Texas Insurance Code - Section 425.114. Authorized Investments: Insurance Company Investment Pools
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§ 425.114. AUTHORIZED INVESTMENTS: INSURANCE COMPANY
INVESTMENT POOLS. (a) In this section, "affiliate" means, with
respect to a person, another person that, directly or indirectly
through one or more intermediaries, controls, is controlled by, or
is under common control with the person.
(b) Subject to Subsections (c)-(g), an insurance company
may acquire investments in an investment pool that invests only in:
(1) obligations that have a rating by the securities
valuation office of one or two, or an equivalent rating issued by a
nationally recognized statistical rating organization recognized
by the securities valuation office, or that are issued by an issuer
with outstanding obligations that have a securities valuation
office one or two rating or an equivalent rating described by this
subdivision, and that:
(A) have a remaining maturity of 397 days or less
or a put that:
(i) entitles the holder to receive the
principal amount of the obligation; and
(ii) may be exercised through maturity at
specified intervals not exceeding 397 days; or
(B) have a remaining maturity of three years or
less and a floating interest rate that resets at least quarterly on
the basis of a current short-term index (federal funds, prime rate,
treasury bills, London InterBank Offered Rate, or commercial paper)
and is not subject to a maximum limit, if the obligations do not
have an interest rate that varies inversely to market interest rate
changes;
(2) securities lending, repurchase, and reverse
repurchase transactions that meet the requirements of Section
425.121 and any applicable department rules;
(3) money market funds as authorized by Section
425.123, except that a short-term investment pool may not acquire
investments in a single business entity that exceed 10 percent of
the total assets of the pool; or
(4) investments that an insurance company may make
under this subchapter, if:
(A) the company's proportionate interest in the
amount invested in those investments does not exceed the limits of
this subchapter; and
(B) the aggregate amount of the company's
investments in all investment pools under this subdivision does not
exceed 25 percent of the company's assets.
(c) An insurance company may not acquire an investment in an
investment pool under Subsection (b) if, after making the
investment, the aggregate amount of the company's investments in
all investment pools would exceed 35 percent of the company's
assets.
(d) For an investment in an investment pool to be qualified
under this section, the pool may not:
(1) acquire securities issued, assumed, guaranteed,
or insured by an investing insurer or an affiliate of the investing
insurance company; or
(2) borrow or incur an indebtedness for borrowed
money, except for securities lending and reverse repurchase
transactions.
(e) For an investment pool to be qualified under this
section:
(1) the pool manager must:
(A) be organized under the laws of the United
States or a state and designated as the pool manager in a pooling
agreement; or
(B) be:
(i) the investing insurance company, an
affiliated insurance company, a business entity affiliated with the
investing company, a custodian bank, a business entity registered
under the Investment Advisers Act of 1940 (15 U.S. C. Section 80b-1
et seq.), as amended;
(ii) in the case of a reciprocal or
interinsurance exchange, the exchange's attorney-in-fact; or
(iii) in the case of a United States branch
of an alien insurance company, the United States manager or an
affiliate or subsidiary of the United States manager;
(2) the pool manager or an entity designated by the
pool manager of the type described by Subdivision (1)(B) must
maintain:
(A) detailed accounting records showing:
(i) the cash receipts and disbursements
reflecting each participant's proportionate investment in the
pool; and
(ii) a complete description of all the
pool's underlying assets, including the amount, interest rate,
maturity date, if any, and other appropriate designations; and
(B) other records that, on a daily basis, allow a
third party to verify each participant's investments in the pool;
and
(3) the assets of the pool must be held in one or more
accounts, in the name or on behalf of the pool, at the principal
office of the pool manager or under a custody agreement or trust
agreement with a custodian bank, provided that the agreement:
(A) states and recognizes the claims and rights
of each participant;
(B) acknowledges that the pool's underlying
assets are held solely for the benefit of each participant in
proportion to the aggregate amount of the participant's investments
in the pool; and
(C) contains an agreement that the pool's
underlying assets may not be commingled with the general assets of
the custodian bank or any other person.
(f) The pooling agreement for each investment pool must be
in writing and must provide that:
(1) 100 percent of the interests in the pool must be
held at all times by the insurance company, the company's
subsidiaries or affiliates, or, in the case of a United States
branch of an alien insurance company, the affiliates or
subsidiaries of the United States manager, and any unaffiliated
insurance company;
(2) the pool's underlying assets may not be commingled
with the general assets of the pool manager or any other person;
(3) in proportion to the aggregate amount of each pool
participant's interest in the pool:
(A) each participant owns an undivided interest
in the pool's underlying assets; and
(B) the pool's underlying assets are held solely
for the benefit of each participant;
(4) a participant, or, in the event of the
participant's insolvency, bankruptcy, or receivership, the
participant's trustee, receiver, conservator, or other successor
in interest, may withdraw all or part of the participant's
investment from the pool under the terms of the pooling agreement;
(5) a withdrawal may be made on demand without penalty
or other assessment on any business day, and settlement of funds
must occur within a reasonable and customary period after the
withdrawal, except that:
(A) in the case of publicly traded securities,
the settlement period may not exceed five business days; and
(B) in the case of securities and investments
other than publicly traded securities, the settlement period may
not exceed 10 business days;
(6) the amount of a distribution under Subdivision (5)
must be computed after subtracting all the pool's applicable fees
and expenses;
(7) the pool manager shall distribute to a
participant, at the manager's discretion:
(A) in cash, an amount that represents the fair
market value of the participant's pro rata share of each of the
pool's underlying assets;
(B) in kind, an amount that represents a pro rata
share of each underlying asset; or
(C) in a combination of cash and in-kind
distributions, an amount that represents a pro rata share in each
underlying asset; and
(8) the pool manager shall make the records of the pool
available for inspection by the commissioner.
(g) An investment in an investment pool is not considered to
be an affiliate transaction under Subchapter C, Chapter 823, but
each pooling agreement is subject to the standards of Section
823.101 and the reporting requirements of Section 823.052.
Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.
Section: 425.107 425.108 425.109 425.110 425.111 425.112 425.113 425.114 425.115 425.116 425.117 425.118 425.119 425.120 425.121
Last modified: August 11, 2007
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