86R19708 JES-F
By: Lucio III H.B. No. 2694
A BILL TO BE ENTITLED
AN ACT
relating to the authority of certain insurers to make investments
in bond exchange-traded funds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 424, Insurance Code, is
amended by adding Section 424.075 to read as follows:
Sec. 424.075. AUTHORIZED INVESTMENTS: BOND EXCHANGE-TRADED
FUNDS. (a) In this section, "bond exchange-traded fund" means an
exchange-traded fund registered as an investment company under the
Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as
amended, that has a principal investment strategy of investing
primarily in bonds, loans, or other debt instruments.
(b) An insurer may invest the insurer's funds in excess of
minimum capital and surplus in shares of a bond exchange-traded
fund if:
(1) the exchange-traded fund is solvent and reported
at least $10 million of net assets in the exchange-traded fund's
latest annual or more recent certified audited financial statement;
(2) the exchange-traded fund is eligible for reporting
as a long-term bond in the Purposes and Procedures Manual of the
securities valuation office or a successor publication; and
(3) the amount of the insurer's investment in the
exchange-traded fund does not exceed 15 percent of the insurer's
funds in excess of minimum capital and surplus.
(c) An insurer may deposit with the department shares of a
bond exchange-traded fund described by Subsection (b) as a
statutory deposit if state law requires a statutory deposit from
the insurer.
SECTION 2. Subchapter C, Chapter 425, Insurance Code, is
amended by adding Section 425.1231 to read as follows:
Sec. 425.1231. AUTHORIZED INVESTMENTS: BOND
EXCHANGE-TRADED FUNDS. (a) In this section, "bond exchange-traded
fund" means an exchange-traded fund registered as an investment
company under the Investment Company Act of 1940 (15 U.S.C. Section
80a-1 et seq.), as amended, that has a principal investment
strategy of investing primarily in bonds, loans, or other debt
instruments.
(b) An insurance company may invest the company's funds in
excess of minimum capital and surplus in shares of a bond
exchange-traded fund if:
(1) the exchange-traded fund is solvent and reported
at least $10 million of net assets in the exchange-traded fund's
latest annual or more recent certified audited financial statement;
(2) the exchange-traded fund is eligible for reporting
as a long-term bond in the Purposes and Procedures Manual of the
securities valuation office or a successor publication; and
(3) the amount of the insurance company's investment
in the exchange-traded fund does not exceed the investment amount
limit in Section 425.157(b).
(c) An insurance company may deposit with the department
shares of a bond exchange-traded fund described by Subsection (b)
as a statutory deposit if state law requires a statutory deposit
from the insurance company.
(d) Each bond exchange-traded fund described by Subsection
(b) shall be considered a separate issuer of shares and a business
entity for purposes of Section 425.110.
SECTION 3. Subchapter D, Chapter 425, Insurance Code, is
amended by adding Section 425.2061 to read as follows:
Sec. 425.2061. AUTHORIZED INVESTMENTS FOR ALL FUNDS: BOND
EXCHANGE-TRADED FUNDS. Subject to Section 425.157(b), an insurer
may invest any of the insurer's funds and accumulations in a bond
exchange-traded fund, as defined by Section 425.1231(a).
SECTION 4. This Act takes effect September 1, 2019.