(a) In this section, “affiliate” means, with respect to a person, another person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the person.
(b) Subject to Subsections (c)-(g), an insurance company may acquire investments in an investment pool that invests only in:
(1) obligations that have a rating by the securities valuation office of one or two, or an equivalent rating issued by a nationally recognized statistical rating organization recognized by the securities valuation office, or that are issued by an issuer with outstanding obligations that have a securities valuation office one or two rating or an equivalent rating described by this subdivision, and that:
(A) have a remaining maturity of 397 days or less or a put that:
(i) entitles the holder to receive the principal amount of the obligation; and
(ii) may be exercised through maturity at specified intervals not exceeding 397 days; or
(B) have a remaining maturity of three years or less and a floating interest rate that resets at least quarterly on the basis of a current short-term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate, or commercial paper) and is not subject to a maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
(2) securities lending, repurchase, and reverse repurchase transactions that meet the requirements of § 425.121 and any applicable department rules;
(3) money market funds as authorized by § 425.123, except that a short-term investment pool may not acquire investments in a single business entity that exceed 10 percent of the total assets of the pool; or
(4) investments that an insurance company may make under this subchapter, if:
(A) the company’s proportionate interest in the amount invested in those investments does not exceed the limits of this subchapter; and
(B) the aggregate amount of the company’s investments in all investment pools under this subdivision does not exceed 25 percent of the company’s assets.

(c) An insurance company may not acquire an investment in an investment pool under Subsection (b) if, after making the investment, the aggregate amount of the company’s investments in all investment pools would exceed 35 percent of the company’s assets.
(d) For an investment in an investment pool to be qualified under this section, the pool may not:
(1) acquire securities issued, assumed, guaranteed, or insured by an investing insurer or an affiliate of the investing insurance company; or
(2) borrow or incur an indebtedness for borrowed money, except for securities lending and reverse repurchase transactions.
(e) For an investment pool to be qualified under this section:
(1) the pool manager must:
(A) be organized under the laws of the United States or a state and designated as the pool manager in a pooling agreement; or
(B) be:
(i) the investing insurance company, an affiliated insurance company, a business entity affiliated with the investing company, a custodian bank, a business entity registered under the Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 et seq.), as amended;
(ii) in the case of a reciprocal or interinsurance exchange, the exchange’s attorney-in-fact; or
(iii) in the case of a United States branch of an alien insurance company, the United States manager or an affiliate or subsidiary of the United States manager;
(2) the pool manager or an entity designated by the pool manager of the type described by Subdivision (1)(B) must maintain:
(A) detailed accounting records showing:
(i) the cash receipts and disbursements reflecting each participant’s proportionate investment in the pool; and
(ii) a complete description of all the pool’s underlying assets, including the amount, interest rate, maturity date, if any, and other appropriate designations; and
(B) other records that, on a daily basis, allow a third party to verify each participant’s investments in the pool; and
(3) the assets of the pool must be held in one or more accounts, in the name or on behalf of the pool, at the principal office of the pool manager or under a custody agreement or trust agreement with a custodian bank, provided that the agreement:
(A) states and recognizes the claims and rights of each participant;
(B) acknowledges that the pool’s underlying assets are held solely for the benefit of each participant in proportion to the aggregate amount of the participant’s investments in the pool; and
(C) contains an agreement that the pool’s underlying assets may not be commingled with the general assets of the custodian bank or any other person.
(f) The pooling agreement for each investment pool must be in writing and must provide that:
(1) 100 percent of the interests in the pool must be held at all times by the insurance company, the company’s subsidiaries or affiliates, or, in the case of a United States branch of an alien insurance company, the affiliates or subsidiaries of the United States manager, and any unaffiliated insurance company;
(2) the pool’s underlying assets may not be commingled with the general assets of the pool manager or any other person;
(3) in proportion to the aggregate amount of each pool participant’s interest in the pool:
(A) each participant owns an undivided interest in the pool’s underlying assets; and
(B) the pool’s underlying assets are held solely for the benefit of each participant;
(4) a participant, or, in the event of the participant’s insolvency, bankruptcy, or receivership, the participant’s trustee, receiver, conservator, or other successor in interest, may withdraw all or part of the participant’s investment from the pool under the terms of the pooling agreement;
(5) a withdrawal may be made on demand without penalty or other assessment on any business day, and settlement of funds must occur within a reasonable and customary period after the withdrawal, except that:
(A) in the case of publicly traded securities, the settlement period may not exceed five business days; and
(B) in the case of securities and investments other than publicly traded securities, the settlement period may not exceed 10 business days;
(6) the amount of a distribution under Subdivision (5) must be computed after subtracting all the pool’s applicable fees and expenses;
(7) the pool manager shall distribute to a participant, at the manager’s discretion:
(A) in cash, an amount that represents the fair market value of the participant’s pro rata share of each of the pool’s underlying assets;
(B) in kind, an amount that represents a pro rata share of each underlying asset; or
(C) in a combination of cash and in-kind distributions, an amount that represents a pro rata share in each underlying asset; and
(8) the pool manager shall make the records of the pool available for inspection by the commissioner.
(g) An investment in an investment pool is not considered to be an affiliate transaction under Subchapter C, Chapter 823, but each pooling agreement is subject to the standards of § 823.101 and the reporting requirements of § 823.052.