October 29, 

### 1957

Mr.William A. Harrison OpinionNO. 

### ~~-289 Commissioner of Insurance State Board of Insurance Re: Austin 14, Texas Whether, fn the light of Article 14,62 of the Code and OpinionNo. 

### W-139, a mutual assessment company may spend one hundred percent of itsmortuary fund for a reinsurance contract with another companywhich provides somethingless than one hundred percent refnsurance on all policyDear Mr. Harrison: holders or members,

You have requested our opinionas towhether a mutual assessment companymay spend 100% of fts mortuary fund for a reinsurance contractwith another companywhich provides something less than 100% reinsurance on all policyholdersor members in the light of Article 14.62, Texas InsuranceCode, and Attorney General's OpinionNo. 

### WW-139,

Article 14.62, Texas InsuranceCode, provides that no company or association shall pay more out of itsmortuary or claim fund under reinsurance contractsor agreements than is currently received by the mortuary or claim fund on the policies of members reinsured, This limitationhas been discussed in Opinion

### WW-139,which held that if only 50% of the policies of its members are reinsured then the company couldnot pay more out of the mortuary fund for such refnsurance than such fund was currently receiving from the premfums from such 50% of such policies, for the reason that each policyholderor member has a certain interest in themortuary or claim fund and is protectedby it. Under the situation contained in your request ft is apparent that each memberwould receive equal proteotfonunder the reinsurance contract, although such protectionwould not be a full or 100% protection,but the entire mortuary fund would be pafd out to the reinsuring companyas a considerationfor the partial reinsurance of the policyholders, Article lb-62 places no additional limitationas to the amount of such reinsurance contracts or agreements other than that such contracts or- . - :

Mr. William A. Harrison, page 2 (WW- 

### 289)

agreements are subject to the approval of the Commissioner of Insurance.

However, Article 14.23, Texas InsuranceCode, provides thatwhen and if, in the course of operation, it shallbe apparent that the claims cannot be met in full from currentassessments and funds on hand, the amount must be increaseduntil they are adequate to meet such claims, and the Board shall so order.

From the factual situation contained in your request, although all of the memberswould receive equal protectionunder the reinsurance contract, the amount for which each member was protectedwould be less than lOO$, or full protectionon the policy, Itwould thereforebe necessary for the Commfssfoner of Insurance to increase the assessment of the members so as to provide for 100% coverage in themortuary fund tomeet the deficiencybetween 100% and the amount of refnsurance covering each policyholder.

It is our opinion that the granting or withholding of approval of the proposedreinsurance contracts is wholly within the discretion of the Commissioner of Insurance, subject only to the limitation contained in Article 

### 14.62construed in Opfnion

### W-139, and to the limitation contained in Article l&,23 just discussed, provided that all of the polfcyholders subject to the reinsurance contractshave equal protectionwith each other.

SUMMARY

A contract of insurancemade by a mutual assessment company doing a life, health and accident business under the provisfons of Chap. 14, Texas Insurance Code,which provides for the payment of the entire mortuary fund as a considerationfor only partial reinsurance of the policies of all fts members does not violate the provisionsof Arts, 

### 14,62and 14,2x, Texas InsuranceCode, as a matter of law, and the approval or disapproval thereof by the Commfssioner of Insurance is a matter resting solely in his discretion,
Yours very truly, WILL WILSON

CKR:wb AssistantMr. William A. Harrison, page 3 

### MJ-289)

APPROVED:
OPINIONCOMMITTEE
Geo. P. Blackburn, Chairman Wallace P. Finfrock L, P. Lollar J.Arthur Sandlln Richard B. Stone