CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES

CHAPTER 884. STIPULATED PREMIUM INSURANCE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 884.001. DEFINITION. In this chapter, "stipulated premium

company" means a:

(1) stipulated premium life insurance company;

(2) stipulated premium accident insurance company;

(3) stipulated premium life and accident insurance company;

(4) stipulated premium accident and health insurance company; or

(5) stipulated premium life, accident, and health insurance

company.

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

2003.

Sec. 884.002. APPLICABILITY OF OTHER LAW TO COMPANY. (a)

Except as expressly provided by this code, a provision of this

code, other than this chapter, does not apply to a stipulated

premium company organized under this chapter.

(b) A law enacted after August 28, 1961, does not apply to a

stipulated premium company unless stipulated premium companies

are expressly designated in the law.

(c) The following provisions of this code apply to a stipulated

premium company:

(1) Article 21.47;

(2) Section 38.001;

(3) Chapter 86;

(4) Subchapter A, Chapter 401;

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

401.152, 401.155, and 401.156;

(6) Sections 403.001, 403.052, and 403.102;

(7) Subchapter A, Chapter 404;

(8) Section 421.001;

(9) Subchapter D, Chapter 425;

(10) Chapter 443;

(11) Chapter 492, other than Sections 492.051(b) and (c);

(12) Chapter 541;

(13) Sections 801.001-801.002;

(14) Sections 801.051-801.055;

(15) Section 801.057;

(16) Sections 801.101-801.102;

(17) Subchapter A, Chapter 821;

(18) Chapter 824;

(19) Chapter 828;

(20) Section 841.251;

(21) Section 841.259;

(22) Section 841.261;

(23) Section 841.703; and

(24) Chapter 4152.

(d) The Securities Act (Article 581-1 et seq., Vernon's Texas

Civil Statutes) applies to a stipulated premium company.

(e) The Texas Business Corporation Act applies to a stipulated

premium company to the extent that law is not inconsistent with

an insurance law applicable to a stipulated premium company. The

department shall perform a duty imposed by the Texas Business

Corporation Act on the office of the secretary of state that is

applicable to a stipulated premium company.

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.076, eff. April 1, 2009.

Sec. 884.003. ADMITTED ASSETS. A stipulated premium insurer may

include among its admitted assets a net asset under Section

841.004.

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

2003.

SUBCHAPTER B. FORMATION AND STRUCTURE OF STIPULATED PREMIUM

INSURANCE COMPANY

Sec. 884.051. FORMATION OF COMPANY. (a) Five or more, but not

more than 35, residents of this state may form a stipulated

premium company.

(b) To form a stipulated premium company:

(1) each incorporator must sign and acknowledge the articles of

incorporation of the company; and

(2) the incorporators must file the articles of incorporation

with the department.

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

2003.

Sec. 884.052. ARTICLES OF INCORPORATION. (a) Articles of

incorporation of a stipulated premium company must specify:

(1) the name and place of residence of each incorporator;

(2) the name of the proposed stipulated premium company;

(3) the location of the proposed company's home office;

(4) the kinds of insurance business the proposed company will

transact;

(5) the amount of the proposed company's capital stock;

(6) the number of shares of the proposed company's capital

stock; and

(7) the period of the proposed company's duration, which may not

exceed 500 years.

(b) The incorporators of a stipulated premium company may

include other provisions in the articles of incorporation.

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

2003.

Sec. 884.053. COMPANY'S NAME. (a) The name of a stipulated

premium company must contain the words "Insurance Company."

(b) A stipulated premium 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. 884.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) A

proposed stipulated premium company's capital stock must be in an

amount of at least $200,000.

(b) All of the capital stock required by Subsection (a) must be

fully subscribed and paid up and delivered to the incorporators

before the articles of incorporation are filed.

(c) To be incorporated, a stipulated premium company must

possess at the time of incorporation, in addition to its capital,

surplus in an amount of at least $75,000. The amount of the

surplus is not required to be stated in the company's articles of

incorporation.

(d) At the time of incorporation the minimum capital and surplus

shall 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 50 percent of the minimum

capital invested in first mortgage real property loans.

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

2003.

Amended by:

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

1309, Sec. 1, eff. September 1, 2009.

Sec. 884.055. SHARES OF STOCK. (a) The shares of stock of a

stipulated premium company must have a par value of not less than

$1 or more than $100.

(b) A stipulated premium company may issue and dispose of

authorized shares for money or an instrument authorized for

minimum capital under Section 884.054(d). After the company

receives payment for a share of stock, the share is

nonassessable.

(c) If all of the shares of stock authorized by the charter or

an amendment to the charter are not subscribed and paid for when

the charter is granted or the amendment is filed, respectively,

the stipulated premium company shall file with the department a

certificate authenticated by a majority of the directors stating

the number of shares issued and the consideration received for

those shares. The company shall file the certificate not later

than the 90th day after the date of issuance of any of those

remaining shares.

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

2003.

Sec. 884.056. APPLICATION FOR CHARTER. (a) To obtain a charter

for a stipulated premium company under this chapter, the

incorporators must pay a charter fee in an amount determined

under Chapter 202 and file with the department:

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

information prescribed by the department;

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

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

states that:

(A) the minimum capital and surplus requirements of Section

884.054 are satisfied;

(B) the capital and 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 department may require that the incorporators provide at

their expense additional evidence of a matter required in the

affidavit before the department takes further action on the

application for the charter.

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.077, eff. April 1, 2009.

Sec. 884.057. ACTION BY COMMISSIONER AND DEPARTMENT AFTER

FILING. (a) After the charter fee is paid and all items

required for a charter under Section 884.056 are filed with the

department, the commissioner shall approve or deny the charter

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. 14, eff. June 19, 2009.

Sec. 884.058. EXAMINATION AFTER DETERMINATION. After making a

determination on an application under Section 884.057, the

commissioner shall immediately make or cause to be made a full

and thorough examination of the company. The company shall pay

for the examination.

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. 15, eff. June 19, 2009.

Sec. 884.059. ACTION ON APPLICATION. (a) In considering the

application, the commissioner, not later than the 30th day after

the date on which a hearing under Section 884.058 is completed,

shall determine if:

(1) the minimum capital and surplus required by Section 884.054

are the bona fide property of the stipulated premium 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 by an affirmative finding any

of the issues under Subsection (a) adversely to the applicants,

the commissioner shall reject the application in writing, giving

the reason for the rejection. An application may not be granted

unless it is adequately supported by competent evidence.

(c) If the commissioner does not reject the application under

Subsection (b), the commissioner shall approve the application

and on receipt of a fee in the amount determined under Chapter

202 shall provide to the incorporators a certified copy of the

application, articles of incorporation, and submitted affidavit.

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.078, eff. April 1, 2009.

Sec. 884.060. BEGINNING OF CORPORATE EXISTENCE. On receipt of

the certified copy of documents under Section 884.059(c), the

stipulated premium company becomes a body politic and corporate

and the incorporators may complete organization of the company

under Section 884.061.

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

2003.

Sec. 884.061. ORGANIZATIONAL MEETING. (a) After receipt of the

certified copy of documents under Section 884.059(c), the

incorporators shall promptly call a meeting of the stipulated

premium company's shareholders. The shareholders shall:

(1) adopt bylaws to govern the company; and

(2) elect the company's initial board of directors.

(b) The directors elected under this section serve until

directors are first elected under Section 884.153.

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

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 884.101. SCHEDULE OF ASSETS. Two or more officers of the

stipulated premium company shall execute and file with the

department:

(1) a sworn schedule of each of the assets of the company

exhibited to the department during the examination under Section

884.057 showing the value of the assets; and

(2) a sworn statement that the assets are bona fide, are the

unconditional and unencumbered property of the company, and are

worth the amount stated in the schedule.

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

2003.

Sec. 884.102. TEMPORARY CERTIFICATE OF AUTHORITY. (a) If the

commissioner makes a determination favorable to the applicants on

all issues under Section 884.059(a), the department, on

compliance with the requirements of Section 884.101, shall

promptly issue to the company a temporary certificate of

authority. The temporary certificate must limit the activities of

the company solely to negotiating and obtaining a direct

reinsurance agreement, as described by Subchapter L, with a

company that on August 28, 1961, was chartered and doing business

under former Chapter 14 of this code.

(b) A temporary certificate of authority expires on the first

anniversary of its date of issuance unless the department renews

it for an additional one-year period.

(c) On the expiration of a temporary certificate of authority

the incorporators of the stipulated premium company to which the

certificate was issued shall promptly surrender the company's

charter to the department for cancellation.

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

2003.

Sec. 884.103. REGULAR CERTIFICATE OF AUTHORITY. (a) If a

direct reinsurance agreement described by Section 884.102(a) is

entered into while the temporary certificate of authority is

valid, the department shall promptly issue to the stipulated

premium company a regular certificate of authority to transact

the business of insurance in this state in accordance with

Subchapter L.

(b) The regular certificate of authority shall provide for the

kind of insurance business that the stipulated premium company

may conduct. If the other party to the agreement conducts the

business of life insurance or is a burial association, the

stipulated premium company is entitled to write life insurance

policies under this chapter. If the other party is permitted

under its charter to write accident insurance, health and

accident insurance, or life, health, and accident insurance, the

stipulated premium company is entitled to write that kind of

insurance.

(c) If a stipulated premium company that holds a regular

certificate of authority enters into a direct reinsurance

agreement with another company engaged in business under Chapter

887 or 888, the stipulated premium company's certificate of

authority shall be amended to authorize the writing of any kind

of insurance authorized for the other company.

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

2003.

SUBCHAPTER D. MANAGEMENT OF STIPULATED PREMIUM COMPANY

Sec. 884.151. CONDUCTING SHAREHOLDERS' MEETING. (a) At a

meeting of a stipulated premium company's shareholders, each

shareholder is entitled to one vote for each fully paid share of

stock appearing in the shareholder's name on the company's books.

(b) A shareholder may vote in person or by written proxy.

(c) At a shareholders' meeting, a quorum is any number of

shareholders whose cumulative stock ownership in the stipulated

premium company represents a majority of the company's paid up

capital stock.

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

2003.

Sec. 884.152. BOARD OF DIRECTORS. (a) Subject to the bylaws of

the stipulated premium company, as adopted or amended by the

shareholders or directors, the board of directors has full

management and control of the company.

(b) The board consists of not fewer than five directors.

(c) The directors shall keep a full and correct record of the

board's transactions. The shareholders may inspect those records

during business hours.

(d) The directors shall fill a vacancy that occurs on the board

or in any office of the company.

(e) A majority of the board is a quorum.

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

2003.

Sec. 884.153. ELECTION OF DIRECTORS. (a) On the second Tuesday

of April of each year the shareholders of a stipulated premium

company shall meet at the company's home office and shall elect

the company's board of directors to serve one-year terms

beginning immediately after the election.

(b) If the shareholders do not elect directors at that meeting,

the shareholders may elect the directors at a special

shareholders' meeting called for that purpose.

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

2003.

Sec. 884.154. OFFICERS. (a) A stipulated premium company's

directors shall choose one of the directors to serve as the

company's president.

(b) Other officers of the stipulated premium company shall be

chosen in accordance with the bylaws of the company. An officer

other than the president is not required to be a director or a

shareholder unless such a qualification is required by the

company's bylaws.

(c) The duties and compensation of a stipulated premium

company's officers are as stated in the company's bylaws. If the

bylaws do not state the duties or compensation of the officers,

the directors shall establish the duties or compensation.

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

2003.

Sec. 884.155. AMENDMENT OF CHARTER OR ARTICLES. (a) The

shareholders of a stipulated premium company by resolution may

amend the company's charter or articles of incorporation at any

shareholders' meeting.

(b) The amendment and a copy of the resolution certified by the

president and secretary of the stipulated premium company shall

be filed and recorded in the same manner as the charter.

(c) An amendment of the charter or articles takes effect when it

is recorded.

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

2003.

SUBCHAPTER E. CAPITAL AND SURPLUS

Sec. 884.201. FORM OF CAPITAL AND SURPLUS. After a charter is

granted under this chapter, the stipulated premium company:

(1) shall maintain the company's minimum capital at all times in

a form described by Section 884.054(d); and

(2) may invest the company's surplus as provided by Sections

425.203-425.228.

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.079, eff. April 1, 2009.

Sec. 884.202. INCREASE OR DECREASE OF CAPITAL STOCK. (a) At

any shareholders' meeting, shareholders of a stipulated premium

company whose cumulative stock ownership represents a majority of

the capital stock of the company by resolution may increase or

decrease the amount of the company's capital stock subject to

this section.

(b) Capital stock may be decreased to an amount that is less

than $200,000 only to avoid insolvency as provided by Section

884.205.

(c) Two officers of the stipulated premium company must sign and

acknowledge a statement of the increase or decrease. The

acknowledged statement and a certified copy of the resolution

shall be filed and recorded in the same manner as the charter.

(d) For an increase or decrease of capital stock, the stipulated

premium company may require the return of the original

certificates evidencing the stock in exchange for new

certificates. An issuance of new certificates that results in a

transfer of stock is subject to Section 884.254.

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

2003.

Amended by:

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

1309, Sec. 2, eff. September 1, 2009.

Sec. 884.203. PUBLIC OFFERING OF CAPITAL STOCK. A stipulated

premium company may not make to the public an offering that is

subject to The Securities Act (Article 581-1 et seq., Vernon's

Texas Civil Statutes), of any of its capital stock before the

company possesses:

(1) capital in an amount of at least $100,000; and

(2) unencumbered surplus in an amount of at least $100,000.

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

2003.

Sec. 884.204. COMPANY'S REPURCHASE OF STOCK. (a) Subject to

Section 884.202, a stipulated premium company may purchase in the

name of the company outstanding shares of the company's capital

stock as provided by the Texas Business Corporation Act.

(b) A purchase of stock under this section is not considered an

investment and does not violate the provisions of this code

relating to eligible investments for a stipulated premium

company.

(c) A stipulated premium company that purchases stock under this

section shall file with the department not later than the 10th

day after the date of the purchase a statement that contains the

name of each shareholder from whom the shares were purchased and

the sum of money paid for those shares.

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

2003.

Sec. 884.205. IMPAIRMENT OF CAPITAL STOCK. (a) If, when

computing the liabilities of a stipulated premium company under

this chapter, one-third or more of the company's capital stock

becomes impaired, the company shall correct the impairment not

later than the 60th day after the date the company becomes

subject to this subsection by:

(1) reducing the company's capital stock;

(2) adjusting the premium rate if permitted by policy contract;

or

(3) both reducing capital stock and adjusting the premium rate.

(b) If, when computing a stipulated premium company's reserve

liability under this chapter, 50 percent or more of the company's

capital stock becomes impaired, the commissioner may apply to a

court for the appointment of a receiver to wind up the affairs of

the company.

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

2003.

Amended by:

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

1309, Sec. 3, eff. September 1, 2009.

Sec. 884.206. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND

SURPLUS AMOUNTS. (a) The commissioner by rule may require a

stipulated premium company that writes or assumes life insurance,

annuity contracts, or accident and health insurance for a risk to

one person in an amount that exceeds $10,000 to maintain capital

and surplus in amounts that exceed the minimum amounts required

by this chapter because of:

(1) the nature and kind of risks the company underwrites or

reinsures;

(2) the premium volume of risks the company underwrites or

reinsures;

(3) the composition, quality, duration, or liquidity of the

company's investment portfolio;

(4) fluctuations in the market value of securities the company

holds; or

(5) the adequacy of the company's reserves.

(b) A rule adopted under Subsection (a) must be designed to

ensure the financial solvency of a stipulated premium company for

the protection of policyholders and may not require that the

total admitted assets of a company exceed 106 percent of its

total liabilities.

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

2003.

Sec. 884.207. NEW BUSINESS PROHIBITED WHEN CAPITAL REQUIREMENTS

NOT SATISFIED. (a) A stipulated premium company may not write

new business in this state unless the company possesses the

minimum capital required under this chapter.

(b) A stipulated premium company subject to Section 884.205(a)

that does not correct the impairment on or before the date

provided by that subsection may not write new business in this

state after that date until the impairment is corrected.

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

2003.

SUBCHAPTER F. GENERAL POWERS AND DUTIES OF STIPULATED PREMIUM

COMPANY

Sec. 884.251. DEPOSIT OF COMPANY'S FUNDS. (a) A director,

member of a committee, officer, or clerk of a stipulated premium

company who has the duty of handling or investing the company's

funds shall deposit or invest those funds in the corporate name

of the company.

(b) An individual described by Subsection (a) may not:

(1) borrow the funds of the stipulated premium company;

(2) have an interest in any way in a loan, pledge, security, or

property of the company, except as shareholder; or

(3) take or receive for the individual's use a fee, brokerage,

commission, gift, or other consideration for, or on account of, a

loan made by or on behalf of the company.

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

2003.

Sec. 884.252. PAYMENTS TO OFFICERS, DIRECTORS, AND EMPLOYEES.

(a) Unless first authorized by a vote of a stipulated premium

company's board of directors or a committee of the board that has

the duty of authorizing the payment, the company may not pay:

(1) any compensation or emolument to an officer or director of

the company; or

(2) compensation or emolument in an amount that exceeds $50,000

in any year to an individual, firm, or corporation that is not an

officer or director of the company.

(b) This section does not prevent a stipulated premium company

from contracting with its agents for the payment of renewal

commissions.

(c) The shareholders of a stipulated premium company may

authorize the creation of one or more plans for the payment of

pensions, retirement benefits, or group insurance for its

officers and employees. The shareholders may delegate to the

company's board of directors the power and duty to prepare,

effect, finally approve, administer, and amend a plan.

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

2003.

Sec. 884.253. DIVIDENDS. (a) A stipulated premium company may

declare or pay a dividend to its shareholders only from the

profits made by the company, not including surplus from the sale

of stock.

(b) A stipulated premium company may not pay a dividend, other

than a stock dividend, unless:

(1) any deficiency reserve under Section 884.453 has been

eliminated; and

(2) the capital of the company is maintained in an amount of at

least $100,000.

(c) A stipulated premium company that complies with Subsection

(b) may pay cash dividends in accordance with Sections 403.001

and 403.052.

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.080, eff. April 1, 2009.

Sec. 884.254. TRANSFER OF STOCK. (a) A stipulated premium

company's shares of stock are transferable on the company's

books, in accordance with law and the bylaws of the company, by

the owner or the owner's authorized agent.

(b) Each person who becomes a shareholder by a transfer of

shares succeeds to all rights of the former holder of those

shares, by reason of that ownership.

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

2003.

Sec. 884.255. USE OF CERTAIN TERMS IN ADVERTISING. A stipulated

premium company may not use in its advertising or representation

of a policy the words "legal reserve company," "stock company,"

"old line legal reserve company," or words of similar meaning

that might lead the public to believe that a policy provides

nonforfeiture values.

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

2003.

Sec. 884.256. ANNUAL STATEMENT; FILING FEE. (a) Except as

provided by Section 884.406, not later than March 31 of each year

a stipulated premium company shall:

(1) prepare a statement showing the condition of the company on

December 31 of the preceding year; and

(2) deliver the statement to the department accompanied by a

filing fee in the amount determined under Chapter 202.

(b) The statement must be under the oath of two of the

stipulated premium company's officers and must show in detail:

(1) the character of the company's assets and liabilities on

December 31 of the preceding year;

(2) the amount and character of business transacted and money

received during the year and how money was spent during the year;

(3) the number and amount of the company's policies in force on

that date; and

(4) the total amount of the company's policies in force on that

date.

(c) For purposes of Subsection (b), an insured under a family

group policy to which Section 884.451(b) applies is accounted for

only if a reserve is required for that insured under that

section.

(d) The department shall prescribe the form of the statement.

(e) Fees collected under this section shall be deposited to the

credit of the Texas Department of Insurance operating account.

Sections 201.001 and 201.002 apply to fees collected under this

section.

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.081, eff. April 1, 2009.

SUBCHAPTER G. POWERS AND DUTIES RELATING TO COVERAGES

Sec. 884.301. REINSURANCE OF POLICY. (a) A stipulated premium

company may reinsure on an individual indemnity policy basis any

risk or part of a risk that the company underwrites or assumes.

(b) The reinsurer must be a legal reserve company that:

(1) is authorized to write life, health, and accident insurance

in this state; and

(2) has capital and surplus in an amount of at least $200,000.

(c) After reinsuring under Subsection (a), a stipulated premium

company may take a credit for the reinsurance against the

aggregate reserves required by Subchapter J.

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

2003.

Sec. 884.302. LIMITS ON LIFE INSURANCE. (a) Until the amount

of the surplus of a stipulated premium company is at least

$50,000, the company may not insure one life for more than $1,000

in the event of death from natural causes or more than $2,000 in

the event of death from accidental causes, unless the company

reinsures the amount of coverage greater than that applicable

amount under Section 884.301.

(b) Subsection (a) does not apply to a policy of insurance

assumed by a stipulated premium company under Subchapter L.

(c) If the amount of the surplus of a stipulated premium company

is at least $50,000 but less than $200,000, the company shall

reinsure the insurance amount that exceeds $15,000 on a life

insurance risk on one life.

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

2003.

Sec. 884.303. ISSUANCE OF LIFE INSURANCE POLICIES BY CERTAIN

COMPANIES. (a) A stipulated premium company that possesses

capital and unencumbered surplus in a combined amount of at least

$100,000 may issue life insurance policies as authorized for a

company operating under Chapter 841.

(b) A stipulated premium company may not insure one life under

this section for more than $25,000, except as provided by Section

884.304 or Subchapter I.

(c) A stipulated premium company may issue a policy under this

section only on an endowment or limited pay basis.

(d) A stipulated premium company must reserve and reinsure a

policy issued under this section as required for a company

operating under Chapter 841.

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

2003.

Amended by:

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

1309, Sec. 4, eff. September 1, 2009.

Sec. 884.304. LIFE INSURANCE OF MORE THAN $25,000. (a) Except

as provided by this section, a stipulated premium company may not

assume liability on a life insurance risk on one life in an

amount that exceeds $25,000.

(b) If a stipulated premium company assumes a life insurance

risk under a life insurance policy, the initial death benefit of

$25,000 or less may increase to an amount greater than $25,000

subject to this section.

(c) For each policy year of a policy for which, after issuance,

the death benefit exceeds $25,000, the amount of the increase of

the death benefit at the end of that policy year from the end of

the preceding policy year may not exceed the greater of:

(1) the amount computed using the maximum rate of increase

provided by the policy, which rate may not exceed five percent a

year, compounded annually; or

(2) the amount computed using the consumer price index for all

urban consumers for all items and for all regions of the United

States combined, as determined by the United States Department of

Labor, Bureau of Labor Statistics, on September 30 of the year

preceding the year in which the policy year ends, compounded

annually.

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

2003.

Amended by:

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

1309, Sec. 5, eff. September 1, 2009.

Sec. 884.305. PREMIUMS ON LIFE INSURANCE POLICIES. The premiums

charged on a life insurance policy issued by a stipulated premium

company may not be less than the renewal net premium computed

under the reserve standard adopted by the stipulated premium

company and approved by the department.

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

2003.

Sec. 884.306. LIFE INSURANCE CONTRACT. A life insurance policy

issued by a stipulated premium company constitutes the entire

contract, except that if a copy of the application for the policy

is attached to the policy, the policy and application constitute

the entire contract.

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

2003.

Sec. 884.307. ISSUANCE OF ANNUITY CONTRACT. (a) A stipulated

premium company that possesses capital and unencumbered surplus

in a combined amount of at least $100,000 more than all of its

liabilities, including contingent liabilities, may issue annuity

contracts as authorized by Chapters 3 and 1701 and Title 7.

(b) The stipulated premium company shall maintain reserves on

the contracts in accordance with the statutes governing reserves

on equivalent contracts issued by a legal reserve company.

(c) A stipulated premium company that writes annuity contracts

under this section shall maintain capital and unencumbered

surplus in at least the combined amount required by Subsection

(a).

(d) A stipulated premium company that does not comply with

Subsection (c) is considered to be insolvent.

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.082, eff. April 1, 2009.

Sec. 884.308. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH INSURANCE

POLICIES. (a) A stipulated premium company may not assume

liability on or indemnify one person for any risk under one or

more accident, health, or hospitalization insurance policies, or

any combination of those policies in an amount that exceeds

$10,000, unless the amount of the issued, outstanding, and stated

capital of the company is at least $700,000.

(b) A stipulated premium company that before January 1, 2002,

ceases to assume liability on, or indemnify any risk under a

policy described by Subsection (a) in the amount specified by

Subsection (a), and notifies the commissioner of that action is

exempt from the requirements of Subsection (a) until the date the

company resumes writing those policies. A company that resumes

assuming liability on or indemnifying risks under these policies

shall comply with Subsections (a) and (c). For purposes of this

subsection, renewal of a policy is not considered to be writing a

policy.

(c) A stipulated premium company that is exempt under Subsection

(b) shall maintain its issued, outstanding, and stated capital in

an amount that is at least:

(1) $100,000, if the last date that the company writes a policy

described by Subsection (a) is before January 1, 1993;

(2) $160,000, if the last date that the company writes a policy

described by Subsection (a) is during 1993;

(3) $220,000, if the last date that the company writes a policy

described by Subsection (a) is during 1994;

(4) $280,000, if the last date that the company writes a policy

described by Subsection (a) is during 1995;

(5) $340,000, if the last date that the company writes a policy

described by Subsection (a) is during 1996;

(6) $400,000, if the last date that the company writes a policy

described by Subsection (a) is during 1997;

(7) $460,000, if the last date that the company writes a policy

described by Subsection (a) is during 1998;

(8) $520,000, if the last date that the company writes a policy

described by Subsection (a) is during 1999;

(9) $580,000, if the last date that the company writes a policy

described by Subsection (a) is during 2000; and

(10) $640,000, if the last date that the company writes a policy

described by Subsection (a) is during 2001.

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

2003.

Sec. 884.309. ADJUSTMENT OF PREMIUMS. (a) The board of

directors of a stipulated premium company by resolution may,

subject to this chapter, increase or otherwise adjust a rate of

premium on any insurance policy it issues, reinsures, or assumes

when, in the board's discretion, the adjustment is necessary.

(b) In making a comprehensive adjustment of one or more classes

of the stipulated premium company's policies, the board of

directors may provide that an insured who is required to pay an

increased premium may choose to pay a part or none of the amount

of the increase and receive a reduction of the corresponding

insurance benefits proportionate to the value of the unpaid part

of the increase.

(c) This section does not apply to a policy:

(1) issued by a stipulated premium company that on the date the

policy is issued possesses an unencumbered surplus in an amount

of at least $50,000;

(2) on which the stipulated premium company has relinquished the

right to adjust rates; and

(3) under which the premium for life insurance requires the

payment of a premium for life insurance that alone is sufficient

to maintain reserves at least equal to those computed on the

basis of the 1958 Commissioners Standard Ordinary Table of

Mortality with interest not to exceed 3-1/2 percent a year.

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

2003.

Sec. 884.310. AGENT. Each agent of a stipulated premium company

must be licensed under Title 13.

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

2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.221(a),

eff. Sept. 1, 2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.083, eff. April 1, 2009.

Sec. 884.311. LAW GOVERNING INVESTMENTS; ELECTION. (a) A

stipulated premium insurance company issuing life, health, or

accident coverages or maintaining policies in force that were

issued in accordance with Subchapter I may elect that the

company's investments and transactions be governed by Subchapter

C, Chapter 425.

(b) The election under Subsection (a) must be made by written

notice to the commissioner and is effective on the first day of

the calendar quarter following the day on which the notice is

filed with the commissioner.

(c) After the second anniversary of the effective date of an

initial election authorized by this section, the stipulated

premium insurance company may elect that the company's

investments and transactions be governed by Sections

425.203-425.228.

(d) The subsequent election under Subsection (c) must be made by

written notice to the commissioner and is effective on the first

day of the calendar quarter following the day on which the notice

is filed with the commissioner.

(e) After a stipulated premium insurance company has made a

subsequent election under Subsection (c), the company may make

another election under this section, subject to the approval of

the election by the commissioner.

Added by Acts 2003, 78th Leg., ch. 487, Sec. 1, eff. Sept. 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.084, eff. April 1, 2009.

SUBCHAPTER H. CONTENTS OF APPLICATIONS AND POLICIES

Sec. 884.351. GENERAL REQUIREMENTS FOR POLICY AND APPLICATION

FORMS. (a) Each stipulated premium company policy or

application form must contain on its face immediately after the

name of the company "A Stipulated Premium Company."

(b) A stipulated premium company shall provide for an adjustment

of the premium rate on the insurance contract in each insurance

policy it issues, reinsures, or assumes that is subject to a

premium adjustment under Section 884.309. Each policy subject to

a premium adjustment under that section must contain on the front

of the policy a statement that the premium is subject to

readjustment.

(c) A stipulated premium company's policy of insurance may not

contain "Approved by the Commissioner of Insurance" or words of a

similar meaning.

(d) A life insurance policy issued by a stipulated premium

company or an application for the policy may not contain language

or be in a form that misleads the policyholder or applicant about

the kind of insurance offered or the rights or benefits of the

policyholder or applicant.

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

2003.

Sec. 884.352. REQUIREMENTS FOR ACCIDENT, HEALTH, AND

HOSPITALIZATION INSURANCE POLICIES. An accident, health, or

hospitalization insurance policy issued, reinsured, or assumed by

a stipulated premium company must contain a premium

redetermination clause that permits the company's board of

directors to adjust the premium rate.

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

2003.

Sec. 884.353. LIFE INSURANCE APPLICATION FORMS. (a) An

application for a life insurance policy issued by a stipulated

premium company must be signed by the applicant. If the applicant

is a minor, the application may be signed by a parent or

guardian.

(b) The application for a policy that provides that a

misstatement relating to the applicant's health or physical

condition may void the policy within the contestable period must

state that provision in language approved by the department. The

statement must be in not less than 10-point type.

(c) In the absence of fraud each statement in an application is

regarded as a representation and not a warranty.

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

2003.

Sec. 884.354. LIFE INSURANCE POLICY FORMS; INCONTESTABILITY.

(a) Each life insurance policy issued by a stipulated premium

company must state on the front page:

(1) the amount of death benefit to be paid; and

(2) the circumstances or conditions under which the benefit is

to be paid.

(b) Each condition of a life insurance policy must be stated in

the policy.

(c) A life insurance policy must provide that a policy in force

for two years becomes incontestable, except for nonpayment of

premiums, on the second anniversary of the date of issuance, if

the insured does not die before that date.

(d) A life insurance policy must provide that if the age of the

insured is misstated, the amount of insurance is the amount that

the premium paid would have purchased if the age had been stated

correctly, based on premium rates in effect when the insured

dies.

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

2003.

Sec. 884.355. DESIGNATION OF BENEFICIARIES. The designation of

a beneficiary under a life insurance policy issued by a

stipulated premium company must comply with Subchapter B, Chapter

1103, and Subchapter A, Chapter 1104.

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

2003.

Sec. 884.356. LIFE INSURANCE BENEFIT REDUCTIONS OR INCREASES.

(a) A life insurance policy may provide for reduced benefits if

the insured:

(1) dies or is injured while engaged in:

(A) military, naval, or aerial service or aerial flight during

peace or war; or

(B) a hazardous occupation specified in the policy; or

(2) dies by the insured's own hand, regardless of whether the

insured is sane or insane.

(b) The front page of a life insurance policy must call

attention to any reduction or exclusion of benefits provided by

the policy. The circumstances or conditions under which the

reduction or exclusion applies must be stated plainly in the

policy.

(c) If a policy that provides natural death benefits contains a

provision for reducing the greatest death benefit provided by the

policy for a specified insured for a reason other than a reason

specified by Subsection (a):

(1) the reduced death benefit for the insured must at all times

when the reduction is in effect equal or exceed 120 percent of

the total premium paid on that policy by the insured; and

(2) the reduction must end before the fifth anniversary of the

date the policy is issued.

(d) Subsection (c) does not apply to a life insurance policy on

which the reduction of the death benefit does not apply at the

time of the death of the insured.

(e) If a life insurance policy provides for an increase of the

initial amount of the death benefit for a specified insured one

or more times during the first five years of the policy, the

amount of death benefit for the insured must at all times during

the period of the increasing benefit equal at least 120 percent

of the premiums paid on that policy by the insured during the

period of the increase.

(f) Subsection (e) does not apply to a life insurance policy

that has been in force for more than five years from the date the

policy is issued.

(g) This section does not apply to a family group life insurance

policy described by Section 884.451(b).

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

2003.

Sec. 884.357. FORM APPROVAL. The approval of a form of an

insurance policy issued by a stipulated premium company is

governed by Chapter 1701.

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.085, eff. April 1, 2009.

SUBCHAPTER I. AUTHORITY TO ISSUE OTHER COVERAGE

Sec. 884.401. AUTHORITY CUMULATIVE. The authority provided by

this subchapter is in addition to the authority provided by this

chapter for the issuance of other insurance coverage.

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

2003.

Sec. 884.402. ADDITIONAL COVERAGE. A stipulated premium company

that, at the time it begins to issue coverages under this

subchapter, possesses the amounts of capital and unencumbered

surplus equal to or greater than the corresponding amounts

required for organization of a life and health company under

Sections 841.052, 841.054, 841.204, 841.205, 841.301, and 841.302

may, subject to Section 884.403:

(1) issue any kind of life insurance coverage authorized by

Chapter 3, 841, or 1701 or Title 7;

(2) issue any kind of health or accident insurance coverage

authorized by:

(A) Title 7;

(B) Chapter 3, 704, 841, 846, 982, 1201, 1202, 1203, 1210, 1251,

1252, 1253, 1254, 1301, 1351, 1354, 1359, 1364, 1368, 1501, 1504,

1505, 1506, 1552, 1575, 1576, 1579, 1581, 1625, 1651, 1652, or

1701;

(C) Chapter 492, other than Sections 492.051(b) and (c);

(D) Subchapter B, Chapter 38, Subchapter D, Chapter 425,

Subchapter A or F, Chapter 1204, Subchapter A, Chapter 1273,

Subchapter A, B, or D, Chapter 1355, Subchapter A, Chapter 1366,

Subchapter A, Chapter 1507;

(E) Section 1204.151, 1204.153, 1204.154, or 1451.051; or

(F) Chapter 177, Local Government Code; or

(3) issue life insurance coverage through policies without cash

surrender values or nonforfeiture values and that exceed $10,000

on one life.

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.086, eff. April 1, 2009.

Sec. 884.403. POLICY REQUIREMENTS. (a) A policy issued under

Section 884. 402(1) or (2) must be reserved and must comply with

the law, including rules, applicable to a policy issued by a

company authorized to engage in or engaging in the business of

insurance under Chapter 841.

(b) A policy of life insurance issued under Section 884.402(3):

(1) must be reserved in accordance with a reserve table adopted

by the department as appropriate for that type of policy;

(2) must contain:

(A) on its first page, a notice that the policy does not provide

cash surrender values or other paid up nonforfeiture benefits or

loan values; and

(B) provisions for a grace period for the payment of each

premium after the first payment during which the policy remains

in force; and

(3) may not be approved until the commissioner has adopted the

standard of valuation, including an appropriate mortality table

and interest rate.

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

2003.

Sec. 884.404. CAPITAL AND SURPLUS REQUIREMENTS. (a) A

stipulated premium company that issues any insurance coverage

under this subchapter shall maintain at all times the capital and

unencumbered surplus required under Section 884.054.

(b) A stipulated premium company that does not comply with this

section is considered to be impaired unless it reinsures all

insurance coverages written under this subchapter with a company

that:

(1) is authorized to engage in the business of insurance in this

state under this chapter or Chapter 841 or 882 or is an accident

insurance company, health insurance company, or life insurance

company authorized to engage in the business of insurance in this

state under Chapter 982, as appropriate; and

(2) complies with the requirements prescribed by this

subchapter.

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

2003.

Amended by:

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

1309, Sec. 6, eff. September 1, 2009.

Sec. 884.405. AGENT; LICENSE. (a) An agent may not solicit or

write any coverage authorized by this subchapter unless the

agent:

(1) holds a license issued under Chapter 4054; and

(2) is appointed by the stipulated premium company for which the

agent is soliciting and writing coverage under this subchapter.

(b) The commissioner may issue under Chapter 4054 a license for

an agent to solicit and write any coverage authorized by this

subchapter for a stipulated premium company. Chapter 4054

applies to the stipulated premium company as if the company were

a legal reserve life insurance company.

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.087, eff. April 1, 2009.

Sec. 884.406. ANNUAL STATEMENT. A stipulated premium company

that issues or maintains in force policies under this subchapter

shall file the annual statement required by Section 884.256 not

later than March 1 of each year.

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

2003.

Sec. 884.407. RELATIONSHIP OF SUBCHAPTER TO OTHER PROVISIONS OF

CHAPTER. (a) Section 884.305 and Subchapter J do not apply to a

policy issued under this subchapter.

(b) The provisions of Sections 884.309 and 884.351 relating to

the adjustment of premiums do not apply to a life insurance

policy issued under this subchapter.

(c) The department may not consider losses sustained by a

stipulated premium company on a policy issued under this

subchapter when applying Section 884.206 or 884.308 to the

company's life insurance policies not issued under this

subchapter.

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

2003.

Sec. 884.408. IMPLEMENTATION OF SUBCHAPTER. The commissioner

shall adopt reasonable rules to implement this subchapter,

including:

(1) rules adopting mortality and reserving tables required by

Sections 884.403(b)(1) and (3); and

(2) reasonable and necessary rules for the content, form, and

style of the notice and terms of the grace period required under

Section 884.403(b)(2).

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

2003.

SUBCHAPTER J. RESERVES

Sec. 884.451. RESERVES ON INDIVIDUAL AND GROUP LIFE INSURANCE

POLICIES. (a) A stipulated premium company shall maintain

reserves on each of its individual life insurance policies in

accordance with the reserve standard adopted by the company and

approved by the department. The standard must provide reserves

that in the aggregate are equal to at least the reserve amounts

computed using the 1956 Chamberlain Reserve Table with interest

that does not exceed 3-1/2 percent per year. A stipulated premium

company may use the 1956 Chamberlain Reserve Table.

(b) A stipulated premium company shall maintain reserves on

family group life insurance policies on which a group premium is

charged and under which the amount of a benefit depends on the

sequence of deaths. The amount of the reserves must be equal to

the reserves that would be required under Subsection (a) on

individual life insurance policies on the lives of:

(1) the two oldest living members of the family group, with the

amount of insurance for those two members determined assuming

that the elder of the two will die first; or

(2) the living members of the family group, with the amount of

insurance for each member of the family group determined assuming

that each member will die first.

(c) A stipulated premium company may select the method to be

used to compute the amount of the reserves under Subsection (b).

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

2003.

Sec. 884.452. RESERVES ON ACCIDENT AND HEALTH INSURANCE

POLICIES. A stipulated premium company shall maintain reserves

on each accident and health insurance policy issued by the

company in the manner required of a company authorized to issue

that type of policy under Chapter 841.

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

2003.

Sec. 884.453. DEFICIENCY RESERVE. (a) On the effective date of

a direct reinsurance agreement under Subchapter L, the stipulated

premium company shall compute:

(1) the amount of the reserves required under this chapter on

the policies assumed under the agreement; and

(2) the amount of the net assets transferred to the stipulated

premium company under the agreement.

(b) If the amount of the net assets transferred is not equal to

the amount of the required reserve, the difference shall be

designated and carried as a deficiency reserve. The deficiency

reserve does not create insolvency of the stipulated premium

company if the company, beginning with the first calendar year

that begins after the effective date of the direct reinsurance

agreement, reduces the computed deficiency amount, including

interest at the assumed rate, by at least 10 percent during each

year as computed on December 31 of that year. The reduction must

result in the deficiency reserve being eliminated on December 31

of the year for which the 11th annual statement is filed after

the company enters into the direct reinsurance agreement. The

required reduction in the deficiency reserve may not exceed the

cumulative aggregate amount of 10 percent a year.

(c) If in any year a stipulated premium company has not reduced

its deficiency reserve as required by Subsection (b), the

company's board of directors by appropriate action shall increase

premium rates by advancing the age of each insured at the date

the insured's policy is issued or otherwise equitably adjust

premium rates to correct that failure. The board shall take that

action not later than the 30th day after the date the reserves

are computed.

(d) If the board does not comply with Subsection (c), the

stipulated premium company is considered to be insolvent for

purposes of this chapter.

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

2003.

Sec. 884.454. COMMISSIONER'S COMPUTATION OF RESERVE LIABILITY.

(a) As soon as practical each year, the department shall compute

the reserve liability of each stipulated premium company that has

outstanding insurance policies.

(b) To make the computations, the department:

(1) shall use the net premium basis in accordance with the

reserve table and interest rate adopted by the stipulated premium

company and approved by the commissioner; and

(2) may use group methods and approximate averages for fractions

of a year.

(c) The reserve liability may be computed on not more than a

one-year preliminary term with allowance for any deficiency

reserve under Section 884.453.

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

2003.

Sec. 884.455. REQUIRED SECURITIES. The commissioner shall

require that a stipulated premium company have securities of the

class and character required by Sections 425.203-425.228 in the

amount of the reserve liability computed for the company under

Section 884.454 less any deficiency reserve under Section 884.453

after all the debts and claims against the company and the

minimum capital required by this chapter have been applied.

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.088, eff. April 1, 2009.

Sec. 884.456. INCREASE OF RESERVES. (a) If a stipulated

premium company does not have the reserves required by this

subchapter and the minimum capital required under this chapter,

the company's board of directors by appropriate action shall

increase premium rates on policies in force by advancing the age

of each insured at the date the insured's policy is issued or

otherwise equitably adjust premium rates to correct the reserve

inadequacy. The board shall take that action not later than the

30th day after the date the reserves are computed.

(b) If the board of directors does not comply with Subsection

(a), the stipulated premium company is treated as if the company

had not corrected an impairment under Section 884.205(a).

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

2003.

SUBCHAPTER K. DIRECT REINSURANCE AGREEMENTS

Sec. 884.501. DIRECT REINSURANCE AGREEMENTS BETWEEN STIPULATED

PREMIUM COMPANIES. (a) Stipulated premium companies organized

under this chapter may enter into a total or partial direct

reinsurance agreement if the company assuming the policies under

the agreement is authorized to transact the kinds of insurance

provided by those policies.

(b) Before a stipulated premium company may enter into a total

direct reinsurance agreement:

(1) the company must submit the agreement to the department; and

(2) the department must approve the agreement as fully

protecting the interests of all the holders of policies being

assumed.

(c) A partial direct reinsurance agreement shall be filed with

the department before the effective date of the agreement.

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

2003.

Sec. 884.502. DIRECT REINSURANCE AGREEMENT WITH LEGAL RESERVE

COMPANY. (a) A stipulated premium company may enter into a

total or partial direct reinsurance agreement with a legal

reserve life insurance company authorized to engage in the

business of insurance in this state.

(b) Before a reinsurance agreement under this section may take

effect, it must be:

(1) approved by a majority vote of the board of directors of

each company;

(2) submitted to the department; and

(3) approved by the department as complying with Section 884.503

or 884.504, as applicable.

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

2003.

Sec. 884.503. DIRECT REINSURANCE OF ACCIDENT OR HEALTH INSURANCE

POLICIES. (a) In the direct reinsurance of a stipulated premium

accident or health insurance policy under Section 884.502, the

company assuming the policy under the agreement must assume the

exact obligations of the policy.

(b) If a policy is non-cancellable or guaranteed renewable, the

assuming company may include in the assumption certificate a

premium redetermination clause instead of the clause required by

Section 884.352.

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

2003.

Sec. 884.504. DIRECT REINSURANCE OF CERTAIN POLICIES. (a) A

reinsurance agreement authorized by Section 884.502 for the

direct reinsurance of life insurance policies or a combination of

life and accident or health insurance policies must contain

provisions that comply with this section.

(b) If the legal reserve life insurance co