in~~ the ~~fee title of real estate. (4) A controlling membership, partnership, shareholder, or trust interest in any~~ entity ~~created solely for~~ the ~~purpose of owning and operating any of~~ the ~~interests described~~ in ~~subparagraph (1), (2),~~ or ~~(3), if the entity is expressly limited to that purpose within its organizational documents. c. Investments~~ under this ~~subsection are not eligible in excess~~ of ~~ten~~ percent of the ~~legal reserve. 15. Railroad obligations. a. Bonds or other evidences of indebtedness which carry a fixed rate~~ of ~~interest and are~~ issued, ~~assumed~~ or guaranteed by ~~any railroad company incorporated under the laws~~ of the ~~United States of America, or~~ of ~~any state, district, insular~~ or ~~territorial possessions thereof, not~~ in ~~reorganization~~ or ~~receivership at the time~~ of such investment, provided that the railroad company: (1) Shall have had for the three-year period immediately preceding investment, for which the necessary data for the railroad company shall have been published, a ~~balance~~ of ~~income available for fixed charges which~~ shall ~~have averaged per year~~ not ~~less than one and one-quarter times the fixed charges for the latest year~~ of ~~the period;~~ and ~~(2) Shall have had for~~ the ~~three-year period immediately preceding~~ investment, ~~for which~~ the ~~necessary data for both the railroad company and all class I railroads shall have been published: (a) A balance~~ of ~~income available for the payment~~ of ~~fixed charges at least as many times greater than~~ the ~~fixed charges for the latest year~~ of ~~the period~~ as ~~the balance~~ of ~~income available for~~ the ~~payment of fixed charges~~ of ~~all class I railroads for~~ the ~~same three-year period is times greater than the~~ amount of ~~all fixed charges for such class I railroads for the latest year of the period;~~ and ~~(b) An amount of railway operating revenues remaining after deduction of three times the fixed charges for~~ the ~~latest year~~ of the ~~period from the balance~~ of ~~income available for~~ the ~~payment~~ of ~~fixed charges for~~ the ~~three-year period, which~~ amount ~~is as great a proportion~~ of ~~its railway operating revenues for~~ the ~~same three-year period as is~~ the ~~proportion~~ of ~~railway operating revenues remaining for all class I railroads, determined in~~ the ~~same manner and for the same period as for the railroad. b.~~ The ~~terms “class I railroads”, “balance of income available for the payment~~ of ~~fixed charges”, “fixed charges” and “railway operating revenues” when used in this subsection, are to be given the same meaning as in the accounting reports filed~~ by ~~a railroad company in accordance with~~ the ~~regulations for common carriers~~ by ~~rail of~~ the ~~Interstate Commerce Act, 24 Stat. 379, codified at 49 U.S.C. §1 – 40, 1001 – 1100, provided that the “balance~~ of ~~income available for~~ the ~~payment~~ of ~~fixed charges” and “railway operating revenues remaining”,~~ as ~~the terms are used in this subsection, shall be computed before deduction~~ of ~~federal income or excess profits taxes;~~ and ~~that in computing “fixed charges” there shall be excluded interest and amortization charges applicable~~ to ~~debt called for redemption or which will otherwise mature within six months from~~ the ~~time of~~ investment ~~and for the payment~~ of ~~which funds have been or currently are being specifically set aside. c.~~ The ~~eligibility~~ of railroad obligations described in paragraph “a”, unnumbered paragraph 1, shall be determined exclusively as provided herein, without regard to the provisions for qualification contained in subsections 5 and ~~8. Provisions for qualification contained in this section shall not be construed~~ as ~~applying~~ to ~~equipment trust obligations, guaranteed stocks,~~ or ~~contingent~~ interest ~~bonds of railroad companies. Investments made~~ in ~~accordance with the provisions of this subsection shall not be eligible in excess~~ of ~~ten~~ percent of the ~~legal reserve. 16. Deposit of securities. a. Securities in an~~ amount ~~not less than the legal reserve as defined in this section shall be deposited and the deposit maintained with the commissioner~~ of ~~insurance~~ or ~~at such places as the commissioner may designate~~ as ~~will properly safeguard them. There may be included in the deposit an amount of cash on hand not in excess of five percent of the deposit required, that deposit~~ to ~~be evidenced~~ by a ~~certified check, certificate of deposit,~~ or ~~other evidence satisfactory to the commissioner~~ of ~~insurance. Deposits~~ of ~~securities may be made in excess~~ of the ~~amounts required by this section. A stock company organized under~~ the ~~laws~~ of this ~~state~~ shall not be required to make a deposit until the legal reserve, as ascertained by the commissioner, exceeds the amount deposited by it as capital. Real estate may be made a part of the deposit by furnishing evidence of ownership satisfactory to the ~~commissioner~~ and ~~by conveying the real estate~~ to ~~the commissioner~~ or ~~the commissioner’s successors in office by warranty deed. The commissioner~~ and ~~the successors in office shall hold the real estate~~ in ~~trust for~~ the ~~benefit of the policyholders of the company or members of the association. Real estate mortgage loans~~ and ~~policy loans~~ may ~~be made a part of the deposit by filing a verified statement of the loans with~~ the ~~commissioner, which statement is~~ subject to ~~check at the discretion~~ of the ~~commissioner. b.~~ The ~~securities comprising the deposit of a company or association against which proceedings are pending~~ under ~~section 508.18~~ shall ~~vest in the state for the benefit of all policyholders of the company or association. c. Securities or title to real estate on deposit may~~ be ~~withdrawn at any time and other eligible securities may be substituted, provided the amount maintained on deposit is equal~~ to ~~the sum of the legal reserve~~ and ~~twenty-five thousand dollars. In the case of real estate the commissioner~~ shall ~~execute and deliver to the company or association a quitclaim deed~~ to ~~the real estate. Any company~~ or ~~association shall, if requested~~ by the ~~commissioner, at the time of withdrawing any securities on deposit, designate for what purpose the securities are being withdrawn. d. Companies~~ or ~~associations having securities~~ or ~~title to real estate on deposit with the commissioner~~ of ~~insurance shall have~~ the ~~right to collect all dividends, interest, rent,~~ or ~~other income from the deposit unless proceedings against~~ the ~~company or association~~ are ~~pending under section 508.18, in which event the commissioner shall collect such interest, dividends, rent,~~ or ~~other income and add the same to~~ the ~~deposit. e. Any company~~ or ~~association receiving payments~~ or partial payments of principal on any securities deposited with the commissioner of insurance shall notify the commissioner of such fact at such times and in such manner as the commissioner may prescribe, giving the amount and date of payment. f. The commissioner of insurance may receive on deposit securities or ~~title to real estate of alien companies authorized to do business in the state of Iowa, for the purpose of securing its policyholders in~~ the ~~state of Iowa~~ and the United ~~States. The provisions~~ of ~~this subsection not inconsistent with~~ the ~~deposit agreement shall apply to the deposits of such alien companies. g. Common stocks~~ or ~~shares issued~~ by ~~any federal home loan bank eligible for inclusion in the legal reserve under subsection 18, paragraph “c”, may be made~~ a ~~part~~ of a ~~deposit by filing a verified statement of~~ the ~~common stocks~~ or ~~shares issued~~ by a ~~federal home loan bank that are held in~~ the ~~legal reserve. Attached to~~ the ~~statement~~ shall be the annual capital stock statement of the respective federal home loan bank showing membership stock balance and activity-based stock balance. h. Financial instruments used in hedging transactions and securities pledged as collateral for financial instruments ~~used in highly effective hedging transactions eligible for inclusion in the legal reserve~~ under subsection ~~22 may~~ be ~~made a part of the deposit by filing a verified statement of the financial instruments used or securities pledged pursuant~~ to ~~the terms~~ and ~~conditions~~ of the ~~applicable hedging transaction agreement or the applicable collateral or other credit support agreement. 17. Rules of valuation.~~ a. (1) ~~All bonds or other evidences of debt having~~ a ~~fixed term and rate~~ of ~~interest, if amply secured~~ and ~~not in default as~~ to ~~principal or interest, may be valued as follows: (a) If purchased at par, at~~ the ~~par value. (b) If purchased above or below par, on~~ the ~~basis~~ of ~~the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime~~ the ~~effective rate~~ of ~~interest at which~~ the ~~purchase was made.~~ (2) ~~In applying the rule contained in~~ subparagraph (1), ~~the purchase price shall in no case be taken at a higher figure than the actual market value at~~ the ~~time of purchase. b. Certificates of sale obtained by foreclosure of liens on real estate~~ shall ~~be valued in an amount~~ not greater than the unpaid principal of the defaulted indebtedness plus any amounts actually expended for taxes and acquisition costs. c. (1) All investments, except those for which a specific rule is provided in this subsection, ~~shall be valued at their market value, or at their appraised value, or at prices determined by the commissioner of insurance~~ as ~~representing their fair market value, or at~~ a ~~value as determined under rules adopted by the national association of insurance commissioners. (2) The commissioner of insurance shall have full discretion in determining the method~~ of ~~calculating values according~~ to the foregoing rules, but no company or association shall be prevented from valuing any asset at an amount less than that provided by this subsection. 18. Common stocks or shares. a. (1) Common stocks, shares, or equity interests issued by solvent corporations or institutions are eligible if the total investment in the ~~common stocks, shares, or equity interests~~ of the ~~corporations or institutions does not~~ exceed ten percent of legal reserve, provided not more than one-half percent of the legal reserve is invested in common stocks, shares, or equity interests of any one corporation or institution. However, not more than four percent of ~~legal reserve shall be invested in common stocks, shares, or equity interests which do not meet one of~~ the ~~following requirements: (a) Are listed or~~ admitted to trading on an established foreign securities exchange or a securities exchange in the United States. (b) Are publicly held and traded in the “over-the-counter market”, provided that market quotations shall be readily available. (2) An investment in common stocks, shares, or equity interests shall not create a conflict of interest for an officer or director of the company between the insurance company and the corporation whose common stocks, shares, or equity interests ~~are purchased. b. Common stocks or shares~~ in a subsidiary ~~corporation, the acquisition or purchase of which is~~ authorized by section ~~508.33 are~~ eligible if the total investment ~~in these stocks or shares~~ does not exceed five percent of the ~~legal reserve; provided, however, that common stocks or shares~~ of ~~stock~~ in a direct or indirect subsidiary insurance ~~company which is~~ domiciled in the United ~~States are eligible up~~ to an additional two percent of the ~~legal reserve upon application by the insurer to and upon approval by the commissioner. Stocks or shares of the~~ insurer’s subsidiary corporations are not eligible in total in excess of seven percent of the legal reserve and the stock or shares of any one subsidiary corporation are not eligible in excess of five percent of the legal reserve. These stocks or shares are eligible even if the stocks or shares are not listed or admitted to ~~trading on a securities exchange in~~ the ~~United States and are not publicly held~~ and ~~have not been traded~~ in ~~the “over-the-counter market”. The stocks or shares shall be valued at their book value; provided, however, that stocks or shares of a direct or indirect~~ subsidiary ~~insurance company held in the legal reserve of up~~ to ~~an additional two percent of~~ the ~~legal reserve shall be valued at their statutory book value, excluding approved permitted practices. c. Common stocks or shares issued~~ by ~~any federal home loan bank~~ under the ~~Federal Home Loan Bank Act, 12 U.S.C. §1421 et seq.,~~ and ~~the Acts amendatory thereof, are eligible if~~ the ~~total~~ investment ~~in those stocks or shares does not exceed one-half of one percent of~~ the ~~legal reserve. 19. Other foreign government or corporate obligations. a. Bonds or other evidences~~ of ~~indebtedness,~~ not ~~to include currency, issued, assumed, or guaranteed by a foreign government other than Canada, or by a corporation incorporated~~ under ~~the laws of~~ a ~~foreign government other than Canada. Such governmental obligations must be valid, legally authorized and issued, and on the date~~ of ~~acquisition have predominantly investment qualities~~ and ~~characteristics as provided by rule. Such corporate obligations must meet~~ the ~~qualifications established in subsection 5 for bonds and other evidences of indebtedness issued, assumed, or guaranteed by a corporation incorporated under~~ the ~~laws~~ of ~~the United States or Canada. Foreign~~ investments ~~authorized~~ by this subsection ~~are not eligible in excess of twenty-five percent of the legal reserve of the life insurance company or association. Investments in obligations~~ of ~~a foreign government, other than Canada,~~ the ~~United Kingdom, and foreign governments rated AAA by Standard and Poor’s division of McGraw-Hill companies, inc., or Aaa by Moody’s investors services, inc., are not eligible in excess of two~~ percent of the ~~legal reserve in the securities of foreign governments~~ of ~~any~~ one ~~foreign nation. Investments in obligations of the United Kingdom are not eligible in excess of four~~ percent of the legal reserve. Investments in obligations of foreign governments rated either AAA by Standard and Poor’s division of McGraw-Hill companies, inc., or Aaa by Moody’s investors services, inc., are not eligible in excess of five percent of the legal reserve. Investments in a corporation incorporated under the laws of a foreign government other than Canada are not eligible in excess of two percent of the legal reserve in the securities of any one foreign corporation. b. Eligible investments in foreign obligations under this subsection are limited to ~~the types~~ of ~~obligations specifically referred to in this subsection. This subsection in no way limits or restricts investments in Canadian~~ obligations ~~and securities specifically authorized in other subsections of this section. c. This subsection shall not authorize investment in evidences of indebtedness issued, assumed, or guaranteed~~ by a ~~foreign government which engages in a consistent pattern of gross violations~~ of ~~human rights. 20. Venture capital funds. a. Shares~~ or ~~equity interests~~ in ~~venture capital funds which agree to invest an amount equal to at least~~ fifty ~~percent of the funds in small businesses having their principal offices within this state and having either more than one half of their assets within this state~~ or more ~~than one half~~ of their employees employed within this state. A company shall not invest more than five percent of its legal reserve under this subsection. b. For purposes of this subsection, “venture capital fund” means a corporation, partnership, proprietorship, or other ~~entity formed under the laws of the United States,~~ or a ~~state, district, or territory of the United States, whose principal~~ business ~~is or will be the making of investments in, and the provision of significant managerial assistance to, small businesses which meet~~ the ~~small~~ business ~~administration definition of small business. “Equity interests” means limited partnership interests and other equity interests in which liability~~ is ~~limited~~ to the amount of the investment, but does not mean general partnership interests or other interests involving general liability. “Venture capital fund” includes an equity interest in the Iowa fund of funds as defined in section 15E.62 and an equity interest in an innovation fund as defined in section 15E.52. 21. Use of ~~custodian banks, clearing corporations, and~~ the ~~federal reserve book-entry system. a. As used in this subsection:~~ (1) “Clearing corporation” means a corporation as defined in section 554.8102. (2) “Custodian bank” means a federal or state bank or trust company regulated under the Iowa banking laws or the federal reserve system, which maintains an account in its name in a clearing corporation and acts as custodian of securities owned by ~~a domestic insurer. (3) “Federal reserve book-entry system” means~~ the ~~computerized system sponsored~~ by ~~the United States department~~ of the ~~treasury and certain agencies and instrumentalities~~ of the ~~United States for holding and transferring securities~~ of the ~~United States government and its agencies~~ and ~~instrumentalities, in~~ the ~~federal reserve banks through national banks, state banks, or trust companies, which either are members of~~ the ~~federal reserve system or otherwise have access to~~ the ~~computerized systems. b. Securities deposited by a domestic insurance company with a custodian bank, or redeposited~~ by a ~~custodian bank with a clearing corporation,~~ or ~~held in the federal reserve book-entry system may be used~~ to ~~meet the deposit requirements of subsection 16.~~ The commissioner shall adopt rules necessary to implement this section which: (1) Establish guidelines on which the commissioner determines whether a custodian bank qualifies as a bank in which securities owned by an ~~insurer may~~ be ~~deposited for~~ the ~~purpose~~ of ~~satisfying~~ the ~~requirements of subsection 16. (2) Designate those clearing corporations in which securities owned by insurers~~ may be deposited. (3) Set forth provisions that custodian agreements executed between custodian banks and insurers shall contain. These shall include provisions stating that minimum deposit levels shall be maintained and that the parties agree securities in deposits with custodian banks shall vest in the state in accordance with section 508.18 whenever proceedings under that section are instituted. (4) Establish other safeguards applicable to the ~~use of custodian banks and clearing corporations by insurers which the commissioner believes necessary to protect~~ the ~~policyholders~~ of the ~~insurers. c.~~ A ~~security owned by a domestic insurer and deposited in a custodian bank or clearing corporation does~~ not ~~qualify for purposes~~ of its legal reserve deposit unless the custodian bank and clearing corporation are approved by the commissioner for that purpose. 22. Financial instruments used in hedging transactions. a. As used in this subsection, unless the context otherwise requires: (1) “Financial instrument” means an ~~agreement, option, instrument, or~~ any ~~series or combination agreement, option, or instrument~~ that ~~provides for either~~ of the ~~following: (a) To make or take delivery of, or assume or relinquish, a specified amount~~ of ~~one or more underlying interests,~~ or to ~~make a cash settlement in lieu of such delivery or relinquishment. (b) Which has a price, performance, value, or cash flow based primarily upon~~ the ~~actual or expected price, level, performance, value, or cash flow~~ of ~~one~~ or ~~more underlying interests. (2) “Financial instrument transaction” means a transaction involving~~ the ~~use of one~~ or ~~more financial instruments. (3) “Hedging transaction” means a financial instrument transaction which is entered into and maintained~~ to ~~reduce either of the following: (a) The risk of a change in~~ the ~~value, yield, price, cash flow, or quality of assets~~ or ~~liabilities which~~ the ~~domestic insurer has acquired and maintains as qualified assets~~ in ~~its legal reserve deposit or which liabilities~~ the ~~domestic insurer has incurred~~ and ~~form~~ the ~~basis for calculation of its legal reserve. (b)~~ The ~~currency exchange-rate risk or the degree~~ of ~~exposure as to assets or liabilities which the domestic insurer has acquired or incurred. (4) “United States government-sponsored enterprise” means the federal national mortgage corporation~~ under ~~12 U.S.C. §1716 – 1723i~~ of the ~~National Housing Act and the federal home loan marketing association~~ under the ~~Federal Home Loan Mortgage Act,~~ 12 ~~U.S.C. §1451 – 1459. b. To be eligible as investments, financial instruments used in hedging transactions~~ shall ~~be either~~ of the ~~following: (1) Be between an~~ insurer and ~~a counterparty~~ that ~~meets~~ the qualifications established in subsection 5 for an issuer, obligor, or guarantor of bonds or other evidences of indebtedness issued, assumed, or guaranteed by a corporation incorporated under the laws of the United States or of ~~any state, district, or insular or territorial possession thereof, or Canada,~~ or ~~that meets~~ the ~~qualifications established in subsection 19 for an issuer, obligor, or guarantor of bonds or other evidences~~ of ~~indebtedness issued, assumed, or guaranteed by~~ a ~~corporation incorporated under~~ the ~~laws of a foreign government other than Canada. (2) Be between an insurer and a conduit and be collateralized by cash or obligations which are eligible~~ under subsection ~~1, 2,~~ 3, ~~5, 19, or 24, are deposited with a custodian bank as defined in subsection 21,~~ and ~~are held under a written agreement with the custodian bank~~ that ~~complies with subsection 21~~ and ~~provides for~~ the ~~proceeds~~ of the ~~collateral, subject~~ to the ~~terms and~~ conditions ~~of the applicable collateral or other credit support agreement, to~~ be ~~remitted to~~ the ~~legal reserve deposit~~ of ~~the company or association~~ and ~~to vest in~~ the ~~state~~ in ~~accordance with section 508.18 whenever proceedings under~~ that ~~section are instituted. Paragraphs “c”, “d”, and “e”~~ of ~~this subsection are not applicable to investments in financial instruments used in hedging transactions eligible pursuant~~ to ~~this subparagraph. As used in this subparagraph, “conduit” means a person within an insurer’s insurance holding company system, as defined in section 521A.1, subsection 7,~~ which ~~aggregates hedging transactions by other persons within~~ the ~~insurance holding company system and replicates them with counterparties. (a) Financial instruments used~~ in ~~hedging~~ transactions ~~between an insurer and a conduit which are collateralized by obligations eligible~~ under ~~subsection 5, 19,~~ or ~~24 are eligible only to the extent that such securities deposited as collateral are not in excess of two percent of the legal reserve~~ in ~~the securities of any one corporation, less any securities~~ of ~~that corporation owned by the insurer~~ or ~~which are the subject~~ of ~~hedging transactions by~~ the ~~insurer,~~ that ~~are included in the insurer’s legal reserve. (b) Financial instruments used in hedging transactions between~~ an insurer ~~and a conduit which are collateralized by obligations eligible under subsection 5 or by cash equivalents eligible under subsection 24, other than a rule 2a-7 money market fund, are eligible only~~ to ~~the extent that such securities deposited as collateral are not in excess of ten percent of the legal reserve, less any obligations eligible under subsection 5 or cash equivalents eligible~~ under ~~subsection 24, other than~~ a ~~rule 2a-7 money market fund, owned by~~ the ~~insurer or which are~~ the ~~subject~~ of ~~hedging transactions~~ by the ~~insurer, that are included in the insurer’s legal reserve. (c) Financial instruments used in hedging transactions between an~~ insurer ~~and a conduit which are collateralized by obligations eligible~~ under subsection ~~19 are eligible only to the extent that such securities deposited as collateral are~~ not ~~in excess of~~ twenty percent of the ~~legal reserve, less any securities eligible~~ under subsection ~~19 owned~~ by the insurer ~~or which are the subject of hedging transactions by the insurer, that are included~~ in the insurer’s legal reserve. (3) Financial instruments used in hedging transactions shall be eligible only as provided by this paragraph “b” and rules adopted by the commission pursuant to chapter 17A setting standards for hedging transactions between an insurer and a ~~conduit as authorized under section 521A.5, subsection 1, paragraph “b”. c. Investments in financial instruments used in hedging transactions are not eligible in excess~~ of ~~two~~ percent of the legal reserve in the financial instruments of any one corporation, less any securities of that corporation owned by the company or association and in which its legal reserve is invested, except insofar as the financial instruments are collateralized by cash, United States government obligations as authorized by subsection 1, or ~~obligations~~ of ~~or guaranteed by a United States government-sponsored enterprise which on~~ the ~~date they are pledged as collateral are investment grade as defined by the commissioner by rule, which are deposited with a custodian bank~~ as ~~defined in subsection 21, and held under a written agreement with the custodian bank that complies with subsection 21 and provides for the proceeds of the collateral, subject~~ to ~~the terms and conditions of the applicable collateral or~~ other ~~credit support agreement, to~~ be ~~remitted to the legal reserve deposit~~ of the ~~company or association and to vest in the state~~ in ~~accordance with section 508.18 whenever proceedings~~ under ~~that section are instituted. d. Investments in financial instruments used in hedging transactions are not eligible in excess~~ of ~~ten percent~~ of ~~the legal reserve, except insofar as the financial instruments are collateralized by cash, United States government obligations as authorized by~~ subsection ~~1, or obligations~~ of or guaranteed by a ~~United States government-sponsored enterprise which on the date they are pledged as collateral are investment grade as defined by the commissioner by rule,~~ which ~~are deposited with a custodian bank as defined~~ in ~~subsection 21, and held under~~ a written agreement with the custodian bank that complies with subsection 21 and provides for the proceeds of the collateral, subject to the terms and conditions of the applicable collateral or other credit support agreement, to be remitted to the legal reserve deposit of ~~the company or association and to vest in the state in accordance with section 508.18 whenever proceedings under that section are instituted. e. (1) Investments in financial instruments~~ of ~~foreign governments or foreign corporate obligations, other than Canada, used~~ in ~~hedging~~ transactions ~~shall be included in~~ the ~~limitation contained in subsection 19 that allows only twenty percent~~ of the ~~legal reserve~~ of ~~the company or association to be invested~~ in ~~such foreign investments, except insofar as~~ the ~~financial instruments are collateralized by cash, United States government obligations as authorized by subsection 1, or obligations~~ of or guaranteed by a United States government-sponsored enterprise which on the date they are pledged as collateral are investment grade as defined by the commissioner by rule, which are deposited with a custodian bank as defined in subsection 21, and ~~held under a written agreement~~ with ~~the custodian bank~~ that ~~complies with subsection 21 and provides for~~ the ~~proceeds of the collateral, subject to the terms~~ and ~~conditions~~ of the ~~applicable collateral or other credit support agreement, to be remitted to~~ the ~~legal reserve deposit~~ of ~~the company or association~~ and ~~to vest in the state in accordance~~ with ~~section 508.18 whenever proceedings under that section are instituted.~~ (2) ~~This paragraph “e” does not authorize~~ the ~~inclusion of financial instruments used in hedging transactions~~ in ~~an insurer’s legal reserve that~~ are in ~~excess of~~ the ~~eligibility limitation provided in paragraph “d” unless~~ the financial instruments ~~are collateralized as provided in this paragraph “e”. f.~~ Prior to engaging in ~~hedging transactions~~ under this subsection, ~~a domestic~~ insurer shall develop ~~and adequately document policies and procedures regarding hedging transaction strategies and objectives. Such policies~~ and ~~procedures shall address authorized hedging transactions, limitations,~~ internal ~~controls, documentation, and authorization and approval procedures. Such policies and~~ procedures ~~shall also provide for review of hedging transactions~~ by the ~~domestic insurer’s board~~ of ~~directors or~~ the ~~board of directors’ designee. g. A domestic~~ insurer shall be able to demonstrate to the ~~commissioner the~~ intended hedging characteristics ~~of hedging transactions under this subsection~~ and the ongoing effectiveness of ~~each hedging~~ transaction or combination of ~~hedging transactions. h. Financial instruments used in hedging~~ transactions shall only be eligible in accordance with this subsection after the commissioner has adopted rules pursuant to chapter 17A regulating hedging transactions under this subsection. i. Securities held in the legal reserve of a life insurance company or ~~association and pledged as collateral for financial instruments used in hedging transactions shall continue to be eligible for inclusion in the legal reserve of~~ the ~~life insurance company or association subject to all~~ of the following: ~~(1) The life insurance company or association does not include the financial instruments used in hedging transactions for which the securities are pledged as collateral in the legal reserve~~ of ~~the life insurance company or association, provided, however, that this subparagraph shall not exclude securities pledged to~~ a ~~counterparty, clearing organization, or clearinghouse~~ on ~~an upfront basis in the form of initial margin, independent amount, or other securities pledged as a precondition of entering into financial instruments used in hedging transactions from inclusion in~~ the ~~legal reserve of~~ the ~~life insurance company or association. (2) Securities pledged as collateral for financial instruments used in highly effective hedging transactions as defined in~~ the ~~national association of insurance commissioners’ statement of statutory accounting principles no. 86~~ or the ~~national association of insurance commissioners’ statement~~ of ~~statutory accounting principles no. 108, together with securities pledged to~~ a ~~counterparty, clearing organization, or clearinghouse~~ on ~~an upfront basis in~~ the ~~form of initial margin, independent amount, or other securities pledged as a precondition of entering into highly effective hedging transactions pursuant~~ to ~~subparagraph (1), are not eligible in excess of ten percent of~~ the ~~legal reserve~~ of the ~~life insurance company or association, less any financial instruments used in hedging transactions held in~~ the ~~legal reserve under this subsection and less any securities included under subparagraph (3). (3) Securities pledged as collateral for financial instruments used in hedging transactions that~~ the ~~life insurance company or association does not report as highly effective hedging transactions, together with securities pledged~~ to ~~a counterparty, clearing organization, or clearinghouse on an upfront basis~~ in the ~~form of initial margin, independent amount, or other securities pledged as a precondition~~ of ~~entering into hedging transactions pursuant to subparagraph (1) that~~ the ~~life insurance company or association~~ does not ~~report as highly effective hedging transactions, are not eligible in excess of three~~ percent of the ~~legal reserve~~ of ~~the life insurance company~~ or ~~association, less any financial instruments used in hedging transactions held in~~ the ~~legal reserve under this subsection. 23. Security loans. a. A life insurance company or association may loan securities held by it~~ in ~~its legal reserve to a broker-dealer registered under~~ the ~~Securities Exchange Act of 1934, a national bank, or a state bank, foreign bank, or trust company that is a member of~~ the ~~United States federal reserve system, and~~ the ~~loaned securities shall continue~~ to ~~be eligible for inclusion in~~ the ~~legal reserve of~~ the ~~life insurance company or association. b. The loan shall be fully collateralized by cash, cash equivalents, or obligations issued~~ or ~~guaranteed by~~ the ~~United States or an agency~~ or ~~instrumentality~~ of the ~~United States.~~ The ~~life insurance company or association shall take delivery of the collateral either directly or through an~~ authorized ~~custodian. c. If~~ the ~~loan~~ is ~~collateralized by cash or cash equivalents, the cash or cash equivalent collateral may be reinvested by the life insurance company or association in rule 2a-7 money market funds~~ as defined in subsection 24, individual securities which are eligible for inclusion in the legal reserve of the life insurance company or association, or in repurchase agreements fully collateralized by such securities if the ~~life insurance company or association takes delivery of~~ the ~~collateral either directly or through an authorized custodian or pooled fund comprised of individual securities which are eligible for inclusion~~ in the ~~legal reserve of the life insurance company or association. If such reinvestment~~ is ~~made in individual securities or in repurchase agreements, the individual securities or the securities which collateralize~~ the ~~repurchase agreements shall mature in less than two hundred seventy days. If such reinvestment is made in~~ a ~~pooled fund, the average maturity of the securities comprising such pooled fund must be one hundred eighty days or less and the individual maturities~~ of the ~~securities comprising such pooled fund must be three hundred ninety-seven days or less. Individual securities and securities comprising the pooled fund shall be investment grade. As used~~ in ~~this paragraph, “maturity” means the earlier of the fixed date on which~~ the ~~holder of~~ the ~~security~~ is ~~unconditionally entitled~~ to ~~receive principal and interest in full or~~ the ~~date~~ on which ~~the holder of the security is unconditionally entitled upon demand to receive principal and interest in full. d. The loan shall be evidenced by~~ a ~~written agreement which provides all of the following: (1) That the~~ loan ~~will be fully collateralized at all times during the term of the loan, and that the collateral will be adjusted~~ as ~~necessary each business day during the term~~ of ~~the loan~~ to ~~maintain~~ the ~~required collateralization in~~ the ~~event~~ of ~~market value changes in the loaned securities or collateral. (2) If the loan is fully collateralized by cash or cash equivalents, the cash or cash equivalent may be reinvested~~ by the ~~life insurance company or association as provided in paragraph “c”. (3) That the loan may be terminated by~~ the ~~life insurance company or association at any time,~~ and ~~that~~ the ~~borrower shall return the loaned stocks or obligations or equivalent~~ stocks ~~or obligations within five business days after termination. (4) That~~ the ~~life insurance company~~ or ~~association has~~ the ~~right to retain~~ the collateral or ~~use the collateral to purchase investments equivalent to the loaned~~ securities ~~if the borrower defaults under the terms~~ of ~~the agreement, and that the borrower remains liable for~~ any ~~losses and expenses incurred by the life insurance company~~ or ~~association due to default that are not covered by the collateral. e. Securities loaned pursuant to~~ this ~~subsection are not eligible for inclusion in~~ the ~~legal reserve~~ of the ~~life insurance company or association~~ in excess of ~~ten~~ percent of the ~~legal reserve. f. A life insurance company or association may continue to hold in the legal reserve~~ of the ~~life insurance company or association securities which are~~ the ~~subject~~ of ~~a reverse repurchase agreement. If such securities are held in~~ the ~~legal reserve~~ of ~~a life insurance company or association,~~ the ~~securities~~ shall be ~~subject to~~ the ~~limitations of paragraph “e” as if they were securities loaned pursuant to this subsection. g. For securities loaned pursuant to~~ this ~~subsection~~ that ~~are included in~~ the ~~legal reserve~~ of ~~the life insurance company or association, the collateral received for~~ the ~~loaned securities shall~~ not ~~be eligible for inclusion in~~ the ~~legal reserve. 24. Cash equivalents.~~ a. ~~As used in~~ this ~~subsection, unless the context otherwise requires: (1) “Cash equivalents” means highly liquid~~ investments ~~with an original term to maturity of ninety days or less that are all of~~ the ~~following: (a) Readily convertible~~ to ~~a known amount of cash without penalty. (b) So near maturity that~~ the ~~investment presents an insignificant risk of change in value. (c) Rated~~ any of the ~~following: (i) “P-1” by Moody’s investors services, inc. (ii) “A-1” by Standard~~ and ~~Poor’s division~~ of ~~McGraw-Hill companies, inc.,~~ or by the national association of insurance commissioners’ securities valuation office. (iii) Equivalent by a nationally recognized statistical rating organization that is recognized by the national association of insurance commissioners’ securities valuation office. (2) “Rule 2a-7 money market fund” means investments in an ~~open-end management investment company registered with~~ the ~~federal securities and exchange commission under~~ the ~~federal Investment Company Act~~ of ~~1940, 15 U.S.C. §80a-1 et seq., and operated in accordance with . b. Cash equivalents include a rule 2a-7 money market fund. c. Cash equivalents, other than~~ a ~~rule 2a-7 money market fund, are not eligible in excess of two percent~~ of the ~~legal reserve~~ in the ~~obligations of any one corporation, and~~ are ~~not eligible in excess of ten percent~~ of the ~~legal reserve.~~ 84 Acts, ch 1067, §40; 85 Acts, ch 136, §1; 85 Acts, ch 228, §4; 85 Acts, ch 252, §31; 87 Acts, ch 64, §1 – 4; 88 Acts, ch 1112, §205; 89 Acts, ch 83, §69; 89 Acts, ch 311, §29; 91 Acts, ch 26, §38, 59, 60; 96 Acts, ch 1013, §1; 96 Acts, ch 1138, §1, 84; 98 Acts, ch 1014, §1; 2000 Acts, ch 1023, §15 – 18, 60; 2002 Acts, ch 1119, §179; 2003 Acts, ch 91, §20; 2004 Acts, ch 1110, §28 – 31; 2006 Acts, ch 1010, §136, 137; 2006 Acts, ch 1117, §50 – 54; 2008 Acts, ch 1123, §20 – 23; 2009 Acts, ch 145, §8; 2010 Acts, ch 1121, §10 – 14; 2011 Acts, ch 70, §24, 25; 2011 Acts, ch 131, §70, 158; 2012 Acts, ch 1023, §110, 111; 2012 Acts, ch 1138, §35; 2013 Acts, ch 30, §125; 2013 Acts, ch 90, §152; 2013 Acts, ch 124, §11 – 14; 2014 Acts, ch 1007, §3, 4; 2015 Acts, ch 30, §163, 164; 2015 Acts, ch 128, §10 – 20, 50, 51; 2017 Acts, ch 7, §1 – 4; 2018 Acts, ch 1003, §1; 2020 Acts, ch 1009, ~~§1 Subsection 22, paragraph i, subparagraph (2) amended~~

(2) For the purpose of any of the following: (a) Meeting cash calls committed to by the partnership prior to July 1, 2023. (b) Completing specific projects or activities of the partnership in which the insurer was a general partner before July 1, 2023, and that had been undertaken before July 1, 2023. (c) Making capital improvements to property owned by the partnership before July 1, 2023, if the insurer was a general partner before July 1, 2023. e. Notwithstanding paragraphs “c” and “d”, a subsidiary or an affiliate of an insurer shall not be prohibited from acting or investing as a general partner. f. (1) Invest in or lend the insurer’s funds upon the security of shares of the insurer’s own stock, except that an insurer may acquire shares of its own stock for any of the following purposes: (a) Conversion of a stock insurer into a mutual or reciprocal insurer, or a mutual or reciprocal insurer into a stock insurer. (b) Issuance to the insurer’s officers, employees, or agents in connection with a plan for converting a publicly held insurer into a privately held insurer, as approved by the commissioner under section 508B.7, or in connection with other stock option and employee benefit plans. (c) In accordance with any other plan approved by the commissioner. (2) Stocks acquired by an insurer under subparagraph (1) shall not be admitted assets of the insurer. 5. Valuation and categorization of investments. a. Unless otherwise specified in this section, the valuation and categorization of, or the amount of, an insurer’s investment acquired or held under subsections 6 through 20, shall be the classification and value at which the assets of an insurer are required to be reported for statutory accounting purposes, as determined in accordance with the accounting and valuation standards of the NAIC including all of the following: (1) The most recently published purposes and procedures manual of the NAIC investment analysis office, or any successor purposes and procedures adopted by the NAIC investment analysis office. (2) The most recently published valuation of securities manual, or any successor valuation of securities procedures adopted by the NAIC. (3) The most recently published accounting practices and procedures manual, or any successor accounting practices and procedures adopted by the NAIC. (4) The most recently published annual statement instructions, or any successor annual statement instructions adopted by the NAIC. (5) Any successor valuation procedures adopted by the NAIC. b. Upon approval of the commissioner, an insurer’s investment in the equity interests of a business entity whose primary purpose is to directly or indirectly invest in and maintain assets and investments on behalf of the insurer and the insurer’s affiliates, or on behalf of the insurer or the insurer’s affiliates, may be deemed to be the insurer itself investing in such assets and investments of the business entity based on the insurer’s pro rata equity interest in the business entity. 6. General five-percent diversification. a. Except as otherwise specified in this section, an insurer shall not directly or indirectly acquire an investment under this section if, as a result of and after giving effect to the investment, the insurer will hold more than five percent of the insurer’s admitted assets in investments of all kinds issued, assumed, accepted, insured, or guaranteed by a single person. b. Notwithstanding paragraph “a”, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity then held by the insurer will exceed five percent of the insurer’s admitted assets. c. Notwithstanding paragraph “a”, an insurer shall not acquire a mortgage loan under subsection 12 if, as a result of and after giving effect to the investment, the aggregate amount of mortgage loans covering any one secured location will exceed five percent of the insurer’s admitted assets. 7. Medium and lower grade investments. a. An insurer shall not acquire an investment under this section, including counterparty exposure net of collateral held, if, as a result of and after giving effect to the investment any of the following apply: (1) The aggregate amount of medium and lower grade investments then held by the insurer will exceed twenty percent of the insurer’s admitted assets. (2) The aggregate amount of lower grade investments then held by the insurer will exceed ten percent of the insurer’s admitted assets. (3) The aggregate amount of investments designated 5 or 6 by the SVO then held by the insurer will exceed three percent of the insurer’s admitted assets. (4) The aggregate amount of investments designated 6 by the SVO then held by the insurer will exceed one percent of the insurer’s admitted assets. b. An insurer shall not acquire an investment under this section, including counterparty exposure net of collateral held, if, as a result of and after giving effect to the investment all of the following apply: (1) The aggregate amount of medium and lower grade investments issued, assumed, guaranteed, accepted, or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer will exceed one percent of the insurer’s admitted assets. (2) The aggregate amount of lower grade investments issued, assumed, guaranteed, accepted, or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer will exceed one-half of one percent of the insurer’s admitted assets. c. If an insurer attains or exceeds the limit of any one designation category under this subsection, the insurer shall not be precluded from acquiring investments in other designation categories, subject to the specific and multi-category limits applicable to each of those investments. 8. Cash or cash equivalents. An insurer may acquire, without limitation, cash and cash equivalents as such terms are defined in the accounting practices and procedures manual. 9. Credit instruments and short-term investments. An insurer may acquire the following credit instruments and short-term investments subject to all of the following: a. The following credit instruments acquired under this subsection shall be subject to subsection 6 and subsection 7, but shall not be subject to subsection 6, paragraph “a”: (1) Credit instruments issued, assumed, guaranteed, or insured by the United States or Canada. (2) Credit instruments issued, assumed, guaranteed, or insured by a government-sponsored enterprise of the United States or Canada, if the credit instruments are assumed, guaranteed, or insured by the United States or Canada, or are otherwise backed or supported by the full faith and credit of the United States or Canada. (3) Credit instruments, excluding asset-backed securities that are any of the following: (a) Issued, assumed, guaranteed, or insured by a government-sponsored enterprise of a government other than the United States or Canada. (b) Issued, assumed, guaranteed, or insured by a state, if the instruments are general obligations of the state. b. Short-term investments acquired under this subsection shall be subject to subsection 6. c. All other credit instruments acquired under this subsection shall be subject to subsections 6 and 7. d. Foreign investments acquired under this subsection shall be subject to subsection 15. 10. Equity interests. An insurer may acquire equity interests subject to all of the following: a. (1) An insurer shall not acquire an investment under this subsection, if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer will exceed ten percent of the insurer’s admitted assets. (2) Notwithstanding subparagraph (1), an insurer that files an annual statement pursuant to section 508.11 and completes the NAIC’s health statement test shall not acquire an investment under this subsection, if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer will exceed twenty-five percent of the insurer’s admitted assets. b. Foreign investments acquired under this subsection shall be subject to subsection 15. c. Equity interests in subsidiary corporations, as authorized by section 508.33, shall be eligible investments if the total investment does not exceed five percent of the insurer’s admitted assets. Upon application to and approval of the commissioner, an insurer may acquire additional equity interests in direct or indirect subsidiary insurance companies that are domiciled in the United States, not to exceed an additional two percent of the insurer’s admitted assets. d. In addition to the investments authorized in paragraphs “a”, “b”, and “c”, an insurer may acquire equity interests in subsidiary entities as permitted by, and as subject to the limitations of, section 521A.2. 11. Tangible personal property. a. An insurer may acquire obligations secured by tangible personal property that is under contract of sale or lease for which contractual payments may reasonably be expected to return the principal of, and provide earnings on, the investment within the anticipated useful life of the tangible personal property. b. An insurer shall not acquire an obligation under paragraph “a”, if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subsection will exceed either of the following: (1) Two percent of the insurer’s admitted assets. (2) One-half of one percent of the insurer’s admitted assets as to any single item of tangible personal property. 12. Mortgage loans. a. An insurer may acquire obligations secured by a mortgage or deed of trust that is a first or second lien upon otherwise unencumbered real estate, or upon leasehold estates in real property if fifty years or more of the term including renewals is unexpired, or other similar instruments, including mezzanine loans, either directly or through a business entity where the business entity’s sole purpose is to hold mortgages that qualify for investment under this subsection, provided all of the following apply: (1) The amount loaned by the insurer, together with any amount secured by an equal or prior security interest, whether of the insurer or another party, does not exceed ninety percent of the appraised value of the real estate and improvements at the time the insurer makes the investment, as evidenced by a current qualified external appraisal or an internal appraisal conducted using standards comparable to an external appraisal. (2) The amount of an obligation required to be included in the calculation of the loan-to-value ratio may be reduced to the extent the obligation is insured or guaranteed by an agency of the United States government. (3) A mezzanine loan acquired under this subsection shall not exceed four percent of an insurer’s admitted assets. b. This subsection shall not be construed to prevent any amount invested under this subsection that exceeds ninety percent of the appraised value of the real estate from being an authorized asset under subsection 10, paragraph “a”, or subsection 20, subject to the limitations of subsection 10, paragraph “a”, and subsection 20. 13. Real estate. a. An insurer may acquire real estate either directly or through certificates evidencing participation with other investors. b. An insurer may acquire real estate required for the insurer’s home offices, or to be otherwise occupied by the insurer or the insurer’s employees in transacting the insurer’s business, and the insurer may lease any unused space to other occupants. The value of an insurer’s investments under this paragraph shall not exceed ten percent of the insurer’s admitted assets. c. Excluding investments under paragraph “b”, an insurer’s investments under this subsection shall not exceed fifteen percent of the insurer’s admitted assets. d. An insurer’s aggregate investments under this subsection and subsection 12 shall not exceed forty-five percent of the insurer’s admitted assets. 14. Securities lending, repurchase, reverse repurchase, and dollar roll transactions. An insurer may enter into securities lending, repurchase, reverse repurchase, and dollar roll transactions with business entities, provided that the insurer’s board of directors, or the board of directors’ designee, adopts a written plan that is consistent with the insurer’s investment policies under subsection 3, and that specifies guidelines and objectives including all of the following: a. A description of how any cash received will either be invested or used for the insurer’s general corporate purposes. b. Operational procedures to manage interest rate risk, counterparty default risk, the conditions under which proceeds from repurchase transactions may be used in the ordinary course of business, and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction. c. The extent to which the insurer may engage in transactions under this subsection. 15. Foreign investments. An insurer may acquire foreign investments, or engage in investment practices with persons or business entities of or in foreign jurisdictions of substantially the same types as those investments that an insurer is permitted to acquire under this subsection, if, as a result and after giving effect to the investment the following apply: a. The aggregate amount of foreign investments then held by the insurer under this subsection does not exceed twenty percent of the insurer’s admitted assets. b. The aggregate amount of foreign investments under this subsection then held by the insurer in a single foreign jurisdiction that has a sovereign debt rating of SVO 1 does not exceed ten percent of the insurer’s admitted assets, or does not exceed three percent of the insurer’s admitted assets as to any other foreign jurisdiction. c. Investments acquired under this subsection shall be aggregated with investments of the same type made in a similar manner under any other subsection of this section for purposes of determining compliance with any limitations contained in any other subsection of this section. d. This subsection shall not authorize investments issued, assumed, or guaranteed by a foreign government which has engaged in a consistent pattern of gross violations of human rights. 16. Derivative transactions. An insurer may engage in derivative transactions if the insurer complies with all of the following conditions: a. The insurer shall include all counterparty exposure amounts, net of collateral held, in determining compliance with the limitations of subsections 6 and 7. b. The insurer shall have sufficient experience with derivatives such that the insurer’s performance and procedures reflect all of the following: (1) That the insurer has a successful history of adequately identifying, measuring, monitoring, and limiting exposures associated with derivative transactions. (2) That the insurer has adequate corporate controls over the activities in subparagraph (1). (3) That the insurer has sufficient staff who are knowledgeable, competent, and skilled in the use of the sophisticated financial instruments necessary to execute subparagraph (1). c. Prior to engaging in a derivative transaction under this subsection, the insurer shall develop guidelines and internal control procedures pursuant to rules promulgated by the commissioner. d. An insurer may use derivative instruments to engage in any of the following: (1) Hedging transactions, provided that the insurer shall be able to demonstrate the intended hedging characteristics and the ongoing effectiveness of the derivative transaction or combination of transactions through cash flow testing or other appropriate analysis. (2) Income generation transactions, provided that the transaction is one of the following: (a) A sale of a call option on assets, if during the entire period the option is outstanding, the insurer holds, or has a currently exercisable right to acquire, the underlying assets. (b) A sale of a put option on assets, if during the entire period the option is outstanding, the insurer holds sufficient short-term liquidity to purchase the underlying assets on exercise of the option, the insurer has the ability to hold the underlying assets in the insurer’s portfolio, and the total market value of the put options sold by the insurer does not exceed two percent of the insurer’s admitted assets. (c) A sale of a covered cap or floor, if the insurer holds in the insurer’s portfolio the investments generating the cash flow necessary to make the required payments under the cap or floor during the complete term that cap or floor is outstanding. (3) Replication transactions, provided that all of the following apply: (a) The insurer is otherwise authorized to invest in the asset being replicated. (b) The asset being replicated is subject to this section as if the transaction constitutes a direct investment by the insurer in the replicated asset. (c) The transaction is filed timely with the SVO as a replicated synthetic asset transaction. 17. Policy loans. An insurer may make a loan on any of the insurer’s policies in an amount not to exceed the reserve that the insurer is required to maintain on the policy on which a loan is made. 18. Preferred stock. An insurer may acquire preferred stock, if, as a result of and after giving effect to the investment, the aggregate amount of preferred stock held by the insurer does not exceed twenty-five percent of the insurer’s admitted assets, and the aggregate amount of preferred stocks held by the insurer that are not designated P1 or P2 by the SVO does not exceed ten percent of the insurer’s admitted assets. 19. Collateral loans and other debt securities secured by collateral. An insurer may acquire collateral loans or other debt securities secured by collateral consisting of any assets or investments permitted under this section, provided that the amount of the loan is not in excess of ninety percent of the value of the collateral at the time of acquisition. For the purpose of determining compliance with the quantitative limits in this section, the collateral pledged to the insurer shall be aggregated with the insurer’s direct investments. 20. Additional authorized investments. An insurer may acquire investments not otherwise authorized under this section, or that exceed the limitation of this section in an amount in the aggregate not exceeding ten percent of the insurer’s admitted assets. a. Investments authorized under this subsection shall not include investments prohibited under subsection 4. b. An insurer shall not make investments under this subsection if the insurer fails to maintain at least company action level risk-based capital as defined by the NAIC. c. This subsection shall not be construed to permit any asset not allowed as an admitted asset under the requirements of the accounting practices and procedures manual to be considered an admitted asset under this section. 21. Application of limitations. An investment qualified, in whole or in part, for acquisition or holding as an admitted asset may be qualified or requalified, in whole or in part, by the insurer at either the time of acquisition or a later date under any subsection of this section if the relevant conditions contained in the applicable subsection are satisfied at the time of the insurer’s qualification or requalification. 22. Rules. The commissioner may adopt rules pursuant to chapter 17A to administer this section. 23. Enforcement. Investments not conforming to this section shall not be admitted assets. The commissioner may take any enforcement action under the commissioner’s authority to enforce compliance with this section. 84 Acts, ch 1067, §40; 85 Acts, ch 136, §1; 85 Acts, ch 228, §4; 85 Acts, ch 252, §31; 87 Acts, ch 64, §1 – 4; 88 Acts, ch 1112, §205; 89 Acts, ch 83, §69; 89 Acts, ch 311, §29; 91 Acts, ch 26, §38, 59, 60; 96 Acts, ch 1013, §1; 96 Acts, ch 1138, §1, 84; 98 Acts, ch 1014, §1; 2000 Acts, ch 1023, §15 – 18, 60; 2002 Acts, ch 1119, §179; 2003 Acts, ch 91, §20; 2004 Acts, ch 1110, §28 – 31; 2006 Acts, ch 1010, §136, 137; 2006 Acts, ch 1117, §50 – 54; 2008 Acts, ch 1123, §20 – 23; 2009 Acts, ch 145, §8; 2010 Acts, ch 1121, §10 – 14; 2011 Acts, ch 70, §24, 25; 2011 Acts, ch 131, §70, 158; 2012 Acts, ch 1023, §110, 111; 2012 Acts, ch 1138, §35; 2013 Acts, ch 30, §125; 2013 Acts, ch 90, §152; 2013 Acts, ch 124, §11 – 14; 2014 Acts, ch 1007, §3, 4; 2015 Acts, ch 30, §163, 164; 2015 Acts, ch 128, §10 – 20, 50, 51; 2017 Acts, ch 7, §1 – 4; 2018 Acts, ch 1003, §1; 2020 Acts, ch 1009, §1; 2021 Acts, ch 57, §1, 2; 2022 Acts, ch 1020, §1, 2; 2022 Acts, ch 1050, §1; 2023 Acts, ch 36, §5; 2023 Acts, ch 66, §155, 159, 161; 2024 Acts, ch 1042, §2 – 9

Official source: Iowa Legislature. Reproduced from public-domain Iowa statutes; confirm against the official source for the current text. Not legal advice.

Download

Copy

Embed on your site

Hover to preview · click to copy the code

Search Wikipedia →

Versions

Jan 1, 2026 – presentcurrentviewing
Iowa Code 2026 edition (legislature per-chapter RTF)
▸ what changed
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2025 – Jan 1, 2026
Iowa Code 2025 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2024 – Jan 1, 2025
Iowa Code 2024 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2023 – Jan 1, 2024
Iowa Code 2023 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2022 – Jan 1, 2023
Iowa Code 2022 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2021 – Jan 1, 2022
Iowa Code 2021 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2020 – Jan 1, 2021
Iowa Code 2020 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2019 – Jan 1, 2020
Iowa Code 2019 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2018 – Jan 1, 2019
Iowa Code 2018 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2017 – Jan 1, 2018
Iowa Code 2017 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2016 – Jan 1, 2017
Iowa Code 2016 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8;
Jan 1, 2015 – Jan 1, 2016
Iowa Code 2015 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2014 – Jan 1, 2015
Iowa Code 2014 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2013 – Jan 1, 2014
Iowa Code 2013 edition (legislature per-chapter RTF)
▸ what changed changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]
Jan 1, 2012 – Jan 1, 2013
Iowa Code 2012 edition (legislature per-chapter RTF)
changes vs current →
Source credit
[C73, §1179 – 1181; C97, §1791 – 1793, 1803, 1804, 1806, 1807; SS15, §1806; C24, 27, 31, 35, 39, §8698 – 8701, 8735 – 8739, 8741, 8742, 8744, 8747; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §511.8; 81 Acts, ch 168, §1; 82 Acts, ch 1095, §2 – 5]

Each edition at which this section's text changed. Select a date to read the text as it stood then.