## THEATTORNEY GENERAL OFTEXAS
**AUETIN** 11. TEXAB **WILL** WIJA3ON ATTORNECY GffiNEZ:HAX. bY 22, 

## 1957

HonorableJohn Osorio, Chairman OpinionNo. WW-139 Board of Insurance Commissioners InternationalLife Building Re: Whether a mutual assessment Austin, Texas associationunder Article 

### 14.62, InsuranceCode of Texas, may reinsure a certainpercentage or portion of its policies or members, and pay for such reinsurancewith more than a pro rata share of itsmorturary Dear Sir: fund.

You have requested our opinion a8 to whether a mutual assessment associationmay reinsure a certainpercentage or portion of its business with another companyunder the provisions of Article 

### 14.62of the Insurance Code of Texas, and pay for such reinsurancewith more than a pro rata share of the mortuary fund held by the associationunder Article 14.25 of the Insurance Code.

You cite as an examplewhether a companymay reinsure 

### 56 of its policyholdersand pay for such reinsurancewith 100% of the mortuary or claim fund.

Article 

### 14.62isas follows: "Companiesand associations operatingunder the provisions of this Act may enter into reinsurance contracts or agreementswith legal reserve companiesauthorized to write life, health, and accident insurance in this State with capital or surplus of at least One HundredThousand Dollars ($lOO,OOO),and pay the premiums for such reinsurance out of the mortuary or claim funds. Provided, that such reinsurance contracts or agreements shallbe subject to the approval of the Board of InsuranceCommiesioners of Texas, and that no company or association shall pay more out of itsmortuary or claim fund for such reinsurancethan is currently receivedby the mortuary or claim fund on the policies or members reinsured.
. . ."
You will note that the statuteprovides that the premiuma for reinsurance shallbe uaid out of the mortuarv or claim funds. but that "no company or association shallpay more out of the mortuary or claim fund for such reinsurancethan is currently receivedby the mortuaryHonorable John Osorio,page 2 

## (UW-139)

or claim fund on the policies or membera reinsured." The mortuary or claim fund is requiredby Article 14.25 to be set aside and held by the company for the purpose of paying clalme of policyholdersor members of the association. The mortuary fund is for the protection of all the policyholders and members. Each policyholder or member has a certain interest in the mortuary or claim fund and is protectedby it. If an associationbe allowed to reinsurehalf of its policyholdersand use all the mortuary fund to pay for this reinsurance,then one-half of its policyholderswould have lost their interest in or protectionby the mortuary fund to the benefit of the reinsured group.

The quoted language above ia unambiguous and is clear. The statute says that no association shall pay more out of itsmortuary fund for reinsurance than the mortuary fund is currently receiving on the policies or membersbeing reinsured. This means if the association reinsures fifty percent of its policies or members, then it cannotpay more out of the mortuary fund for such reinsurancethan the mortuary fund is currently receiving from the premiums on such fifty percent of its policies or members. Therefore, your question is answered in the negative, and we hold that a mutual assessment company cannot reinsure a certainportion or percentage of its policies or members under the provisions of Article 14.62 and pay for such reinsurancewith more than the amount of the premiums currentlybeing receivedby the mortuary fund on such policies or membersbeing reinsured.
SJMMARY
No mutual assessment company shall pay more out of itsmortuary fund for reinsurance than the mortuary fund is currentlyreceiving on the policies or members being reinsured. WDD:lm
APPROVED:
OPINION COMMITTEE H. Grady Chandler, Chairman Lenny Zwiener Wallace Finfrock Houghton Brownlee,Jr.
REVIEWED FOR TRE ATTORNEY GENERAL BY: Gee. P. Blackburn Very truly yours,

WILL WILSON Attorney General

Will D. Davis Assistant