28 Tex. Admin. Code § 11.806 - Investment Management by Affiliate Companies
(a) Subject to compliance with Insurance Code
Chapter 843 (concerning Health Maintenance Organizations), this chapter, and
other applicable insurance laws and regulations of this state, a domestic HMO,
which is a member of a holding company system with assets in an aggregate
amount in excess of $1 billion and a tangible net worth of at least $100
million and having affiliates licensed in this state may authorize an
affiliated corporation that, if other than the ultimate holding company, is
solvent with at least $10 million tangible net worth and whose performance and
obligations under a written agreement with the HMO are guaranteed by the
ultimate holding company to invest, hold, and administer as agent or nominee on
behalf of the domestic HMO bonds, notes, or other evidences of indebtedness
that are authorized and permissible investments under Insurance Code Chapter
843 and other applicable insurance laws and regulations of this state that
apply to HMOs, and which mature within one year of the date of acquisition. The
securities must be invested, held, and administered under a written agreement
authorized by the board of directors of the HMO or an authorized committee, and
submitted to the commissioner for prior approval. Approval must be based on
satisfactory evidence that the agreement will facilitate the operations of the
domestic HMO and will not unreasonably diminish the service to or protection of
the domestic HMO's enrollees within this state.
(b) The agreement must:
(1) specify in which office location it will
maintain records adequate to identify and verify the securities (or
proportionate interest therein) belonging to the HMO; and
(2) allow the commissioner or the
commissioner's designee to examine all records relating to those securities
held subject to the agreement and must agree to furnish these records at the
principal office of the HMO within 10 business days of a request by the
commissioner or any of the department's commissioned examiners.
(c) The HMO may authorize the
affiliate to:
(1) hold the securities of the
HMO in bulk, in certificates issued in the name of the affiliate or its
nominee, and to commingle them with securities owned by other affiliates of the
affiliate;
(2) provide for the
securities to be held by a custodian, including the custodian of securities of
the affiliate, or in a clearing corporation or the Federal Reserve Book Entry
System as provided in this subchapter; and
(3) purchase, sell, or otherwise dispose of
the securities in compliance with instructions received from the HMO.
(d) If required by the
commissioner, the HMO must report annually to the department:
(1) all investments with the affiliate under
this section;
(2) the market value
of all securities held by the affiliate on behalf of the HMO as of December 31
of the year next preceding or other date as the commissioner may require;
and
(3) the financial condition of
the affiliate including, at the commissioner's discretion, balance sheets,
income statements, and supporting schedules with an opinion on those financial
statements by an independent certified public accountant for the most recent
fiscal year.
(e) All of
the investments and transactions between or among affiliates and the HMO must
otherwise comply with all other applicable provisions of Insurance Code
Chapters 823 (concerning Insurance Holding Systems) and 843, and other
applicable insurance laws and regulations of this state.
(f) If the HMO or the affiliate does not
comply with Insurance Code Chapters 823 and 843 and other applicable insurance
laws and regulations of this state, or does not comply with the written
agreement governing the investing, holding, and administering of securities,
then the commissioner's approval will be withdrawn after reasonable notice and
ample opportunity to cure the noncompliance. If the HMO wishes to continue the
arrangement, it must submit a request to the commissioner for
approval.
(g) On the withdrawal of
approval of the agreement, the HMO must undertake to obtain, and the affiliated
corporation must undertake to return, investments or funds resulting from the
sale or maturity of those investments in which the affiliated corporation
invested, held, and administered on behalf of the HMO and the return must be
accomplished within 90 days unless:
(1) the
commissioner determines that the 90-day period creates a hazard to the public,
in which case the commissioner may designate that the period may not exceed 30
days from the date of determination; or
(2) the commissioner extends the period for
specific investments on request by the HMO and affiliated corporation, but in
no event to exceed one year from the date of the withdrawal of
approval.
(h) The
affiliate must be organized under the laws of one of the states of the United
States of America or of the District of Columbia.
Notes
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