Texas Insurance Code - Not Codified - Article 3.33. Authorized Investments And Loans For Capital Stock Domestic Life, Health And Accident Insurance Companies
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Art. 3.33. AUTHORIZED INVESTMENTS AND LOANS FOR CAPITAL
STOCK DOMESTIC LIFE, HEALTH AND ACCIDENT INSURANCE COMPANIES.
Article repealed effective April 1, 2007
Scope
Sec. 1. This article and the rules promulgated to interpret
and implement it shall apply to all domestic insurance companies as
defined in Section 841.001 of this code and other insurers
specifically made subject to the provisions hereof, including a
stipulated premium insurance company electing to be governed by
this article under Section 884.311 of this code. Articles 3.39,
3.40, and 3.40-1 of this code shall not be applicable to such
companies, but such articles shall continue to be applicable to
insurance companies chartered under Chapters 9, 881, 884, 885, 886,
and 887 of this code, except as otherwise specifically provided in
those chapters. This article shall not limit or restrict the
investments in or transactions with or within subsidiaries and
affiliates which are made pursuant to the authority of the Texas
Insurance Holding Company System Regulatory Act (Chapter 823,
Insurance Code).
Purpose
Sec. 2. The purpose of this article is to protect and further
the interests of insureds, insurers, creditors, and the public by
providing standards for the development and administration of plans
for the investment of the assets of insurers.
Insurers' Investment Plans
Sec. 3. (a) The board of directors of each insurer or
corresponding authority designated by the charter, bylaws, or plan
of operations of an insurer which has no board of directors shall:
(1) adopt a written investment plan consistent with the
provisions of this article which:
(A) specifies the diversification of the insurer's
investments, so as to reduce the risk of large losses, by:
(i) broad categories (such as bonds and real estate loans),
(ii) kinds (such as obligations of governments, or business
entities, mortgage-backed securities, and real estate loans on
office, retail, industrial or residential properties),
(iii) quality,
(iv) maturity,
(v) industry, and
(vi) geographical areas (as to both domestic and foreign
investments);
(B) balances safety of principal with yield and growth;
(C) seeks a reasonable relationship of assets and
liabilities as to term and nature;
(D) is appropriate considering the capital and surplus and
the business conducted by the insurer;
(2) at least annually, review the adequacy of such
investment plan and the implementation thereof.
(b) The insurer shall maintain the investment plan in its
principal office and shall provide same to the commissioner or his
designee upon request, and such plans shall be maintained as a
privileged and confidential document by the Commissioner of
Insurance or his designee and it shall not be subject to public
disclosure. The insurer shall maintain investment records covering
each transaction. At all times, the insurer shall be able to
demonstrate that its investments are within the limitations
prescribed in this article.
Community Investment Report
Sec. 3A. (a) The Texas Department of Insurance shall, after
consultation with the insurance industry of this state and the
Office of Public Insurance Counsel, develop a report of insurance
industry community investments in Texas.
(b) The commissioner may request and insurance companies
shall provide information necessary to complete the requirements of
Subsection (a).
(c) The report established under Subsection (a) shall be
provided to the Texas Legislature no later than December 1 of each
even-numbered year.
Authorized Investments and Transactions
Sec. 4. Subject to the limitations and restrictions herein
contained and, unless otherwise specified, based upon the insurer's
capital, surplus and admitted assets as reported in the most
recently filed statutory financial statement, the investments and
transactions described in the following subsections, and in Section
6, Article 21.49-1, and none other, are authorized for the insurers
subject hereto:
(a) United States Government Bonds. Bonds, evidences of
indebtedness or obligations of the United States of America, or
bonds, evidences of indebtedness or obligations guaranteed as to
principal and interest by the full faith and credit of the United
States of America, and bonds, evidences of indebtedness, or
obligations of agencies and instrumentalities of the government of
the United States of America;
(b) Other Governmental Bonds. Bonds, evidences of
indebtedness or obligations of governmental units in the United
States, Canada, or any province or city of Canada, and of the
instrumentalities of such governmental units; provided:
(1) such governmental unit or instrumentality is not in
default in the payment of principal or interest in any of its
obligations; and
(2) investments in the obligations of any one governmental
unit or instrumentality may not exceed 20 percent of the insurer's
capital and surplus;
(c) Obligations of Business Entities. Obligations,
including bonds or evidences of indebtedness, or participations in
those bonds or evidences of indebtedness, or asset-backed
securities, that are issued, assumed, guaranteed, or insured by any
business entity, including a sole proprietorship, a corporation, an
association, a general or limited partnership, a limited liability
company, a joint-stock company, a joint venture, a trust, or any
other form of business organization, whether for-profit or
not-for-profit, that is organized under the laws of the United
States, another state, Canada, or any state, district, province, or
territory of Canada, subject to all conditions set forth below:
(1) an insurer may acquire obligations or counterparty
exposure amounts, as defined in Subsection (u), in any one business
entity rated by the Securities Valuation Office of the National
Association of Insurance Commissioners, but not to exceed 20
percent of the insurer's statutory capital and surplus;
(2) an insurer shall not acquire an obligation,
counterparty exposure amount or preferred stock of any business
entity if, after giving effect to the investment:
(A) the aggregate amount of such investments then held by
the insurer that are rated 3, 4, 5 or 6 by the Securities Valuation
Office of the National Association of Insurance Commissioners would
exceed 20 percent of its assets;
(B) the aggregate amount of such investments then held by
the insurer that are rated 4, 5, or 6 by the Securities Valuation
Office would exceed 10 percent of its assets;
(C) the aggregate amount of such investments then held by
the insurer that are rated 5 or 6 by the Securities Valuation Office
would exceed three percent of its assets; or
(D) the aggregate amount of such investments then held by
the insurer that are rated 6 by the Securities Valuation Office
would exceed one percent of its assets.
If an insurer attains or exceeds the limit of any one rating
category referred to in this subsection, the insurer shall not be
precluded from acquiring investments in other rating categories
subject to the specific and multiple category limits applicable to
those investments;
(3) notwithstanding the foregoing, an insurer may acquire
an obligation of a business entity in which the insurer already
holds one or more obligations if the obligation is acquired in order
to protect an investment previously made in that business entity,
but obligations so acquired may not exceed one-half percent of the
insurer's assets; and
(4) this subsection does not prohibit an insurer from
acquiring an obligation as a result of a restructuring of an already
held obligation or preferred stock that is rated 3, 4, 5 or 6 by the
Securities Valuation Office;
(d) International Market. Bonds issued, assumed, or
guaranteed by the Interamerican Development Bank, the
International Bank for Reconstruction and Development (the World
Bank), the Asian Development Bank, the State of Israel, the African
Development Bank, and the International Finance Corporation;
provided:
(1) investments in the bonds of any one of the entities
specified above may not exceed 20 percent of the insurer's capital
and surplus; and
(2) the aggregate of all investments made under this
subsection may not exceed 20 percent of the insurer's assets;
(e) Policy Loans. Loans upon the security of the insurer's
own policies not in excess of the amount of the reserve values
thereof;
(f) Time and Savings Deposits. Any type or form of savings
deposits, time deposits, certificates of deposit, NOW accounts, and
money market accounts in solvent banks, savings and loan
associations, and credit unions and branches thereof, organized
under the laws of the United States of America or its states, when
made in accordance with the laws or regulations applicable to such
entities; provided the amount of the deposits in any one bank,
savings and loan association, or credit union will not exceed the
greater of:
(1) 20 percent of the insurer's capital and surplus;
(2) the amount of federal or state deposit insurance
coverage pertaining to such deposit; or
(3) 10 percent of the amount of capital, surplus, and
undivided profits of the entity receiving such deposits;
(g) Insurer Investment Pools. For the purposes of this
Subsection (g), the following definition shall apply:
(A) "Affiliate" means, as to any person, another person
that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with the
person.
(1) An insurer may acquire investments in investment pools
that:
(A) invest only in:
(i) obligations that are rated 1 or 2 by the Securities
Valuation Office or have an equivalent of a Securities Valuation
Office 1 or 2 rating (or, in the absence of a 1 or 2 rating or
equivalent rating, the issuer has outstanding obligations with a
Securities Valuation Office 1 or 2 or equivalent rating) by a
nationally recognized statistical rating organization recognized
by the Securities Valuation Office and have:
(a) a remaining maturity of 397 days or less or a put that
entitles the holder to receive the principal amount of the
obligation which put may be exercised through maturity at specified
intervals not exceeding 397 days; or
(b) a remaining maturity of three years or less and a
floating interest rate that resets no less frequently than
quarterly on the basis of a current short-term index (federal
funds, prime rate, treasury bills, London InterBank Offered Rate
(LIBOR) or commercial paper) and is subject to no maximum limit, if
the obligations do not have an interest rate that varies inversely
to market interest rate changes;
(ii) securities lending, repurchase and reverse repurchase
transactions that meet the requirements of Subsection (q) and any
applicable regulations of the department; or
(iii) money market mutual funds as authorized in Subsection
(s); provided that this short-term investment pool shall not
acquire investments in any one business entity that exceed 10
percent of the total assets of the investment pool;
(B) invest only in investments which an insurer may acquire
under this article, if the insurer's proportionate interest in the
amount invested in these investments does not exceed the applicable
limits of this article, and the aggregate amount of all investments
in such other investment pools may not exceed 25 percent of the
insurer's assets.
(2) An insurer shall not acquire an investment in an
investment pool under this subsection if after giving effect to the
investment, the aggregate amount of investments in all investment
pools then held by the insurer would exceed 35 percent of its
assets.
(3) For an investment in an investment pool to be qualified
under this article, the investment pool shall not:
(A) acquire securities issued, assumed, guaranteed or
insured by the insurer or an affiliate of the insurer;
(B) borrow or incur any indebtedness for borrowed money,
except for securities lending and reverse repurchase transactions.
(4) For an investment pool to be qualified under this
article:
(A) the manager of the investment pool shall:
(i) be organized under the laws of the United States or a
state and designated as the pool manager in a pooling agreement;
(ii) be the insurer, an affiliated insurer, a business
entity affiliated with the insurer, a custodian bank, a business
entity registered under the Investment Advisors Act of 1940 (15
U.S.C. Section 80a-1 et seq.), as amended, or, in the case of a
reciprocal insurer or interinsurance exchange, its
attorney-in-fact or, in the case of a United States branch of an
alien insurer, its United States manager or affiliates or
subsidiaries of its United States manager;
(B) the pool manager or an entity designated by the pool
manager of the type set forth in (4)(A)(ii) shall maintain detailed
accounting records setting forth:
(i) the cash receipts and disbursements reflecting each
participant's proportionate investment in the investment pool;
(ii) a complete description of all underlying assets of the
investment pool (including amount, interest rate, maturity date (if
any) and other appropriate designations); and
(iii) other records which, on a daily basis, allow third
parties to verify each participant's investments in the investment
pool;
(C) the assets of the investment pool shall be held in one or
more accounts, in the name or on behalf of the investment pool,
either (i) under a custody agreement or trust agreement with a
custodian bank or (ii) at the principal office of the pool manager.
The applicable agreement shall:
(i) state and recognize the claims and rights of each
participant;
(ii) acknowledge that the underlying assets of the
investment pool are held solely for the benefit of each participant
in proportion to the aggregate amount of its investments in the
investment pool; and
(iii) contain an agreement that the underlying assets of the
investment pool shall not be commingled with the general assets of
the custodian bank or any other person.
(5) The pooling agreement for each investment pool shall be
in writing and shall provide that:
(A) the insurer, its subsidiaries, affiliates or, in the
case of a United States branch of an alien insurer, affiliates or
subsidiaries of its United States manager, and any unaffiliated
insurer shall, at all times, hold 100 percent of the interests in
the investment pool;
(B) the underlying assets of the investment pool shall not
be commingled with the general assets of the pool manager or any
other person;
(C) in proportion to the aggregate amount of each pool
participant's interest in the investment pool:
(i) each participant owns an undivided interest in the
underlying assets or the investment pool; and
(ii) the underlying assets of the investment pool are held
solely for the benefit of each participant;
(D) a participant, or, in the event of the participant's
insolvency, bankruptcy, or receivership, its trustee, receiver,
conservator or other successor-in-interest, may withdraw all or any
portion of its investment from the investment pool under the terms
of the pooling agreement;
(E) withdrawals may be made on demand without penalty or
other assessment on any business day, but settlement of funds shall
occur within a reasonable and customary period thereafter provided:
(i) in the case of publicly traded securities, settlement shall not
exceed five business days, and (ii) in the case of all other
securities and investments, settlement shall not exceed 10 business
days. Distributions under this paragraph shall be calculated in
each case net of all then applicable fees and expenses of the
investment pool. The pooling agreement shall provide that the pool
manager shall distribute to a participant, at the discretion of the
pool manager:
(i) in cash, the then fair market value of the participant's
pro rata share of each underlying asset of the investment pool;
(ii) in kind, a pro rata share of each underlying asset; or
(iii) in a combination of cash and in kind distributions, a
pro rata share in each underlying asset; and
(F) the pool manager shall make the records of the
investment pool available for inspection by the commissioner.
(6) An investment in an investment pool shall not be deemed
to be an affiliate transaction under Section 4, Article 21.49-1, of
this code; however each pooling agreement shall be subject to the
standards of Section 4(a), Article 21.49-1, of this code and the
reporting requirements of Section 3(b), Article 21.49-1, of this
code.
(h) Equity Interests. Equity interests including common
stock, equity investment in an investment company (other than a
money market mutual fund as defined in Subsection (s) of this
section), real estate investment trust, limited partnership
interests, warrants or other rights to acquire equity interests
that are created by the person that owns or would issue the equity
to be acquired, and equity interests in any business entity that is
organized under the laws of the United States, any of its states,
Canada or any province or territory of Canada provided:
(1) if no market value from a generally recognized source is
available for the equity interest, the business entity or other
investment shall be subject to an annual audit by an independent
certified public accountant or subject to another method of
valuation acceptable to the commissioner; and
(2) an insurer shall not be permitted to invest in a
partnership, as a general partner, except through an investment
subsidiary;
(3) such investments in any one business entity other than a
money market fund defined in Subsection (s) may not exceed 15
percent of the insurer's capital and surplus;
(4) the aggregate amount of all investments made under this
subsection may not exceed 25 percent of the insurer's assets.
For purposes of this subsection, a business entity shall mean
a real estate investment trust, corporation, limited liability
company, association, limited partnership, joint venture, mutual
fund, trust, joint tenancy or other similar form of business
organization, whether organized for profit or not-for-profit.
(i) Preferred Stock. Preferred stock of business entities
as described in Subsection (c) of this section; provided:
(1) investments in the preferred stock of any one business
entity will not exceed 20 percent of the insurer's capital and
surplus;
(2) the preferred stock is rated by the Securities Valuation
Office, and the aggregate investment in preferred stock rated 3, 4,
5, or 6, when added to the investments under Subsection (c)(2) do
not result in the combined total of such investments exceeding the
limitations specified in Subsection (c)(2);
(3) in the aggregate not more than 10 percent of the
insurer's assets may be invested in preferred stock, the redemption
and retirement of which is not provided for by a sinking fund
meeting the standards established by the National Association of
Insurance Commissioners; and
(4) the aggregate of all investments made under this
subsection may not exceed 40 percent of the insurer's assets;
(j) Collateral Loans. Collateral loans secured by a first
lien upon or a valid and perfected first security interest in an
asset; provided:
(1) the amount of any such collateral loan will not exceed
80 percent of the value of the collateral asset at any time during
the duration of the loan; and
(2) the asset used as collateral would be authorized for
direct investment by the insurer under other provisions of this
Section 4, except real property in Subsection (l);
(k) Real Estate Loans. Notes, evidences of indebtedness, or
participations therein secured by a valid first lien upon real
property or leasehold estate therein located in the United States
of America; provided:
(1) the amount of any such obligation secured by a first
lien upon real property or leasehold estate therein shall not
exceed 90 percent of the value of such real property or leasehold
estate therein, but the amount of such obligation:
(A) may exceed 90 percent but shall not exceed 100 percent
of the value of such real property or leasehold estate therein if
the insurer or one or more wholly owned subsidiaries of the insurer
owns in the aggregate a 10 percent or greater equity interest in
such real property or leasehold estate therein;
(B) may be 95 percent of the value of such real property or
leasehold estate therein if it contains only a dwelling designed
exclusively for occupancy by not more than four families for
residential purposes, and the portion of the unpaid balance of such
obligation which is in excess of an amount equal to 90 percent of
such value is guaranteed or insured by a mortgage insurance company
qualified to do business in the State of Texas; or
(C) may be greater than 90 percent of the value of such real
property or leasehold estate therein to the extent the obligation
is insured or guaranteed by the United States of America, the
Federal Housing Administration pursuant to the National Housing Act
of 1934, as amended (12 U.S.C. Section 1701 et seq.), or the State
of Texas; and
(2) the term of an obligation secured by a first lien upon a
leasehold estate in real property shall not exceed a period equal to
four-fifths of the then unexpired term of such leasehold estate;
provided the unexpired term of the leasehold estate must extend at
least 10 years beyond the term of the obligation, and each
obligation shall be payable in an installment or installments of
sufficient amount or amounts so that at any time after the
expiration of two-thirds of the original loan term, the principal
balance will be no greater than the principal balance would have
been if the loan had been amortized over the original loan term in
equal monthly, quarterly, semiannual, or annual payments of
principal and interest, it being required that under any method of
repayment such obligation will fully amortize during a period of
time not exceeding four-fifths of the then unexpired term of the
security leasehold estate; and
(3) if any part of the value of buildings is to be included
in the value of such real property or leasehold estate therein to
secure the obligations provided for in this subsection, such
buildings shall be covered by adequate property insurance,
including but not limited to fire and extended coverage insurance
issued by a company authorized to transact business in the State of
Texas or by a company recognized as acceptable for such purpose by
the insurance regulatory official of the state in which such real
estate is located, and the amount of insurance granted in the policy
or policies shall be not less than the unpaid balance of the
obligation or the insurable value of such buildings, whichever is
the lesser; the loss clause shall be payable to the insurer as its
interest may appear; and
(4) to the extent any note, evidence of indebtedness, or
participation therein under this subsection represents an equity
interest in the underlying real property, the value of such equity
interest shall be determined at the time of execution of such note,
evidence of indebtedness, or participation therein and that portion
shall be designated as an investment subject to the provisions of
Subsection (l)(2) of this section; and
(5) the amount of any one such obligation may not exceed 25
percent of the insurer's capital and surplus; and
(6) a first lien on real property may be purchased after its
origination if the first lien is insured by a mortgagee's title
policy issued to the original mortgagee that contains a provision
that inures the policy to the use and benefit of the owners of the
evidence of debt indicated in the policy and to any subsequent
owners of that evidence of debt, and if the insurer maintains
evidence of assignments or other transfers of the first lien on real
property to the insurer. An assignment or other transfer to the
insurer, duly recorded in the county in which the real property is
located, shall be presumed to create legal ownership of the first
lien by the insurer;
(l) Real Estate. Real property fee simple or leasehold
estates located within the United States of America, as follows:
(1) home and branch office real property or participations
therein, which must be materially enhanced in value by the
construction of durable, permanent-type buildings and other
improvements costing an amount at least equal to the cost of such
real property, exclusive of buildings and improvements at the time
of acquisition, or by the construction of such buildings and
improvements which must be commenced within two years of the date of
the acquisition of such real property; provided:
(A) at least 30 percent of the available space in such
building shall be occupied for the business purposes of the insurer
and its affiliates; and
(B) the aggregate investment in such home and branch offices
shall not exceed 20 percent of the insurer's assets; and
(2) other investment property or participations therein,
which must be materially enhanced in value by the construction of
durable, permanent-type buildings and other improvements costing
an amount at least equal to the cost of such real property,
exclusive of buildings and improvements at the time of acquisition,
or by the construction of such buildings and improvements which
must be commenced within two years of the date of acquisition of
such real property; provided that such investment in any one piece
of property or interest therein, including the improvements,
fixtures, and equipment pertaining thereto may not exceed five
percent of the insurer's assets; provided, however, nothing in
this article shall allow ownership of, development of, or equity
interest in any residential property or subdivision, single or
multiunit family dwelling property, or undeveloped real estate for
the purpose of subdivision for or development of residential,
single, or multiunit family dwellings, except acquisitions as
provided in Subdivision (4) below, and such ownership, development,
or equity interests shall be specifically prohibited;
(3) the admissible asset value of each such investment in
the properties acquired under Subdivisions (1) and (2) of this
subsection shall be subject to review and approval by the
Commissioner of Insurance. The commissioner shall have discretion
at the time such investment is made or any time when an examination
of the company is being made to cause any such investment to be
appraised by an appraiser, appointed by the commissioner, and the
reasonable expense of such appraisal shall be paid by such
insurance company and shall be deemed to be a part of the expense of
examination of such company; if the appraisal is made upon
application of the company, the expense of such appraisal shall not
be considered a part of the expense of examination of such company;
no insurance company may hereafter make any write-up in the
valuation of any of the properties described in Subdivision (1) or
(2) of this subsection unless and until it makes application
therefor and such increase in valuation shall be approved by the
commissioner; and
(4) other real property acquired:
(A) in good faith by way of security for loans previously
contracted or money due; or
(B) in satisfaction of debts previously contracted for in
the course of its dealings; or
(C) by purchase at sales under judgment or decrees of court,
or mortgage or other lien held by such insurer; and
(5) regardless of the mode of acquisition specified herein,
upon sale of any such real property, the fee title to the mineral
estate or any portion thereof may be retained by the insurance
company indefinitely;
(m) Oil, Gas, and Minerals. In addition to and without
limitation on the purposes for which real property may be acquired,
secured, held, or retained pursuant to other provisions of this
section, every such insurance company may secure, hold, retain, and
convey production payments, producing royalties and producing
overriding royalties, or participations therein as an investment
for the production of income; provided:
(1) in no event may such company carry such assets in an
amount in excess of 90 percent of the appraised value thereof; and
(2) no one investment under this subsection may exceed 10
percent of the insurer's capital and surplus in excess of statutory
minimum capital and surplus applicable to that insurer, and the
aggregate of all such investments may not exceed 10 percent of the
insurer's assets as of December 31st next preceding the date of such
investment; and
(3) for the purposes of this subsection, the following
definitions apply:
(A) a production payment is defined to mean a right to oil,
gas, or other minerals in place or as produced that entitles its
owner to a specified fraction of production until a specified sum of
money, or a specified number of units of oil, gas, or other
minerals, has been received;
(B) a royalty and an overriding royalty are each defined to
mean a right to oil, gas, and other minerals in place or as produced
that entitles the owner to a specified fraction of production
without limitation to a specified sum of money or a specified number
of units of oil, gas, or other minerals;
(C) "producing" is defined to mean producing oil, gas, or
other minerals in paying quantities, provided that it shall be
deemed that oil, gas, or other minerals are being produced in paying
quantities if a well has been "shut in" and "shut-in royalties" are
being paid;
(n) Foreign Countries and United States Territories. In
addition to the investments in Canada authorized in other
subsections of this section, investments in other foreign countries
or in commonwealths, territories, or possessions of the United
States; provided:
(1) such investments are substantially the same types as
those authorized for investment within the United States of America
or Canada by other provisions of this section; and
(2) such investments when added to the amount of similar
investments made within the United States and Canada do not result
in the combined total of such investments exceeding the limitations
specified in Subsections (a) through (m), (o), (q) and (u) of this
section; and
(3) such investments may not exceed the sum of:
(A) the amount of insurer's reserves attributable to the
insurance business in force in foreign countries, if any, and any
additional investments required by any foreign country as a
condition to doing business therein; and
(B) 20 percent of the insurer's assets of which no more than
10 percent of the insurer's assets may be investments denominated
in foreign currency that are not hedged pursuant to the provisions
of Subsection (u);
(o) Investments Not Otherwise Specified. Investments which
are not otherwise authorized by this article and which are not
specifically prohibited by statute, including that portion of any
investments which may exceed the limits specified in Subsections
(a) through (n), (q) and (u) of this section; provided:
(1) if any aggregate or individual specified investment
limitation in Subsections (a) through (n), (q) and (u) of this
section is exceeded, then the excess portion of such investment
shall be an investment under this subsection; and
(2) the burden of establishing the value of such investments
shall be upon the insurer; and
(3) the amount of any one such investment may not exceed 10
percent of the insurer's capital and surplus in excess of the
statutory minimum capital and surplus applicable to that insurer;
and
(4) the aggregate of all investments made under this
subsection may not exceed the lesser of either five percent of the
insurer's assets or the insurer's capital and surplus in excess of
the statutory minimum capital and surplus applicable to that
insurer;
(p) Other Authorized Investments. Those other investments
as follows:
(1) any investment held by an insurer on the effective date
of this Act, which was legally authorized at the time it was made or
acquired or which the insurer was authorized to hold or possess
immediately prior to such effective date, but which does not
conform to the requirements of the investments authorized in
Subsections (a) through (o) of this section, may continue to be held
by and considered as an authorized asset or transaction of the
insurer; provided the investment or transaction is disposed of at
its maturity date, if any, or within the time prescribed by the law
under which it was acquired, if any; and provided further, in no
event shall the provisions of this subdivision alter the legal or
accounting status of such asset; and
(2) any other investment which may be authorized by other
provisions of this code or by other laws of this state for the
insurers which are subject to this article.
(q) Securities Lending, Repurchase, Reverse Repurchase and
Dollar Roll Transactions. (a) For purposes of this Subsection (q),
the following definitions shall apply:
(1) "Repurchase transaction" means a transaction in which
an insurer purchases securities from a business entity that is
obligated to repurchase the purchased securities or equivalent
securities from the insurer at a specified price, either within a
specified period of time or upon demand.
(2) "Reverse repurchase transaction" means a transaction in
which an insurer sells securities to a business entity and is
obligated to repurchase the sold securities or equivalent
securities from the business entity at a specified price, either
within a specified period of time or upon demand.
(3) "Securities lending transaction" means a transaction in
which securities are loaned by an insurer to a business entity that
is obligated to return the loaned securities or equivalent
securities to the insurer, either within a specified period of time
or upon demand.
(4) "Dollar roll transaction" means two simultaneous
transactions with settlement dates no more than 96 days apart so
that in one transaction an insurer sells to a business entity, and
in the other transaction the insurer is obligated to purchase from
the same business entity, substantially similar securities of the
following types:
(A) mortgage-backed securities issued, assumed or
guaranteed by the Government National Mortgage Association, the
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation or their respective successors; and
(B) other mortgage-backed securities referred to in Section
106 of Title I of the Secondary Mortgage Market Enhancement Act of
1984 (15 U.S.C. Section 77r-1), as amended.
(b) An insurer may engage in securities lending,
repurchase, reverse repurchase and dollar roll transactions as set
forth herein. The insurer shall enter into a written agreement for
all transactions, except dollar roll transactions, that shall
require each transaction terminate no more than one year from its
inception.
(c) Cash received in a transaction under this section shall
be invested in accordance with this article and in a manner that
recognizes the liquidity needs of the transaction or used by the
insurer for its general corporate purposes. For so long as the
transaction remains outstanding, the insurer, its agent or
custodian shall maintain, as to acceptable collateral received in a
transaction under this subsection, either physically or through the
book entry systems of the Federal Reserve, Depository Trust
Company, Participants Trust Company or other securities
depositories approved by the commissioner:
(1) possession of the acceptable collateral;
(2) a perfected security interest in the acceptable
collateral; or
(3) in the case of a jurisdiction outside of the United
States, title to, or rights of a secured creditor to, the acceptable
collateral; and
(d) The limitations of Section 4(c) and Section 5(a) shall
not apply to the business entity counterparty exposure created by
transactions under this section. An insurer shall not enter into a
transaction under this subsection if, as a result of and after
giving effect to the transaction:
(1) the aggregate amount of securities then loaned, sold to,
or purchased from, any one business entity counterparty under this
subsection would exceed 5 percent of its assets. In calculating the
amount sold to or purchased from a business entity counterparty
under repurchase or reverse repurchase transactions, effect may be
given to netting provisions under a master written agreement; or
(2) the aggregate amount of all securities then loaned, sold
to or purchased from all business entities under this subsection
would exceed 40 percent of its assets.
(e) The amount of collateral required for securities
lending, repurchase and reverse repurchase transactions is the
amount required pursuant to the provisions of the Purposes and
Procedures of the Securities Valuation Office or such successor
publication.
(f) Article 3.39-1 shall not apply to transactions
authorized by this Subsection (q).
(r) Premium Loans. Loans to finance the payment of premiums
for the insurer's own insurance policies or annuity contracts;
provided that the amount of any such loan does not exceed the sum
of: (i) the available cash value of such insurance policy or
annuity contract; and (ii) the amount of any escrowed commissions
payable relating to such insurance policy or annuity contract for
which the premium loan is made; and
(s) Money Market Funds. (1) Money market mutual funds as
defined by 17 CFR 270.2a-7 under the Investment Company Act of 1940
(15 U.S.C. 80a-1 et seq.) that may be either of the following:
(A) government money market mutual fund which is a money
market mutual fund that:
(i) invests only in obligations issued, guaranteed or
insured by the federal government of the United States or
collateralized repurchase agreements composed of these
obligations; and
(ii) qualifies for investment without a reserve under the
Purposes and Procedures of the Securities Valuation Office or any
successor publication; or
(B) class one money market mutual fund which is a money
market mutual fund that qualifies for investment using the bond
class one reserve factor under the Purposes and Procedures of the
Securities Valuation Office or any successor publication.
(2) For purposes of complying with Subsection (h) of this
section, money market funds qualifying for listing within these
categories must conform to the Purposes and Procedures of the
Securities Valuation Office or such successor publication;
(t) The percentage authorizations and limitations set forth
in any or all of the provisions of this Article 3.33 shall apply
only at the time of the original acquisition of an investment or at
the time a transaction is entered into and shall not be applicable
to the insurer or such investment or transaction thereafter except
as provided in Subsection (w) of this section. In addition, any
investment, once qualified under any subsection of this section,
shall remain qualified notwithstanding any refinancing,
restructuring or modification of such investment provided that, the
insurer shall not engage in any such refinancing, restructuring or
modification of any investment for the purpose of circumventing the
requirements or limitations of this article.
(u) Risk Control Transactions. An insurer may use
derivative instruments to engage in hedging transactions,
replication transactions and income generation transactions as set
forth herein.
(1) For the purposes of this Subsection (u), the following
definitions shall apply:
(A) "Acceptable collateral" means cash, cash equivalents,
letters or credit and direct obligations, or securities that are
fully guaranteed as to principal and interest by, the government of
the United States.
(B) "Business entity" includes a sole proprietorship,
corporation, limited liability company, association, partnership,
joint stock company, joint venture, mutual fund, bank, trust, joint
tenancy or other similar form of business organization, whether
organized for-profit or not-for-profit.
(C) "Cap" means an agreement obligating the seller to make
payments to the buyer with each payment based on the amount by which
a reference price or level or the performance or value of one or
more underlying interests exceeds a predetermined number,
sometimes called the strike rate or strike price.
(D) "Cash equivalents" means short-term, highly rated,
highly liquid and readily marketable investments or securities,
which includes money market funds as defined in Subsection (s). For
purposes of this definition:
(i) "short-term" means investments with a remaining term to
maturity of one year or less; and
(ii) "highly rated" means an investment rated "P-1" by
Moody's Investors Service, Inc., or "A-1" by the Standard and Poor's
Division of the McGraw Hill Companies, Inc., or its equivalent
rating by a nationally recognized statistical rating organization
recognized by the Securities Valuation Office.
(E) "Collar" means an agreement to receive payments as the
buyer of an option, cap or floor and to make payments as the seller
of a different option, cap or floor.
(F) "Counterparty exposure amount" means:
(i) for an over-the-counter derivative instrument not
entered into pursuant to a written master agreement which provides
for netting of payments owed by the respective parties:
(a) the market value of the over-the-counter derivative
instrument if the liquidation of the derivative instrument would
result in a final cash payment to the insurer; or
(b) zero if the liquidation of the derivative instrument
would not result in a final cash payment to the insurer;
(ii) for over-the-counter derivative instruments entered
into pursuant to a written master agreement which provides for
netting of payments owed by the respective parties, and the
domiciliary jurisdiction of the counterparty is either within the
United States, or if not within the United States, is within a
foreign (not United States) jurisdiction listed in the Purposes and
Procedures Manual of the Securities Valuation Office as eligible
for netting, the greater of zero or the net sum payable to the
insurer in connection with all derivative instruments subject to
the written master agreement upon their liquidation in the event of
default by the counterparty pursuant to the master agreement
(assuming no conditions precedent to the obligations of the
counterparty to make such a payment and assuming no setoff of
amounts payable pursuant to any other instrument or agreement);
(iii) for purposes of this definition, market value or the
net sum payable, as the case may be, shall be determined at the end
of the most recent quarter of the insurer's fiscal year and shall be
reduced by the market value of acceptable collateral held by the
insurer or a custodian on the insurer's behalf.
(G) "Derivative instrument" means any agreement, option or
instrument, or any series or combinations thereof:
(i) to make or take delivery of, or assume or relinquish, a
specified amount of one or more underlying interests, or to make a
cash settlement in lieu thereof; or
(ii) that have a price, performance, value or cash flow
based primarily upon the actual or expected price, yield, level,
performance, value or cash flow of one or more underlying
interests.
Derivative instruments include options, warrants not
otherwise permitted to be held by the insurer under this article,
caps, floors, collars, swaps, swaptions, forwards, futures and any
other agreements, options or instruments substantially similar
thereto, or any series or combinations thereof.
Derivative instruments do not include collateralized
mortgage obligations, other asset-backed securities,
principal-protected structured securities, floating rate
securities, or instruments which an insurer is otherwise permitted
to invest in or receive under this article other than under this
subsection, and any debt obligations of the insurer.
(H) "Derivative transaction" means a transaction involving
the use of one or more derivative instruments. Dollar roll
transactions, repurchase transactions, reverse repurchase
transactions and securities lending transactions shall not be
included as derivative transactions for purposes of this
subsection.
(I) "Floor" means an agreement obligating the seller to make
payments to the buyer in which each payment is based on the amount
by which a predetermined number, sometimes called the floor rate or
price, exceeds a reference price, level, performance or value of
one or more underlying interests.
(J) "Forward" means an agreement (other than a future) to
make or take delivery in the future of one or more underlying
interests, or effect a cash settlement, based on the actual or
expected price, level, performance or value of such underlying
interests, but shall not mean or include spot transactions effected
within customary settlement periods, when-issued purchases or
other similar cash market transactions.
(K) "Future" means an agreement, traded on a futures
exchange, to make or take delivery of, or effect a cash settlement
based on the actual or expected price, level, performance or value
of, one or more underlying interests.
(L) "Futures exchange" means a foreign or domestic
exchange, contract market or board of trade on which trading in
futures is conducted and, in the United States, which has been
authorized for such trading by the Commodities Futures Trading
Commission or any successor thereof.
(M) "Hedging transaction" means a derivative transaction
which is entered into and maintained to manage:
(i) the risk of a change in the value, yield, price, cash
flow or quantity of assets or liabilities (or a portfolio of assets
and/or liabilities) which the insurer has acquired or incurred or
anticipates acquiring or incurring; or
(ii) the currency exchange rate risk related to assets or
liabilities (or a portfolio of assets and/or liabilities) which an
insurer has acquired or incurred or anticipates acquiring or
incurring.
(N) "Income generation transaction" means a derivative
transaction which is entered into to generate income. A derivative
transaction which is entered into as a hedging transaction or a
replication transaction shall not be considered an income
generation transaction.
(O) "Market value" means the price for the security or
derivative instrument obtained from a generally recognized source
or the most recent quotation from such a source or, to the extent no
generally recognized source exists, the price for the security or
derivative instrument as determined pursuant to the terms of the
instrument or in good faith by the insurer as can be reasonably
demonstrated to the Commissioner upon request, plus accrued but
unpaid income thereon to the extent not included in the price as of
the date.
(P) "Option" means an agreement giving the buyer the right
to buy or receive (a "call option"), sell or deliver (a "put
option"), enter into, extend or terminate or effect a cash
settlement based on the actual or expected price, spread, level,
performance or value of one or more underlying interests.
(Q) "Over-the-counter derivative instrument" means a
derivative instrument entered into with a business entity, other
than through a securities exchange, futures exchange, or cleared
through a qualified clearinghouse.
(R) "Potential exposure" means:
(i) as to a futures position, the amount of initial margin
required for that position; or
(ii) as to swaps, collars and forwards, one-half percent
times the notional amount times the square root of the remaining
years to maturity.
(S) "Qualified clearinghouse" means a clearinghouse subject
to the rules of a securities exchange or a futures exchange, which
provides clearing services, including acting as a counterparty to
each of the parties to a transaction such that the parties no longer
have credit risk to each other.
(T) "Replication transaction" means a derivative
transaction or combination of derivative transactions effected
either separately or in conjunction with cash market investments
included in the insurer's investment portfolio in order to
replicate the risks and returns of another authorized transaction,
investment or instrument and/or operate as a substitute for cash
market transactions. A derivative transaction entered into by the
insurer as a hedging transaction shall not be considered a
replication transaction.
(U) "Securities exchange" means:
(i) an exchange registered as a national securities
exchange or a securities market registered under the Securities
Exchange Act of 1934 (15 U.S.C. Section 78 et seq.), as amended;
(ii) Private Offerings Resales and Trading through
Automated Linkages (PORTAL); or
(iii) a designated offshore securities market as defined in
Securities Exchange Commission Regulation S, 17 C.F.R. Part 230, as
amended.
(V) "Swap" means an agreement to exchange or to net payments
at one or more times based on the actual or expected price, yield,
level, performance or value of one or more underlying interests.
(W) "Swaption" means an option to purchase or sell a swap at
a given price and time or at a series of prices and times. A
swaption does not mean a swap with an embedded option.
(X) "Underlying interest" means the assets, liabilities or
other interests, or a combination thereof, underlying a derivative
instrument, such as any one or more securities, currencies, rates,
indices, commodities or derivatives instruments.
(Y) "Warrant" means an instrument that gives the holder the
right to purchase or sell the underlying interest at a given price
and time or at a series of prices and times outlined in the warrant
agreement.
(2) Prior to entering into any derivative transaction, the
board of directors of the insurer shall approve a derivative use
plan, as part of the investment plan required in Section 3 of this
article, that:
(A) describes investment objectives and risk constraints,
such as counterparty exposure amounts;
(B) defines permissible transactions identifying the risks
to be hedged, the assets or liabilities being replicated; and
(C) requires compliance with internal control procedures.
(3) The insurer shall establish written internal control
procedures that provide for:
(A) a quarterly report to the board of directors that
reviews:
(i) all derivative transactions entered into, outstanding
or closed out;
(ii) the results and effectiveness of the derivatives
program; and
(iii) the credit risk exposure to each counterparty for
over-the-counter derivative transactions based upon the
counterparty exposure amount;
(B) a system for determining whether hedging or replication
strategies utilized have been effective;
(C) a system of regular reports (not less frequently than
monthly) to management including:
(i) a description of all the derivative transactions
entered into, outstanding or closed out during the period since the
last report;
(ii) the purpose of each outstanding derivative
transaction;
(iii) a performance review of the derivative instrument
program; and
(iv) the counterparty exposure amount for over-the-counter
derivative transactions;
(D) written authorizations that identify the
responsibilities and limitations of authority of persons
authorized to effect and maintain derivative transactions;
(E) documentation appropriate for each transaction
including:
(i) the purpose of the transaction;
(ii) the assets or liabilities to which the transaction
relates;
(iii) the specific derivative instrument used in the
transaction;
(iv) for over-the-counter derivative instrument
transactions, the name of the counterparty and the counterparty
exposure amount; and
(v) for exchange-traded derivative instruments, the name of
the exchange and the name of the firm that handled the transaction.
(4) An insurer shall be able to demonstrate to the
commissioner, upon request, the intended hedging characteristics
and ongoing effectiveness of the derivative transaction or
combination of transactions through cash flow testing, duration
analysis or other appropriate analysis.
(5) An insurer shall include all counterparty exposure
amounts in determining compliance with the limitations of
Subsection (c).
(6)(a) Ten days prior to entering into the initial hedging
transaction, the insurer shall notify the commissioner in writing
that: (i) the insurer's board of directors has adopted an
investment plan which authorizes hedging transactions, and (ii) all
hedging transactions will comply with this Subsection (u).
Insurers already engaged in hedging transactions shall notify the
commissioner as set forth in the preceding sentence within 30 days
of the effective date of this Subsection (u). Thereafter, an
insurer may enter into hedging transactions under this subsection,
if as a result of and after giving effect to each such transaction:
(A) the aggregate statement value of all outstanding
options (other than collars), caps, floors, swaptions and warrants
(not attached to another financial instrument purchased by the
insurer) pursuant to this subsection does not exceed 7.5 percent of
its assets;
(B) the aggregate statement value of all outstanding
options (other than collars), swaptions, warrants, caps and floors
written by the insurer pursuant to this subsection does not exceed
three percent of its assets; and
(C) the aggregate potential exposure of all outstanding
collars, swaps, forwards and futures entered into or acquired by
the insurer pursuant to this subsection does not exceed 6.5 percent
of its assets.
(b) Whenever the derivative transactions entered into under
this Subsection (u)(6), are not in compliance with this Subsection
(u) or, if continued, may now or subsequently, create a hazardous
financial condition to the insurer which affects its policyholders,
creditors or the general public, the commissioner may, after notice
and an opportunity for a hearing, order the insurer to take such
action as may be reasonably necessary to (i) rectify a hazardous
financial condition, or (ii) to prevent an impending hazardous
financial condition from occurring.
(7) An insurer may only enter into an income generation
transaction if:
(A) as a result of and after giving effect to the
transaction, the aggregate statement value of admitted assets that
are then subject to call or that generate the cash flows for
payments required to be made by the insurer under caps and floors
sold by the insurer and then outstanding under this subsection,
plus the statement value of admitted assets underlying derivative
instruments then subject to calls sold by the insurer and
outstanding under this subsection, plus the purchase price of
assets subject to puts then outstanding under this subsection does
not exceed 10 percent of its assets; and
(B) the transaction is one of the following types, is
covered in the manner specified below and meets the other
requirements specified below:
(i) sales of call options on assets, provided that the
insurer holds or has a currently exercisable right to acquire the
underlying assets during the entire period that the option is
outstanding;
(ii) sales of put options on assets, provided that the
insurer holds sufficient cash, cash equivalents or interests in a
short-term investment pool to purchase the underlying assets upon
exercise during the entire period that the option is outstanding,
and has the ability to hold the underlying assets in its portfolio.
If the total market value of all put options sold by the insurer
exceeds two percent of the insurer's assets, the insurer shall set
aside pursuant to a custodial or escrow agreement cash or cash
equivalents having a market value equal to the amount of its put
option obligations in excess of two percent of the insurer's assets
during the entire period the option is outstanding;
(iii) sales of call options on derivative instruments
(including swaptions), provided that the insurer holds or has a
currently exercisable right to acquire assets generating the cash
flow to make any payments for which the insurer is liable pursuant
to the underlying derivative instruments during the entire period
that the call options are outstanding and has the ability to enter
into the underlying derivative transactions for its portfolio; and
(iv) sales of caps and floors, provided that the insurer
holds or has a currently exercisable right to acquire assets
generating the cash flow to make any payments for which the insurer
is liable pursuant to the caps and floors during the entire period
that the caps and floors are outstanding.
(8)(a) An insurer may enter into replication transactions
only with prior written approval from the Commissioner, provided
that:
(A) the insurer would otherwise be authorized to invest its
funds under this article in the asset being replicated; and
(B) the asset being replicated is subject to all the
provisions and limitations on the making thereof specified in this
article with respect to investments by the insurer as if the
transaction constituted a direct investment by the insurer in the
replicated asset.
(b) The commissioner may adopt such rules and regulations
regarding replication transactions as may be fair and reasonable to
implement this Subsection (u)(8).
(9) An insurer may purchase or sell one or more derivative
instruments to offset, in whole or in part, any derivative
instrument previously purchased or sold, as the case may be,
without regard to the quantitative limitations of this subsection,
provided that such offsetting transaction utilizes the same type of
derivative instrument as the derivative instrument being offset.
(10) Trading Requirements. Each derivative instrument
shall be:
(A) traded on a securities exchange;
(B) entered into with, or guaranteed by, a business entity;
(C) issued or written by or entered into with the issuer of
the underlying interest on which the derivative instrument is
based; or
(D) in the case of futures, traded through a broker which is
registered as a futures commission merchant under the Commodity
Exchange Act or which has received exemptive relief from such
registration under Rule 30.10 promulgated under the Commodity
Exchange Act.
(11) Article 3.39-2 shall not apply to transactions
authorized by this Subsection (u).
(v) Distributions, Reinsurance, and Merger. No provision
of this article prohibits the acquisition by an insurer of
additional obligations, securities, or other assets if received as
a dividend or as a distribution of assets, nor does this article
apply to securities, obligations, or other assets accepted incident
to the workout, adjustment, restructuring or similar realization of
any kind of investment or transaction when deemed by the insurer's
board of directors or by a committee appointed by the board of
directors to be in the best interests of the insurer, if the
investment or transaction had previously been authorized, nor does
this article apply to assets acquired pursuant to a lawful
agreement of bulk reinsurance, merger, or consolidation if such
assets constituted legal and authorized investments for the ceding,
merged or consolidated company. No obligation, security or other
asset acquired as permitted by this subsection need be qualified
under any other subsection of this article.
(w) Qualification of Investments. The qualification or
disqualification of an investment under one subsection of this
section does not prevent its qualification in whole or in part under
another subsection, and an investment authorized by more than one
subsection may be held under whichever authorizing subsection the
insurer elects. An investment or transaction qualified under any
subsection at the time it was acquired or entered into by the
insurer shall continue to be qualified under that subsection. An
investment, in whole or in part, may be transferred from time to
time, at the election of the insurer, to the authority of any
subsection under which it then qualifies, whether or not it
originally qualified thereunder.
Aggregate Diversification Requirements
Sec. 5. The following provisions govern and take precedence
over each and every provision of Section 4, except Subsections (q),
(t) and (v):
(a) Investment in all or any types of securities, loans,
obligations, or evidences of indebtedness of a single issuer or
borrower (which shall include such issuer's or borrower's
majority-owned subsidiaries or parent or the majority-owned
subsidiaries of such parent), other than those authorized
investments that are either direct obligations of or guaranteed by
the full faith and credit of the United States of America, the State
of Texas, or a political subdivision thereof or are insured by an
agency of the United States of America or the State of Texas shall
not in the aggregate exceed five percent of the insurer's assets
except for those investments provided for in Subsections (e) and
(f) of Section 4 of this article; and
(b) The aggregate investment in real property authorized by
Subsections (l), (m), (o), and (p) of Section 4 may not exceed
33-1/3 percent of the insurer's assets; provided, in the event an
insurer acquires real property under Subdivision (4) of Subsection
(l) of Section 4 and such acquisition causes such aggregate real
estate to exceed the limitation set forth herein, the insurer shall
either dispose of sufficient excess real property to come within
such limitations within 10 years of such acquisition or it may not
thereafter admit as an asset the value of the real property in
excess of such limitation; should an insurer's real property
acquisitions exceed such 33-1/3 percent limitation, no additional
real property acquisitions under Subdivisions (1) and (2) of
Subsection (l), and Subsections (m), (o), and (p) of Section 4 of
this article are authorized until such excess is removed.
Prior Approval Exception
Sec. 6. The quantitative limitations respecting any
investment authorized in Section 4 may be waived by prior written
approval of the commissioner; provided:
(a) A hearing is held to determine whether approval should
be granted;
(b) The applicant seeking prior approval establishes that
unreasonable or unnecessary loss or harm to the insurer will result
if approval is withheld;
(c) The excessive investment will not have a material
adverse effect upon the insurer;
(d) The size of the investment is reasonable in relation to
the insurer's assets, capital, surplus, and liabilities; and
(e) The commissioner's prior authorization may treat the
resulting excess investment as an asset not admitted.
Accounting Provisions
Sec. 7. (a) The term "assets" as used in this article shall
mean the statutory accounting admitted assets of the insurer,
including lawful money of the United States, whether in the form of
cash or demand deposits in solvent banks, savings and loan
associations, and credit unions and branches thereof, organized
under the laws of the United States of America or its states, when
held in accordance with the laws or regulations applicable to such
entities, less the insurer's separate accounts that are subject to
Part III of Article 3.39, Article 3.72, Article 3.73, and Article
3.75 of this code.
(b) Each insurer shall maintain reasonable, adequate, and
accurate evidence of its ownership of its assets and investments.
(c) The ownership of governmental or corporate securities
shall be evidenced as provided for in Article 21.39-B, Section 4, of
this code.
(d) Other than investments made as a participation in a
partnership or joint venture, or as otherwise provided in Article
21.39-B of this code, investments shall be held solely in the name
of the insurer.
Investments of Companies Reinsured
Sec. 8. In any case in which a domestic insurance company
shall assume and reinsure the business and take over the assets of
another insurance company, either domestic or foreign, all assets
or investments of such reinsured company that were authorized as
proper assets or investments for the funds of such reinsured
company, and which are taken over by such domestic company, shall be
considered as valid assets or investments of such reinsuring
domestic company under the laws of this state; provided such assets
or investments are approved by the Commissioner of Insurance of
this state, and the same are taken over on terms satisfactory to
said commissioner, and upon the condition that the commissioner
shall have the power to require the reinsuring domestic company to
reasonably dispose of any of such assets or investments as do not
otherwise meet the requirements of this article within such time
schedule as will minimize any financial loss or other hardship by
the disposition of such asset or investment.
Rules and Regulations
Sec. 9. The State Board of Insurance may adopt such rules,
regulations, minimum standards, or limitations which are fair and
reasonable as may be appropriate for the augmentation and
implementation of this article.
Real Estate Brokerage
Sec. 10. Domestic companies as defined in Section 5 of
Article 3.01 of this code and other insurers specifically made
subject to the provisions of this article shall not engage in the
business of a real estate broker or a real estate salesman as
defined by The Real Estate License Act, as amended (Article 6573a,
Vernon's Texas Civil Statutes), except that such insurers may hold,
improve, maintain, manage, rent, lease, sell, exchange, or convey
any of the real property interests owned as investments under
Section 4 of this article.
Added by Acts 1985, 69th Leg., ch. 36, Sec. 1, eff. Jan. 1, 1986.
Sec. 4 amended by Acts 1989, 71st Leg., ch. 187, Sec. 3, eff. Aug.
28, 1989; Acts 1991, 72nd Leg., ch. 408, Sec. 7, eff. Aug. 26, 1991;
Acts 1993, 73rd Leg., ch. 685, Sec. 7.11, eff. Sept. 1, 1993; Sec. 2
amended by Acts 1997, 75th Leg., ch. 556, Sec. 1, eff. Sept. 1,
1997; Sec. 3 amended by Acts 1997, 75th Leg., ch. 556, Sec. 2, eff.
Sept. 1, 1997; Sec. 3A added by Acts 1997, 75th Leg., ch. 556, Sec.
3, eff. Sept. 1, 1997; Sec. 4 amended by Acts 1997, 75th Leg., ch.
556, Sec. 4, eff. Sept. 1, 1997; Sec. 5 amended by Acts 1997, 75th
Leg., ch. 556, Sec. 5, eff. Sept. 1, 1997; Sec. 7 amended by Acts
1997, 75th Leg., ch. 556, Sec. 6, eff. Sept. 1, 1997; Sec. 1 amended
by Acts 2003, 78th Leg., ch. 487, Sec. 2, eff. Sept. 1, 2003.
Article: 3.16 3.17 3.18 3.28 3.29 3.31 3.32 3.33 3.38 3.39 3.39a 3.40 3.40-1 3.41 3.41a
Last modified: August 11, 2007
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