Texas 2019 - 86th Regular

Texas Senate Bill SB1958 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
	1	+	86R3475 JES-F
1	2		By: Creighton S.B. No. 1958
2		-	(In the Senate - Filed March 7, 2019; March 19, 2019, read
3		-	first time and referred to Committee on Business & Commerce;
4		-	April 16, 2019, reported adversely, with favorable Committee
5		-	Substitute by the following vote: Yeas 9, Nays 0; April 16, 2019,
6		-	sent to printer.)
7		-	Click here to see the committee vote
8		-	COMMITTEE SUBSTITUTE FOR S.B. No. 1958 By: Creighton
9	3
10	4
11	5		A BILL TO BE ENTITLED
12	6		AN ACT
13		-	relating to fraternal benefit societies in a hazardous financial
14		-	condition.
	7	+	relating to financially impaired fraternal benefit societies.
15	8		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
16	9		SECTION 1. Section 885.311, Insurance Code, is amended by
17	10		amending Subsection (a) and adding Subsections (d) and (e) to read
18	11		as follows:
19	12		(a) A fraternal benefit society shall provide in the
20	13		fraternal benefit society's laws that if the society's reserves for
21	14		any class of the society's benefit certificates become impaired,
22	15		the society's supreme governing body or board of directors may
23	16		require the certificate holders to pay the society an equitable
24	17		proportion of the deficiency as determined by the governing body or
25	18		board. The aggregate assessment for the impaired reserves may not
26	19		exceed the total amount required to comply with Section 885.408.
27	20		(d) Not later than the 90th day before the proposed
28	21		effective date of an assessment under Subsection (a), the fraternal
29	22		benefit society shall file with the department an application for
30	23		approval of the assessment and a statement sworn to by the president
31	24		and secretary or corresponding officers of the society. The
32	25		statement must:
33	26		(1) include:
34	27		(A) the terms of the assessment, including the
35	28		proposed effective date; and
36		-	(B) ~~a narrative statement~~ of the ~~financial~~
37		-	~~condition of the fraternal~~ benefit society; and
	29	+	(B) the financial condition of the fraternal
	30	+	benefit society; and
38	31		(2) state that the assessment:
39	32		(A) received approval by a majority vote of the
40	33		supreme governing body or board of directors of the society; and
41	34		(B) complies with the requirements of this
42	35		section.
43		-	(e) ~~After~~ the ~~department receives a completed application,~~
44		-	the ~~commissioner may approve or disapprove~~ the ~~application. If the~~
45		-	~~commissioner does not approve or disapprove~~ the application ~~before~~
46		-	the ~~60th day after~~ the ~~date the department receives the completed~~
47		-	~~application~~, the application is considered ~~approved. The~~
48		-	commissioner may impose an effective date earlier ~~than the date~~
49		-	requested in the application if the earlier effective ~~date is in the~~
50		-	best interests of the certificate holders.
	36	+	(e) The commissioner shall approve or disapprove an
	37	+	application under this section not later than the 60th day after the
	38	+	date the department receives the application. If the commissioner
	39	+	does not approve or disapprove the application before the
	40	+	expiration of the 60-day period, the application is considered
	41	+	approved. The commissioner may impose an effective date earlier
	42	+	than the date requested in the application if the earlier effective
	43	+	date is in the best interests of the certificate holders.
51	44		SECTION 2. Section 885.407, Insurance Code, is amended to
52	45		read as follows:
53		-	Sec. 885.407. SOLVENCY. (a) If a fraternal benefit
54		-	society reports admissible assets greater than the society's
55		-	liabilities in an amount that authorizes the commissioner to place
56		-	the society under regulatory control and the commissioner
57		-	reasonably believes the society's hazardous financial condition
58		-	will not be promptly remedied without intervention by the
59		-	department, the commissioner may order the society to promptly seek
60		-	and negotiate an agreement to transfer in accordance with this
61		-	section all benefit members, benefit certificates, assets, and
62		-	liabilities of the society to another fraternal benefit society. A
63		-	transfer under this section:
	46	+	Sec. 885.407. SOLVENCY. (a) If a fraternal benefit society
	47	+	reports a ratio of total adjusted capital to authorized control
	48	+	level risk-based capital that triggers an authorized control level
	49	+	as determined by the commissioner in accordance with 28 T.A.C.
	50	+	Section 7.402 and the commissioner reasonably believes the impaired
	51	+	society's financial condition will not be promptly remedied without
	52	+	intervention by the department, the commissioner may order the
	53	+	impaired society to promptly seek and negotiate an agreement to
	54	+	transfer in accordance with this section all benefit members,
	55	+	benefit certificates, assets, and liabilities of the impaired
	56	+	society to another fraternal benefit society. A transfer under this
	57	+	section:
64	58		(1) may be by merger, consolidation, assumption, or
65	59		otherwise;
66	60		(2) constitutes an entire novation of each benefit
67		-	certificate transferred by the society ~~in a hazardous financial~~
68		-	~~condition, and the receiving~~ society is legally and contractually
69		-	~~responsible for each~~ transferred certificate;
	61	+	certificate transferred by the impaired society, and the receiving
	62	+	society is legally and contractually responsible for each
	63	+	transferred certificate;
70	64		(3) must conclude before the deadline set by the
71	65		commissioner;
72	66		(4) may be approved by a vote of the majority of the
73		-	supreme governing body or board of directors of the society in a
74		-	hazardous financial condition, notwithstanding Section
75		-	885.063(a)(2)(C) or any provision of the society's laws to the
76		-	contrary; and
	67	+	supreme governing body or board of directors of the impaired
	68	+	society, notwithstanding Section 885.063 or any provision of the
	69	+	impaired society's laws to the contrary; and
77	70		(5) is subject to approval by the commissioner.
78		-	(b) Not later than the seventh day before the date the
79		-	supreme governing body or board of directors of a fraternal benefit
80		-	society votes on a transfer proposed under Subsection (a), the
81		-	governing body or board shall provide the society's certificate
82		-	holders written notice of and an opportunity to comment on the
83		-	proposed transfer. If the governing body or board approves the
84		-	transfer, the governing body or board shall provide the certificate
85		-	holders' comments to the commissioner.
	71	+	(b) Not later than the 30th day after the date the
	72	+	commissioner approves a transfer under Subsection (a), the impaired
	73	+	society transferring the certificates shall notify the certificate
	74	+	holders of the transfer.
86	75		(c) The supreme governing body or board of directors of a
87	76		fraternal benefit society receiving benefit certificates pursuant
88	77		to a transfer under an agreement described by Subsection (a) may
89	78		suspend or modify qualifications for membership in the receiving
90	79		society to the extent necessary to permit the society to accept the
91		-	certificate holders of the society ~~transferring certificates under~~
92		-	~~the agreement,~~ notwithstanding any provision of the receiving
93		-	~~society's laws to~~ the contrary.
	80	+	certificate holders of the impaired society under the agreement,
	81	+	notwithstanding any provision of the receiving society's laws to
	82	+	the contrary.
94	83		(d) The commissioner may grant to a fraternal benefit
95	84		society that is not authorized to engage in the business of
96	85		insurance in this state the authority to service benefit
97	86		certificates transferred pursuant to Subsection (a) and fulfill all
98	87		obligations to the holders of the certificates. Commissioner
99	88		action under this subsection does not authorize the fraternal
100	89		benefit society to otherwise engage in the business of insurance in
101	90		this state.
102	91		(e) A transfer under Subsection (a) may be made to an
103	92		insurer that is not a fraternal benefit society if the insurer is
104	93		authorized to engage in the business of insurance in this state. A
105	94		holder of a certificate subject to a transfer as authorized by this
106	95		subsection is deemed to agree that any term in the certificate,
107	96		including a term that makes the certificate subject to the
108	97		transferring society's laws or that provides for maintenance of the
109	98		transferring society's solvency that is inconsistent with transfer
110	99		to an insurer that is not a fraternal benefit society, is void on
111	100		transfer of the certificate. The receiving insurer shall endorse
112		-	~~on a form approved by the commissioner~~ each benefit certificate
113		-	~~received by a transfer made under this~~ section to reflect any terms
114		-	~~of the certificate voided by this~~ subsection. A certificate
115		-	~~holder's obligation to pay an~~ outstanding assessment under Section
116		-	~~885.311 that is not released~~ under the transfer agreement is not
117		-	~~released or voided by this~~ subsection.
	101	+	each benefit certificate received by a transfer made under this
	102	+	section to reflect any terms of the certificate voided by this
	103	+	subsection. A certificate holder's obligation to pay an
	104	+	outstanding assessment under Section 885.311 that is not released
	105	+	under the transfer agreement is not released or voided by this
	106	+	subsection.
118	107		(f) The commissioner may request the attorney general bring
119	108		an action under Section 885.502 to terminate a fraternal benefit
120	109		society that fails to comply with an order under this section or
121	110		fails to remedy the financial condition that gave rise to the order.
122	111		(g) The powers and authority of the commissioner under this
123	112		section are cumulative and in addition to all other powers and
124	113		authority to remediate the financial condition of a fraternal
125		-	benefit society available to the commissioner. [A fraternal
126		-	benefit society is considered solvent if its admissible assets are
127		-	equal to or greater than its liabilities.]
	114	+	benefit society available to the commissioner, including the powers
	115	+	and authority under 28 T.A.C. Section 7.402. [A fraternal benefit
	116	+	society is considered solvent if its admissible assets are equal to
	117	+	or greater than its liabilities.]
128	118		SECTION 3. The changes in law made by this Act to Section
129	119		885.311, Insurance Code, apply only to an assessment by a fraternal
130	120		benefit society with an effective date on or after January 1, 2020.
131	121		An assessment by a fraternal benefit society with an effective date
132	122		before January 1, 2020, is governed by the law as it existed
133	123		immediately before the effective date of this Act, and that law is
134	124		continued in effect for that purpose.
135	125		SECTION 4. This Act takes effect September 1, 2019.
136		-	* * * * *