Wharton Bill Raises Failed Insurer Backstop To $500,000

The text as introduced · 765 words

90R3924 SCR-D

By: Wharton
H.B. No. 886

A BILL TO BE ENTITLED

AN ACT

relating to the amount of benefits excluded from certain

contractual obligations for the purpose of determining the amount

of coverage provided to an insured of an impaired or insolvent

insurer by the Texas Life and Health Insurance Guaranty

Association.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 463.204, Insurance Code, is amended to

read as follows:

Sec. 463.204. OBLIGATIONS EXCLUDED. A contractual

obligation does not include:

(1) death benefits in an amount in excess of $500,000

[ $300,000 ] or a net cash surrender or net cash withdrawal value in

an amount in excess of $100,000 under one or more life insurance

policies on a single life;

(2) an amount in excess of:

(A) $500,000 [ $250,000 ] in the present value

under one or more annuity contracts issued with respect to a single

life under individual annuity policies or group annuity policies;

or

(B) $5 million in unallocated annuity contract

benefits with respect to a single contract owner regardless of the

number of those contracts;

(3) an amount in excess of the following amounts,

including any net cash surrender or cash withdrawal values, under

one or more accident, health, accident and health, or long-term

care insurance policies on a single life:

(A) $500,000 for health benefit plans;

(B) $300,000 for disability income and long-term

care insurance, as those terms are defined by this code or rules

adopted by the commissioner; or

(C) $200,000 for coverages that are not defined

as health benefit plans, disability income, or long-term care

insurance;

(4) an amount in excess of $250,000 in present value

annuity benefits, in the aggregate, including any net cash

surrender and net cash withdrawal values, with respect to each

individual participating in a governmental retirement benefit plan

established under Section 401, 403(b), or 457, Internal Revenue

Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by

an unallocated annuity contract or the beneficiary or beneficiaries

of the individual if the individual is deceased;

(5) an amount in excess of $500,000 [ $250,000 ] in

present value annuity benefits, in the aggregate, including any net

cash surrender and net cash withdrawal values, with respect to each

payee of a structured settlement annuity or the beneficiary or

beneficiaries of the payee if the payee is deceased;

(6) aggregate benefits in an amount in excess of

$500,000 [ $300,000 ] with respect to a single life, except with

respect to[ :

[ (A) benefits paid under health benefit plans,

described by Subdivision (3)(A), in which case the aggregate

benefits are $500,000; and

[ (B) ] benefits paid to one owner of multiple

nongroup policies of life insurance, whether the policy owner is an

individual, firm, corporation, or other person, and whether the

persons insured are officers, managers, employees, or other

persons, in which case the maximum benefits are $5 million

regardless of the number of policies and contracts held by the

owner;

(7) an amount in excess of $5 million in benefits, with

respect to either one plan sponsor whose plans own directly or in

trust one or more unallocated annuity contracts not included in

Subdivision (4) irrespective of the number of contracts with

respect to the contract owner or plan sponsor or one contract owner

provided coverage under Section 463.201(a)(3)(B), except that, if

one or more unallocated annuity contracts are covered contracts

under this chapter and are owned by a trust or other entity for the

benefit of two or more plan sponsors, coverage shall be afforded by

the association if the largest interest in the trust or entity

owning the contract or contracts is held by a plan sponsor whose

principal place of business is in this state, and in no event shall

the association be obligated to cover more than $5 million in

benefits with respect to all these unallocated contracts;

(8) any contractual obligations of the insolvent or

impaired insurer under a covered policy or contract that do not

materially affect the economic value of economic benefits of the

covered policy or contract; or

(9) punitive, exemplary, extracontractual, or bad

faith damages, regardless of whether the damages are:

(A) agreed to or assumed by an insurer, insured,

or covered person; or

(B) imposed by a court.

SECTION 2. The changes in law made by Section 463.204,

Insurance Code, as amended by this Act, apply only to an insurer

that first becomes impaired or insolvent on or after the effective

date of this Act.

SECTION 3. This Act takes effect September 1, 2027.