Texas Insurance Code Title 4, Chapter 425 - Reserves And Investments For Life Insurance Companies And Related Entities

SUBCHAPTER A GENERAL PROVISIONS

• Texas Section 425.001 - Securities In Amount Of Reserves Required
  The commissioner, after determining the amount of the reserves required on all of a life insurance company's policies in force, shall ensure that the company...
• Texas Section 425.002 - Certain Insurers: Deposit Of Securities, Money, Or Property In Amount Of Legal Reserves
  (a) Except as provided by Subsection (b), a life insurance company incorporated under the laws of this state may deposit with the department, for the...
• Texas Section 425.003 - Certain Insurers: Required Deposits Of Securities; Additional Deposits And Withdrawals
  (a) A life insurance company that, before August 28, 1961, issued or assumed the obligations of policies or annuity contracts that were registered as provided...
• Texas Section 425.004 - Records Of Securities Deposited With Department; Report Of Value
  Each life insurance company that is required by Section 425.003 to have securities on deposit with the department shall: (1) keep records of: (A) all...
• Texas Section 425.005 - Department Duties Regarding Deposited Securities; Insurance Company Access
  (a) The department shall keep securities deposited by a life insurance company under Sections 425.002 and 425.003 in a secure safe-deposit, fireproof box or vault...
• Texas Section 425.006 - Additional Reserves Required: Substandard Or Extra Hazardous Policies
  (a) If a life insurance company engaged in business under the laws of this state has written or assumed risks that are substandard or extra...
• Texas Section 425.007 - Subscription To Or Underwriting Purchase Or Sale Of Securities Or Property Prohibited; Control Of Disposition Of Property
  (a) A life insurance company organized under the laws of this state may not: (1) subscribe to, or participate in, any underwriting of the purchase...
• Texas Section 425.008 - Authorized Investments For Foreign Companies
  A foreign company shall invest the company's assets in: (1) securities or property of the same classes in which the law of this state permits...

SUBCHAPTER B STANDARD VALUATION LAW

• Texas Section 425.009 - Student Loans
  A foreign or domestic life insurance company may make loans to a student enrolled in an institution of higher education if the principal amount of...
• Texas Section 425.051 - Short Title
  This subchapter may be cited as the Standard Valuation Law. Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1,
• Texas Section 425.052 - Definitions
  (a) In this subchapter: (1) "Accident and health insurance" means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness,...
• Texas Section 425.053 - Annual Valuation Of Reserves For Policies And Contracts Issued Before Operative Date Of Valuation Manual
  (a) The department shall annually value or cause to be valued the reserves for all outstanding life insurance policies and annuity and pure endowment contracts...
• Texas Section 425.0535 - Annual Valuation Of Reserves For Policies And Contracts Issued On Or After Operative Date Of Valuation Manual
  (a) The commissioner shall annually value, or cause to be valued, the reserves for all outstanding life insurance contracts, annuity and pure endowment contracts, accident...
• Texas Section 425.054 - Actuarial Opinion Of Reserves Issued Before Operative Date Of Valuation Manual
  Sec. 425.054. ACTUARIAL OPINION OF RESERVES ISSUED BEFORE OPERATIVE DATE OF VALUATION MANUAL. (a) This section applies only to an actuarial opinion of reserves issued...
• Texas Section 425.0545 - Actuarial Opinion Of Reserves After Operative Date Of Valuation Manual
  (a) A company that has outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and is subject to regulation...
• Texas Section 425.055 - Supporting Memorandum For Actuarial Opinion
  (a) A memorandum shall be prepared to support each actuarial opinion required by Section 425.054 or 425.0545. The form and substance of each supporting memorandum...
• Texas Section 425.056 - Limitation On Liability For Actuarial Opinion
  (a) Except in cases of fraud or wilful misconduct or as provided by Subsection (b), a person who certifies an opinion under Section 425.054 or...
• Texas Section 425.057 - Disciplinary Action: Company Or Person Certifying Opinion
  A company or person that certifies an opinion under Section 425.054 or 425.0545 and that violates Section 425.054, 425.0545, or 425.055 or rules adopted under...
• Texas Section 425.058 - Computation Of Minimum Standard: General Rule
  (a) Except as otherwise provided by Section 425.059, 425.060, 425.061, 425.062, or 425.063, the minimum standard for the valuation of an outstanding life insurance policy...
• Texas Section 425.059 - Computation Of Minimum Standard For Certain Annuities And Pure Endowment Contracts
  (a) This section applies to an individual annuity or pure endowment contract issued on or after January 1, 1979, and an annuity or pure endowment...
• Texas Section 425.060 - Applicability Of Calendar Year Statutory Valuation Interest Rates
  The calendar year statutory valuation interest rates as defined by Sections 425.061, 425.062, and 425.063 are the interest rates used in determining the minimum standard...
• Texas Section 425.061 - Computation Of Calendar Year Statutory Valuation Interest Rate: General Rule
  (a) For purposes of Subsection (b): (1) R1 is the lesser of R or.09; (2) R2 is the greater of R or.09; (3) R is...
• Texas Section 425.062 - Weighting Factors
  (a) This section prescribes the weighting factors referred to in the formulas prescribed by Section 425.061. (b) The weighting factor for a life insurance policy...
• Texas Section 425.063 - Reference Interest Rate
  (a) In this section, "Moody's Corporate Bond Yield Average" means the Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc....
• Texas Section 425.064 - Commissioners Reserve Valuation Method For Life Insurance And Endowment Benefits
  (a) Except as otherwise provided by Sections 425.065 and 425.068 and subject to Subsection (b), for the life insurance and endowment benefits of a policy...
• Texas Section 425.065 - Commissioners Annuity Reserve Valuation Method For Annuity And Pure Endowment Benefits
  (a) This section applies to an annuity or pure endowment contract other than a group annuity or pure endowment contract purchased under a retirement or...
• Texas Section 425.066 - Minimum Aggregate Reserves
  (a) An insurance company's aggregate reserves for all life insurance policies, excluding disability or accidental death benefits, issued by the company on or after the...
• Texas Section 425.067 - Optional Reserve Computations
  (a) Reserves for a policy or contract issued by a life insurance company before the date on which Chapter 1105 would apply to the policy...
• Texas Section 425.068 - Reserve Computation: Gross Premium Charged Less Than Valuation Net Premium
  (a) If in a contract year the gross premium charged by a life insurance company on a policy or contract is less than the valuation...
• Texas Section 425.069 - Reserve Computation: Indeterminate Premium Plans And Certain Other Plans
  (a) For a life insurance plan that provides for future premium determination, the amounts of which are to be determined by the insurance company based...
• Texas Section 425.070 - Computation Of Reserve For Certain Policies By Calendar Year Of Issue
  (a) The reserve for a policy or contract issued by a life insurance company before the date on which Chapter 1105 would apply to the...
• Texas Section 425.071 - Lapse Rates In Minimum Standard Of Valuation
  (a) The minimum standard of valuation under this subchapter may include lapse rates in the calculation of reserves for a secondary guarantee in universal life...
• Texas Section 425.072 - Minimum Standard For Accident And Health Insurance Contracts
  (a) The standard prescribed by the valuation manual for accident and health insurance contracts issued on or after the operative date of the valuation manual...
• Texas Section 425.073 - Valuation Manual For Policies Issued On Or After The Operative Date Of The Valuation Manual
  (a) Except as otherwise provided by this section, for policies issued on or after the operative date of the valuation manual, the standard prescribed by...
• Texas Section 425.074 - Requirements Of A Principle-based Valuation
  (a) A company shall establish reserves using a principle-based valuation that meets the conditions for policies or contracts provided by the valuation manual. At a...
• Texas Section 425.075 - Experience Reporting For Policies In Force On Or After Operative Date Of Valuation Manual
  A company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the valuation manual. Added by Acts 2015, 84th...
• Texas Section 425.076 - Confidentiality
  (a) In this section, "confidential information" means: (1) a memorandum in support of an opinion submitted under Section 425.0545 and any other documents, materials, and...

SUBCHAPTER C AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR CAPITAL STOCK LIFE, HEALTH, AND ACCIDENT INSURERS

• Texas Section 425.077 - Single State Exemption
  The commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in this state from...
• Texas Section 425.101 - Definitions
  In this subchapter: (1) "Assets" means the statutory accounting admitted assets of an insurance company. The term includes lawful money of the United States, whether...
• Texas Section 425.102 - Inapplicability Of Certain Law
  The definition of "state" assigned by Section 311.005, Government Code, does not apply to this subchapter. Added by Acts 2005, 79th Leg., Ch. 727 (H.B....
• Texas Section 425.103 - Applicability Of Subchapter
  (a) This subchapter and rules adopted to interpret and implement this subchapter apply to all domestic insurance companies as defined in Section 841.001 and to...
• Texas Section 425.104 - Purpose
  The purpose of this subchapter is to protect and further the interests of insureds, insurance companies, creditors, and the public by providing standards for development...
• Texas Section 425.105 - Written Investment Plan
  (a) Each insurance company's board of directors or, if the company does not have a board of directors, the corresponding authority designated by the company's...
• Texas Section 425.106 - Investment Records; Demonstration Of Compliance
  An insurance company shall maintain investment records covering each transaction. The company must be able to demonstrate at all times that the company's investments are...
• Texas Section 425.108 - Authorized Investments And Transactions In General
  (a) Subject to the limitations and restrictions imposed by this subchapter, and, unless otherwise specified, based on the insurance company's capital, surplus, and admitted assets...
• Texas Section 425.109 - Authorized Investments: Government Obligations
  (a) An insurance company may invest in: (1) a bond, evidence of indebtedness, or other obligation of the United States; (2) a bond, evidence of...
• Texas Section 425.110 - Authorized Investments: Obligations Of And Other Investments In Business Entities
  (a) In this section: (1) "Business entity" includes a sole proprietorship, corporation, association, general or limited partnership, limited liability company, joint-stock company, joint venture, trust,...
• Texas Section 425.111 - Authorized Investments: Bonds Issued, Assumed, Or Guaranteed In International Market
  (a) Subject to this section, an insurance company may invest in bonds issued, assumed, or guaranteed by: (1) the Inter-American Development Bank; (2) the International...
• Texas Section 425.112 - Authorized Investments: Policy Loans
  An insurance company may invest in loans on the security of the company's own policies in an amount that does not exceed the amount of...
• Texas Section 425.113 - Authorized Investments: Deposits In Certain Financial Institutions
  (a) Subject to this section, an insurance company may invest in any type of savings deposit, time deposit, certificate of deposit, NOW account, or money...
• Texas Section 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...
• Texas Section 425.115 - Authorized Investments: Equity Interests
  (a) In this section, "business entity" means a real estate investment trust, corporation, limited liability company, association, limited partnership, joint venture, mutual fund, trust, joint...
• Texas Section 425.116 - Authorized Investments: Preferred Stock
  (a) Subject to this section, an insurance company may invest in preferred stock of a business entity, as defined by Section 425.110. (b) An insurance...
• Texas Section 425.117 - Authorized Investments: Collateral Loans
  (a) Subject to this section, an insurance company may invest in a collateral loan secured by: (1) a first lien on an asset; or (2)...
• Texas Section 425.118 - Authorized Investments: Obligations Secured By Real Property Loans
  (a) Subject to this section, an insurance company may invest in a note, an evidence of indebtedness, or a participation in a note or evidence...
• Texas Section 425.1185 - Authorized Investments: Mezzanine Real Estate Loans
  (a) In this section, "mezzanine real estate loan" means a loan that is secured by a pledge of direct or indirect equity interests in an...
• Texas Section 425.119 - Authorized Investments: Real Property
  (a) Subject to this section, an insurance company may invest in a real property fee simple or leasehold estate located in the United States. (b)...
• Texas Section 425.120 - Authorized Investments: Oil, Gas, And Minerals
  (a) In this section: (1) "Producing" means producing oil, gas, or other minerals in paying quantities. A well that has been shut in is considered...
• Texas Section 425.121 - Authorized Investments: Securities Lending, Repurchase, Reverse Repurchase, And Dollar Roll Transactions
  (a) In this section: (1) "Dollar roll transaction" means two simultaneous transactions with settlement dates not more than 96 days apart, in one of which...
• Texas Section 425.122 - Authorized Investments: Premium Loans
  (a) Subject to Subsection (b), an insurance company may make loans to finance the payment of premiums for the company's own insurance policies or annuity...
• Texas Section 425.123 - Authorized Investments: Money Market Funds
  (a) An insurance company may invest in a money market fund as described by 17 C.F.R. Section 270.2a-7 under the Investment Company Act of 1940...
• Texas Section 425.124 - Authorized Investments: Risk Control Transactions
  Subject to Sections 425.126-425.132, an insurance company may use derivative instruments, as defined by Section 425.125, to engage in hedging transactions, replication transactions, and income...
• Texas Section 425.125 - Risk Control Transactions: Definitions
  In Sections 425.124-425.132: (1) "Acceptable collateral" means cash, cash equivalents, letters of credit, and direct obligations, or securities that are fully guaranteed as to principal...
• Texas Section 425.126 - Risk Control Transactions: Derivative Use Plan
  (a) Before an insurance company enters into a derivative transaction, the company's board of directors must approve a derivative use plan as part of the...
• Texas Section 425.127 - Risk Control Transactions: Internal Control Procedures
  An insurance company that enters into a derivative transaction shall establish written internal control procedures that provide for: (1) a quarterly report to the board...
• Texas Section 425.128 - Risk Control Transactions: Oversight By Commissioner
  (a) An insurance company must be able to demonstrate to the commissioner on request the intended hedging characteristics and continuing effectiveness of a derivative transaction...
• Texas Section 425.129 - Risk Control Transactions: Limitations On Income Generation Transactions
  An insurance company may enter into an income generation transaction only if: (1) as a result of and after making the transaction, the sum of...
• Texas Section 425.130 - Risk Control Transactions: Limitations On Replication Transactions
  (a) An insurance company may enter into a replication transaction only with the prior written approval of the commissioner, and only if: (1) the company...
• Texas Section 425.131 - Risk Control Transactions: Trading Requirements
  For purposes of Sections 425.124-425.132, each derivative instrument must be: (1) traded on a securities exchange; (2) entered into with, or guaranteed by, a business...
• Texas Section 425.132 - Risk Control Transactions: Offsetting Transactions
  (a) Subject to this section, an insurance company may purchase or sell one or more derivative instruments to wholly or partly offset a derivative instrument...
• Texas Section 425.151 - Authorized Investments: Foreign Countries And United States Territories
  (a) In addition to the investments within Canada authorized by this subchapter and subject to this section, an insurance company may make investments within another...
• Texas Section 425.152 - Authorized Investments: Investments Not Otherwise Specified Or Prohibited; Investments Authorized By Other Law
  (a) Subject to this section, an insurance company may make an investment that is not otherwise authorized by this subchapter and that is not specifically...
• Texas Section 425.153 - Authorized Investments: Certain Previously Authorized Investments
  (a) An insurance company may continue to hold an investment held by the company on January 1, 1986, that does not conform to the requirements...
• Texas Section 425.154 - Applicability Of Percentage Authorizations And Limitations
  The percentage authorizations and limitations established by this subchapter apply only at the time an investment is originally acquired or a transaction is entered into...
• Texas Section 425.155 - Qualification Of Investments
  (a) The qualification or disqualification of an investment under one section of this subchapter does not prevent the investment from qualifying, wholly or partly, under...
• Texas Section 425.156 - Distributions, Reinsurance, And Merger
  (a) This subchapter does not prohibit an insurance company from acquiring additional obligations, securities, or other assets received as a dividend or as a distribution...
• Texas Section 425.157 - Aggregate Diversification Requirements
  (a) This section takes precedence over Sections 425.109-425.120, 425.122-425.153, and 425.155(a), (b), and (c). (b) An insurance company's investments in all or any types of...
• Texas Section 425.158 - Waiver By Commissioner Of Quantitative Limitations
  (a) The commissioner may waive a quantitative limitation on any investment authorized by Sections 425.109-425.132 and 425.151-425.156 if: (1) the insurer seeks the waiver before...
• Texas Section 425.159 - Accounting Provisions
  (a) Each insurance company shall maintain reasonable, adequate, and accurate evidence of the company's ownership of the company's assets and investments. (b) An insurance company...
• Texas Section 425.160 - Investments Of Ceding Insurers
  (a) Subject to this section, if a domestic insurance company assumes and reinsures the business of and takes over the assets of another domestic insurance...
• Texas Section 425.161 - Acting As Real Estate Broker Or Salesperson Prohibited
  A domestic insurance company or another insurance company specifically made subject to this subchapter may not engage in the business of a broker or salesperson...

SUBCHAPTER D AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR OTHER LIFE, HEALTH, AND ACCIDENT INSURERS

• Texas Section 425.162 - Rules
  The commissioner may adopt rules, minimum standards, or limitations that are fair and reasonable as appropriate to supplement and implement this subchapter. Added by Acts...
• Texas Section 425.201 - Definition
  In this subchapter, "contingency funds" means an insurer's contingency funds over and above the amount of the insurer's policy reserves. Added by Acts 2005, 79th...
• Texas Section 425.202 - Applicability Of Subchapter
  This subchapter applies only to an insurer organized under Chapter 881, 884, 885, 886, 887, or 2551, except as specifically provided by those chapters. Added...
• Texas Section 425.203 - Limitation On Funds And Other Assets
  (a) An insurer may not use the insurer's funds to make an investment or loan that is not authorized by this subchapter. (b) An insurer...
• Texas Section 425.204 - Approval Of Investments And Loans Required
  (a) An insurer may not make an investment unless the investment has been authorized by the insurer's board of directors or by a committee responsible...
• Texas Section 425.205 - Authorized Investments For All Funds: Government Bonds
  (a) Subject to this section, an insurer may invest any of the insurer's funds and accumulations in: (1) a bond, treasury bill, note, or certificate...
• Texas Section 425.206 - Authorized Investments For All Funds: Corporate Bonds, Notes, And Debentures
  (a) Subject to Subsection (e), an insurer may invest any of the insurer's funds and accumulations in a first mortgage bond or first lien note...
• Texas Section 425.207 - Authorized Investments For All Funds: Shares Of Savings And Loan Associations
  (a) Subject to this section, an insurer may invest any of the insurer's funds and accumulations in a share, stock, share or savings account, or...
• Texas Section 425.208 - Authorized Investments For All Funds: Bank And Bank Holding Company Stocks
  (a) Subject to this section, an insurer may invest any of the insurer's funds and accumulations in: (1) the stock of a state or national...
• Texas Section 425.209 - Authorized Investments For All Funds: Debentures Of Public Utility Corporations
  (a) Subject to this section, an insurer may invest any of the insurer's funds and accumulations in: (1) a debenture of a solvent public utility...
• Texas Section 425.210 - Authorized Investments For All Funds: Preferred Stock Of Public Utility Corporations
  (a) Subject to this section, an insurer may invest any of the insurer's funds and accumulations in: (1) preferred stock of a solvent public utility...
• Texas Section 425.211 - Authorized Investments For All Funds: Bonds Issued, Assumed, Or Guaranteed In International Market
  An insurer may invest any of the insurer's funds and accumulations in bonds issued, assumed, or guaranteed by: (1) the Inter-American Development Bank; (2) the...
• Texas Section 425.212 - Authorized Investments For All Funds: Securities Or Investments Authorized Or Described By Specific Statutory Provision
  An insurer may invest any of the insurer's funds and accumulations in a security or investment authorized or described by: (1) Section 65.013, Finance Code;...
• Texas Section 425.213 - Authorized Investments For All Funds: Other Securities Specifically Authorized By Law
  An insurer may invest any of the insurer's funds and accumulations in: (1) an adequately secured equipment trust obligation or certificate or another adequately secured...
• Texas Section 425.214 - Authorized Investments For All Funds: Loans Secured By Real Property
  (a) Subject to this section, an insurer may loan any of the insurer's funds and accumulations and take as collateral a first lien on real...
• Texas Section 425.215 - Authorized Investments For All Funds: Loans Secured By Certain Collateral Secured By Real Property
  An insurer may loan any of the insurer's funds and accumulations and take as collateral an obligation secured by a first lien on real property...
• Texas Section 425.216 - Authorized Investments For All Funds: Policy Loans
  (a) Subject to Subsection (b), an insurer may loan any of the insurer's funds and accumulations and take as collateral an insurance policy issued by...
• Texas Section 425.217 - Authorized Investments For All Funds: Loans Secured By Certain Securities
  An insurer may loan any of the insurer's funds and accumulations and take as collateral for the loan any security described by Sections 425.205-425.213 and...
• Texas Section 425.218 - Authorized Investments For All Funds: Securities Not Otherwise Specified
  (a) Notwithstanding any express or implied prohibitions, and subject to this section, an insurer may invest any of the insurer's funds and accumulations in an...
• Texas Section 425.219 - Authorized Investments For Policy Reserves And Surplus: Bonds Of Certain Water Control And Improvement Districts
  An insurer may invest the insurer's policy reserves and surplus over and above the insurer's capital in municipal bonds issued under Section 51.039, Water Code....
• Texas Section 425.220 - Authorized Investments For Capital, Surplus, And Contingency Funds: Capital Stock, Bonds, And Other Corporate Obligations
  (a) Subject to this section and Section 425.226, an insurer may invest the insurer's capital, surplus, and contingency funds in the capital stock, bonds, bills...
• Texas Section 425.221 - Authorized Investments For Capital, Surplus, And Contingency Funds: Bonds Or Notes Of Educational Or Religious Corporations
  Subject to Section 425.226, an insurer may invest the insurer's capital, surplus, and contingency funds in a bond or note of an educational or religious...
• Texas Section 425.222 - Authorized Investments For Capital, Surplus, And Contingency Funds: Life Income Interests In Qualified Trusts
  (a) Subject to this section, an insurer may invest the insurer's capital, surplus, and contingency funds in a life income interest in a qualified irrevocable...
• Texas Section 425.223 - Authorized Investments For Capital, Surplus, And Contingency Funds: Capital Stock Of Reinsurer
  (a) Subject to Subsection (b), an insurer may invest the insurer's capital, surplus, and contingency funds in not more than 20 percent of the capital...
• Texas Section 425.224 - Authorized Investments For Capital, Surplus, And Contingency Funds: Loans Secured By Corporate Stock
  (a) Subject to this section, an insurer may loan the insurer's capital, surplus, and contingency funds and take as collateral the capital stock, bonds, bills...
• Texas Section 425.225 - Investment In Foreign Securities
  (a) An insurer authorized to engage in business in a foreign country may invest in securities of that country that are the same kind of...
• Texas Section 425.226 - Investment In Stock Subject To Assessment Prohibited
  An insurer may not invest any of the insurer's funds in a stock, the holder or owner of which is or may become liable for...
• Texas Section 425.227 - Certain Investment Powers Not A Restriction
  The investment powers granted by Sections 425.207 and 425.208 may not be construed as restricting the powers granted by Sections 425.220 and 425.221. Added by...
• Texas Section 425.228 - Investments Of Ceding Insurer
  (a) Subject to this section, if a domestic insurer assumes the business and takes over the assets of another domestic or a foreign insurer, all...
• Texas Section 425.229 - Authorized Investments: Real Estate For Insurer's Offices
  (a) Subject to this section, an insurer may secure, hold, and convey the following real property: (1) one building site and office building for the...
• Texas Section 425.230 - Authorized Investments: Oil, Gas, And Minerals
  (a) In this section and Section 425.231: (1) "Producing" means producing oil, gas, or other minerals in paying quantities. A well that has been shut...
• Texas Section 425.231 - Authorized Investments: Real Property Acquired Under Certain Circumstances
  (a) Subject to this section, an insurer may secure, hold, and convey the following real property: (1) real property acquired in good faith as security...
• Texas Section 425.232 - Authorized Investments: Improved Income-producing Real Property
  (a) In this section, "improved income-producing real property" includes all commercial and industrial real property, a substantial portion of which has been materially enhanced in...

Last modified: September 28, 2016