Art. 1.39. SUBORDINATED INDEBTEDNESS. Article repealed effective April 1, 2007 (a) This article applies to an insurer as that term is defined by Article 1.15A of this code. (b) An insurer may obtain a loan or an advance of cash, cash equivalents, or other assets that have a readily determinable value and are satisfactory to the commissioner, repayable with interest, and may assume a subordinated liability for repayment of the advance and payment of interest on the advance if the insurer and creditor execute a written agreement stating that the creditor may be paid only out of that portion of the insurer's surplus that exceeds the greater of a minimum surplus stated and fixed in the agreement or a minimum surplus of $500,000 for that insurer. The department or the commissioner may not require the agreement to provide another minimum surplus amount. (c) A loan or advance made under this article, and any interest accruing on the loan or advance, is a legal liability and financial statement liability of the insurer only to the extent provided by the terms and conditions of the loan or advance agreement, and the loan or advance may not otherwise be a legal liability or financial statement liability of the insurer. (d) If the loan or advance agreement provides for a sinking fund out of which the loan or advance is to be repaid, then the loan or advance shall be a legal liability and financial statement liability of the insurer only to the extent of those funds accumulated and held in the sinking fund, and the loan or advance may not otherwise be a legal liability or financial statement liability of the insurer. By mutual agreement of the parties to the agreement, any portion of the accumulated funds in the sinking fund may be returned to the surplus of the insurer at any time and from time to time and thereafter may not be considered as a legal liability or financial statement liability of the insurer. (e) An agreement entered into under Subsection (b) of this article must be submitted to the commissioner for approval as to form and content; provided, however, that the commissioner must give his decision of either approval or disapproval within 30 days after the written filing by the insurer, and his failure to so act within such 30 days shall constitute approval of the transaction. An insurer may not assume a subordinated liability until the commissioner has approved the agreement under either Section 4, Article 21.49-1, or this article. An insurer may not repay principal or pay interest on a subordinated liability assumed under either Section 4, Article 21.49-1, or this article on or after September 1, 1995, unless either (i) such payment or repayment complies with a specific schedule of payments contained within the terms of the previously approved agreement, or (ii) written notice is provided to the commissioner at least 15 days before the date scheduled for any payment or repayment if either a schedule of payments is not contained within the terms of the previously approved agreement, or such payment or repayment does not comply with the specific schedule of payments contained within the terms of the previously approved agreement. A loan, debenture, revenue bond, or advance agreement issued before September 1, 1995, and any subsequent payment of interest or repayment of principal are governed by the law in effect on the date of issuance. (f) The commissioner shall adopt rules as necessary to implement this article. Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 14.01, eff. Jan. 1, 1992. Amended by Acts 1993, 73rd Leg., ch. 685, Sec. 7.10, eff. Sept. 1, 1993; Subsec. (b) amended by and Subsecs. (e), (f) added by Acts 1995, 74th Leg., ch. 614, Sec. 1, eff. Sept. 1, 1995.

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Last modified: August 10, 2007