Texas Insurance Code 425.224 – Authorized Investments for Capital, Surplus, and Contingency Funds: Loans Secured by Corporate Stock
(a) Subject to this section, an insurer may loan the insurer’s capital, surplus, and contingency funds and take as collateral the capital stock, bonds, bills of exchange, or other commercial notes or bills or the securities of:
(1) a solvent corporation that has not defaulted in the payment of any debt during the five years preceding the investment; or
(2) a solvent corporation that has not been in existence for the five years preceding the investment, if:
(A) the corporation has succeeded to the business and assets and has assumed the liabilities of another corporation; and
(B) neither the successor corporation nor the corporation succeeded has defaulted in the payment of any debt during the five years preceding the investment.
(b) Subject to this section, an insurer may loan the insurer’s capital, surplus, and contingency funds and take as collateral the bonds or notes of an educational or religious corporation that has provided for the payment of a sufficient amount of the first weekly or monthly revenues of the corporation to an interest and sinking fund account in a bank or trust company as an independent paying agent.
Terms Used In Texas Insurance Code 425.224
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Continuance: Putting off of a hearing ot trial until a later time.
- 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.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
(c) The market value of the stock, bills of exchange, other commercial notes or bills, or securities must be at all times during the continuance of the loan at least 50 percent more than the amount loaned on the securities or obligations.
(d) An insurer may not take as collateral for any loan:
(1) the insurer’s capital stock;
(2) the stock of a single corporation in an amount that exceeds 10 percent of the amount of the insurer’s own capital, surplus, and contingency funds;
(3) the stock of a manufacturing corporation with a net worth of less than $25,000;
(4) the stock of an oil corporation with a net worth of less than $500,000; or
(5) any stock, the holder or owner of which is or may become liable for any assessment other than taxes.