NOTICE OF DIRECTLY PLACED UNAUTHORIZED INSURANCE
To: Commissioner of Insurance
State of Wisconsin
P.O. Box 7873
Madison, WI 53707-7873
1. Name of Person or Organization Insured
2. Address of Insured
3. Contract Number
4. Effective Date
5. Expiration Date
6. Name and Address of Insurance Company
7. Description or Type of Coverage
8. Premium Charged
The undersigned certifies that this report is true and correct according to the best of his or her information, knowledge, and belief.
, 2
Ins 6.19 NoteNote: This report, pursuant to s. 618.42 (2), Stats., must be filed with the Commissioner of Insurance within 60 days after effectuation of any new or renewal insurance contract independently procured from an unauthorized insurer. A separate report is required for each new or renewal insurance contract. A 3% Tax on the premiums charged for such contracts during the calendar year ending December 31 must be paid to the Commissioner on or before March 1 next succeeding. Ins 6.20Ins 6.20 Investments of insurance companies. Ins 6.20(1)(1) Purpose. The purpose of this rule is to implement and interpret ch. 620, Stats., for the purpose of establishing procedures and requirements for investments of insurance companies. Ins 6.20(2)(2) Scope. This rule shall apply to all insurers subject to ch. 620, Stats. Ins 6.20(3)(am)(am) “Derivative instrument” has the meaning contained in the accounting practices and procedures manual of the national association of insurance commissioners. “Derivative instrument” includes derivatives embedded within an investment. Ins 6.20(3)(c)(c) “Financial instrument” means a security, currency, or index of a group of securities or currencies. Ins 6.20(3)(e)(e) “Fixed charges” includes interest on all debt, and amortization of debt discount. Ins 6.20(3)(ee)(ee) “Foreign country” means any country other than the United States and Canada. Ins 6.20(3)(em)(em) “Foreign government” means any governmental unit or instrumentality that is not in the United States or Canada. Ins 6.20(3)(es)(es) “Foreign issuer” means any issuer that is not domiciled in the United States or Canada and is not a foreign government. An issuer domiciled in the United States or Canada shall be deemed a foreign issuer when the issuer is a shell business entity or special purpose vehicle, unless the investment is assumed, accepted, guaranteed, insured or otherwise backed by an entity domiciled in the United States or Canada that is not a shell business entity or special purpose vehicle. Ins 6.20(3)(f)(f) “Money market mutual fund” means a fund that meets the conditions of 17 Code of Federal Regulations Par. 270.2a-7, under the Investment Company Act of 1940 (15 USC 80a-1 et seq.), as amended or renumbered. Ins 6.20(3)(g)(g) “Net earnings available for fixed charges” means income after allowance for operating and maintenance expenses, depreciation and depletion, and taxes other than federal and state income taxes, but without allowance for extraordinary nonrecurring items of income or expense appearing in the regular financial statements of the issuing company. If the issuing company has acquired, prior to the date of investment, substantially all the assets of another company by purchase, merger, consolidation or otherwise, the net earnings available for fixed charges of the other company for the portion of the test period that preceded acquisition may be included in accordance with a consolidated earnings statement covering the period. Ins 6.20(3)(h)(h) “Net earnings available for fixed charges and dividends” shall be determined in the same manner as “net earnings available for fixed charges” but after allowance for federal and state income taxes. Ins 6.20(3)(hg)(hg) “Nationally Recognized Statistical Rating Organization” or “NRSRO” means a credit rating agency registered with the U.S. securities and exchange commission, pursuant to the Credit Rating Agency Reform Act of 2006, as amended. Ins 6.20(3)(hr)(hr) “No-load mutual fund” means a mutual fund whose shares are sold without any sales charges, or commissions, including sales compensation that is on an immediate or deferred basis or in some combination of immediate and deferred compensation. No-load mutual funds may impose fees for redemption, exchange, distribution, marketing, or other purposes unrelated to sales charges or commissions. Ins 6.20(3)(i)(i) “Preferred dividend requirements” include dividends at the maximum prescribed rate on all stock ranking as to dividends on parity with or prior to that being acquired, whether or not the dividends are cumulative. Ins 6.20(3)(k)(k) “Real estate” or “real property” includes leaseholds. Ins 6.20(3)(L)(L) “Repurchase transaction” means a transaction in which an insurer purchases securities from a business entity which is obligated to repurchase the purchased securities or equivalent securities from the insurer at a specified price, either within a specified period or upon demand. Ins 6.20(4)(4) General limitations on restricted insurers. No insurer restricted under s. 620.03, Stats., may invest in any of the following classes of assets, unless prior permission is granted by the commissioner: Ins 6.20(4)(a)(a) Any securities of an issuer who has defaulted on any payment on any debt security within the previous 5 years. Ins 6.20(5)(5) Special limitations pertaining to a restricted insurer other than a town mutual insurer. An insurer that is restricted under s. 620.03, Stats., and is not a town mutual insurer shall not invest in any of the following investments: Ins 6.20(5)(a)(a) Bonds or evidences of indebtedness. An insurer shall not invest in bonds or evidences of indebtedness described in s. 620.22 (1), Stats., unless the bonds or evidences of indebtedness are lawfully authorized and have at least one of the following characteristics: Ins 6.20(5)(a)1.1. 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. Ins 6.20(5)(a)2.2. 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. Ins 6.20(5)(a)3.3. 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. Ins 6.20(5)(a)4.4. 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. Ins 6.20(5)(a)5.5. 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. Ins 6.20(5)(b)(b) Equipment securities. In equipment securities or in certificates of an equipment trust under sub. (8) (b) unless the obligor’s net earnings have averaged at least 2 times its average annual fixed charges for the previous 3 years. Ins 6.20(5)(c)1.1. On the security of encumbered property, but property shall not be deemed encumbered because of unpaid but not delinquent assessments and taxes, mineral, oil or timber rights, easements for public highways, private roads, railroads, telegraph, telephone, electric light and power lines, drains, sewers or other similar easements, liens for service and maintenance of water rights when not delinquent, party wall agreements, building restrictions, or other restrictive covenants or conditions, with or without a reversionary clause, or leases under which rents or profits are reserved to the owner; Ins 6.20(5)(c)2.2. In excess of 2/3 of the fair market value, including buildings covered by the mortgage. If the value of buildings constitute part of the security, the buildings must be insured adequately to protect the insurer’s security interest. The 2/3 limitation shall not apply to any loan fully insured by a federal insurance corporation; nor Ins 6.20(5)(c)3.3. On the security of a leasehold interest in real property unless it is unencumbered except by rentals owed to the owner of the fee, has at least 25 years yet to run, and then for no more than 50% of the fair market value of the leasehold less the present value of all rentals due upon it to the owner of the fee. Ins 6.20(5)(d)(d) Preferred shares. In preferred shares unless the issuing company has had, disregarding fixed charges on indebtedness and dividend requirements on preferred stock for the retirement of which provision has been made at the date of the investment, net earnings: Ins 6.20(5)(d)1.1. Available for fixed charges and dividends that during the previous 5 fiscal years have averaged not less than twice the sum of the fixed charges, maximum contingent interest and preferred dividend requirements of the issuing company; or Ins 6.20(5)(d)2.2. Available for fixed charges and dividends that for each of the previous 3 fiscal years have been not less than 1 1/2 times the sum of the fixed charges, maximum contingent interest and preferred dividend requirements of the issuing company; or Ins 6.20(5)(d)3.3. Available to meet preferred dividend requirements of the previous 5 years, after allowance for fixed charges and federal and state income taxes, that have averaged not less than 3 times the preferred dividend requirements. Ins 6.20(5)(e)1.1. In accordance with a plan of acquisition proposed by the insurer and approved by the commissioner; and Ins 6.20(5)(e)2.2. In common stocks which are authorized securities for NASDAQ, the automated quotation system of the National Association of Securities Dealers. Ins 6.20(5)(f)(f) Real property. In any investment under s. 620.22 (4) or (5), Stats., except with prior written approval of the commissioner. Ins 6.20(5)(g)1.1. Except as permitted under subd. 2., more than 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 Ins 6.20(5)(g)2.2. More than 10% of assets in the securities of one state, of one instrumentality of a state, or of one governmental unit of a state. Ins 6.20(6)(a)(a) Status as a restricted insurer. Town mutual insurance companies authorized to operate under the provisions of ch. 612, Stats., are restricted insurers and are subject to the restrictions of ss. 612.36 and 620.03 (1), Stats., sub. (4) and other applicable provisions of this section. The commissioner may grant exemptions under s. 620.03 (2), Stats. Ins 6.20(6)(b)(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: Ins 6.20(6)(b)1.1. 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. Ins 6.20(6)(b)2.2. 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. Ins 6.20(6)(b)3.3. Bonds of any United State or Canadian corporation 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, 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. Ins 6.20(6)(b)4.4. Bonds of 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, with a final maturity of 15 years or less, except that no amount shall be invested in zero coupon bonds. Ins 6.20(6)(b)5.5. No more than an aggregate of 5% of assets in cumulative dividend preferred stock of any United States or Canadian corporation that at the time of purchase has a 1 or 2 designation by the national association of insurance commissioners, or an equivalent rating by a NRSRO. Ins 6.20(6)(b)5g.5g. Shares in no-load mutual funds, provided that all of the following requirements are met: Ins 6.20(6)(b)5g.a.a. Each no-load mutual fund shall have an expense ratio, including any fees for marketing or distribution, of 1.20% or less. Ins 6.20(6)(b)5g.b.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. Ins 6.20(6)(b)5g.c.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. Ins 6.20(6)(b)5g.d.d. Each no-load mutual fund investment must be carried at the fair market value on the annual statement filed with the commissioner. Ins 6.20(6)(b)5g.e.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. Ins 6.20(6)(b)5r.5r. Shares of exchange-traded funds, provided that all of the following requirements are met: Ins 6.20(6)(b)5r.a.a. Each exchange-traded fund shall have an expense ratio, including any fees for marketing or distribution, of 1.20% or less. Ins 6.20(6)(b)5r.b.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. Ins 6.20(6)(b)5r.c.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. Ins 6.20(6)(b)5r.d.d. Each exchange-traded fund investment shall be carried at the fair market value on the annual statement filed with the commissioner. Ins 6.20(6)(b)5r.e.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. Ins 6.20(6)(c)(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) were in an amount at least equal to the sum of its liabilities plus the greatest of the following: Ins 6.20(6)(c)1.1. 100% of the net written premiums and assessments for the 12-month period ending December 31. Ins 6.20(6)(c)2.2. 33% of the direct written premiums and assessments for the 12-month period ending December 31. Ins 6.20(6)(d)(d) Permitted investments for assets in excess of minimum expected assets. A town mutual insurer may invest assets in excess of the amount determined under par. (c) in one or more of the following: Ins 6.20(6)(d)1.1. Unrated bonds of a Wisconsin municipality or political subdivision not included in par. (b). Any bonds purchased under this subdivision must be direct obligations of the municipality or political subdivision, and no investment shall be made in unrated industrial revenue or industrial development bonds. Such investments shall not exceed 3% of assets in any single issue or 10% of assets in a single issuer or its affiliates; Ins 6.20(6)(d)2.2. Bonds with a final maturity of more than 15 years that would otherwise be classified within par. (b) 1., 3. or 4. Ins 6.20(6)(d)3c.3c. Stock which is either common stock or preferred stock of a licensed insurance company domiciled in this state which reinsured town mutual insurers in this state at the time it converted from a mutual insurance corporation to a stock insurance corporation. Ins 6.20(6)(d)3g.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. Ins 6.20(6)(d)3L.3L. 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). Ins 6.20(6)(d)3p.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).
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