§ 31-4434. Power of mutual company to borrow or assume liability.

Current through October 23, 2012

(a)(1) In addition to the general power and authority to borrow money for its regular business purposes, if a domestic insurance company obtains prior written approval for a stated maximum amount, it may borrow money by the issuance of notes to:

(A) Pay the reasonable expenses of its organization;

(B) Provide contingency loss funds;

(D) Satisfy a deficiency; or

(E) Provide the amount of required minimum surplus.

(2) The notes issued for the purposes stated in paragraph (1) of this subsection shall be known as surplus notes and shall fully recite the purpose for which the money was borrowed. The amount of the outstanding principal and unpaid interest of the surplus notes shall be stated in each annual report.

(b) The principal indebtedness of surplus notes issued on or after October 21, 2000, shall not be a liability or claim against any of the assets of the company. The principal of, and interest on, the notes may be paid from time to time, either in full or in part, from available surplus funds of the company only if the amount of the surplus of the company is twice the amount of principal and interest being paid. The company may make such payments whenever it is able to do so if it receives the prior written approval of the Commissioner. The Commissioner shall use the standards set forth in subchapter I of Chapter 7 of this title, relating to adequacy of surplus in determining whether or not to approve the payments. Upon a dissolution of the company, the principal and accrued and unpaid interest of the surplus notes shall be payable from surplus.

                
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(June 19, 1934, 48 Stat. 1152, ch. 672, ch. III, § 34; May 21, 1997, D.C. Law 11-268, § 10(k), 44 DCR 1730; Oct. 21, 2000, D.C. Law 13-189, § 2, 47 DCR 7077; June 19, 2001, D.C. Law 13-313, § 13, 48 DCR 1873.)

HISTORICAL AND STATUTORY NOTES

Prior Codifications

1981 Ed., § 35-633.

1973 Ed., § 35-534.

Effect of Amendments

D.C. Law 13-189 rewrote this section which prior thereto provided:

"A mutual company organized under chapters 3 to 8 [1981 Ed.] of this title may borrow or assume a liability for the repayment of a sum of money sufficient to defray the reasonable expenses of its organization or to enable it to comply with any requirement of the law or as a guaranty fund upon agreement, which shall first be submitted to and approved by the Commissioner, that such loan or advance, with interest at a rate not exceeding 6% per annum, shall be repaid out of the earnings, or profits of such corporation with the approval of the Commissioner whenever in his judgment the financial condition of the company shall warrant; but such approval shall not be withheld if, after such repayment shall be made, the company shall have and be in possession of a surplus equal to 10% or more of its gross annual premiums. Any such loan or advance shall not form a part of the legal liabilities of the company, but until repaid all statements published by such company or filed with the Commissioner shall show the amount thereof then remaining unpaid."

D.C. Law 13-313 substituted "prior written approval" for "prior approval" in the third sentence of subsec. (b).

Legislative History of Laws

For legislative history of D.C. Law 11-268, see Historical and Statutory Notes following § 31-4402.

Law 13-189, the "Surplus Note Amendment Act of 2000," was introduced in Council and assigned Bill No. 13-677, which was referred to the Committee on Consumer and Regulatory Affairs. The Bill was adopted on first and second readings on June 26, 2000, and July 11, 2000, respectively. Signed by the Mayor on August 2, 2000, it was assigned Act No. 13-405 and transmitted to both Houses of Congress for its review. D.C. Law 13-189 became effective on October 21, 2000.

Law 13-313, the "Technical Amendment Act of 2000," was introduced in Council and assigned Bill No. 13-879, which was referred to the Committee on the Whole. The Bill was adopted on first and second readings on December 5, 2000, and December 19, 2000, respectively. Signed by the Mayor on January 19, 2001, it was assigned Act No. 13-574 and transmitted to both Houses of Congress for its review. D.C. Law 13-313 became effective on June 19, 2001.

Miscellaneous Notes

Department of Insurance abolished: See Historical and Statutory Notes following § 31-4402.