DAR File No. 43561

Insurance, Administration

Rule R590-280

Counting Short-Term Funds

Notice of Proposed Rule

(New Rule)

DAR File No.: 43561
Filed: 03/01/2019 01:02:15 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Utah statutes limit the types of investments that insurance companies can make. The Insurance Commissioner has authority to approve investments that fall within those limitations. This rule approves one type of investment that qualifies: an investment in short-term mortgages.

Summary of the rule or change:

Businesses that take out Small Business Administration (SBA) loans sometimes must wait months for their loans to fund. To obtain capital during the waiting period, those businesses take out bridge loans that they pay off when the SBA loans are funded. This rule allows insurers to make those bridge loans if: 1) the insurers meet certain financial stability requirements; and 2) their loans are adequately secured, do not exceed certain thresholds, and last no longer than 150 days.

Statutory or constitutional authorization for this rule:

• Subsection 31A-18-105(16)
• Subsection 31A-2-201(3)

Anticipated cost or savings to:

the state budget:

There is no anticipated cost or savings to the state budget. This rule permits insurance companies to take out certain short-term loans at their discretion and does not have any fiscal tie to the state.

local governments:

There is no anticipated cost or savings to local governments. This rule permits insurance companies to take out certain short-term loans at their discretion, and does not have any fiscal tie to local governments.

small businesses:

There is no anticipated cost or savings to small businesses. While this rule permits insurance companies to take out certain short-term loans at their discretion, no insurance companies in Utah employ fewer than 50 persons.

persons other than small businesses, businesses, or local governmental entities:

The short-term loans carry competitive interest rates and appear to be profitable for insurers. The amount of savings/earnings from issuing those loans depends on their terms and the financial circumstances of individual insurers/lenders. Therefore, it is impossible to quantify the financial benefit of allowing insurers to make short-term loan investments.

Compliance costs for affected persons:

There are no compliance costs for any affected persons. This rule allows insurance companies to take out certain short-term loans at their discretion, but does not require it.

Comments by the department head on the fiscal impact the rule may have on businesses:

After conducting a thorough analysis, it was determined that this proposed rule will not result in a fiscal impact to businesses.

Todd E. Kiser, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Steve Gooch at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

04/15/2019

This rule may become effective on:

04/22/2019

Authorized by:

Steve Gooch, Information Specialist

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2019	FY 2020	FY 2021
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Person	$0	$0	$0
Total Fiscal Costs:	$0	$0	$0
Fiscal Benefits
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$0	$0	$0
Net Fiscal Benefits:	$0	$0	$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non - Small Businesses are described in Appendix 2.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

There are 46 domestic insurance companies operating in Utah. The short-term loans carry competitive interest rates and appear to be profitable for insurers. The amount of savings/earnings from issuing those loans depends on their terms and the financial circumstances of individual insurers/lenders. Therefore, it is impossible to quantify the financial benefit of allowing insurers to make short-term loan investments.

 

The head of the Insurance Department, Commissioner Todd E. Kiser, has reviewed and approved this fiscal analysis.

 

 

R590. Insurance, Administration.

R590-280. Counting Short-Term Funds.

R590-280-1. Authority.

This rule is adopted pursuant to Section 31A-2-201(3), which authorizes the commissioner to make rules that implement the provisions of Title 31A, and Section 31A-18-105(16), which states that the commissioner may authorize investments for risk-based capital determinations.

 

R590-280-2. Scope.

This rule applies to an insurer subject to Title 31A, Chapter 17, Part 6.

 

R590-280-3. Purpose.

The purpose of this rule is to state the requirements that an insurer must satisfy to count short-term funds as defined in this rule.

 

R590-280-4. Definitions.

(1) "SBA" means the United States Small Business Administration.

(2) "Short-term funds" means a sum of money that an insurer loans to an SBA borrower to fund the SBA borrower's anticipated use of SBA 504 loan proceeds where the insurer's loan is secured by a lien on real property or by any other form of collateral authorized by the commissioner.

 

R590-280-5. Requirements for Counting Short-Term Funds.

An insurer may count short-term funds for the purposes specified under Title 31A, Chapter 17, Part 6, only if:

(1) the total amount of short-term funds at any point in time does not exceed the following as set forth in the insurer's annual or quarterly statutory financial statement, whichever was last filed with the National Association of Insurance Commissioners:

(a) 1.5% of the insurer's total assets as determined according to Subsection 31A-18-106(4); and

(b) 15% of the insurer's capital and surplus;

(2) the duration of each loan does not exceed 150 days;

(3) the insurer provides on request satisfactory proof of compliance with this rule;

(4) the filing of the insurer's most recent RBC report did not qualify as an action level event or as a control level event under Title 31A, Chapter 17, Part 6; and

(5) at the time of the insurer's loan to the SBA borrower, the insurer is not subject to administrative action under Title 31A, Chapter 27, Part 5.

 

R590-280-6. Enforcement Date.

The commissioner will begin enforcing the provisions of this rule on the rule's effective date.

 

R590-280-7. Severability.

If any provision of this rule or its application to any persons or circumstances is for any reason held to be invalid, the remainder of the rule and the application of the provision to other persons or circumstances shall not be affected thereby.

 

KEY: insurance

Date of Enactment or Last Substantive Amendment: 2019

Authorizing, and Implemented or Interpreted Law: 31A-18-105(16); 31A-2-201(3)