H.B. 928 78(R)    BILL ANALYSIS


H.B. 928
By: Eiland
Insurance
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

Prior to 1985, all life insurance companies domiciled in Texas had to make
their investments pursuant to investment code provisions set forth in
Article 3.39 of the Texas Insurance Code (Code). This investment statute
was originally adopted in 1951.  In 1985, the Legislature enacted a new
investment code (Article 3.33 of the Code) in  response to the changing
investment climate.  This new investment code applied only to large life,
health, and accident insurance companies, such as those organized under
Chapter 3 of the Code.  In many respects, Article 3.33 is identical to
Article 3.39.  However, there are several changes in Article 3.33 that
update investment opportunities making it easier for companies to manage
national portfolios.  For example, Article 3.33 allows for investments in
foreign countries, Commonwealths, or territories or possessions of the
United States, allows for money market investments, and allows for mutual
fund investments (with a small percentage of total assets). At the time
Article 3.33 was adopted, there were several smaller stipulated premium
companies that did not want to switch over to Article 3.33 investment
criteria. These smaller companies typically have investment strategies
that are local in nature as opposed to national in scope. 
 This bifurcation has worked well and continues to work for most
stipulated premium companies. However, due primarily to consolidation
among stipulated premium companies, some of these companies are now larger
than Chapter 3 companies and would benefit from the updated investment
opportunities authorized by Article 3.33.  

House Bill 928 authorizes a stipulated premium company to elect for the
company's investments and transactions to be governed by Article 3.33.  
RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

House Bill 928 amends the Insurance Code to authorize a stipulated premium
insurance company issuing life, health, or accident coverages or
maintaining policies in force to elect for the company's investments and
transactions to be governed by Article 3.33 of the Insurance Code.  The
bill authorizes a stipulated premium insurance company to elect for the
company's investments and transactions to be governed by Article 3.39 of
the Insurance Code, after the second anniversary of the effective date of
the initial election, but prohibits a company from making another election
after this subsequent election has been made.  The bill provides that
elections must be made by written notice to the Commissioner of Insurance
and describes when elections take effect.        

EFFECTIVE DATE

September 1, 2003.