By:  Henderson                                        S.B. No. 1544
                                 A BILL TO BE ENTITLED
                                        AN ACT
    1-1  relating to amending certain provisions of the Insurance Code,
    1-2  including those relating to authorized investments of insurers.
    1-3        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-4        SECTION 1.  Subsection (b), Section 3, Article 3.33,
    1-5  Insurance Code, is amended to read as follows:
    1-6        (b)  The insurer shall maintain the investment plan in its
    1-7  principal office and shall provide same to the commissioner or his
    1-8  designee upon request, and such plans shall be maintained as a
    1-9  privileged and confidential document by the Commissioner of
   1-10  Insurance or his designee and it shall not be subject to public
   1-11  disclosure.  The insurer shall maintain investment records covering
   1-12  each transaction.  <Such investment records shall contain a
   1-13  reference to the subsection of this article and, if appropriate,
   1-14  other provision of law that authorizes the investment.>  At all
   1-15  times, the insurer shall be able to demonstrate that its
   1-16  investments are within the limitations prescribed in this article.
   1-17        SECTION 2.  Section 4, Article 3.33, Insurance Code, is
   1-18  amended to read as follows:
   1-19        Sec. 4.  Authorized Investments and Loans.  Subject to the
   1-20  limitations and restrictions herein contained, the investments and
   1-21  loans described in the following subsections, and none other, are
   1-22  authorized for the insurers subject hereto:
   1-23        (a)  United States Government Bonds.  Bonds, evidences of
    2-1  indebtedness or obligations of the United States of America, or
    2-2  bonds, evidences of indebtedness or obligations guaranteed as to
    2-3  principal and interest by the full faith and credit of the United
    2-4  States of America, and bonds, evidences of indebtedness, or
    2-5  obligations of agencies and instrumentalities of the government of
    2-6  the United States of America;
    2-7        (b)  Other Governmental Bonds.  Bonds, evidences of
    2-8  indebtedness or obligations of governmental units in the United
    2-9  States, Canada, or any province or city of Canada, and of the
   2-10  instrumentalities of such governmental units; provided:
   2-11              (1)  such governmental unit or instrumentality is not
   2-12  in default in the payment of principal or interest in any of its
   2-13  obligations; and
   2-14              (2)  investments in the obligations of any one
   2-15  governmental unit or instrumentality may not exceed 20 percent of
   2-16  the insurer's capital and surplus;
   2-17        (c)  Obligations of Business Entities.  Obligations,
   2-18  including bonds or evidences of indebtedness, or participations in
   2-19  those bonds or evidences of indebtedness, that are issued, assumed,
   2-20  guaranteed, or insured by any business entity, including a sole
   2-21  proprietorship, a corporation, an association, a general or limited
   2-22  partnership, a joint-stock company, a joint venture, a trust, or
   2-23  any other form of business organization, whether for-profit or
   2-24  not-for-profit, that is organized under the laws of the United
   2-25  States, another state, Canada, or any state, district, province, or
    3-1  territory of Canada, subject to all conditions set forth below:
    3-2              (1)  an insurer may acquire obligations in any one
    3-3  business entity rated one or two by the Securities Valuation Office
    3-4  of the National Association of Insurance Commissioners, but not to
    3-5  exceed 20 percent of the insurer's statutory capital and surplus as
    3-6  reported in the most recent annual statement filed with the
    3-7  department;
    3-8              (2)  an insurer may acquire obligations rated three or
    3-9  lower by the Securities Valuation Office if, after giving effect to
   3-10  such an acquisition, the aggregate amount of all obligations rated
   3-11  three or lower then held by the domestic insurer does not exceed 20
   3-12  percent of its admitted assets.  Not more than 10 percent of the
   3-13  admitted assets of that insurer may consist of obligations rated
   3-14  four, five, or six by the Securities Valuation Office.  Not more
   3-15  than three percent of the admitted assets of that insurer may
   3-16  consist of obligations rated five or six by the Securities
   3-17  Valuation Office.  Not more than one percent of the admitted assets
   3-18  of that insurer may consist of obligations rated six by the
   3-19  Securities Valuation Office.  Attaining or exceeding the limit in
   3-20  any one category does not preclude an insurer from acquiring
   3-21  obligations in other categories, subject to the specific and
   3-22  multi-category limits;
   3-23              (3)  an insurer may not invest more than an aggregate
   3-24  of one percent of its admitted assets in obligations rated three by
   3-25  the Securities Valuation Office that are issued, assumed,
    4-1  guaranteed, or insured by any one business entity, or more than
    4-2  one-half percent of its admitted assets in obligations rated four,
    4-3  five, or six by the Securities Valuation Office that are issued,
    4-4  assumed, guaranteed, or insured by any one business entity.  An
    4-5  insurer may not invest more than one percent of its admitted assets
    4-6  in any obligations rated three, four, five, or six by the
    4-7  Securities Valuation Office that are issued, assumed, guaranteed,
    4-8  or insured by any one business entity;
    4-9              (4)  notwithstanding the foregoing, an insurer may
   4-10  acquire an obligation of a business entity in which the insurer
   4-11  already has one or more obligations if the obligation is acquired
   4-12  in order to protect an investment previously made in that business
   4-13  entity.  Such acquired obligations may not exceed one-half percent
   4-14  of the insurer's admitted assets; and
   4-15              (5)  this subsection does not prohibit an insurer from
   4-16  acquiring an obligation as a result of a restructuring of an
   4-17  already held obligation that is rated three or lower by the
   4-18  Securities Valuation Office;
   4-19        (d)  International Market.  Bonds issued, assumed, or
   4-20  guaranteed by the Interamerican Development Bank, the International
   4-21  Bank for Reconstruction and Development (the World Bank), the Asian
   4-22  Development Bank, the State of Israel, the African Development
   4-23  Bank, and the International Finance Corporation; provided:
   4-24              (1)  investments in the bonds of any one of the
   4-25  entities specified above may not exceed 20 percent of the insurer's
    5-1  capital and surplus; and
    5-2              (2)  the aggregate of all investments made under this
    5-3  subsection may not exceed 20 percent of the insurer's assets;
    5-4        (e)  Policy Loans.  Loans upon the security of the insurer's
    5-5  own policies not in excess of the amount of the reserve values
    5-6  thereof;
    5-7        (f)  Time and Savings Deposits.  Any type or form of savings
    5-8  deposits, time deposits, certificates of deposit, NOW accounts, and
    5-9  money market accounts in solvent banks, savings and loan
   5-10  associations, and credit unions and branches thereof, organized
   5-11  under the laws of the United States of America or its states, when
   5-12  made in accordance with the laws or regulations applicable to such
   5-13  entities; provided the amount of the deposits in any one bank,
   5-14  savings and loan association, or credit union will not exceed the
   5-15  greater of:
   5-16              (1)  twenty percent of the insurer's capital and
   5-17  surplus;
   5-18              (2)  the amount of federal or state deposit insurance
   5-19  coverage pertaining to such deposit; or
   5-20              (3)  ten percent of the amount of capital, surplus, and
   5-21  undivided profits of the entity receiving such deposits;
   5-22        (g)  Short-term Investment Pools.  Short-term investment
   5-23  pools subject to the following:
   5-24              (1)  ownership interests in pools that invest only in
   5-25  obligations that an insurer may acquire under this article and
    6-1  that:
    6-2                    (A)(i)  have a remaining maturity of 397 days or
    6-3  less or contain a put option that upon exercise entitles the pool
    6-4  to receive the principal amount within 397 days and (ii) are rated
    6-5  1 or 2 by the Securities Valuation Office of the National
    6-6  Association of Insurance Commissioners;
    6-7                    (B)(i)  have a rating of 1 or 2 by the Securities
    6-8  Valuation Office and (ii) have a remaining maturity of three years
    6-9  or less and (iii) have a floating interest rate that resets no less
   6-10  frequently than quarterly on the basis of any one short-term index
   6-11  (federal funds, prime rate, treasury bills, LIBOR, or commercial
   6-12  paper) and (iv) are subject to no maximum limit, provided that no
   6-13  obligation having an interest rate that changes inversely to market
   6-14  interest rate changes shall be permitted; or
   6-15                    (C)  money market funds on the Securities
   6-16  Valuation Office Approved List of Exempt or Class 1 Money Market
   6-17  Funds;
   6-18              (2)  the pool may engage in securities lending and
   6-19  repurchase and reverse repurchase transactions in an amount up to
   6-20  40 percent of pool assets, but may not incur indebtedness for any
   6-21  other purpose or invest in any security issued, assumed,
   6-22  guaranteed, or insured by the insurer or any of its affiliates;
   6-23  provided, however, that such transactions are subject to Article
   6-24  3.39-1 of this code and any applicable regulations of the
   6-25  department;
    7-1              (3)  ownership interests in pools are subject to either
    7-2  of the following limits:
    7-3                    (A)  the maximum investment in one business
    7-4  entity may not exceed 10 percent of the assets of the pool, and the
    7-5  maximum investment by an insurer in a pool may not exceed 10
    7-6  percent of the insurer's admitted assets; or
    7-7                    (B)  provided that if the admitted assets of
    7-8  either the insurer or the group of affiliated insurers exceed $1
    7-9  billion, the insurer's pro rata share of each underlying asset
   7-10  shall be aggregated with all other investments of the insurer for
   7-11  purposes of determining compliance with this article;
   7-12              (4)  the pool assets shall be held in a separate
   7-13  custodian account by a custodian bank for the benefit of each pool
   7-14  participant as its interest may appear.  The custodial agreement
   7-15  and the pool agreement shall be in writing and the pool agreement
   7-16  shall provide that:
   7-17                    (A)  participation in the pool is restricted to
   7-18  the insurer and its affiliates;
   7-19                    (B)  the pool manager shall be organized under
   7-20  the laws of the United States or a state and shall be the insurer,
   7-21  an affiliate of the insurer, a commercial bank, or an investment
   7-22  advisor registered under the Investment Advisors Act of 1940, as
   7-23  amended (15 U.S.C. Section 80b-1 et seq.);
   7-24                    (C)  the underlying assets are held solely for
   7-25  the benefit of each participant, and each participant owns an
    8-1  undivided interest in each underlying asset;
    8-2                    (D)  each participant may withdraw from the pool
    8-3  on demand without penalty or assessment on any business day;
    8-4                    (E)  the fees and expenses of managing the pool
    8-5  may be charged to the pool; and
    8-6                    (F)  the pool manager is responsible for
    8-7  maintaining accounting records of all transactions including a
    8-8  complete description of all pool assets and each participant's
    8-9  interest in the pool; these records shall be made available for
   8-10  inspection by the commissioner, and an audit of pool accounting
   8-11  records shall be conducted at least annually by an independent
   8-12  auditor; and
   8-13              (5)  investment in pools shall not be deemed to be an
   8-14  affiliate transaction under Article 21.49-1 of this code <Equipment
   8-15  Trusts.  Equipment trust obligations or certificates; provided:>
   8-16              <(1)  any such obligation or certificate is secured by
   8-17  an interest in transportation equipment that is in whole or in part
   8-18  within the United States of America;>
   8-19              <(2)  the obligation or certificate provides a right to
   8-20  receive determined portions of rental, purchase, or other fixed
   8-21  obligatory payments for the use or purchase of the transportation
   8-22  equipment;>
   8-23              <(3)  the obligation is classified as an obligation of
   8-24  a business entity and is subject to the limitations on obligations
   8-25  of business entities set forth in Subsection (c) of this section;
    9-1  and>
    9-2              <(4)  the aggregate of all investments made under this
    9-3  subsection may not exceed 10 percent of the insurer's assets>;
    9-4        (h)  Equity Interests <Common Stock>.  (i) Common stock of
    9-5  any corporation organized under the laws of the United States of
    9-6  America or any of its states, (ii) shares of mutual funds doing
    9-7  business under the Investment Company Act of 1940 (15 U.S.C.
    9-8  Section 80a-1 et seq.), other than money market funds as defined in
    9-9  Subsection (s) of this section, (iii) <and> shares in real estate
   9-10  investment trusts as defined in the Internal Revenue Code of 1954
   9-11  (26 U.S.C. Section 856), and (iv) equity interests in any business
   9-12  entity that is a limited liability partnership, limited liability
   9-13  company, limited partnership, a limited partnership interest in a
   9-14  joint venture, or trust that is organized under the laws of the
   9-15  United States, another state, Canada, or any state, district,
   9-16  province, or territory of Canada; provided:
   9-17              (1)  any such corporation, other than a mutual fund,
   9-18  must be solvent with at least $1,000,000 net worth as of the date
   9-19  of its latest annual or more recent certified audited financial
   9-20  statement or will have at least $1,000,000 of net worth after
   9-21  completion of a securities offering which is being subscribed to by
   9-22  the insurer;
   9-23              (2)  mutual funds, other than money market funds as
   9-24  defined in Subsection (s) of this section, and real estate
   9-25  investment trusts must be solvent with at least $1,000,000 of net
   10-1  assets as of the date of its latest annual or more recent certified
   10-2  audited financial statement;
   10-3              (3)  investments in any one corporation, mutual fund,
   10-4  other than a money market fund as defined in Subsection (s) of this
   10-5  section, or real estate investment trust may not exceed 15 percent
   10-6  of the insurer's capital and surplus; <and>
   10-7              (4)  the business entity shall be subject to an annual
   10-8  audit by an independent certified public accountant or subject to
   10-9  another method of valuation acceptable to the commissioner; and
  10-10              (5)  the aggregate of all investments made under this
  10-11  subsection may not exceed 25 percent of the insurer's assets;
  10-12        (i)  Preferred Stock.  Preferred stock of corporations
  10-13  organized under the laws of the United States of America or any of
  10-14  its states; provided:
  10-15              (1)  such corporation must be solvent with at least
  10-16  $1,000,000 of net worth as of the date of its latest annual or more
  10-17  recent certified audited financial statement or will have at least
  10-18  $1,000,000 of net worth after completion of a security offering
  10-19  which is being subscribed to by the insurer;
  10-20              (2)  investments in the preferred stock of any one
  10-21  corporation will not exceed 20 percent of the insurer's capital and
  10-22  surplus;
  10-23              (3)  in the aggregate not more than 10 percent of the
  10-24  insurer's assets may be invested in preferred stock, the redemption
  10-25  and retirement of which is not provided for by a sinking fund
   11-1  meeting the standards established by the National Association of
   11-2  Insurance Commissioners to value the preferred stock at cost; and
   11-3              (4)  the aggregate of all investments made under this
   11-4  subsection may not exceed 40 percent of the insurer's assets;
   11-5        (j)  Collateral Loans.  Collateral loans secured by a first
   11-6  lien upon or a valid and perfected first security interest in an
   11-7  asset; provided:
   11-8              (1)  the amount of any such collateral loan will not
   11-9  exceed 80 percent of the value of the collateral asset at any time
  11-10  during the duration of the loan; <and>
  11-11              (2)  the asset used as collateral would be authorized
  11-12  for direct investment by the insurer under other provisions of this
  11-13  Section 4, except real property in Subsection (l); and
  11-14              (3)  notwithstanding anything contained herein to the
  11-15  contrary, this subsection does not apply to obligations qualified
  11-16  under Subsection (c) of this section;
  11-17        (k)  Real Estate Loans.  Notes, evidences of indebtedness, or
  11-18  participations therein secured by a valid first lien upon real
  11-19  property or leasehold estate therein located in the United States
  11-20  of America; provided:
  11-21              (1)  the amount of any such obligation secured by a
  11-22  first lien upon real property or leasehold estate therein shall not
  11-23  exceed 90 percent of the value of such real property or leasehold
  11-24  estate therein, but the amount of such obligation:
  11-25                    (A)  may exceed 90 percent but shall not exceed
   12-1  100 percent of the value of such real property or leasehold estate
   12-2  therein if the insurer or one or more wholly owned subsidiaries of
   12-3  the insurer owns in the aggregate a 10 percent or greater equity
   12-4  interest in such real property or leasehold estate therein;
   12-5                    (B)  may be 95 percent of the value of such real
   12-6  property or leasehold estate therein if it contains only a dwelling
   12-7  designed exclusively for occupancy by not more than four families
   12-8  for residential purposes, and the portion of the unpaid balance of
   12-9  such obligation which is in excess of an amount equal to 90 percent
  12-10  of such value is guaranteed or insured by a mortgage insurance
  12-11  company qualified to do business in the State of Texas; <or>
  12-12                    (C)  may be greater than 90 percent of the value
  12-13  of such real property or leasehold estate therein to the extent the
  12-14  obligation is insured or guaranteed by the United States of
  12-15  America, the Federal Housing Administration pursuant to the
  12-16  National Housing Act of 1934, as amended (12 U.S.C. Section 1701 et
  12-17  seq.), or the State of Texas; or
  12-18                    (D)  may exceed 90 percent if that portion of the
  12-19  loan which does not exceed 90 percent of the value of such real
  12-20  property or leasehold estate therein is deemed to be a permitted
  12-21  investment under Subsection (l) of this section, and the remainder
  12-22  of the loan in excess of the 90 percent limit is deemed to be made
  12-23  under Subsection (o) of this section; and
  12-24              (2)  the term of an obligation secured by a first lien
  12-25  upon a leasehold estate in real property shall not exceed a period
   13-1  equal to four-fifths of the then unexpired term of such leasehold
   13-2  estate; provided the unexpired term of the leasehold estate must
   13-3  extend at least 10 years beyond the term of the obligation, and
   13-4  each obligation shall be payable in an installment or installments
   13-5  of sufficient amount or amounts so that at any time after the
   13-6  expiration of two-thirds of the original loan term, the principal
   13-7  balance will be no greater than the principal balance would have
   13-8  been if the loan had been amortized over the original loan term in
   13-9  equal monthly, quarterly, semiannual, or annual payments of
  13-10  principal and interest, it being required that under any method of
  13-11  repayment such obligation will fully amortize during a period of
  13-12  time not exceeding four-fifths of the then unexpired term of the
  13-13  security leasehold estate; and
  13-14              (3)  if any part of the value of buildings is to be
  13-15  included in the value of such real property or leasehold estate
  13-16  therein to secure the obligations provided for in this subsection,
  13-17  such buildings shall be covered by adequate property insurance,
  13-18  including but not limited to fire and extended coverage insurance
  13-19  issued by a company authorized to transact business in the State of
  13-20  Texas or by a company recognized as acceptable for such purpose by
  13-21  the insurance regulatory official of the state in which such real
  13-22  estate is located, and the amount of insurance granted in the
  13-23  policy or policies shall be not less than the unpaid balance of the
  13-24  obligation or the insurable value of such buildings, whichever is
  13-25  the lesser; the loss clause shall be payable to the insurer as its
   14-1  interest may appear; and
   14-2              (4)  to the extent any note, evidence of indebtedness,
   14-3  or participation therein under this subsection represents an equity
   14-4  interest in the underlying real property, the value of such equity
   14-5  interest shall be determined at the time of execution of such note,
   14-6  evidence of indebtedness, or participation therein and that portion
   14-7  shall be designated as an investment subject to the provisions of
   14-8  Subsection (l)(2) of this section; and
   14-9              (5)  the amount of any one such obligation may not
  14-10  exceed 25 percent of the insurer's capital and surplus; and
  14-11              (6)  a first lien on real property may be purchased
  14-12  after its origination if the first lien is insured by a mortgagee's
  14-13  title policy issued to the original mortgagee that contains a
  14-14  provision that inures the policy to the use and benefit of the
  14-15  owners of the evidence of debt indicated in the policy and to any
  14-16  subsequent owners of that evidence of debt, and if the insurer
  14-17  maintains evidence of assignments or other transfers of the first
  14-18  lien on real property to the insurer.  An assignment or other
  14-19  transfer to the insurer, duly recorded in the county in which the
  14-20  real property is located, shall be presumed to create legal
  14-21  ownership of the first lien by the insurer;
  14-22        (l)  Real Estate.  Real property fee simple or leasehold
  14-23  estates located within the United States of America, as follows:
  14-24              (1)  home and branch office real property or
  14-25  participations therein, which must be materially enhanced in value
   15-1  by the construction of durable, permanent-type buildings and other
   15-2  improvements costing an amount at least equal to the cost of such
   15-3  real property, exclusive of buildings and improvements at the time
   15-4  of acquisition, or by the construction of such buildings and
   15-5  improvements which must be commenced within two years of the date
   15-6  of the acquisition of such real property; provided:
   15-7                    (A)  at least 30 percent of the available space
   15-8  in such building shall be occupied for the business purposes of the
   15-9  insurer and its affiliates; and
  15-10                    (B)  the aggregate investment in such home and
  15-11  branch offices shall not exceed 20 percent of the insurer's assets;
  15-12  and
  15-13              (2)  other investment property or participations
  15-14  therein, which must be materially enhanced in value by the
  15-15  construction of durable, permanent-type buildings and other
  15-16  improvements costing an amount at least equal to the cost of such
  15-17  real property, exclusive of buildings and improvements at the time
  15-18  of acquisition, or by the construction of such buildings and
  15-19  improvements which must be commenced within two years of the date
  15-20  of acquisition of such real property; provided that such investment
  15-21  in any one piece of property or interest therein, including the
  15-22  improvements, fixtures, and equipment pertaining thereto may not
  15-23  exceed five percent of the insurer's assets; provided, however,
  15-24  nothing in this article shall allow ownership of, development of,
  15-25  or equity interest in any residential property or subdivision,
   16-1  single or multiunit family dwelling property, or undeveloped real
   16-2  estate for the purpose of subdivision for or development of
   16-3  residential, single, or multiunit family dwellings, except
   16-4  acquisitions as provided in Subdivision (4) below, and such
   16-5  ownership, development, or equity interests shall be specifically
   16-6  prohibited;
   16-7              (3)  the admissible asset value of each such investment
   16-8  in the properties acquired under Subdivisions (1) and (2) of this
   16-9  subsection shall be subject to review and approval by the
  16-10  Commissioner of Insurance.  The commissioner shall have discretion
  16-11  at the time such investment is made or any time when an examination
  16-12  of the company is being made to cause any such investment to be
  16-13  appraised by an appraiser, appointed by the commissioner, and the
  16-14  reasonable expense of such appraisal shall be paid by such
  16-15  insurance company and shall be deemed to be a part of the expense
  16-16  of examination of such company; if the appraisal is made upon
  16-17  application of the company, the expense of such appraisal shall not
  16-18  be considered a part of the expense of examination of such company;
  16-19  no insurance company may hereafter make any write-up in the
  16-20  valuation of any of the properties described in Subdivision (1) or
  16-21  (2) of this subsection unless and until it makes application
  16-22  therefor and such increase in valuation shall be approved by the
  16-23  commissioner; and
  16-24              (4)  other real property acquired:
  16-25                    (A)  in good faith by way of security for loans
   17-1  previously contracted or money due; or
   17-2                    (B)  in satisfaction of debts previously
   17-3  contracted for in the course of its dealings; or
   17-4                    (C)  by purchase at sales under judgment or
   17-5  decrees of court, or mortgage or other lien held by such insurer;
   17-6  and
   17-7              (5)  regardless of the mode of acquisition specified
   17-8  herein, upon sale of any such real property, the fee title to the
   17-9  mineral estate or any portion thereof may be retained by the
  17-10  insurance company indefinitely;
  17-11        (m)  Oil, Gas, and Minerals.  In addition to and without
  17-12  limitation on the purposes for which real property may be acquired,
  17-13  secured, held, or retained pursuant to other provisions of this
  17-14  section, every such insurance company may, either directly or
  17-15  through a business entity, secure, hold, retain, and convey
  17-16  production payments, producing royalties and producing overriding
  17-17  royalties, or participations therein as an investment for the
  17-18  production of income; provided:
  17-19              (1)  in no event may such company carry such assets in
  17-20  an amount in excess of 90 percent of the appraised value thereof;
  17-21  and
  17-22              (2)  no one investment under this subsection may exceed
  17-23  10 percent of the insurer's capital and surplus in excess of
  17-24  statutory minimum capital and surplus applicable to that insurer,
  17-25  and the aggregate of all such investments may not exceed 10 percent
   18-1  of the insurer's assets as of December 31st next preceding the date
   18-2  of such investment; and
   18-3              (3)  for the purposes of this subsection, the following
   18-4  definitions apply:
   18-5                    (A)  a production payment is defined to mean a
   18-6  right to oil, gas, or other minerals in place or as produced that
   18-7  entitles its owner to a specified fraction of production until a
   18-8  specified sum of money, or a specified number of units of oil, gas,
   18-9  or other minerals, has been received;
  18-10                    (B)  a royalty and an overriding royalty are each
  18-11  defined to mean a right to oil, gas, and other minerals in place or
  18-12  as produced that entitles the owner to a specified fraction of
  18-13  production without limitation to a specified sum of money or a
  18-14  specified number of units of oil, gas, or other minerals;
  18-15                    (C)  "producing" is defined to mean producing
  18-16  oil, gas, or other minerals in paying quantities, provided that it
  18-17  shall be deemed that oil, gas, or other minerals are being produced
  18-18  in paying quantities if a well has been "shut in" and "shut-in
  18-19  royalties" are being paid;
  18-20        (n)  Foreign Countries and United States Territories.  In
  18-21  addition to the investments in Canada authorized in other
  18-22  subsections of this section, investments in other foreign countries
  18-23  or in commonwealths, territories, or possessions of the United
  18-24  States; provided:
  18-25              (1)  such investments are similar to those authorized
   19-1  for investment within the United States of America or Canada by
   19-2  other provisions of this section and are rated one or two by the
   19-3  Securities Valuation Office of the National Association of
   19-4  Insurance Commissioners; and
   19-5              (2)  such investments when added to the amount of
   19-6  similar investments made within the United States and Canada do not
   19-7  result in the combined total of such investments exceeding the
   19-8  limitations specified in Subsections (a) through (p) of this
   19-9  section; and
  19-10              (3)  such investments may not exceed the sum of:
  19-11                    (A)  the amount of reserves attributable to the
  19-12  business in force in said countries, if any, and any additional
  19-13  investments required by any country as a condition to doing
  19-14  business therein; and
  19-15                    (B)  20 <five> percent of the insurer's assets;
  19-16        (o)  Investments Not Otherwise Specified.  Investments which
  19-17  are not otherwise authorized by this article and which are not
  19-18  specifically prohibited by statute, including that portion of any
  19-19  investments which may exceed the limits specified in Subsections
  19-20  (a) through (n) of this section; provided:
  19-21              (1)  if any aggregate or individual specified
  19-22  investment limitation in Subsections (a) through (n) of this
  19-23  section is exceeded, then the excess portion of such investment
  19-24  shall be an investment under this subsection; and
  19-25              (2)  the burden of establishing the value of such
   20-1  investments shall be upon the insurer; and
   20-2              (3)  the amount of any one such investment may not
   20-3  exceed 10 percent of the insurer's capital and surplus in excess of
   20-4  the statutory minimum capital and surplus applicable to that
   20-5  insurer; and
   20-6              (4)  the aggregate of all investments made under this
   20-7  subsection may not exceed the lesser of either five percent of the
   20-8  insurer's assets or the insurer's capital and surplus in excess of
   20-9  the statutory minimum capital and surplus applicable to that
  20-10  insurer;
  20-11        (p)  Other Authorized Investments.  Those other investments
  20-12  as follows:
  20-13              (1)  any investment held by an insurer on the effective
  20-14  date of this Act, which was legally authorized at the time it was
  20-15  made or acquired or which the insurer was authorized to hold or
  20-16  possess immediately prior to such effective date, but which does
  20-17  not conform to the requirements of the investments authorized in
  20-18  Subsections (a) through (o) of this section, may continue to be
  20-19  held by and considered as an admitted asset of the insurer;
  20-20  provided the investment is disposed of at its maturity date, if
  20-21  any, or within the time prescribed by the law under which it was
  20-22  acquired, if any; and provided further, in no event shall the
  20-23  provisions of this subdivision alter the legal or accounting status
  20-24  of such asset; and
  20-25              (2)  any other investment which may be authorized by
   21-1  other provisions of this code or by other laws of this state for
   21-2  the insurers which are subject to this article.
   21-3        (q)  Special Limitations for Certain Fixed Annuity Insurers.
   21-4  The quantitative limitations imposed above in Subsections (b)(2),
   21-5  (c)(1) <(c)(2)>, (f)(1), (g)(3), (h)(3), (i)(2), and (k)(5) of this
   21-6  section shall not apply to any insurer with assets in excess of
   21-7  $2,500,000,000 and that receives more than 90 percent of its
   21-8  premium income from fixed rate annuity contracts and that has more
   21-9  than 90 percent of its assets allocated to its reserves held for
  21-10  fixed rate annuity contracts, excluding, however, any premium
  21-11  income, assets, and reserves received from, held for, or allocated
  21-12  to separate accounts from the computation of the above percentages,
  21-13  and in lieu thereof, the following quantitative limitations shall
  21-14  apply to such insurers:
  21-15              (1)  the limitation in Subsection (b)(2) of this
  21-16  section shall be two percent of the insurer's assets;
  21-17              (2)  the limitation in Subsection (c)(1) <(c)(2)> of
  21-18  this section shall be two percent of the insurer's assets;
  21-19              (3)  the limitation in Subsection (f)(1) of this
  21-20  section shall be two percent of the insurer's assets;
  21-21              (4)  the limitation in Subsection (g)(3) of this
  21-22  section shall be one percent of the insurer's assets;
  21-23              (5)  the limitation in Subsection (h)(3) of this
  21-24  section shall be one percent of the insurer's assets;
  21-25              (6)  the limitation in Subsection (i)(2) of this
   22-1  section shall be two percent of the insurer's assets; and
   22-2              (7)  the limitation in Subsection (k)(5) of this
   22-3  section shall be two percent of the insurer's assets;<.>
   22-4        (r)  Premium Loans.  Loans to finance the payment of premiums
   22-5  for the insurer's own insurance policies or annuity contracts;
   22-6  provided that the amount of any such loan does not exceed the sum
   22-7  of:  (i) the available cash value of such insurance policy or
   22-8  annuity contract; and (ii) the amount of any escrowed commissions
   22-9  payable relating to such insurance policy or annuity contract for
  22-10  which the premium loan is made; and
  22-11        (s)  Money Market Funds.  (1)  Money market funds as defined
  22-12  by 17 CFR 270.2a-7 under the Investment Company Act of 1940 (15
  22-13  U.S.C. 80a-1 et seq.) that meet the following additional
  22-14  conditions:
  22-15                    (A)  the funds invest 100 percent of total assets
  22-16  in United States treasury bills, notes, and bonds, and
  22-17  collateralized repurchase agreements composed of those obligations
  22-18  at all times;
  22-19                    (B)  the funds invest 100 percent of total assets
  22-20  in other full faith and credit instruments of the United States; or
  22-21                    (C)  the funds invest at least 95 percent of
  22-22  total assets in exempt securities, short-term debt instruments with
  22-23  a maturity of 397 days or less, class one bonds, and collateralized
  22-24  repurchase agreements composed of those securities at all times;
  22-25              (2)  For purposes of complying with Subsection (h) of
   23-1  this section, money market funds qualifying for listing within
   23-2  these categories must conform to the purpose and procedures manual
   23-3  of the valuation of securities manual of the National Association
   23-4  of Insurance Commissioners;<.>
   23-5        (t)  The percentage authorizations and limitations set forth
   23-6  in any and all of the provisions of this section shall apply at the
   23-7  time of originally making such investments and shall not be
   23-8  applicable to the company or such investment thereafter except as
   23-9  provided in Subsection (v) of this section.  In addition, any
  23-10  investment, once qualified under any subsection of this section,
  23-11  shall remain qualified notwithstanding any refinancing,
  23-12  restructuring or modification of such investment.
  23-13        (u)  Distributions, Reinsurance, and Merger.  No provision of
  23-14  this article prohibits the acquisition by an insurer of additional
  23-15  obligations, securities, or other assets if received as a dividend
  23-16  or as a distribution of assets, nor does this article apply to
  23-17  securities, obligations, or other assets accepted incident to the
  23-18  adjustment or realization of any kind of investment, when deemed by
  23-19  the insurer's board of directors or by a committee appointed by the
  23-20  board of directors to be in the best interests of the insurer, if
  23-21  the debt or investment had previously qualified as an admitted
  23-22  asset, nor does this article apply to assets acquired pursuant to a
  23-23  lawful agreement of bulk reinsurance, merger, or consolidation if
  23-24  such assets constituted legal and admissible investments for the
  23-25  ceding, merged, or consolidated company.  No obligation, security,
   24-1  or other asset acquired as permitted by this subsection need be
   24-2  qualified under any other subsection of this article.
   24-3        (v)  Qualification of Investments.  The qualification or
   24-4  disqualification of an investment under one subsection of this
   24-5  section does not prevent its qualification in whole or in part
   24-6  under another subsection, and an investment authorized by more than
   24-7  one subsection may be held under whichever authorizing subsection
   24-8  the insurer elects.  An investment or investment practice qualified
   24-9  under any subsection at the time it was acquired or entered into by
  24-10  the company shall continue to be qualified under that subsection.
  24-11  An investment, in whole or in part, may be transferred from time to
  24-12  time, at the election of the insurer, to the authority of any
  24-13  subsection under which it qualifies, whether originally qualifying
  24-14  thereunder or not.
  24-15        SECTION 3.  Subsections (a) and (d), Section 7, Article
  24-16  21.28-D, Insurance Code, are amended to read as follows:
  24-17        (a)  The Commissioner <State Board> of Insurance shall
  24-18  appoint a board of directors of the association consisting of nine
  24-19  members, three of whom shall be chosen from employees or officers
  24-20  chosen from the 50 <ten> member companies having the largest total
  24-21  direct premium income based on the latest financial statement on
  24-22  file at date of appointment, two of whom shall be chosen from the
  24-23  other companies to give fair representation to member insurers
  24-24  based on due consideration of their varying categories of premium
  24-25  income and geographical location, and four of whom shall be
   25-1  representatives of the general public.  Members serve for six-year
   25-2  staggered terms, with the terms of three members expiring each
   25-3  odd-numbered year.  All directors shall serve until their
   25-4  successors are appointed, except that in the case of any vacancy,
   25-5  the unexpired term of office shall be filled by the appointment of
   25-6  a director by the Commissioner <State Board> of Insurance.  If a
   25-7  director ceases to be an officer or employee of a member insurer
   25-8  during the director's term of office, that office becomes vacant
   25-9  until the director's successor is appointed.  All directors are
  25-10  eligible to succeed themselves in office.  A public representative
  25-11  may not be:
  25-12              (1)  an officer, director, or employee of an insurance
  25-13  company, insurance agency, agent, broker, solicitor, adjuster, or
  25-14  any other business entity regulated by the department <State Board
  25-15  of Insurance>;
  25-16              (2)  a person required to register with the secretary
  25-17  of state under Chapter 305, Government Code; or
  25-18              (3)  related to a person described by Subparagraph (1)
  25-19  or (2) of this paragraph within the second degree of affinity or
  25-20  consanguinity.
  25-21        (d)  A director of the association <or any member company or
  25-22  other entity represented by the director> may not receive any money
  25-23  or valuable thing directly, indirectly, or through any substantial
  25-24  interest in any other corporation, firm, or business unit for
  25-25  negotiating, procuring, participating, recommending, or aiding in a
   26-1  transaction, reinsurance agreement, merger, purchase, sale,
   26-2  contribution, or exchange of assets, policies of insurance, or
   26-3  property made by the association or the supervisor, conservator, or
   26-4  receiver on behalf of an impaired insurer.  The director of the
   26-5  association<, company, or entity> may not have a pecuniary interest
   26-6  <be pecuniarily or contractually interested>, as principal,
   26-7  co-principal, agent, or beneficiary, directly, indirectly, or
   26-8  through any substantial interest in any other corporation, firm, or
   26-9  business unit, in the transaction, reinsurance agreement, merger,
  26-10  purchase, sale, contribution, or exchange.
  26-11        SECTION 4.  Section 5, Article 21.39-B, Insurance Code, is
  26-12  repealed.
  26-13        SECTION 5.  This Act takes effect September 1, 1995.
  26-14        SECTION 6.  The importance of this legislation and the
  26-15  crowded condition of the calendars in both houses create an
  26-16  emergency and an imperative public necessity that the
  26-17  constitutional rule requiring bills to be read on three several
  26-18  days in each house be suspended, and this rule is hereby suspended.