Code of the District of Columbia

§ 31–702. Subsidiaries of insurers.

(a) Any domestic insurer, either by itself or in cooperation with 1 or more persons, may organize or acquire 1 or more subsidiaries. The subsidiaries may conduct any kind of business and their authority to do so shall not be limited by reason of the fact that they are subsidiaries of a domestic insurer.

(b) In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under the insurance laws of the District, a domestic insurer may also:

(1) Invest, in common stock, preferred stock, debt obligations, and other securities of 1 or more subsidiaries, amounts which do not exceed the lesser of 10% of the insurer’s assets or 50% of the insurer’s surplus as regards policyholders; provided that after these investments, the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs. In calculating the amount of these investments, investments in domestic or foreign insurance subsidiaries shall be excluded, and there shall be included:

(A) Total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and

(B) All amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus, of a subsidiary subsequent to its acquisition or formation;

(2) Invest any amount in common stock, preferred stock, debt obligations, and other securities of 1 or more subsidiaries engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer, provided, that each subsidiary agrees to limit its investments in any asset so that the investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in or in paragraph (1) of this subsection or in § 31-2502.18 [repealed], or in §§ 31-4435 [repealed] and 31-4442, applicable to the insurer. For the purposes of this paragraph, the term “the total investment of the insurer” shall include:

(A) Any direct investment by the insurer in an asset; and

(B) The insurer’s proportionate share of any investment in an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiary’s investment by the percentage of the ownership of such a subsidiary; or

(3) With the approval of the Mayor, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of 1 or more subsidiaries; provided, that after the investment the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs.

(c) Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries made pursuant to subsection (b) of this section shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in the insurance laws of the District applicable to the investments of insurers.

(d) Whether any investment pursuant to subsection (b) of this section meets the applicable requirements is to be determined before the investment is made by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the day they were made, net of any return of capital invested, not including dividends.

(e) If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within 3 years from the time of the cessation of control or within any further time the Mayor may prescribe, unless at any time after the investment shall have been made, the investment shall have met the requirements for investment under any other section of the insurance laws of the District, and the insurer has notified the Mayor.


(Oct. 21, 1993, D.C. Law 10-44, § 3, 40 DCR 6027; Mar. 24, 1998, D.C. Law 12-81, § 40(a), 45 DCR 745.)

Prior Codifications

1981 Ed., § 35-3702.

Section References

This section is referenced in § 31-755 and § 31-1371.03.