Interim Procedures for Banks Selling Annuities.

Home

Bulletins

1997

b-0051-7.html

December 18, 1997

To:

ALL INSURANCE COMPANIES, CORPORATIONS, EXCHANGES, MUTUALS, RECIPROCALS, ASSOCIATIONS, LLOYD s, HEALTH MAINTENANCE ORGANIZATIONS OR OTHER ENTITIES REGULATED BY THE TEXAS DEPARTMENT OF INSURANCE AND AUTHORIZED TO DO BUSINESS IN TEXAS; AND TO THEIR AGENTS AND REPRESENTATIVES AND THE PUBLIC GENERALLYRE: INTERIM PROCEDURES FOR BANKS SELLING ANNUITIES

Re:

INTERIM PROCEDURES FOR BANKS SELLING ANNUITIES

On October 7, 1997, United States District Judge James R. Nowlin issued a final judgment in

Texas Bankers Association, et al. vs Elton Bomer, in his official capacity as Commissioner of Insurance, Texas Department of Insurance

, Civil No. A-96-CA-694 JN, in the United States District Court for the Western District of Texas, (

"TBA vs. Bomer"

) declaring that national banks are authorized under 12 U.S.C. 24(Seventh) to sell annuities as agent in the State of Texas, and that the provisions of the Insurance Code which prohibit national banks' exercise of that authority are preempted.

Based on this ruling, provisions of the Texas Insurance Code may be preempted as applied to banks that wish to sell annuities under Section 24 of the National Bank Act. The Texas Legislature passed HB 3391 during the 75th session amending several Insurance Code provisions to allow banks located and doing business in a place with a population of 5,000 or less to sell insurance. However, since the district court s decision in

TBA vs. Bomer

applies to banks regardless of geographic location, Texas Insurance Code provisions that limit the sale of annuities to banks located and doing business in a place with a population of 5,000 or less have been preempted. Since the Texas Insurance Code as it now exists does not contemplate that banks located and doing business in a place with a population of over 5,000 may sell annuities,

TBA vs

mer

applies to banks regardless of geographic location, Texas Insurance Code provisions that limit the sale of annuities to banks located and doing business in a place with a population of 5,000 or less have been preempted. Since the Texas Insurance Code as it now exists does not contemplate that banks located and doing business in a place with a population of over 5,000 may sell annuities,

TBA vs. Bomer

requires the adoption of procedures to comply with federal law until the Texas Legislature convenes in 1999 and can address amendments to the Texas Insurance Code.

Because I must continue to carry out my responsibility to regulate the sale of insurance (including annuities) in Texas, and the Legislature will not have an opportunity to act on these issues for many months, I believe that it is in the public interest to implement an interim procedure for allowing banks to sell annuities subject, to the extent possible, to the same licensing and operating requirements as other insurance agents. In doing so, I will apply Texas statutes in a manner consistent with the court s ruling in

TBA vs. Bomer

. Interim procedures will afford oversight of banks' annuity business until the Legislature can consider appropriate statutory changes.

The procedures set forth in this bulletin apply to national banks, to state banks through the Texas Constitution bank parity provision, Article XVI, Section 16(c), and to state savings banks under the Texas Savings Bank Act, Article 489e, Section 7.11.

These provisions are

interim

only. These procedures are not intended to and do not create a class of licensees whose status must be "grandfathered" into any statutory scheme adopted by the Texas Legislature. Neither the existence of nor compliance with the interim procedures confers any property or other rights on licensed entities other than the right to conduct the sale of annuities in accordance with these interim procedures until they are superseded or terminated

and do not create a class of licensees whose status must be "grandfathered" into any statutory scheme adopted by the Texas Legislature. Neither the existence of nor compliance with the interim procedures confers any property or other rights on licensed entities other than the right to conduct the sale of annuities in accordance with these interim procedures until they are superseded or terminated. Moreover, these interim procedures may be modified at any time while they remain in effect

.

Interim procedures for authority to sell annuities.

A bank located and doing business in Texas may obtain a bank annuity license to offer fixed or variable annuity products, or both, by complying with all the licensing requirements of Texas Insurance Code, Article 21.07-1, 4(f), except to the extent that such requirements limit such license to banks located and doing business in a place with a population of 5,000 or less. The bank s application must include:

1. a certified copy of its charter;

2. a list of all licensed personnel, including at least one bank officer,who will conduct the business of insurance by selling or offering to sell annuities under the bank s license;

3. a board resolution authorizing the applying officer to make application for a corporate agent license on behalf of the bank; and

4. all other information required of applicants for a bank agent license.

These procedures are available only to banks located and doing business in Texas, consistent with Texas law precluding foreign corporations from being licensed as agents.

Like all other agents, a bank s employees who propose to engage in the sale of annuities must hold a Group I License as required by Texas Insurance Code, Article 21.07-1, and if the employee intends to engage in the sale of variable annuities, the employee must also obtain a Variable Contract Agent s License as required by Texas Insurance Code, Article 3.75, 7 and 28 TAC 19.701 - 19.709

as agents.

Like all other agents, a bank s employees who propose to engage in the sale of annuities must hold a Group I License as required by Texas Insurance Code, Article 21.07-1, and if the employee intends to engage in the sale of variable annuities, the employee must also obtain a Variable Contract Agent s License as required by Texas Insurance Code, Article 3.75, 7 and 28 TAC 19.701 - 19.709. Such employee may sell annuities but no other insurance products on behalf of the bank unless that bank is also licensed to sell such insurance products.

A bank licensed to sell annuities may receive a commission or other valuable consideration only for the sale of annuities and not for the sale of any other insurance products.

A bank applying for a bank annuity license may list in its application all the locations from which it intends to sell annuities without the necessity of filing a separate additional office location registration (LDTL) with the Department as required by 28 TAC 19.902. Any additional locations not listed in the original application must be registered with the Department.

If a bank intends to collect premiums other than the initial premium, or to adjust or settle claims, it must obtain a third party administrator (TPA) license pursuant to Texas Insurance Code, Article 21.07-6.

How to Contact the Texas Department of Insurance (TDI)

To obtain agent license applications, call 512-322-3503.

To notify TDI of a change in ownership of an agency, write to:

Texas Department of Insurance

Licensing Group

P.O. Box 149104

Mail Code 107-1A

Austin, TX 78714-9104

To notify consumers how to file a complaint with TDI, write to or call:

Texas Department of Insurance

Consumer Protection Program (111-1A)

P.O. Box 149091

Austin, TX 78714-9091

Phone: 800-252-3439 In Austin, call 463-6515

Fax: 512-475-1771

Elton Bomer

Commissioner of Insurance