NAC681A.325. Reinsurance agreement entered into in conjunction with trust agreement and establishment of trust account: Stipulation of value and types of assets deposited in trust account.

     1. A reinsurance agreement entered into in conjunction with a trust agreement and the establishment of a trust account may stipulate that assets deposited in the trust account must be valued according to their current fair market value and must consist only of:

     (a) Cash in United States legal tender.

     (b) Certificates of deposit issued by a United States bank and payable in United States legal tender.

     (c) Investments of the types permitted by chapter 681B of NRS, if the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the grantor or the beneficiary.

     (d) Obligations that are issued in the United States, and obligations issued in a market outside the United States that are dollar denominated, by a solvent institution located in the United States other than an insurance company, or which are assumed or guaranteed by a solvent institution located in the United States other than an insurance company and which are not in default as to principal or interest, if the obligations:

          (1) Are rated “A” or higher, or its equivalent, by a securities rating agency recognized by the Securities Valuation Office, or if not so rated, are similar in structure and other material respects to other obligations of the same institution so rated;

          (2) Are insured by at least one authorized insurer, other than the investing insurer or a parent, subsidiary or affiliate of the investing insurer, that is licensed to insure obligations in this State and, after considering the insurance, are rated “AAA” or its equivalent by a securities rating agency recognized by the Securities Valuation Office; or

          (3) Have been designated as Class One or Class Two by the Securities Valuation Office.

     (e) The following equity interests:

          (1) Investments in common shares or interests in a partnership of a solvent institution located in the United States if:

               (I) The obligations and preferred shares, if any, of the solvent institution are eligible as investments pursuant to this section; and

               (II) For solvent institutions that are not insurance companies, the equity interests of the solvent institution are registered on a national securities exchange as provided in the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a to 78kk, or otherwise registered pursuant to that Act, and if otherwise registered, price quotations for the equity interests are furnished through a nationwide automated quotations system approved by the National Association of Securities Dealers, Inc. A trust shall not invest in equity interests pursuant to this sub-subparagraph in an amount exceeding 1 percent of the assets of the trust, even though the equity interests are not so registered and are not issued by an insurance company.

          (2) Investments in common shares of a solvent institution organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development, if:

               (I) All the obligations of the solvent institution are rated “A” or higher, or its equivalent, by a rating agency recognized by the Securities Valuation Office; and

               (II) The equity interests of the solvent institution are registered on a securities exchange regulated by the government of a country that is a member of the Organization for Economic Cooperation and Development.

     (f) Obligations issued, assumed or guaranteed by a multinational development bank if the obligations are rated “A” or higher, or its equivalent, by a rating agency recognized by the Securities Valuation Office.

     (g) Securities of an investment company that is registered pursuant to the Investment Company Act of 1940, 15 U.S.C. §§ 80a-1 et seq., if the investment company:

          (1) Invests at least 90 percent of its assets in the types of securities that qualify as an investment under paragraph (d) or subparagraph (2) of paragraph (e) or NRS 682A.070, or if the investment company invests in securities that are determined by the Commissioner to be substantively similar to the types of securities set forth in those provisions; or

          (2) Invests at least 90 percent of its assets in the types of equity interests that qualify as an investment under subparagraph (1) of paragraph (e).

     (h) Other types of investments specified by the reinsurance agreement.

     2. For the purposes of paragraph (d) of subsection 1:

     (a) An investment in or a loan upon the obligations of an institution other than an institution that issues mortgage-related securities must not exceed 5 percent of the assets of the trust;

     (b) An investment in any one mortgage-related security must not exceed 5 percent of the assets of the trust;

     (c) The aggregate total investment in mortgage-related securities must not exceed 25 percent of the assets of the trust; and

     (d) Preferred or guaranteed shares issued or guaranteed by a solvent institution located in the United States are permissible if all the obligations of the solvent institution qualify as investments under subparagraph (1) or (3) of paragraph (d) of subsection 1 and the investment in the shares does not exceed 2 percent of the assets of the trust.

     3. For the purposes of paragraph (e) of subsection 1, investments in or loans upon the equity interests in any one institution must not exceed 1 percent of the assets of the trust. The cost of an investment in equity interests made pursuant to paragraph (e) of subsection 1, when added to the aggregate cost of other investments in equity interests then held pursuant to paragraph (e) of subsection 1, must not exceed 10 percent of the assets in the trust.

     4. For the purposes of paragraph (g) of subsection 1:

     (a) An investment in an investment company qualifying under subparagraph (1) of paragraph (g) of subsection 1 must not exceed 10 percent of the assets in the trust and the aggregate amount of investment in qualifying investment companies must not exceed 25 percent of the assets in the trust; and

     (b) Investments in an investment company qualifying under subparagraph (2) of paragraph (g) of subsection 1 must not exceed 5 percent of the assets in the trust and the aggregate amount of investment in qualifying investment companies must be included when calculating the permissible aggregate value of equity interests pursuant to subparagraph (1) of paragraph (e) of subsection 1.

     5. As used in this section:

     (a) “Manufactured home” has the meaning ascribed to it in 42 U.S.C. § 5402(6).

     (b) “Mortgage-related security” means an obligation which is rated “AA” or higher, or its equivalent, by a securities rating agency recognized by the Securities Valuation Office and which:

          (1) Represents ownership of one or more promissory notes or certificates of interest or represents participation in promissory notes, including any rights designed to ensure the servicing, or the receipt or timeliness of receipt by the holders of the notes, certificates or participation, of amounts payable under the notes, certificates or participation, that:

               (I) Are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling, a mixed residential and commercial structure, or a residential manufactured home, regardless of whether the manufactured home is considered real or personal property under the laws of the state in which the manufactured home is located; and

               (II) Were originated by:

                   (i) A savings and loan association, savings bank, commercial bank, credit union, insurance company or any other similar institution that is supervised and examined by a federal or state housing authority; or

                   (ii) A mortgage approved by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. §§ 1709 and 1715b or, if the notes involve a lien on the manufactured home, by an institution or by a financial institution approved for insurance by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. § 1703; or

          (2) Is secured by:

               (I) One or more promissory notes or certificates of deposit or by participations in the notes, with or without recourse to the insurer of the notes and, by its terms, provides for payments or reasonable projections of payments; or

               (II) Notes meeting the requirements of sub-subparagraphs (I) and (II) of subparagraph (1).

     (c) “Promissory notes,” when used in connection with a manufactured home, includes a loan, an advance or a credit sale as evidenced by a retail installment sales contract or other instrument.

     (d) “Securities Valuation Office” means the Securities Valuation Office of the National Association of Insurance Commissioners.

     (Added to NAC by Comm’r of Insurance by R027-02, eff. 5-31-2002)