KRS 304.7-403: Limits on investments.

(1) (a) Except as otherwise specified in this subtitle, an insurer shall not acquire,

directly or indirectly through an investment subsidiary, an investment under

this subtitle if, as a result of and after giving effect to the investment, the

insurer would hold mo re than three percent (3%) of its admitted assets in

investments of all kinds issued, assumed, accepted, insured, or guaranteed by

a single person.

(b) This three percent (3%) limitation shall not apply to the aggregate amounts

insured by a single financia l guaranty insurer with the highest generic rating

issued by a nationally recognized statistical rating organization.

(c) Asset-backed securities shall not be subject to the limitations of paragraph (a)

of this subsection, however an insurer shall not acqu ire an asset -backed

security if, as a result of and after giving effect to the investment, the

aggregate amount of asset -backed securities secured by or evidencing an

interest in a single asset or single pool of assets held by a trust or other

business entity, then held by the insurer would exceed three percent (3%) of

its admitted assets.

(2) (a) An insurer shall not acquire, directly or indirectly through an investment

subsidiary, an investment under KRS 304.7-405, 304.7-411, and 304.7-417, or

counterparty exposure under KRS 304.7 -419(4), if, as a a result of and after

giving effect to the investment:

1. The aggregate amount of medium and lower grade investments then held

by the insurer would exceed twenty percent (20%) of its admitted assets;

2. The aggre gate amount of lower grade investments then held by the

insurer would exceed ten percent (10%) of its admitted assets;

3. The aggregate amount of investments rated 5 or 6 by the SVO then held

by the insurer would exceed three percent (3%) of its admitted assets;

4. The aggregate amount of investments rated 6 by the SVO then held by

the insurer would exceed one percent (1%) of its admitted assets; or

5. The aggregate amount of medium and lower grade investments then held

by the insurer that receive as cash i ncome less than the equivalent yield

for Treasury issues with a comparative average life, would exceed one

percent (1%) of its admitted assets.

(b) An insurer shall not acquire, directly or indirectly through an investment

subsidiary, an investment under KRS 304.7-405, 304.7-411, and 304.7-417, or

counterparty exposure under KRS 304.7 -419(4), if, as a result of and after

giving effect to the investment:

1. The aggregate amount of medium and lower grade investments issued,

assumed, guaranteed, accepted, or insured by any one (1) person or, as to

asset-backed securities secured by or evidencing an interest in a single

asset or pool of assets, then held by the insurer would exceed one

percent (1%) of its admitted assets; or

2. The aggregate amount of lower gra de investments issued, assumed,

guaranteed, accepted, or insured by any one (1) person or, as to asset -

backed securities secured by or evidencing an interest in a single asset or

pool of assets, then held by the insurer would exceed one -half of one

percent (0.5%) of its admitted assets.

(c) If an insurer attains or exceeds the limit of any one (1) rating category referred

to in this subsection, the insurer shall not thereby be precluded from ac quiring

investments in other rating categories subject to the specific multicategory

limits applicable to those investments.

(3) (a) An insurer shall not acquire, directly or indirectly through an investment

subsidiary, a Canadian investment authorized by this subtitle, if as a result of

and after giving effect to the investment, the aggregate amount of these

investments then held by the insurer would exceed forty percent (40%) of its

admitted assets, or if the aggregate amount of Canadian investments not

acquired under KRS 304.7 -405(2) then held by the insurer would exceed

twenty-five percent (25%) of its admitted assets.

(b) However, as to an insurer that is authorized to do business in Canada or that

has outstanding insurance, annuity, or reinsurance cont racts on lives or risks

resident or located in Canada and denominated in Canadian currency, the

limitations of paragraph (a) of this subsection shall be increased by the greater

of:

1. The amount the insurer is required by Canadian law to invest in Canada

or to be denominated in Canadian currency; or

2. One hundred fifteen percent (115%) of the amount of its reserves and

other obligations under contracts on lives or risks resident or located in

Canada.