Ariz. Rev. Stat. § 20-538
An insurer may invest any of its funds in bonds or other evidences of indebtedness not in default as to principal or interest, which are valid and legally authorized securities or obligations issued, assumed, or guaranteed by the state of Arizona or any counties, municipalities, school districts, or political subdivisions of any type organized pursuant to the Constitution or statutes of the state of Arizona, or issued, assumed, or guaranteed by any other state or territory of the United States or by any counties, incorporated cities, towns, villages, municipalities, school districts, public districts of any type organized pursuant to statute or constitution in other states or territories where any of the foregoing political subdivisions are so designated, or by a political subdivision thereof, or by any civil division or public instrumentality of one or more of the foregoing, if, by statutory or other legal requirements applicable thereto, such obligations are or may become payable, as to both principal and interest, from taxes levied or required to be levied upon all taxable property or all taxable income within the jurisdiction of such governmental unit. No investment authorized by this section shall include any security issued by any such governmental unit if any default on any other security issued by such governmental unit has occurred within five years of such investment.
A.R.S. § 20-538