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A BILL TO BE ENTITLED
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AN ACT
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relating to certain authorized investments for domestic life, |
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health, and accident insurers. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 425.118, Insurance Code, is amended by |
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amending Subsections (c), (d), and (e) and adding Subsections (d-1) |
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and (e-1) to read as follows: |
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(c) The term of an obligation secured by a first lien on a |
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leasehold estate in real property may not, as of the date the |
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obligation is acquired, exceed a period equal to four-fifths of the |
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unexpired term of the leasehold estate, including any renewal |
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options exercisable by the lessee, and the obligation must fully |
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amortize during that period. The term of the leasehold estate, |
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including any renewal options exercisable by the lessee, may not |
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expire sooner than the 10th anniversary of the expiration date of |
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the term of the obligation. |
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(d) An obligation secured by a first lien on a leasehold |
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estate in real property must be payable in one or more installments |
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of an amount or amounts sufficient to ensure that, at any time |
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during [after the expiration of two-thirds of] the original term of |
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the obligation, the principal balance on the obligation is not |
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greater than the principal balance would have been if the |
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obligation had been amortized over the original term of the |
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obligation in equal monthly, quarterly, semiannual, or annual |
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payments of principal and interest with payments of interest only |
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for the first five years of the original term of the obligation. |
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(d-1) Subsection (d) does not apply to an obligation secured |
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by a first lien on a leasehold estate in real property if: |
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(1) the amount of the obligation does not, as of the |
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date the obligation is acquired, exceed 75 percent of the value of |
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the leasehold estate; |
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(2) the lease agreement provides that the fee simple |
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estate in the real property transfers automatically to the lessee |
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on or before the expiration of the term of the leasehold estate, |
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including any renewal options exercisable by the lessee; or |
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(3) the lease agreement provides that the lessee has |
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an option to purchase the fee simple estate in the real property on |
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or before the expiration of the term of the leasehold estate, |
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including any renewal options exercisable by the lessee, for an |
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amount that is less than 10 percent of the appraised value of the |
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real property, and the insurance company has a contractual right if |
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the lessee does not exercise that option to acquire the fee simple |
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estate in the real property for that same amount, by assignment from |
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the lessee or otherwise. |
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(e) Except as provided by Subsection (e-1), if [If] any part |
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of the value of buildings is to be included in the value of real |
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property or a leasehold estate in real property to secure an |
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obligation under this section: |
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(1) the buildings must be covered by adequate property |
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insurance, including fire and extended coverage insurance, issued |
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by: |
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(A) an insurer authorized to engage in business |
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in this state; or |
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(B) an insurer recognized as acceptable to issue |
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that coverage by the insurance regulatory official of the state in |
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which the real property is located; |
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(2) the amount of insurance provided by one or more |
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policies may not be less than the lesser of: |
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(A) the unpaid balance of the obligation; or |
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(B) the insurable value of the buildings; and |
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(3) the loss clause under each policy must be payable |
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to the insurance company as the company's interest may appear. |
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(e-1) The property insurance otherwise required under |
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Subsection (e) is not required if the borrower maintains a net worth |
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as indicated in the borrower's audited financial statements for the |
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most recent fiscal year of at least the greater of five times the |
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amount of the indebtedness or $100 million and: |
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(1) the insurance company has recourse against the |
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borrower or the borrower's guarantor; or |
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(2) for an obligation secured by a leasehold estate: |
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(A) the tenant assigned the lease to the |
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insurance company; and |
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(B) the lease agreement is in writing and |
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provides that if a building on the property is damaged or destroyed, |
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the tenant or the tenant's guarantor is obligated to rebuild or |
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restore the damaged or destroyed building to the building's |
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condition immediately before the damage or destruction occurred or |
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compensate the owner for the loss arising from the damage or |
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destruction. |
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SECTION 2. Section 425.118, Insurance Code, as amended by |
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this Act, applies only to an investment made on or after the |
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effective date of this Act. An investment made before the effective |
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date of this Act is governed by the law as it existed immediately |
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before that date, and that law is continued in effect for that |
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purpose. |
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SECTION 3. This Act takes effect September 1, 2017. |