STIPULATED PREMIUM INSURANCE COMPANIES

Tex. INS Code ch. 884

in effect

Tex. INS Code § 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.

Tex. INS Code § 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 493 , other than Section 493.051 (b); (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 (Title 12, Government Code) 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.

Tex. INS Code § 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

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1309 (H.B. 2570 ), Sec. 1, eff. September 1, 2009.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1022 (H.B. 4291 ), Sec. 14, eff. June 19, 2009.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1022 (H.B. 4291 ), Sec. 15, eff. June 19, 2009.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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

Tex. INS Code § 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.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1309 (H.B. 2570 ), Sec. 2, eff. September 1, 2009.

Tex. INS Code § 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 (Title 12, Government Code), 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.

Tex. INS Code § 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.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1309 (H.B. 2570 ), Sec. 3, eff. September 1, 2009.

Tex. INS Code § 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.

Tex. INS Code § 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

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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. SUBCHAPTER G. POWERS AND DUTIES RELATING TO COVERAGES

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1309 (H.B. 2570 ), Sec. 4, eff. September 1, 2009.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1309 (H.B. 2570 ), Sec. 5, eff. September 1, 2009.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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. SUBCHAPTER H. CONTENTS OF APPLICATIONS AND POLICIES

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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. SUBCHAPTER I. AUTHORITY TO ISSUE OTHER COVERAGE

Tex. INS Code § 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.

Tex. INS Code § 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 , 1552 , 1575 , 1576 , 1579 , 1581 , 1625 , 1651 , 1652 , or 1701 ; (C) Chapter 493 , other than Section 493.051 (b); (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 , or 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.

Tex. INS Code § 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.

Tex. INS Code § 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. Acts 2009, 81st Leg., R.S., Ch. 1309 (H.B. 2570 ), Sec. 6, eff. September 1, 2009.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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.

Tex. INS Code § 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 company is the reinsurer and issues an assumption certificate providing whole life coverage for the life benefit, the policyholder is not entitled to receive the policyholder's individual reserve in cash by surrendering the assumption certificate. (c) If the reserves and premium under the stipulated premium policy are inadequate to provide whole life coverage under the legal reserve assumption certificate and a term coverage assumption is made available, each affected policyholder must be allowed to select: (1) payment in cash of the amount of the individual reserve, reduced by the deficiency reserve, if any, to the policyholder on surrender of the policy; (2) an assumption certificate of another stipulated premium company engaging in the business of insurance under this chapter; or (3) the legal reserve life insurance company's assumption certificate for term coverage that is renewable for the life of the insured without evidence of insurability and the rate for which is based on the legal reserve table selected by the assuming company at the attained age of the insured on the date of the renewal increased by an appropriate expense factor. (d) To exercise the option described by Subsection (c)(1) the policyholder must request that option not later than the 60th day after the date that the notice of the options available to the policyholder is mailed. A policyholder is entitled to exercise the option under Subsection (c)(2) or (3) not later than the 60th day after the date the assumption certificate of the legal reserve life insurance company is mailed to the policyholder. (e) If the legal reserve life insurance company makes term coverage available, the company shall use each policyholder's individual reserve, less the amount of the deficiency, if any, as: (1) a reserve credit to permit the legal reserve assumption certificate to be backdated to the earliest date the reserve credit allows; or (2) an annuity to reduce the required premium during the initial period of the term coverage. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.505. EFFECT OF TOTAL DIRECT REINSURANCE AGREEMENT.

(a) A stipulated premium company that enters into a total direct reinsurance agreement under Section 884.501 or 884.502 under which it is the ceding company shall promptly surrender its certificate of authority to the department. (b) The stipulated premium company's shareholders and board of directors shall effect the company's dissolution. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.506. ASSUMPTION CERTIFICATE.

The company assuming a policy under a partial direct reinsurance agreement shall issue to the holder of the assumed policy an assumption certificate to be attached to the policy. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. SUBCHAPTER L. DIRECT REINSURANCE AGREEMENTS WITH MUTUAL ASSESSMENT COMPANIES

Tex. INS Code § 884.551. DEFINITIONS.

In this subchapter: (1) "Mutual assessment company" means any entity regulated under Chapter 887 or 888 . (2) "Net assets" means a company's funds that are available for the payment of the company's obligations in this state, including uncollected premiums that are not more than three months past due, after the deduction of all unpaid losses and claims, claims for losses, and all other debts. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.552. AUTHORITY TO CONTRACT.

A mutual assessment company may enter into a direct reinsurance agreement with a stipulated premium company in accordance with this subchapter. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.553. REINSURANCE AGREEMENT.

(a) A reinsurance agreement under this subchapter must provide that the stipulated premium company is to assume the policies of the mutual assessment company. (b) The reinsurance agreement must provide for the computation, on the effective date of the agreement, of: (1) the amount of the net assets, including mortuary and expense funds, of the mutual assessment company that is to be transferred to the stipulated premium company after the payment of all liabilities; (2) the amount of the required reserves to be established under the reserve and interest table used in the agreement; and (3) the amount of any deficiency reserve resulting from the computation of Subdivisions (1) and (2). (c) The deficiency reserve is subject to Section 884.453 , except that instead of reducing the deficiency as required by that section, the reinsurance agreement may provide for immediate premium rate adjustments, in accordance with accepted actuarial practices and standards, to eliminate the deficiency at the time of reinsurance or during the period allowed for eliminating the deficiency under Section 884.453 . (d) For purposes of computing the reserves of members of a mutual assessment company, the total net assets of the company shall be apportioned among the members assessed. The percentage of the total amount of the net assets allotted to a member is computed by dividing the amount of the required reserve for that member insured under the reinsurance agreement by the total amount of the required reserve for all members under the agreement. (e) The reinsurance agreement must provide that each policyholder who is dissatisfied with the agreement and who does not want to accept the assumption certificate offered by the stipulated premium company is entitled to receive the amount of the reserve under the policyholder's policy reduced by the amount of any deficiency reserve applicable to the policy. The policyholder must make a written request for that option to the stipulated premium company not later than the 60th day after the date the assumption certificate is mailed. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.554. APPROVAL BY DEPARTMENT.

(a) A mutual assessment company's board of directors may determine by a majority vote to submit a proposed direct reinsurance agreement to the members of the company. Before the agreement may be submitted to the members, the board must prepare detailed plans for the reinsurance and must submit the agreement to the department. (b) If the department determines that the proposed direct reinsurance agreement complies with this chapter, the department shall approve the agreement for submission to the members of the company. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.555. MEMBERS MEETING; NOTICE.

(a) After the department approves a proposed direct reinsurance agreement, the board of directors of the mutual assessment company shall: (1) call a meeting of the company's members in accordance with the company's bylaws for voting on ratification of the direct reinsurance agreement; and (2) mail to each member: (A) a copy of the proposed agreement; and (B) a copy of the notice of the meeting. (b) The meeting may not be held before the 16th day after the date on which the copies are mailed under Subsection (a)(2). Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.556. MEMBERS MEETING; PROCEDURES.

(a) In a meeting called under Section 884.555 , a member may vote in person, by proxy to whomever the member designates, or by mail. (b) All votes must be cast by ballot. A two-thirds vote of the members participating in the election is required to ratify the reinsurance agreement. (c) The person presiding at the meeting shall supervise and direct the procedure of the meeting and shall appoint an adequate number of inspectors to conduct the voting at the meeting. (d) The inspectors may determine all questions concerning the qualifications of the voters and the verification, canvassing, and validity of the ballots. (e) At the conclusion of the meeting, the inspectors shall certify under oath the result of the election to the department and to the stipulated premium company that is a party to the proposed agreement. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.557. SUBMISSION OF MEETING FACTS TO DEPARTMENT.

Not later than the 90th day after the date of the meeting of the members, all facts relating to the meeting, including the accounting of the meeting and the computation of the required reserves, shall be submitted under oath to the department. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.558. EFFECTIVE DATE OF AGREEMENT.

A direct reinsurance agreement that is ratified under Section 884.556 takes effect on the date specified in the agreement. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.559. ACTION AFTER AGREEMENT RATIFICATION.

(a) After ratification of the reinsurance agreement under Section 884.556 , the mutual assessment company shall cease doing business and shall transfer all of its assets to the assuming stipulated premium company. (b) The stipulated premium company shall assume: (1) all policy liability in accordance with the reinsurance agreement; and (2) all other liabilities in accordance with the method of payment of those liabilities. (c) On transfer of a mutual assessment company's assets: (1) the company shall promptly surrender its certificate of authority and charter to the department; and (2) the company's corporate existence ceases. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.560. ASSUMPTION CERTIFICATE.

Immediately after ratification of the reinsurance agreement under Section 884.556 , the stipulated premium company shall issue to each member of the mutual assessment company an assumption certificate that states: (1) the terms of the assumption; and (2) the reserve and interest table under which the policy is assumed. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.561. ADJUSTMENT OF LIFE INSURANCE PREMIUMS.

(a) If the premium charged on a life insurance policy assumed by the stipulated premium company is less than the renewal net premium computed under the reserve standard adopted in the reinsurance agreement, the stipulated premium company shall adjust the premium rate to provide an amount that is at least equal to the renewal net premium based on the age of the insured on the date the policy was issued by the mutual assessment company. (b) Notwithstanding Subsection (a), if the gross premium charged on a family group policy reinsured by a stipulated premium company is less than the renewal net premium for that policy, the stipulated premium company may choose to not adjust the rate if: (1) the deficiency reserve of the business of the mutual assessment company is less than 25 percent of the required reserve on the business to be reinsured, including the deficiency premium reserve required by Subdivision (3); (2) at the time of reinsurance, the gross premium of all family group policies to be reinsured by the stipulated premium company is in the aggregate equal to at least 120 percent of the required net premiums on those family group policies; and (3) the stipulated premium company maintains on that policy, in addition to any other reserve required by law, a deficiency premium reserve that is equal to the present value, computed using the reserve standard adopted in the reinsurance agreement, of an annuity, the amount of which is equal to the difference between the premium charged and that net premium and the term of which in years is equal to the number of annual premiums for the remainder of the premium paying period. (c) The deficiency premium reserve required by Subsection (b)(3) is a part of the company's deficiency reserve and shall be reduced in the manner provided by Section 884.453 . Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.562. APPROVAL OF RATE ADJUSTMENT.

A stipulated premium company may not adjust a life insurance premium rate under this subchapter before: (1) obtaining the approval of the department; and (2) providing notice to the policyholder. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003. SUBCHAPTER M. CONVERSION TO LEGAL RESERVE COMPANY

Tex. INS Code § 884.601. AUTHORIZATION TO CONVERT.

(a) The shareholders of a stipulated premium company that possesses capital in an amount equal to at least $700,000, unencumbered surplus in an amount equal to at least $700,000, and sufficient reserves on hand for the company's policies as required under provisions of Chapter 425 , other than Sections 425.002-425.005, may convert the company to a legal reserve company that operates under Chapter 841 by complying with each requirement applicable to a company operating under that chapter. (b) The department may approve the conversion only after determining that the converting company has complied with the requirements applicable to that company under Subsection (a). Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.602. ASSUMPTION CERTIFICATE.

(a) Not later than the 30th day after the date of a conversion under this subchapter, the converted company shall issue to each policyholder an assumption certificate by which the policy liability is assumed by the converted company. (b) The certificate must contain all of the provisions applicable to a policy issued by a company operating under Chapter 841 . Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Tex. INS Code § 884.603. EXEMPTION FROM CAPITAL AND SURPLUS REQUIREMENTS.

(a) A stipulated premium company is exempt from the capital and surplus requirements of Section 884.601 (a) if the company: (1) was organized before September 1, 1989; (2) possesses capital in an amount equal to at least $100,000 and unencumbered surplus in an amount equal to at least $100,000; and (3) converted to a company that operates under Chapter 841 before September 1, 1999. (b) A stipulated premium company that is exempt under Subsection (a) shall immediately increase its capital and surplus to amounts that satisfy Section 884.601 (a) on: (1) a change of control of at least 50 percent of the voting securities of the converted company; or (2) if the converted company or the holding company that controls the converted company, if any, is not controlled by voting securities, a change of at least 50 percent of the ownership of the converted company or its holding company. (c) For purposes of Subsection (b), a transfer of ownership that occurs because of death, regardless of whether the decedent died testate or intestate, may not be considered a change in the control of a converted stipulated premium company or holding company if ownership is transferred solely to one or more individuals, each of whom would be 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. SUBCHAPTER O. GENERAL FINANCIAL REGULATION

Tex. INS Code § 884.701. HAZARDOUS FINANCIAL CONDITION, SUPERVISION, CONSERVATORSHIP, AND LIQUIDATION.

Subchapter A , Chapter 404 , and Chapters 441 and 443 apply to a stipulated premium company engaged in the business of insurance in this state. Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Source: TX Statutes (Official Site)URL: https://statutes.capitol.texas.gov/Fetched: 6/29/2026