85R19426 SMT-F
By: Faircloth H.B. No. 3803
Substitute the following for H.B. No. 3803:
By: Phillips C.S.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 (c), (d), and (e) and adding Subsections (d-1)
and (e-1) to read as follows:
(c) The term of an obligation secured by a first lien on a
leasehold estate in real property may not, as of the date the
obligation is acquired, exceed a period equal to four-fifths of the
unexpired term of the leasehold estate, including any renewal
options exercisable by the lessee, and the obligation must fully
amortize during that period. The term of the leasehold estate,
including any renewal options exercisable by the lessee, may not
expire sooner than the 10th anniversary of the expiration date of
the term of the obligation.
(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) Subsection (d) does 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, as of the
date the obligation is acquired, 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 under
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 the greater of five times the
amount of the indebtedness or $100 million and:
(1) the insurance company has recourse against the
borrower or the borrower's guarantor; or
(2) for an obligation secured by a leasehold estate:
(A) the tenant assigned the lease to the
insurance company; and
(B) the lease agreement is in writing and
provides that if a building on the property is damaged or destroyed,
the tenant or the tenant's guarantor is obligated to rebuild or
restore the damaged or destroyed building to the building's
condition immediately before the damage or destruction occurred or
compensate the owner for the loss arising from the damage or
destruction.
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.