86R17486 JES-F
By: Thompson of Harris H.B. No. 1251
A BILL TO BE ENTITLED
AN ACT
relating to fraternal benefit societies in a hazardous financial
condition.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 885.311, Insurance Code, is amended by
amending Subsection (a) and adding Subsections (d) and (e) to read
as follows:
(a) A fraternal benefit society shall provide in the
fraternal benefit society's laws that if the society's reserves for
any class of the society's benefit certificates become impaired,
the society's supreme governing body or board of directors may
require the certificate holders to pay the society an equitable
proportion of the deficiency as determined by the governing body or
board. The aggregate assessment for the impaired reserves may not
exceed the total amount required to comply with Section 885.408.
(d) Not later than the 90th day before the proposed
effective date of an assessment under Subsection (a), the fraternal
benefit society shall file with the department an application for
approval of the assessment and a statement sworn to by the president
and secretary or corresponding officers of the society. The
statement must:
(1) include:
(A) the terms of the assessment, including the
proposed effective date; and
(B) a narrative statement of the financial
condition of the fraternal benefit society; and
(2) state that the assessment:
(A) received approval by a majority vote of the
supreme governing body or board of directors of the society; and
(B) complies with the requirements of this
section.
(e) After the department receives a completed application,
the commissioner may approve or disapprove the application. If the
commissioner does not approve or disapprove the application before
the 60th day after the date the department receives the completed
application, the application is considered approved. The
commissioner may impose an effective date earlier than the date
requested in the application if the earlier effective date is in the
best interests of the certificate holders.
SECTION 2. Section 885.407, Insurance Code, is amended to
read as follows:
Sec. 885.407. SOLVENCY. (a) If a fraternal benefit society
reports a ratio of total adjusted capital to authorized control
level risk-based capital that triggers an authorized control level
as determined by the commissioner in accordance with 28 T.A.C.
Section 7.402 and the commissioner reasonably believes the
society's hazardous financial condition will not be promptly
remedied without intervention by the department, the commissioner
may order the society to promptly seek and negotiate an agreement to
transfer in accordance with this section all benefit members,
benefit certificates, assets, and liabilities of the society to
another fraternal benefit society. A transfer under this section:
(1) may be by merger, consolidation, assumption, or
otherwise;
(2) constitutes an entire novation of each benefit
certificate transferred by the society in a hazardous financial
condition, and the receiving society is legally and contractually
responsible for each transferred certificate;
(3) must conclude before the deadline set by the
commissioner;
(4) may be approved by a vote of the majority of the
supreme governing body or board of directors of the society in a
hazardous financial condition, notwithstanding Section
885.063(a)(2)(C) or any provision of the society's laws to the
contrary; and
(5) is subject to approval by the commissioner.
(b) Not later than the seventh day before the date the
supreme governing body or board of directors of a fraternal benefit
society votes on a transfer proposed under Subsection (a), the
governing body or board shall provide the society's certificate
holders written notice of and an opportunity to comment on the
proposed transfer. If the governing body or board approves the
transfer, the governing body or board shall provide the certificate
holders' comments to the commissioner.
(c) Notwithstanding any other law or provision of the
society's laws to the contrary, the supreme governing body or board
of directors of a fraternal benefit society that is ordered to agree
to a transfer under Subsection (a) shall suspend or modify the
society's laws, including laws requiring notice to certificate
holders or the approval of the governing body of the society of a
transfer of the society's certificates, as necessary to facilitate
a transfer approved by the commissioner under that subsection.
(d) The supreme governing body or board of directors of a
fraternal benefit society receiving benefit certificates pursuant
to a transfer under an agreement described by Subsection (a) may
suspend or modify qualifications for membership in the receiving
society to the extent necessary to permit the society to accept the
certificate holders of the society transferring certificates under
the agreement, notwithstanding any provision of the receiving
society's laws to the contrary.
(e) The commissioner may grant to a fraternal benefit
society that is not authorized to engage in the business of
insurance in this state the authority to service benefit
certificates transferred pursuant to Subsection (a) and fulfill all
obligations to the holders of the certificates. Commissioner
action under this subsection does not authorize the fraternal
benefit society to otherwise engage in the business of insurance in
this state.
(f) A transfer under Subsection (a) may be made to an
insurer that is not a fraternal benefit society if the insurer is
authorized to engage in the business of insurance in this state. A
holder of a certificate subject to a transfer as authorized by this
subsection is deemed to agree that any term in the certificate,
including a term that makes the certificate subject to the
transferring society's laws or that provides for maintenance of the
transferring society's solvency that is inconsistent with transfer
to an insurer that is not a fraternal benefit society, is void on
transfer of the certificate. The receiving insurer shall endorse
on a form approved by the commissioner each benefit certificate
received by a transfer made under this section to reflect any terms
of the certificate voided by this subsection. A certificate
holder's obligation to pay an outstanding assessment under Section
885.311 that is not released under the transfer agreement is not
released or voided by this subsection.
(g) The commissioner may request the attorney general bring
an action under Section 885.502 to terminate a fraternal benefit
society that fails to comply with an order under this section or
fails to remedy the financial condition that gave rise to the order.
(h) The powers and authority of the commissioner under this
section are cumulative and in addition to all other powers and
authority to remediate the financial condition of a fraternal
benefit society available to the commissioner, including the powers
and authority under 28 T.A.C. Section 7.402. [A fraternal benefit
society is considered solvent if its admissible assets are equal to
or greater than its liabilities.]
SECTION 3. The changes in law made by this Act to Section
885.311, Insurance Code, apply only to an assessment by a fraternal
benefit society with an effective date on or after January 1, 2020.
An assessment by a fraternal benefit society with an effective date
before January 1, 2020, is governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
SECTION 4. This Act takes effect September 1, 2019.