CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES
CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 882.001. APPLICABILITY OF THIS CHAPTER AND OTHER LAW.
Except to the extent of any conflict with this chapter, a law
governing a company organized under Chapter 841 applies to a
mutual life insurance company organized under this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.002. EXAMINATION OF COMPANY. The following provisions
apply to a mutual life insurance company organized under this
chapter:
(1) Subchapter A, Chapter 86; and
(2) Sections 401.051, 401.052, 401.054-401.062, 401.151,
401.152, 401.155, and 401.156.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.073, eff. April 1, 2009.
Sec. 882.003. ANNUAL STATEMENT. A mutual life insurance company
shall file an annual statement with the department.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER B. FORMATION AND STRUCTURE OF MUTUAL LIFE INSURANCE
COMPANY
Sec. 882.051. AUTHORITY TO FORM COMPANY; PURPOSE. A mutual life
insurance company may be formed under this chapter to insure the
lives of individuals on the mutual level premium and legal
reserve plan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.052. FORMATION OF COMPANY; ARTICLES OF INCORPORATION.
(a) Nine or more persons who are residents of this state may
form a mutual life insurance company by executing and
acknowledging articles of incorporation for that purpose.
(b) The articles of incorporation of the proposed company must
state:
(1) the name and residence of each incorporator;
(2) the name of the company;
(3) the location of the company's principal office at which
company business is to be transacted;
(4) the number of directors;
(5) the name and residence of each initial director; and
(6) the amount of the company's unencumbered surplus.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.053. COMPANY'S NAME. (a) The name of a mutual life
insurance company must contain the words "Mutual Life Insurance
Company."
(b) A mutual life insurance company's name may not be so similar
to the name of another insurance company as to likely mislead the
public.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.054. INITIAL BOARD OF DIRECTORS; TERM. An initial
director named as provided in Section 882.052 serves until:
(1) the first annual election of directors;
(2) the initial director's successor qualifies for office; or
(3) the initial director is removed from the board for improper
practices.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.055. UNENCUMBERED SURPLUS REQUIREMENTS. A mutual life
insurance company must possess at the time of incorporation
unencumbered surplus in an amount of at least $200,000. The
unencumbered surplus may consist only of:
(1) United States currency;
(2) bonds of the United States, this state, or a county or
municipality of this state; or
(3) government insured mortgage loans that are authorized by
this chapter, with not more than 25 percent of the unencumbered
surplus invested in first mortgage real estate loans.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.056. APPLICATION FOR CHARTER. (a) To obtain a charter
for a mutual life insurance company under this chapter, the
incorporators must pay the charter fee in the amount determined
under Chapter 202 and file with the department:
(1) an application for charter on the form and including the
information prescribed by the commissioner;
(2) the company's articles of incorporation; and
(3) an affidavit made by two or more of the incorporators that
states that:
(A) the unencumbered surplus requirements of Section 882.055 are
satisfied;
(B) the unencumbered surplus is the bona fide property of the
company; and
(C) the information in the application and articles of
incorporation is true and correct.
(b) The commissioner may require that the incorporators provide
at their expense additional evidence of a matter required in the
affidavit before the commissioner takes further action on the
application for the charter.
(c) The charter must state the name of each director who is to
serve until the first annual election.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.074, eff. April 1, 2009.
Sec. 882.057. APPLICATION PROCESS. (a) After the charter fee
is paid and all items required for a charter under Section
882.056 are filed with the department, the commissioner shall
approve, deny, or disapprove the application.
(b) On the applicant's request, the commissioner shall hold a
hearing on a denial. Not later than the 30th day after the date
of the applicant's request for a hearing, the commissioner shall
request a hearing date.
(c) An interested party may participate fully and in all
respects in any proceeding related to the application. An
intervenor has the rights and privileges of a proper or necessary
party in a civil suit in the courts of this state, including the
right to be represented by counsel.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1022, Sec. 12, eff. June 19, 2009.
Sec. 882.058. ACTION ON APPLICATION. (a) In considering the
application, the commissioner shall determine if:
(1) the minimum unencumbered surplus required by Section 882.055
is the bona fide property of the mutual life insurance company;
(2) the proposed officers, directors, and managing executives of
the company have sufficient insurance experience, ability, and
standing to make success of the proposed company probable; and
(3) the applicants are acting in good faith.
(b) If the commissioner determines that the applicant has not
met the standards set out by Subsection (a), the commissioner
shall deny the application in writing, giving the reason for the
denial. An application may not be granted unless it is
adequately supported by competent evidence.
(c) Repealed by Acts 2009, 81st Leg., R.S., Ch. 1022, Sec.
19(6), eff. June 19, 2009.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1022, Sec. 13, eff. June 19, 2009.
Acts 2009, 81st Leg., R.S., Ch.
1022, Sec. 19(6), eff. June 19, 2009.
Sec. 882.059. EXAMINATION AFTER DETERMINATION. After making a
determination on an application under Section 882.058, the
commissioner shall immediately make or cause to be made a full
and thorough examination of the mutual life insurance company.
The company shall pay for the examination.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 882.101. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) After
the examination of a mutual life insurance company under Section
882.059, the commissioner shall issue a certificate of authority
to the company if the commissioner finds that:
(1) the company has complied with all applicable laws;
(2) the company satisfies the unencumbered surplus requirements
of Section 882.055; and
(3) the company's unencumbered surplus is in the custody of the
company's officers.
(b) A certificate of authority issued under this section
authorizes the company to engage in the business of life, health,
or accident insurance in this state as may be specified in the
company's charter or charter application.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER D. MANAGEMENT OF MUTUAL LIFE INSURANCE COMPANY
Sec. 882.151. BOARD OF DIRECTORS. (a) The board of directors
of a mutual life insurance company controls the business of the
company.
(b) The board of directors consists of at least five directors
as stated in the company's articles of incorporation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.152. ADOPTION OF INITIAL BYLAWS. (a) At the first
meeting of the initial board of directors of a mutual life
insurance company after the department issues a certificate of
authority to the company, the board shall adopt the initial
bylaws of the company.
(b) The bylaws adopted under Subsection (a) shall govern the
company until the first annual meeting of the board of directors.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.153. ANNUAL MEETING. (a) Except as provided by
Subsection (b), after a mutual life insurance company is issued a
certificate of authority under Section 882.101, the company shall
hold an annual meeting of the policyholders on the fourth Tuesday
in April at the home office of the company or another location
properly announced to each policyholder.
(b) The bylaws of a mutual life insurance company may establish
an annual meeting date different than the date under Subsection
(a). A meeting date established under this subsection must be
before April 30 of each year.
(c) At each annual meeting, the policyholders:
(1) shall elect the company's board of directors to serve until
the next annual meeting, except as provided by Section 882.154;
and
(2) may adopt, amend, or repeal the bylaws of the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS. (a)
This section applies only to a mutual life insurance company
whose board of directors consists of at least nine members.
(b) The bylaws of a mutual life insurance company may provide
that the company's directors, other than initial directors, may
be elected to serve staggered terms as provided by this section.
(c) The company's directors shall be divided into two or three
classes, with each class consisting of an equal number of
directors to the extent possible. After the directors are divided
into classes:
(1) the terms of the directors in the first class expire on the
first annual meeting date after their initial election;
(2) the terms of the directors in the second class expire on the
second annual meeting date after their initial election; and
(3) the terms of the directors in the third class, if any,
expire on the third annual meeting date after their initial
election.
(d) At each annual meeting after the directors are first
elected, the policyholders shall elect the number of directors
whose terms expire on that date. Directors are elected for:
(1) staggered two-year terms, if the board is divided into two
classes; or
(2) staggered three-year terms, if the board is divided into
three classes.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.155. VOTING BY POLICYHOLDERS. (a) At an annual or
special meeting of a mutual life insurance company, each
policyholder is entitled to one vote for each $500 of insurance
held by the policyholder in the company.
(b) A policyholder may vote at an annual or special meeting by
proxy, unless the proxy is revoked before the meeting.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.156. OFFICERS. (a) The board of directors of a mutual
life insurance company shall elect the following officers for the
company:
(1) a president;
(2) the number of vice presidents as required by the company's
bylaws;
(3) a secretary;
(4) a treasurer;
(5) a medical director; and
(6) other officers as required by the company's bylaws.
(b) The board shall establish the compensation of each officer.
(c) The duties of each officer shall be prescribed by the
company's bylaws.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.157. OFFICER BONDS. The president, secretary, and
treasurer of a mutual life insurance company shall each provide a
bond for the protection of the company's policyholders:
(1) in an amount and with sureties approved by the commissioner;
and
(2) conditioned on the faithful performance of the officer's
duties.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.158. BYLAWS MUST COMPLY WITH LAW. The bylaws of a
mutual life insurance company may not be inconsistent with this
chapter or other laws of this state.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER E. AGENTS
Sec. 882.201. APPLICABILITY OF SUBCHAPTER. This subchapter does
not apply to a mutual life insurance company organized under this
chapter that has a surplus of at least the minimum amount of
capital and surplus required of a capital stock company under
Sections 841.054, 841.204, 841.205, 841.301, and 841.302.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.202. ISSUANCE OF LICENSE TO AGENT. On written request
of a mutual life insurance company to which a certificate of
authority has been issued under this chapter, the department
shall issue a license to each agent of the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.203. LIMITATION ON AGENT COMPENSATION. A contract
between a mutual life insurance company and an agent of the
company to which a license has been issued under Section 882.202
may not provide a commission or other compensation to the agent
that exceeds the expense loading in the premiums on policies that
are issued on applications obtained by the agent and for which
the premiums are collected and paid to the company in cash.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER F. GENERAL FINANCIAL REQUIREMENTS
Sec. 882.251. LIMITED AUTHORITY TO BORROW MONEY. (a) Except as
provided by this subchapter, a mutual life insurance company may
not borrow money for any purpose other than to pay a death loss.
(b) A company may not incur a debt on an account for which any
part of the company's assets that exceeds the assets represented
by or derived from the expense loading in the premiums collected
by the company is subject to execution on a judgment.
(c) Subsection (b) does not prohibit a company from incurring a
debt on an account:
(1) under a policy issued by the company; or
(2) to borrow money to pay a death loss.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.252. INVESTMENT OF MONEY. (a) A mutual life insurance
company shall invest the company's money in accordance with the
law governing investments of life, health, and accident insurance
companies organized under Chapter 841.
(b) An officer of a mutual life insurance company who does not
invest the money of the company as required by Subsection (a)
shall deposit the money in the name of the company in a bank
that:
(1) is subject to state or federal regulation; and
(2) has been approved by the commissioner as a depository for
that purpose.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.253. LOANS TO COMPANY. (a) An officer or director of
a mutual life insurance company, or a person authorized under
Chapter 825, may loan to the company money to:
(1) promote or conserve the company's business; or
(2) enable the company to comply with a legal requirement.
(b) The company may repay a loan and agreed interest, at an
annual rate not to exceed 10 percent, from the surplus remaining
after the company provides for the company's reserves and other
liabilities.
(c) A loan under this section or interest on a loan is not
otherwise a liability or claim against the company or any of its
assets.
(d) A mutual life insurance company may not pay a commission or
promotion expense in connection with a loan made to the company.
(e) A mutual life insurance company shall report in its annual
statement the amount of each loan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER G. UNENCUMBERED SURPLUS REQUIREMENTS
Sec. 882.301. AMOUNT OF UNENCUMBERED SURPLUS. (a) A mutual
life insurance company that engages in the business of insurance
in this state shall maintain an unencumbered surplus of at least
$100,000 that consists of cash or classes of investment as
provided by Section 882.055.
(b) Except as otherwise authorized by this code, a company that
does not maintain an unencumbered surplus as required by this
section may not write new insurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.302. EXEMPTION FOR CERTAIN COMPANIES. A mutual life
insurance company that was authorized and engaged in the business
of insurance in this state before May 1, 1955, is not required to
increase the amount or convert the class or form of the company's
existing unencumbered surplus to comply with Section 882.301 and
may not be prohibited from writing new insurance because the
company does not maintain an unencumbered surplus as required by
that section if the company complies with all other laws.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.303. UNENCUMBERED SURPLUS LESS THAN $25,000. A mutual
life insurance company whose unencumbered surplus is less than
$25,000 shall allocate at least 25 percent of the company's net
earned surplus for the preceding calendar year to the company's
unencumbered surplus until the company has obtained an
unencumbered surplus of at least $25,000.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.304. INVESTMENT OF EXCESS UNENCUMBERED SURPLUS. A
mutual life insurance company that is granted a charter under
this chapter may invest that part of the company's unencumbered
surplus that exceeds $100,000 as provided by this code for
companies operating under Chapter 841.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.305. IMPAIRMENT OF UNENCUMBERED SURPLUS. (a) If
one-third or more of a mutual life insurance company's
unencumbered surplus as required by Section 882.301 is impaired,
the company shall correct the impairment not later than the 60th
day after the date the surplus is impaired.
(b) A company that does not correct an impairment of surplus as
required by Subsection (a) may not write insurance in this state
until the company corrects the impairment.
(c) In determining whether a company's surplus is impaired, the
company shall compute its liabilities in the manner provided by
state law.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.306. IMPAIRMENT OF UNENCUMBERED SURPLUS; APPOINTMENT OF
RECEIVER. (a) If one-half or more of a mutual life insurance
company's unencumbered surplus as required by Section 882.301 is
impaired, the commissioner may apply to a court for the
appointment of a receiver to wind up the affairs of the company.
(b) In determining whether a company's surplus is impaired, the
company shall compute its reserve liability in the manner
provided by state law.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER H. DIVIDENDS
Sec. 882.351. POLICYHOLDER'S ENTITLEMENT TO DIVIDEND. A
policyholder of a mutual life insurance company is entitled to a
credit or payment of a dividend from that part of the company's
divisible surplus that may be fairly allocated to the
policyholder's policy.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.352. ACCOUNTING AND PROCEDURE FOR ALLOCATION OF
DIVISIBLE SURPLUS; REPORT TO COMMISSIONER. (a) On December 31
of each year, or as soon after as practicable, each mutual life
insurance company shall determine the amount of surplus earned by
the company during that year.
(b) Not later than the end of the second year in which a policy
issued by the company is in effect, the company shall provide to
the policyholder:
(1) an annual accounting of the company's divisible surplus; and
(2) if all premiums due on the policy have been paid for at
least two years, a fair allocation of the company's divisible
surplus that remains after deducting:
(A) any amount approved by the commissioner for retirement of
any unpaid loans made under Section 882.253;
(B) the company's contingency reserve; and
(C) any earned surplus the company allocated to unencumbered
surplus as provided by this chapter.
(c) The company shall immediately submit to the commissioner a
detailed report of an allocation of divisible surplus made under
this section. The president or secretary of the company shall
sign the report under oath.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.353. DEPARTMENT APPROVAL OF ALLOCATION; REVISIONS. (a)
The department shall approve a mutual life insurance company's
allocation of divisible surplus under Section 882.352 if the
department finds that the allocation is fair to the policyholders
and complies with this chapter.
(b) If the department does not approve a company's allocation of
surplus, the department shall revise the allocation in a manner
that the department determines is fair to the policyholders and
necessary to comply with this chapter. The department shall
certify the revisions to the company.
(c) An allocation of surplus approved under Subsection (a) takes
effect on the date of approval. An allocation of surplus revised
by the department under Subsection (b) takes effect on the date
the department certifies the revisions to the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.354. DIVIDEND PAYMENT METHOD. (a) A dividend declared
by a mutual life insurance company under this subchapter shall be
paid in:
(1) cash; or
(2) the equivalent of the dividend's cash value as provided by
an option stated in the policy and selected by the policyholder.
(b) A policyholder shall notify the company in writing of an
option selected by the policyholder under Subsection (a)(2).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.355. LIMITATIONS ON DIVISIBLE SURPLUS. A mutual life
insurance company's divisible surplus available for payment of
dividends to the company's policyholders may not include:
(1) any part of the company's unencumbered surplus that has
been:
(A) allocated from the company's earned surplus;
(B) transferred from the company's contingency reserve; or
(C) otherwise acquired by the company;
(2) if the company was organized after September 5, 1955, any
part of the company's unencumbered surplus required to comply
with Section 882.301; or
(3) if the company's unencumbered surplus is less than $25,000,
the part of the company's earned surplus for the preceding
calendar year in excess of 75 percent of the earned surplus.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.356. PAYMENT OF DIVIDENDS NOT REQUIRED. This
subchapter does not require a mutual life insurance company to
pay a dividend to a policyholder if the unencumbered surplus
acquired by the company is impaired.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER I. CONTINGENCY RESERVE
Sec. 882.401. AMOUNT OF CONTINGENCY RESERVE. (a) A mutual life
insurance company organized under this chapter may maintain a
contingency reserve that exceeds the reserves and liabilities
provided by this chapter. The amount of the contingency reserve
may not exceed the greater of:
(1) $10,000;
(2) an amount that:
(A) equals 20 percent of the company's policy reserves and
policy liabilities plus one percent of the amount of the
company's life insurance in force; and
(B) does not exceed $750,000; or
(3) an amount that equals 20 percent of the company's policy
reserves and policy liabilities.
(b) In determining the amount of a company's policy reserves and
policy liabilities for purposes of this section, the company may
only include the following, after deducting the net value of the
company's risks reinsured by other solvent assuming insurers:
(1) the company's reserves on outstanding life insurance
policies and annuity contracts, contracts issued as supplemental
to the policies or contracts or in connection with the policies
or contracts or provisions included in policies or contracts that
insure against disability or accidental death; and
(2) the company's liabilities for:
(A) optional modes of settlement; or
(B) dividends left on deposit at interest.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.402. EXCESS CONTINGENCY RESERVE. (a) The
commissioner, for good cause shown, may issue an order
authorizing a mutual life insurance company to maintain a
contingency reserve that exceeds the amount of the reserve
authorized by Section 882.401.
(b) The order must state:
(1) a period not exceeding one year during which the company may
maintain the excess contingency reserve; and
(2) each reason for authorizing the excess contingency reserve.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.403. CONTINGENCY RESERVE REQUIREMENTS. (a) A mutual
life insurance company's contingency reserve as authorized by
this subchapter must be:
(1) invested as provided by law; and
(2) used only to pay death claims and dividends to
policyholders.
(b) If the interest and earnings from the investment of a
company's contingency reserve exceed the amount of reserve
authorized by Section 882.401 or 882.402, the company shall pay
the excess amount to the policyholders of the company in the form
of dividends as provided by law.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.404. ALLOCATION OF CONTINGENCY RESERVE TO UNENCUMBERED
SURPLUS. If a mutual life insurance company's unencumbered
surplus is less than $100,000, the company may allocate any part
of the company's contingency reserve to the company's
unencumbered surplus.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.405. DESIGNATION OF CONTINGENCY RESERVE AS UNASSIGNED
SURPLUS. The contingency reserve described by this subchapter is
and may be treated as unassigned surplus, including designating
the contingency reserve as unassigned surplus in financial
statements.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER J. POLICY REQUIREMENTS
Sec. 882.451. APPLICABILITY OF CERTAIN PROVISIONS. Sections
882.452, 882. 453, and 882.454 do not apply to a mutual life
insurance company organized under this chapter that has a surplus
of at least the minimum amount of capital and surplus required of
a capital stock company under Sections 841.054, 841.204, 841.205,
841.301, and 841.302.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.452. TYPE OF POLICY AUTHORIZED. A mutual life
insurance company may issue a policy only on the participating
plan with dividends payable annually as provided by Subchapter H.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.453. POLICY FORM. An insurance policy issued by a
mutual life insurance company must:
(1) be on a form approved by the department; and
(2) contain the following statement on both the front and
reverse sides of the policy: "The form of this policy is approved
by the Texas Department of Insurance."
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.454. LIMITATION ON AMOUNT OF POLICY VALUE FOR CERTAIN
COMPANIES. If the total amount of a mutual life insurance
company's insurance in force is less than $10 million, the
company may not issue a policy that, after deducting any
reinsurance, binds the company for more than $5,000 on a single
life.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.455. TABLE OF GUARANTEED VALUES. (a) Each insurance
policy issued by a mutual life insurance company must contain a
table of guaranteed values. The guaranteed values become
nonforfeitable not later than the date of payment of the third
full annual premium.
(b) The table of guaranteed values shall be drawn in accordance
with the law governing life, health, and accident insurance
companies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER K. TOTAL ASSUMPTION REINSURANCE AGREEMENTS
Sec. 882.501. TOTAL ASSUMPTION REINSURANCE AGREEMENTS BETWEEN
LIFE INSURANCE COMPANIES. (a) A domestic mutual life insurance
company and any other domestic or foreign life insurance company
may enter into a total assumption reinsurance agreement if the
company assuming the policies under the agreement is authorized
to engage in the kinds of insurance provided by those policies.
(b) Before a total assumption reinsurance agreement may be
entered into:
(1) the agreement must be submitted to the department; and
(2) the commissioner must approve the agreement as fully
protecting the interests of each domestic company's
policyholders.
(c) After an assumption reinsurance agreement in which the
ceding company is a domestic mutual insurance company is approved
by the commissioner as required by Subsection (b), the agreement
must be approved by the policyholders of the ceding domestic
company in the same manner as required for a merger or
consolidation under Subchapter L.
(d) When the reinsurance agreement described by Subsection (c)
is effective, the assuming company is entitled to the same
rights, privileges, and benefits granted a company that assumes a
company by merger or consolidation as provided by Subchapter L.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER L. MERGERS AND CONSOLIDATIONS
Sec. 882.551. APPLICABILITY OF SUBCHAPTER. This subchapter
applies only to a merger or consolidation in which at least one
of the parties to the transaction is a mutual life insurance
company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.552. AUTHORITY TO MERGE OR CONSOLIDATE. A domestic or
foreign mutual life insurance company may merge with a domestic
or foreign mutual or stock legal reserve life insurance company
or consolidate into a new domestic or foreign mutual or stock
life insurance company as provided by this subchapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.553. PROPOSED PLAN OF MERGER OR CONSOLIDATION; FILING
WITH COMMISSIONER. (a) If the boards of directors of at least
two life insurance companies determine by majority vote to merge
or consolidate, the boards of directors shall prepare a proposed
plan of merger or consolidation. The plan may contain:
(1) a future allocation of divisible surplus; or
(2) any other fair arrangement by which any equitable interests
of the mutual life insurance company's policyholders may be
adjusted.
(b) The boards of directors shall file the proposed plan with
the commissioner for approval.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.554. HEARING ON PLAN. As soon as practicable after a
proposed plan is filed with the commissioner, the commissioner
shall hold a hearing to determine whether to approve the plan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.555. COMMISSIONER DETERMINATION ON PLAN. (a) As soon
as practicable after the commissioner holds a hearing on a
proposed plan under Section 882.554, the commissioner shall
approve the plan unless the commissioner determines that:
(1) the plan is contrary to law; or
(2) implementation of the plan:
(A) would not be in the best interests of the policyholders of
any mutual life insurance company that is a party to the plan; or
(B) would substantially reduce the security of or service to be
rendered to policyholders of any mutual insurance company that is
a party to the plan, regardless of whether the policyholders
reside in this state or elsewhere.
(b) In determining whether to approve a proposed plan, the
commissioner may consider all relevant financial or other
information, including past, present, and future operations and
accumulations of each company that is a party to the plan.
(c) If the commissioner approves the proposed plan, the
commissioner shall notify each party to the plan of the approval.
(d) If the commissioner disapproves the proposed plan, the
commissioner shall, within a reasonable time after holding a
hearing under Section 882.554:
(1) specify in detail each reason for the disapproval; and
(2) notify each party to the plan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.556. APPROVAL OF PLAN BY POLICYHOLDERS. (a) As soon
as practicable after receiving from the commissioner notice of
approval of a proposed plan under Section 882.555, the board of
directors of each mutual life insurance company that is a party
to the plan shall submit the plan to the policyholders for a vote
at an annual or special meeting.
(b) Not later than the 15th day before the date of the meeting,
the company shall provide written notice of the meeting to the
policyholders as provided by the company's bylaws. The notice
must:
(1) be sent to the policyholder's last known address;
(2) state that one of the purposes of the meeting is to vote on
the proposed plan; and
(3) be accompanied by a copy of the proposed plan.
(c) At a meeting under Subsection (a), each policyholder:
(1) is entitled to the number of votes as provided by Section
882.155; and
(2) may vote:
(A) in person;
(B) by written proxy; or
(C) by mailed ballot.
(d) A proposed plan is approved by the policyholders on the
affirmative vote of at least two-thirds of the votes cast at the
meeting.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.557. DOMESTIC STOCK LIFE INSURANCE COMPANY; APPROVAL OF
PLAN BY SHAREHOLDERS. On notice of approval of a proposed plan
under Section 882.555, the board of directors of each domestic
stock life insurance company that is a party to the plan shall
submit the plan for approval to the company's shareholders in the
manner provided by Section 824.003.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.558. FOREIGN LIFE INSURANCE COMPANY; APPROVAL OF PLAN
BY POLICYHOLDERS OR SHAREHOLDERS. On notice of approval of a
proposed plan under Section 882.555, the board of directors of
each foreign life insurance company that is a party to the plan
shall submit the plan for approval to the company's policyholders
or shareholders as provided by the law of the appropriate
jurisdiction.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.559. FILING OF AFFIDAVIT OF PLAN APPROVAL; ISSUANCE OF
CERTIFICATE OF MERGER OR CONSOLIDATION. (a) On the approval of
a proposed plan under Section 882.556, 882.557, or 882.558, the
president or a vice president and the secretary or an assistant
secretary of each company that is a party to the plan shall
execute and file with the department an affidavit stating that
the plan has been approved by the policyholders or shareholders
of the company as required by this subchapter.
(b) If the department finds that the affidavit complies with
law, the department shall:
(1) endorse the affidavit with:
(A) the word "filed"; and
(B) the date of filing;
(2) if the plan is a plan of merger, issue a certificate of
merger to the surviving company or the company's representative;
and
(3) if the plan is a plan of consolidation, issue a certificate
of consolidation to the new company on the issuance of a charter
and a certificate of authority to the new company after:
(A) submission of proper articles of incorporation to the
department;
(B) approval by the department in accordance with procedures
required for the issuance of a new charter; and
(C) submission of proof that the new company has policyholder
surplus at least equal to that of the mutual life insurance
company that is a party to the consolidation and has the largest
surplus.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.560. EFFECTIVE DATE OF MERGER OR CONSOLIDATION. A
merger or consolidation takes effect on the later of:
(1) the date of issuance of the certificate of merger or
consolidation; or
(2) a date specified in the plan of merger or consolidation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.561. ASSUMPTION OF OUTSTANDING INSURANCE POLICIES. (a)
On the effective date of a merger or consolidation under this
subchapter, a new or surviving life insurance company resulting
from the merger or consolidation assumes each insurance policy
outstanding against each company that merges or consolidates on
the same terms and under the same conditions as if the policy had
continued in force through the original company.
(b) The new or surviving insurance company shall implement the
terms of the policy.
(c) The new or surviving insurance company is entitled to:
(1) all rights and privileges under the policy; and
(2) all reserves and surplus that accumulated on the policy
before the merger or consolidation.
(d) A policyholder of a mutual life insurance company that is a
party to a merger or consolidation resulting in a new or
surviving stock life insurance company is not entitled to any
voting rights in the new or surviving company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.562. ASSUMPTION OF LIABILITIES. On the effective date
of a merger or consolidation under this subchapter, a new or
surviving life insurance company resulting from the merger or
consolidation assumes all liabilities of the original companies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.563. EFFECT OF MERGER OR CONSOLIDATION ON PROPERTY. On
the effective date of a merger or consolidation under this
subchapter, the property rights, including any right of recovery,
of each company that is a party to the merger or consolidation
are transferred to the new or surviving life insurance company
resulting from the merger or consolidation without a deed or
other transfer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.564. EFFECT OF MERGER OR CONSOLIDATION ON CERTAIN
INVESTMENTS. (a) This section applies to each investment of an
affected life insurance company, including an investment in real
property, that:
(1) was authorized as a proper asset, as of the date on which
the investment was made and under the laws of the state in which
the company was organized, for investment of funds of a life
insurance company; and
(2) is taken over by the new or surviving company under the
terms of the merger or consolidation.
(b) On the effective date of a merger or consolidation of two or
more life insurance companies under this subchapter, an
investment of the affected companies described by Subsection (a)
is a proper asset under the laws of this state of the new or
surviving company if the investment is:
(1) approved by the commissioner; and
(2) taken over on terms satisfactory to the commissioner.
(c) A new or surviving company that acquires, under the terms of
the merger or consolidation, real property that exceeds the
amount of real property permitted by the applicable sections of
this code relating to owning or holding real property shall sell
or dispose of the excess real property:
(1) within the period specified by those sections; or
(2) within a longer period if the company obtains a certificate
from the commissioner:
(A) stating that the interests of the company will materially
suffer by the forced sale or other disposition of the real
property; and
(B) specifying the longer period for the sale or other
disposition of the real property.
(d) This section does not preclude the designation and use of
the excess real property as branch offices of the company in
accordance with this code.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.565. EFFECT OF MERGER OR CONSOLIDATION ON DIVISIBLE
SURPLUS. (a) This section applies only to a mutual life
insurance company that is a new company or the surviving company
resulting from a merger or consolidation under this subchapter.
(b) If the divisible surplus of each domestic mutual life
insurance company that is a party to a merger or consolidation
under this subchapter was available for allocation to
policyholders as provided by Subchapter H immediately before the
effective date of the merger or consolidation, the divisible
surplus remains available to the policyholders of the new or
surviving mutual life insurance company resulting from the merger
or consolidation as provided by Subchapter H.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.566. EFFECT ON ANTITRUST LAWS. This subchapter does
not affect in any manner the antitrust laws of this state.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER M. CONVERSION OF MUTUAL LIFE INSURANCE COMPANY TO
STOCK LEGAL RESERVE LIFE INSURANCE COMPANY
Sec. 882.601. AUTHORITY TO CONVERT TO STOCK LEGAL RESERVE LIFE
INSURANCE COMPANY; POLICYHOLDER AUTHORIZATION REQUIRED. A mutual
life insurance company organized under this chapter may convert
to a stock legal reserve life insurance company as provided by
this subchapter only if the conversion is approved by the
policyholders by a vote of at least two-thirds of the votes cast
by the policyholders in person or by proxy at a meeting called
for that purpose.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.602. AMENDMENT TO CHARTER OR ARTICLES OF INCORPORATION
REQUIRED. If the policyholders of a mutual life insurance
company authorize a conversion under Section 882.601, the board
of directors and officers of the company shall amend the
company's charter or articles of incorporation to comply with the
requirements applicable to a stock legal reserve life insurance
company under Chapter 841.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.603. CAPITAL AND SURPLUS REQUIREMENTS. (a) The
capital and surplus of the converted stock legal reserve life
insurance company must be at least equal to the minimum capital
and surplus required for the organization of a stock legal
reserve life insurance company under Chapter 841.
(b) If a contribution of United States currency is necessary to
meet the capital and surplus requirements of this section, the
contribution must be made before the effective date of the
conversion.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.604. HEARING. (a) After public notice, the
commissioner shall hold a hearing on a conversion authorized
under Section 882.601.
(b) Any policyholder of the mutual life insurance company that
is the subject of the conversion is entitled to appear and be
heard at the hearing.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.605. CONVERSION ON COMMISSIONER APPROVAL. A mutual
life insurance company is converted to a stock legal reserve life
insurance company if:
(1) the company complies with this subchapter; and
(2) after hearing, the conversion is approved by the
commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.606. APPLICABLE LAW AFTER CONVERSION. After a mutual
life insurance company is converted to a stock legal reserve life
insurance company, the converted company is governed in the same
manner as a company organized under Chapter 841.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.607. OTHER TYPES OF CONVERSION NOT PROHIBITED. This
subchapter does not prohibit a mutual life insurance company from
converting to a stock legal reserve life insurance company by:
(1) merger or consolidation;
(2) a total direct or assumption reinsurance agreement; or
(3) any other plan or procedure approved by the company's
policyholders and the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER N. CONVERSION OF CERTAIN MUTUAL ASSESSMENT COMPANIES
OR ASSOCIATIONS TO MUTUAL LIFE INSURANCE COMPANIES
Sec. 882.651. AUTHORITY TO CONVERT. A mutual assessment company
or association organized and operating under the laws of this
state on May 17, 1943, may convert to a mutual life insurance
company as provided by this subchapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.652. VOLUNTARY CONVERSION. The department may not
require a mutual assessment company or association to convert to
a mutual life insurance company under this subchapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.653. CONVERSION REQUIREMENTS. Except as provided by
Section 882. 654, a mutual assessment company or association may
convert to a mutual life insurance company only if the company or
association:
(1) possesses an unencumbered surplus of at least $1.4 million;
and
(2) complies with the requirements of this chapter, including
the requirements that the company or association execute articles
of incorporation and obtain a charter and a certificate of
authority.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.654. EXEMPTION FROM SURPLUS REQUIREMENTS. (a) A
mutual assessment company or association is exempt from the
surplus requirements of Section 882.653 if the company or
association:
(1) possesses an unencumbered surplus of at least $200,000; and
(2) converted to a mutual life insurance company before
September 1, 1999.
(b) A mutual assessment company or association that is exempt
under Subsection (a) and that was converted on or after September
1, 1989, shall immediately increase its surplus to an amount that
satisfies Section 882.653 on:
(1) a change of control of at least 50 percent of the voting
securities of the converted company or association; or
(2) if the converted company or association or the holding
company that controls the converted company or association, if
any, is not controlled by voting securities, a change of at least
50 percent of the ownership of the converted company or
association or its holding company.
(c) For purposes of Subsection (b), a transfer of ownership
because of death, regardless of whether the decedent died testate
or intestate, is not considered a change of control of a
converted mutual assessment company or association or its holding
company, if ownership is transferred only to one or more
individuals, each of whom would have been an heir of the decedent
if the decedent had died intestate.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.655. APPLICABLE LAW AFTER CONVERSION. After a mutual
assessment company or association is converted to a mutual life
insurance company, the converted company is governed by this
chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER O. ENFORCEMENT PROVISIONS
Sec. 882.701. APPLICABILITY OF SUBCHAPTER. This subchapter does
not apply to a mutual life insurance company organized under this
chapter that has a surplus of at least the minimum amount of
capital and surplus required of a capital stock company under
Sections 841.054, 841.204, 841.205, 841.301, and 841.302.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 882.702. INVESTMENT AND DEPOSIT OF FUNDS; CRIMINAL PENALTY.
(a) A person commits an offense if the person is an officer or
director of a mutual life insurance company and the person
knowingly or wilfully violates or assents to the violation of
Section 882.252.
(b) An offense under this section is punishable by imprisonment
in the Texas Department of Criminal Justice for a term of not
more than five years or less than one year.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
87, Sec. 25.121, eff. September 1, 2009.
Sec. 882.703. POLICY FORM; REVOCATION OF CERTIFICATE. The
department shall revoke the certificate of authority of a mutual
life insurance company that issues a policy on a form that has
not been approved by the department as required by Section
882.453.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER P. CONVERSION OF MUTUAL LIFE INSURANCE COMPANY TO
INSURANCE HOLDING COMPANY AND STOCK LIFE INSURANCE COMPANY
Sec. 882.751. AUTHORITY TO CONVERT. A mutual life insurance
company organized or operating under this chapter may convert by
forming an insurance holding company based on a mutual plan and
continuing the corporate existence of the converting mutual life
insurance company as a stock life insurance company if the
commissioner:
(1) determines that the conversion is fair and equitable to the
policyholders of the converting company; and
(2) approves the proposed plan of conversion.
Added by Acts 2005, 79th Leg., Ch.
82, Sec. 1, eff. September 1, 2005.
Sec. 882.752. APPLICATION OF OTHER LAW. Except to the extent of
a conflict with this subchapter, Chapter 826 applies to
conversion of a mutual life insurance company under this
subchapter.
Added by Acts 2005, 79th Leg., Ch.
82, Sec. 1, eff. September 1, 2005.
Sec. 882.753. JURISDICTION OF COMMISSIONER. The commissioner
retains jurisdiction over a company that converts under this
subchapter.
Added by Acts 2005, 79th Leg., Ch.
82, Sec. 1, eff. September 1, 2005.
Sec. 882.754. INCORPORATION REQUIREMENTS. A mutual insurance
holding company that results from a conversion under this
subchapter must be incorporated under and subject to this chapter
and Chapter 22, Business Organizations Code.
Added by Acts 2005, 79th Leg., Ch.
82, Sec. 1, eff. September 1, 2005.
Sec. 882.755. ARTICLES OF INCORPORATION. The articles of
incorporation of a mutual insurance holding company that results
from a conversion under this subchapter, and any amendments to
the articles of incorporation, are subject to approval by the
commissioner.
Added by Acts 2005, 79th Leg., Ch.
82, Sec. 1, eff. September 1, 2005.
Sec. 882.756. SALE OF SECURITIES. (a) A sale, issuance, or
offering of securities under this subchapter is exempt from the
registration and licensing provisions of The Securities Act
(Article 581-1 et seq., Vernon's Texas Civil Statutes).
(b) An officer, director, or employee of a mutual life insurance
company or a mutual insurance holding company or stock life
insurance company resulting from a conversion under this
subchapter who participates in the conversion is exempt from the
registration and licensing provisions of The Securities Act
(Article 581-1 et seq., Vernon's Texas Civil Statutes). A person
may not receive compensation, other than that person's usual
salary or compensation, for services performed under the
exemption provided by this subsection.
Added by Acts 2005, 79th Leg., Ch.
82, Sec. 1, eff. September 1, 2005.