THEATTORNEY GENERAL 

OFTEXAS 

AUETIN 11. TEXAB 

WILL WIJA3ON 

ATTORNECY GffiNEZ:HAX. 

bY 22, 1957 

Honorable John Osorio, Chairman Opinion No. WW-139 

Board of Insurance Commissioners 

International Life Building Re: Whether a mutual assessment 

Austin, Texas association under Article 14.62, 

Insurance Code of Texas, may 

reinsure a certain percentage 

or portion of its policies or 

members, and pay for such reinsurance with more than a pro 

rata share of its morturary 

Dear Sir: fund. 

You have requested our opinion a8 to whether a mutual assessment 

association may reinsure a certain percentage or portion of its business 

with another company under the provisions of Article 14.62 of the Insurance Code of Texas, and pay for such reinsurance with more than a pro 

rata share of the mortuary fund held by the association under Article 

14.25 of the Insurance Code. 

You cite as an example whether a company may reinsure 56 of 

its policyholders and pay for such reinsurance with 100% of the mortuary 

or claim fund. 

Article 14.62 is as follows: 

"Companies and associations operating under the provisions of this Act may enter into reinsurance contracts or 

agreements with legal reserve companies authorized to write 

life, health, and accident insurance in this State with capital or surplus of at least One Hundred Thousand Dollars 

($lOO,OOO), and pay the premiums for such reinsurance out 

of the mortuary or claim funds. Provided, that such reinsurance contracts or agreements shall be subject to the approval of the Board of Insurance Commiesioners of Texas, 

and that no company or association shall pay more out of 

its mortuary or claim fund for such reinsurance than is 

currently received by the mortuary or claim fund on the 

policies or members reinsured. . . ." 

You will note that the statute provides that the premiuma for 

reinsurance shall be uaid out of the mortuarv or claim funds. but that 

"no company or association shall pay more out of the mortuary or claim 

fund for such reinsurance than is currently received by the mortuary 
Honorable John Osorio, page 2 (UW-139) 

or claim fund on the policies or membera reinsured." The mortuary or 

claim fund is required by Article 14.25 to be set aside and held by the 

company for the purpose of paying clalme of policyholders or 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 protected by it. If an 

association be allowed to reinsure half of its policyholders and use 

all the mortuary fund to pay for this reinsurance, then one-half of 

its policyholders would have lost their interest in or protection by 

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 its mortuary fund 

for reinsurance than the mortuary fund is currently receiving on the 

policies or members being reinsured. This means if the association reinsures fifty percent of its policies or members, then it cannot pay 

more out of the mortuary fund for such reinsurance than 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 certain portion or percentage of its policies or members under the 

provisions of Article 14.62 and pay for such reinsurance with more than 

the amount of the premiums currently being received by the mortuary fund 

on such policies or members being reinsured. 

SJMMARY 

No mutual assessment company shall pay more 

out of its mortuary fund for reinsurance 

than the mortuary fund is currently receiving 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