{"data":{"id":"us-ky/krs-304.7-465","jurisdiction":"us-ky","citation":"KRS 304.7-465","heading":"Permitted acquisitions -- Loan-to-value ratio -- Exemptions for certain","body":"mortgage loans and credit release transactions -- Real estate -- Ratios relating\nto aggregate amount of investments.\n(1) Subject to the limitations of KRS 304.7 -455, an insurer may acquire, either directly\nor indirectly through limited partnership interests and general partnership interests\nnot otherwise prohibited by KRS 304.7 -363(4), joint ventures, stock of an\ninvestment subsidiary or membership interests in a limited liabilit y company, trust\ncertificates, or other similar instruments, obligations secured by mortgages on real\nestate situated within a domestic jurisdiction, but a mortgage loan that is secured by\nother than a first lien shall not be acquired unless the insurer is the holder of the first\nlien. The obligations held by the insurer and any obligations with an equal lien\npriority, shall not, at the time of acquisition of the obligation, exceed:\n(a) 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;\n(b) Eighty percent (80%) of the fair market value of the real estate, if the\nmortgage loan requires immediate scheduled pa yments in periodic\ninstallments of principal and interest, has an amortization period of thirty (30)\nyears or less, and periodic payments made no less frequently than annually.\nEach periodic payment shall be sufficient to assure that at all times the\noutstanding principal balance of the mortgage loan shall not be greater than\nthe outstanding principal balance that would be outstanding under a mortgage\nloan with the same original principal balance, with the same interest rate, and\nrequiring equal payments of  principal and interest with the same frequency\nover the same amortization period. Mortgage loans permitted under this\nsubsection are permitted notwithstanding the fact that they provide for a\npayment of the principal balance prior to the end of the period  of amortization\nof the loan. 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\n(c) Seventy-five percent (75%) of the fair marke t value of the real estate for\nmortgage loans that do not meet the requirements of paragraph (a) or (b) of\nthis subsection.\n(2) For purposes of subsection (1) of this section, the amount of an obligation required\nto be included in the calculation of the lo an-to-value ratio may be reduced to the\nextent the obligation is insured by the Federal Housing Administration, guaranteed\nby the Administrator of Veteran Affairs, or their successors.\n(3) A mortgage loan that is held by an insurer under KRS 304.7 -014(7) o r acquired\nunder this section and is restructured in a manner that meets the requirement of a\nrestructured mortgage loan in accordance with the NAIC Accounting Practices and\nProcedures Manual or successor publication shall continue to qualify as a mortgage\nloan under this subtitle.\n(4) Subject to the limitations of KRS 304.7 -455, credit lease transactions that do not\nqualify for investment under KRS 304.7-457 with the following characteristics shall\nbe exempt from the provisions of subsection (1) of this section:\n(a) 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 exceed\nthe original appraised value of the real estate;\n(b) The lease payments cover or exceed t he total debt service over the life of the\nloan;\n(c) A tenant or its affiliated entity whose rated credit instruments have a SVO 1 or\n2 designation or a comparable rating from a nationally recognized statistical\nrating organization recognized by the SVO ha s a full faith and credit\nobligation to make the lease payments;\n(d) The insurer holds or is the beneficial holder of a first lien mortgage on the real\nestate;\n(e) The expenses of the real estate are passed through to the tenant excluding\nexterior, structu ral, parking, and heating, ventilation and air conditioning\nreplacement expenses, unless annual escrow contributions, from cash flows\nderived from the lease payments, cover the expense shortfall; and\n(f) There is a perfected assignment of the rents due und er the lease to or for the\nbenefit of the insurer.\n(5) An insurer may acquire, manage, and dispose of real estate situated in a domestic\njurisdiction either directly or indirectly through limited partnership interests and\ngeneral partnership interests not otherwise prohibited by KRS 304.7 -363(4), joint\nventures, stock of an investment subsidiary or membership interests in a limited\nliability company, trust certificates, or other similar instruments. The real estate\nshall be income producing or intended for improvement or development for\ninvestment purposes under an existing program, in which case the real estate shall\nbe deemed to be income producing.\n(6) The real estate may be subject to mortgages, liens, or other encumbrances, the\namount of which shall, to the extent that the obligations secured by the mortgages,\nliens, or encumbrances are without recourse to the insurer, be deducted from the\namount of the investment of the insurer in the real estate for purposes of\ndetermining compliance with subsections (9) and (10) of this section.\n(7) 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.\n(a) Real estate acquired under this subsection may include excess space for rent to\nothers if the excess space, valued at its fair market value, would otherwise be\na permitted investment under subsections (5) and (6) of this sectio n and is so\nqualified by the insurer;\n(b) The real estate acquired under this subsection may be subject to one (1) or\nmore mortgages, liens, or other encumbrances, the amount of which shall, to\nthe extent that the obligations secured by the mortgages, lien s, or\nencumbrances are without recourse to the insurer, be deducted from the\namount of the investment of the insurer in the real estate for purposes of\ndetermining compliance with subsection (11) of this section; and\n(c) For purposes of this subsection, \"b usiness operations\" shall not include that\nportion of real estate used for the direct provision of health care services by an\ninsurer whose insurance premiums and required statutory reserves for accident\nand health insurance constitute at least ninety -five percent (95%) of total\npremium considerations or total statutory required reserves, respectively. An\ninsurer may acquire real estate used for these purposes under subsections (5)\nand (6) of this section.\n(8) An insurer shall not acquire an investment unde r subsections (1) to (4) of this\nsection if, as a result of and after giving effect to the investment, the aggregate\namount of all investments then held by the insurer under subsections (1) to (4) of\nthis section would exceed:\n(a) One percent (1%) of its a dmitted assets in mortgage loans covering any one\n(1) secured location;\n(b) One-quarter of one percent (0.25%) of its admitted assets in construction loans\ncovering any one (1) secured location; or\n(c) One percent (1%) of its admitted assets in construction loans in the aggregate.\n(9) An insurer shall not acquire an investment under subsections (5) and (6) of this\nsection if, a result of and after giving effect to the investment and any outstanding\nguarantees made by the insurer in connection with the inves tment, the aggregate\namount of investments then held by the insurer under subsections (5) and (6) of this\nsection plus the guarantees then outstanding would exceed:\n(a) One percent (1%) of its admitted assets in any one (1) parcel or group of\ncontiguous parcels of real estate, except that this limitation shall not apply to\nthat portion of real estate used for the direct provision of health care services\nby an insurer whose insurance premiums and required statutory reserves for\naccident and health insurance constitute at least ninety -five percent (95%) of\ntotal premium considerations or total statutory required reserves, respectively,\nsuch as hospitals, medical clinics, medical professional buildings, or other\nhealth facilities used for the purpose of providing health services; or\n(b) The lesser of ten percent (10%) of its admitted assets or forty percent (40%) of\nits surplus as regards policyholders in the aggregate, except for an insurer\nwhose insurance premiums and required statutory reserves for accident a nd\nhealth insurance constitute at least ninety-five percent (95%) of total premium\nconsiderations or total statutory required reserves, respectively, this limitation\nshall be increased to fifteen percent (15%) of its admitted assets in the\naggregate.\n(10) An insurer shall not acquire an investment under subsections (1) to (6) of this\nsection if, as a result of and after giving effect to the investment and any guarantees\nit has made in connection with the investment, the aggregate amount of all\ninvestments then held by the insurer under subsections (1) to (6) of this section plus\nthe guarantees then outstanding would exceed twenty -five percent (25%) of its\nadmitted assets.\n(11) The limitations of KRS 304.7 -455 shall not apply to an insurer's acquisition of re al\nestate under subsection (7) of this section. An insurer shall not acquire real estate\nunder subsection (7) of this section if, as a result of and after giving effect to the\nacquisition, the aggregate amount of all real estate then held by the insurer un der\nsubsection (7) of this section would exceed ten percent (10%) of its admitted assets.\nWith the permission of the commissioner, additional amounts of real estate may be\nacquired under subsection (7) of this section.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=16859","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:39Z","sha256":"b5f3b1153350aa6c343cdbdd86ad506b7f75113347761364c260d5557c57d4e6","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.7-463","next":"us-ky/krs-304.7-467"},"notice":"GroundRules: Original legal text. Not legal advice."}