Texas Statutes
Subchapter D. Authorized Investments and Transactions for Other Life, Health, and Accident Insurers
Section 425.222. Authorized Investments for Capital, Surplus, and Contingency Funds: Life Income Interests in Qualified Trusts

Sec. 425.222. AUTHORIZED INVESTMENTS FOR CAPITAL, SURPLUS, AND CONTINGENCY FUNDS: LIFE INCOME INTERESTS IN QUALIFIED TRUSTS. (a) Subject to this section, an insurer may invest the insurer's capital, surplus, and contingency funds in a life income interest in a qualified irrevocable express testamentary trust.
(b) For purposes of this section, a trust is a qualified trust if:
(1) each fee simple recipient of any part of the corpus of the trust:
(A) is a public charity, church, educational institution, or scientific institution;
(B) is located in this state; and
(C) is recognized by the United States Internal Revenue Service as exempt from payment of income taxes;
(2) the corpus of the trust is wholly or partly composed of interests in real estate, stocks, bonds, debentures, and other securities of an aggregate total value of at least $5 million; and
(3) the corpus of the trust produces annual income of at least $100,000.
(c) An insurer's life income interest in a qualified trust may not exceed 10 percent of the insurer's admitted assets.
(d) Before an insurer may acquire a life income interest in a qualified trust, the insurer must present evidence satisfactory to the commissioner that shows:
(1) the interest is subject to transfer and is recognized as transferable;
(2) the interest is capable of reasonable valuation;
(3) a market for the sale of the interest exists; and
(4) the interest is supported by life insurance in:
(A) an amount not less than the admitted value of the interest; and
(B) a form approved by the commissioner.
(e) In valuing a life income interest in a qualified trust on the insurer's books, the insurer may value the interest only on the basis of the lesser of:
(1) the recognized market established in accordance with Subsection (d)(3); or
(2) the ratio that the fractional life income interest in the income of the trust bears to the total market value of the properties held by the trust that are of a type of property an insurer may lawfully acquire under the investment statutes of this state.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.

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