State Codes and Statutes

Statutes > Texas > Insurance-code > Title-4-regulation-of-solvency > Chapter-423-transactions-with-money-and-other-assets

INSURANCE CODE

TITLE 4. REGULATION OF SOLVENCY

SUBTITLE B. RESERVES AND INVESTMENTS

CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 423.001. APPLICABILITY OF CHAPTER. (a) This chapter

applies to a domestic insurer regulated under this code,

including:

(1) a stock company;

(2) a reciprocal or interinsurance exchange;

(3) a Lloyd's plan;

(4) a fraternal benefit society;

(5) a stipulated premium company;

(6) a mutual insurance company of any kind, including:

(A) a statewide mutual assessment company;

(B) a local mutual aid association;

(C) a burial association;

(D) a county mutual insurance company; and

(E) a farm mutual insurance company; and

(7) any other organization or person engaged in the business of

insurance.

(b) A provision of this code limiting the regulation of an

insurer under this code does not limit the application of this

chapter, except that this chapter does not apply to an insurer

that is exempted from its application by another statute that

cites this chapter.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.002. AMBIGUITIES AND CONFLICTS WITH OTHER LAW. This

chapter controls to the extent of an ambiguity or a conflict

between this chapter and another provision of this code.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.003. RULES. The commissioner may adopt rules necessary

to implement this chapter.

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

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER B. TRANSACTIONS WITH MONEY

Sec. 423.051. DEPOSIT AND INVESTMENT OF MONEY. A director,

member of a committee, officer, or clerk of a domestic insurer

who has the duty to handle or invest the insurer's money may not:

(1) invest the money other than in the corporate name of the

insurer, except as provided by Section 423.102;

(2) deposit the money unless the deposit is:

(A) in the corporate name of the insurer;

(B) in a pooling account with one or more affiliates, as

described by Section 823.003; or

(C) in accordance with a reinsurance agreement;

(3) borrow the insurer's money;

(4) have any interest in a loan, pledge, security, or property

of the insurer, except as a stockholder; or

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

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

loan made by or on behalf of the insurer.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.052. MONEY HELD IN POOLING ACCOUNT. (a) Only a

domestic insurer and an affiliate, as described by Section

823.003, may hold money in a pooling account.

(b) The accounting and operating records and books of the

insurer and affiliate must be adequately detailed to identify

specific insurance policies and policyholders with the money from

premiums received by the insurer that issues the policies.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.053. AUTHORITY TO DEPOSIT MONEY IN ACCOUNT OF

REINSURER. A reinsurance agreement between a domestic insurer

and an affiliate, as described by Section 823.003, must

specifically authorize the deposit of money from premiums to the

account of the affiliate that assumes the reinsurance.

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

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER C. TRANSACTIONS WITH OTHER ASSETS

Sec. 423.101. DEFINITION. In this subchapter, "clearing

corporation" means:

(1) a clearing corporation as defined by Section 8.102(a),

Business & Commerce Code; or

(2) a clearance system that:

(A) is organized or operating under the laws of at least one

foreign country;

(B) provides for book-entry settlement and custody of

internationally traded securities; and

(C) has been organized and in operation for not less than 15

consecutive years.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.102. DEPOSIT AND HOLDING OF SECURITIES. (a) A

domestic insurer that has securities held in or purchased for the

insurer's general account or separate accounts may deposit the

securities or arrange through an agent, broker, or dealer for

deposit of the securities with a clearing corporation or in the

Federal Reserve book-entry system.

(b) If securities are deposited directly with a clearing

corporation or deposited indirectly through a participating

custodian bank, certificates representing securities of the same

class of the same issuer may be merged and held in bulk, in the

name of a nominee of the clearing corporation, with any other

securities deposited with the clearing corporation by any person,

regardless of the ownership of the securities.

(c) Certificates under Subsection (b) that represent securities

of small denominations may be merged into one or more

certificates of larger denominations.

(d) The records of an agent, broker, dealer, or member bank

through which an insurer holds securities in the Federal Reserve

book-entry system and the records of a custodian bank through

which an insurer holds securities with a clearing corporation

must show that the securities are held for the insurer and show

the accounts for which the securities are held.

(e) A bank must enter into a custodial agreement with an insurer

to be eligible to act as a participating custodian bank for the

insurer under this section.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.103. SECURITIES HELD UNDER CUSTODIAL OR TRUST

AGREEMENT. A domestic insurer's securities that are held under a

custodial agreement or trust agreement with a bank, Federal Home

Loan Bank, or trust company may be issued in the name of a

nominee of the bank, Federal Home Loan Bank, or trust company

only if the bank, Federal Home Loan Bank, or trust company:

(1) has corporate trust powers;

(2) is authorized to act as a custodian or trustee;

(3) is organized under the laws of the United States or any

state of the United States; and

(4) meets one of the following requirements:

(A) is a member of the Federal Reserve System;

(B) is a member of or is eligible to receive deposits that are

insured by the Federal Deposit Insurance Corporation;

(C) maintains an account with a Federal Reserve Bank and is

subject to supervision and examination by the Board of Governors

of the Federal Reserve System; or

(D) is subject to supervision and examination by the Federal

Housing Finance Board.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.104. PROOF OF OWNERSHIP OF SECURITIES. (a) A domestic

insurer may demonstrate ownership of a security through a

definitive certificate or in accordance with rules adopted under

this section.

(b) The commissioner shall adopt rules under which a domestic

insurer may demonstrate ownership of an uncertificated security,

as defined by Section 8.102(a), Business & Commerce Code,

consistent with common practices of securities exchanges and

markets. The rules must establish:

(1) standards for the types of uncertificated securities the

insurer may hold;

(2) the manner in which the insurer may demonstrate ownership of

the security; and

(3) adequate financial safeguards relating to the ownership of

uncertificated securities.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.105. MANDATORY DEPOSIT OF SECURITIES; COMMISSIONER

CONTROL. (a) An insurer that is required to deposit securities

as a condition of engaging in the business of insurance in this

state may deposit the securities with a clearing corporation or

in the Federal Reserve book-entry system.

(b) Securities under Subsection (a) are under the commissioner's

control and may not be withdrawn by the insurer without the

commissioner's approval.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.106. REQUIRED EVIDENCE FOR SECURITIES. (a) An insurer

that deposits securities under Section 423.105 shall provide

evidence to the commissioner to establish that:

(1) the securities are recorded in an account in the name of:

(A) the participating custodian bank or member bank through

which the insurer deposits the securities with a clearing

corporation or in the Federal Reserve book-entry system; or

(B) the insurer, if the insurer makes the deposit directly with

the clearing corporation as a direct participant; and

(2) the records of the participating custodian bank, direct

participant, or member bank and of the clearing corporation show

that the securities are under the commissioner's control.

(b) Evidence under Subsection (a)(1) must be issued, as

applicable, by:

(1) the participating custodian bank;

(2) the member bank; or

(3) the insurer, when the insurer makes the deposit directly

with the clearing corporation as a direct participant.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.107. ASSETS DEPOSITED WITH CLEARING CORPORATION. A

domestic insurer may deposit assets with a clearing corporation

only if:

(1) the insurer is a member of an insurance holding company

system that has assets of at least $5 billion, as shown by annual

statements of member insurers for the preceding year;

(2) the insurer uses the clearing corporation only as a

depository for investments in internationally traded securities;

(3) the insurer's total investment in internationally traded

securities under Subdivision (2) does not exceed the insurer's

policyholders' surplus; and

(4) the insurer does not use securities deposited with the

clearing corporation as security for reinsurance.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.108. LIMITATION ON ASSETS DEPOSITED WITH CLEARING

CORPORATION. The commissioner by rule may adopt a reasonable

limit on the percentage of a domestic insurer's assets that may

be deposited with a clearing corporation. The limit may not

exceed five percent of the insurer's total assets, as shown by

the insurer's annual statement filed with the department for the

year preceding the year for which the limit is adopted.

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

727, Sec. 1, eff. April 1, 2007.

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-4-regulation-of-solvency > Chapter-423-transactions-with-money-and-other-assets

INSURANCE CODE

TITLE 4. REGULATION OF SOLVENCY

SUBTITLE B. RESERVES AND INVESTMENTS

CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 423.001. APPLICABILITY OF CHAPTER. (a) This chapter

applies to a domestic insurer regulated under this code,

including:

(1) a stock company;

(2) a reciprocal or interinsurance exchange;

(3) a Lloyd's plan;

(4) a fraternal benefit society;

(5) a stipulated premium company;

(6) a mutual insurance company of any kind, including:

(A) a statewide mutual assessment company;

(B) a local mutual aid association;

(C) a burial association;

(D) a county mutual insurance company; and

(E) a farm mutual insurance company; and

(7) any other organization or person engaged in the business of

insurance.

(b) A provision of this code limiting the regulation of an

insurer under this code does not limit the application of this

chapter, except that this chapter does not apply to an insurer

that is exempted from its application by another statute that

cites this chapter.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.002. AMBIGUITIES AND CONFLICTS WITH OTHER LAW. This

chapter controls to the extent of an ambiguity or a conflict

between this chapter and another provision of this code.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.003. RULES. The commissioner may adopt rules necessary

to implement this chapter.

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

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER B. TRANSACTIONS WITH MONEY

Sec. 423.051. DEPOSIT AND INVESTMENT OF MONEY. A director,

member of a committee, officer, or clerk of a domestic insurer

who has the duty to handle or invest the insurer's money may not:

(1) invest the money other than in the corporate name of the

insurer, except as provided by Section 423.102;

(2) deposit the money unless the deposit is:

(A) in the corporate name of the insurer;

(B) in a pooling account with one or more affiliates, as

described by Section 823.003; or

(C) in accordance with a reinsurance agreement;

(3) borrow the insurer's money;

(4) have any interest in a loan, pledge, security, or property

of the insurer, except as a stockholder; or

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

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

loan made by or on behalf of the insurer.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.052. MONEY HELD IN POOLING ACCOUNT. (a) Only a

domestic insurer and an affiliate, as described by Section

823.003, may hold money in a pooling account.

(b) The accounting and operating records and books of the

insurer and affiliate must be adequately detailed to identify

specific insurance policies and policyholders with the money from

premiums received by the insurer that issues the policies.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.053. AUTHORITY TO DEPOSIT MONEY IN ACCOUNT OF

REINSURER. A reinsurance agreement between a domestic insurer

and an affiliate, as described by Section 823.003, must

specifically authorize the deposit of money from premiums to the

account of the affiliate that assumes the reinsurance.

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

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER C. TRANSACTIONS WITH OTHER ASSETS

Sec. 423.101. DEFINITION. In this subchapter, "clearing

corporation" means:

(1) a clearing corporation as defined by Section 8.102(a),

Business & Commerce Code; or

(2) a clearance system that:

(A) is organized or operating under the laws of at least one

foreign country;

(B) provides for book-entry settlement and custody of

internationally traded securities; and

(C) has been organized and in operation for not less than 15

consecutive years.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.102. DEPOSIT AND HOLDING OF SECURITIES. (a) A

domestic insurer that has securities held in or purchased for the

insurer's general account or separate accounts may deposit the

securities or arrange through an agent, broker, or dealer for

deposit of the securities with a clearing corporation or in the

Federal Reserve book-entry system.

(b) If securities are deposited directly with a clearing

corporation or deposited indirectly through a participating

custodian bank, certificates representing securities of the same

class of the same issuer may be merged and held in bulk, in the

name of a nominee of the clearing corporation, with any other

securities deposited with the clearing corporation by any person,

regardless of the ownership of the securities.

(c) Certificates under Subsection (b) that represent securities

of small denominations may be merged into one or more

certificates of larger denominations.

(d) The records of an agent, broker, dealer, or member bank

through which an insurer holds securities in the Federal Reserve

book-entry system and the records of a custodian bank through

which an insurer holds securities with a clearing corporation

must show that the securities are held for the insurer and show

the accounts for which the securities are held.

(e) A bank must enter into a custodial agreement with an insurer

to be eligible to act as a participating custodian bank for the

insurer under this section.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.103. SECURITIES HELD UNDER CUSTODIAL OR TRUST

AGREEMENT. A domestic insurer's securities that are held under a

custodial agreement or trust agreement with a bank, Federal Home

Loan Bank, or trust company may be issued in the name of a

nominee of the bank, Federal Home Loan Bank, or trust company

only if the bank, Federal Home Loan Bank, or trust company:

(1) has corporate trust powers;

(2) is authorized to act as a custodian or trustee;

(3) is organized under the laws of the United States or any

state of the United States; and

(4) meets one of the following requirements:

(A) is a member of the Federal Reserve System;

(B) is a member of or is eligible to receive deposits that are

insured by the Federal Deposit Insurance Corporation;

(C) maintains an account with a Federal Reserve Bank and is

subject to supervision and examination by the Board of Governors

of the Federal Reserve System; or

(D) is subject to supervision and examination by the Federal

Housing Finance Board.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.104. PROOF OF OWNERSHIP OF SECURITIES. (a) A domestic

insurer may demonstrate ownership of a security through a

definitive certificate or in accordance with rules adopted under

this section.

(b) The commissioner shall adopt rules under which a domestic

insurer may demonstrate ownership of an uncertificated security,

as defined by Section 8.102(a), Business & Commerce Code,

consistent with common practices of securities exchanges and

markets. The rules must establish:

(1) standards for the types of uncertificated securities the

insurer may hold;

(2) the manner in which the insurer may demonstrate ownership of

the security; and

(3) adequate financial safeguards relating to the ownership of

uncertificated securities.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.105. MANDATORY DEPOSIT OF SECURITIES; COMMISSIONER

CONTROL. (a) An insurer that is required to deposit securities

as a condition of engaging in the business of insurance in this

state may deposit the securities with a clearing corporation or

in the Federal Reserve book-entry system.

(b) Securities under Subsection (a) are under the commissioner's

control and may not be withdrawn by the insurer without the

commissioner's approval.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.106. REQUIRED EVIDENCE FOR SECURITIES. (a) An insurer

that deposits securities under Section 423.105 shall provide

evidence to the commissioner to establish that:

(1) the securities are recorded in an account in the name of:

(A) the participating custodian bank or member bank through

which the insurer deposits the securities with a clearing

corporation or in the Federal Reserve book-entry system; or

(B) the insurer, if the insurer makes the deposit directly with

the clearing corporation as a direct participant; and

(2) the records of the participating custodian bank, direct

participant, or member bank and of the clearing corporation show

that the securities are under the commissioner's control.

(b) Evidence under Subsection (a)(1) must be issued, as

applicable, by:

(1) the participating custodian bank;

(2) the member bank; or

(3) the insurer, when the insurer makes the deposit directly

with the clearing corporation as a direct participant.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.107. ASSETS DEPOSITED WITH CLEARING CORPORATION. A

domestic insurer may deposit assets with a clearing corporation

only if:

(1) the insurer is a member of an insurance holding company

system that has assets of at least $5 billion, as shown by annual

statements of member insurers for the preceding year;

(2) the insurer uses the clearing corporation only as a

depository for investments in internationally traded securities;

(3) the insurer's total investment in internationally traded

securities under Subdivision (2) does not exceed the insurer's

policyholders' surplus; and

(4) the insurer does not use securities deposited with the

clearing corporation as security for reinsurance.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.108. LIMITATION ON ASSETS DEPOSITED WITH CLEARING

CORPORATION. The commissioner by rule may adopt a reasonable

limit on the percentage of a domestic insurer's assets that may

be deposited with a clearing corporation. The limit may not

exceed five percent of the insurer's total assets, as shown by

the insurer's annual statement filed with the department for the

year preceding the year for which the limit is adopted.

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

727, Sec. 1, eff. April 1, 2007.


State Codes and Statutes

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-4-regulation-of-solvency > Chapter-423-transactions-with-money-and-other-assets

INSURANCE CODE

TITLE 4. REGULATION OF SOLVENCY

SUBTITLE B. RESERVES AND INVESTMENTS

CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 423.001. APPLICABILITY OF CHAPTER. (a) This chapter

applies to a domestic insurer regulated under this code,

including:

(1) a stock company;

(2) a reciprocal or interinsurance exchange;

(3) a Lloyd's plan;

(4) a fraternal benefit society;

(5) a stipulated premium company;

(6) a mutual insurance company of any kind, including:

(A) a statewide mutual assessment company;

(B) a local mutual aid association;

(C) a burial association;

(D) a county mutual insurance company; and

(E) a farm mutual insurance company; and

(7) any other organization or person engaged in the business of

insurance.

(b) A provision of this code limiting the regulation of an

insurer under this code does not limit the application of this

chapter, except that this chapter does not apply to an insurer

that is exempted from its application by another statute that

cites this chapter.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.002. AMBIGUITIES AND CONFLICTS WITH OTHER LAW. This

chapter controls to the extent of an ambiguity or a conflict

between this chapter and another provision of this code.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.003. RULES. The commissioner may adopt rules necessary

to implement this chapter.

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

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER B. TRANSACTIONS WITH MONEY

Sec. 423.051. DEPOSIT AND INVESTMENT OF MONEY. A director,

member of a committee, officer, or clerk of a domestic insurer

who has the duty to handle or invest the insurer's money may not:

(1) invest the money other than in the corporate name of the

insurer, except as provided by Section 423.102;

(2) deposit the money unless the deposit is:

(A) in the corporate name of the insurer;

(B) in a pooling account with one or more affiliates, as

described by Section 823.003; or

(C) in accordance with a reinsurance agreement;

(3) borrow the insurer's money;

(4) have any interest in a loan, pledge, security, or property

of the insurer, except as a stockholder; or

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

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

loan made by or on behalf of the insurer.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.052. MONEY HELD IN POOLING ACCOUNT. (a) Only a

domestic insurer and an affiliate, as described by Section

823.003, may hold money in a pooling account.

(b) The accounting and operating records and books of the

insurer and affiliate must be adequately detailed to identify

specific insurance policies and policyholders with the money from

premiums received by the insurer that issues the policies.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.053. AUTHORITY TO DEPOSIT MONEY IN ACCOUNT OF

REINSURER. A reinsurance agreement between a domestic insurer

and an affiliate, as described by Section 823.003, must

specifically authorize the deposit of money from premiums to the

account of the affiliate that assumes the reinsurance.

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

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER C. TRANSACTIONS WITH OTHER ASSETS

Sec. 423.101. DEFINITION. In this subchapter, "clearing

corporation" means:

(1) a clearing corporation as defined by Section 8.102(a),

Business & Commerce Code; or

(2) a clearance system that:

(A) is organized or operating under the laws of at least one

foreign country;

(B) provides for book-entry settlement and custody of

internationally traded securities; and

(C) has been organized and in operation for not less than 15

consecutive years.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.102. DEPOSIT AND HOLDING OF SECURITIES. (a) A

domestic insurer that has securities held in or purchased for the

insurer's general account or separate accounts may deposit the

securities or arrange through an agent, broker, or dealer for

deposit of the securities with a clearing corporation or in the

Federal Reserve book-entry system.

(b) If securities are deposited directly with a clearing

corporation or deposited indirectly through a participating

custodian bank, certificates representing securities of the same

class of the same issuer may be merged and held in bulk, in the

name of a nominee of the clearing corporation, with any other

securities deposited with the clearing corporation by any person,

regardless of the ownership of the securities.

(c) Certificates under Subsection (b) that represent securities

of small denominations may be merged into one or more

certificates of larger denominations.

(d) The records of an agent, broker, dealer, or member bank

through which an insurer holds securities in the Federal Reserve

book-entry system and the records of a custodian bank through

which an insurer holds securities with a clearing corporation

must show that the securities are held for the insurer and show

the accounts for which the securities are held.

(e) A bank must enter into a custodial agreement with an insurer

to be eligible to act as a participating custodian bank for the

insurer under this section.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.103. SECURITIES HELD UNDER CUSTODIAL OR TRUST

AGREEMENT. A domestic insurer's securities that are held under a

custodial agreement or trust agreement with a bank, Federal Home

Loan Bank, or trust company may be issued in the name of a

nominee of the bank, Federal Home Loan Bank, or trust company

only if the bank, Federal Home Loan Bank, or trust company:

(1) has corporate trust powers;

(2) is authorized to act as a custodian or trustee;

(3) is organized under the laws of the United States or any

state of the United States; and

(4) meets one of the following requirements:

(A) is a member of the Federal Reserve System;

(B) is a member of or is eligible to receive deposits that are

insured by the Federal Deposit Insurance Corporation;

(C) maintains an account with a Federal Reserve Bank and is

subject to supervision and examination by the Board of Governors

of the Federal Reserve System; or

(D) is subject to supervision and examination by the Federal

Housing Finance Board.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.104. PROOF OF OWNERSHIP OF SECURITIES. (a) A domestic

insurer may demonstrate ownership of a security through a

definitive certificate or in accordance with rules adopted under

this section.

(b) The commissioner shall adopt rules under which a domestic

insurer may demonstrate ownership of an uncertificated security,

as defined by Section 8.102(a), Business & Commerce Code,

consistent with common practices of securities exchanges and

markets. The rules must establish:

(1) standards for the types of uncertificated securities the

insurer may hold;

(2) the manner in which the insurer may demonstrate ownership of

the security; and

(3) adequate financial safeguards relating to the ownership of

uncertificated securities.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.105. MANDATORY DEPOSIT OF SECURITIES; COMMISSIONER

CONTROL. (a) An insurer that is required to deposit securities

as a condition of engaging in the business of insurance in this

state may deposit the securities with a clearing corporation or

in the Federal Reserve book-entry system.

(b) Securities under Subsection (a) are under the commissioner's

control and may not be withdrawn by the insurer without the

commissioner's approval.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.106. REQUIRED EVIDENCE FOR SECURITIES. (a) An insurer

that deposits securities under Section 423.105 shall provide

evidence to the commissioner to establish that:

(1) the securities are recorded in an account in the name of:

(A) the participating custodian bank or member bank through

which the insurer deposits the securities with a clearing

corporation or in the Federal Reserve book-entry system; or

(B) the insurer, if the insurer makes the deposit directly with

the clearing corporation as a direct participant; and

(2) the records of the participating custodian bank, direct

participant, or member bank and of the clearing corporation show

that the securities are under the commissioner's control.

(b) Evidence under Subsection (a)(1) must be issued, as

applicable, by:

(1) the participating custodian bank;

(2) the member bank; or

(3) the insurer, when the insurer makes the deposit directly

with the clearing corporation as a direct participant.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.107. ASSETS DEPOSITED WITH CLEARING CORPORATION. A

domestic insurer may deposit assets with a clearing corporation

only if:

(1) the insurer is a member of an insurance holding company

system that has assets of at least $5 billion, as shown by annual

statements of member insurers for the preceding year;

(2) the insurer uses the clearing corporation only as a

depository for investments in internationally traded securities;

(3) the insurer's total investment in internationally traded

securities under Subdivision (2) does not exceed the insurer's

policyholders' surplus; and

(4) the insurer does not use securities deposited with the

clearing corporation as security for reinsurance.

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

727, Sec. 1, eff. April 1, 2007.

Sec. 423.108. LIMITATION ON ASSETS DEPOSITED WITH CLEARING

CORPORATION. The commissioner by rule may adopt a reasonable

limit on the percentage of a domestic insurer's assets that may

be deposited with a clearing corporation. The limit may not

exceed five percent of the insurer's total assets, as shown by

the insurer's annual statement filed with the department for the

year preceding the year for which the limit is adopted.

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

727, Sec. 1, eff. April 1, 2007.