Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 13 - MISCELLANEOUS INSURERS AND OTHER REGULATED ENTITIES › Subchapter A - STATEWIDE MUTUAL ASSESSMENT COMPANIES, LOCAL MUTUAL AID ASSOCIATIONS, AND BURIAL ASSOCIATIONS › Section 13.17 - Conversion or Reinsurance of Entire Membership into Legal Reserve Companies under the Insurance Code, Article 14.61

Current through Reg. 49, No. 28; July 12, 2024
(a) Approval of a plan of conversion or
				  reinsurance under Article 14.61 must be obtained from the commissioner of
				  insurance prior to the time any such plan is submitted to the membership of any
				  company or association for their ratification or rejection. When the
				  commissioner of insurance has entered a written order approving such plan of
				  conversion or reinsurance or approving such plan as amended to meet the
				  requirements of the commissioner of insurance as provided by law, the plan of
				  conversion or reinsurance shall be submitted to the members of the company or
				  association affected for their ratification or rejection, and such submission
				  shall be made in the manner provided by law and these sections.
(b) The following procedure shall be followed
				  in submitting a plan of conversion or reinsurance to the commissioner of
				  insurance.
(1) A complete outline of the plan,
				  together with all exhibits necessary to show compliance with the applicable
				  statutes, which outline shall be duly verified and submitted to the
				  commissioner of insurance in writing in quintuplicate (five copies).
(2) The plan submitted shall set out all
				  facts pertinent thereto. Approval of the plan may be given by the commissioner
				  of insurance only after a public hearing held following due notice and only
				  after it has been established that:
(A) the
				  plan is in conformity with the Insurance Code, Article 14.61, and other
				  applicable statutes and in conformity with these sections; and
(B) the written application to the
				  commissioner of insurance has been authorized by proper action of the board of
				  directors of each company or association involved, and that a true and correct
				  copy of the minutes of the meetings of such boards of directors, duly
				  certified, be submitted with the applications.
(3) As exhibits attached to the written
				  application, the following information and documents in blank form must be
				  furnished on behalf of each mutual assessment company or association involved.
(A) A copy of the form of notice of each
				  membership meeting, which notice is to be sent to the policyholders to be
				  affected by the proposed plan of conversion or reinsurance. The form of notice
				  must provide the following:
(i) the date,
				  hour, and place of the meeting of the membership;
(ii) the name of the company or association
				  and the date of the notice, such notice to bear the signature (actual or
				  facsimile) of the secretary or other appropriate officer of such company or
				  association;
(iii) an accurate
				  summary of the plan and the reasons for the conversion or reinsurance;
				  and
(iv) a list of enclosures,
				  which shall include a copy of the proposed reinsurance agreement if reinsurance
				  is involved, a copy of the proposed certificate or assumption, and a copy of
				  the ballot to be used in voting by mail.
(B) The form of the affidavit to be executed
				  by the secretary (verified as required by law) showing that the notice of the
				  membership meeting was mailed to each member at the last known address of said
				  member as reflected by the records of such company or association, and the date
				  of the mailing of the notice.
(C) A
				  statement or outline giving the proposed procedure to be followed at the
				  membership meeting of the mutual assessment companies or associations affected,
				  which statement or outline shall provide:
(i)
				  a tabulation giving the number of members who appear at the membership meeting
				  in person;
(ii) a tabulation giving
				  the number of members represented at the membership meeting by a special
				  proxy;
(iii) a tabulation giving
				  the number of members voting by mail ballot;
(iv) a statement that the procedure, purpose,
				  and probable effect of such reinsurance or conversion will be fully explained
				  to the members at the meeting;
(v)
				  a copy of the proposed resolution or motion to be adopted by the members
				  approving such plan;
(vi)
				  provisions that the minutes of such membership meeting will be duly recorded
				  and signed by the president or vice-president and the secretary or an assistant
				  secretary of such company or association, and that such minutes will reflect
				  the date, time, and place of such membership meeting and the matters considered
				  and action taken at such meeting;
(vii) a statement of any other action
				  proposed to be taken at such membership meeting;
(viii) a copy of the proposed resolution or
				  motion to be submitted to the members dissolving or converting the mutual
				  assessment company or association and authorizing the surrender of its articles
				  of incorporation or articles of association and its certificate of authority to
				  the commissioner of insurance for cancellation;
(ix) if the plan involves a conversion,
				  copies of the proposed articles of incorporation and all other papers required
				  to effect the organization of a company under the Insurance Code, Chapter 11,
				  and under the applicable provisions of the Texas Business Corporation
				  Act.
(4) If
				  the plan involves reinsurance, the following must be furnished by the assuming
				  company as exhibits attached to the written application:
(A) the minutes of the meeting of the board
				  of directors of the assuming company approving the plan of reinsurance and
				  authorizing the officers of such company to enter into the reinsurance
				  agreement involved in the plan;
(B)
				  a copy of the reinsurance agreement involved in such plan, which agreement
				  shall comply with the provisions of the Insurance Code, Article 14.16, shall
				  state the date, hour, and minute when the agreement is to become effective,
				  shall provide that the assuming company will assume all of the liabilities of
				  the mutual assessment companies or associations being reinsured including
				  making provisions for proper credit for advance premiums paid, and that the
				  mutual assessment companies or associations being reinsured shall be dissolved
				  and their certificates of authority and articles of association or articles of
				  incorporation shall be surrendered to the commissioner of insurance for
				  cancellation upon consummation of the plan; and
(C) a financial statement setting forth the
				  current financial condition of the legal reserve life insurance company,
				  including therein information as to all liabilities, contingent or
				  otherwise.
(5) Whether
				  such plan involves reinsurance or conversion, the following, in blank form,
				  must be furnished as exhibits attached to the written application:
(A) the proposed certificate of assumption or
				  policy, which shall be in conformity with the provisions of the Insurance Code,
				  Chapters 3 and 11, as applicable, and shall not contain any provisions
				  prohibited by the Insurance Code, Chapter 3;
(B) the form of the letter of transmittal to
				  be sent with the assumption certificate or policy, in which letter the member
				  shall be furnished a copy of the plan, or, in lieu thereof, an accurate summary
				  of the plan and the reasons for the conversion or reinsurance and advised that
				  the member may refuse to accept the assumption certificate or policy, that he
				  or she may make request for his actuarial portion as of a certain date within
				  60 days following the date of conversion or reinsurance (if notice is not sent
				  to the policyholder on the effective date of the conversion or reinsurance, the
				  policyholder will have 60 days from the date the notice is mailed to request
				  the actuarial portion) and that, upon request by the member to the association
				  or company, he or she shall be advised as to the actuarial portion of the
				  mortuary fund as of a certain date to which he or she may be entitled;
				  and
(C) a current statement of the
				  condition of the affairs of each mutual assessment company or association
				  affected by such reinsurance or conversion, which statement shall set forth the
				  following minimum facts:
(i) the number of
				  bona fide, premium paying members;
(ii) the amount of the mortuary fund
				  balance;
(iii) the amount of the
				  expense fund balance; and
(iv) a
				  list of all unpaid claims and liabilities, contingent or otherwise.