§ 1403. Reserve and other investments; certain requirements. (a) If
the requirements of section one thousand four hundred two of this
article are met:

(1) any domestic life insurance company may invest its funds in, or
otherwise acquire, or loan upon, only the types of investments specified
in section one thousand four hundred two, this section, sections one
thousand four hundred five, one thousand four hundred six, one thousand
four hundred ten, four thousand two hundred forty and article seventeen
of this chapter, subject to the limitations therein contained. The
provisions of section one thousand four hundred four of this article
shall not have any application to investments of life insurance
companies, except to the extent provided in paragraph four of subsection
(b) of section one thousand four hundred two of this article;

(2) any domestic corporation subject to article forty-three or
sixty-four of this chapter and any domestic fraternal benefit society
subject to article forty-five of this chapter may invest its funds in,
or otherwise acquire, or loan upon, only the types of investments
specified in section one thousand four hundred two, this section and
section one thousand four hundred four of this article, except as may be
modified by said article forty-three or sixty-four of this chapter as to
corporations organized thereunder or by article forty-five of this
chapter as to societies organized thereunder. Any such corporation
subject to article forty-three or any such society governed by
subsection (a) of section forty-five hundred twenty-nine of this chapter
may also invest in, or otherwise acquire, subsidiaries to the extent
permitted by subsection (b) of section one thousand seven hundred one of
this chapter. Any such fraternal benefit society may also make policy
loans under section one thousand four hundred six of this article.

(b) A domestic charitable annuity society, the investments of which
are subject to the provisions of section eleven hundred ten of this
chapter, may invest such of its assets (the investment of which is
controlled by section eleven hundred ten) in, or otherwise acquire, or
loan upon, only the types of securities specified in section one
thousand four hundred two, this section and section one thousand four
hundred four of this article. A retirement system subject to the
provisions of article forty-six of this chapter may invest its funds
only as provided in article forty-six of this chapter. In addition, a
retirement system subject to article forty-six may acquire subsidiaries
under article seventeen of this chapter and may establish separate
accounts under section four thousand two hundred forty of this chapter,
in each case to the extent permitted by article forty-six of this
chapter.

(c) If the requirements of section one thousand four hundred two of
this article are met, any domestic insurer, other than an insurer
subject to subsection (a) or (b) of this section, may, except as set
forth below, invest its funds in, or otherwise acquire, or loan upon,
only the types of investments specified in such section, this section
and subsection (a) of section one thousand four hundred four of this
article (except paragraphs eight and ten of subsection (a) of such
section); provided that any such domestic insurer may also invest its
funds in, or otherwise acquire or loan upon investments permitted under
sections one thousand four hundred seven (including investments of the
classes described in paragraphs eight and ten of subsection (a) of
section one thousand four hundred four), section one thousand four
hundred eight of this article and article sixteen of this chapter, so
long as it maintains cash, investments required by section one thousand
four hundred two of this article and reserve investments under
subsection (a) of section one thousand four hundred four of this
article, free from any lien or pledge, which, when valued in accordance
with the provisions of this chapter, shall at least equal fifty percent
of the aggregate amount of its unearned premium, loss and loss
adjustment expense reserves as shown by its last sworn statement, annual
or quarterly, on file with the superintendent. If an insurer, other than
an accident and health insurance company, maintains cash, investments
required by section one thousand four hundred two of this article and
reserve investments under subsection (a) of section one thousand four
hundred four of this article, free from any lien or pledge, which, when
valued in accordance with the provisions of this chapter, shall at least
equal the aggregate of seventy percent of its loss and loss adjustment
expense reserves and fifty percent of its unearned premium reserves as
shown by its last sworn statement, annual or quarterly, on file with the
superintendent, then such insurer, other than an accident and health
insurance company, may in addition enter into the types of transactions
set forth in section one thousand four hundred ten of this article,
subject to the limitations set forth in such section. The term "lien or
pledge" as used in this subsection shall not include any deposit of
securities or cash with any government, nor trusteed assets, held in
trust for the benefit or protection of all or any class of the
policyholders, or policyholders and creditors, of such insurer.

(d) (1) Except for investments referred to in subsection (e) of this
section, investments that are neither interest bearing nor income paying
shall be purchased or acquired only under, and to the extent permitted
by, subsection (b) of section one thousand four hundred four of this
article (in the case of insurers that make investments under section one
thousand four hundred four of this article other than insurers making
investments under the authority of subsection (c) of this section),
paragraph eight of subsection (a) of section one thousand four hundred
five of this article (in the case of insurers that make investments
under section one thousand four hundred five) or section one thousand
four hundred seven of this article (in the case of insurers that make
investments under the authority of subsection (c) of this section),
however, a default in interest or income occurring subsequent to the
purchase or other acquisition of an investment shall not affect the
allowance thereof as an admitted asset at the market value thereof.

(2)(A) Notwithstanding any other provision of this article, a domestic
insurer making investments pursuant to paragraph two of subsection (a)
of this section, a domestic charitable annuity society and a retirement
system making investments pursuant to subsection (b) of this section,
and a domestic accident and health insurer making investments pursuant
to subsection (c) of this section may sell call options on securities,
provided that:

(i) such options are traded on a securities exchange registered under
the laws of the United States, and

(ii) the insurer holds, or can immediately acquire through the
exercise of warrants or conversion rights already owned at a
contractually specified price, the underlying securities during the
entire period the option is outstanding.

(B) An insurer selling call options on securities pursuant to
subparagraph (A) of this paragraph may purchase any such option to
offset an outstanding option previously sold by the insurer for the same
kind and amount of securities.

(e) (1) Nothing contained in this chapter shall prohibit the
acquisition by any insurer of other securities or property (i) received
as a dividend or pursuant to a judicial or lawful non-judicial plan of
reorganization or dissolution or pursuant to a lawful and bona fide
agreement of bulk reinsurance or consolidation; or (ii) received through
the exercise of rights of conversion, stock warrants or stock options
acquired by it in accordance with this subsection or section one
thousand four hundred four, one thousand four hundred five, one thousand
four hundred seven or one thousand four hundred ten of this article. Nor
shall anything in this chapter prohibit acquisition of (1) an investment
permitted under section one thousand four hundred four, one thousand
four hundred five, one thousand four hundred seven or one thousand four
hundred ten of this article because such investment is convertible into
other securities in which such insurer is not permitted to invest under
this chapter, or because such insurer receives in connection with such
investment stock warrants, whether detachable or non-detachable, stock
options, stock, property interests or other assets of any kind or (2)
securities or property (real or personal) or any interest therein
received in satisfaction of a debt previously owing to such insurer. If
any securities or other property received by any insurer in accordance
with the first sentence of this paragraph shall consist in whole or in
part of shares of any institution or of obligations or other property
not meeting the requirements specified in section one thousand four
hundred four (in the case of insurers making investments under the
authority of section one thousand four hundred four) or section one
thousand four hundred five (in the case of insurers making investments
under the authority of section one thousand four hundred five) of this
article, then any such shares and any such obligations or property so
received shall be disposed of within five years from the time of
acquisition or before the expiration of such further period or periods
of time as may be prescribed in writing by the superintendent, unless at
any time after such acquisition such shares, obligations or property
shall have met such requirements and the insurer has notified the
superintendent thereof.

(2) Except as otherwise specifically provided in this chapter,
investments in subsidiaries are not subject to the provisions of this
section, section one thousand four hundred four (except paragraph nine
of subsection (a) thereof) or one thousand four hundred five of this
article.

(f) (1) Subsidiaries of domestic life insurance companies, whether
acquired under subsection (e) of this section, sections one thousand
four hundred five, four thousand two hundred forty, or otherwise, shall
be subject to the provisions of article seventeen of this chapter to the
extent therein provided.

(2) Subsidiaries of domestic corporations subject to article
forty-three of this chapter and of domestic retirement systems, whether
acquired under subsection (e) of this section, section one thousand four
hundred four, four thousand two hundred forty (in the case of retirement
systems), or otherwise, shall be subject to the provisions of article
seventeen of this chapter to the extent therein provided.

(g) This section does not prohibit any domestic insurance company from
acquiring shares under article seventy-one of this chapter or any
domestic life insurance company from acquiring shares of its own capital
stock pursuant to section seven thousand three hundred two of this
chapter.

(h) With respect to all transactions between a domestic insurer and
any person, five percent or more of whose voting securities are held,
directly or indirectly, by such insurer, but which is not a subsidiary,
the insurer shall maintain books, accounts and records that disclose
clearly and accurately the nature and detail of such transactions.

(i) (1) Except as provided in subparagraph (A) of paragraph two of
subsection (a) of section four thousand two hundred forty of this
chapter, investments made for separate accounts under the provisions of
section four thousand two hundred forty of this chapter shall be
disregarded, and shall be excluded from admitted assets, in applying the
quantitative investment limitations contained in this chapter to other
investments.

(2) Except as provided in subparagraph (A) of paragraph two of
subsection (a) or paragraph four of subsection (a) of section four
thousand two hundred forty of this chapter, the restrictions,
limitations and other provisions relating to investments specified in
this chapter shall not apply to investments made for separate accounts
under the provisions of section four thousand two hundred forty of this
chapter.