Texas Insurance Code 425.222 – Authorized Investments for Capital, Surplus, and Contingency Funds: Life Income Interests in Qualified Trusts
(a) Subject to this section, an insurer may invest the insurer’s capital, surplus, and contingency funds in a life income interest in a qualified irrevocable express testamentary trust.
(b) For purposes of this section, a trust is a qualified trust if:
(1) each fee simple recipient of any part of the corpus of the trust:
(A) is a public charity, church, educational institution, or scientific institution;
(B) is located in this state; and
(C) is recognized by the United States Internal Revenue Service as exempt from payment of income taxes;
(2) the corpus of the trust is wholly or partly composed of interests in real estate, stocks, bonds, debentures, and other securities of an aggregate total value of at least $5 million; and
(3) the corpus of the trust produces annual income of at least $100,000.
Terms Used In Texas Insurance Code 425.222
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Charity: An agency, institution, or organization in existence and operating for the benefit of an indefinite number of persons and conducted for educational, religious, scientific, medical, or other beneficent purposes.
- 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.
- Fee simple: Absolute title to property with no limitations or restrictions regarding the person who may inherit it.
- Property: means real and personal property. See Texas Government Code 311.005
- United States: includes a department, bureau, or other agency of the United States of America. See Texas Government Code 311.005
(c) An insurer’s life income interest in a qualified trust may not exceed 10 percent of the insurer’s admitted assets.
(d) Before an insurer may acquire a life income interest in a qualified trust, the insurer must present evidence satisfactory to the commissioner that shows:
(1) the interest is subject to transfer and is recognized as transferable;
(2) the interest is capable of reasonable valuation;
(3) a market for the sale of the interest exists; and
(4) the interest is supported by life insurance in:
(A) an amount not less than the admitted value of the interest; and
(B) a form approved by the commissioner.
(e) In valuing a life income interest in a qualified trust on the insurer’s books, the insurer may value the interest only on the basis of the lesser of:
(1) the recognized market established in accordance with Subsection (d)(3); or
(2) the ratio that the fractional life income interest in the income of the trust bears to the total market value of the properties held by the trust that are of a type of property an insurer may lawfully acquire under the investment statutes of this state.