P.R. Laws tit. 26, § 649
(1) Insurers may acquire, own or invest in those investments, or engage in those investment practices described in §§ 648–662 of this title. Investments that do not adjust to §§ 648–662 of this title shall not be eligible investments and shall not be a part of the assets allowed to the insurer.
(2) An insurer shall not acquire an asset unless:
(a) Its acquisition price is equal to or less than its market value;
(b) it is eligible for the payment or accrual of interest or discount, or is eligible to receive dividends or other distributions;
(c) if the interest is accrued in other assets, such assets should be eligible pursuant to §§ 648–662 of this title;
(d) it is not in arrears regarding the payment of interest, dividends or other distributions;
(e) in the case of stock and other equity in interest that the investment shall otherwise generate income or have the potential to increase in value, or
(f) it is acquired under § 657(3) of this title, or constitutes an investment practice allowed under §§ 658 and 660 of this title.
(3) An insurer may acquire and maintain as an allowed investment, any investments that do not otherwise comply with the provisions of §§ 648–662 of this title:
(a) If the insurer did not acquire the same for the purpose of evading any of the limitations contained in §§ 648–662 of this title;
(b) if the investment is not an investment prohibited under § 651 of this title;
(c) if the investment meets the requirements in § 652 of this title, and
(d) if the insurer acquired it under any of the following circumstances:
(i) As a payment on account of obligations or existing debts or related to the refinancing or restructuring of the same, if it is to protect the interest of the insurer in said security or investment;
(ii) as execution of collateral for default of a payment obligation to the insurer;
(iii) in connection with any other eligible investment or any investment practice, if the security is obtained as interest, dividend or other distribution related to the investment or investment practice, or in connection with the refinancing of the investment, provided the same does not proceed from an investment in an affiliated company; however, in each case, such acquisition must occur at no additional cost to the insurer or only at a minimum or nominal cost;
(iv) pursuant to a legal and bona fide recapitalization or voluntary or involuntary reorganization agreement regarding an investment held by the insurer, provided the same does not proceed from a reorganization or voluntary reorganization of an affiliated company, or
(v) pursuant to a mass reinsurance agreement, merger or consolidation if the assets constitute legal and admissible investments for the ceding, merging or consolidated companies.
(4) An investment acquired by an insurer under the conditions established in subsection (3) of this section shall become an inadmissible asset within three (3) years from the date of acquisition, unless during said period the investment has become an eligible investment under any section other than subsection (3) of this section. Notwithstanding the above:
(a) Upon request of the insurer, and based on evidence by the insurer that determining an asset held by him/her to be inadmissible under subsection (3) of this section would materially affect the interests of the insurer, the Commissioner may extend the term for the disposition of the investment for two (2) additional years.
(b) The term for disposing of mortgage and real estate loans shall be of five (5) years. In this case, the dispositions established in subsection (a) of this section shall not apply.
(c) Any investment acquired under any mass reinsurance agreement, merger and consolidation may be withheld for a longer term if so provided in the reinsurance, merger or consolidation plan, as approved by the Commissioner.
(5) Except as provided in subsections (6) and (8) of this section, an investment shall qualify as an eligible investment under §§ 648–662 of this title if as of the date of its acquisition, or trade date, it qualified as an eligible investment under §§ 648–662 of this title. For the purpose of determining the limitations contained in §§ 648–662 of this title, insurers must recognize their investments by using the trade date.
(6) Investments owned by an insurer as of the effective date of this act, which were eligible investments under Chapter six (6) before said date, shall be deemed as eligible investments under §§ 648–662 of this title. Likewise, each specific transaction that constitutes an investment practice of the type described in §§ 648–662 of this title, legally executed by an insurer and in effect as of the effective date of this act, shall continue to be allowed under §§ 648–662 of this title until its expiration or termination pursuant to its terms.
(7) Except as otherwise indicated in §§ 648–662 of this title, the limitations established that are applicable to the investments effected based on the allowed assets or the capital and surplus of an insurer shall be determined according to the information found in the last annual statement filed with the Commissioner pursuant to § 331 of this title. For purposes of determining any limitation based on the allowed assets, the insurer shall subtract from the assets, the sum of the liabilities registered in the annual statement on account of:
(a) The return of collateral to the insurer as a result of a reverse repurchase agreement or securities loan;
(b) cash received in dollar roll transactions, and
(c) loans if not included in clauses (a) and (b) of this subsection.
(8) A qualified investment, for acquisition or possession in whole or in part, as an allowed asset, must be qualified or requalified in whole or in part at the time of its acquisition or on a subsequent date, under any other section of §§ 648–662 of this title, if all relevant conditions contained in said section are met at the time of its qualification or requalification. In the case of an investment that becomes ineligible after its acquisition because of its conversion to a low rating, the insurer shall have one (1) year from the occurrence of said ineligibility to dispose of said investment.
(9) An insurer must hold documents to show that each investment was acquired pursuant to the provisions of §§ 648–662 of this title, and such documents shall specify the section of §§ 648–662 of this title under which the investment was acquired.
(10) An insurer shall not execute any securities purchase agreement until the same are issued to the public for resale as part of the distribution of said securities by its issuer, nor may otherwise guarantee the distribution of said securities.
(11) The Commissioner may, for just cause, order the insurer to limit, dispose of, withdraw, or discontinue an investment or investment practice, or declare same as inadmissible asset. The authority of the Commissioner under this subsection is in addition to any other authority that the Commissioner may have.
(12) At the request of the insurer, the Commissioner may approve additional investments to those set forth in §§ 648–662 of this title, if he deems that the investment or prevention strategies and the financial condition of the insurer do so warrant.
(13) Insurance futures and insurance future options shall not be deemed as investments for the purposes of §§ 648–662 of this title.
History —Ins. Code, added as § 6.030 on May 16, 2003, No. 130, § 1.