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A BILL TO BE ENTITLED
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AN ACT
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relating to the authority of certain insurers to make investments |
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in bond exchange-traded funds. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 424, Insurance Code, is |
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amended by adding Section 424.075 to read as follows: |
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Sec. 424.075. AUTHORIZED INVESTMENTS: BOND EXCHANGE-TRADED |
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FUNDS. (a) In this section, "bond exchange-traded fund" means an |
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exchange-traded fund registered as an investment company under the |
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Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as |
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amended, that has a principal investment strategy of investing |
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primarily in bonds, loans, or other debt instruments. |
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(b) An insurer may invest the insurer's funds in excess of |
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minimum capital and surplus in shares of a bond exchange-traded |
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fund if: |
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(1) the exchange-traded fund is solvent and reported |
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at least $10 million of net assets in the exchange-traded fund's |
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latest annual or more recent certified audited financial statement; |
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(2) the exchange-traded fund is eligible for reporting |
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as a long-term bond in the Purposes and Procedures Manual of the |
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securities valuation office or a successor publication; and |
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(3) the amount of the insurer's investment in the |
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exchange-traded fund does not exceed 15 percent of the insurer's |
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funds in excess of minimum capital and surplus. |
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(c) An insurer may deposit with the department shares of a |
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bond exchange-traded fund described by Subsection (b) as a |
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statutory deposit if state law requires a statutory deposit from |
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the insurer. |
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SECTION 2. Subchapter C, Chapter 425, Insurance Code, is |
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amended by adding Section 425.1231 to read as follows: |
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Sec. 425.1231. AUTHORIZED INVESTMENTS: BOND |
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EXCHANGE-TRADED FUNDS. (a) In this section, "bond exchange-traded |
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fund" means an exchange-traded fund registered as an investment |
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company under the Investment Company Act of 1940 (15 U.S.C. Section |
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80a-1 et seq.), as amended, that has a principal investment |
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strategy of investing primarily in bonds, loans, or other debt |
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instruments. |
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(b) An insurance company may invest the company's funds in |
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excess of minimum capital and surplus in shares of a bond |
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exchange-traded fund if: |
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(1) the exchange-traded fund is solvent and reported |
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at least $10 million of net assets in the exchange-traded fund's |
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latest annual or more recent certified audited financial statement; |
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(2) the exchange-traded fund is eligible for reporting |
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as a long-term bond in the Purposes and Procedures Manual of the |
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securities valuation office or a successor publication; and |
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(3) the amount of the insurance company's investment |
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in the exchange-traded fund does not exceed the investment amount |
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limit in Section 425.157(b). |
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(c) An insurance company may deposit with the department |
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shares of a bond exchange-traded fund described by Subsection (b) |
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as a statutory deposit if state law requires a statutory deposit |
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from the insurance company. |
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(d) Each bond exchange-traded fund described by Subsection |
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(b) shall be considered a separate issuer of shares and a business |
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entity for purposes of Section 425.110. |
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SECTION 3. Subchapter D, Chapter 425, Insurance Code, is |
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amended by adding Section 425.2061 to read as follows: |
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Sec. 425.2061. AUTHORIZED INVESTMENTS FOR ALL FUNDS: BOND |
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EXCHANGE-TRADED FUNDS. Subject to Section 425.157(b), an insurer |
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may invest any of the insurer's funds and accumulations in a bond |
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exchange-traded fund, as defined by Section 425.1231(a). |
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SECTION 4. This Act takes effect September 1, 2019. |