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A BILL TO BE ENTITLED
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AN ACT
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relating to the authority of certain domestic life, health, and |
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accident insurance companies to make certain investments; adding |
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provisions that may be subject to a criminal penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter C, Chapter 425, Insurance Code, is |
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amended by adding Section 425.1185 to read as follows: |
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Sec. 425.1185. AUTHORIZED INVESTMENTS: MEZZANINE REAL |
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ESTATE LOANS. (a) In this section, "mezzanine real estate loan" |
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means a loan that is secured by a pledge of a direct or indirect |
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equity interest in an entity that owns real estate. |
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(b) Subject to Subsections (c) and (d), an insurance company |
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with more than $10 billion in admitted assets may invest in a |
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mezzanine real estate loan if the loan documents: |
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(1) require that each pledgor abstain from granting an |
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additional security interest in the equity interest pledged; |
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(2) employ techniques to minimize the likelihood or |
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impact of a bankruptcy filing by the real estate owner or the |
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mezzanine real estate loan borrower; and |
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(3) require the real estate owner and the mezzanine |
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real estate loan borrower to: |
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(A) hold no assets other than, in the case of the |
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owner, the real estate, and in the case of the borrower, the equity |
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interest in the entity; |
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(B) not engage in any business other than, in the |
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case of the owner, the ownership and operation of the real estate, |
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and in the case of the borrower, holding the ownership interest in |
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the owner; and |
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(C) not incur additional debt, other than limited |
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trade payables, a first mortgage loan, or the mezzanine real estate |
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loan. |
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(c) Before making an initial investment in a mezzanine real |
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estate loan, an insurance company shall corroborate that the sum of |
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the first mortgage on the real estate and the mezzanine real estate |
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loan does not exceed 100 percent of the value of the current |
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appraised value of the real estate. |
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(d) An insurance company's cumulative investment under this |
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section may not exceed three percent of the insurance company's |
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admitted assets. |
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SECTION 2. Section 425.1185, Insurance Code, as added by |
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this Act, applies only to an investment made on or after the |
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effective date of this Act. An investment made before the effective |
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date of this Act is governed by the law as it existed immediately |
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before that date, and that law is continued in effect for that |
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purpose. |
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SECTION 3. This Act takes effect September 1, 2015. |