{"data":{"id":"us-ky/krs-304.7-413","jurisdiction":"us-ky","citation":"KRS 304.7-413","heading":"Permitted acquisitions -- Loan-to-value ratio -- Exemption for certain","body":"mortgage loans and credit lease transactions -- Real estate -- Ratios relating to\naggregate amount of investments.\n(1) (a) Subject to the limitations of KRS 304.7 -403, an insurer  may acquire, either\ndirectly or indirectly through limited partnership interests and general\npartnership interests not otherwise prohibited by KRS 304.7 -363(4), joint\nventures, stock of an investment subsidiary or membership interests in a\nlimited liabili ty company, trust certificates, or other similar instruments,\nobligations secured by mortgages on real estate situated within a domestic\njurisdiction, but a mortgage loan that is secured by other than a first lien shall\nnot be acquired unless the insurer i s the holder of the first lien. The\nobligations held by the insurer and any obligations with an equal lien priority,\nshall not, at the time of acquisition of the obligation, exceed:\n1. Ninety percent (90%) of the fair market value of the real estate, if th e\nmortgage loan is secured by a purchase money mortgage or like security\nreceived by the insurer upon disposition of the real estate;\n2. Eighty percent (80%) of the fair market value of the real estate, if the\nmortgage loan requires immediate scheduled pay ment in periodic\ninstallments of principal and interest, has an amortization period of\nthirty (30) years or less, and periodic payments made no less frequently\nthan annually. Each periodic payment shall be sufficient to assure that at\nall times the outstanding principal balance of the mortgage loan shall be\nno greater than the outstanding principal balance that would be\noutstanding under a mortgage loan with the same original principal\nbalance, with the same interest rate, and requiring equal payments of\nprincipal and interest with the same frequency over the same\namortization period. Mortgage loans permitted under this subsection are\npermitted notwithstanding the fact that they provide for a payment of the\nprincipal balance prior to the end of the period of  amortization of the\nloan. For residential mortgage loans, the eighty percent (80%) limitation\nmay be increased to ninety -seven percent (97%) if acceptable private\nmortgage insurance has been obtained; or\n3. Seventy-five percent (75%) of the fair market va lue of the real estate for\nmortgage loans that do not meet the requirements of subparagraph 1. or\n2. of this paragraph.\n(b) For purposes of paragraph (a) of this subsection, the amount of an obligation\nrequired to be included in the calculation of the loan -to-value ratio may be\nreduced to the extent the obligation is insured by the Federal Housing\nAdministration, guaranteed by the Administrator of Veteran Affairs, or their\nsuccessors.\n(c) A mortgage loan that is held by an insurer under KRS 304.7 -014(7) or\nacquired under this section and is restructured in a manner that meets the\nrequirements of a restructured mortgage loan in accordance with the NAIC\nAccounting Practices and Procedures Manual or successor publication shall\ncontinue to qualify as a mortgage loan under this subtitle.\n(d) Subject to the limitations of KRS 304.7 -403, credit lease transactions that do\nnot qualify for investment under KRS 304.7 -405 with the following\ncharacteristics shall be exempt from the provisions of paragraph (a) of this\nsubsection:\n1. The loan amortizes over the initial fixed lease term at least in an amount\nsufficient so that the loan balance at the end of the lease term does not\nexceed the original appraised value of the real estate;\n2. The lease payments cover or exceed the total debt service over the life of\nthe loan;\n3. A tenant or its affiliated entity whose rated credit instruments have a\nSVO 1 or 2 designation or a comparable rating from a nationally\nrecognized statistical rating organization recognized by the SVO has a\nfull faith and credit obligation to make the lease payments;\n4. The insurer holds or is the beneficial holder of a first lien mortgage on\nthe real estate;\n5. The expenses of the real estate are passed through to the tenant,\nexcluding exterior, structural , parking, and heating, ventilation, and air\nconditioning replacement expenses, unless annual escrow contributions,\nfrom cash flows derived from the lease payments, cover the expense\nshortfall; and\n6. There is a perfected assignment of the re nts due in accordance with the\nlease to or for the benefit of the insurer.\n(2) (a) An insurer may acquire, manage, and dispose of real estate situated in a\ndomestic jurisdiction either directly or indirectly through limited partnership\ninterests and genera l partnership interests not otherwise prohibited by KRS\n304.7-363(4), joint ventures, stock of an investment subsidiary or membership\ninterests in a limited liability company, trust certificates, or other similar\ninstruments. The real estate shall be incom e producing or intended for\nimprovement or development for investment purposes under an existing\nprogram in which case the real estate shall be deemed to be income producing.\n(b) The real estate may be subject to mortgages, liens, or other encumbrances, th e\namount of which shall, to the extent that the obligations secured by the\nmortgages, liens, or encumbrances are without recourse to the insurer, be\ndeducted from the amount of the investment of the insurer in the real estate for\npurposes of determining co mpliance with subsection (4)(b) and (c) of this\nsection.\n(3) (a) An insurer may acquire, manage, and dispose of real estate for the convenient\naccommodation of the insurer's, which may include its affiliates, business\noperations, including home office, branch office, and field office operations:\n1. Real estate acquired under this subsection may include excess space for\nrent to others, if the excess space, valued at its fair market value, would\notherwise be a permitted investment under subsection (2) of this  section\nand is so qualified by the insurer;\n2. The real estate acquired under this subsection may be subject to one (1)\nor more mortgages, liens, or other encumbrances, the amount of which\nshall, to the extent that the obligations secured by the mortgages , liens,\nor encumbrances are without recourse to the insurer, be deducted from\nthe amount of the investment of the insurer in the real estate for\npurposes of determining compliance with paragraph (d) of subsection\n(4) of this section; and\n3. For purposes o f this subsection, \"business operations\" shall not include\nthat portion of real estate used for the direct provision of health care\nservices by an accident and health insurer or its insured. An insurer may\nacquire real estate used for these purposes under subsection (2) of this\nsection.\n(4) (a) An insurer shall not acquire an investment under subsection (1) of this section\nif, as a result of and after giving effect to the investment, the aggregate amount\nof all investments then held by the insurer under sub section (1) of this section\nwould exceed:\n1. One percent (1%) of its admitted assets in mortgage loans covering any\none (1) secured location;\n2. One-quarter of one percent (0.25%) of its admitted assets in construction\nloans covering any one (1) secured location; or\n3. Two percent (2%) of its admitted assets in construction loans in the\naggregate.\n(b) An insurer shall not acquire an investment under subsection (2) of this section\nif, as a result of and after giving effect to the investment and any outstandi ng\nguarantees made by the insurer in connection with the investment, the\naggregate amount of investments then held by the insurer under subsection (2)\nof this section plus the guarantees then outstanding would exceed:\n1. One percent (1%) of its admitted as sets in one (1) parcel or group of\ncontiguous parcels of real estate, except that this limitation shall not\napply to that portion of real estate used for the direct provision of health\ncare services by an accident and health insurer for its insureds, such as\nhospitals, medical clinics, medical professional buildings, or other health\nfacilities used for the purpose of providing health services; or\n2. Fifteen percent (15%) of its admitted assets in the aggregate, but not\nmore than five percent (5%) of its adm itted assets as to properties that\nare to be improved or developed.\n(c) An insurer shall not acquire an investment under subsection (1) or (2) of this\nsection if, as a result of and after giving effect to the investment and any\nguarantees made by the insur er in connection with the investment, the\naggregate amount of all investments then held by the insurer under\nsubsections (1) and (2) of this section plus the guarantees then outstanding\nwould exceed forty -five percent (45%) of its admitted assets. However,  an\ninsurer may exceed this limitation by no more than thirty percent (30%) of its\nadmitted assets if:\n1. This increased amount is invested only in residential mortgage loans;\n2. The insurer has no more than ten percent (10%) of its admitted assets\ninvested in mortgage loans other than residential mortgage loans;\n3. The loan -to-value ratio of each residential mortgage loan does not\nexceed sixty percent (60%) at the time the mortgage loan is qualified\nunder this increased authority, and the fair market value  is supported by\nan appraisal no more than two (2) years old, prepared by an independent\nappraiser;\n4. A single mortgage loan qualified under this increased authority shall not\nexceed one-half of one percent (0.5%) of its admitted assets;\n5. The insurer files with the commissioner, and receives approval from the\ncommissioner for, a plan that is designed to result in a portfolio of\nresidential mortgage loans that is sufficiently geographically diversified;\nand\n6. The insurer agrees to file annually with the commissioner records that\ndemonstrate that its portfolio of residential mortgage loans is\ngeographically diversified in accordance with the plan.\n(d) The limitations of KRS 304.7-403 shall not apply to an insurer's acquisition of\nreal estate under subsecti on (3) of this section. An insurer shall not acquire\nreal estate under subsection (3) of this section if, as a result of and after giving\neffect to the acquisition, the aggregate amount of real estate then held by the\ninsurer under subsection (3) of this section would exceed ten percent (10%) of\nits admitted assets. With the permission of the commissioner, additional\namounts of real estate may be acquired under subsection (3) of this section.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=16846","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:39Z","sha256":"ae2e99e0e283f5a72366d3f49dd5265f473a8ddc918e969e8908b062e7ca3d85","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.7-411","next":"us-ky/krs-304.7-415"},"notice":"GroundRules: Original legal text. Not legal advice."}