CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS
INSURANCE CODE
TITLE 4. REGULATION OF SOLVENCY
SUBTITLE B. RESERVES AND INVESTMENTS
CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 423.001. APPLICABILITY OF CHAPTER. (a) This chapter
applies to a domestic insurer regulated under this code,
including:
(1) a stock company;
(2) a reciprocal or interinsurance exchange;
(3) a Lloyd's plan;
(4) a fraternal benefit society;
(5) a stipulated premium company;
(6) a mutual insurance company of any kind, including:
(A) a statewide mutual assessment company;
(B) a local mutual aid association;
(C) a burial association;
(D) a county mutual insurance company; and
(E) a farm mutual insurance company; and
(7) any other organization or person engaged in the business of
insurance.
(b) A provision of this code limiting the regulation of an
insurer under this code does not limit the application of this
chapter, except that this chapter does not apply to an insurer
that is exempted from its application by another statute that
cites this chapter.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.002. AMBIGUITIES AND CONFLICTS WITH OTHER LAW. This
chapter controls to the extent of an ambiguity or a conflict
between this chapter and another provision of this code.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.003. RULES. The commissioner may adopt rules necessary
to implement this chapter.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
SUBCHAPTER B. TRANSACTIONS WITH MONEY
Sec. 423.051. DEPOSIT AND INVESTMENT OF MONEY. A director,
member of a committee, officer, or clerk of a domestic insurer
who has the duty to handle or invest the insurer's money may not:
(1) invest the money other than in the corporate name of the
insurer, except as provided by Section 423.102;
(2) deposit the money unless the deposit is:
(A) in the corporate name of the insurer;
(B) in a pooling account with one or more affiliates, as
described by Section 823.003; or
(C) in accordance with a reinsurance agreement;
(3) borrow the insurer's money;
(4) have any interest in a loan, pledge, security, or property
of the insurer, except as a stockholder; or
(5) take or receive for the individual's use a fee, brokerage,
commission, gift, or other consideration for, or on account of, a
loan made by or on behalf of the insurer.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.052. MONEY HELD IN POOLING ACCOUNT. (a) Only a
domestic insurer and an affiliate, as described by Section
823.003, may hold money in a pooling account.
(b) The accounting and operating records and books of the
insurer and affiliate must be adequately detailed to identify
specific insurance policies and policyholders with the money from
premiums received by the insurer that issues the policies.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.053. AUTHORITY TO DEPOSIT MONEY IN ACCOUNT OF
REINSURER. A reinsurance agreement between a domestic insurer
and an affiliate, as described by Section 823.003, must
specifically authorize the deposit of money from premiums to the
account of the affiliate that assumes the reinsurance.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
SUBCHAPTER C. TRANSACTIONS WITH OTHER ASSETS
Sec. 423.101. DEFINITION. In this subchapter, "clearing
corporation" means:
(1) a clearing corporation as defined by Section 8.102(a),
Business & Commerce Code; or
(2) a clearance system that:
(A) is organized or operating under the laws of at least one
foreign country;
(B) provides for book-entry settlement and custody of
internationally traded securities; and
(C) has been organized and in operation for not less than 15
consecutive years.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.102. DEPOSIT AND HOLDING OF SECURITIES. (a) A
domestic insurer that has securities held in or purchased for the
insurer's general account or separate accounts may deposit the
securities or arrange through an agent, broker, or dealer for
deposit of the securities with a clearing corporation or in the
Federal Reserve book-entry system.
(b) If securities are deposited directly with a clearing
corporation or deposited indirectly through a participating
custodian bank, certificates representing securities of the same
class of the same issuer may be merged and held in bulk, in the
name of a nominee of the clearing corporation, with any other
securities deposited with the clearing corporation by any person,
regardless of the ownership of the securities.
(c) Certificates under Subsection (b) that represent securities
of small denominations may be merged into one or more
certificates of larger denominations.
(d) The records of an agent, broker, dealer, or member bank
through which an insurer holds securities in the Federal Reserve
book-entry system and the records of a custodian bank through
which an insurer holds securities with a clearing corporation
must show that the securities are held for the insurer and show
the accounts for which the securities are held.
(e) A bank must enter into a custodial agreement with an insurer
to be eligible to act as a participating custodian bank for the
insurer under this section.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.103. SECURITIES HELD UNDER CUSTODIAL OR TRUST
AGREEMENT. A domestic insurer's securities that are held under a
custodial agreement or trust agreement with a bank, Federal Home
Loan Bank, or trust company may be issued in the name of a
nominee of the bank, Federal Home Loan Bank, or trust company
only if the bank, Federal Home Loan Bank, or trust company:
(1) has corporate trust powers;
(2) is authorized to act as a custodian or trustee;
(3) is organized under the laws of the United States or any
state of the United States; and
(4) meets one of the following requirements:
(A) is a member of the Federal Reserve System;
(B) is a member of or is eligible to receive deposits that are
insured by the Federal Deposit Insurance Corporation;
(C) maintains an account with a Federal Reserve Bank and is
subject to supervision and examination by the Board of Governors
of the Federal Reserve System; or
(D) is subject to supervision and examination by the Federal
Housing Finance Board.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.104. PROOF OF OWNERSHIP OF SECURITIES. (a) A domestic
insurer may demonstrate ownership of a security through a
definitive certificate or in accordance with rules adopted under
this section.
(b) The commissioner shall adopt rules under which a domestic
insurer may demonstrate ownership of an uncertificated security,
as defined by Section 8.102(a), Business & Commerce Code,
consistent with common practices of securities exchanges and
markets. The rules must establish:
(1) standards for the types of uncertificated securities the
insurer may hold;
(2) the manner in which the insurer may demonstrate ownership of
the security; and
(3) adequate financial safeguards relating to the ownership of
uncertificated securities.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.105. MANDATORY DEPOSIT OF SECURITIES; COMMISSIONER
CONTROL. (a) An insurer that is required to deposit securities
as a condition of engaging in the business of insurance in this
state may deposit the securities with a clearing corporation or
in the Federal Reserve book-entry system.
(b) Securities under Subsection (a) are under the commissioner's
control and may not be withdrawn by the insurer without the
commissioner's approval.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.106. REQUIRED EVIDENCE FOR SECURITIES. (a) An insurer
that deposits securities under Section 423.105 shall provide
evidence to the commissioner to establish that:
(1) the securities are recorded in an account in the name of:
(A) the participating custodian bank or member bank through
which the insurer deposits the securities with a clearing
corporation or in the Federal Reserve book-entry system; or
(B) the insurer, if the insurer makes the deposit directly with
the clearing corporation as a direct participant; and
(2) the records of the participating custodian bank, direct
participant, or member bank and of the clearing corporation show
that the securities are under the commissioner's control.
(b) Evidence under Subsection (a)(1) must be issued, as
applicable, by:
(1) the participating custodian bank;
(2) the member bank; or
(3) the insurer, when the insurer makes the deposit directly
with the clearing corporation as a direct participant.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.107. ASSETS DEPOSITED WITH CLEARING CORPORATION. A
domestic insurer may deposit assets with a clearing corporation
only if:
(1) the insurer is a member of an insurance holding company
system that has assets of at least $5 billion, as shown by annual
statements of member insurers for the preceding year;
(2) the insurer uses the clearing corporation only as a
depository for investments in internationally traded securities;
(3) the insurer's total investment in internationally traded
securities under Subdivision (2) does not exceed the insurer's
policyholders' surplus; and
(4) the insurer does not use securities deposited with the
clearing corporation as security for reinsurance.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 423.108. LIMITATION ON ASSETS DEPOSITED WITH CLEARING
CORPORATION. The commissioner by rule may adopt a reasonable
limit on the percentage of a domestic insurer's assets that may
be deposited with a clearing corporation. The limit may not
exceed five percent of the insurer's total assets, as shown by
the insurer's annual statement filed with the department for the
year preceding the year for which the limit is adopted.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.