Texas 2021 - 87th Regular

Texas Senate Bill SB1954 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	S.B. No. 1954
	1	+	By: Hancock S.B. No. 1954
	2	+	(Oliverson)
2	3
3	4
	5	+	A BILL TO BE ENTITLED
4	6		AN ACT
5	7		relating to the pledge or encumbrance of an insurer's assets under
6	8		the Asset Protection Act.
7	9		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
8	10		SECTION 1. Section 422.002(a), Insurance Code, is amended
9	11		to read as follows:
10	12		(a) The purposes of this chapter are to:
11	13		(1) require an insurer to maintain unencumbered assets
12	14		in an amount equal to the insurer's policy reserve liabilities;
13	15		(2) provide preferential claims against assets in
14	16		favor of an owner, beneficiary, assignee, certificate holder, or
15	17		third-party beneficiary of an insurance policy; and
16	18		(3) prevent the pledge or encumbrance of assets in
17	19		excess of certain amounts without a prior written order of the
18	20		commissioner.
19	21		SECTION 2. Sections 422.003(1) and (4), Insurance Code, are
20	22		amended to read as follows:
21	23		(1) "Asset" means any property in which an insurer
22	24		owns a legal or equitable interest that is reported as an asset in
23	25		the domestic insurer's statutory financial statements most
24	26		recently filed with the department.
25	27		(4) "Policy reserve [Reserve] liabilities" means the
26	28		liabilities that an insurer is required under this code to
27	29		establish for all of the insurer's outstanding insurance policies.
28	30		SECTION 3. Section 422.005(a), Insurance Code, is amended
29	31		to read as follows:
30	32		(a) This chapter does not apply to:
31	33		(1) variable contracts for which separate accounts are
32	34		required to be maintained;
33	35		(2) a reinsurance agreement and [or] any trust account
34	36		related to the reinsurance agreement if the reinsurance agreement
35	37		and related trust account meet the requirements of Chapter 493;
36	38		(3) an assessment-as-needed company or insurance
37	39		coverage written by an assessment-as-needed company;
38	40		(4) an insurer while:
39	41		(A) the insurer is subject to a conservatorship
40	42		order issued by the commissioner; or
41	43		(B) a court-appointed receiver is in charge of
42	44		the insurer's affairs; [or]
43	45		(5) an insurer's reserve assets that are held,
44	46		deposited, pledged, or otherwise encumbered to secure, offset,
45	47		protect, or meet the insurer's policy reserve liabilities
46	48		established in a reinsurance agreement under which the insurer
47	49		reinsures the insurance policy liabilities of a ceding insurer if:
48	50		(A) the ceding insurer and the reinsurer are
49	51		authorized to engage in business in this state; and
50	52		(B) in accordance with a written agreement
51	53		between the ceding insurer and the reinsurer, reserve assets
52	54		substantially equal to the policy reserve liabilities the reinsurer
53	55		must establish on the reinsured business are:
54	56		(i) deposited by or withheld from the
55	57		reinsurer and held in the custody of the ceding insurer, or
56	58		deposited and held in a trust account with a state or national bank
57	59		domiciled in this state, as security for the payment of the
58	60		reinsurer's obligations under the reinsurance agreement;
59	61		(ii) held subject to withdrawal by the
60	62		ceding insurer; and
61	63		(iii) held under the separate or joint
62	64		control of the ceding insurer; or
63	65		(6) any pledge, encumbrance, or lien contemplated by
64	66		or customarily included in the documentation for:
65	67		(A) an investment or transaction authorized by:
66	68		(i) Section 424.068, Subchapter D, Chapter
67	69		424, or Section 425.121 or 425.151; or
68	70		(ii) Section 424.068, Subchapter E, Chapter
69	71		424, or Section 425.124, 425.125, 425.126, 425.127, 425.128,
70	72		425.129, 425.130, 425.131, or 425.132; and
71	73		(B) a custodial or trust agreement for an
72	74		insurer's securities authorized by Section 423.103 that provides
73	75		for a limited grant or lien or security interest for payment of fees
74	76		and expenses due to a service provider or intermediary under the
75	77		custodial or trust agreement.
76	78		SECTION 4. Subchapter A, Chapter 422, Insurance Code, is
77	79		amended by adding Section 422.007 to read as follows:
78	80		Sec. 422.007. RULES. The commissioner may adopt rules
79	81		regarding the provisions of this chapter.
80	82		SECTION 5. Section 422.051, Insurance Code, is amended by
81	83		amending Subsection (a) and adding Subsections (b-1) and (b-2) to
82	84		read as follows:
83	85		(a) An insurer shall at all times maintain unencumbered
84	86		assets in an amount equal to the insurer's policy reserve
85	87		liabilities.
86	88		(b-1) The calculation of the quantitative limits in
87	89		Subsections (a) and (b) must be based on the statutory financial
88	90		statements for the insurer most recently filed with the department
89	91		as of the date compliance is determined. The date that a pledge or
90	92		encumbrance is made is the date used to determine compliance with
91	93		the limits in Subsection (b).
92	94		(b-2) Compliance with the quantitative limits in Subsection
93	95		(b) is achieved when, on the date of determination of compliance,
94	96		the sum of the value of a proposed pledge or encumbrance, when added
95	97		to the values of the sum of all previous and still outstanding
96	98		pledges and encumbrances, does not exceed any quantitative limit in
97	99		Subsection (b).
98	100		SECTION 6. Section 422.052, Insurance Code, is amended by
99	101		amending Subsection (b) and adding Subsection (c) to read as
100	102		follows:
101	103		(b) Annually, or more often as required by the commissioner,
102	104		the insurer shall file with the commissioner a statement sworn to by
103	105		the insurer's chief executive officer that:
104	106		(1) title to assets that equal the amount of the
105	107		insurer's policy reserve liabilities and that are not pledged or
106	108		otherwise encumbered is vested in the insurer;
107	109		(2) the only assets of the insurer that are pledged or
108	110		otherwise encumbered are those identified and reported in the sworn
109	111		statement, and no other assets of the insurer are pledged or
110	112		otherwise encumbered; and
111	113		(3) the terms of the transaction pledging or otherwise
112	114		encumbering the assets are those reported in the sworn statement.
113	115		(c) The insurer is not required to file the report described
114	116		by Subsection (a) for a pledge or encumbrance permitted in a
115	117		transaction approved by the commissioner under Section 1152.055.
116	118		SECTION 7. Section 422.053, Insurance Code, is amended to
117	119		read as follows:
118	120		Sec. 422.053. CLAIMANT LIEN ON CERTAIN ASSETS. (a) A
119	121		person, corporation, association, governmental entity, or any
120	122		other legal entity that accepts as security for an insurer's debt or
121	123		other obligation a pledge or encumbrance of an asset of the insurer
122	124		that is not made in accordance with this chapter is considered to
123	125		have accepted the asset subject to a superior, preferential, and
124	126		automatically perfected lien in favor of a claimant of the insurer.
125	127		(b) Subsection (a) does not apply to:
126	128		(1) an asset of an insurer in conservatorship or
127	129		receivership if the commissioner in the conservatorship
128	130		proceeding, or the court in which the receivership is pending,
129	131		approves the pledge or encumbrance of the asset; or
130	132		(2) a pledge or encumbrance of an asset permitted in a
131	133		transaction approved by the commissioner under Section 1152.055.
132	134		SECTION 8. Section 422.054, Insurance Code, is amended to
133	135		read as follows:
134	136		Sec. 422.054. PREFERENTIAL CLAIMS ON LIQUIDATION. If an
135	137		insurer is involuntarily or voluntarily liquidated, a claimant of
136	138		the insurer has a prior and preferential claim against all assets of
137	139		the insurer other than the assets that have been pledged or
138	140		encumbered in accordance with this chapter or the assets that are
139	141		subject to a pledge or encumbrance of an asset described by Section
140	142		422.053(b)(2). All claimants have equal status, and their prior
141	143		and preferential claim is superior to any claim or cause of action
142	144		against the insurer by any other person, corporation, association,
143	145		or legal entity.
144	146		SECTION 9. This Act takes effect September 1, 2021.
145		-	______________________________ ______________________________
146		-	President of the Senate Speaker of the House
147		-	I hereby certify that S.B. No. 1954 passed the Senate on
148		-	April 19, 2021, by the following vote: Yeas 31, Nays 0.
149		-	______________________________
150		-	Secretary of the Senate
151		-	I hereby certify that S.B. No. 1954 passed the House on
152		-	May 4, 2021, by the following vote: Yeas 145, Nays 0, two present
153		-	not voting.
154		-	______________________________
155		-	Chief Clerk of the House
156		-	Approved:
157		-	______________________________
158		-	Date
159		-	______________________________
160		-	Governor