206             1997 Session Laws of Kansas             Ch. 64

An Act relating to certain deposits with commissioner of insurance or a financial institution
on behalf of the commissioner; amending K.S.A. 1996 Supp. 40-229a and repealing the
existing section.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 1996 Supp. 40-229a is hereby amended to read as
follows: 40-229a. (a) All cash, securities, real estate deeds, mortgages or
other assets deposited with the commissioner of insurance pursuant to
the provisions of the insurance code of the state of Kansas shall be de-
posited with any Kansas financial institution acceptable to the commis-
sioner through which a custodial or controlled account, a joint custody
receipt arrangement or any combination of these or other measures that
are acceptable to the commissioner is used. As used in this section, ``fi-
nancial institution'' means any Kansas domiciled bank acceptable to the

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commissioner, which has its principal place of business in Kansas. As used
in this section, ``commissioner'' means the commissioner of insurance. All
such deposits shall be held by such financial institution on behalf of the
commissioner as in trust for the use and benefit of such company and
such company's policyholders and creditors. Such assets shall be released
from such deposits only upon written approval of the commissioner. All
income from deposits shall belong to the depositing organization and shall
be paid to it as it becomes available. The commissioner, upon written
approval, may direct the financial institution to permit exchange of se-
curities or assets upon deposit of specified substituted securities or assets.

All forms for deposit, withdrawal or exchange shall be prescribed, pre-
pared and furnished by the commissioner and no facsimile signatures shall
be used or recognized. The commissioner or assistant commissioner of
insurance or a duly authorized insurance department employee author-
ized by the commissioner may at any time inspect the securities on deposit
in any such financial institution. Nothing in this act shall be construed to
hold the state of Kansas, the commissioner, assistant commissioner or
authorized employee liable either personally or officially for any default
of such financial institution.

Real estate shall be deposited with the commissioner by the depositing
organization executing a deed or assignment conveying title thereto to
the commissioner, in trust for the use and benefit of such company. Such
deeds or assignment shall be recorded in the office of the register of deeds
of the county in which such real estate is situated. When the depositing
organization is authorized to withdraw real estate from deposit, the com-
missioner shall execute deeds to such organization or such other persons,
companies or corporations as directed by such organization shall direct.
The costs of registering such deeds shall be borne paid by the depositing
organization.

All deposits made with the commissioner shall be audited by the com-
missioner and the state treasurer not less frequently than once each three
years. The commissioner may accept an audit performed by another gov-
ernmental agency acceptable to the commissioner, in lieu of this audit
requirement.

(b) Assets, except real estate assets, deposited pursuant to this section
shall be held by the custodian on behalf of the commissioner as in trust
for the use and benefit of the depositing organization. Such assets shall
remain the specific property of the organization and shall not be subject
to the claim of any third party against the custodian.

(c) The custodian is authorized to redeposit such assets with a clear-
ing corporation as defined in K.S.A. 84-8-102 and amendments thereto,
if such clearing corporation is domiciled in the United States. The cus-
todian is authorized to hold such assets through the federal reserve bank
book-entry system.

(d) The commissioner shall by adopt rules and regulations to establish

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requirements relating to deposits under this subsection section appropri-
ate to assure the security and safety of such deposits, including but not
limited to the following:

(1) Capital and surplus of the custodian;

(2) title in which deposited assets are held;

(3) records to be kept by the custodian and the commissioner's access
thereto;

(4) periodic reports by the custodian to the commissioner;

(5) responsibility of the custodian to indemnify the company depos-
itor for loss of deposited assets;

(6) withdrawal or exchange of deposited assets; and

(7) authority of the commissioner to terminate the deposit if the con-
dition of the custodian should threaten the security of the deposited as-
sets.

(e) As used in this section:

(1) ``Commissioner'' means the commissioner of insurance; and

(2) ``financial institution'' means banks and savings and loan institu-
tions incorporated under the laws of this state, and banks, savings and
loan associations and savings banks organized under the laws of the
United States or another state which have main or branch offices in this
state. ``Main office'' and ``branch'' shall have the meaning ascribed thereto
in subsections (f) and (g) of section 1 of 1997 Substitute for Senate Bill
No. 86.

Sec. 2. K.S.A. 1996 Supp. 40-229a is hereby repealed.

Sec. 3. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 7, 1997.