                                 CODE OF VIRGINIA

INVESTMENT LIMITS IN MEDIUM GRADE AND LOWER GRADE OBLIGATIONS (§ 38.2-1411.2)

A. No domestic insurer shall acquire, directly or indirectly, any medium grade
or lower grade obligations of any business entity if, after giving effect to any
such acquisition, the aggregate amount of all medium grade and lower grade
obligations then held by the domestic insurer would exceed twenty percent of its
admitted assets, provided that:

   1. No more than ten percent of its admitted assets consists of lower grade
   obligations;

   2. No more than three percent of its admitted assets consists of lower grade
   obligations rated five or six by the Securities Valuation Office of the
   National Association of Insurance Commissioners; and

   3. No more than one percent of its admitted assets consists of lower grade
   obligations rated six by the Securities Valuation Office of the National
   Association of Insurance Commissioners.
   				Attaining or exceeding the limit of any one category shall not preclude an
   insurer from acquiring obligations in other categories subject to the specific
   and multi-category limits.

B. No domestic insurer may invest more than an aggregate of one percent of its
admitted assets in medium grade obligations issued, guaranteed or insured by any
one business entity nor may it invest more than one-half of one percent of its
admitted assets in lower grade obligations issued, guaranteed or insured by any
one business entity. In no event may a domestic insurer invest more than one
percent of its admitted assets in any medium or lower grade obligations issued,
guaranteed or insured by any one business entity.

C. Nothing contained in this section shall prohibit a domestic insurer from
acquiring any obligation which it has committed to acquire if the insurer would
have been permitted to acquire that obligation pursuant to the provisions of
this chapter on the date on which such insurer committed to purchase that
obligation.

D. Notwithstanding the foregoing, a domestic insurer may acquire any obligation
of a business entity in which the insurer already has one or more obligations,
if the obligation is acquired in order to protect an investment previously made
in the obligations of the business entity; however, all such acquired
obligations shall not exceed one-half of one percent of the insured&#8217;s
admitted assets.

E. Nothing contained in this section shall prohibit a domestic insurer from
acquiring any obligation as a result of a restructuring of any obligation
already held.

F. Nothing contained in this section shall require a domestic insurer to sell or
otherwise dispose of any obligations legally acquired prior to July 1, 1992.

G. The Board of Directors of any domestic insurer which acquires or invests,
directly or indirectly, more than two percent of its admitted assets in medium
grade or lower grade obligations of any individual business entity, shall adopt
a written plan for the making of such investments. The plan shall contain, in
addition to guidelines with respect to the quality of the issues invested in,
diversification standards including, but not limited to, standards for issuer,
industry, duration, liquidity and geographic location.

H. If the Commission finds that economic or other conditions render any rating
of any obligation by the Securities Valuation Office of the National Association
of Insurance Commissioners obsolete or unreflective of a diminished
creditworthiness of the business entity issuing such obligations, the Commission
may assign the obligations to a lower grade based on the findings of a national
rating agency recognized by the Commission.

HISTORY: 1992, c. 588; 2000, c. 187.