Each contract of reinsurance entered into by companies or
associations operating under the Insurance Code, Chapter 14, with legal reserve
companies under the provisions of the Insurance Code, Article 14.62, shall
become effective only after such contract has been approved by the commissioner
of insurance. The commissioner of insurance shall not approve any such contract
of reinsurance unless it be shown at a public hearing that the following
conditions exist:
(1) that the legal
reserve company is authorized to write life, health, and accident insurance in
Texas and that such company has capital or surplus of at least
$100,000;
(2) that such contract
will be to the benefit of the members of the company operating under the
provisions of the Insurance Code, Chapter 14;
(3) that upon cancellation of such contract
the cancellation thereof shall not apply to risks theretofore assumed by the
reinsurer for which premiums have been paid or become due;
(4) that reinsurance premiums may be paid
from the mortuary fund or expense fund, or both; however, any premium paid from
the mortuary fund shall not exceed the amount of premium currently received in
the mortuary fund from the policies being reinsured but calculated separately
upon each individual policy, and, additionally, the amount of such premium so
paid from the mortuary fund shall not exceed the percentage of the total
mortuary fund premium so individually calculated as the percentage of the risk
reinsured applies to the total of the risk insured by the mutual assessment
company. For example, if the mortuary fund portion of the annual premium of $10
for a $1,000 mutual assessment policy and one-half of the risk ($500) is
reinsured, only $5.00 annually may be paid from the mortuary fund for the
reinsurance;
(5) that the ceding
company or association will set up and maintain current and adequate records
which will reflect the true status of all policies or risks
reinsured;
(6) that no officer,
director, agent, or employee of the ceding company shall receive any commission
or remuneration in any manner for procuring a reinsurance agreement between the
ceding company and a reinsurer, except that dividends or profit sharing
agreements may be effected whereby the mortuary or claim fund shall be the
recipient; and
(7) that no credit
shall be allowed to any ceding insurer for reinsurance made, ceded or renewed,
as an admitted asset or as a reduction of liability, unless by the terms of the
written reinsurance agreement the reinsurance is payable by the assuming
insurer on the basis of the liability of the ceding insurer under any policy or
contract reinsured without diminution because of the insolvency of the ceding
insurer, nor unless under the contract or contracts of reinsurance the
liability of such reinsurance is assumed by the assuming insurer or insurers as
of the same effective date.
