H.B. No. 1251

	AN ACT
	relating to fraternal benefit societies in a hazardous financial
	condition.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 885.311, Insurance Code, is amended by
	amending Subsection (a) and adding Subsections (d) and (e) to read
	as follows:
	(a)  A fraternal benefit society shall provide in the
	fraternal benefit society's laws that if the society's reserves for
	any class of the society's benefit certificates become impaired,
	the society's supreme governing body or board of directors may
	require the certificate holders to pay the society an equitable
	proportion of the deficiency as determined by the governing body or
	board.  The aggregate assessment for the impaired reserves may not
	exceed the total amount required to comply with Section 885.408.
	(d)  Not later than the 90th day before the proposed
	effective date of an assessment under Subsection (a), the fraternal
	benefit society shall file with the department an application for
	approval of the assessment and a statement sworn to by the president
	and secretary or corresponding officers of the society.  The
	statement must:
	(1)  include:
	(A)  the terms of the assessment, including the
	proposed effective date; and
	(B)  a narrative statement of the financial
	condition of the fraternal benefit society; and
	(2)  state that the assessment:
	(A)  received approval by a majority vote of the
	supreme governing body or board of directors of the society; and
	(B)  complies with the requirements of this
	section.
	(e)  After the department receives a completed application,
	the commissioner may approve or disapprove the application.  If the
	commissioner does not approve or disapprove the application before
	the 60th day after the date the department receives the completed
	application, the application is considered approved.  The
	commissioner may impose an effective date earlier than the date
	requested in the application if the earlier effective date is in the
	best interests of the certificate holders.
	SECTION 2.  Section 885.407, Insurance Code, is amended to
	read as follows:
	Sec. 885.407.  SOLVENCY.  (a)  If a fraternal benefit society
	reports admissible assets greater than the society's liabilities in
	an amount that authorizes the commissioner to place the society
	under regulatory control and the commissioner reasonably believes
	the society's hazardous financial condition will not be promptly
	remedied without intervention by the department, the commissioner
	may order the society to promptly seek and negotiate an agreement to
	transfer in accordance with this section all benefit members,
	benefit certificates, assets, and liabilities of the society to
	another fraternal benefit society.  A transfer under this section:
	(1)  may be by merger, consolidation, assumption, or
	otherwise;
	(2)  constitutes an entire novation of each benefit
	certificate transferred by the society in a hazardous financial
	condition, and the receiving society is legally and contractually
	responsible for each transferred certificate;
	(3)  must conclude before the deadline set by the
	commissioner;
	(4)  may be approved by a vote of the majority of the
	supreme governing body or board of directors of the society in a
	hazardous financial condition, notwithstanding Section
	885.063(a)(2)(C) or any provision of the society's laws to the
	contrary; and
	(5)  is subject to approval by the commissioner.
	(b)  Not later than the seventh day before the date the
	supreme governing body or board of directors of a fraternal benefit
	society votes on a transfer proposed under Subsection (a), the
	governing body or board shall provide the society's certificate
	holders written notice of and an opportunity to comment on the
	proposed transfer.  If the governing body or board approves the
	transfer, the governing body or board shall provide the certificate
	holders' comments to the commissioner.
	(c)  The supreme governing body or board of directors of a
	fraternal benefit society receiving benefit certificates pursuant
	to a transfer under an agreement described by Subsection (a) may
	suspend or modify qualifications for membership in the receiving
	society to the extent necessary to permit the society to accept the
	certificate holders of the society transferring certificates under
	the agreement, notwithstanding any provision of the receiving
	society's laws to the contrary.
	(d)  The commissioner may grant to a fraternal benefit
	society that is not authorized to engage in the business of
	insurance in this state the authority to service benefit
	certificates transferred pursuant to Subsection (a) and fulfill all
	obligations to the holders of the certificates.  Commissioner
	action under this subsection does not authorize the fraternal
	benefit society to otherwise engage in the business of insurance in
	this state.
	(e)  A transfer under Subsection (a) may be made to an
	insurer that is not a fraternal benefit society if the insurer is
	authorized to engage in the business of insurance in this state.  A
	holder of a certificate subject to a transfer as authorized by this
	subsection is deemed to agree that any term in the certificate,
	including a term that makes the certificate subject to the
	transferring society's laws or that provides for maintenance of the
	transferring society's solvency that is inconsistent with transfer
	to an insurer that is not a fraternal benefit society, is void on
	transfer of the certificate.  The receiving insurer shall endorse
	on a form approved by the commissioner each benefit certificate
	received by a transfer made under this section to reflect any terms
	of the certificate voided by this subsection.  A certificate
	holder's obligation to pay an outstanding assessment under Section
	885.311 that is not released under the transfer agreement is not
	released or voided by this subsection.
	(f)  The commissioner may request the attorney general bring
	an action under Section 885.502 to terminate a fraternal benefit
	society that fails to comply with an order under this section or
	fails to remedy the financial condition that gave rise to the order.
	(g)  The powers and authority of the commissioner under this
	section are cumulative and in addition to all other powers and
	authority to remediate the financial condition of a fraternal
	benefit society available to the commissioner.  [A fraternal
	benefit society is considered solvent if its admissible assets are
	equal to or greater than its liabilities.]
	SECTION 3.  The changes in law made by this Act to Section
	885.311, Insurance Code, apply only to an assessment by a fraternal
	benefit society with an effective date on or after January 1, 2020.
	An assessment by a fraternal benefit society with an effective date
	before January 1, 2020, is governed by the law as it existed
	immediately before the effective date of this Act, and that law is
	continued in effect for that purpose.
	SECTION 4.  This Act takes effect September 1, 2019.
	______________________________	______________________________
	President of the Senate	Speaker of the House
	I certify that H.B. No. 1251 was passed by the House on April
	18, 2019, by the following vote:  Yeas 138, Nays 9, 2 present, not
	voting; and that the House concurred in Senate amendments to H.B.
	No. 1251 on May 22, 2019, by the following vote:  Yeas 119, Nays 22,
	3 present, not voting.
	______________________________
	Chief Clerk of the House
	I certify that H.B. No. 1251 was passed by the Senate, with
	amendments, on May 15, 2019, by the following vote:  Yeas 31, Nays
	0.
	______________________________
	Secretary of the Senate
	APPROVED: __________________
	Date
	__________________
	Governor