By:  Harris of Dallas                                 S.B. No. 1134
                                 A BILL TO BE ENTITLED
                                        AN ACT
    1-1  relating to an amendment to the Texas Insurance Code including
    1-2  Article 3.33 concerning the investments of insurers including the
    1-3  treatment of money market funds.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Section 4, Article 3.33, Insurance Code, is
    1-6  amended to read as follows:
    1-7        Sec. 4.  Subject to the limitations and restrictions herein
    1-8  contained, the investments and loans described in the following
    1-9  subsections, and none other, are authorized for the insurers
   1-10  subject hereto:
   1-11        (a)  United States Government Bonds.  Bonds, evidences of
   1-12  indebtedness or obligations of the United States of America, or
   1-13  bonds, evidences of indebtedness or obligations guaranteed as to
   1-14  principal and interest by the full faith and credit of the United
   1-15  States of America, and bonds, evidences of indebtedness, or
   1-16  obligations of agencies and instrumentalities of the government of
   1-17  the United States of America;
   1-18        (b)  Other Governmental Bonds.  Bonds, evidences of
   1-19  indebtedness or obligations of governmental units in the United
   1-20  States, Canada, or any province or city of Canada, and of the
   1-21  instrumentalities of such governmental units; provided:
   1-22              (1)  such governmental unit or instrumentality is not
   1-23  in default in the payment of principal or interest in any of its
    2-1  obligations; and
    2-2              (2)  investments in the obligations of any one
    2-3  governmental unit or instrumentality may not exceed 20 percent of
    2-4  the insurer's capital and surplus;
    2-5        (c)  Corporate Bonds.  Bonds, evidences of indebtedness or
    2-6  obligations of corporations organized under the laws of the United
    2-7  States of America or its states or Canada or any state, district,
    2-8  province, or territory of Canada; provided:
    2-9              (1)  any such corporation must be solvent with at least
   2-10  $1,000,000 of net worth as of the date of its latest annual or more
   2-11  recent certified audited financial statement or will have at least
   2-12  $1,000,000 of net worth after completion of a securities offering
   2-13  which is being subscribed to by the insurer, or the obligation is
   2-14  guaranteed as to principal and interest by a solvent corporation
   2-15  meeting such net worth requirements which is organized under the
   2-16  laws of the United States of America or one of its states or Canada
   2-17  or any state, district, province, or territory of Canada;
   2-18              (2)  investments in the obligations of any one
   2-19  corporation may not exceed 20 percent of the insurer's capital and
   2-20  surplus; and
   2-21              (3)  the aggregate of all investments under this
   2-22  subsection may not exceed:
   2-23                    (A)  one hundred percent of the insurer's assets
   2-24  (excluding, however, those assets representing the minimum capital
   2-25  required for the insurer), but only if more than 75 percent of the
    3-1  total amount invested by the insurer in such bonds, evidences of
    3-2  indebtedness, or obligations of any such corporations qualifying
    3-3  under Subdivision (1) of this subsection are rated either:  (i) AA
    3-4  or better by Standard and Poor's Bond Ratings service; or (ii) Aa
    3-5  or better by Moody's Bond Ratings service; or
    3-6                    (B)  eighty percent of the insurer's assets
    3-7  (excluding, however, those assets representing the minimum capital
    3-8  required for the insurer), but only if more than 50 percent of the
    3-9  total amount invested by the insurer in such bonds, evidences of
   3-10  indebtedness or obligations of any such corporations qualifying
   3-11  under Subdivision (1) of this subsection are rated either:  (i) BBB
   3-12  or better by Standard and Poor's Bond Ratings service; or (ii) Baa
   3-13  or better by Moody's Bond Ratings service; or
   3-14                    (C)  fifty percent of the insurer's assets;
   3-15        (d)  International Market.  Bonds issued, assumed, or
   3-16  guaranteed by the Interamerican Development Bank, the International
   3-17  Bank for Reconstruction and Development (the World Bank), the Asian
   3-18  Development Bank, the State of Israel, the African Development
   3-19  Bank, and the International Finance Corporation; provided:
   3-20              (1)  investments in the bonds of any one of the
   3-21  entities specified above may not exceed 20 percent of the insurer's
   3-22  capital and surplus; and
   3-23              (2)  the aggregate of all investments made under this
   3-24  subsection may not exceed 20 percent of the insurer's assets;
   3-25        (e)  Policy Loans.  Loans upon the security of the insurer's
    4-1  own policies not in excess of the amount of the reserve values
    4-2  thereof;
    4-3        (f)  Time and Savings Deposits.  Any type or form of savings
    4-4  deposits, time deposits, certificates of deposit, NOW accounts, and
    4-5  money market accounts in solvent banks, savings and loan
    4-6  associations, and credit unions and branches thereof, organized
    4-7  under the laws of the United States of America or its states, when
    4-8  made in accordance with the laws or regulations applicable to such
    4-9  entities; provided the amount of the deposits in any one bank,
   4-10  savings and loan association, or credit union will not exceed the
   4-11  greater of:
   4-12              (1)  twenty percent of the insurer's capital and
   4-13  surplus;
   4-14              (2)  the amount of federal or state deposit insurance
   4-15  coverage pertaining to such deposit; or
   4-16              (3)  ten percent of the amount of capital, surplus, and
   4-17  undivided profits of the entity receiving such deposits;
   4-18        (g)  Equipment Trusts.  Equipment trust obligations or
   4-19  certificates; provided:
   4-20              (1)  any such obligation or certificate is secured by
   4-21  an interest in transportation equipment that is in whole or in part
   4-22  within the United States of America and the amount of the
   4-23  obligation or certificate may not exceed 90 percent of the value of
   4-24  the equipment;
   4-25              (2)  the obligation or certificate provides a right to
    5-1  receive determined portions of rental, purchase, or other fixed
    5-2  obligatory payments for the use or purchase of the transportation
    5-3  equipment;
    5-4              (3)  investment in any one equipment trust obligation
    5-5  or certificate may not exceed 10 percent of the insurer's capital
    5-6  and surplus; and
    5-7              (4)  the aggregate of all investments made under this
    5-8  subsection may not exceed 10 percent of the insurer's assets;
    5-9        (h)  Common Stock.  Common stock of any corporation organized
   5-10  under the laws of the United States of America or any of its
   5-11  states, shares of mutual funds doing business under the Investment
   5-12  Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), other than
   5-13  money market funds as defined in Subsection (s), and shares in real
   5-14  estate investment trusts as defined in the Internal Revenue Code of
   5-15  1954 (26 U.S.C. Section 856); provided:
   5-16              (1)  any such corporation, other than a mutual fund,
   5-17  must be solvent with at least $1,000,000 net worth as of the date
   5-18  of its latest annual or more recent certified audited financial
   5-19  statement or will have at least $1,000,000 of net worth after
   5-20  completion of a securities offering which is being subscribed to by
   5-21  the insurer;
   5-22              (2)  mutual funds, other than money market funds as
   5-23  defined in Subsection (s), and real estate investment trusts must
   5-24  be solvent with at least $1,000,000 of net assets as of the date of
   5-25  its latest annual or more recent certified audited financial
    6-1  statement;
    6-2              (3)  investments in any one corporation, mutual fund,
    6-3  other than a money market fund as described in Subsection (s), or
    6-4  real estate investment trust may not exceed 10 percent of the
    6-5  insurer's capital and surplus; and
    6-6              (4)  the aggregate of all investments made under this
    6-7  subsection may not exceed 20 percent of the insurer's assets;
    6-8        (i)  Preferred Stock.  Preferred stock of corporations
    6-9  organized under the laws of the United States of America or any of
   6-10  its states; provided:
   6-11              (1)  such corporation must be solvent with at least
   6-12  $1,000,000 of net worth as of the date of its latest annual or more
   6-13  recent certified audited financial statement or will have at least
   6-14  $1,000,000 of net worth after completion of a security offering
   6-15  which is being subscribed to by the insurer;
   6-16              (2)  investments in the preferred stock of any one
   6-17  corporation will not exceed 20 percent of the insurer's capital and
   6-18  surplus;
   6-19              (3)  in the aggregate not more than 10 percent of the
   6-20  insurer's assets may be invested in preferred stock, the redemption
   6-21  and retirement of which is not provided for by a sinking fund
   6-22  meeting the standards established by the National Association of
   6-23  Insurance Commissioners to value the preferred stock at cost; and
   6-24              (4)  the aggregate of all investments made under this
   6-25  subsection may not exceed 40 percent of the insurer's assets;
    7-1        (j)  Collateral Loans.  Collateral loans secured by a first
    7-2  lien upon or a valid and perfected first security interest in an
    7-3  asset; provided:
    7-4              (1)  the amount of any such collateral loan will not
    7-5  exceed 80 percent of the value of the collateral asset at any time
    7-6  during the duration of the loan; and
    7-7              (2)  the asset used as collateral would be authorized
    7-8  for direct investment by the insurer under other provisions of this
    7-9  Section 4, except real property in Subsection (l);
   7-10        (k)  Real Estate Loans.  Notes, evidences of indebtedness, or
   7-11  participations therein secured by a valid first lien upon real
   7-12  property or leasehold estate therein located in the United States
   7-13  of America; provided:
   7-14              (1)  the amount of any such obligation secured by a
   7-15  first lien upon real property or leasehold estate therein shall not
   7-16  exceed 90 percent of the value of such real property or leasehold
   7-17  estate therein, but the amount of such obligation:
   7-18                    (A)  may exceed 90 percent but shall not exceed
   7-19  100 percent of the value of such real property or leasehold estate
   7-20  therein if the insurer or one or more wholly owned subsidiaries of
   7-21  the insurer owns in the aggregate a 10 percent or greater equity
   7-22  interest in such real property or leasehold estate therein;
   7-23                    (B)  may be 95 percent of the value of such real
   7-24  property or leasehold estate therein if it contains only a dwelling
   7-25  designed exclusively for occupancy by not more than four families
    8-1  for residential purposes, and the portion of the unpaid balance of
    8-2  such obligation which is in excess of an amount equal to 90 percent
    8-3  of such value is guaranteed or insured by a mortgage insurance
    8-4  company qualified to do business in the State of Texas; or
    8-5                    (C)  may be greater than 90 percent of the value
    8-6  of such real property or leasehold estate therein to the extent the
    8-7  obligation is insured or guaranteed by the United States of
    8-8  America, the Federal Housing Administration pursuant to the
    8-9  National Housing Act of 1934, as amended (12 U.S.C. Section 1701 et
   8-10  seq.), or the State of Texas; and
   8-11              (2)  the term of an obligation secured by a first lien
   8-12  upon a leasehold estate in real property shall not exceed a period
   8-13  equal to four-fifths of the then unexpired term of such leasehold
   8-14  estate; provided the unexpired term of the leasehold estate may
   8-15  extend at least 10 years beyond the term of the obligation, and
   8-16  each obligation shall be payable in an installment or installments
   8-17  of sufficient amount or amounts so that at any time after the
   8-18  expiration of two-thirds of the original loan term, the principal
   8-19  balance will be no greater than the principal balance would have
   8-20  been if the loan had been amortized over the original loan term in
   8-21  equal monthly, quarterly, semiannual, or annual payments of
   8-22  principal and interest, it being required that under any method of
   8-23  repayment such obligations will fully amortize during a period of
   8-24  time not exceeding four-fifths of the then unexpired term of the
   8-25  security leasehold estate; and
    9-1              (3)  if any part of the value of buildings is to be
    9-2  included in the value of such real property or leasehold estate
    9-3  therein to secure the obligations provided for in this subsection,
    9-4  such buildings shall be covered by adequate property insurance,
    9-5  including but not limited to fire and extended coverage insurance
    9-6  issued by a company authorized to transact business in the State of
    9-7  Texas or by a company recognized as acceptable for such purpose by
    9-8  the insurance regulatory official of the state in which such real
    9-9  estate is located, and the amount of insurance granted in the
   9-10  policy or policies shall be not less than the unpaid balance of the
   9-11  obligation or the insurable value of such buildings, whichever is
   9-12  the lesser; the loss clause shall be payable to the insurer as its
   9-13  interest may appear; and
   9-14              (4)  to the extent any note, evidence of indebtedness,
   9-15  or participation therein under this subsection represents an equity
   9-16  interest in the underlying real property, the value of such equity
   9-17  interest shall be determined at the time of execution of such note,
   9-18  evidence of indebtedness, or participation therein and that portion
   9-19  shall be designated as an investment subject to the provisions of
   9-20  Subsection (l)(2) of this section; and
   9-21              (5)  the amount of any one such obligation may not
   9-22  exceed 25 percent of the insurer's capital and surplus;
   9-23        (l)  Real Estate.  Real property fee simple or leasehold
   9-24  estates located within the United States of America, as follows:
   9-25              (1)  home and branch office real property or
   10-1  participations therein, which must be materially enhanced in value
   10-2  by the construction of durable, permanent-type buildings and other
   10-3  improvements costing an amount at least equal to the cost of such
   10-4  real property, exclusive of buildings and improvements at the time
   10-5  of acquisition, or by the construction of such buildings and
   10-6  improvements which must be commenced within two years of the date
   10-7  of the acquisition of such real property; provided:
   10-8                    (A)  at least 30 percent of the available space
   10-9  in such building shall be occupied for the business purposes of the
  10-10  insurer and its affiliates; and
  10-11                    (B)  the aggregate investment in such home and
  10-12  branch offices shall not exceed 20 percent of the insurer's assets;
  10-13  and
  10-14              (2)  other investment property or participations
  10-15  therein, which must be materially enhanced in value by the
  10-16  construction of durable, permanent-type buildings and other
  10-17  improvements costing an amount at least equal to the cost of such
  10-18  real property, exclusive of buildings and improvements at the time
  10-19  of acquisition, or by the construction of such buildings and
  10-20  improvements which must be commenced within two years of the date
  10-21  of acquisition of such real property; provided that such investment
  10-22  in any one piece of property or interest therein, including the
  10-23  improvements, fixtures, and equipment pertaining thereto may not
  10-24  exceed five percent of the insurer's assets; provided, however,
  10-25  nothing in this article shall allow ownership of, development of,
   11-1  or equity interest in any residential property or subdivision,
   11-2  single or multiunit family dwelling property, or undeveloped real
   11-3  estate for the purpose of subdivision for or development of
   11-4  residential, single, or multiunit family dwellings, except
   11-5  acquisitions as provided in Subdivision (4) below, and such
   11-6  ownership, development, or equity interests shall be specifically
   11-7  prohibited;
   11-8              (3)  the admissible asset value of each such investment
   11-9  in the properties acquired under Subdivisions (1) and (2) of this
  11-10  subsection shall be subject to review and approval by the
  11-11  Commissioner of Insurance.  The commissioner shall have discretion
  11-12  at the time such investment is made or any time when an examination
  11-13  of the company is being made to cause any such investment to be
  11-14  appraised by an appraiser, appointed by the commissioner, and the
  11-15  reasonable expense of such appraisal shall be paid by such
  11-16  insurance company and shall be deemed to be a part of the expense
  11-17  of examination of such company; if the appraisal is made upon
  11-18  application of the company, the expense of such appraisal shall not
  11-19  be considered a part of the expense of examination of such company;
  11-20  no insurance company may hereafter make any write-up in the
  11-21  valuation of any of the properties described in Subdivision (1) or
  11-22  (2) of this subsection unless and until it makes application
  11-23  therefor and such increase in valuation shall be approved by the
  11-24  commissioner; and
  11-25              (4)  other real property acquired:
   12-1                    (A)  in good faith by way of security for loans
   12-2  previously contracted or money due; or
   12-3                    (B)  in satisfaction of debts previously
   12-4  contracted for in the course of its dealings; or
   12-5                    (C)  by purchase at sales under judgment or
   12-6  decrees of court, or mortgage or other lien held by such insurer;
   12-7  and
   12-8              (5)  regardless of the mode of acquisition specified
   12-9  herein, upon sale of any such real property, the fee title to the
  12-10  mineral estate or any portion thereof may be retained by the
  12-11  insurance company indefinitely;
  12-12        (m)  Oil, Gas, and Minerals.  In addition to and without
  12-13  limitation on the purposes for which real property may be acquired,
  12-14  secured, held, or retained pursuant to other provisions of this
  12-15  section, every such insurance company may secure, hold, retain, and
  12-16  convey production payments, producing royalties and producing
  12-17  overriding royalties, or participations therein as an investment
  12-18  for the production of income; provided:
  12-19              (1)  in no event may such company carry such assets in
  12-20  an amount in excess of 90 percent of the appraised value thereof;
  12-21  and
  12-22              (2)  no one investment under this subsection may exceed
  12-23  10 percent of the insurer's capital and surplus in excess of
  12-24  statutory minimum capital and surplus applicable to that insurer,
  12-25  and the aggregate of all such investments may not exceed 10 percent
   13-1  of the insurer's assets as of December 31st next preceding the date
   13-2  of such investment; and
   13-3              (3)  for the purposes of this subsection, the following
   13-4  definitions apply:
   13-5                    (A)  a production payment is defined to mean a
   13-6  right to oil, gas, or other minerals in place or as produced that
   13-7  entitles its owner to a specified fraction of production until a
   13-8  specified sum of money, or a specified number of units of oil, gas,
   13-9  or other minerals, has been received;
  13-10                    (B)  a royalty and an overriding royalty are each
  13-11  defined to mean a right to oil, gas, and other minerals in place or
  13-12  as produced that entitles the owner to a specified fraction of
  13-13  production without limitation to a specified sum of money or a
  13-14  specified number of units of oil, gas, or other minerals;
  13-15                    (C)  "producing" is defined to mean producing
  13-16  oil, gas, or other minerals in paying quantities, provided that it
  13-17  shall be deemed that oil, gas, or other minerals are being produced
  13-18  in paying quantities if a well has been "shut in" and "shut-in
  13-19  royalties" are being paid;
  13-20        (n)  Foreign Countries and United States Territories.
  13-21  Investments in foreign countries or in commonwealths, territories,
  13-22  or possessions of the United States where the insurer conducts an
  13-23  insurance business; provided:
  13-24              (1)  such investments are similar to those authorized
  13-25  for investment within the United States of America by other
   14-1  provisions of this section; and
   14-2              (2)  such investments when added to the amount of
   14-3  similar investments made within the United States do not result in
   14-4  the combined total of such investments exceeding the limitations
   14-5  specified in Subsections (a) through (p) of this section; and
   14-6              (3)  such investments may not exceed the amount of
   14-7  reserves attributable to the business in force in said countries;
   14-8  provided, however, such investments may exceed such reserves to the
   14-9  extent required by any country as a condition to doing business
  14-10  therein, but to the extent such investments exceed such reserves
  14-11  said investments shall not be considered as admitted assets of the
  14-12  insurer;
  14-13        (o)  Investments Not Otherwise Specified.  Investments which
  14-14  are not otherwise authorized by this article and which are not
  14-15  specifically prohibited by statute, including that portion of any
  14-16  investments which may exceed the limits specified in Subsections
  14-17  (a) through (n) of this section; provided:
  14-18              (1)  if any aggregate or individual specified
  14-19  investment limitation in Subsections (a) through (n) of this
  14-20  section is exceeded, then the excess portion of such investment
  14-21  shall be an investment under this subsection; and
  14-22              (2)  the burden of establishing the value of such
  14-23  investments shall be upon the insurer; and
  14-24              (3)  the amount of any one such investment may not
  14-25  exceed 10 percent of the insurer's capital and surplus in excess of
   15-1  the statutory minimum capital and surplus applicable to that
   15-2  insurer; and
   15-3              (4)  the aggregate of all investments made under this
   15-4  subsection may not exceed the lesser of either five percent of the
   15-5  insurer's assets or the insurer's capital and surplus applicable to
   15-6  that insurer;
   15-7        (p)  Other Authorized Investments.  Those other investments
   15-8  as follows:
   15-9              (1)  any investment held by an insurer on the effective
  15-10  date of this Act, which was legally authorized at the time it was
  15-11  made or acquired or which the insurer was authorized to hold or
  15-12  possess immediately prior to such effective date, but which does
  15-13  not conform to the requirements of the investments authorized in
  15-14  Subsections (a) through (o) of this section, may continue to be
  15-15  held by and considered as an admitted asset of the insurer;
  15-16  provided the investment is disposed of at its maturity date, if
  15-17  any, or within the time prescribed by the law under which it was
  15-18  acquired, if any; and provided further, in no event shall the
  15-19  provisions of the subdivision alter the legal or accounting status
  15-20  of such asset; and
  15-21              (2)  any other investment which may be authorized by
  15-22  other provisions of this code or by other laws of this state for
  15-23  the insurers which are subject to this article.
  15-24        (q)  Special Limitations for Certain Fixed Annuity Insurers.
  15-25  The quantitative limitations imposed above in Subsections (b)(2),
   16-1  (c)(2), (f)(1), (g)(3), (h)(3), (i)(2), and (k)(5) of this section
   16-2  shall not apply to any insurer with assets in excess of
   16-3  $2,500,000,000 and that receives more than 90 percent of its
   16-4  premium income from fixed rate annuity contracts and that has more
   16-5  than 90 percent of its assets allocated to its reserves held for
   16-6  fixed rate annuity contracts, excluding, however, any premium
   16-7  income, assets, and reserves received from, held for, or allocated
   16-8  to separate accounts from the computation of the above percentages,
   16-9  and in lieu thereof, the following quantitative limitations shall
  16-10  apply to such insurers:
  16-11              (1)  the limitation in Subsection (b)(2) of this
  16-12  section shall be two percent of the insurer's assets;
  16-13              (2)  the limitation in Subsection (c)(2) of this
  16-14  section shall be two percent of the insurer's assets;
  16-15              (3)  the limitation in Subsection (f)(1) of this
  16-16  section shall be two percent of the insurer's assets;
  16-17              (4)  the limitation in Subsection (g)(3) of this
  16-18  section shall be one percent of the insurer's assets;
  16-19              (5)  the limitation in Subsection (h)(3) of this
  16-20  section shall be one percent of the insurer's assets;
  16-21              (6)  the limitation in Subsection (i)(2) of this
  16-22  section shall be two percent of the insurer's assets; and
  16-23              (7)  the limitation in Subsection (k)(5) of this
  16-24  section shall be two percent of the insurer's assets.
  16-25        (r)  Premium Loans.  Loans to finance the payment of premiums
   17-1  for the insurer's own insurance policies or annuity contracts;
   17-2  provided that the amount of any such loan does not exceed the sum
   17-3  of:  (i) the available cash value of such insurance policy or
   17-4  annuity contract; and (ii) the amount of any escrowed commissions
   17-5  payable relating to such insurance policy or annuity contract for
   17-6  which the premium loan is made.
   17-7        (s)  Money market funds are those defined by 17 CFR 270.2a-7
   17-8  under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.)
   17-9  and further which meet the following conditions:
  17-10              (1)  such funds shall invest 100% of its total assets
  17-11  in U.S. treasury bills, notes, and bonds and collateralized
  17-12  repurchase agreements comprised of those obligations at all times;
  17-13  or
  17-14              (2)  such funds shall invest 100% of its total assets
  17-15  in other full faith and credit instruments of the United States
  17-16  government; or
  17-17              (3)  such funds shall invest at least 95% of its total
  17-18  assets in exempt securities short-term debt instruments with a
  17-19  maturity of 397 days or less, class and bonds, and collateralized
  17-20  repurchase agreements comprised of those securities at all times.
  17-21        For purposes of complying with subsection (h) herein, funds
  17-22  qualifying for listing within these categories must conform to the
  17-23  Purpose and Procedures Manual of the Valuation of Securities Manual
  17-24  of the National Association of Insurance Commissioners.
  17-25        SECTION 2.  This Act takes effect September 1, 1993.
   18-1        SECTION 3.  The importance of this legislation and the
   18-2  crowded condition of the calendars in both houses create an
   18-3  emergency and an imperative public necessity that the
   18-4  constitutional rule requiring bills to be read on three several
   18-5  days in each house be suspended, and this rule is hereby suspended.