Section 56-11-102 - Authorization for subsidiary(a) Authorization. Any domestic insurer or licensed health maintenance organization, either by itself or in cooperation with one (1) or more persons, may organize or acquire one (1) or more subsidiaries. The subsidiaries may conduct any kind of business or businesses and their authority to do so shall not be limited by reason of the fact that they are subsidiaries of a domestic insurer or a licensed health maintenance organization.(b)Additional Investment Authority. In addition to investments in common stock, preferred stock, debt obligations and other securities permitted under all other sections of this title, a domestic insurer or licensed health maintenance organization may also:(1) Invest, in common stock, preferred stock, debt obligations, and other securities of one (1) or more subsidiaries, amounts which do not exceed the lesser of ten percent (10%) of the insurer's assets or fifty percent (50%) of the insurer's surplus as regards policyholders, or, with respect to health maintenance organization's, net worth; provided, that after such investments, the insurer's surplus as regards policyholders or health maintenance organizations net worth will be reasonable in relation to the insurer's or health maintenance organization's outstanding liabilities and adequate to meet its financial needs. In calculating the amount of such investments, investments in domestic or foreign insurance subsidiaries and health maintenance organizations shall be excluded, and there shall be included:(A) Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a 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(B) All amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities; and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation;(2)(A) Invest any amount in common stock, preferred stock, debt obligations and other securities of one or more subsidiaries engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer; provided, that each subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision (b)(1) or in §§ 56-3-301 - 56-3-307 or §§ 56-3-401 - 56-3-409 applicable to the insurer.(B) For the purpose of this subdivision (b)(2), "the total investment of the insurer" includes: (i) Any direct investment by the insurer or health maintenance organization in an asset, and(ii) The insurer's or health maintenance organization's proportionate share of any investment in an asset by any subsidiary of the insurer or health maintenance organization, which shall be calculated by multiplying the amount of the subsidiary's investment by the percentage of the ownership of the subsidiary;(3) With the approval of the commissioner, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one (1) or more subsidiaries; provided, that after the investment the insurer's surplus as regards policyholders or health maintenance organization's net worth will be reasonable in relation to the insurer's or health maintenance organization's outstanding liabilities and adequate to its financial needs.(c)Exemption from Investment Restrictions. Investments in common stock, preferred stock, debt obligations or other securities of subsidiaries made pursuant to subsection (b) shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this title applicable to such investments of insurers except §§ 56-3-303, 56-3-402, 56-3-403 and 56-3-404.(d) Qualification of Investment; When Determined. Whether any investment made pursuant to subsection (b) meets the applicable requirements of subsection (b) is to be determined before the investment is made, by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the day they were made, net of any return of capital invested, not including dividends.(e)Cessation of Control. If an insurer ceases to control a subsidiary, it shall dispose of any investment in that subsidiary made pursuant to this section within three (3) years from the time of the cessation of control or within such further time as the commissioner may prescribe, unless at any time after the investment shall have been made, the investment shall have met the requirements for investment under any other section of this part, and the insurer has so notified the commissioner.Amended by 2014 Tenn. Acts, ch. 583, s 3, eff. 3/28/2014.Acts 1986, ch. 572, § 2; T.C.A. § 56-11-202.