Texas Insurance Code - Not Codified - Article 1.39. Subordinated Indebtedness
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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Article repealed effective April 1, 2007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.
Article: 1.16 1.17 1.17A 1.18 1.19 1.32 1.33 1.39 1.61 2.10 2.10-1 2.10-2 2.10-3A 2.10-4 2.10-5
Last modified: August 11, 2007
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