| 1 | 1 | | 84R11359 PMO-F |
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| 2 | 2 | | By: Frullo H.B. No. 3237 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the authority of certain domestic life, health, and |
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| 8 | 8 | | accident insurance companies to make certain investments; adding |
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| 9 | 9 | | provisions that may be subject to a criminal penalty. |
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| 10 | 10 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 11 | 11 | | SECTION 1. Subchapter C, Chapter 425, Insurance Code, is |
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| 12 | 12 | | amended by adding Section 425.1185 to read as follows: |
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| 13 | 13 | | Sec. 425.1185. AUTHORIZED INVESTMENTS: MEZZANINE REAL |
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| 14 | 14 | | ESTATE LOANS. (a) In this section, "mezzanine real estate loan" |
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| 15 | 15 | | means a loan that is secured by a pledge of a direct or indirect |
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| 16 | 16 | | equity interest in an entity that owns real estate. |
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| 17 | 17 | | (b) Subject to Subsections (c) and (d), an insurance company |
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| 18 | 18 | | with more than $10 billion in admitted assets may invest in a |
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| 19 | 19 | | mezzanine real estate loan if the loan documents: |
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| 20 | 20 | | (1) require that each pledgor abstain from granting an |
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| 21 | 21 | | additional security interest in the equity interest pledged; |
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| 22 | 22 | | (2) employ techniques to minimize the likelihood or |
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| 23 | 23 | | impact of a bankruptcy filing by the real estate owner or the |
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| 24 | 24 | | mezzanine real estate loan borrower; and |
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| 25 | 25 | | (3) require the real estate owner and the mezzanine |
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| 26 | 26 | | real estate loan borrower to: |
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| 27 | 27 | | (A) hold no assets other than, in the case of the |
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| 28 | 28 | | owner, the real estate, and in the case of the borrower, the equity |
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| 29 | 29 | | interest in the entity; |
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| 30 | 30 | | (B) not engage in any business other than, in the |
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| 31 | 31 | | case of the owner, the ownership and operation of the real estate, |
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| 32 | 32 | | and in the case of the borrower, holding the ownership interest in |
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| 33 | 33 | | the owner; and |
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| 34 | 34 | | (C) not incur additional debt, other than limited |
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| 35 | 35 | | trade payables, a first mortgage loan, or the mezzanine real estate |
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| 36 | 36 | | loan. |
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| 37 | 37 | | (c) Before making an initial investment in a mezzanine real |
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| 38 | 38 | | estate loan, an insurance company shall corroborate that the sum of |
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| 39 | 39 | | the first mortgage on the real estate and the mezzanine real estate |
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| 40 | 40 | | loan does not exceed 100 percent of the value of the current |
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| 41 | 41 | | appraised value of the real estate. |
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| 42 | 42 | | (d) An insurance company's cumulative investment under this |
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| 43 | 43 | | section may not exceed three percent of the insurance company's |
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| 44 | 44 | | admitted assets. |
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| 45 | 45 | | SECTION 2. Section 425.1185, Insurance Code, as added by |
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| 46 | 46 | | this Act, applies only to an investment made on or after the |
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| 47 | 47 | | effective date of this Act. An investment made before the effective |
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| 48 | 48 | | date of this Act is governed by the law as it existed immediately |
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| 49 | 49 | | before that date, and that law is continued in effect for that |
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| 50 | 50 | | purpose. |
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| 51 | 51 | | SECTION 3. This Act takes effect September 1, 2015. |
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