Texas 2021 - 87th Regular

Texas House Bill HB4518 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	87R8801 MWC-F
2	2	By: Oliverson H.B. No. 4518
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the pledge or encumbrance of an insurer's assets under
8	8	the Asset Protection Act.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 422.002(a), Insurance Code, is amended
11	11	to read as follows:
12	12	(a) The purposes of this chapter are to:
13	13	(1) require an insurer to maintain unencumbered assets
14	14	in an amount equal to the insurer's policy reserve liabilities;
15	15	(2) provide preferential claims against assets in
16	16	favor of an owner, beneficiary, assignee, certificate holder, or
17	17	third-party beneficiary of an insurance policy; and
18	18	(3) prevent the pledge or encumbrance of assets in
19	19	excess of certain amounts without a prior written order of the
20	20	commissioner.
21	21	SECTION 2. Sections 422.003(1) and (4), Insurance Code, are
22	22	amended to read as follows:
23	23	(1) "Asset" means any property in which an insurer
24	24	owns a legal or equitable interest that is reported as an asset in
25	25	the domestic insurer's statutory financial statements most
26	26	recently filed with the department.
27	27	(4) "Policy reserve [Reserve] liabilities" means the
28	28	liabilities that an insurer is required under this code to
29	29	establish for all of the insurer's outstanding insurance policies.
30	30	SECTION 3. Section 422.005(a), Insurance Code, is amended
31	31	to read as follows:
32	32	(a) This chapter does not apply to:
33	33	(1) variable contracts for which separate accounts are
34	34	required to be maintained;
35	35	(2) a reinsurance agreement and [or] any trust account
36	36	related to the reinsurance agreement if the reinsurance agreement
37	37	and related trust account meet the requirements of Chapter 493;
38	38	(3) an assessment-as-needed company or insurance
39	39	coverage written by an assessment-as-needed company;
40	40	(4) an insurer while:
41	41	(A) the insurer is subject to a conservatorship
42	42	order issued by the commissioner; or
43	43	(B) a court-appointed receiver is in charge of
44	44	the insurer's affairs; [or]
45	45	(5) an insurer's reserve assets that are held,
46	46	deposited, pledged, or otherwise encumbered to secure, offset,
47	47	protect, or meet the insurer's policy reserve liabilities
48	48	established in a reinsurance agreement under which the insurer
49	49	reinsures the insurance policy liabilities of a ceding insurer if:
50	50	(A) the ceding insurer and the reinsurer are
51	51	authorized to engage in business in this state; and
52	52	(B) in accordance with a written agreement
53	53	between the ceding insurer and the reinsurer, reserve assets
54	54	substantially equal to the policy reserve liabilities the reinsurer
55	55	must establish on the reinsured business are:
56	56	(i) deposited by or withheld from the
57	57	reinsurer and held in the custody of the ceding insurer, or
58	58	deposited and held in a trust account with a state or national bank
59	59	domiciled in this state, as security for the payment of the
60	60	reinsurer's obligations under the reinsurance agreement;
61	61	(ii) held subject to withdrawal by the
62	62	ceding insurer; and
63	63	(iii) held under the separate or joint
64	64	control of the ceding insurer; or
65	65	(6) any pledge, encumbrance, or lien contemplated by
66	66	or customarily included in the documentation for:
67	67	(A) an investment or transaction authorized by:
68	68	(i) Section 424.068, Subchapter D, Chapter
69	69	424, or Section 425.121 or 425.151; or
70	70	(ii) Section 424.068, Subchapter E, Chapter
71	71	424, or Section 425.124, 425.125, 425.126, 425.127, 425.128,
72	72	425.129, 425.130, 425.131, or 425.132; and
73	73	(B) a custodial or trust agreement for an
74	74	insurer's securities authorized by Section 423.103 that provides
75	75	for a limited grant or lien or security interest for payment of fees
76	76	and expenses due to a service provider or intermediary under the
77	77	custodial or trust agreement.
78	78	SECTION 4. Subchapter A, Chapter 422, Insurance Code, is
79	79	amended by adding Section 422.007 to read as follows:
80	80	Sec. 422.007. RULES. The commissioner may adopt rules
81	81	regarding the provisions of this chapter.
82	82	SECTION 5. Section 422.051, Insurance Code, is amended by
83	83	amending Subsection (a) and adding Subsections (b-1) and (b-2) to
84	84	read as follows:
85	85	(a) An insurer shall at all times maintain unencumbered
86	86	assets in an amount equal to the insurer's policy reserve
87	87	liabilities.
88	88	(b-1) The calculation of the quantitative limits in
89	89	Subsections (a) and (b) must be based on the statutory financial
90	90	statements for the insurer most recently filed with the department
91	91	as of the date compliance is determined. The date that a pledge or
92	92	encumbrance is made is the date used to determine compliance with
93	93	the limits in Subsection (b).
94	94	(b-2) Compliance with the quantitative limits in Subsection
95	95	(b) is achieved when, on the date of determination of compliance,
96	96	the sum of the value of a proposed pledge or encumbrance, when added
97	97	to the values of the sum of all previous and still outstanding
98	98	pledges and encumbrances, does not exceed any quantitative limit in
99	99	Subsection (b).
100	100	SECTION 6. Section 422.052, Insurance Code, is amended by
101	101	amending Subsection (b) and adding Subsection (c) to read as
102	102	follows:
103	103	(b) Annually, or more often as required by the commissioner,
104	104	the insurer shall file with the commissioner a statement sworn to by
105	105	the insurer's chief executive officer that:
106	106	(1) title to assets that equal the amount of the
107	107	insurer's policy reserve liabilities and that are not pledged or
108	108	otherwise encumbered is vested in the insurer;
109	109	(2) the only assets of the insurer that are pledged or
110	110	otherwise encumbered are those identified and reported in the sworn
111	111	statement, and no other assets of the insurer are pledged or
112	112	otherwise encumbered; and
113	113	(3) the terms of the transaction pledging or otherwise
114	114	encumbering the assets are those reported in the sworn statement.
115	115	(c) The insurer is not required to file the report described
116	116	by Subsection (a) for a pledge or encumbrance permitted in a
117	117	transaction approved by the commissioner under Section 1152.055.
118	118	SECTION 7. Section 422.053, Insurance Code, is amended to
119	119	read as follows:
120	120	Sec. 422.053. CLAIMANT LIEN ON CERTAIN ASSETS. (a) A
121	121	person, corporation, association, governmental entity, or any
122	122	other legal entity that accepts as security for an insurer's debt or
123	123	other obligation a pledge or encumbrance of an asset of the insurer
124	124	that is not made in accordance with this chapter is considered to
125	125	have accepted the asset subject to a superior, preferential, and
126	126	automatically perfected lien in favor of a claimant of the insurer.
127	127	(b) Subsection (a) does not apply to:
128	128	(1) an asset of an insurer in conservatorship or
129	129	receivership if the commissioner in the conservatorship
130	130	proceeding, or the court in which the receivership is pending,
131	131	approves the pledge or encumbrance of the asset; or
132	132	(2) a pledge or encumbrance of an asset permitted in a
133	133	transaction approved by the commissioner under Section 1152.055.
134	134	SECTION 8. Section 422.054, Insurance Code, is amended to
135	135	read as follows:
136	136	Sec. 422.054. PREFERENTIAL CLAIMS ON LIQUIDATION. If an
137	137	insurer is involuntarily or voluntarily liquidated, a claimant of
138	138	the insurer has a prior and preferential claim against all assets of
139	139	the insurer other than the assets that have been pledged or
140	140	encumbered in accordance with this chapter or the assets that are
141	141	subject to a pledge or encumbrance of an asset described by Section
142	142	422.053(b)(2). All claimants have equal status, and their prior
143	143	and preferential claim is superior to any claim or cause of action
144	144	against the insurer by any other person, corporation, association,
145	145	or legal entity.
146	146	SECTION 9. This Act takes effect September 1, 2021.