Bill Text: TX HB3803 | 2017-2018 | 85th Legislature | Enrolled


Bill Title: Relating to certain authorized investments for domestic life, health, and accident insurers.

Spectrum: Bipartisan Bill

Status: (Passed) 2017-06-15 - Effective on 9/1/17 [HB3803 Detail]

Download: Texas-2017-HB3803-Enrolled.html
 
 
  H.B. No. 3803
 
 
 
 
AN ACT
  relating to certain authorized investments for domestic life,
  health, and accident insurers.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 425.118, Insurance Code, is amended by
  amending Subsections (c), (d), and (e) and adding Subsections (d-1)
  and (e-1) to read as follows:
         (c)  The term of an obligation secured by a first lien on a
  leasehold estate in real property may not, as of the date the
  obligation is acquired, exceed a period equal to four-fifths of the
  unexpired term of the leasehold estate, including any renewal
  options exercisable by the lessee, and the obligation must fully
  amortize during that period.  The term of the leasehold estate,
  including any renewal options exercisable by the lessee, may not
  expire sooner than the 10th anniversary of the expiration date of
  the term of the obligation.
         (d)  An obligation secured by a first lien on a leasehold
  estate in real property must be payable in one or more installments
  of an amount or amounts sufficient to ensure that, at any time
  during [after the expiration of two-thirds of] the original term of
  the obligation, the principal balance on the obligation is not
  greater than the principal balance would have been if the
  obligation had been amortized over the original term of the
  obligation in equal monthly, quarterly, semiannual, or annual
  payments of principal and interest with payments of interest only
  for the first five years of the original term of the obligation
         (d-1)  Subsection (d) does not apply to an obligation secured
  by a first lien on a leasehold estate in real property if:
               (1)  the amount of the obligation does not, as of the
  date the obligation is acquired, exceed 75 percent of the value of
  the leasehold estate; 
               (2)  the lease agreement provides that the fee simple
  estate in the real property transfers automatically to the lessee
  on or before the expiration of the term of the leasehold estate,
  including any renewal options exercisable by the lessee; or 
               (3)  the lease agreement provides that the lessee has
  an option to purchase the fee simple estate in the real property on
  or before the expiration of the term of the leasehold estate,
  including any renewal options exercisable by the lessee, for an
  amount that is less than 10 percent of the appraised value of the
  real property, and the insurance company has a contractual right if
  the lessee does not exercise that option to acquire the fee simple
  estate in the real property for that same amount, by assignment from
  the lessee or otherwise.
         (e)  Except as provided by Subsection (e-1), if [If] any part
  of the value of buildings is to be included in the value of real
  property or a leasehold estate in real property to secure an
  obligation under this section:
               (1)  the buildings must be covered by adequate property
  insurance, including fire and extended coverage insurance, issued
  by:
                     (A)  an insurer authorized to engage in business
  in this state; or
                     (B)  an insurer recognized as acceptable to issue
  that coverage by the insurance regulatory official of the state in
  which the real property is located;
               (2)  the amount of insurance provided by one or more
  policies may not be less than the lesser of:
                     (A)  the unpaid balance of the obligation; or
                     (B)  the insurable value of the buildings; and
               (3)  the loss clause under each policy must be payable
  to the insurance company as the company's interest may appear.
         (e-1)  The property insurance otherwise required under
  Subsection (e) is not required if the borrower maintains a net worth
  as indicated in the borrower's audited financial statements for the
  most recent fiscal year of at least the greater of five times the
  amount of the indebtedness or $100 million and:
               (1)  the insurance company has recourse against the
  borrower or the borrower's guarantor; or
               (2)  for an obligation secured by a leasehold estate:
                     (A)  the tenant assigned the lease to the
  insurance company; and
                     (B)  the lease agreement is in writing and
  provides that if a building on the property is damaged or destroyed,
  the tenant or the tenant's guarantor is obligated to rebuild or
  restore the damaged or destroyed building to the building's
  condition immediately before the damage or destruction occurred or
  compensate the owner for the loss arising from the damage or
  destruction.
         SECTION 2.  Section 425.118, Insurance Code, as amended by
  this Act, applies only to an investment made on or after the
  effective date of this Act. An investment made before the effective
  date of this Act is governed by the law as it existed immediately
  before that date, and that law is continued in effect for that
  purpose.
         SECTION 3.  This Act takes effect September 1, 2017.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 3803 was passed by the House on May 2,
  2017, by the following vote:  Yeas 145, Nays 0, 1 present, not
  voting.
 
  ______________________________
  Chief Clerk of the House   
 
 
         I certify that H.B. No. 3803 was passed by the Senate on May
  19, 2017, by the following vote:  Yeas 31, Nays 0.
 
  ______________________________
  Secretary of the Senate    
  APPROVED:  _____________________
                     Date          
   
            _____________________
                   Governor       
feedback