Amends TCA Title 56.

ON APRIL 1, 2019, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 673, AS AMENDED.<br /> <br /> AMENDMENT #1 rewrites this bill and revises various provisions of the Insurers Rehabilitation and Liquidation Act.<br /> <br /> This amendment provides that notwithstanding the following present law provisions under the Act, a federal home loan bank may not be stayed, enjoined, or prohibited from exercising or enforcing any right or cause of action regarding collateral pledged under a security agreement or under any pledge agreement, security agreement, collateral agreement, or other similar arrangement or credit enhancement relating to a security agreement to which the federal home loan bank is a party:<br /> <br /> (1) The present law provision whereby a receiver appointed in a proceeding under the Act may apply for, and any court of general jurisdiction may grant, the restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to prevent, among other things, the institution or further prosecution of any actions or proceedings or any other threatened or contemplated action that might lessen the value of the insurer's assets or prejudice the rights of policyholders, creditors or shareholders, or the administration of any proceeding under this Act; and<br /> (2) The present law provisions whereby a court before which any action or proceeding in which the insurer is a party, or is obligated to defend a party, is pending when a rehabilitation order against the insurer is entered must stay the action or proceeding for 90 days and any additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings; whereby no statute of limitations or defense of laches runs with respect to any action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition; whereby an action against the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the order of rehabilitation is entered or the petition is denied; and whereby the rehabilitator may, upon an order for rehabilitation, within one year or such other longer time as applicable law may permit, institute an action or proceeding on behalf of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which the order is entered.<br /> <br /> <br /> (2) Present law authorizes a liquidator under the Act to enter into any contracts necessary to carry out the order to liquidate, and affirm or disavow any contracts to which the insurer is a party. This amendment adds that the liquidator is prohibited from disavowing, rejecting, or repudiating a federal home loan bank security agreement or any pledge agreement, security agreement, collateral agreement, guarantee agreement, or other similar arrangement or credit enhancement relating to a security agreement to which a federal home loan bank is a party.<br /> <br /> (3) This amendment prohibits a receiver from avoiding any transfer of, or any obligation to transfer, money or any other property arising under or in connection with a federal home loan bank security agreement or any pledge agreement, security agreement, collateral agreement, guarantee agreement, or other similar arrangement or credit enhancement relating to a security agreement to which a federal home loan bank is a party. However, a transfer may be avoided under this provision if it was made with the actual intent to hinder, delay, or defraud either existing or future creditors.<br /> <br /> (4) This amendment prohibits liquidators and rehabilitators from avoiding any preference arising under or in connection with a federal home loan bank security agreement or any pledge agreement, security agreement, collateral agreement, guarantee agreement, or other similar arrangement or credit enhancement relating to a security agreement to which a federal home loan bank is a party.<br /> <br /> (5) This amendment adds to the Act that any secured claim that a federal home loan bank has on an insurer who is subject to a delinquency proceeding under the Act is governed exclusively by the following: <br /> (A) A receiver is prohibited from voiding a redemption or repurchase of any stock or equity securities made by a federal home loan bank within four months of the commencement of the delinquency proceedings or that received prior approval of the receiver. However, a transfer is voidable if the transfer is made with the actual intent to hinder, delay, or defraud the insurer member, the receiver for the insurer member, existing creditors, or future creditors;<br /> (B) If a federal home loan bank exercises its rights regarding collateral pledged by an insurer member who is subject to a delinquency proceeding, then the federal home loan bank must repurchase any capital stock that is in excess of the amount of federal home loan bank stock that the insurer member is required to hold as a minimum investment, to the extent the federal home loan bank in good faith determines the repurchase to be permissible under applicable laws, regulations, regulatory obligations, and the federal home loan bank's capital plan, and consistent with the federal home loan bank's current capital stock practices applicable to its entire membership;<br /> (C) Following the appointment of a receiver for an insurer member, the federal home loan bank, within 10 business days after a request made by the receiver, must provide a process and establish timelines for the certain activities, such as the release of collateral that exceeds the lendable collateral value, as determined pursuant to the advance agreement with the federal home loan bank, required to support secured obligations remaining after any repayment of advances;<br /> (D) Upon request from the receiver for an insurer member, the federal home loan bank must provide any available options that an insurer member may exercise to renew or restructure an advance to defer associated prepayment fees, subject to: market conditions; the terms of the advances outstanding to the insurer member; the applicable policies of the federal home loan bank; and compliance with the Federal Home Loan Bank Act and corresponding regulations; and<br /> (E) After the tenth day following the commencement of a delinquency proceeding in this state involving an insurer member of the federal home loan bank, the federal home loan bank must not be stayed or prohibited from exercising its rights regarding collateral pledged by that insurer member.<br /> <br />