reglab/statecodes huggingface dataset:
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter B. Standard Valuation Law › Section 425.069. Reserve Computation: Indeterminate Premium Plans and Certain Other Plans

Sec. 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 on estimates of future experience, or a life insurance plan or annuity for which the minimum reserves cannot be determined by the methods described by Sections 425.064, 425.065, and 425.068, the reserves held must:
(1)  be appropriate in relation to the benefits and the pattern of premiums for the plan; and
(2)  be computed by a method that is consistent with the principles of this subchapter, as determined by commissioner rule.
(b)  Notwithstanding any other provision of state law, the commissioner must affirmatively approve a policy, contract, or certificate that provides life insurance under a plan described by Subsection (a) before the policy, contract, or certificate may be marketed, issued, delivered, or used in this state.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter B. Standard Valuation Law › Section 425.071. Lapse Rates in Minimum Standard of Valuation

Sec. 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 contracts issued after December 31, 2006.
(b)  For purposes of this section, a secondary guarantee refers to specified conditions in a universal life contract that, if satisfied, provide for death benefits to remain in effect regardless of the accumulation value in the contract.
(c)  Lapse rates authorized by this section may not exceed two percent per year.
(d)  The commissioner is authorized to adopt rules to implement this section.
Added by Acts 2007, 80th Leg., R.S., Ch. 681 (H.B. 1590), Sec. 1, eff. June 15, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter B. Standard Valuation Law › Section 425.072. Minimum Standard for Accident and Health Insurance Contracts

Sec. 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 is the minimum standard of valuation required under Section 425.0535.
(b)  For disability, accident and sickness, and accident and health insurance contracts issued before the operative date of the valuation manual, the minimum standard of valuation is the standard in existence before the operative date of the valuation manual in addition to any requirements established by the commissioner and adopted by rule.
Added by Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 15, eff. September 1, 2015.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter B. Standard Valuation Law › Section 425.074. Requirements of a Principle-Based Valuation

Sec. 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 minimum, the valuation shall:
(1)  quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the terms of the contracts;
(2)  with respect to policies and contracts with significant tail risk, reflect conditions appropriately adverse to quantify the tail risk;
(3)  incorporate assumptions, risk analysis methods, and financial models and management techniques that are consistent with those used in the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods;
(4)  incorporate assumptions:
(A)  prescribed by the valuation manual; or
(B)  established:
(i)  using the company's available experience, to the extent that data is relevant and statistically credible; or
(ii)  to the extent that the company data is not available, relevant, or statistically credible, using other relevant, statistically credible experience; and
(5)  provide margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.
(b)  A company using a principle-based valuation for one or more policies or contracts subject to this section and as specified by the valuation manual shall:
(1)  establish procedures for corporate governance and oversight of the actuarial valuation function consistent with procedures specified by the valuation manual;
(2)  provide to the commissioner and the company's board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation; and
(3)  develop, and file with the commissioner on request, a principle-based valuation report that complies with standards prescribed in the valuation manual.
(c)  A company's internal controls with respect to the principle-based valuation must be designed to ensure that all material risks inherent in the liabilities and associated assets subject to the valuation are included in the valuation, and that valuations are made in accordance with the valuation manual.  The certification described by Subsection (b)(2) must be based on the controls in place as of the end of the preceding calendar year.
(d)  A principle-based valuation may include a prescribed formulaic reserve component.
Added by Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 15, eff. September 1, 2015.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter B. Standard Valuation Law › Section 425.075. Experience Reporting for Policies in Force on or After Operative Date of Valuation Manual

Sec. 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 Leg., R.S., Ch. 313 (S.B. 1654), Sec. 15, eff. September 1, 2015.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter B. Standard Valuation Law › Section 425.077. Single State Exemption

Sec. 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 the requirements of Section 425.073 if:
(1)  the commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing; and
(2)  the company computes reserves using assumptions and methods used before the operative date of the valuation manual in addition to any requirements established by the commissioner and adopted by rule.
Added by Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 15, eff. September 1, 2015.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.101. Definitions

Sec. 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 in the form of cash or demand deposits in solvent banks, savings and loan associations, credit unions, and branches of those entities, organized under the laws of the United States or a state of the United States, if held in accordance with the laws or regulations applicable to those entities.  The term does not include the company's separate accounts that are subject to Chapter 1152.
(2)  "Securities valuation office" means the Securities Valuation Office of the National Association of Insurance Commissioners.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.102. Inapplicability of Certain Law

Sec. 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. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.103. Applicability of Subchapter

Sec. 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 other insurance companies specifically made subject to this subchapter, including a stipulated premium company that elects under Section 884.311 to be governed by this subchapter.
(b)  Subchapter D does not apply to an insurance company to which this subchapter applies.
(c)  This subchapter does not limit or restrict investments in or transactions with or within subsidiaries and affiliates made under Chapter 823.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.104. Purpose

Sec. 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 and administration of plans for investment of insurance companies' assets.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.105. Written Investment Plan

Sec. 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 charter, bylaws, or plan of operation, shall adopt a written investment plan consistent with this subchapter.
(b)  The investment plan must:
(1)  specify the diversification of the insurance company's investments, so as to reduce the risk of large losses, by:
(A)  broad categories, such as bonds and real property loans;
(B)  kinds, such as government obligations, obligations of business entities, mortgage-backed securities, and real property loans on office, retail, industrial, or residential properties;
(C)  quality;
(D)  maturity;
(E)  industry; and
(F)  geographical areas, as to both domestic and foreign investments;
(2)  balance safety of principal with yield and growth;
(3)  seek a reasonable relationship of assets and liabilities as to term and nature; and
(4)  be appropriate considering the capital and surplus and the business conducted by the company.
(c)  At least annually, the board of directors or corresponding authority shall review the adequacy of the investment plan and the implementation of the plan.
(d)  An insurance company shall maintain the company's investment plan in the company's principal office and provide the plan to the commissioner or the commissioner's designee on request.  The commissioner or the commissioner's designee shall maintain the plan as a privileged and confidential document.  The plan is not subject to public disclosure.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.106. Investment Records; Demonstration of Compliance

Sec. 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 within the limitations imposed by this subchapter.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.108. Authorized Investments and Transactions in General

Sec. 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 as reported in the company's most recently filed statutory financial statement, the investments and transactions described by this subchapter and Subchapter F, Chapter 823, are authorized investments and transactions for a company subject to this subchapter.
(b)  An insurance company may not make an investment or enter into a transaction that is not authorized by this subchapter or Subchapter F, Chapter 823.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.109. Authorized Investments: Government Obligations

Sec. 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 indebtedness, or other obligation guaranteed as to principal and interest by the full faith and credit of the United States;
(3)  a bond, evidence of indebtedness, or other obligation of an agency or instrumentality of the United States government; and
(4)  subject to Subsections (b) and (c), a bond, evidence of indebtedness, or other obligation of a governmental unit in the United States, Canada, or any province or municipality of Canada, or of an instrumentality of one of those governmental units.
(b)  An insurance company may not invest in a bond, evidence of indebtedness, or other obligation under Subsection (a)(4) if the governmental unit or instrumentality is in default in the payment of principal of or interest on any of the governmental unit's or instrumentality's obligations.
(c)  An insurance company's investments in the obligations of a single governmental unit or instrumentality under Subsection (a)(4) may not exceed 20 percent of the company's capital and surplus.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.111. Authorized Investments: Bonds Issued, Assumed, or Guaranteed in International Market

Sec. 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 Bank for Reconstruction and Development (the World Bank);
(3)  the Asian Development Bank;
(4)  the State of Israel;
(5)  the African Development Bank; and
(6)  the International Finance Corporation.
(b)  An insurance company's investments in the bonds of a single entity under this section may not exceed 20 percent of the company's capital and surplus.
(c)  The aggregate of all investments made by an insurance company under this section may not exceed 20 percent of the company's assets.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.112. Authorized Investments: Policy Loans

Sec. 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 the reserve values of those policies.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.113. Authorized Investments: Deposits in Certain Financial Institutions

Sec. 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 market account in a solvent bank, savings and loan association, or credit union that is organized under the laws of the United States or a state, or in a branch of one of those financial institutions.
(b)  An investment under this section must be made in accordance with the laws or regulations applicable to the bank, savings and loan association, or credit union.
(c)  The amount of an insurance company's deposits in a single bank, savings and loan association, or credit union may not exceed the greater of:
(1)  20 percent of the company's capital and surplus;
(2)  the amount of federal or state deposit insurance coverage that applies to the deposits; or
(3)  10 percent of the amount of capital, surplus, and undivided profits of the financial institution receiving the deposits.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.115. Authorized Investments: Equity Interests

Sec. 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 tenancy, or other similar form of business organization, regardless of whether organized for profit.
(b)  Subject to this section, an insurance company may invest in an equity interest, including common stock, an equity investment in an investment company other than a money market fund described by Section 425.123, a real estate investment trust, a limited partnership interest, a warrant, another right to acquire an equity interest that is created by the person that owns or would issue the equity in which the interest is acquired, and an equity interest in a business entity that is organized under the laws of the United States, a state of the United States, Canada, or a province or territory of Canada.
(c)  If a market value from a generally recognized source is not available for an equity interest, the business entity or other investment in which the interest is acquired must be subject to:
(1)  an annual audit by an independent certified public accountant; or
(2)  another method of valuation acceptable to the commissioner.
(d)  An insurance company may not invest in a partnership as a general partner except through an investment subsidiary.
(e)  An insurance company's investments under this section in a single business entity, other than a money market fund described by Section 425.123, may not exceed 15 percent of the company's capital and surplus.
(f)  The aggregate amount of an insurance company's investments under this section may not exceed 25 percent of the company's assets.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.116. Authorized Investments: Preferred Stock

Sec. 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 company may invest in preferred stock only if:
(1)  the stock is rated by the securities valuation office; and
(2)  the sum of the company's aggregate investment in preferred stock rated 3, 4, 5, or 6 and the company's investments under Section 425.110(d) does not exceed the limitations specified by Section 425.110(d).
(c)  An insurance company's investments in the preferred stock of a single business entity may not exceed 20 percent of the company's capital and surplus.
(d)  The aggregate amount of an insurance company's investments in preferred stock as to which there is not a sinking fund for the redemption and retirement of the stock that meets the standards established by the National Association of Insurance Commissioners may not exceed 10 percent of the company's assets.
(e)  The aggregate amount of an insurance company's investments under this section may not exceed 40 percent of the company's assets.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.117. Authorized Investments: Collateral Loans

Sec. 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)  a valid and perfected first security interest in an asset.
(b)  The amount of a loan invested in under this section may not exceed 80 percent of the value of the collateral asset at any time during the duration of the loan.
(c)  The asset used as collateral for a loan under this section must be an asset, other than real property described by Section 425.119, in which the insurance company is authorized by this subchapter to directly invest.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.1185. Authorized Investments: Mezzanine Real Estate Loans

Sec. 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 entity that owns real estate.
(b)  Subject to Subsections (c) and (d), an insurance company with more than $10 billion in admitted assets may invest in a mezzanine real estate loan if the loan documents:
(1)  require that each pledgor abstain from granting an additional security interest in the equity interest pledged;
(2)  employ techniques to minimize the likelihood or impact of a bankruptcy filing by the real estate owner or the mezzanine real estate loan borrower; and
(3)  require the real estate owner or the mezzanine real estate loan borrower to:
(A)  hold no assets other than, in the case of the owner, the real estate, and in the case of the borrower, the equity interests in the entity;
(B)  not engage in any business other than, in the case of the owner, the ownership and operation of the real estate, and in the case of the borrower, holding an ownership interest in the owner; and
(C)  not incur additional debt, other than limited trade payables, a first mortgage loan, or the mezzanine real estate loan.
(c)  Before making an initial investment in a mezzanine real estate loan, an insurance company shall corroborate that the sum of the first mortgage on the real estate and the mezzanine real estate loan does not exceed 100 percent of the value of the current appraised value of the real estate.
(d)  An insurance company's cumulative investment under this section may not exceed three percent of the insurance company's admitted assets.
Added by Acts 2015, 84th Leg., R.S., Ch. 310 (S.B. 1008), Sec. 1, eff. September 1, 2015.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.120. Authorized Investments: Oil, Gas, and Minerals

Sec. 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 to be producing oil, gas, or other minerals in paying quantities if shut-in royalties are being paid.
(2)  "Production payment" means a right to oil, gas, or other minerals in place or as produced that entitles the owner of the right to a specified fraction of production until the owner receives a specified amount of money, or a specified number of units of oil, gas, or other minerals.
(3)  "Royalty" or "overriding royalty" means a right to oil, gas, and other minerals in place or as produced that entitles the owner of the right to a specified fraction of production without limitation to a specified amount of money or a specified number of units of oil, gas, or other minerals.
(b)  Subject to this section, in addition to and without limitation on the purposes for which real property may be acquired, secured, held, or retained under other provisions of this subchapter, an insurance company may secure, hold, retain, and convey production payments, producing royalties, and producing overriding royalties, or participations in production payments, producing royalties, or producing overriding royalties as an investment for the production of income.
(c)  An insurance company may not carry an asset described by Subsection (b) in an amount that exceeds 90 percent of the appraised value of the asset.
(d)  A single investment under this section may not exceed 10 percent of the amount of the insurance company's capital and surplus that exceeds the statutory minimum capital and surplus applicable to the company.
(e)  The aggregate amount of an insurance company's investments under this section may not exceed 10 percent of the company's assets as of December 31 preceding the date of the investment.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.122. Authorized Investments: Premium Loans

Sec. 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 contracts.
(b)  The amount of a loan under this section may not exceed the sum of:
(1)  the available cash value of the insurance policy or annuity contract for which the premium loan is made; and
(2)  the amount of any escrowed commissions payable relating to the insurance policy or annuity contract.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.124. Authorized Investments: Risk Control Transactions

Sec. 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 generation transactions, as those terms are defined by Section 425.125.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.126. Risk Control Transactions: Derivative Use Plan

Sec. 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 investment plan required by Section 425.105.
(b)  The derivative use plan must:
(1)  describe investment objectives and risk constraints, such as counterparty exposure amounts;
(2)  define permissible transactions identifying the risks to be hedged or the assets or liabilities being replicated; and
(3)  require compliance with internal control procedures.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.127. Risk Control Transactions: Internal Control Procedures

Sec. 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 of directors that reviews:
(A)  each derivative transaction entered into, outstanding, or closed out;
(B)  the results and effectiveness of the derivatives program; and
(C)  the credit risk exposure to each counterparty for over-the-counter derivative transactions based on the counterparty exposure amount;
(2)  a system for determining whether hedging or replication strategies used have been effective;
(3)  a system of regular reports, at least monthly, to management that include:
(A)  a description of each derivative transaction entered into, outstanding, or closed out during the period since the last report;
(B)  the purpose of each outstanding derivative transaction;
(C)  a performance review of the derivative instrument program; and
(D)  the counterparty exposure amount for each over-the-counter derivative transaction;
(4)  a written authorization that identifies the responsibilities and limitations of authority of each person authorized to effect and maintain derivative transactions; and
(5)  appropriate documentation for each transaction, including:
(A)  the purpose of the transaction;
(B)  the assets or liabilities to which the transaction relates;
(C)  the specific derivative instrument used in the transaction;
(D)  for an over-the-counter derivative transaction, the name of the counterparty and the counterparty exposure amount; and
(E)  for an exchange-traded derivative instrument, the name of the exchange and the name of the firm that handled the transaction.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.128. Risk Control Transactions: Oversight by Commissioner

Sec. 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 or combination of transactions through:
(1)  cash flow testing;
(2)  duration analysis; or
(3)  other appropriate analysis.
(b)  Ten days before entering into an initial hedging transaction, an insurance company shall notify the commissioner in writing that:
(1)  the company's board of directors has adopted an investment plan that authorizes hedging transactions; and
(2)  each hedging transaction will comply with Sections 425.124-425.132.
(c)  After providing the notice under Subsection (b), the insurance company may enter into a hedging transaction under Section 425.124 if as a result of and after making the transaction:
(1)  the aggregate statement value of all outstanding options other than collars, and of all caps, floors, swaptions, and warrants under Sections 425.124-425.132 not attached to another financial instrument purchased by the company does not exceed 7.5 percent of the company's assets;
(2)  the aggregate statement value of all outstanding options other than collars, and of all caps, floors, swaptions, and warrants written by the company under Sections 425.124-425.132 does not exceed three percent of the company's assets; and
(3)  the aggregate potential exposure of all outstanding collars, swaps, forwards, and futures entered into or acquired by the company under Sections 425.124-425.132 does not exceed 6.5 percent of the company's assets.
(d)  If the hedging transaction does not comply with Sections 425.124-425.132, or if continuing the transaction may create a hazardous financial condition for the insurance company that affects the company's policyholders or creditors or the public, the commissioner may, after notice and an opportunity for a hearing, order the company to take action reasonably necessary to:
(1)  remedy a hazardous financial condition; or
(2)  prevent an impending hazardous financial condition from occurring.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.130. Risk Control Transactions: Limitations on Replication Transactions

Sec. 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 would otherwise be authorized to invest the company's funds under this subchapter in the asset being replicated; and
(2)  the asset being replicated is subject to all the provisions of this subchapter relating to the making of investments by the company in that type of asset as if the transaction constituted a direct investment by the company in the replicated asset.
(b)  The commissioner may adopt fair and reasonable rules regarding replication transactions to implement this section.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.131. Risk Control Transactions: Trading Requirements

Sec. 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 entity;
(3)  issued or written by, or entered into with, the issuer of the underlying interest on which the derivative instrument is based; or
(4)  in the case of futures, traded through a broker that is:
(A)  registered as a futures commission merchant under the Commodity Exchange Act (7 U.S.C. Section 1 et seq.); or
(B)  exempt from that registration under 17 C.F.R. Section 30.10, adopted under the Commodity Exchange Act.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.132. Risk Control Transactions: Offsetting Transactions

Sec. 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 previously purchased or sold, without regard to the quantitative limitations of Sections 425.124-425.131.
(b)  An offsetting transaction under this section must use the same type of derivative instrument as the derivative instrument being offset.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.151. Authorized Investments: Foreign Countries and United States Territories

Sec. 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 foreign country or a commonwealth, territory, or possession of the United States.
(b)  An investment made under this section must be substantially the same type as an investment authorized to be made within the United States or Canada by this subchapter.
(c)  The sum of the amount of investments made under this section and the amount of similar investments made within the United States and Canada may not exceed any limitation imposed by Sections 425.109-425.121, 425.124-425.132, and 425.152.
(d)  The aggregate amount of an insurance company's investments under this section may not exceed the sum of:
(1)  the amount of the company's reserves attributable to insurance business in force in foreign countries, if any, and any additional investments required by a foreign country as a condition of engaging in business in that country; and
(2)  20 percent of the company's assets.
(e)  An insurance company may not invest more than 10 percent of the company's assets in investments denominated in foreign currency that are not hedged under Sections 425.124-425.132.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.152. Authorized Investments: Investments Not Otherwise Specified or Prohibited; Investments Authorized by Other Law

Sec. 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 prohibited by statute, including any portion of an investment that exceeds the limits imposed by Sections 425.109-425.121, 425.124-425.132, and 425.151.
(b)  If any aggregate or individual investment limitation imposed by Sections 425.109-425.121, 425.124-425.132, and 425.151 is exceeded, the excess portion of the investment is considered to be an investment under Subsection (a).
(c)  The insurance company has the burden of establishing the value of an investment made under Subsection (a).
(d)  The amount of a single investment made by an insurance company under Subsection (a) may not exceed 10 percent of the company's capital and surplus in excess of the statutory minimum capital and surplus applicable to that company.
(e)  The aggregate amount of an insurance company's investments under Subsection (a) may not exceed the lesser of:
(1)  five percent of the company's assets; or
(2)  the amount of the company's capital and surplus that exceeds the amount of statutory minimum capital and surplus applicable to that company.
(f)  An insurance company may invest in any investment authorized for an insurance company that is subject to this subchapter by a provision of this code other than this subchapter or by another law of this state.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.153. Authorized Investments: Certain Previously Authorized Investments

Sec. 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 of the investments authorized by Sections 425.109-425.120, 425.151, and 425.152 if the investment was legally authorized at the time the investment was made or acquired or that the company was authorized to hold immediately before January 1, 1986.
(b)  An investment described by Subsection (a) is considered an authorized investment of the insurance company.  A company shall dispose of the investment at the investment's maturity date, if any, or within the time prescribed by the law under which the investment was acquired, if any.
(c)  This section does not alter the legal or accounting status of an investment described by Subsection (a).
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.154. Applicability of Percentage Authorizations and Limitations

Sec. 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 and do not apply to the insurance company or the investment or transaction after that time, except as provided by Section 425.155.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter C. Authorized Investments and Transactions for Capital Stock Life, Health, and Accident Insurers › Section 425.155. Qualification of Investments

Sec. 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 another section of this subchapter.  An investment authorized by more than one section may be held under the authorizing section elected by the insurance company.
(b)  An investment or transaction qualified under any section of this subchapter at the time the insurance company acquired the investment or entered into the transaction continues to be qualified under that section.
(c)  An insurance company may elect to transfer at any time the qualification of an investment, wholly or partly, to the authority of any section of this subchapter under which the investment qualifies at the time of the transfer, regardless of whether the investment originally qualified under that section.
(d)  An investment, once qualified under this subchapter, remains qualified notwithstanding any refinancing, restructuring, or modification of the investment, except that an insurance company may not refinance, restructure, or modify an investment to circumvent the requirements of this subchapter.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.