CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES

CHAPTER 882. MUTUAL LIFE INSURANCE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 882.001. APPLICABILITY OF THIS CHAPTER AND OTHER LAW.

Except to the extent of any conflict with this chapter, a law

governing a company organized under Chapter 841 applies to a

mutual life insurance company organized under this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.002. EXAMINATION OF COMPANY. The following provisions

apply to a mutual life insurance company organized under this

chapter:

(1) Subchapter A, Chapter 86; and

(2) Sections 401.051, 401.052, 401.054-401.062, 401.151,

401.152, 401.155, and 401.156.

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.073, eff. April 1, 2009.

Sec. 882.003. ANNUAL STATEMENT. A mutual life insurance company

shall file an annual statement with the department.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER B. FORMATION AND STRUCTURE OF MUTUAL LIFE INSURANCE

COMPANY

Sec. 882.051. AUTHORITY TO FORM COMPANY; PURPOSE. A mutual life

insurance company may be formed under this chapter to insure the

lives of individuals on the mutual level premium and legal

reserve plan.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.052. FORMATION OF COMPANY; ARTICLES OF INCORPORATION.

(a) Nine or more persons who are residents of this state may

form a mutual life insurance company by executing and

acknowledging articles of incorporation for that purpose.

(b) The articles of incorporation of the proposed company must

state:

(1) the name and residence of each incorporator;

(2) the name of the company;

(3) the location of the company's principal office at which

company business is to be transacted;

(4) the number of directors;

(5) the name and residence of each initial director; and

(6) the amount of the company's unencumbered surplus.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.053. COMPANY'S NAME. (a) The name of a mutual life

insurance company must contain the words "Mutual Life Insurance

Company."

(b) A mutual life insurance 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. 882.054. INITIAL BOARD OF DIRECTORS; TERM. An initial

director named as provided in Section 882.052 serves until:

(1) the first annual election of directors;

(2) the initial director's successor qualifies for office; or

(3) the initial director is removed from the board for improper

practices.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.055. UNENCUMBERED SURPLUS REQUIREMENTS. A mutual life

insurance company must possess at the time of incorporation

unencumbered surplus in an amount of at least $200,000. The

unencumbered surplus may 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 25 percent of the unencumbered

surplus invested in first mortgage real estate loans.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.056. APPLICATION FOR CHARTER. (a) To obtain a charter

for a mutual life insurance company under this chapter, the

incorporators must pay the charter fee in the amount determined

under Chapter 202 and file with the department:

(1) an application for charter on the form and including the

information prescribed by the commissioner;

(2) the company's articles of incorporation; and

(3) an affidavit made by two or more of the incorporators that

states that:

(A) the unencumbered surplus requirements of Section 882.055 are

satisfied;

(B) the unencumbered 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 commissioner may require that the incorporators provide

at their expense additional evidence of a matter required in the

affidavit before the commissioner takes further action on the

application for the charter.

(c) The charter must state the name of each director who is to

serve until the first annual election.

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.074, eff. April 1, 2009.

Sec. 882.057. APPLICATION PROCESS. (a) After the charter fee

is paid and all items required for a charter under Section

882.056 are filed with the department, the commissioner shall

approve, deny, or disapprove the 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. 12, eff. June 19, 2009.

Sec. 882.058. ACTION ON APPLICATION. (a) In considering the

application, the commissioner shall determine if:

(1) the minimum unencumbered surplus required by Section 882.055

is the bona fide property of the mutual life insurance 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 that the applicant has not

met the standards set out by Subsection (a), the commissioner

shall deny the application in writing, giving the reason for the

denial. An application may not be granted unless it is

adequately supported by competent evidence.

(c) Repealed by Acts 2009, 81st Leg., R.S., Ch. 1022, Sec.

19(6), eff. June 19, 2009.

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. 13, eff. June 19, 2009.

Acts 2009, 81st Leg., R.S., Ch.

1022, Sec. 19(6), eff. June 19, 2009.

Sec. 882.059. EXAMINATION AFTER DETERMINATION. After making a

determination on an application under Section 882.058, the

commissioner shall immediately make or cause to be made a full

and thorough examination of the mutual life insurance company.

The company shall pay for the examination.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 882.101. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) After

the examination of a mutual life insurance company under Section

882.059, the commissioner shall issue a certificate of authority

to the company if the commissioner finds that:

(1) the company has complied with all applicable laws;

(2) the company satisfies the unencumbered surplus requirements

of Section 882.055; and

(3) the company's unencumbered surplus is in the custody of the

company's officers.

(b) A certificate of authority issued under this section

authorizes the company to engage in the business of life, health,

or accident insurance in this state as may be specified in the

company's charter or charter application.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER D. MANAGEMENT OF MUTUAL LIFE INSURANCE COMPANY

Sec. 882.151. BOARD OF DIRECTORS. (a) The board of directors

of a mutual life insurance company controls the business of the

company.

(b) The board of directors consists of at least five directors

as stated in the company's articles of incorporation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.152. ADOPTION OF INITIAL BYLAWS. (a) At the first

meeting of the initial board of directors of a mutual life

insurance company after the department issues a certificate of

authority to the company, the board shall adopt the initial

bylaws of the company.

(b) The bylaws adopted under Subsection (a) shall govern the

company until the first annual meeting of the board of directors.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.153. ANNUAL MEETING. (a) Except as provided by

Subsection (b), after a mutual life insurance company is issued a

certificate of authority under Section 882.101, the company shall

hold an annual meeting of the policyholders on the fourth Tuesday

in April at the home office of the company or another location

properly announced to each policyholder.

(b) The bylaws of a mutual life insurance company may establish

an annual meeting date different than the date under Subsection

(a). A meeting date established under this subsection must be

before April 30 of each year.

(c) At each annual meeting, the policyholders:

(1) shall elect the company's board of directors to serve until

the next annual meeting, except as provided by Section 882.154;

and

(2) may adopt, amend, or repeal the bylaws of the company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS. (a)

This section applies only to a mutual life insurance company

whose board of directors consists of at least nine members.

(b) The bylaws of a mutual life insurance company may provide

that the company's directors, other than initial directors, may

be elected to serve staggered terms as provided by this section.

(c) The company's directors shall be divided into two or three

classes, with each class consisting of an equal number of

directors to the extent possible. After the directors are divided

into classes:

(1) the terms of the directors in the first class expire on the

first annual meeting date after their initial election;

(2) the terms of the directors in the second class expire on the

second annual meeting date after their initial election; and

(3) the terms of the directors in the third class, if any,

expire on the third annual meeting date after their initial

election.

(d) At each annual meeting after the directors are first

elected, the policyholders shall elect the number of directors

whose terms expire on that date. Directors are elected for:

(1) staggered two-year terms, if the board is divided into two

classes; or

(2) staggered three-year terms, if the board is divided into

three classes.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.155. VOTING BY POLICYHOLDERS. (a) At an annual or

special meeting of a mutual life insurance company, each

policyholder is entitled to one vote for each $500 of insurance

held by the policyholder in the company.

(b) A policyholder may vote at an annual or special meeting by

proxy, unless the proxy is revoked before the meeting.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.156. OFFICERS. (a) The board of directors of a mutual

life insurance company shall elect the following officers for the

company:

(1) a president;

(2) the number of vice presidents as required by the company's

bylaws;

(3) a secretary;

(4) a treasurer;

(5) a medical director; and

(6) other officers as required by the company's bylaws.

(b) The board shall establish the compensation of each officer.

(c) The duties of each officer shall be prescribed by the

company's bylaws.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.157. OFFICER BONDS. The president, secretary, and

treasurer of a mutual life insurance company shall each provide a

bond for the protection of the company's policyholders:

(1) in an amount and with sureties approved by the commissioner;

and

(2) conditioned on the faithful performance of the officer's

duties.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.158. BYLAWS MUST COMPLY WITH LAW. The bylaws of a

mutual life insurance company may not be inconsistent with this

chapter or other laws of this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER E. AGENTS

Sec. 882.201. APPLICABILITY OF SUBCHAPTER. This subchapter does

not apply to a mutual life insurance company organized under this

chapter that has a surplus of at least the minimum amount of

capital and surplus required of a capital stock company under

Sections 841.054, 841.204, 841.205, 841.301, and 841.302.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.202. ISSUANCE OF LICENSE TO AGENT. On written request

of a mutual life insurance company to which a certificate of

authority has been issued under this chapter, the department

shall issue a license to each agent of the company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.203. LIMITATION ON AGENT COMPENSATION. A contract

between a mutual life insurance company and an agent of the

company to which a license has been issued under Section 882.202

may not provide a commission or other compensation to the agent

that exceeds the expense loading in the premiums on policies that

are issued on applications obtained by the agent and for which

the premiums are collected and paid to the company in cash.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER F. GENERAL FINANCIAL REQUIREMENTS

Sec. 882.251. LIMITED AUTHORITY TO BORROW MONEY. (a) Except as

provided by this subchapter, a mutual life insurance company may

not borrow money for any purpose other than to pay a death loss.

(b) A company may not incur a debt on an account for which any

part of the company's assets that exceeds the assets represented

by or derived from the expense loading in the premiums collected

by the company is subject to execution on a judgment.

(c) Subsection (b) does not prohibit a company from incurring a

debt on an account:

(1) under a policy issued by the company; or

(2) to borrow money to pay a death loss.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.252. INVESTMENT OF MONEY. (a) A mutual life insurance

company shall invest the company's money in accordance with the

law governing investments of life, health, and accident insurance

companies organized under Chapter 841.

(b) An officer of a mutual life insurance company who does not

invest the money of the company as required by Subsection (a)

shall deposit the money in the name of the company in a bank

that:

(1) is subject to state or federal regulation; and

(2) has been approved by the commissioner as a depository for

that purpose.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.253. LOANS TO COMPANY. (a) An officer or director of

a mutual life insurance company, or a person authorized under

Chapter 825, may loan to the company money to:

(1) promote or conserve the company's business; or

(2) enable the company to comply with a legal requirement.

(b) The company may repay a loan and agreed interest, at an

annual rate not to exceed 10 percent, from the surplus remaining

after the company provides for the company's reserves and other

liabilities.

(c) A loan under this section or interest on a loan is not

otherwise a liability or claim against the company or any of its

assets.

(d) A mutual life insurance company may not pay a commission or

promotion expense in connection with a loan made to the company.

(e) A mutual life insurance company shall report in its annual

statement the amount of each loan.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER G. UNENCUMBERED SURPLUS REQUIREMENTS

Sec. 882.301. AMOUNT OF UNENCUMBERED SURPLUS. (a) A mutual

life insurance company that engages in the business of insurance

in this state shall maintain an unencumbered surplus of at least

$100,000 that consists of cash or classes of investment as

provided by Section 882.055.

(b) Except as otherwise authorized by this code, a company that

does not maintain an unencumbered surplus as required by this

section may not write new insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.302. EXEMPTION FOR CERTAIN COMPANIES. A mutual life

insurance company that was authorized and engaged in the business

of insurance in this state before May 1, 1955, is not required to

increase the amount or convert the class or form of the company's

existing unencumbered surplus to comply with Section 882.301 and

may not be prohibited from writing new insurance because the

company does not maintain an unencumbered surplus as required by

that section if the company complies with all other laws.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.303. UNENCUMBERED SURPLUS LESS THAN $25,000. A mutual

life insurance company whose unencumbered surplus is less than

$25,000 shall allocate at least 25 percent of the company's net

earned surplus for the preceding calendar year to the company's

unencumbered surplus until the company has obtained an

unencumbered surplus of at least $25,000.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.304. INVESTMENT OF EXCESS UNENCUMBERED SURPLUS. A

mutual life insurance company that is granted a charter under

this chapter may invest that part of the company's unencumbered

surplus that exceeds $100,000 as provided by this code for

companies operating under Chapter 841.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.305. IMPAIRMENT OF UNENCUMBERED SURPLUS. (a) If

one-third or more of a mutual life insurance company's

unencumbered surplus as required by Section 882.301 is impaired,

the company shall correct the impairment not later than the 60th

day after the date the surplus is impaired.

(b) A company that does not correct an impairment of surplus as

required by Subsection (a) may not write insurance in this state

until the company corrects the impairment.

(c) In determining whether a company's surplus is impaired, the

company shall compute its liabilities in the manner provided by

state law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.306. IMPAIRMENT OF UNENCUMBERED SURPLUS; APPOINTMENT OF

RECEIVER. (a) If one-half or more of a mutual life insurance

company's unencumbered surplus as required by Section 882.301 is

impaired, the commissioner may apply to a court for the

appointment of a receiver to wind up the affairs of the company.

(b) In determining whether a company's surplus is impaired, the

company shall compute its reserve liability in the manner

provided by state law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER H. DIVIDENDS

Sec. 882.351. POLICYHOLDER'S ENTITLEMENT TO DIVIDEND. A

policyholder of a mutual life insurance company is entitled to a

credit or payment of a dividend from that part of the company's

divisible surplus that may be fairly allocated to the

policyholder's policy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.352. ACCOUNTING AND PROCEDURE FOR ALLOCATION OF

DIVISIBLE SURPLUS; REPORT TO COMMISSIONER. (a) On December 31

of each year, or as soon after as practicable, each mutual life

insurance company shall determine the amount of surplus earned by

the company during that year.

(b) Not later than the end of the second year in which a policy

issued by the company is in effect, the company shall provide to

the policyholder:

(1) an annual accounting of the company's divisible surplus; and

(2) if all premiums due on the policy have been paid for at

least two years, a fair allocation of the company's divisible

surplus that remains after deducting:

(A) any amount approved by the commissioner for retirement of

any unpaid loans made under Section 882.253;

(B) the company's contingency reserve; and

(C) any earned surplus the company allocated to unencumbered

surplus as provided by this chapter.

(c) The company shall immediately submit to the commissioner a

detailed report of an allocation of divisible surplus made under

this section. The president or secretary of the company shall

sign the report under oath.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.353. DEPARTMENT APPROVAL OF ALLOCATION; REVISIONS. (a)

The department shall approve a mutual life insurance company's

allocation of divisible surplus under Section 882.352 if the

department finds that the allocation is fair to the policyholders

and complies with this chapter.

(b) If the department does not approve a company's allocation of

surplus, the department shall revise the allocation in a manner

that the department determines is fair to the policyholders and

necessary to comply with this chapter. The department shall

certify the revisions to the company.

(c) An allocation of surplus approved under Subsection (a) takes

effect on the date of approval. An allocation of surplus revised

by the department under Subsection (b) takes effect on the date

the department certifies the revisions to the company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.354. DIVIDEND PAYMENT METHOD. (a) A dividend declared

by a mutual life insurance company under this subchapter shall be

paid in:

(1) cash; or

(2) the equivalent of the dividend's cash value as provided by

an option stated in the policy and selected by the policyholder.

(b) A policyholder shall notify the company in writing of an

option selected by the policyholder under Subsection (a)(2).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.355. LIMITATIONS ON DIVISIBLE SURPLUS. A mutual life

insurance company's divisible surplus available for payment of

dividends to the company's policyholders may not include:

(1) any part of the company's unencumbered surplus that has

been:

(A) allocated from the company's earned surplus;

(B) transferred from the company's contingency reserve; or

(C) otherwise acquired by the company;

(2) if the company was organized after September 5, 1955, any

part of the company's unencumbered surplus required to comply

with Section 882.301; or

(3) if the company's unencumbered surplus is less than $25,000,

the part of the company's earned surplus for the preceding

calendar year in excess of 75 percent of the earned surplus.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.356. PAYMENT OF DIVIDENDS NOT REQUIRED. This

subchapter does not require a mutual life insurance company to

pay a dividend to a policyholder if the unencumbered surplus

acquired by the company is impaired.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER I. CONTINGENCY RESERVE

Sec. 882.401. AMOUNT OF CONTINGENCY RESERVE. (a) A mutual life

insurance company organized under this chapter may maintain a

contingency reserve that exceeds the reserves and liabilities

provided by this chapter. The amount of the contingency reserve

may not exceed the greater of:

(1) $10,000;

(2) an amount that:

(A) equals 20 percent of the company's policy reserves and

policy liabilities plus one percent of the amount of the

company's life insurance in force; and

(B) does not exceed $750,000; or

(3) an amount that equals 20 percent of the company's policy

reserves and policy liabilities.

(b) In determining the amount of a company's policy reserves and

policy liabilities for purposes of this section, the company may

only include the following, after deducting the net value of the

company's risks reinsured by other solvent assuming insurers:

(1) the company's reserves on outstanding life insurance

policies and annuity contracts, contracts issued as supplemental

to the policies or contracts or in connection with the policies

or contracts or provisions included in policies or contracts that

insure against disability or accidental death; and

(2) the company's liabilities for:

(A) optional modes of settlement; or

(B) dividends left on deposit at interest.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.402. EXCESS CONTINGENCY RESERVE. (a) The

commissioner, for good cause shown, may issue an order

authorizing a mutual life insurance company to maintain a

contingency reserve that exceeds the amount of the reserve

authorized by Section 882.401.

(b) The order must state:

(1) a period not exceeding one year during which the company may

maintain the excess contingency reserve; and

(2) each reason for authorizing the excess contingency reserve.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.403. CONTINGENCY RESERVE REQUIREMENTS. (a) A mutual

life insurance company's contingency reserve as authorized by

this subchapter must be:

(1) invested as provided by law; and

(2) used only to pay death claims and dividends to

policyholders.

(b) If the interest and earnings from the investment of a

company's contingency reserve exceed the amount of reserve

authorized by Section 882.401 or 882.402, the company shall pay

the excess amount to the policyholders of the company in the form

of dividends as provided by law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.404. ALLOCATION OF CONTINGENCY RESERVE TO UNENCUMBERED

SURPLUS. If a mutual life insurance company's unencumbered

surplus is less than $100,000, the company may allocate any part

of the company's contingency reserve to the company's

unencumbered surplus.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.405. DESIGNATION OF CONTINGENCY RESERVE AS UNASSIGNED

SURPLUS. The contingency reserve described by this subchapter is

and may be treated as unassigned surplus, including designating

the contingency reserve as unassigned surplus in financial

statements.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER J. POLICY REQUIREMENTS

Sec. 882.451. APPLICABILITY OF CERTAIN PROVISIONS. Sections

882.452, 882. 453, and 882.454 do not apply to a mutual life

insurance company organized under this chapter that has a surplus

of at least the minimum amount of capital and surplus required of

a capital stock company under Sections 841.054, 841.204, 841.205,

841.301, and 841.302.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.452. TYPE OF POLICY AUTHORIZED. A mutual life

insurance company may issue a policy only on the participating

plan with dividends payable annually as provided by Subchapter H.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.453. POLICY FORM. An insurance policy issued by a

mutual life insurance company must:

(1) be on a form approved by the department; and

(2) contain the following statement on both the front and

reverse sides of the policy: "The form of this policy is approved

by the Texas Department of Insurance."

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.454. LIMITATION ON AMOUNT OF POLICY VALUE FOR CERTAIN

COMPANIES. If the total amount of a mutual life insurance

company's insurance in force is less than $10 million, the

company may not issue a policy that, after deducting any

reinsurance, binds the company for more than $5,000 on a single

life.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.455. TABLE OF GUARANTEED VALUES. (a) Each insurance

policy issued by a mutual life insurance company must contain a

table of guaranteed values. The guaranteed values become

nonforfeitable not later than the date of payment of the third

full annual premium.

(b) The table of guaranteed values shall be drawn in accordance

with the law governing life, health, and accident insurance

companies.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER K. TOTAL ASSUMPTION REINSURANCE AGREEMENTS

Sec. 882.501. TOTAL ASSUMPTION REINSURANCE AGREEMENTS BETWEEN

LIFE INSURANCE COMPANIES. (a) A domestic mutual life insurance

company and any other domestic or foreign life insurance company

may enter into a total assumption reinsurance agreement if the

company assuming the policies under the agreement is authorized

to engage in the kinds of insurance provided by those policies.

(b) Before a total assumption reinsurance agreement may be

entered into:

(1) the agreement must be submitted to the department; and

(2) the commissioner must approve the agreement as fully

protecting the interests of each domestic company's

policyholders.

(c) After an assumption reinsurance agreement in which the

ceding company is a domestic mutual insurance company is approved

by the commissioner as required by Subsection (b), the agreement

must be approved by the policyholders of the ceding domestic

company in the same manner as required for a merger or

consolidation under Subchapter L.

(d) When the reinsurance agreement described by Subsection (c)

is effective, the assuming company is entitled to the same

rights, privileges, and benefits granted a company that assumes a

company by merger or consolidation as provided by Subchapter L.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER L. MERGERS AND CONSOLIDATIONS

Sec. 882.551. APPLICABILITY OF SUBCHAPTER. This subchapter

applies only to a merger or consolidation in which at least one

of the parties to the transaction is a mutual life insurance

company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.552. AUTHORITY TO MERGE OR CONSOLIDATE. A domestic or

foreign mutual life insurance company may merge with a domestic

or foreign mutual or stock legal reserve life insurance company

or consolidate into a new domestic or foreign mutual or stock

life insurance company as provided by this subchapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.553. PROPOSED PLAN OF MERGER OR CONSOLIDATION; FILING

WITH COMMISSIONER. (a) If the boards of directors of at least

two life insurance companies determine by majority vote to merge

or consolidate, the boards of directors shall prepare a proposed

plan of merger or consolidation. The plan may contain:

(1) a future allocation of divisible surplus; or

(2) any other fair arrangement by which any equitable interests

of the mutual life insurance company's policyholders may be

adjusted.

(b) The boards of directors shall file the proposed plan with

the commissioner for approval.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.554. HEARING ON PLAN. As soon as practicable after a

proposed plan is filed with the commissioner, the commissioner

shall hold a hearing to determine whether to approve the plan.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.555. COMMISSIONER DETERMINATION ON PLAN. (a) As soon

as practicable after the commissioner holds a hearing on a

proposed plan under Section 882.554, the commissioner shall

approve the plan unless the commissioner determines that:

(1) the plan is contrary to law; or

(2) implementation of the plan:

(A) would not be in the best interests of the policyholders of

any mutual life insurance company that is a party to the plan; or

(B) would substantially reduce the security of or service to be

rendered to policyholders of any mutual insurance company that is

a party to the plan, regardless of whether the policyholders

reside in this state or elsewhere.

(b) In determining whether to approve a proposed plan, the

commissioner may consider all relevant financial or other

information, including past, present, and future operations and

accumulations of each company that is a party to the plan.

(c) If the commissioner approves the proposed plan, the

commissioner shall notify each party to the plan of the approval.

(d) If the commissioner disapproves the proposed plan, the

commissioner shall, within a reasonable time after holding a

hearing under Section 882.554:

(1) specify in detail each reason for the disapproval; and

(2) notify each party to the plan.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.556. APPROVAL OF PLAN BY POLICYHOLDERS. (a) As soon

as practicable after receiving from the commissioner notice of

approval of a proposed plan under Section 882.555, the board of

directors of each mutual life insurance company that is a party

to the plan shall submit the plan to the policyholders for a vote

at an annual or special meeting.

(b) Not later than the 15th day before the date of the meeting,

the company shall provide written notice of the meeting to the

policyholders as provided by the company's bylaws. The notice

must:

(1) be sent to the policyholder's last known address;

(2) state that one of the purposes of the meeting is to vote on

the proposed plan; and

(3) be accompanied by a copy of the proposed plan.

(c) At a meeting under Subsection (a), each policyholder:

(1) is entitled to the number of votes as provided by Section

882.155; and

(2) may vote:

(A) in person;

(B) by written proxy; or

(C) by mailed ballot.

(d) A proposed plan is approved by the policyholders on the

affirmative vote of at least two-thirds of the votes cast at the

meeting.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.557. DOMESTIC STOCK LIFE INSURANCE COMPANY; APPROVAL OF

PLAN BY SHAREHOLDERS. On notice of approval of a proposed plan

under Section 882.555, the board of directors of each domestic

stock life insurance company that is a party to the plan shall

submit the plan for approval to the company's shareholders in the

manner provided by Section 824.003.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.558. FOREIGN LIFE INSURANCE COMPANY; APPROVAL OF PLAN

BY POLICYHOLDERS OR SHAREHOLDERS. On notice of approval of a

proposed plan under Section 882.555, the board of directors of

each foreign life insurance company that is a party to the plan

shall submit the plan for approval to the company's policyholders

or shareholders as provided by the law of the appropriate

jurisdiction.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.559. FILING OF AFFIDAVIT OF PLAN APPROVAL; ISSUANCE OF

CERTIFICATE OF MERGER OR CONSOLIDATION. (a) On the approval of

a proposed plan under Section 882.556, 882.557, or 882.558, the

president or a vice president and the secretary or an assistant

secretary of each company that is a party to the plan shall

execute and file with the department an affidavit stating that

the plan has been approved by the policyholders or shareholders

of the company as required by this subchapter.

(b) If the department finds that the affidavit complies with

law, the department shall:

(1) endorse the affidavit with:

(A) the word "filed"; and

(B) the date of filing;

(2) if the plan is a plan of merger, issue a certificate of

merger to the surviving company or the company's representative;

and

(3) if the plan is a plan of consolidation, issue a certificate

of consolidation to the new company on the issuance of a charter

and a certificate of authority to the new company after:

(A) submission of proper articles of incorporation to the

department;

(B) approval by the department in accordance with procedures

required for the issuance of a new charter; and

(C) submission of proof that the new company has policyholder

surplus at least equal to that of the mutual life insurance

company that is a party to the consolidation and has the largest

surplus.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.560. EFFECTIVE DATE OF MERGER OR CONSOLIDATION. A

merger or consolidation takes effect on the later of:

(1) the date of issuance of the certificate of merger or

consolidation; or

(2) a date specified in the plan of merger or consolidation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.561. ASSUMPTION OF OUTSTANDING INSURANCE POLICIES. (a)

On the effective date of a merger or consolidation under this

subchapter, a new or surviving life insurance company resulting

from the merger or consolidation assumes each insurance policy

outstanding against each company that merges or consolidates on

the same terms and under the same conditions as if the policy had

continued in force through the original company.

(b) The new or surviving insurance company shall implement the

terms of the policy.

(c) The new or surviving insurance company is entitled to:

(1) all rights and privileges under the policy; and

(2) all reserves and surplus that accumulated on the policy

before the merger or consolidation.

(d) A policyholder of a mutual life insurance company that is a

party to a merger or consolidation resulting in a new or

surviving stock life insurance company is not entitled to any

voting rights in the new or surviving company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.562. ASSUMPTION OF LIABILITIES. On the effective date

of a merger or consolidation under this subchapter, a new or

surviving life insurance company resulting from the merger or

consolidation assumes all liabilities of the original companies.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.563. EFFECT OF MERGER OR CONSOLIDATION ON PROPERTY. On

the effective date of a merger or consolidation under this

subchapter, the property rights, including any right of recovery,

of each company that is a party to the merger or consolidation

are transferred to the new or surviving life insurance company

resulting from the merger or consolidation without a deed or

other transfer.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.564. EFFECT OF MERGER OR CONSOLIDATION ON CERTAIN

INVESTMENTS. (a) This section applies to each investment of an

affected life insurance company, including an investment in real

property, that:

(1) was authorized as a proper asset, as of the date on which

the investment was made and under the laws of the state in which

the company was organized, for investment of funds of a life

insurance company; and

(2) is taken over by the new or surviving company under the

terms of the merger or consolidation.

(b) On the effective date of a merger or consolidation of two or

more life insurance companies under this subchapter, an

investment of the affected companies described by Subsection (a)

is a proper asset under the laws of this state of the new or

surviving company if the investment is:

(1) approved by the commissioner; and

(2) taken over on terms satisfactory to the commissioner.

(c) A new or surviving company that acquires, under the terms of

the merger or consolidation, real property that exceeds the

amount of real property permitted by the applicable sections of

this code relating to owning or holding real property shall sell

or dispose of the excess real property:

(1) within the period specified by those sections; or

(2) within a longer period if the company obtains a certificate

from the commissioner:

(A) stating that the interests of the company will materially

suffer by the forced sale or other disposition of the real

property; and

(B) specifying the longer period for the sale or other

disposition of the real property.

(d) This section does not preclude the designation and use of

the excess real property as branch offices of the company in

accordance with this code.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.565. EFFECT OF MERGER OR CONSOLIDATION ON DIVISIBLE

SURPLUS. (a) This section applies only to a mutual life

insurance company that is a new company or the surviving company

resulting from a merger or consolidation under this subchapter.

(b) If the divisible surplus of each domestic mutual life

insurance company that is a party to a merger or consolidation

under this subchapter was available for allocation to

policyholders as provided by Subchapter H immediately before the

effective date of the merger or consolidation, the divisible

surplus remains available to the policyholders of the new or

surviving mutual life insurance company resulting from the merger

or consolidation as provided by Subchapter H.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.566. EFFECT ON ANTITRUST LAWS. This subchapter does

not affect in any manner the antitrust laws of this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER M. CONVERSION OF MUTUAL LIFE INSURANCE COMPANY TO

STOCK LEGAL RESERVE LIFE INSURANCE COMPANY

Sec. 882.601. AUTHORITY TO CONVERT TO STOCK LEGAL RESERVE LIFE

INSURANCE COMPANY; POLICYHOLDER AUTHORIZATION REQUIRED. A mutual

life insurance company organized under this chapter may convert

to a stock legal reserve life insurance company as provided by

this subchapter only if the conversion is approved by the

policyholders by a vote of at least two-thirds of the votes cast

by the policyholders in person or by proxy at a meeting called

for that purpose.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.602. AMENDMENT TO CHARTER OR ARTICLES OF INCORPORATION

REQUIRED. If the policyholders of a mutual life insurance

company authorize a conversion under Section 882.601, the board

of directors and officers of the company shall amend the

company's charter or articles of incorporation to comply with the

requirements applicable to a stock legal reserve life insurance

company under Chapter 841.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.603. CAPITAL AND SURPLUS REQUIREMENTS. (a) The

capital and surplus of the converted stock legal reserve life

insurance company must be at least equal to the minimum capital

and surplus required for the organization of a stock legal

reserve life insurance company under Chapter 841.

(b) If a contribution of United States currency is necessary to

meet the capital and surplus requirements of this section, the

contribution must be made before the effective date of the

conversion.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.604. HEARING. (a) After public notice, the

commissioner shall hold a hearing on a conversion authorized

under Section 882.601.

(b) Any policyholder of the mutual life insurance company that

is the subject of the conversion is entitled to appear and be

heard at the hearing.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.605. CONVERSION ON COMMISSIONER APPROVAL. A mutual

life insurance company is converted to a stock legal reserve life

insurance company if:

(1) the company complies with this subchapter; and

(2) after hearing, the conversion is approved by the

commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.606. APPLICABLE LAW AFTER CONVERSION. After a mutual

life insurance company is converted to a stock legal reserve life

insurance company, the converted company is governed in the same

manner as a company organized under Chapter 841.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.607. OTHER TYPES OF CONVERSION NOT PROHIBITED. This

subchapter does not prohibit a mutual life insurance company from

converting to a stock legal reserve life insurance company by:

(1) merger or consolidation;

(2) a total direct or assumption reinsurance agreement; or

(3) any other plan or procedure approved by the company's

policyholders and the commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER N. CONVERSION OF CERTAIN MUTUAL ASSESSMENT COMPANIES

OR ASSOCIATIONS TO MUTUAL LIFE INSURANCE COMPANIES

Sec. 882.651. AUTHORITY TO CONVERT. A mutual assessment company

or association organized and operating under the laws of this

state on May 17, 1943, may convert to a mutual life insurance

company as provided by this subchapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.652. VOLUNTARY CONVERSION. The department may not

require a mutual assessment company or association to convert to

a mutual life insurance company under this subchapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.653. CONVERSION REQUIREMENTS. Except as provided by

Section 882. 654, a mutual assessment company or association may

convert to a mutual life insurance company only if the company or

association:

(1) possesses an unencumbered surplus of at least $1.4 million;

and

(2) complies with the requirements of this chapter, including

the requirements that the company or association execute articles

of incorporation and obtain a charter and a certificate of

authority.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.654. EXEMPTION FROM SURPLUS REQUIREMENTS. (a) A

mutual assessment company or association is exempt from the

surplus requirements of Section 882.653 if the company or

association:

(1) possesses an unencumbered surplus of at least $200,000; and

(2) converted to a mutual life insurance company before

September 1, 1999.

(b) A mutual assessment company or association that is exempt

under Subsection (a) and that was converted on or after September

1, 1989, shall immediately increase its surplus to an amount that

satisfies Section 882.653 on:

(1) a change of control of at least 50 percent of the voting

securities of the converted company or association; or

(2) if the converted company or association or the holding

company that controls the converted company or association, if

any, is not controlled by voting securities, a change of at least

50 percent of the ownership of the converted company or

association or its holding company.

(c) For purposes of Subsection (b), a transfer of ownership

because of death, regardless of whether the decedent died testate

or intestate, is not considered a change of control of a

converted mutual assessment company or association or its holding

company, if ownership is transferred only to one or more

individuals, each of whom would have been an heir of the decedent

if the decedent had died intestate.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.655. APPLICABLE LAW AFTER CONVERSION. After a mutual

assessment company or association is converted to a mutual life

insurance company, the converted company is governed by this

chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER O. ENFORCEMENT PROVISIONS

Sec. 882.701. APPLICABILITY OF SUBCHAPTER. This subchapter does

not apply to a mutual life insurance company organized under this

chapter that has a surplus of at least the minimum amount of

capital and surplus required of a capital stock company under

Sections 841.054, 841.204, 841.205, 841.301, and 841.302.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 882.702. INVESTMENT AND DEPOSIT OF FUNDS; CRIMINAL PENALTY.

(a) A person commits an offense if the person is an officer or

director of a mutual life insurance company and the person

knowingly or wilfully violates or assents to the violation of

Section 882.252.

(b) An offense under this section is punishable by imprisonment

in the Texas Department of Criminal Justice for a term of not

more than five years or less than one year.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 25.121, eff. September 1, 2009.

Sec. 882.703. POLICY FORM; REVOCATION OF CERTIFICATE. The

department shall revoke the certificate of authority of a mutual

life insurance company that issues a policy on a form that has

not been approved by the department as required by Section

882.453.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER P. CONVERSION OF MUTUAL LIFE INSURANCE COMPANY TO

INSURANCE HOLDING COMPANY AND STOCK LIFE INSURANCE COMPANY

Sec. 882.751. AUTHORITY TO CONVERT. A mutual life insurance

company organized or operating under this chapter may convert by

forming an insurance holding company based on a mutual plan and

continuing the corporate existence of the converting mutual life

insurance company as a stock life insurance company if the

commissioner:

(1) determines that the conversion is fair and equitable to the

policyholders of the converting company; and

(2) approves the proposed plan of conversion.

Added by Acts 2005, 79th Leg., Ch.

82, Sec. 1, eff. September 1, 2005.

Sec. 882.752. APPLICATION OF OTHER LAW. Except to the extent of

a conflict with this subchapter, Chapter 826 applies to

conversion of a mutual life insurance company under this

subchapter.

Added by Acts 2005, 79th Leg., Ch.

82, Sec. 1, eff. September 1, 2005.

Sec. 882.753. JURISDICTION OF COMMISSIONER. The commissioner

retains jurisdiction over a company that converts under this

subchapter.

Added by Acts 2005, 79th Leg., Ch.

82, Sec. 1, eff. September 1, 2005.

Sec. 882.754. INCORPORATION REQUIREMENTS. A mutual insurance

holding company that results from a conversion under this

subchapter must be incorporated under and subject to this chapter

and Chapter 22, Business Organizations Code.

Added by Acts 2005, 79th Leg., Ch.

82, Sec. 1, eff. September 1, 2005.

Sec. 882.755. ARTICLES OF INCORPORATION. The articles of

incorporation of a mutual insurance holding company that results

from a conversion under this subchapter, and any amendments to

the articles of incorporation, are subject to approval by the

commissioner.

Added by Acts 2005, 79th Leg., Ch.

82, Sec. 1, eff. September 1, 2005.

Sec. 882.756. SALE OF SECURITIES. (a) A sale, issuance, or

offering of securities under this subchapter is exempt from the

registration and licensing provisions of The Securities Act

(Article 581-1 et seq., Vernon's Texas Civil Statutes).

(b) An officer, director, or employee of a mutual life insurance

company or a mutual insurance holding company or stock life

insurance company resulting from a conversion under this

subchapter who participates in the conversion is exempt from the

registration and licensing provisions of The Securities Act

(Article 581-1 et seq., Vernon's Texas Civil Statutes). A person

may not receive compensation, other than that person's usual

salary or compensation, for services performed under the

exemption provided by this subsection.

Added by Acts 2005, 79th Leg., Ch.

82, Sec. 1, eff. September 1, 2005.