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LAWS OF MARYLAND

Ch. 199

Article 48A - Insurance Code

Section 494A, 497(b-l), 500A, and 500B

Annotated Code of Maryland

(1979 Replacement Volume and 1985 Supplement)

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That the Laws of Maryland read as follows:

Article 48A - Insurance Code

493.

(b) In addition to investments in common stock, PREFERRED
STOCK, DEBT OBLIGATIONS, AND OTHER SECURITIES, permitted under
any other section of this article, a domestic insurer may:

(1)  (I) Invest in common stock, PREFERRED STOCK, DEBT
OBLIGATIONS, AND OTHER SECURITIES, of one or more subsidiaries in
an amount which [together with the cost at the time of
acquisition or formation of other such subsidiary investments
under this paragraph] does not exceed the lesser of [five (5)] 10
percent of such insurer's assets or [forty] 50 percent [(40%)] of
such insurer's surplus as regards policyholders, provided that
after such 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[, and
provided further, as used in this paragraph, the term "cost"
shall include all money or other consideration expended and
obligations assumed in the acquisition or formation of a
subsidiary including all organizational expenses and contribution
to capital and surplus of such subsidiary whether or not
represented by the purchase of capital stock or issuance of other
securities;].

(II) THE CALCULATION OF THE AMOUNT OF
INVESTMENTS MADE UNDER THIS SUBSECTION SHALL EXCLUDE INVESTMENTS
IN DOMESTIC OR FOREIGN INSURANCE SUBSIDIARIES BUT SHALL INCLUDE:

1.  TOTAL NET MONEYS OR OTHER
CONSIDERATION EXPENDED AND OBLIGATIONS ASSUMED IN THE ACQUISITION
OR FORMATION OF ANY SUBSIDIARY, OTHER THAN A DOMESTIC OR FOREIGN
INSURANCE 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

2.  ALL AMOUNTS EXPENDED IN ACQUIRING
ADDITIONAL COMMON STOCK, PREFERRED STOCK, DEBT OBLIGATIONS, AND
OTHER SECURITIES AND ALL CONTRIBUTIONS TO THE CAPITAL OR SURPLUS,
OF ANY SUBSIDIARY, OTHER THAN A DOMESTIC OR FOREIGN INSURANCE
SUBSIDIARY, SUBSEQUENT TO ITS ACQUISITION OR FORMATION;

(2)  If the insurer's total liabilities, as calculated
for NAIC annual statement purposes are less than [ten (10)] 10