CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES
CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 884.001. DEFINITION. In this chapter, "stipulated premium
company" means a:
(1) stipulated premium life insurance company;
(2) stipulated premium accident insurance company;
(3) stipulated premium life and accident insurance company;
(4) stipulated premium accident and health insurance company; or
(5) stipulated premium life, accident, and health insurance
company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.002. APPLICABILITY OF OTHER LAW TO COMPANY. (a)
Except as expressly provided by this code, a provision of this
code, other than this chapter, does not apply to a stipulated
premium company organized under this chapter.
(b) A law enacted after August 28, 1961, does not apply to a
stipulated premium company unless stipulated premium companies
are expressly designated in the law.
(c) The following provisions of this code apply to a stipulated
premium company:
(1) Article 21.47;
(2) Section 38.001;
(3) Chapter 86;
(4) Subchapter A, Chapter 401;
(5) Sections 401.051, 401.052, 401.054-401.062, 401.151,
401.152, 401.155, and 401.156;
(6) Sections 403.001, 403.052, and 403.102;
(7) Subchapter A, Chapter 404;
(8) Section 421.001;
(9) Subchapter D, Chapter 425;
(10) Chapter 443;
(11) Chapter 492, other than Sections 492.051(b) and (c);
(12) Chapter 541;
(13) Sections 801.001-801.002;
(14) Sections 801.051-801.055;
(15) Section 801.057;
(16) Sections 801.101-801.102;
(17) Subchapter A, Chapter 821;
(18) Chapter 824;
(19) Chapter 828;
(20) Section 841.251;
(21) Section 841.259;
(22) Section 841.261;
(23) Section 841.703; and
(24) Chapter 4152.
(d) The Securities Act (Article 581-1 et seq., Vernon's Texas
Civil Statutes) applies to a stipulated premium company.
(e) The Texas Business Corporation Act applies to a stipulated
premium company to the extent that law is not inconsistent with
an insurance law applicable to a stipulated premium company. The
department shall perform a duty imposed by the Texas Business
Corporation Act on the office of the secretary of state that is
applicable to a stipulated premium company.
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.076, eff. April 1, 2009.
Sec. 884.003. ADMITTED ASSETS. A stipulated premium insurer may
include among its admitted assets a net asset under Section
841.004.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER B. FORMATION AND STRUCTURE OF STIPULATED PREMIUM
INSURANCE COMPANY
Sec. 884.051. FORMATION OF COMPANY. (a) Five or more, but not
more than 35, residents of this state may form a stipulated
premium company.
(b) To form a stipulated premium company:
(1) each incorporator must sign and acknowledge the articles of
incorporation of the company; and
(2) the incorporators must file the articles of incorporation
with the department.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.052. ARTICLES OF INCORPORATION. (a) Articles of
incorporation of a stipulated premium company must specify:
(1) the name and place of residence of each incorporator;
(2) the name of the proposed stipulated premium company;
(3) the location of the proposed company's home office;
(4) the kinds of insurance business the proposed company will
transact;
(5) the amount of the proposed company's capital stock;
(6) the number of shares of the proposed company's capital
stock; and
(7) the period of the proposed company's duration, which may not
exceed 500 years.
(b) The incorporators of a stipulated premium company may
include other provisions in the articles of incorporation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.053. COMPANY'S NAME. (a) The name of a stipulated
premium company must contain the words "Insurance Company."
(b) A stipulated premium 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. 884.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) A
proposed stipulated premium company's capital stock must be in an
amount of at least $200,000.
(b) All of the capital stock required by Subsection (a) must be
fully subscribed and paid up and delivered to the incorporators
before the articles of incorporation are filed.
(c) To be incorporated, a stipulated premium company must
possess at the time of incorporation, in addition to its capital,
surplus in an amount of at least $75,000. The amount of the
surplus is not required to be stated in the company's articles of
incorporation.
(d) At the time of incorporation the minimum capital and surplus
shall 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 50 percent of the minimum
capital invested in first mortgage real property loans.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1309, Sec. 1, eff. September 1, 2009.
Sec. 884.055. SHARES OF STOCK. (a) The shares of stock of a
stipulated premium company must have a par value of not less than
$1 or more than $100.
(b) A stipulated premium company may issue and dispose of
authorized shares for money or an instrument authorized for
minimum capital under Section 884.054(d). After the company
receives payment for a share of stock, the share is
nonassessable.
(c) If all of the shares of stock authorized by the charter or
an amendment to the charter are not subscribed and paid for when
the charter is granted or the amendment is filed, respectively,
the stipulated premium company shall file with the department a
certificate authenticated by a majority of the directors stating
the number of shares issued and the consideration received for
those shares. The company shall file the certificate not later
than the 90th day after the date of issuance of any of those
remaining shares.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.056. APPLICATION FOR CHARTER. (a) To obtain a charter
for a stipulated premium company under this chapter, the
incorporators must pay a charter fee in an amount determined
under Chapter 202 and file with the department:
(1) an application for charter on the form and containing the
information prescribed by the department;
(2) the company's articles of incorporation; and
(3) an affidavit made by two or more of the incorporators that
states that:
(A) the minimum capital and surplus requirements of Section
884.054 are satisfied;
(B) the capital and 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 department may require that the incorporators provide at
their expense additional evidence of a matter required in the
affidavit before the department takes further action on the
application for the charter.
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.077, eff. April 1, 2009.
Sec. 884.057. ACTION BY COMMISSIONER AND DEPARTMENT AFTER
FILING. (a) After the charter fee is paid and all items
required for a charter under Section 884.056 are filed with the
department, the commissioner shall approve or deny the charter
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. 14, eff. June 19, 2009.
Sec. 884.058. EXAMINATION AFTER DETERMINATION. After making a
determination on an application under Section 884.057, the
commissioner shall immediately make or cause to be made a full
and thorough examination of the company. The company shall pay
for the examination.
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. 15, eff. June 19, 2009.
Sec. 884.059. ACTION ON APPLICATION. (a) In considering the
application, the commissioner, not later than the 30th day after
the date on which a hearing under Section 884.058 is completed,
shall determine if:
(1) the minimum capital and surplus required by Section 884.054
are the bona fide property of the stipulated premium 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 by an affirmative finding any
of the issues under Subsection (a) adversely to the applicants,
the commissioner shall reject the application in writing, giving
the reason for the rejection. An application may not be granted
unless it is adequately supported by competent evidence.
(c) If the commissioner does not reject the application under
Subsection (b), the commissioner shall approve the application
and on receipt of a fee in the amount determined under Chapter
202 shall provide to the incorporators a certified copy of the
application, articles of incorporation, and submitted affidavit.
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.078, eff. April 1, 2009.
Sec. 884.060. BEGINNING OF CORPORATE EXISTENCE. On receipt of
the certified copy of documents under Section 884.059(c), the
stipulated premium company becomes a body politic and corporate
and the incorporators may complete organization of the company
under Section 884.061.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.061. ORGANIZATIONAL MEETING. (a) After receipt of the
certified copy of documents under Section 884.059(c), the
incorporators shall promptly call a meeting of the stipulated
premium company's shareholders. The shareholders shall:
(1) adopt bylaws to govern the company; and
(2) elect the company's initial board of directors.
(b) The directors elected under this section serve until
directors are first elected under Section 884.153.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 884.101. SCHEDULE OF ASSETS. Two or more officers of the
stipulated premium company shall execute and file with the
department:
(1) a sworn schedule of each of the assets of the company
exhibited to the department during the examination under Section
884.057 showing the value of the assets; and
(2) a sworn statement that the assets are bona fide, are the
unconditional and unencumbered property of the company, and are
worth the amount stated in the schedule.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.102. TEMPORARY CERTIFICATE OF AUTHORITY. (a) If the
commissioner makes a determination favorable to the applicants on
all issues under Section 884.059(a), the department, on
compliance with the requirements of Section 884.101, shall
promptly issue to the company a temporary certificate of
authority. The temporary certificate must limit the activities of
the company solely to negotiating and obtaining a direct
reinsurance agreement, as described by Subchapter L, with a
company that on August 28, 1961, was chartered and doing business
under former Chapter 14 of this code.
(b) A temporary certificate of authority expires on the first
anniversary of its date of issuance unless the department renews
it for an additional one-year period.
(c) On the expiration of a temporary certificate of authority
the incorporators of the stipulated premium company to which the
certificate was issued shall promptly surrender the company's
charter to the department for cancellation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.103. REGULAR CERTIFICATE OF AUTHORITY. (a) If a
direct reinsurance agreement described by Section 884.102(a) is
entered into while the temporary certificate of authority is
valid, the department shall promptly issue to the stipulated
premium company a regular certificate of authority to transact
the business of insurance in this state in accordance with
Subchapter L.
(b) The regular certificate of authority shall provide for the
kind of insurance business that the stipulated premium company
may conduct. If the other party to the agreement conducts the
business of life insurance or is a burial association, the
stipulated premium company is entitled to write life insurance
policies under this chapter. If the other party is permitted
under its charter to write accident insurance, health and
accident insurance, or life, health, and accident insurance, the
stipulated premium company is entitled to write that kind of
insurance.
(c) If a stipulated premium company that holds a regular
certificate of authority enters into a direct reinsurance
agreement with another company engaged in business under Chapter
887 or 888, the stipulated premium company's certificate of
authority shall be amended to authorize the writing of any kind
of insurance authorized for the other company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER D. MANAGEMENT OF STIPULATED PREMIUM COMPANY
Sec. 884.151. CONDUCTING SHAREHOLDERS' MEETING. (a) At a
meeting of a stipulated premium company's shareholders, each
shareholder is entitled to one vote for each fully paid share of
stock appearing in the shareholder's name on the company's books.
(b) A shareholder may vote in person or by written proxy.
(c) At a shareholders' meeting, a quorum is any number of
shareholders whose cumulative stock ownership in the stipulated
premium company represents a majority of the company's paid up
capital stock.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.152. BOARD OF DIRECTORS. (a) Subject to the bylaws of
the stipulated premium company, as adopted or amended by the
shareholders or directors, the board of directors has full
management and control of the company.
(b) The board consists of not fewer than five directors.
(c) The directors shall keep a full and correct record of the
board's transactions. The shareholders may inspect those records
during business hours.
(d) The directors shall fill a vacancy that occurs on the board
or in any office of the company.
(e) A majority of the board is a quorum.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.153. ELECTION OF DIRECTORS. (a) On the second Tuesday
of April of each year the shareholders of a stipulated premium
company shall meet at the company's home office and shall elect
the company's board of directors to serve one-year terms
beginning immediately after the election.
(b) If the shareholders do not elect directors at that meeting,
the shareholders may elect the directors at a special
shareholders' meeting called for that purpose.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.154. OFFICERS. (a) A stipulated premium company's
directors shall choose one of the directors to serve as the
company's president.
(b) Other officers of the stipulated premium company shall be
chosen in accordance with the bylaws of the company. An officer
other than the president is not required to be a director or a
shareholder unless such a qualification is required by the
company's bylaws.
(c) The duties and compensation of a stipulated premium
company's officers are as stated in the company's bylaws. If the
bylaws do not state the duties or compensation of the officers,
the directors shall establish the duties or compensation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.155. AMENDMENT OF CHARTER OR ARTICLES. (a) The
shareholders of a stipulated premium company by resolution may
amend the company's charter or articles of incorporation at any
shareholders' meeting.
(b) The amendment and a copy of the resolution certified by the
president and secretary of the stipulated premium company shall
be filed and recorded in the same manner as the charter.
(c) An amendment of the charter or articles takes effect when it
is recorded.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER E. CAPITAL AND SURPLUS
Sec. 884.201. FORM OF CAPITAL AND SURPLUS. After a charter is
granted under this chapter, the stipulated premium company:
(1) shall maintain the company's minimum capital at all times in
a form described by Section 884.054(d); and
(2) may invest the company's surplus as provided by Sections
425.203-425.228.
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.079, eff. April 1, 2009.
Sec. 884.202. INCREASE OR DECREASE OF CAPITAL STOCK. (a) At
any shareholders' meeting, shareholders of a stipulated premium
company whose cumulative stock ownership represents a majority of
the capital stock of the company by resolution may increase or
decrease the amount of the company's capital stock subject to
this section.
(b) Capital stock may be decreased to an amount that is less
than $200,000 only to avoid insolvency as provided by Section
884.205.
(c) Two officers of the stipulated premium company must sign and
acknowledge a statement of the increase or decrease. The
acknowledged statement and a certified copy of the resolution
shall be filed and recorded in the same manner as the charter.
(d) For an increase or decrease of capital stock, the stipulated
premium company may require the return of the original
certificates evidencing the stock in exchange for new
certificates. An issuance of new certificates that results in a
transfer of stock is subject to Section 884.254.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1309, Sec. 2, eff. September 1, 2009.
Sec. 884.203. PUBLIC OFFERING OF CAPITAL STOCK. A stipulated
premium company may not make to the public an offering that is
subject to The Securities Act (Article 581-1 et seq., Vernon's
Texas Civil Statutes), of any of its capital stock before the
company possesses:
(1) capital in an amount of at least $100,000; and
(2) unencumbered surplus in an amount of at least $100,000.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.204. COMPANY'S REPURCHASE OF STOCK. (a) Subject to
Section 884.202, a stipulated premium company may purchase in the
name of the company outstanding shares of the company's capital
stock as provided by the Texas Business Corporation Act.
(b) A purchase of stock under this section is not considered an
investment and does not violate the provisions of this code
relating to eligible investments for a stipulated premium
company.
(c) A stipulated premium company that purchases stock under this
section shall file with the department not later than the 10th
day after the date of the purchase a statement that contains the
name of each shareholder from whom the shares were purchased and
the sum of money paid for those shares.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.205. IMPAIRMENT OF CAPITAL STOCK. (a) If, when
computing the liabilities of a stipulated premium company under
this chapter, one-third or more of the company's capital stock
becomes impaired, the company shall correct the impairment not
later than the 60th day after the date the company becomes
subject to this subsection by:
(1) reducing the company's capital stock;
(2) adjusting the premium rate if permitted by policy contract;
or
(3) both reducing capital stock and adjusting the premium rate.
(b) If, when computing a stipulated premium company's reserve
liability under this chapter, 50 percent or more of the company's
capital stock becomes impaired, the commissioner may apply to a
court for the appointment of a receiver to wind up the affairs of
the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1309, Sec. 3, eff. September 1, 2009.
Sec. 884.206. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND
SURPLUS AMOUNTS. (a) The commissioner by rule may require a
stipulated premium company that writes or assumes life insurance,
annuity contracts, or accident and health insurance for a risk to
one person in an amount that exceeds $10,000 to maintain capital
and surplus in amounts that exceed the minimum amounts required
by this chapter because of:
(1) the nature and kind of risks the company underwrites or
reinsures;
(2) the premium volume of risks the company underwrites or
reinsures;
(3) the composition, quality, duration, or liquidity of the
company's investment portfolio;
(4) fluctuations in the market value of securities the company
holds; or
(5) the adequacy of the company's reserves.
(b) A rule adopted under Subsection (a) must be designed to
ensure the financial solvency of a stipulated premium company for
the protection of policyholders and may not require that the
total admitted assets of a company exceed 106 percent of its
total liabilities.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.207. NEW BUSINESS PROHIBITED WHEN CAPITAL REQUIREMENTS
NOT SATISFIED. (a) A stipulated premium company may not write
new business in this state unless the company possesses the
minimum capital required under this chapter.
(b) A stipulated premium company subject to Section 884.205(a)
that does not correct the impairment on or before the date
provided by that subsection may not write new business in this
state after that date until the impairment is corrected.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER F. GENERAL POWERS AND DUTIES OF STIPULATED PREMIUM
COMPANY
Sec. 884.251. DEPOSIT OF COMPANY'S FUNDS. (a) A director,
member of a committee, officer, or clerk of a stipulated premium
company who has the duty of handling or investing the company's
funds shall deposit or invest those funds in the corporate name
of the company.
(b) An individual described by Subsection (a) may not:
(1) borrow the funds of the stipulated premium company;
(2) have an interest in any way in a loan, pledge, security, or
property of the company, except as shareholder; or
(3) 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 company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.252. PAYMENTS TO OFFICERS, DIRECTORS, AND EMPLOYEES.
(a) Unless first authorized by a vote of a stipulated premium
company's board of directors or a committee of the board that has
the duty of authorizing the payment, the company may not pay:
(1) any compensation or emolument to an officer or director of
the company; or
(2) compensation or emolument in an amount that exceeds $50,000
in any year to an individual, firm, or corporation that is not an
officer or director of the company.
(b) This section does not prevent a stipulated premium company
from contracting with its agents for the payment of renewal
commissions.
(c) The shareholders of a stipulated premium company may
authorize the creation of one or more plans for the payment of
pensions, retirement benefits, or group insurance for its
officers and employees. The shareholders may delegate to the
company's board of directors the power and duty to prepare,
effect, finally approve, administer, and amend a plan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.253. DIVIDENDS. (a) A stipulated premium company may
declare or pay a dividend to its shareholders only from the
profits made by the company, not including surplus from the sale
of stock.
(b) A stipulated premium company may not pay a dividend, other
than a stock dividend, unless:
(1) any deficiency reserve under Section 884.453 has been
eliminated; and
(2) the capital of the company is maintained in an amount of at
least $100,000.
(c) A stipulated premium company that complies with Subsection
(b) may pay cash dividends in accordance with Sections 403.001
and 403.052.
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.080, eff. April 1, 2009.
Sec. 884.254. TRANSFER OF STOCK. (a) A stipulated premium
company's shares of stock are transferable on the company's
books, in accordance with law and the bylaws of the company, by
the owner or the owner's authorized agent.
(b) Each person who becomes a shareholder by a transfer of
shares succeeds to all rights of the former holder of those
shares, by reason of that ownership.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.255. USE OF CERTAIN TERMS IN ADVERTISING. A stipulated
premium company may not use in its advertising or representation
of a policy the words "legal reserve company," "stock company,"
"old line legal reserve company," or words of similar meaning
that might lead the public to believe that a policy provides
nonforfeiture values.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.256. ANNUAL STATEMENT; FILING FEE. (a) Except as
provided by Section 884.406, not later than March 31 of each year
a stipulated premium company shall:
(1) prepare a statement showing the condition of the company on
December 31 of the preceding year; and
(2) deliver the statement to the department accompanied by a
filing fee in the amount determined under Chapter 202.
(b) The statement must be under the oath of two of the
stipulated premium company's officers and must show in detail:
(1) the character of the company's assets and liabilities on
December 31 of the preceding year;
(2) the amount and character of business transacted and money
received during the year and how money was spent during the year;
(3) the number and amount of the company's policies in force on
that date; and
(4) the total amount of the company's policies in force on that
date.
(c) For purposes of Subsection (b), an insured under a family
group policy to which Section 884.451(b) applies is accounted for
only if a reserve is required for that insured under that
section.
(d) The department shall prescribe the form of the statement.
(e) Fees collected under this section shall be deposited to the
credit of the Texas Department of Insurance operating account.
Sections 201.001 and 201.002 apply to fees collected under this
section.
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.081, eff. April 1, 2009.
SUBCHAPTER G. POWERS AND DUTIES RELATING TO COVERAGES
Sec. 884.301. REINSURANCE OF POLICY. (a) A stipulated premium
company may reinsure on an individual indemnity policy basis any
risk or part of a risk that the company underwrites or assumes.
(b) The reinsurer must be a legal reserve company that:
(1) is authorized to write life, health, and accident insurance
in this state; and
(2) has capital and surplus in an amount of at least $200,000.
(c) After reinsuring under Subsection (a), a stipulated premium
company may take a credit for the reinsurance against the
aggregate reserves required by Subchapter J.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.302. LIMITS ON LIFE INSURANCE. (a) Until the amount
of the surplus of a stipulated premium company is at least
$50,000, the company may not insure one life for more than $1,000
in the event of death from natural causes or more than $2,000 in
the event of death from accidental causes, unless the company
reinsures the amount of coverage greater than that applicable
amount under Section 884.301.
(b) Subsection (a) does not apply to a policy of insurance
assumed by a stipulated premium company under Subchapter L.
(c) If the amount of the surplus of a stipulated premium company
is at least $50,000 but less than $200,000, the company shall
reinsure the insurance amount that exceeds $15,000 on a life
insurance risk on one life.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.303. ISSUANCE OF LIFE INSURANCE POLICIES BY CERTAIN
COMPANIES. (a) A stipulated premium company that possesses
capital and unencumbered surplus in a combined amount of at least
$100,000 may issue life insurance policies as authorized for a
company operating under Chapter 841.
(b) A stipulated premium company may not insure one life under
this section for more than $25,000, except as provided by Section
884.304 or Subchapter I.
(c) A stipulated premium company may issue a policy under this
section only on an endowment or limited pay basis.
(d) A stipulated premium company must reserve and reinsure a
policy issued under this section as required for a company
operating under Chapter 841.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1309, Sec. 4, eff. September 1, 2009.
Sec. 884.304. LIFE INSURANCE OF MORE THAN $25,000. (a) Except
as provided by this section, a stipulated premium company may not
assume liability on a life insurance risk on one life in an
amount that exceeds $25,000.
(b) If a stipulated premium company assumes a life insurance
risk under a life insurance policy, the initial death benefit of
$25,000 or less may increase to an amount greater than $25,000
subject to this section.
(c) For each policy year of a policy for which, after issuance,
the death benefit exceeds $25,000, the amount of the increase of
the death benefit at the end of that policy year from the end of
the preceding policy year may not exceed the greater of:
(1) the amount computed using the maximum rate of increase
provided by the policy, which rate may not exceed five percent a
year, compounded annually; or
(2) the amount computed using the consumer price index for all
urban consumers for all items and for all regions of the United
States combined, as determined by the United States Department of
Labor, Bureau of Labor Statistics, on September 30 of the year
preceding the year in which the policy year ends, compounded
annually.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1309, Sec. 5, eff. September 1, 2009.
Sec. 884.305. PREMIUMS ON LIFE INSURANCE POLICIES. The premiums
charged on a life insurance policy issued by a stipulated premium
company may not be less than the renewal net premium computed
under the reserve standard adopted by the stipulated premium
company and approved by the department.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.306. LIFE INSURANCE CONTRACT. A life insurance policy
issued by a stipulated premium company constitutes the entire
contract, except that if a copy of the application for the policy
is attached to the policy, the policy and application constitute
the entire contract.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.307. ISSUANCE OF ANNUITY CONTRACT. (a) A stipulated
premium company that possesses capital and unencumbered surplus
in a combined amount of at least $100,000 more than all of its
liabilities, including contingent liabilities, may issue annuity
contracts as authorized by Chapters 3 and 1701 and Title 7.
(b) The stipulated premium company shall maintain reserves on
the contracts in accordance with the statutes governing reserves
on equivalent contracts issued by a legal reserve company.
(c) A stipulated premium company that writes annuity contracts
under this section shall maintain capital and unencumbered
surplus in at least the combined amount required by Subsection
(a).
(d) A stipulated premium company that does not comply with
Subsection (c) is considered to be insolvent.
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.082, eff. April 1, 2009.
Sec. 884.308. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH INSURANCE
POLICIES. (a) A stipulated premium company may not assume
liability on or indemnify one person for any risk under one or
more accident, health, or hospitalization insurance policies, or
any combination of those policies in an amount that exceeds
$10,000, unless the amount of the issued, outstanding, and stated
capital of the company is at least $700,000.
(b) A stipulated premium company that before January 1, 2002,
ceases to assume liability on, or indemnify any risk under a
policy described by Subsection (a) in the amount specified by
Subsection (a), and notifies the commissioner of that action is
exempt from the requirements of Subsection (a) until the date the
company resumes writing those policies. A company that resumes
assuming liability on or indemnifying risks under these policies
shall comply with Subsections (a) and (c). For purposes of this
subsection, renewal of a policy is not considered to be writing a
policy.
(c) A stipulated premium company that is exempt under Subsection
(b) shall maintain its issued, outstanding, and stated capital in
an amount that is at least:
(1) $100,000, if the last date that the company writes a policy
described by Subsection (a) is before January 1, 1993;
(2) $160,000, if the last date that the company writes a policy
described by Subsection (a) is during 1993;
(3) $220,000, if the last date that the company writes a policy
described by Subsection (a) is during 1994;
(4) $280,000, if the last date that the company writes a policy
described by Subsection (a) is during 1995;
(5) $340,000, if the last date that the company writes a policy
described by Subsection (a) is during 1996;
(6) $400,000, if the last date that the company writes a policy
described by Subsection (a) is during 1997;
(7) $460,000, if the last date that the company writes a policy
described by Subsection (a) is during 1998;
(8) $520,000, if the last date that the company writes a policy
described by Subsection (a) is during 1999;
(9) $580,000, if the last date that the company writes a policy
described by Subsection (a) is during 2000; and
(10) $640,000, if the last date that the company writes a policy
described by Subsection (a) is during 2001.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.309. ADJUSTMENT OF PREMIUMS. (a) The board of
directors of a stipulated premium company by resolution may,
subject to this chapter, increase or otherwise adjust a rate of
premium on any insurance policy it issues, reinsures, or assumes
when, in the board's discretion, the adjustment is necessary.
(b) In making a comprehensive adjustment of one or more classes
of the stipulated premium company's policies, the board of
directors may provide that an insured who is required to pay an
increased premium may choose to pay a part or none of the amount
of the increase and receive a reduction of the corresponding
insurance benefits proportionate to the value of the unpaid part
of the increase.
(c) This section does not apply to a policy:
(1) issued by a stipulated premium company that on the date the
policy is issued possesses an unencumbered surplus in an amount
of at least $50,000;
(2) on which the stipulated premium company has relinquished the
right to adjust rates; and
(3) under which the premium for life insurance requires the
payment of a premium for life insurance that alone is sufficient
to maintain reserves at least equal to those computed on the
basis of the 1958 Commissioners Standard Ordinary Table of
Mortality with interest not to exceed 3-1/2 percent a year.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.310. AGENT. Each agent of a stipulated premium company
must be licensed under Title 13.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.221(a),
eff. Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.083, eff. April 1, 2009.
Sec. 884.311. LAW GOVERNING INVESTMENTS; ELECTION. (a) A
stipulated premium insurance company issuing life, health, or
accident coverages or maintaining policies in force that were
issued in accordance with Subchapter I may elect that the
company's investments and transactions be governed by Subchapter
C, Chapter 425.
(b) The election under Subsection (a) must be made by written
notice to the commissioner and is effective on the first day of
the calendar quarter following the day on which the notice is
filed with the commissioner.
(c) After the second anniversary of the effective date of an
initial election authorized by this section, the stipulated
premium insurance company may elect that the company's
investments and transactions be governed by Sections
425.203-425.228.
(d) The subsequent election under Subsection (c) must be made by
written notice to the commissioner and is effective on the first
day of the calendar quarter following the day on which the notice
is filed with the commissioner.
(e) After a stipulated premium insurance company has made a
subsequent election under Subsection (c), the company may make
another election under this section, subject to the approval of
the election by the commissioner.
Added by Acts 2003, 78th Leg., ch. 487, Sec. 1, eff. Sept. 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.084, eff. April 1, 2009.
SUBCHAPTER H. CONTENTS OF APPLICATIONS AND POLICIES
Sec. 884.351. GENERAL REQUIREMENTS FOR POLICY AND APPLICATION
FORMS. (a) Each stipulated premium company policy or
application form must contain on its face immediately after the
name of the company "A Stipulated Premium Company."
(b) A stipulated premium company shall provide for an adjustment
of the premium rate on the insurance contract in each insurance
policy it issues, reinsures, or assumes that is subject to a
premium adjustment under Section 884.309. Each policy subject to
a premium adjustment under that section must contain on the front
of the policy a statement that the premium is subject to
readjustment.
(c) A stipulated premium company's policy of insurance may not
contain "Approved by the Commissioner of Insurance" or words of a
similar meaning.
(d) A life insurance policy issued by a stipulated premium
company or an application for the policy may not contain language
or be in a form that misleads the policyholder or applicant about
the kind of insurance offered or the rights or benefits of the
policyholder or applicant.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.352. REQUIREMENTS FOR ACCIDENT, HEALTH, AND
HOSPITALIZATION INSURANCE POLICIES. An accident, health, or
hospitalization insurance policy issued, reinsured, or assumed by
a stipulated premium company must contain a premium
redetermination clause that permits the company's board of
directors to adjust the premium rate.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.353. LIFE INSURANCE APPLICATION FORMS. (a) An
application for a life insurance policy issued by a stipulated
premium company must be signed by the applicant. If the applicant
is a minor, the application may be signed by a parent or
guardian.
(b) The application for a policy that provides that a
misstatement relating to the applicant's health or physical
condition may void the policy within the contestable period must
state that provision in language approved by the department. The
statement must be in not less than 10-point type.
(c) In the absence of fraud each statement in an application is
regarded as a representation and not a warranty.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.354. LIFE INSURANCE POLICY FORMS; INCONTESTABILITY.
(a) Each life insurance policy issued by a stipulated premium
company must state on the front page:
(1) the amount of death benefit to be paid; and
(2) the circumstances or conditions under which the benefit is
to be paid.
(b) Each condition of a life insurance policy must be stated in
the policy.
(c) A life insurance policy must provide that a policy in force
for two years becomes incontestable, except for nonpayment of
premiums, on the second anniversary of the date of issuance, if
the insured does not die before that date.
(d) A life insurance policy must provide that if the age of the
insured is misstated, the amount of insurance is the amount that
the premium paid would have purchased if the age had been stated
correctly, based on premium rates in effect when the insured
dies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.355. DESIGNATION OF BENEFICIARIES. The designation of
a beneficiary under a life insurance policy issued by a
stipulated premium company must comply with Subchapter B, Chapter
1103, and Subchapter A, Chapter 1104.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.356. LIFE INSURANCE BENEFIT REDUCTIONS OR INCREASES.
(a) A life insurance policy may provide for reduced benefits if
the insured:
(1) dies or is injured while engaged in:
(A) military, naval, or aerial service or aerial flight during
peace or war; or
(B) a hazardous occupation specified in the policy; or
(2) dies by the insured's own hand, regardless of whether the
insured is sane or insane.
(b) The front page of a life insurance policy must call
attention to any reduction or exclusion of benefits provided by
the policy. The circumstances or conditions under which the
reduction or exclusion applies must be stated plainly in the
policy.
(c) If a policy that provides natural death benefits contains a
provision for reducing the greatest death benefit provided by the
policy for a specified insured for a reason other than a reason
specified by Subsection (a):
(1) the reduced death benefit for the insured must at all times
when the reduction is in effect equal or exceed 120 percent of
the total premium paid on that policy by the insured; and
(2) the reduction must end before the fifth anniversary of the
date the policy is issued.
(d) Subsection (c) does not apply to a life insurance policy on
which the reduction of the death benefit does not apply at the
time of the death of the insured.
(e) If a life insurance policy provides for an increase of the
initial amount of the death benefit for a specified insured one
or more times during the first five years of the policy, the
amount of death benefit for the insured must at all times during
the period of the increasing benefit equal at least 120 percent
of the premiums paid on that policy by the insured during the
period of the increase.
(f) Subsection (e) does not apply to a life insurance policy
that has been in force for more than five years from the date the
policy is issued.
(g) This section does not apply to a family group life insurance
policy described by Section 884.451(b).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.357. FORM APPROVAL. The approval of a form of an
insurance policy issued by a stipulated premium company is
governed by Chapter 1701.
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.085, eff. April 1, 2009.
SUBCHAPTER I. AUTHORITY TO ISSUE OTHER COVERAGE
Sec. 884.401. AUTHORITY CUMULATIVE. The authority provided by
this subchapter is in addition to the authority provided by this
chapter for the issuance of other insurance coverage.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.402. ADDITIONAL COVERAGE. A stipulated premium company
that, at the time it begins to issue coverages under this
subchapter, possesses the amounts of capital and unencumbered
surplus equal to or greater than the corresponding amounts
required for organization of a life and health company under
Sections 841.052, 841.054, 841.204, 841.205, 841.301, and 841.302
may, subject to Section 884.403:
(1) issue any kind of life insurance coverage authorized by
Chapter 3, 841, or 1701 or Title 7;
(2) issue any kind of health or accident insurance coverage
authorized by:
(A) Title 7;
(B) Chapter 3, 704, 841, 846, 982, 1201, 1202, 1203, 1210, 1251,
1252, 1253, 1254, 1301, 1351, 1354, 1359, 1364, 1368, 1501, 1504,
1505, 1506, 1552, 1575, 1576, 1579, 1581, 1625, 1651, 1652, or
1701;
(C) Chapter 492, other than Sections 492.051(b) and (c);
(D) Subchapter B, Chapter 38, Subchapter D, Chapter 425,
Subchapter A or F, Chapter 1204, Subchapter A, Chapter 1273,
Subchapter A, B, or D, Chapter 1355, Subchapter A, Chapter 1366,
Subchapter A, Chapter 1507;
(E) Section 1204.151, 1204.153, 1204.154, or 1451.051; or
(F) Chapter 177, Local Government Code; or
(3) issue life insurance coverage through policies without cash
surrender values or nonforfeiture values and that exceed $10,000
on one life.
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.086, eff. April 1, 2009.
Sec. 884.403. POLICY REQUIREMENTS. (a) A policy issued under
Section 884. 402(1) or (2) must be reserved and must comply with
the law, including rules, applicable to a policy issued by a
company authorized to engage in or engaging in the business of
insurance under Chapter 841.
(b) A policy of life insurance issued under Section 884.402(3):
(1) must be reserved in accordance with a reserve table adopted
by the department as appropriate for that type of policy;
(2) must contain:
(A) on its first page, a notice that the policy does not provide
cash surrender values or other paid up nonforfeiture benefits or
loan values; and
(B) provisions for a grace period for the payment of each
premium after the first payment during which the policy remains
in force; and
(3) may not be approved until the commissioner has adopted the
standard of valuation, including an appropriate mortality table
and interest rate.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.404. CAPITAL AND SURPLUS REQUIREMENTS. (a) A
stipulated premium company that issues any insurance coverage
under this subchapter shall maintain at all times the capital and
unencumbered surplus required under Section 884.054.
(b) A stipulated premium company that does not comply with this
section is considered to be impaired unless it reinsures all
insurance coverages written under this subchapter with a company
that:
(1) is authorized to engage in the business of insurance in this
state under this chapter or Chapter 841 or 882 or is an accident
insurance company, health insurance company, or life insurance
company authorized to engage in the business of insurance in this
state under Chapter 982, as appropriate; and
(2) complies with the requirements prescribed by this
subchapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1309, Sec. 6, eff. September 1, 2009.
Sec. 884.405. AGENT; LICENSE. (a) An agent may not solicit or
write any coverage authorized by this subchapter unless the
agent:
(1) holds a license issued under Chapter 4054; and
(2) is appointed by the stipulated premium company for which the
agent is soliciting and writing coverage under this subchapter.
(b) The commissioner may issue under Chapter 4054 a license for
an agent to solicit and write any coverage authorized by this
subchapter for a stipulated premium company. Chapter 4054
applies to the stipulated premium company as if the company were
a legal reserve life insurance company.
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.087, eff. April 1, 2009.
Sec. 884.406. ANNUAL STATEMENT. A stipulated premium company
that issues or maintains in force policies under this subchapter
shall file the annual statement required by Section 884.256 not
later than March 1 of each year.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.407. RELATIONSHIP OF SUBCHAPTER TO OTHER PROVISIONS OF
CHAPTER. (a) Section 884.305 and Subchapter J do not apply to a
policy issued under this subchapter.
(b) The provisions of Sections 884.309 and 884.351 relating to
the adjustment of premiums do not apply to a life insurance
policy issued under this subchapter.
(c) The department may not consider losses sustained by a
stipulated premium company on a policy issued under this
subchapter when applying Section 884.206 or 884.308 to the
company's life insurance policies not issued under this
subchapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.408. IMPLEMENTATION OF SUBCHAPTER. The commissioner
shall adopt reasonable rules to implement this subchapter,
including:
(1) rules adopting mortality and reserving tables required by
Sections 884.403(b)(1) and (3); and
(2) reasonable and necessary rules for the content, form, and
style of the notice and terms of the grace period required under
Section 884.403(b)(2).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER J. RESERVES
Sec. 884.451. RESERVES ON INDIVIDUAL AND GROUP LIFE INSURANCE
POLICIES. (a) A stipulated premium company shall maintain
reserves on each of its individual life insurance policies in
accordance with the reserve standard adopted by the company and
approved by the department. The standard must provide reserves
that in the aggregate are equal to at least the reserve amounts
computed using the 1956 Chamberlain Reserve Table with interest
that does not exceed 3-1/2 percent per year. A stipulated premium
company may use the 1956 Chamberlain Reserve Table.
(b) A stipulated premium company shall maintain reserves on
family group life insurance policies on which a group premium is
charged and under which the amount of a benefit depends on the
sequence of deaths. The amount of the reserves must be equal to
the reserves that would be required under Subsection (a) on
individual life insurance policies on the lives of:
(1) the two oldest living members of the family group, with the
amount of insurance for those two members determined assuming
that the elder of the two will die first; or
(2) the living members of the family group, with the amount of
insurance for each member of the family group determined assuming
that each member will die first.
(c) A stipulated premium company may select the method to be
used to compute the amount of the reserves under Subsection (b).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.452. RESERVES ON ACCIDENT AND HEALTH INSURANCE
POLICIES. A stipulated premium company shall maintain reserves
on each accident and health insurance policy issued by the
company in the manner required of a company authorized to issue
that type of policy under Chapter 841.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.453. DEFICIENCY RESERVE. (a) On the effective date of
a direct reinsurance agreement under Subchapter L, the stipulated
premium company shall compute:
(1) the amount of the reserves required under this chapter on
the policies assumed under the agreement; and
(2) the amount of the net assets transferred to the stipulated
premium company under the agreement.
(b) If the amount of the net assets transferred is not equal to
the amount of the required reserve, the difference shall be
designated and carried as a deficiency reserve. The deficiency
reserve does not create insolvency of the stipulated premium
company if the company, beginning with the first calendar year
that begins after the effective date of the direct reinsurance
agreement, reduces the computed deficiency amount, including
interest at the assumed rate, by at least 10 percent during each
year as computed on December 31 of that year. The reduction must
result in the deficiency reserve being eliminated on December 31
of the year for which the 11th annual statement is filed after
the company enters into the direct reinsurance agreement. The
required reduction in the deficiency reserve may not exceed the
cumulative aggregate amount of 10 percent a year.
(c) If in any year a stipulated premium company has not reduced
its deficiency reserve as required by Subsection (b), the
company's board of directors by appropriate action shall increase
premium rates by advancing the age of each insured at the date
the insured's policy is issued or otherwise equitably adjust
premium rates to correct that failure. The board shall take that
action not later than the 30th day after the date the reserves
are computed.
(d) If the board does not comply with Subsection (c), the
stipulated premium company is considered to be insolvent for
purposes of this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.454. COMMISSIONER'S COMPUTATION OF RESERVE LIABILITY.
(a) As soon as practical each year, the department shall compute
the reserve liability of each stipulated premium company that has
outstanding insurance policies.
(b) To make the computations, the department:
(1) shall use the net premium basis in accordance with the
reserve table and interest rate adopted by the stipulated premium
company and approved by the commissioner; and
(2) may use group methods and approximate averages for fractions
of a year.
(c) The reserve liability may be computed on not more than a
one-year preliminary term with allowance for any deficiency
reserve under Section 884.453.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.455. REQUIRED SECURITIES. The commissioner shall
require that a stipulated premium company have securities of the
class and character required by Sections 425.203-425.228 in the
amount of the reserve liability computed for the company under
Section 884.454 less any deficiency reserve under Section 884.453
after all the debts and claims against the company and the
minimum capital required by this chapter have been applied.
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.088, eff. April 1, 2009.
Sec. 884.456. INCREASE OF RESERVES. (a) If a stipulated
premium company does not have the reserves required by this
subchapter and the minimum capital required under this chapter,
the company's board of directors by appropriate action shall
increase premium rates on policies in force by advancing the age
of each insured at the date the insured's policy is issued or
otherwise equitably adjust premium rates to correct the reserve
inadequacy. The board shall take that action not later than the
30th day after the date the reserves are computed.
(b) If the board of directors does not comply with Subsection
(a), the stipulated premium company is treated as if the company
had not corrected an impairment under Section 884.205(a).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER K. DIRECT REINSURANCE AGREEMENTS
Sec. 884.501. DIRECT REINSURANCE AGREEMENTS BETWEEN STIPULATED
PREMIUM COMPANIES. (a) Stipulated premium companies organized
under this chapter may enter into a total or partial direct
reinsurance agreement if the company assuming the policies under
the agreement is authorized to transact the kinds of insurance
provided by those policies.
(b) Before a stipulated premium company may enter into a total
direct reinsurance agreement:
(1) the company must submit the agreement to the department; and
(2) the department must approve the agreement as fully
protecting the interests of all the holders of policies being
assumed.
(c) A partial direct reinsurance agreement shall be filed with
the department before the effective date of the agreement.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.502. DIRECT REINSURANCE AGREEMENT WITH LEGAL RESERVE
COMPANY. (a) A stipulated premium company may enter into a
total or partial direct reinsurance agreement with a legal
reserve life insurance company authorized to engage in the
business of insurance in this state.
(b) Before a reinsurance agreement under this section may take
effect, it must be:
(1) approved by a majority vote of the board of directors of
each company;
(2) submitted to the department; and
(3) approved by the department as complying with Section 884.503
or 884.504, as applicable.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.503. DIRECT REINSURANCE OF ACCIDENT OR HEALTH INSURANCE
POLICIES. (a) In the direct reinsurance of a stipulated premium
accident or health insurance policy under Section 884.502, the
company assuming the policy under the agreement must assume the
exact obligations of the policy.
(b) If a policy is non-cancellable or guaranteed renewable, the
assuming company may include in the assumption certificate a
premium redetermination clause instead of the clause required by
Section 884.352.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 884.504. DIRECT REINSURANCE OF CERTAIN POLICIES. (a) A
reinsurance agreement authorized by Section 884.502 for the
direct reinsurance of life insurance policies or a combination of
life and accident or health insurance policies must contain
provisions that comply with this section.
(b) If the legal reserve life insurance co