85R7233 SMT-F
By: Faircloth H.B. No. 3803
A BILL TO BE ENTITLED
AN ACT
relating to certain authorized investments for domestic life,
health, and accident insurers.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 425.118, Insurance Code, is amended by
amending Subsections (d) and (e) and adding Subsections (d-1) and
(e-1) to read as follows:
(d) An obligation secured by a first lien on a leasehold
estate in real property must be payable in one or more installments
of an amount or amounts sufficient to ensure that, at any time
during [after the expiration of two-thirds of] the original term of
the obligation, the principal balance on the obligation is not
greater than the principal balance would have been if the
obligation had been amortized over the original term of the
obligation in equal monthly, quarterly, semiannual, or annual
payments of principal and interest with payments of interest only
for the first five years of the original term of the obligation.
(d-1) Subsections (c) and (d) do not apply to an obligation
secured by a first lien on a leasehold estate in real property if:
(1) the amount of the obligation does not exceed 75
percent of the value of the leasehold estate;
(2) the lease agreement provides that the fee simple
estate in the real property transfers automatically to the lessee
on or before the expiration of the term of the leasehold estate,
including any renewal options exercisable by the lessee; or
(3) the lease agreement provides that the lessee has
an option to purchase the fee simple estate in the real property on
or before the expiration of the term of the leasehold estate,
including any renewal options exercisable by the lessee, for an
amount that is less than 10 percent of the appraised value of the
real property, and the insurance company has a contractual right if
the lessee does not exercise that option to acquire the fee simple
estate in the real property for that same amount, by assignment from
the lessee or otherwise.
(e) Except as provided by Subsection (e-1), if [If] any part
of the value of buildings is to be included in the value of real
property or a leasehold estate in real property to secure an
obligation under this section:
(1) the buildings must be covered by adequate property
insurance, including fire and extended coverage insurance, issued
by:
(A) an insurer authorized to engage in business
in this state; or
(B) an insurer recognized as acceptable to issue
that coverage by the insurance regulatory official of the state in
which the real property is located;
(2) the amount of insurance provided by one or more
policies may not be less than the lesser of:
(A) the unpaid balance of the obligation; or
(B) the insurable value of the buildings; and
(3) the loss clause under each policy must be payable
to the insurance company as the company's interest may appear.
(e-1) The property insurance otherwise required for
purposes of Subsection (e) is not required if the borrower
maintains a net worth as indicated in the borrower's audited
financial statements for the most recent fiscal year of at least
three times the amount of the indebtedness.
SECTION 2. Section 425.118, Insurance Code, as amended by
this Act, applies only to an investment made on or after the
effective date of this Act. An investment made before the effective
date of this Act is governed by the law as it existed immediately
before that date, and that law is continued in effect for that
purpose.
SECTION 3. This Act takes effect September 1, 2017.