CHAPTER 266

An Act to amend and reenact §§ $8.1-182, $8.1-199, 38.1-200, $8.1-202.1,
88.1-207, $8.1-208, 88.1-215 and 38.1-216 of the Code of Virginia, as
severally amended, relating to investments by insurers. CH 376]

Approved March 31, 1966

Be it enacted by the General Assembly of Virginia:

1. That §§ 38.1-182, 38.1-199, 38.1-200, 38.1-202.1, 38.1-207, 38.1-208,
88.1-215 and 88.1-216 of the Code of Virginia, as severally amended, be
amended and reenacted as follows:

§ 88.1-182. Any such insurer may invest its funds and assets com-
prising its excess capital and surplus in such securities or other property
as its board of directors or other governing body, or any committee
charged by the governing body or the bylaws with the duty of making
such investments, determines to be for the best interest of the insurer.
For the purposes of determining the amount of such surplus, any security
valuation reserves either required by law, or prescribed by the Commis-
sion, shall be considered as a part of such surplus to the extent suc
reserves arise by virtue of common stocks held by such insurer which are
listed on a national securities exchange. oo
oH. 266) ACTS OF ASSEMBLY 437

The further provisions of this chapter imposing limitations on the
investment of funds and assets of insurers, and on the securities and
other property which insurers may acquire and hold, do not apply to
securities and other property or assets comprising the excess capital and
surplus of any such company.

§ 38.1-199. Any such insurer may invest its assets in interest bear-
ing bonds or other evidences of indebtedness of any solvent company,
other than companies referred to in § 38.1-197, which is incorporated
under the laws of the United States or any state thereof, or the Dominion
of Canada or any province thereof, if:

(1) Such bonds are secured by adequate security or collateral, at
least two-thirds in value of which security or collateral is other than
common stock;

(2) Such corporation has not during any time within five years next
preceding such investment defaulted in the payment of interest on such

nds:

(3) For the five fiscal years preceding such investment the average
net annual income of such corporation, before interest charges but after
taxes * , excluding United States and state corporate income taxes, and
after deducting proper charges for replacements, depreciation and obso-
lescence, has been at least one and one-half times the average annual
interest for the same period on such issue of bonds, on prior obligations
and on obligations of equal rank, or, in the case of the issuance of new
bonds, such average net annual income for the five years preceding such
Investment has been at least one and one-half times the pro forma annual
interest on the new bonds, on prior obligations and on bonds of equal

an

(4) Such bonds are payable both as to principal and interest in lawful

money of the United States.
_ No such insurer shall invest in excess of two per centum of its assets
in any one issue of bonds or other evidences of indebtedness made eligible
for investment under this section, nor in excess of ten per centum of its
assets in bonds or other evidences of indebtedness of companies incorpo-
rated under the laws of the Dominion of Canada.

§ 38.1-200. Any such insurer may invest its assets in bonds, deben-
tures or notes of any solvent company incorporated under the laws of the
United States, or of any state thereof, or under the laws of the Dominion
of Canada or of any province thereof, or in the bonds, debentures or notes
of any solvent church or religious body, although such bonds, debentures
or notes are not secured as provided in § 38.1-199, if such corporation,
church or religious body, after paying or providing for the payment of *
taxes, if any, excluding United States and state corporate income taxes,
and after deducting proper charges for replacements, depreciation and
obsolescence, has not failed in any one of the three fiscal years next pre-
ceding such investment, to have earned in the case of a corporation, or to

ve earned or by gift received in the case of a church or religious body,
4 sum applicable to interest on its outstanding indebtedness equal at least
to * one and one-half times the amount of interest due for that year, or,
in the case of new issues, such earnings and receipts applicable to interest
are equal to at least * one and one-half times the amount of pro forma
annual interest on the obligations of such corporation, church or religious
body after giving effect to such new financing. No such insurer shall
invest in excess of two per centum of its assets in any one issue of bonds,
debentures or notes made eligible for investment under this section.

§ 38.1-202.1. Any such insurer may invest in the * capital stock,
notes or debentures of any bank or trust company which is a member of
the Federal Deposit Insurance Corporation and has earned no less than
five per centum on its total capital accounts for each of the preceding three
years. The investment in capital stock of a bank or trust company may
not * exceed * ten per centum of the actually issued and outstanding
common capital stock of any one such bank or trust company and * not
more in the aggregate than five per centum of the assets of such insurer
shall be so invested at any time in the capital stock, notes and debentures
of any bank. * Not more in the aggregate than twenty per centum of the
assets of such insurer shall be invested at any time in investments made
eligible herein and by §§ 38.1-201 and 38.1-202. For the purpose of this
section the term “bank” shall be deemed to include a registered bank hold-
ing company as defined by the Federal Bank Holding Act of 1956 and
such registered bank holding company shall be deemed a member of the
Federal Deposit Insurance Corporation provided all its subsidiary banks
are members of the Federal Deposit Insurance Corporation.
38.1-207. Any such insurer may invest its funds in:

(1) Bonds, notes, or other evidences of indebtedness which are
secured by mortgages, security deeds, vendor’s liens or deeds of trust on
improved unencumbered real property in the United States or in Canada;

(2) Bonds, notes or other evidences of indebtedness which are secured
by mortgages, security deeds, vendor’s liens or deeds of trust upon lease-
hold estate * on improved unencumbered real estate in the United States
if at least * thirty years of the term has not expired.

(8) Bonds, notes or other evidences of indebtedness which are secured
by mortgages, security deeds, vendor’s liens or deeds of trust on real estate
or an interest in real estate in the United States, if the payment of such
indebtedness is fully guaranteed by the Administrator of Veterans’ Affairs
pursuant to the provisions of Title III of an Act of Congress of the United
States, approved June twenty-two, nineteen hundred forty-four, entitled
the “Servicemen’s Readjustment Act of 1944”, as amended; or

(4) Bonds or notes secured by mortgage or trust deed guaranteed
or insured by, and debentures issued by, the Federal Housing Adminis-
trator under the terms of an Act of Congress of June twenty-seven, nine-
teen hundred thirty-four, entitled the “National Housing Act’, as amended.

§ 38.1-208. No investment in evidences of indebtedness secured upon
any real property referred to in paragraph (1) of § 38.1-207 shall at the

ime such investment is made exceed * seventy-five per centum of the fair
market value of the property as shown by an appraisement in writing
made by at least two competent appraisers or by a Veterans’ Administra-
tion certificate of reasonable value and, if such real property is pri-
marily improved by a single family residence, * such evidences of indebted-
ness shall provide for amortization of principal, such amortization pay-
ments to be made annually or more frequently, over a period of not more
than * thirty years. * No investment in evidences of indebtedness secured
upon any leasehold estate referred to in paragraph (2) of § 38.1-207 shall
exceed * sixty-six and two-thirds per centum of the fair market value of
the estate as shown by an appraisement in writing made by at least two
competent appraisers; provided, however, that any investment in evidences
of indebtedness secured upon any such real property may exceed the per-
centage limitations of fair market value stated hereinabove, and any
investment in evidences of indebtedness secured upon any such leasehold
estate may exceed * sixty-six and two-thirds per centum of its fair market
value, to the extent that the payment of such indebtedness is guaranteed
by the Administrator of Veterans’ Affairs under the provisions of Title ITI
of an Act of the Congress of the United States, approved June twenty-two,
nineteen hundred forty-four, entitled the ‘“‘SServicemen’s Readjustment Act
of 1944”, as amended.

§ 38.1-215. Real property acquired pursuant to § 88.1-214 shall not
treated as an investment thereunder unless and until the improvements
required shall have been constructed and the lease agreement entered into
in accordance with the terms of such section; but if the lessee be a cor-
poration the bonds, debentures, notes or preferred stock of which are
eligible as investments under either § 38.1-200, or § 38.1-201, the require-
ments of such § 38.1-214 as to the erection of improvements and the vest-
ing of ownership of such improvements in the owner of the real estate
shall not be applicable.

The amount at which real estate acquired pursuant to § 38.1-214
shall be treated as an investment thereunder shall not exceed the amount
actually invested reduced each year by such amounts as will suffice to
write off completely that part of the investment allocable to improvements
on such real estate at the normal termination of the lease or at the end:
of fifty years should the term of the lease, or the unexpired period of the
lease, be for a longer period than fifty years.

No investment shall be made by an insurer pursuant to § 38.1-214
which will cause its investment in all real property owned by it to exceed
fifteen per centum of its assets or when all real property owned by such
Insurer equals or exceeds fifteen per centum of its assets.

§ 38.1-216. Any such insurer may invest its funds in real property
acquired or held as an investment for the production of income. Such real
property may include land on which there has been completed, in whole
or in part, or is to be constructed, any housing development or project to
provide decent, safe and sanitary dwelling accommodations, but shall not
include property to be used primarily for agricultural, horticultural, ranch,
mining, recreational, amusement, hotel or club purposes. The insurer may
improve or otherwise develop in any manner such real estate and the im-
provements thereon. The term “real property’’ as used in this section shall
include a leasehold of real estate having an unexpired term of not less than
twenty years. |

Each investment made under the provisions of this section shall be
valued on the books of the insurer as of December thirty-one of each year
at an amount that will include a writedown of that part of the cost of such
property * allocable to improvements thereon at a rate that will average
not less than two per centum per annum of such cost for each year or part
thereof that the property has been so held. Income produced by an invest-
ment in any leasehold under the provisions of this section shall be applied
by the insurer in a manner that will amortize the amount invested for
acquisition and improvement thereof within a period not exceeding eight-
tenths of such unexpired term of the leasehold following such acquisition
or improvement, or within a period of forty years thereafter, whichever
is less.