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Texas Insurance Code - INS § 425.222. Authorized Investments for Capital, Surplus, and Contingency funds:  Life Income interests in Qualified trusts

Current as of January 01, 2024 | Updated by Findlaw Staff

(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.

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Cite this article: FindLaw.com - Texas Insurance Code - INS § 425.222. Authorized Investments for Capital, Surplus, and Contingency funds:  Life Income interests in Qualified trusts - last updated January 01, 2024 | https://codes.findlaw.com/tx/insurance-code/ins-sect-425-222/

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