Texas Insurance Code 425.110 – Authorized Investments: Obligations of and Other Investments in Business Entities
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(a) In this section:
(1) “Business entity” includes a sole proprietorship, corporation, association, general or limited partnership, limited liability company, joint-stock company, joint venture, trust, or other form of business organization, regardless of whether organized for profit, that is organized under the laws of the United States, another state, Canada, or any district, province, or territory of Canada.
(2) “Counterparty exposure amount” has the meaning assigned by § 425.125.
(b) Subject to this section, an insurance company may invest in an obligation, including a bond or evidence of indebtedness, a participation in a bond or evidence of indebtedness, or an asset-backed security, that is issued, assumed, guaranteed, or insured by a business entity.
Terms Used In Texas Insurance Code 425.110
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- United States: includes a department, bureau, or other agency of the United States of America. See Texas Government Code 311.005
(c) An insurance company’s investments in the obligations or counterparty exposure amounts of a single business entity rated by the securities valuation office may not exceed 20 percent of the company’s statutory capital and surplus.
(d) An insurance company may not invest in an obligation, counterparty exposure amount, or preferred stock of a business entity if, after making the investment:
(1) the aggregate amount of those investments then held by the company that are rated 3, 4, 5, or 6 by the securities valuation office would exceed 20 percent of the company’s assets;
(2) the aggregate amount of those investments then held by the company that are rated 4, 5, or 6 by the securities valuation office would exceed 10 percent of the company’s assets;
(3) the aggregate amount of those investments then held by the company that are rated 5 or 6 by the securities valuation office would exceed three percent of the company’s assets; or
(4) the aggregate amount of those investments then held by the company that are rated 6 by the securities valuation office would exceed one percent of the company’s assets.
(e) If an insurance company attains or exceeds the limit of a rating category referred to in Subsection (d), the company is not precluded from acquiring investments in other rating categories subject to the specific and multiple category limits applicable to those investments.
(f) Notwithstanding Subsections (c)-(e), an insurance company may invest in an additional obligation of a business entity in which the company holds one or more obligations if the investment is made to protect an investment previously made in that business entity. Obligations invested in under this subsection may not exceed one-half percent of the company’s assets.
(g) This section does not prohibit an insurance company from investing in an obligation as a result of a restructuring of an already held obligation or preferred stock that is rated 3, 4, 5, or 6 by the securities valuation office.
(h) An insurance company shall include all counterparty exposure amounts in determining compliance with the limitations of this section.