Investments And Regulation

Deborah Maples Keller Willams East County

Life insurance:

1. Bonds most state regulations permit life insurance company investments in debentures, mortgage bonds, and blue chip corporate bonds.
2. Stocks(a) preferred stock investment is limited to 20% of the total stock of any one company, not exceeding 2% of a company's admitted assets; (b) common stock investment is limited to the lesser amount of 1% of the ADMITTED ASSETS or the policy owner's surplus.
3. Mortgage investment is unlimited in first mortgages on residential, commercial, and industrial real estate.
4. Real Estate investment is limited to 10% of admitted assets.

Valuation of the assets in a typical state is accomplished in the following manner: stocks or bonds in default (principal or interest) cannot be valued at greater than market value; bonds not in default valued according to their purchase price adjusted to equal par at maturity; preferred and common stocks of firms in good financial condition are valued according to purchase price; preferred and common stocks in companies not in good financial condition are valued at market price; and real estate, mortgages, and policy loans are valued at book value. Property and casualty insurance:

1. DOMESTIC INSURERS and FOREIGN INSURERS must invest according to the minimum capitalization requirement in federal, state, or municipal bonds.
2. Company funds in excess of minimum capitalization and reserve requirements can be invested in federal, state, or municipal bonds as well as stocks or real estate. The insurance company is limited in its investment in any one firm up to no more than 10% of its admitted assets; its real estate investment can be no more than 10% of its admitted assets.