Arkansas Code
Subchapter 1 - General Provisions
§ 23-69-132. Borrowed surplus

(a)
(1)
(A) A domestic stock or mutual insurer may borrow cash or other admitted assets satisfactory to the Insurance Commissioner to defray the expenses of its organization, provide it with surplus funds, or for any purpose of its business, upon entering a written agreement that the cash or other admitted assets are required to be repaid only out of the insurer's surplus in excess of that stipulated in the agreement.
(B) The agreement described in subdivision (a)(1)(A) of this section may provide for interest which shall or shall not constitute a liability of the insurer as to its funds other than the excess or surplus, as stipulated in the agreement.

(2) A commission or promotion expense shall not be paid in connection with the loan.

(b)
(1) Cash or other admitted assets satisfactory to the commissioner borrowed under subsection (a) of this section, together with the interest thereon, if stipulated to in the agreement, shall not be:
(A) Included in the insurer's legal liabilities except as to its surplus in excess of the amount thereof stipulated to in the agreement; or
(B) The basis of any setoff.

(2) Until the cash or other admitted assets are repaid, the financial statements filed or published by the insurer shall show as a footnote thereto the amount of surplus borrowed, any remaining balance, and any accrued interest unpaid.

(c)
(1) Any loan to an insurer shall be subject to the Insurance Commissioner's approval.
(2) The insurer shall, in advance of the loan, file with the commissioner a statement of the purpose of the loan and a copy of the proposed loan agreement.
(3) The loan and agreement shall be deemed approved unless, within fifteen (15) days after the date of filing, the insurer is notified of the commissioner's disapproval and the reasons therefor.
(4) The commissioner shall disapprove any proposed loan or agreement if he or she finds the loan is unnecessary or excessive for the purpose intended, or that the terms of the loan agreement are not fair and equitable to the parties, and to other similar lenders, if any, to the insurer, or that the information so filed by the insurer is inadequate.

(d) Any loan to an insurer or substantial portion thereof shall be repaid by the insurer when no longer necessary for the purpose originally intended. No repayment of the loan shall be made by an insurer unless it is approved by the commissioner in advance.
(e) This section shall not apply to loans obtained by the insurer in the ordinary course of business from banks and other financial institutions nor to loans secured by pledge or mortgage of assets.

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