112 STAT. 2681-895 PUBLIC LAW 105-277—OCT. 21, 1998 "(ii) APPLICABLE HOME COUNTRY RISKS. —The term 'applicable home country risks' means risks in connection with property in, liability arising out of activity in, or the lives or health of residents of, the home country of the qualifying insurance company or qualify- ing insurance company branch, as the case may be, issuing or reinsuring the contract covering the risks. "(C) SUBSTANTIAL ACTIVITY REQUIREMENTS FOR CROSS BORDER RISKS.— A contract issued by a qualifying insurance company or qualifying insurance company branch which covers risks other than applicable home country risks (as defined in subparagraph (B)(ii)) shall not be treated as an exempt contract unless such company or branch, as the case may be— "(i) conducts substantial activity with respect to an insurance business in its home country, and "(ii) performs in its home country substantially all of the activities necessary to give rise to the income generated by such contract. "(3) QUALIFYING INSURANCE COMPANY.—The term 'qualify- ing insurance company' means any controlled foreign corporation which— "(A) is subject to regulation as an insurance (or reinsurance) company by its home country, and is licensed, authorized, or regulated by the applicable insurance regulatory body for its home country to sell insurance, reinsurance, or annuity contracts to persons other than related persons (within the meaning of section 954(d)(3)) in such home country, "(B) derives more than 50 percent of its aggregate net written premiums from the issuance or reinsurance by such controlled foreign corporation and each of its qualifying insurance company branches of contracts— "(i) covering applicable home country risks (as defined in paragraph (2)) of such corporation or branch, as the case may be, and "(ii) with respect to which no policyholder, insured, annuitant, or beneficiary is a related person (as defined in section 954(d)(3)), except that in the case of a branch, such premiums shall only be taken into account to the extent such premiums are treated as earned by such branch in its home country for purposes of such country's tax laws, and "(C) is engaged in the insurance business and would be subject to tax under subchapter L if it were a domestic corporation. "(4) QUALIFYING INSURANCE COMPANY BRANCH. —The term 'qualifying insurance company branch' means a qualified business unit (within the meaning of section 989(a)) of a controlled foreign corporation if— "(A) such unit is licensed, authorized, or regulated by the applicable insurance regulatory body for its home country to sell insurance, reinsurance, or annuity contracts to persons other than related persons (within the meaning of section 954(d)(3)) in such home country, and
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