(c) Any financial futures contract or financial options contract derivative instrument.
(5) Special limitations pertaining to a on restricted insurers insurer, other than a town mutuals mutual insurer. An insurer which that is restricted under s. 620.03, Stats., and which is not a town mutual, insurer shall not invest in any of the following investments: (a) Evidences Bonds or evidences of indebtedness. In An insurer shall not invest in bonds or evidences of indebtedness under described in s. 620.22 (1), Stats., unless such the bonds or evidences of indebtedness are lawfully authorized and have at least one of the following characteristics: SECTION 9. Ins 6.20 (5) (a) 1. is repealed and recreated to read:
Ins 6.20 (5) (a) 1. At the time of purchase have a 1 or 2 designation by the national association of insurance commissioners, or an equivalent rating by a NRSRO.
SECTION 10. Ins 6.20 (5) (a) 2. to 5. are amended to read:
Ins 6.20 (5) (a) 2. They are The bonds or evidences of indebtedness are of a municipally owned public utility of this state created pursuant to section 3 of article XI of the constitution, and the net book value of the property pledged as security for the bonds has been established or approved by the public service commission, and the total issue of the bonds does not exceed 50% of the net book value of such property; or. 3. They Principal and interest are payable from revenues of a public utility or railroad owned by or held for the benefit of any governmental unit in the United States or Canada, if they are adequately secured by mortgage or lien on property or by specific pledge or revenues, and lawful authorizing resolutions or ordinance of the governing body of the unit require that during the life of the bond or evidence of indebtedness the rates, fees, tolls or charges together with any other revenues pledged shall at all times produce revenues sufficient to pay all expenses of operation and maintenance, interest as promised and the principal sum when due; or.
4. They are The bonds or evidences of indebtedness are of public utilities in the United States or Canada and are either adequately secured by mortgage, pledge or other collateral, or have had net earnings available for fixed charges that for the previous 3 fiscal years have averaged per year not less than 1 1/2 times the average annual fixed charges; or.
5. They are The bonds or evidences of indebtedness are of a United States or Canadian private corporation, and they are either adequately secured by mortgage, pledge or other collateral, or are issued by a corporation which has had net earnings available for fixed charges that have averaged for the previous 5 years, and equaled for each of the previous 2 years an annual amount which exceeded average annual fixed charges by at least 50%, or 25% in the case of corporations engaged primarily in wholesale or retail merchandising, installment, commercial and consumer financing, factoring or small loan business.
SECTION 11. Ins 6.20 (6) (a) (title) is created to read:
Ins 6.20 (6) (a) (title) Status as a restricted insurer.
SECTION 12. Ins 6.20 (6) (b) (intro.), and 1. to 5. are amended to read:
Ins 6.20 (6) (b) Permitted investments. Except as permitted by pars. (c), (d) and (e), a town mutual insurer may only invest in one or more of the following:
1. Treasury bonds, treasury notes, treasury bills or any other direct obligations of the United States government or agencies or instrumentalities of the United States government with a final maturity 15 years or less, except that no part of the amount determined under this paragraph shall be invested in zero coupon bonds or collateralized mortgage obligations;.
2. Demand deposit, interest bearing accounts and certificates of deposit in financial institutions, including banks, savings and loan associations and credit unions, except that the amount of an insurer’s investment with each such financial institution shall be limited to the total amount eligible for insurance under the financial institution’s depositor insurance program;.
3. Bonds of any United States or Canadian corporation that at the time of purchase have a “BBB” or better rating from Standard and Poor’s Corporation or Moody’s Investment Service or bonds rated “1” 1 or 2 rating designation by the National Association of Insurance Commissioners Securities Valuation Office national association of insurance commissioners, or an equivalent rating by a NRSRO, except that no part of the amount determined under this paragraph shall be invested in zero coupon bonds, collateralized mortgage obligations, payment in kind bonds, or bonds with a final maturity of more than 15 years;.
4. Bonds of any United States municipality that at the time of purchase have a “BBB” or better rating from Standard and Poors Corporation or Moody’s Investment Service or bonds rated “1” 1 or 2 designation by the National Association of Insurance Commissioners Securities Valuation Office national association of insurance commissioners, or an equivalent rating by a NRSRO, with a final maturity of 15 years or less, except that no amount shall be invested in zero coupon bonds;.
5. No more than an aggregate of 10% 5% of assets in cumulative dividend preferred stock of any United States or Canadian corporation that at the time of purchase has a “BBB” or better rating from Standard and Poor’s Corporation or Moody’s Investment Service or bonds rated “1” 1 or 2 designation by the National Association of Insurance Commissioners Securities Valuation Office; national association of insurance commissioners, or an equivalent rating by a NRSRO.
SECTION 13. Ins 6.20 (6) (b) 5g. and 5r. are created to read:
Ins 6.20 (6) (b) 5g. Shares in no-load mutual funds, provided that all of the following requirements are met:
a. Each no-load mutual fund shall have an expense ratio, including any fees for marketing or distribution, of 1.20% or less.
b. Each no-load mutual fund shall have as a stated investment objective, as disclosed in its prospectus, an intent to invest 80% or more of its assets under management in bonds of any direct obligations of the United States government or agencies or instrumentalities of the United States government, any United States or Canadian corporation, or any United States municipality, that, at the time of purchase, have a 1 or 2 designation by the national association of insurance commissioners, or an equivalent rating by a NRSRO.
c. Each no-load mutual fund shall have an intent, as stated in its prospectus, to maintain a weighted average maturity of 8 years or less.
d. Each no-load mutual fund investment must be carried at the fair market value on the annual statement filed with the commissioner.
e. Each town mutual insurer shall file a prospectus of each fund purchased in accordance with this paragraph with the commissioner no later than February 15 of the year immediately following the year the purchase was made.
5r. Shares of exchange-traded funds, provided that all of the following requirements are met:
a. Each exchange-traded fund shall have an expense ratio, including any fees for marketing or distribution, of 1.20% or less.
b. Each exchange-traded fund shall have as a stated investment objective, as disclosed in its prospectus, an intent to invest 80% or more of its assets under management in bonds of any direct obligations of the United States government or agencies or instrumentalities of the United States government, any United States or Canadian corporation or any United States municipality, that, at the time of purchase, have a 1 or 2 designation by the national association of insurance commissioners, or equivalent ratings by a NRSRO.
c. Each exchange-traded fund shall have an intent, as stated in its prospectus, to maintain a weighted average maturity of 8 years or less.
d. Each exchange-traded fund investment shall be carried at the fair market value on the annual statement filed with the commissioner.
e. Each town mutual insurer shall file a prospectus of each fund purchased in accordance with this paragraph with the commissioner no later no later than February 15 of the year immediately following the year the purchase was made.
SECTION 14. Ins 6.20 (6) (b) 6., (6) (c) (title), (intro.), 1. and 2. are amended to read:
Ins 6.20 (6) (b) 6. No more than an aggregate of 10% of assets in Shares in money market mutual funds.
(6) (c) Minimum expected assets. A town mutual insurer may invest in assets permitted under par. (d) only if, on December 31 of the preceding year, its assets invested in accordance with par. (b) are were in an amount at least equal to the sum of its liabilities plus the greater greatest of the following:
1. 50 100% of the net written premiums and assessments for the 12−month period ending December 31;.
2. 33% of the gross direct written premiums and assessments for the 12−month period ending December 31; or .
SECTION 15. Ins 6.20 (6) (d) (title) is created.
Ins 6.20 (6) (d) (title) Permitted investments for assets in excess of minimum expected assets.
SECTION 16. Ins 6.20 (6) (d) 3. (intro.) is repealed.
Section 17. Ins 6.20 (6) (d) 3. a. to c. are renumbered Ins 6.20 (6) (d) 3c., 3g., and 3L. and Ins 6.20 (6) (d) 3g. and 3L. as renumbered, are amended to read:
Ins 6.20 (6) (d) 3g. Common or preferred stock or convertible securities of any United States, Canadian or foreign corporation not included in par. (b) that are traded on a federally regulated securities exchange in the United States.
3L. Any mutual fund that invests Shares in no-load mutual funds, which have an expense ratio, including any fees for marketing or distribution, of 1.20% or less and have as their stated investment objective, as disclosed in their prospectus, an intent to invest 80% or more of their assets under management in common or preferred stock or convertible securities of any United States, Canadian or foreign corporation not included in par. (b) that has a minimum four-star rating from Morningstar Mutual Funds Inc. A town mutual insurer shall not exceed 10% of assets in any single family of mutual funds.
SECTION 18. Ins 6.20 (6) (d) 3p., 3t., and 3x. are created to read:
Ins 6.20 (6) (d) 3p. Shares of exchange-traded funds, which have an expense ratio, including any fees for marketing or distribution, of 1.20% or less and have as their stated investment objective, as disclosed in their prospectus, an intent to invest 80% or more of their assets under management in common or preferred stock or convertible securities of any United States, Canadian or foreign corporation not included in par. (b).
3t. Shares in no-load mutual funds with a weighted average maturity of more than 8 years that would otherwise be permitted under par. (b) 5g.
3x. Shares in exchange-traded funds with a weighted average maturity of more than 8 years that would otherwise be permitted under par. (b) 5r.
SECTION 19. Ins 6.20 (6) (d) 5. and 8. are repealed.
SECTION 20. Ins 6.20 (6) (d) 9. is amended to read:
Ins 6.20 (6) (d) 9. Investments not otherwise permitted by this paragraph, and not specifically prohibited by statute or rule, to the extent of not more than 5% of the insurer's assets. This includes the cash surrender value of life insurance policies and annuities of insurers authorized to do business in Wisconsin.
SECTION 21. Ins 6.20 (6) (e) (title), (intro.), 1. and 2. are consolidated, renumbered Ins 6.20 (6) (e) and amended to read:
Ins 6.20 (6) (e) Town mutual insurer reinsurer stock; grandfathered provision. A town mutual insurer is not required to divest stock described in par. (d) 3. a.3c. which is held by the town mutual insurer on December 31, 1995. Any such This type of stock:
1. Is is an authorized investment; and
2. Is is not an asset invested in accordance with par. (b). for the purpose of determining under par. (c) whether an investment is authorized under par. (d); and
SECTION 22. Ins 6.20 (6) (e) 3. is repealed.
SECTION 23. Ins 6.20 (6) (f) (intro.), and 1. is amended to read:
Ins 6.20 (6) (f) Limitations on amount of investment. A town mutual insurer may not invest : in any of the following:
1. Except as permitted under subd. 2., more that 3% of assets in securities of any single issuer unless it obtains the prior written permission of the commissioner or unless the investment is in securities of the government of the United States or its instrumentalities or in securities guaranteed by the full faith and credit of the United States; or.
SECTION 24. Ins 6.20 (6) (f) 3. to 5. are created to read:
Ins 6.20 (6) (f) 3. More than 10% of assets in any single mutual fund.
4. More than 10% of assets in any single exchange-traded fund.
5. More than 20% of assets in investments sponsored or managed by any single issuer or its affiliates with respect to mutual funds and exchange-traded funds.
SECTION 25. Ins 6.20 (6) (g) is repealed and recreated to read:
Ins 6.20 (6) (g) Transition and divestment. Except as provided under par. (e), a town mutual insurer shall comply with all of the following:
1. A town mutual insurer that holds investments permitted under par. (d) but no longer meets the minimum asset test of par. (c) may continue to hold such investments so long as the town mutual insurer holds investments in accordance with par. (b) in an amount that is no less than the sum of its liabilities plus the greatest of any of the following:
a. 75% of the net written premiums and assessments for the 12−month period ending December 31.
b. 33% of the direct written premiums and assessments for the 12−month period ending December 31.
c. $300,000.
2. A town mutual insurer shall divest of any investment which does not meet the requirements of pars. (b) to (f) due to decline in the rating of a bond, the insurer’s size, limitations on investments or any other reason, within three years of its noncompliance.
3. If at the time of purchase a town mutual insurer investment did not meet the requirements of pars. (b) to (f), then the town mutual insurer shall immediately divest of the investment.
SECTION 26. Ins 6.20 (6) (h) 4. a. to c., and (i) are created to read:
Ins 6.20 (6) (h) 4. a. If a town mutual insurer utilizes the services of an investment advisor, the town mutual shall have, and maintain, a written agreement with the investment advisor, that shall be approved by the board of directors. A separate agreement shall be entered into for each specific arrangement.
b. Each written agreement with an investment advisor shall include a description of the scope and nature of the services to be provided; the standard of care to be provided; how or whether the investment strategy, including asset allocations, and any applicable limitations, incorporates the board approved investment policy; the level of authority the advisor exercises over the insurer’s portfolio, whether discretionary or non-discretionary; a description of all types of compensation to the investment advisor; and a description as to how investment transactions, holdings, and portfolio performance will be communicated to the company’s board of directors, including the frequency, content and means of reporting.
c. An agreement under subpar. b. shall clearly state whether the investment advisor is, or is not, acting as a fiduciary with respect to the town mutual insurer. A fiduciary is someone whose conduct is subject to the fiduciary duty standard, as defined under applicable rules, regulations, or standards of conduct promulgated by the U.S. securities and exchange commission.
(i) Custody. In addition to the requirements of s. 610.23, Stats., the shares of any mutual fund in which a town mutual insurer invests may be held in the direct custody of the town mutual insurer, and the shares must be maintained either in book entry form with the mutual fund’s registrar and transfer agent, or in certificate form. If the town mutual insurer does not have direct custody of the shares, the shares shall be held in the custody of a bank or bank and trust company. SECTION 27. Ins 6.20 (8) (j), (k), (m), and (o) are repealed:
SECTION 28. Ins 6.20 (8g) and (8r) are created to read:
Ins 6.20 (8g) Foreign investments. An insurer, and in the case of insurers that are subject to special restrictions under s. 620.03, Stats., in accordance with any other rules applicable to them, may invest in foreign investments, in addition to investments authorized by s. 620.22 (1) to (7), Stats., that meet the following criteria and limitations: (a) An insurer with assets less than $500,000,000 as of the financial statement filing date may invest up to 1% of assets in direct obligations of foreign governments.
(b) An insurer with assets equal to at least $500,000,000 as of the financial statement filing date may invest up to 4% of assets in direct obligations of foreign governments that at the time of purchase have a 1 or 2 designation from the national association of insurance commissioners, or equivalent ratings by a NRSRO and, in addition, up to 1% of assets in the direct obligations of foreign governments without regard to ratings.
(c) An insurer with assets less than $500,000,000 as of the financial statement filing date may invest up to 2% of assets in loans, securities or investments of foreign issuers which are of substantially the same kinds, classes and investment grades as those eligible for investment under ch. 620, Stats., and supplementary rules. (d) An insurer with assets equal to at least $500,000,000 as of the financial statement filing date may invest up to 8% of assets in loans, securities or investments of foreign issuers which are substantially the same kinds, classes and investment grades as those eligible for investment under ch. 620, Stats, and supplementary rules. (e) All investments in a foreign country, foreign government, and foreign issuers are subject to all of the following aggregate limits:
1. All investments in a single foreign country, 4% of assets.
2. All investments of a single foreign issuer and its foreign issuer affiliates, 3% of assets.
3. All investments denominated in a single foreign currency, 5% of assets excluding investments under par. (f).
(f) An insurer doing business in a foreign country may invest in assets in that foreign country, or in that country’s currency, that are needed to meet the insurer’s obligations, provided the investment would be permitted if made in this state.
(g) An insurer are responsible for monitoring their compliance with individual and aggregate limitations on all investments in a foreign country, foreign government, and foreign issuer, including such investments held indirectly through mutual funds, and must maintain a record of all such investments, which shall be reconciled at least quarterly and be available for production upon the request of the commissioner.
