Texas Insurance Code - Not Codified
CHAPTER 3. LIFE, HEALTH AND ACCIDENT INSURANCECode Resources
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INSURANCE CODE - NOT CODIFIED CHAPTER 3. LIFE, HEALTH AND ACCIDENT INSURANCE SUBCHAPTER A. TERMS DEFINED; DOMESTIC COMPANIES Art. 3.10. MAY REINSURE.Article repealed effective April 1, 2007 (a) Any insurer authorized to do the business of insurance in this state may reinsure in any solvent assuming insurer, any risk or part of a risk which both are authorized to assume; provided, however, no credit for reinsurance, either as an asset or a deduction of liability, may be taken by the ceding insurer except as provided in this article, and, provided further, no insurer operating under Section 2(a) of Article 3.02 shall reinsure any risk or part of a risk with any insurer which is not licensed to engage in the business of insurance in this state. This article applies to all insurers regulated by the State Board of Insurance, including any stock and mutual life, accident, and health insurers, fraternal benefit societies, health maintenance organizations operating under the Texas Health Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance Code), and nonprofit hospital, medical, or dental service corporations, including companies subject to Chapter 20 of this code. No such insurer shall have the power to reinsure its entire outstanding business to an assuming insurer unless the assuming insurer is licensed in this state and until the contract therefor shall be submitted to the Commissioner and approved by him as protecting fully the interests of all policy holders. This article does not apply to ceding insurers domiciled in another state that regulates credit for reinsurance under statutes, rules, or regulations substantially similar in substance or effect to this article. To qualify for this exception, the ceding insurer must provide the Commissioner on request with evidence of the similarity in the form of statutes, rules, or regulations, and an interpretation of the statutes, rules, or regulations and the standards used by the state of domicile. This article is supplementary to and cumulative of other provisions of this code and other insurance laws of this state relating to reinsurance to the extent those provisions are not in conflict with this article. (b) Credit for reinsurance shall be allowed a ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when: (1) the reinsurance is ceded to an assuming insurer which is licensed to transact insurance or reinsurance in this state; or (2) the reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this state. An accredited reinsurer is one which: submits to this state's jurisdiction; submits to this state's authority to examine its books and records; is domiciled and licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state; files annually a copy of its annual statement, filed with the insurance department of its state of domicile, with the State Board of Insurance; and maintains a surplus as regards policy holders in an amount not less than $20 million; or (3) the reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution, as defined in Subsection (e)(2), for the payment of the valid claims of its United States policy holders and ceding insurers, their assigns, and successors in interest. The trusteed assuming insurer shall report annually not later than March 1 to the State Board of Insurance information substantially the same as that required to be reported on the NAIC Annual Statement form by licensed insurers to enable the State Board of Insurance to determine the sufficiency of the trust fund. In the case of a single assuming insurer, the trust shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, include a trusteed surplus of not less than $20 million. In the case of a group of insurers, which group includes unincorporated individual insurers, the trust shall consist of a trusteed account representing the group's liabilities attributable to business written in the United States and, in addition, include a trusteed surplus of not less than $100 million and the group shall make available to the State Board of Insurance an annual certification by the group's domiciliary regulator and its independent public accountants of the solvency of each underwriter. Such trust shall be established in a form approved by the State Board of Insurance. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in the trustees of the trust for its United States policy holders and ceding insurers, their assigns, and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the State Board of Insurance. The trust described herein must remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust. Not later than February 28 of each year the trustees of the trust shall report to the State Board of Insurance in writing setting forth the balance of the trust and listing the trust's investments at the preceding year end and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31; or (4) the reinsurance is ceded to an assuming insurer not meeting the requirements of Subdivision (1), (2), or (3), but only with respect to the insurance of risks located in a jurisdiction where such reinsurance is required by applicable law or regulation of that jurisdiction to be ceded to an assuming insurer that does not meet the requirements of Subdivision (1), (2), or (3) of this subsection. (c) If the assuming insurer is not licensed or accredited to transact insurance or reinsurance in this state, the credit permitted by Subsection (b)(3) of this article shall not be allowed unless the assuming insurer agrees in the reinsurance agreements: (1) that in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any State of the United States, will comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or of any Appellate Court in the event of an appeal; and (2) to designate the State Board of Insurance or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the ceding company. This provision, however, is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement. (d) Any asset or reduction from liability for the reinsurance ceded to an assuming insurer not meeting the requirements of Subsection (b) shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer, and such asset or reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder, if such security is held in the United States subject to withdrawal solely by and under the exclusive control of the ceding insurer or, in the case of a trust, held in a qualified United States financial institution, as defined in Subsection (e). This security may be in the form of: (1) cash; (2) securities readily marketable over a national exchange with a maturity date of not later than one year listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets; (3) clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States financial institution, as defined in Subsection (e)(1). Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification, or amendment, whichever first occurs; provided, however, the letter of credit must be replaced within three months after the date of the institution's failure to meet applicable standards of issuer acceptability. (4) any other form of security acceptable to the Commissioner. (e) Qualified United States Financial Institutions. (1) For the purposes of Subsection (d)(3), a "qualified United States financial institution" means an institution that: (A) is organized or, in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state thereof; (B) is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and (C) has been determined by either the Commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Commissioner. (2) A "qualified United States financial institution" means, for the purposes of those provisions of this law specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that: (A) is organized, or, in the case of a United States branch or agency office of a foreign banking organization, licensed, under the laws of the United States or any state thereof and has been granted the authority to operate with fiduciary powers; and (B) is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies. (f) The Board may adopt rules and regulations implementing the provisions of this law. (g) Subsections (a) through (f) of this article shall apply to all reinsurance agreements having an inception, anniversary, or renewal date not less than four months after the effective date of this statute. (h) A person does not have any rights against a reinsurer that are not specifically set forth in the contract of reinsurance or in a specific agreement between the reinsurer and the person. (i) The State Board of Insurance shall require schedules of reinsurance to be filed by every insurer at the time of making the annual report and at such other times as the Board may direct. (j) Credit may not be given in the accounting and financial statements, either as an asset or a deduction from liability, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contracts reinsured without diminution because of the insolvency of the ceding insurer and is payable directly to the ceding insurer or to its domiciliary liquidator or receiver. (k) "Assuming insurer" means the insurer who under a contract of reinsurance incurs to the ceding insurer an obligation of which the performance is contingent on incurring of liability or loss by the ceding insurer under its contract or contracts of insurance made with third persons. (l ) An insurer shall account for reinsurance agreements and shall record those reinsurance agreements in the insurer's financial statement in a manner that accurately reflects the effect of the reinsurance agreements on the financial condition of the company. The State Board of Insurance may adopt reasonable rules relating to the accounting and financial statement requirements of this section and the treatment of reinsurance agreements between insurance companies, including minimum risk transfer standards, asset debits or credits, reinsurance debits or credits, and reserve debits or credits relating to the transfer of all or any part of an insurer's risks or liabilities by reinsurance agreements and any contingencies arising from reinsurance agreements. Rules adopted subsequent to September 1, 1995, shall apply to reinsurance agreements entered into on or after the effective date of such rules, and to reinsurance agreements that are amended on or after the effective date of such rules. A reinsurance agreement may contain a provision that allows the offset of mutual debts and credits between a ceding insurer and the assuming insurer, whether arising out of one or more reinsurance agreements. (m) The Commissioner may request the filing of financial statements certified and audited by an independent certified public accountant, certified copies of the certificate or letter of authority from the domiciliary jurisdiction, and information on the principals and management of any assuming insurer that does not meet the requirements of Subsection (b) of this article. The failure of an assuming insurer that does not meet the requirements of Subsection (b) of this article to comply with a request for information by the Commissioner may result in the Commissioner issuing a directive prohibiting all licensed insurers from taking credit for business ceded with any such assuming insurer after the effective date of such directive. A nonlicensed insurer that is included in the most recent quarterly listing published by the Non-admitted Insurers Information Office of the National Association of Insurance Commissioners is considered to have complied with a request for information from the Commissioner. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1961, 57th Leg., p. 447, ch. 220, Sec. 1; Acts 1979, 66th Leg., p. 1167, ch. 567, Sec. 1, eff. Aug. 27, 1979. Amended by Acts 1987, 70th Leg., ch. 564, Sec. 1, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 1082, Sec. 7.01, eff. Sept. 1, 1989. Subsecs. (a), (b), (e) amended by and Subsec. (m) added by Acts 1991, 72nd Leg., ch. 242, Sec. 3.01, eff. Sept. 1, 1991; Subsec. (a) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 13.01, eff. Sept. 1, 1993; Subsec. (b) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 13.06, eff. Sept. 1, 1993; Subsec. (l) amended by Acts 1995, 74th Leg., ch. 614, Sec. 2, eff. Sept. 1, 1995. Art. 3.11. CERTAIN GUARANTEES IN LIFE INSURANCE POLICIES. Section 841.253 of this code does not prohibit the issuance of life insurance policies guaranteeing, by coupons or otherwise, definite payments or reductions in premiums, but any such guarantee contained in policies or coupons issued after the effective date of this Act shall be treated as a definite contract benefit and so valued according to the reserve requirements of this Chapter using in the case of policies or coupons issued before the date determined under Section 1105.002(a) or (b) of this code, as applicable to the company, reserve valuation net premium for such benefits which is a uniform percentage of the gross premiums, provided that any policy containing such a contract benefit may be valued on a basis which provides for not more than one (1) year preliminary term insurance, and using in the case of policies or coupons issued on or after the date determined under Section 1105.002(a) or (b) of this code, as applicable to the company, the commissioners reserve valuation method as defined in Article 3.28. Nothing in this Section with respect to reserves shall apply to any policy issued prior to September 7, 1955. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p. 916, ch. 363, Sec. 8; Acts 1963, 58th Leg., p. 1117, ch. 434, Sec. 1; Acts 1963, 58th Leg., p. 1362, ch. 518, Sec. 1. Amended by Acts 1987, 70th Leg., ch. 813, Sec. 3, eff. June 18, 1987; Acts 2001, 77th Leg., ch. 1419, Sec. 9, eff. June 1, 2003. Art. 3.16. DEPOSITS OF SECURITIES IN AMOUNT OF LEGAL RESERVE.Article repealed effective April 1, 2007 Sec. 1. Any life insurance company now or which may hereafter be incorporated under the laws of this State may deposit with the State Board of Insurance for the common benefit of all the holders of its policies and annuity bonds, securities of the kinds in which, by the laws of this State, it is permitted to invest or loan its capital, surplus and/or reserves, equal to the legal reserve on all its outstanding policies in force, which securities shall be held by said State Board of Insurance in trust for the purpose and objects herein specified. The physical delivery of such securities to the State Board of Insurance shall be sufficient without being accompanied by a written transfer of any lien securing them. Any such company may deposit lawful money of the United States in lieu of the securities above referred to, or any portion thereof, and may also, for the purposes of such deposit, convey to said State Board of Insurance in trust the real estate in which any portion of its said reserve may be lawfully invested. In such case, the State Board of Insurance shall hold the title thereto in trust until other securities in lieu thereof shall be deposited with it, whereupon it shall reconvey the same to such company. Said State Board of Insurance may cause any such securities or real estate to be appraised and valued prior to their being deposited with or conveyed to it, in trust as aforesaid; the reasonable expense of such appraisement or valuation to be paid by the company. Under the provisions of this Article, registered as well as unregistered United States Government securities may be deposited. Sec. 2. Notwithstanding the provisions of Section 1, of this Article, no new deposit of securities will be lawful after the effective date of this Section, except to the extent expressly required by Article 3.17. Sec. 3. For the purpose of state, county, and municipal taxation the situs of securities deposited with the State Board of Insurance shall be in the city and county where the principal business office of such company is fixed by its charter. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1957, 55th Leg., p. 812, ch. 344, Sec. 2; Acts 1961, 57th Leg., p. 1053, ch. 469, Sec. 1. Art. 3.17. WHAT DEPOSITS MAY INCLUDE.Article repealed effective April 1, 2007 Sec. 1. Any life insurance company which has heretofore issued or assumed the obligations of policies or annuity bonds which have been registered in the manner at any time authorized by this Chapter, shall at all times hereafter have on deposit with the State Board of Insurance securities of the character described in Article 3.16 in amounts equal to or in excess of the aggregate net value of such outstanding registered policies and annuity bonds in force, and for such purpose new and additional deposits of securities shall be made from time to time and in amounts of not less than Five Thousand Dollars ($5,000). Any such company whose deposits exceed such aggregate net value of its outstanding registered policies and annuity bonds in force may from time to time withdraw such excess by withdrawals of not less than Five Thousand Dollars ($5,000). Any such company may at any time withdraw any of its deposited securities by depositing in their stead others of equal value and of the character authorized by this Chapter, and may collect the interest, rents and other income from its securities on deposit. The net value of every policy or annuity bond subject to this Act shall be its value according to the standard prescribed by the laws of this State, when the first premium thereon has been paid, less the amount of such liens as the company may have against it not in excess of such value. Sec. 2. The securities of any such company on deposit with the State Board of Insurance shall be held in trust by said board for the benefit of all of the holders of the outstanding policies and annuity bonds of such company which have been registered pursuant to this Chapter. Sec. 3. No company which has outstanding registered policies or annuity bonds in force shall reinsure its outstanding registered business, or the whole of any one or more of its registered policies or annuity bonds, except in a company or companies incorporated and organized under the laws of this State or having permission to do business in this State. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1961, 57th Leg., p. 1053, ch. 469, Sec. 2. Art. 3.18. EFFECT AND VALUE OF DEPOSITS IN AMOUNT OF LEGAL RESERVE.Article repealed effective April 1, 2007 Sec. 1. After the effective date of this Section 1, of this Article, no policy or annuity bond shall be registered in the manner heretofore authorized by this Chapter. Sec. 2. Every life insurance company which is required by this Chapter to have securities on deposit with the State Board of Insurance shall keep records of all of its outstanding registered policies and annuity bonds in force, and of the net value thereof. Sec. 3. Each life insurance company which is required by this Chapter to have securities on deposit with the State Board of Insurance shall, within fifteen (15) days after the termination of each calendar month, file with said Board a report stating whether or not the value of its securities on deposit is equal to or in excess of the aggregate value of its registered policies and annuity bonds outstanding and in force at the end of such preceding calendar month. Sec. 4. The securities deposited under this Chapter by each company shall be placed and kept by the State Board of Insurance in some secure safe-deposit, fireproof box or vault in the city or town in or near where the home office of the company is located. The officers of the company shall have access to such securities for the purpose of detaching interest coupons and crediting payment and exchanging securities as above provided, under such reasonable rules and regulations as the State Board of Insurance may establish. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1961, 57th Leg., p. 1053, ch. 469, Sec. 3.SUBCHAPTER C. RESERVES AND INVESTMENTS Art. 3.28. STANDARD VALUATION LAW.Article repealed effective April 1, 2007 Title Sec. 1. This Article shall be known as the Standard Valuation Law.Reserve Valuation Sec. 2. The State Board of Insurance shall annually value, or cause to be valued, the reserve liabilities (hereinafter called reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state, and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest, and methods (net level premium method or other) used in the calculation of such reserves. In calculating such reserves, the Board may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves herein required of any foreign or alien company, the Board may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard herein provided and if the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the State Board of Insurance when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction.Opinion of reserves Sec. 2A. (a) General. (1) In conjunction with the annual statement and in addition to other information required by this article, every life insurance company doing business in this state shall annually submit to the State Board of Insurance the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by rule of the Board are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The Board by rule shall define the specific requirements of this opinion and shall include any matters deemed to be necessary to the opinion's scope. For purposes of this subdivision, "qualified actuary" has the meaning assigned by Article 1.11(d) of this code. A person who, before September 1, 1993, satisfied the requirements of the Board to submit an opinion under this subdivision may also submit the opinion required by this subdivision. (2) The opinion required under this section shall apply to all business in force including individual and group health insurance plans, in form and substance as specified by Board rule and acceptable to the commissioner. (3) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion filed in the other state reasonably meets the requirements applicable to a company domiciled in this state. (4) A. Except in cases of fraud or wilful misconduct or as provided by Subsection (a)(7)B of this section, a person who certifies to an opinion under this section shall not be liable for damages to a person other than the insurance company covered by the opinion prepared by the certifying person for any act, error, omission, decision, or conduct with respect to the person's opinion. (B) Subsection (a)7A of this section does not apply to a monetary forfeiture imposed under Section 7, Article 1.10, Insurance Code. (5) A company or a person who certifies to an opinion under this section and that fails to comply with or violates this section or rules adopted by the Board pursuant to this section is subject to disciplinary action under Section 7, Article 1.10, Insurance Code. (6) A memorandum, in form and substance in compliance with rules of the State Board of Insurance, shall be prepared to support each opinion. (7) If an insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified by rule or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the Board's rules or is otherwise unacceptable to the commissioner, the commissioner may engage an actuary or other financial specialist as defined by Board rule at the expense of the company to review the opinion and the basis for the opinion and prepare such supporting memorandum. (b) Actuarial Analysis of Reserves and Assets Supporting Such Reserves. Every life insurance company, except as exempted by or pursuant to rule adopted by the Board, shall also annually include in the opinion required by Subsection (a)(1) of this section, an opinion of the same person who certifies to the opinion under Subsection (a)(1) of this section as to whether the reserves and related actuarial items held in support of the policies and contracts specified by Board rule, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts. The rules adopted by the Board under this section may exempt those companies that would be exempted from the requirements stated in this subsection (b) according to the most recently adopted regulation by the National Association of Insurance Commissioners entitled "Model Actuarial Opinion and Memorandum Regulation" or its successor regulation if the Board considers the exemption appropriate.Computation of Minimum Standard Sec. 3. The minimum standard for the valuation of all such policies and contracts issued prior to the operative date of Article 3.44a (the Standard Nonforfeiture Law for Life Insurance) shall be that provided in Section 12 of this article. Except as otherwise provided in Sections 4 and 5 of this article, the minimum standard for the valuation of all such policies and contracts issued on or after the operative date of Article 3.44a (the Standard Nonforfeiture Law for Life Insurance) shall be the commissioners reserve valuation methods defined in Sections 6, 7, and 10 of this article, three and one-half per cent (3-1/2%) interest; in the case of policies and contracts, other than annuity and pure endowment contracts, issued on or after June 14, 1973, four per cent (4%) interest for such policies issued prior to August 29, 1977; or five and one-half per cent (5-1/2%) interest for single premium life insurance policies and four and one-half per cent (4-1/2%) interest for all other such policies issued on and after August 29, 1977, and the following tables: (a) For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, the Commissioners 1941 Standard Ordinary Mortality Table for such policies issued prior to the operative date of Section 6 of the Standard Nonforfeiture Law for Life Insurance, as amended, the Commissioners 1958 Standard Ordinary Mortality Table for such policies issued on or after the operative date of Section 6 of the Standard Nonforfeiture Law for Life Insurance, as amended, and prior to the operative date of Section 8 of the Standard Nonforfeiture Law for Life Insurance, as amended, provided that for any category of such policies issued on female risks, all modified net premiums and present values referred to in this Act may be calculated according to an age not more than three years younger than the actual age of the insured for policies issued prior to August 29, 1977 and not more than six years younger than the actual age of the insured for policies issued on and after August 29, 1977; and for such policies issued on or after the operative date of Section 8 of the Standard Nonforfeiture Law for Life Insurance, as amended, (i) the Commissioners 1980 Standard Ordinary Mortality Table, or (ii) at the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors, or (iii) any ordinary mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation promulgated by the State Board of Insurance for use in determining the minimum standard valuation for such policies. (b) For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies, the 1941 Standard Industrial Mortality Table for such policies issued prior to the operative date of Section 7 of the Standard Nonforfeiture Law for Life Insurance, as amended, and for such policies issued on or after such operative date, the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation promulgated by the State Board of Insurance for use in determining the minimum standard of valuation for such policies. (c) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies, the 1937 Standard Annuity Mortality Table, or, at the option of the company, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the State Board of Insurance. (d) For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies, the Group Annuity Mortality Table for 1951, any modification of such table approved by the State Board of Insurance, or, at the option of the company, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts. (e) For total and permanent disability benefits in or supplementary to ordinary policies or contracts, for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit, or any tables of disablement rates and termination rates adopted after 1980 by the National Association of Insurance Commissioners that are approved by regulation promulgated by the State Board of Insurance for use in determining the minimum standard of valuation for such policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the company, the Class (3) Disability Table (1926); and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies. (f) For accidental death benefits in or supplementary to policies, for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation promulgated by the State Board of Insurance for use in determining the minimum standard of valuation for such policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, either such table or, at the option of the company, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies. (g) For group life insurance, life insurance issued on the substandard basis and other special benefits, such tables as may be approved by the State Board of Insurance.Text of subsec. (h) effective until Sept. 1, 2013 (h) Notwithstanding any other law, the minimum reserve requirements applicable to a policy issued under Article 3.53 of this code are met if, in aggregate, the reserves are maintained at 100 percent of the 1980 Commissioner's Standard Ordinary Mortality Table, with interest not to exceed 5.5 percent. This subsection expires September 1, 2013.Computation of Minimum Standard for Annuities Sec. 4. Except as provided in Section 5 of this article, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after the operative date of this Section 4, as defined herein, and for all annuities and pure endowments purchased on or after such operative date under group annuity and pure endowment contracts shall be the commissioners reserve valuation methods defined in Sections 6 and 7 of this article and the following tables and interest rates: (a) For individual annuity and pure endowment contracts issued prior to August 29, 1977, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, or any modification of this table approved by the State Board of Insurance, and six per cent (6%) interest for single premium immediate annuity contracts, and four per cent (4%) interest for all other individual annuity and pure endowment contracts. (b) For individual single premium immediate annuity contracts issued on or after August 29, 1977, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation promulgated by the State Board of Insurance for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the State Board of Insurance, and seven and one-half per cent (7-1/2%) interest. (c) For individual annuity and pure endowment contracts issued on or after August 29, 1977, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation promulgated by the State Board of Insurance for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the State Board of Insurance, and five and one-half per cent (5-1/2%) interest for single premium deferred annuity and pure endowment contracts and four and one-half per cent (4-1/2%) interest for all other such individual annuity and pure endowment contracts. (d) For all annuities and pure endowments purchased prior to August 29, 1977, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, or any modification of this table approved by the State Board of Insurance, and six per cent (6%) interest. (e) For all annuities and pure endowments purchased on or after August 29, 1977, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table or any group annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation promulgated by the State Board of Insurance for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of these tables approved by the State Board of Insurance, and seven and one-half per cent (7-1/2%) interest. After June 14, 1973, any company may file with the State Board of Insurance a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1979, which shall be the operative date of this section for such company; provided, a company may elect a different operative date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If a company makes no such election, the operative date of this section for such company shall be January 1, 1979.Computation of Minimum Standard by Calendar Year of Issue Sec. 5. (a) Applicability of this section (1) The calendar year statutory valuation interest rates as defined in this Section shall be the interest rates used in determining the minimum standard for valuation of: (A) all life insurance policies issued in a particular calendar year on or after the operative date of Section 8 of the Standard Nonforfeiture Law for Life Insurance; (B) all individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982; (C) all annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and (D) the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts. (b) Calendar Year Statutory Valuation Interest Rates (1) The calendar year statutory valuation interest rates, "I," shall be determined as follows and the results rounded to the nearer one-fourth of one per cent (1/4 of 1%): (A) For life insurance, I = .03 + W(R1 - .03) + W/2 (R2 - .09). (B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options, I = .03 + W(R - .03) where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this section, and W is the weighting factor defined in this section. (C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in Paragraph (B) of Subdivision (1) of Subsection (b) of this section, the formula for life insurance stated in Paragraph (A) of Subdivision (1) of Subsection (b) of this section shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years and the formula for single premium immediate annuities stated in Paragraph (B) of Subdivision (1) of Subsection (b) of this section shall apply to annuities and guaranteed interest contracts with guarantee duration of 10 years or less. (D) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in Paragraph (B) of Subdivision (1) of Subsection (b) of this section shall apply. (E) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in Paragraph (B) of Subdivision (1) of Subsection (b) of this section shall apply. (2) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one per cent (1/2 of 1%), the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 (using the reference interest rate defined for 1979) and shall be determined for each subsequent calendar year regardless of when Section 8 of the Standard Nonforfeiture Law for Life Insurance becomes operative. (c) Weighting Factors (1) The weighting factors referred to in the formulas stated above are given in the following tables: (A) Weighting Factors for Life Insurance: Guarantee Duration Weighting (Years) Factors 10 or less .50 More than 10, but not more than 20 .45 More than 20 .35 For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy; (B) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options:.80 (C) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in Paragraph (B) of Subdivision (1) of Subsection (c) of this section, shall be as specified in tables (i), (ii), and (iii) below, according to the rules and definitions in (iv), (v), and (vi) below: (i) For annuities and guaranteed interest contracts valued on an issue year basis: Guarantee Weighting Factor Duration for Plan Type (Years) ABC 5 or less: .80 .60 .50 More than 5, but not more than 10: .75 .60 .50 More than 10, but not more than 20: .65 .50 .45 More than 20: .45 .35 .35 (ii)Forannuitiesand Plan Type guaranteedinterestcontracts ABC valued on a change in fund basis, thefactorsshownin(i)above increased by: .15 .25 .05 (iii)Forannuitiesand Plan Type guaranteedinterestcontracts ABC valuedonanissueyearbasis (otherthanthose withno cash settlement options)which donot guaranteeintereston considerations received more than one year after issueorpurchase and for annuitiesand guaranteed interestcontractsvaluedon a change in fundbasis which donot guaranteeinterestrateson considerations received more than 12 monthsbeyondthevaluation date, the factorsshown in (i) or derived in (ii) increased by: .05 .05 .05 (iv) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence. (v) Plan type as used in the above tables (i), (ii), and (iii) is defined as follows: Plan Type A: At any time policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of funds by the insurance company, or (2) without such adjustment but in installments over five years or more, or (3) as an immediate life annuity, or (4) no withdrawal permitted. Plan Type B: Before expiration of the interest rate guarantee, the policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without such adjustment but in installments over five years or more, or (3) no withdrawal permitted. At the end of interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years. Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either (1) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund. (vi) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund. (d) Reference Interest Rate (1) Except as provided in Subsection (e) of this section, the reference interest rate referred to in Subsection (b) of this section shall be defined as follows: (A) For all life insurance, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year next preceding the year of issue, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc. (B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc. (C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in Paragraph (B) of Subdivision (1) of Subsection (d) of this section, with guarantee duration in excess of 10 years, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc. (D) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in Paragraph (B) of Subdivision (1) of Subsection (d) of this section, with guarantee duration of 10 years or less, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc. (E) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc. (F) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in Paragraph (B) of Subdivision (1) of Subsection (d) of this section, the average over a period of 12 months, ending on June 30 of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc. (e) State Board of Insurance Promulgation of Definitions of Reference Interest Rate The State Board of Insurance shall, not less than annually, determine whether the definition of reference interest rates as specified in Subsection (d) of this section continues to be a reasonably accurate approximation of the average yield achieved from purchases in the United States in publicly quoted markets of investment grade fixed term and fixed interest corporate obligations for the times specified in such subsection and shall, if it determines that such definition is no longer such reasonably accurate approximation, promulgate rules in the manner specified in the Administrative Procedure and Texas Register Act, as amended (Article 6252-13a, Vernon's Texas Civil Statutes), to adopt such alternative methods as are appropriate to achieve such purpose.Commissioners Reserve Valuation Method Sec. 6. Except as otherwise provided in Sections 7 and 10 of this article, reserves according to the commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (a) over (b), as follows: (a) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium on the nineteen year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy. (b) A net one year term premium for such benefits provided for in the first policy year. Provided that for any life insurance policy issued on or after January 1, 1985, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in Section 10 of this article, be the greater of the reserve as of such policy anniversary calculated as previously described in this Section 6 and the reserve as of such policy anniversary calculated as previously described in this Section 6 but with (i) the value defined in Subsection (a) of Section 6 of this article being reduced by fifteen per cent (15%) of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in Sections 3 and 5 of this article shall be used. Reserves according to the commissioners reserve valuation method for: (1) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums; (2) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended; (3) disability and accidental death benefits in all policies and contracts; and (4) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts; shall be calculated by a method consistent with the principles of the preceding paragraphs of this section.Commissioners Reserve Valuation Method--Annuity and Pure Endowment Benefits Sec. 7. This section shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended. Reserves according to the commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate or rates specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.Minimum Reserves Sec. 8. In no event shall a company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after the operative date of Article 3.44a (the Standard Nonforfeiture Law for Life Insurance), be less than the aggregate reserves calculated in accordance with the methods set forth in Sections 6, 7, 10, and 11 and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.Minimum aggregate reserves Sec. 8A. In no event shall aggregate reserves of a company covered by Section 8 of this article for all policies, contracts, and benefits be less than the aggregate reserves determined to be necessary to render the opinion required by Section 2A of this article.Optional Reserve Calculation Sec. 9. Reserves for all policies and contracts issued prior to the operative date of Article 3.44a (the Standard Nonforfeiture Law for Life Insurance) may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by the laws in effect immediately prior to such date. Reserves for any category of policies, contracts or benefits as established by the State Board of Insurance, issued on or after the operative date of Article 3.44a (the Standard Nonforfeiture Law for Life Insurance), may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided therein. Any such company which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the State Board of Insurance, adopt any lower standard of valuation, but not lower than the minimum herein provided.Effect of opinion on standard of valuation Sec. 9A. For the purposes of Section 9 of this article, the holding of additional reserves previously determined to be necessary to render the opinion required by Section 2A of this article shall not be deemed to be the adoption of a higher standard of valuation.Reserve Calculation--Valuation Net Premium Exceeding the Gross Premium Charged Sec. 10. If in any contract year the gross premium charged by any life insurance company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in Sections 3 and 5 of this article. Provided that for any life insurance policy issued on or after January 1, 1985, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this Section 10 shall be applied as if the method actually used in calculating the reserve for such policy were the method described in Section 6 of this article, ignoring the second paragraph of Section 6. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with Section 6, including the second paragraph of that section, and the minimum reserve calculated in accordance with this Section 10.Reserve Calculation--Indeterminate Premium Plans and Certain Other Plans Sec. 11. In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in Sections 6, 7, and 10 of this article, the reserves which are held under any such plan must: (a) be appropriate in relation to the benefits and the pattern of premiums for that plan, and (b) be computed by a method which is consistent with the principles of this Standard Valuation Law, as determined by regulations promulgated by the State Board of Insurance. Notwithstanding any other provision in the laws of this state, any policy, contract, or certificate providing life insurance under any such plan must be affirmatively approved by the State Board of Insurance before it can be marketed, issued, delivered, or used in this state.Computation of Minimum Standard by Calendar Year of Issue Sec. 12. This section shall apply only to those policies and contracts issued prior to the operative date of Article 3.44a (the Standard Nonforfeiture Law for Life Insurance). The reserve liability of all such policies and contracts shall be computed in accordance with their terms and the following rules: (a) As respects policies issued prior to the first day of January, 1910, the computation shall be on the basis of the American Experience Table of Mortality and four and one-half per cent (4-1/2%) interest per annum. (b) As respects policies issued after the 31st day of December, 1909, and prior to January 1, 1948, the computation shall be on the basis of the Actuaries or Combined Experience Table of Mortality with four per cent (4%) interest per annum, if the interest rate guaranteed in the policy is four per cent (4%) per annum or higher. If any such policies were issued upon a reserve basis of an interest rate lower than four per cent (4%) per annum, then the computation shall be made on the basis of the American Experience Table of Mortality with interest at such lower specified rate. (c) As respects policies issued after the 31st day of December, 1947, the computation shall be on the basis of the mortality table and interest rate specified in the respective policies, provided that (A) the specified rate of interest shall not exceed three and one-half per cent (3-1/2%) per annum; (B) the specified table for policies other than policies of industrial life insurance shall be the American Experience Table of Mortality, the American Men Ultimate Table of Mortality, the Commissioners 1941 Standard Ordinary Mortality Table, or, as respects policies issued after the 31st day of December, 1959, the Commissioners 1958 Standard Ordinary Mortality Table; and (C) the specified table for policies of industrial life insurance shall be the American Experience Table of Mortality, the Standard Industrial Mortality Table, the Sub-Standard Industrial Mortality Table, the 1941 Standard Industrial Mortality Table, or the 1941 Sub-Standard Industrial Mortality Table, or, as respects policies issued after the 31st day of December, 1963, the Commissioners 1961 Standard Industrial Mortality Table. (d) As respects policies on female risks issued after the 31st day of December, 1959, other than policies of industrial life insurance, computation shall be based on any mortality table and rate of interest permitted under Subsection (c) of Section 12 of this article and specified in the respective policies but may at the option of the company be based on an age not more than three (3) years younger than the actual age of the insured. (e) Except as otherwise provided in Section 4 of this article with respect to coverages purchased on or after the operative date of such subsection under group annuity and pure endowment contracts, as respects policies issued on substandard risks and annuity contracts and contracts or policies for disability benefits and accidental death benefits, the computation shall be on the basis of the standards and methods adopted by the respective companies and approved by the State Board of Insurance. (f) The reserve values of all policies of group insurance issued prior to May 15, 1947, shall be computed upon the basis of the American Men Ultimate Table of Mortality with interest at the rate of three per cent (3%) or three and one-half per cent (3-1/2%) per annum as provided in such policies. The reserve values of all policies of group insurance issued on and subsequent to May 15, 1947, and prior to January 1, 1961, shall be computed upon the basis of either the American Men Ultimate Table of Mortality or the Commissioners 1941 Standard Ordinary Mortality Table with interest at a rate not in excess of three and one-half per cent (3-1/2%) per annum as provided in such policies. The reserve values of all policies of group insurance issued on and subsequent to January 1, 1961, shall be computed on the basis of an interest rate not exceeding three and one-half per cent (3-1/2%) per annum and such mortality table as shall be adopted by the company with the approval of the State Board of Insurance.Repeal of Conflicting Laws Sec. 13. All acts and parts of acts inconsistent with the provisions of this article are hereby repealed. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1959, 56th Leg., p. 960, ch. 448, Sec. 1; Acts 1963, 58th Leg., p. 1117, ch. 434, Sec. 2; Acts 1973, 63rd Leg., p. 1070, ch. 411, Sec. 1, 2, eff. June 14, 1973; Acts 1977, 65th Leg., p. 2098, ch. 842, Sec. 1 to 5, eff. Aug. 29, 1977; Acts 1981, 67th Leg., p. 2170, ch. 508, Sec. 1, eff. Aug. 31, 1981. Sec. 2A added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.101, eff. Sept. 1, 1991; Secs. 8A, 9A added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.102, eff. Sept. 1, 1991; Sec. 2A(a)(1) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 7.01, eff. Sept. 1, 1993; Sec. 2A(b) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 7.02, eff. Sept. 1, 1993; Sec. 3 amended by Acts 2001, 77th Leg., ch. 1318, Sec. 1, eff. Sept. 1, 2001. Art. 3.29. EXTRA HAZARDOUS POLICIES.Article repealed effective April 1, 2007 If any life insurance company doing business under the laws of this State has written or assumed risks that are sub-standard or extra hazardous and has charged therefor more than its published rates of premium, the Board of Insurance Commissioners shall in valuing such policies compute and charge such extra reserves thereon as is warranted by reason of the extra hazard assumed and the extra premium charged. If the Board of Insurance Commissioners shall find, after notice and hearing, that a particular risk or class of risks is sub-standard or extra hazardous, then and in that event no such company shall thereafter write or assume any such risks unless they charge therefor such extra premium as is warranted by reason of the extra hazard assumed. Acts 1951, 52nd Leg., ch. 491. Art. 3.31. FAILURE TO FILE CERTIFICATE.Article repealed effective April 1, 2007 If any such foreign insurance company shall fail to file the certificate authorized by the preceding article, it shall be required forthwith to file with the Board of Insurance Commissioners full detailed lists of its policies and securities and shall be liable for all charges and expenses consequent upon its failure so to file such certificate. Acts 1951, 52nd Leg., ch. 491. Art. 3.32. REQUIREMENT OF SECURITIES IN AMOUNT OF RESERVE.Article repealed effective April 1, 2007 Having determined the required reserves on all the policies in force, the Board shall see that the company has in securities of the class and character required by the laws of this State the amount of said reserves on all its policies, after all the debts and claims against it and the minimum capital required by this chapter have been provided for. Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p. 916, ch. 363, Sec. 11. Art. 3.33. AUTHORIZED INVESTMENTS AND LOANS FOR CAPITAL STOCK DOMESTIC LIFE, HEALTH AND ACCIDENT INSURANCE COMPANIES.Article repealed effective April 1, 2007 Scope Sec. 1. This article and the rules promulgated to interpret and implement it shall apply to all domestic insurance companies as defined in Section 841.001 of this code and other insurers specifically made subject to the provisions hereof, including a stipulated premium insurance company electing to be governed by this article under Section 884.311 of this code. Articles 3.39, 3.40, and 3.40-1 of this code shall not be applicable to such companies, but such articles shall continue to be applicable to insurance companies chartered under Chapters 9, 881, 884, 885, 886, and 887 of this code, except as otherwise specifically provided in those chapters. This article shall not limit or restrict the investments in or transactions with or within subsidiaries and affiliates which are made pursuant to the authority of the Texas Insurance Holding Company System Regulatory Act (Chapter 823, Insurance Code).Purpose Sec. 2. The purpose of this article is to protect and further the interests of insureds, insurers, creditors, and the public by providing standards for the development and administration of plans for the investment of the assets of insurers.Insurers' Investment Plans Sec. 3. (a) The board of directors of each insurer or corresponding authority designated by the charter, bylaws, or plan of operations of an insurer which has no board of directors shall: (1) adopt a written investment plan consistent with the provisions of this article which: (A) specifies the diversification of the insurer's investments, so as to reduce the risk of large losses, by: (i) broad categories (such as bonds and real estate loans), (ii) kinds (such as obligations of governments, or business entities, mortgage-backed securities, and real estate loans on office, retail, industrial or residential properties), (iii) quality, (iv) maturity, (v) industry, and (vi) geographical areas (as to both domestic and foreign investments); (B) balances safety of principal with yield and growth; (C) seeks a reasonable relationship of assets and liabilities as to term and nature; (D) is appropriate considering the capital and surplus and the business conducted by the insurer; (2) at least annually, review the adequacy of such investment plan and the implementation thereof. (b) The insurer shall maintain the investment plan in its principal office and shall provide same to the commissioner or his designee upon request, and such plans shall be maintained as a privileged and confidential document by the Commissioner of Insurance or his designee and it shall not be subject to public disclosure. The insurer shall maintain investment records covering each transaction. At all times, the insurer shall be able to demonstrate that its investments are within the limitations prescribed in this article.Community Investment Report Sec. 3A. (a) The Texas Department of Insurance shall, after consultation with the insurance industry of this state and the Office of Public Insurance Counsel, develop a report of insurance industry community investments in Texas. (b) The commissioner may request and insurance companies shall provide information necessary to complete the requirements of Subsection (a). (c) The report established under Subsection (a) shall be provided to the Texas Legislature no later than December 1 of each even-numbered year.Authorized Investments and Transactions Sec. 4. Subject to the limitations and restrictions herein contained and, unless otherwise specified, based upon the insurer's capital, surplus and admitted assets as reported in the most recently filed statutory financial statement, the investments and transactions described in the following subsections, and in Section 6, Article 21.49-1, and none other, are authorized for the insurers subject hereto: (a) United States Government Bonds. Bonds, evidences of indebtedness or obligations of the United States of America, or bonds, evidences of indebtedness or obligations guaranteed as to principal and interest by the full faith and credit of the United States of America, and bonds, evidences of indebtedness, or obligations of agencies and instrumentalities of the government of the United States of America; (b) Other Governmental Bonds. Bonds, evidences of indebtedness or obligations of governmental units in the United States, Canada, or any province or city of Canada, and of the instrumentalities of such governmental units; provided: (1) such governmental unit or instrumentality is not in default in the payment of principal or interest in any of its obligations; and (2) investments in the obligations of any one governmental unit or instrumentality may not exceed 20 percent of the insurer's capital and surplus; (c) Obligations of Business Entities. Obligations, including bonds or evidences of indebtedness, or participations in those bonds or evidences of indebtedness, or asset-backed securities, that are issued, assumed, guaranteed, or insured by any business entity, including a sole proprietorship, a corporation, an association, a general or limited partnership, a limited liability company, a joint-stock company, a joint venture, a trust, or any other form of business organization, whether for-profit or not-for-profit, that is organized under the laws of the United States, another state, Canada, or any state, district, province, or territory of Canada, subject to all conditions set forth below: (1) an insurer may acquire obligations or counterparty exposure amounts, as defined in Subsection (u), in any one business entity rated by the Securities Valuation Office of the National Association of Insurance Commissioners, but not to exceed 20 percent of the insurer's statutory capital and surplus; (2) an insurer shall not acquire an obligation, counterparty exposure amount or preferred stock of any business entity if, after giving effect to the investment: (A) the aggregate amount of such investments then held by the insurer that are rated 3, 4, 5 or 6 by the Securities Valuation Office of the National Association of Insurance Commissioners would exceed 20 percent of its assets; (B) the aggregate amount of such investments then held by the insurer that are rated 4, 5, or 6 by the Securities Valuation Office would exceed 10 percent of its assets; (C) the aggregate amount of such investments then held by the insurer that are rated 5 or 6 by the Securities Valuation Office would exceed three percent of its assets; or (D) the aggregate amount of such investments then held by the insurer that are rated 6 by the Securities Valuation Office would exceed one percent of its assets. If an insurer attains or exceeds the limit of any one rating category referred to in this subsection, the insurer shall not be precluded from acquiring investments in other rating categories subject to the specific and multiple category limits applicable to those investments; (3) notwithstanding the foregoing, an insurer may acquire an obligation of a business entity in which the insurer already holds one or more obligations if the obligation is acquired in order to protect an investment previously made in that business entity, but obligations so acquired may not exceed one-half percent of the insurer's assets; and (4) this subsection does not prohibit an insurer from acquiring an obligation as a result of a restructuring of an already held obligation or preferred stock that is rated 3, 4, 5 or 6 by the Securities Valuation Office; (d) International Market. Bonds issued, assumed, or guaranteed by the Interamerican Development Bank, the International Bank for Reconstruction and Development (the World Bank), the Asian Development Bank, the State of Israel, the African Development Bank, and the International Finance Corporation; provided: (1) investments in the bonds of any one of the entities specified above may not exceed 20 percent of the insurer's capital and surplus; and (2) the aggregate of all investments made under this subsection may not exceed 20 percent of the insurer's assets; (e) Policy Loans. Loans upon the security of the insurer's own policies not in excess of the amount of the reserve values thereof; (f) Time and Savings Deposits. Any type or form of savings deposits, time deposits, certificates of deposit, NOW accounts, and money market accounts in solvent banks, savings and loan associations, and credit unions and branches thereof, organized under the laws of the United States of America or its states, when made in accordance with the laws or regulations applicable to such entities; provided the amount of the deposits in any one bank, savings and loan association, or credit union will not exceed the greater of: (1) 20 percent of the insurer's capital and surplus; (2) the amount of federal or state deposit insurance coverage pertaining to such deposit; or (3) 10 percent of the amount of capital, surplus, and undivided profits of the entity receiving such deposits; (g) Insurer Investment Pools. For the purposes of this Subsection (g), the following definition shall apply: (A) "Affiliate" means, as to any person, another person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the person. (1) An insurer may acquire investments in investment pools that: (A) invest only in: (i) obligations that are rated 1 or 2 by the Securities Valuation Office or have an equivalent of a Securities Valuation Office 1 or 2 rating (or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has outstanding obligations with a Securities Valuation Office 1 or 2 or equivalent rating) by a nationally recognized statistical rating organization recognized by the Securities Valuation Office and have: (a) a remaining maturity of 397 days or less or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding 397 days; or (b) a remaining maturity of three years or less and a floating interest rate that resets no less frequently than quarterly on the basis of a current short-term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper) and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes; (ii) securities lending, repurchase and reverse repurchase transactions that meet the requirements of Subsection (q) and any applicable regulations of the department; or (iii) money market mutual funds as authorized in Subsection (s); provided that this short-term investment pool shall not acquire investments in any one business entity that exceed 10 percent of the total assets of the investment pool; (B) invest only in investments which an insurer may acquire under this article, if the insurer's proportionate interest in the amount invested in these investments does not exceed the applicable limits of this article, and the aggregate amount of all investments in such other investment pools may not exceed 25 percent of the insurer's assets. (2) An insurer shall not acquire an investment in an investment pool under this subsection if after giving effect to the investment, the aggregate amount of investments in all investment pools then held by the insurer would exceed 35 percent of its assets. (3) For an investment in an investment pool to be qualified under this article, the investment pool shall not: (A) acquire securities issued, assumed, guaranteed or insured by the insurer or an affiliate of the insurer; (B) borrow or incur any indebtedness for borrowed money, except for securities lending and reverse repurchase transactions. (4) For an investment pool to be qualified under this article: (A) the manager of the investment pool shall: (i) be organized under the laws of the United States or a state and designated as the pool manager in a pooling agreement; (ii) be the insurer, an affiliated insurer, a business entity affiliated with the insurer, a custodian bank, a business entity registered under the Investment Advisors Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as amended, or, in the case of a reciprocal insurer or interinsurance exchange, its attorney-in-fact or, in the case of a United States branch of an alien insurer, its United States manager or affiliates or subsidiaries of its United States manager; (B) the pool manager or an entity designated by the pool manager of the type set forth in (4)(A)(ii) shall maintain detailed accounting records setting forth: (i) the cash receipts and disbursements reflecting each participant's proportionate investment in the investment pool; (ii) a complete description of all underlying assets of the investment pool (including amount, interest rate, maturity date (if any) and other appropriate designations); and (iii) other records which, on a daily basis, allow third parties to verify each participant's investments in the investment pool; (C) the assets of the investment pool shall be held in one or more accounts, in the name or on behalf of the investment pool, either (i) under a custody agreement or trust agreement with a custodian bank or (ii) at the principal office of the pool manager. The applicable agreement shall: (i) state and recognize the claims and rights of each participant; (ii) acknowledge that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and (iii) contain an agreement that the underlying assets of the investment pool shall not be commingled with the general assets of the custodian bank or any other person. (5) The pooling agreement for each investment pool shall be in writing and shall provide that: (A) the insurer, its subsidiaries, affiliates or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, and any unaffiliated insurer shall, at all times, hold 100 percent of the interests in the investment pool; (B) the underlying assets of the investment pool shall not be commingled with the general assets of the pool manager or any other person; (C) in proportion to the aggregate amount of each pool participant's interest in the investment pool: (i) each participant owns an undivided interest in the underlying assets or the investment pool; and (ii) the underlying assets of the investment pool are held solely for the benefit of each participant; (D) a participant, or, in the event of the participant's insolvency, bankruptcy, or receivership, its trustee, receiver, conservator or other successor-in-interest, may withdraw all or any portion of its investment from the investment pool under the terms of the pooling agreement; (E) withdrawals may be made on demand without penalty or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter provided: (i) in the case of publicly traded securities, settlement shall not exceed five business days, and (ii) in the case of all other securities and investments, settlement shall not exceed 10 business days. Distributions under this paragraph shall be calculated in each case net of all then applicable fees and expenses of the investment pool. The pooling agreement shall provide that the pool manager shall distribute to a participant, at the discretion of the pool manager: (i) in cash, the then fair market value of the participant's pro rata share of each underlying asset of the investment pool; (ii) in kind, a pro rata share of each underlying asset; or (iii) in a combination of cash and in kind distributions, a pro rata share in each underlying asset; and (F) the pool manager shall make the records of the investment pool available for inspection by the commissioner. (6) An investment in an investment pool shall not be deemed to be an affiliate transaction under Section 4, Article 21.49-1, of this code; however each pooling agreement shall be subject to the standards of Section 4(a), Article 21.49-1, of this code and the reporting requirements of Section 3(b), Article 21.49-1, of this code. (h) Equity Interests. Equity interests including common stock, equity investment in an investment company (other than a money market mutual fund as defined in Subsection (s) of this section), real estate investment trust, limited partnership interests, warrants or other rights to acquire equity interests that are created by the person that owns or would issue the equity to be acquired, and equity interests in any business entity that is organized under the laws of the United States, any of its states, Canada or any province or territory of Canada provided: (1) if no market value from a generally recognized source is available for the equity interest, the business entity or other investment shall be subject to an annual audit by an independent certified public accountant or subject to another method of valuation acceptable to the commissioner; and (2) an insurer shall not be permitted to invest in a partnership, as a general partner, except through an investment subsidiary; (3) such investments in any one business entity other than a money market fund defined in Subsection (s) may not exceed 15 percent of the insurer's capital and surplus; (4) the aggregate amount of all investments made under this subsection may not exceed 25 percent of the insurer's assets. For purposes of this subsection, a business entity shall mean a real estate investment trust, corporation, limited liability company, association, limited partnership, joint venture, mutual fund, trust, joint tenancy or other similar form of business organization, whether organized for profit or not-for-profit. (i) Preferred Stock. Preferred stock of business entities as described in Subsection (c) of this section; provided: (1) investments in the preferred stock of any one business entity will not exceed 20 percent of the insurer's capital and surplus; (2) the preferred stock is rated by the Securities Valuation Office, and the aggregate investment in preferred stock rated 3, 4, 5, or 6, when added to the investments under Subsection (c)(2) do not result in the combined total of such investments exceeding the limitations specified in Subsection (c)(2); (3) in the aggregate not more than 10 percent of the insurer's assets may be invested in preferred stock, the redemption and retirement of which is not provided for by a sinking fund meeting the standards established by the National Association of Insurance Commissioners; and (4) the aggregate of all investments made under this subsection may not exceed 40 percent of the insurer's assets; (j) Collateral Loans. Collateral loans secured by a first lien upon or a valid and perfected first security interest in an asset; provided: (1) the amount of any such collateral loan will not exceed 80 percent of the value of the collateral asset at any time during the duration of the loan; and (2) the asset used as collateral would be authorized for direct investment by the insurer under other provisions of this Section 4, except real property in Subsection (l); (k) Real Estate Loans. Notes, evidences of indebtedness, or participations therein secured by a valid first lien upon real property or leasehold estate therein located in the United States of America; provided: (1) the amount of any such obligation secured by a first lien upon real property or leasehold estate therein shall not exceed 90 percent of the value of such real property or leasehold estate therein, but the amount of such obligation: (A) may exceed 90 percent but shall not exceed 100 percent of the value of such real property or leasehold estate therein if the insurer or one or more wholly owned subsidiaries of the insurer owns in the aggregate a 10 percent or greater equity interest in such real property or leasehold estate therein; (B) may be 95 percent of the value of such real property or leasehold estate therein if it contains only a dwelling designed exclusively for occupancy by not more than four families for residential purposes, and the portion of the unpaid balance of such obligation which is in excess of an amount equal to 90 percent of such value is guaranteed or insured by a mortgage insurance company qualified to do business in the State of Texas; or (C) may be greater than 90 percent of the value of such real property or leasehold estate therein to the extent the obligation is insured or guaranteed by the United States of America, the Federal Housing Administration pursuant to the National Housing Act of 1934, as amended (12 U.S.C. Section 1701 et seq.), or the State of Texas; and (2) the term of an obligation secured by a first lien upon a leasehold estate in real property shall not exceed a period equal to four-fifths of the then unexpired term of such leasehold estate; provided the unexpired term of the leasehold estate must extend at least 10 years beyond the term of the obligation, and each obligation shall be payable in an installment or installments of sufficient amount or amounts so that at any time after the expiration of two-thirds of the original loan term, the principal balance will be no greater than the principal balance would have been if the loan had been amortized over the original loan term in equal monthly, quarterly, semiannual, or annual payments of principal and interest, it being required that under any method of repayment such obligation will fully amortize during a period of time not exceeding four-fifths of the then unexpired term of the security leasehold estate; and (3) if any part of the value of buildings is to be included in the value of such real property or leasehold estate therein to secure the obligations provided for in this subsection, such buildings shall be covered by adequate property insurance, including but not limited to fire and extended coverage insurance issued by a company authorized to transact business in the State of Texas or by a company recognized as acceptable for such purpose by the insurance regulatory official of the state in which such real estate is located, and the amount of insurance granted in the policy or policies shall be not less than the unpaid balance of the obligation or the insurable value of such buildings, whichever is the lesser; the loss clause shall be payable to the insurer as its interest may appear; and (4) to the extent any note, evidence of indebtedness, or participation therein under this subsection represents an equity interest in the underlying real property, the value of such equity interest shall be determined at the time of execution of such note, evidence of indebtedness, or participation therein and that portion shall be designated as an investment subject to the provisions of Subsection (l)(2) of this section; and (5) the amount of any one such obligation may not exceed 25 percent of the insurer's capital and surplus; and (6) a first lien on real property may be purchased after its origination if the first lien is insured by a mortgagee's title policy issued to the original mortgagee that contains a provision that inures the policy to the use and benefit of the owners of the evidence of debt indicated in the policy and to any subsequent owners of that evidence of debt, and if the insurer maintains evidence of assignments or other transfers of the first lien on real property to the insurer. An assignment or other transfer to the insurer, duly recorded in the county in which the real property is located, shall be presumed to create legal ownership of the first lien by the insurer; (l) Real Estate. Real property fee simple or leasehold estates located within the United States of America, as follows: (1) home and branch office real property or participations therein, which must be materially enhanced in value by the construction of durable, permanent-type buildings and other improvements costing an amount at least equal to the cost of such real property, exclusive of buildings and improvements at the time of acquisition, or by the construction of such buildings and improvements which must be commenced within two years of the date of the acquisition of such real property; provided: (A) at least 30 percent of the available space in such building shall be occupied for the business purposes of the insurer and its affiliates; and (B) the aggregate investment in such home and branch offices shall not exceed 20 percent of the insurer's assets; and (2) other investment property or participations therein, which must be materially enhanced in value by the construction of durable, permanent-type buildings and other improvements costing an amount at least equal to the cost of such real property, exclusive of buildings and improvements at the time of acquisition, or by the construction of such buildings and improvements which must be commenced within two years of the date of acquisition of such real property; provided that such investment in any one piece of property or interest therein, including the improvements, fixtures, and equipment pertaining thereto may not exceed five percent of the insurer's assets; provided, however, nothing in this article shall allow ownership of, development of, or equity interest in any residential property or subdivision, single or multiunit family dwelling property, or undeveloped real estate for the purpose of subdivision for or development of residential, single, or multiunit family dwellings, except acquisitions as provided in Subdivision (4) below, and such ownership, development, or equity interests shall be specifically prohibited; (3) the admissible asset value of each such investment in the properties acquired under Subdivisions (1) and (2) of this subsection shall be subject to review and approval by the Commissioner of Insurance. The commissioner shall have discretion at the time such investment is made or any time when an examination of the company is being made to cause any such investment to be appraised by an appraiser, appointed by the commissioner, and the reasonable expense of such appraisal shall be paid by such insurance company and shall be deemed to be a part of the expense of examination of such company; if the appraisal is made upon application of the company, the expense of such appraisal shall not be considered a part of the expense of examination of such company; no insurance company may hereafter make any write-up in the valuation of any of the properties described in Subdivision (1) or (2) of this subsection unless and until it makes application therefor and such increase in valuation shall be approved by the commissioner; and (4) other real property acquired: (A) in good faith by way of security for loans previously contracted or money due; or (B) in satisfaction of debts previously contracted for in the course of its dealings; or (C) by purchase at sales under judgment or decrees of court, or mortgage or other lien held by such insurer; and (5) regardless of the mode of acquisition specified herein, upon sale of any such real property, the fee title to the mineral estate or any portion thereof may be retained by the insurance company indefinitely; (m) Oil, Gas, and Minerals. In addition to and without limitation on the purposes for which real property may be acquired, secured, held, or retained pursuant to other provisions of this section, every such insurance company may secure, hold, retain, and convey production payments, producing royalties and producing overriding royalties, or participations therein as an investment for the production of income; provided: (1) in no event may such company carry such assets in an amount in excess of 90 percent of the appraised value thereof; and (2) no one investment under this subsection may exceed 10 percent of the insurer's capital and surplus in excess of statutory minimum capital and surplus applicable to that insurer, and the aggregate of all such investments may not exceed 10 percent of the insurer's assets as of December 31st next preceding the date of such investment; and (3)