Bill not drafted by TLC or Senate E&E.
Line and page numbers may not match official copy.
By Averitt H.B. No. 2792
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to subordinated indebtedness.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsections (b), (c), (e), and (f) of Article
1-5 1.39, Insurance Code, are amended to read as follows:
1-6 (a) This article applies to an insurer as that term is
1-7 defined by Article 1.15A of this code.
1-8 (b) An insurer may obtain a loan or an advance of cash[,] or
1-9 cash equivalents, [or other assets that have a readily determinable
1-10 value and are satisfactory to the commissioner,] repayable with
1-11 interest, and may assume a subordinated liability for repayment
1-12 thereof [of the advance] and payment of interest thereon [on the
1-13 advance] if the insurer and creditor execute a written agreement
1-14 stating that the creditor may be paid only out of that portion of
1-15 the insurer's surplus that exceeds the greater of (i) a minimum
1-16 surplus stated and fixed in the agreement, or (ii) a minimum
1-17 surplus of [$500,000] $1,000,000 for [that] such insurer. However,
1-18 if an insurer's minimum surplus is less than $1,000,000, the
1-19 agreement must be submitted to the commissioner for approval;
1-20 provided, however, that the commissioner must give his decision of
1-21 either approval or disapproval within 30 days after the written
1-22 filing by the insurer, and his failure to so act within 30 days
1-23 shall constitute approval of the transaction. The department or
1-24 the commissioner may not require the agreement to provide another
2-1 minimum surplus amount.
2-2 (c) A loan or advance agreement made under this article,
2-3 whether or not containing a provision for a minimum sum certain
2-4 payable, repayment schedule, maturity date, prepayment, or any
2-5 combination thereof, shall not be considered [and any interest
2-6 accruing on the loan or advance, is] a legal liability [and] or
2-7 financial statement liability of the insurer [only to the extent
2-8 provided by the terms and conditions of the loan or advance
2-9 agreement, and the loan or advance may not otherwise be a legal
2-10 liability or financial statement liability of the insurer.], and
2-11 shall be considered a subordinated indebtedness to be recorded with
2-12 the capital and surplus items in the financial statements of the
2-13 insurer.
2-14 (d) If the loan or advance agreement provides for a sinking
2-15 fund out of which the loan or advance is to be repaid, then the
2-16 loan or advance shall be a legal liability and financial statement
2-17 liability of the insurer only to the extent of those funds
2-18 accumulated and held in the sinking fund, and the loan or advance
2-19 may not otherwise be a legal liability or financial statement
2-20 liability of the insurer. By mutual agreement of the parties to
2-21 the agreement, any portion of the accumulated funds in the sinking
2-22 fund may be returned to the surplus of the insurer at any time and
2-23 from time to time and thereafter may not be considered as a legal
2-24 liability or financial statement liability of the insurer.
2-25 (e) [An agreement entered into under Subsection (b) of this
2-26 article must be submitted to the commissioner for approval as to
2-27 form and content, provided, however, that the commissioner must
2-28 give his decision of either approval or disapproval within 30 days
2-29 after the written filing by the insurer, and his failure to so act
2-30 within such 30 days shall constitute approval of the transaction.
3-1 An insurer may not assume a subordinated liability until the
3-2 commissioner has approved the agreement under either Section 4,
3-3 Article 21.40-1, as this article. An insurer may not repay
3-4 principal or pay interest on a subordinated liability assumed under
3-5 either Section 4, Article 21.40-1, as this article on or after
3-6 September 1, 1995, unless either (i) such payment or repayment
3-7 complies with a specific schedule of payments contained within the
3-8 terms of the previously approved agreement, or (ii) written notice
3-9 is provided to the commissioner at least 15 days before the date
3-10 scheduled for any payment or repayment if either a schedule of
3-11 payments is not contained within the terms of the previously
3-12 approved agreement, or such payment or repayment does not comply
3-13 with the specific schedule of payments contained within the terms
3-14 of the previously approved agreement.]
3-15 (f) The commissioner [shall] may adopt reasonable rules as
3-16 necessary to implement this article[,]; provided, however, the
3-17 rules adopted shall not go beyond the contents of this statute.
3-18 SECTION 2. In the event that a court of competent
3-19 jurisdiction shall declare any provision of this Act
3-20 unconstitutional, the unconstitutional provision shall be severed
3-21 from the remaining provisions, which shall continue in full force
3-22 and effect.
3-23 SECTION 3. Any rule adopted by the Commissioner which is not
3-24 in conformity to the standards set forth in Section 1 of this Act
3-25 shall be null and void and of no force or effect.
3-26 SECTION 4. If this law is in conflict with any other law,
3-27 rule, regulation, or provision of the code, this law shall control.
3-28 SECTION 5. The importance of this legislation and the
3-29 crowded condition of the calendars in both houses create an
3-30 emergency and an imperative public necessity that the
4-1 constitutional rule requiring bills to be read on three several
4-2 days in each house be suspended, and this rule is hereby suspended,
4-3 and that this Act take effect and be in force from and after its
4-4 passage, and it is so enacted.