         Gerald C. Mann                AUSTIN      11. Tx.:xas
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            Hon. 0. P. Lockhart                    Opinion No. O-4054
            Chairman                               Re: Eligibility   of bonds of the
            Board of Insurance                     United States for investment and
            Commissioners                          deposit ,by insurance companies.
            Kustin, Texas
            Dear Sir:

                             Your request   for    an opinion    of this   department reads:
                           “We understand that United States Defense
                     Bonds, Series F and G, provide in their face as
                     to both classes that they shall be ‘non-transfer-
                     able’ ; Series F providing that they may be cashed
                     by the holder after 90 days from purchase date,
                     and Series G providing that they may be cashed by
                     the holder after one year from purchase date.
                           “Please give us        your opinion upon the question
                     whether such bonds of         either or both series may law-
                     fully be approved by         the Board of Insurance Commis-
                     sioners as securities         in the followiqg  circumstances.
                           “As capital   stock deposits of old line legal
                     reserve life,   health, and accident companies under
                     the provisions    of Article 4739.
                            ‘IAs reserve deposits of such companies under
                     Article 4740, 4725, and other pertinent    statutory
                     provisions.
                          “iis ‘Securities    of the United States’          under
                     the provisions    of Article 4759.
                           “As reserve securities    for the four types of
                     companies or associations    affected  by, and required
                     to accumulate and maintain reserve of securities      by
                     the terms of, S.B. 1 5, (Acts, 1939, 46th Leg.,
                     Page 401, Article 5028-1, Sections l-31) as amended
                     by H.B. 1065 effective     June 2 1941, and as amended
                     by S.B. 93, {Acts, 1941) eff.ec;ive    October 3, 1941.”
                         The question before us is whether or not the particu-
            lar type of United States bonds described     in paragraph one of
            your inquiry,    by reason of the limitations  contained therein,
            are eligible    for investment and deposit under the hereinafter
Hon. 0. P. Lockhart,     page 2    (O-4054)


discussed   statutes.  For convenience we will dispose of the
questions   before us by discussing  the statutes in the order
appearing   in your inquiry.
            &ticle   4739, Revised    Civil   Statutes,   reads:
            ‘#Any life   insurance company, accident insur-
     ance company, life and accident,           health and acci-
     dent, or life,      health and accident insurance
     company, organized under the laws of this State,
     may at its option,       deposit with the State Treas-
     urer securities      equal to the amount of its capital
     stock, and may, at its option, withdraw the same
     or any part thereof,       first   having deposited in
     the treasury in lieu thereof other securities
     equal in value to those withdrawn.             Any such se-
     curities,    before being so originally         deposited or
     substituted,      shall be approved by the Commissioner.
     When any such deposit is made, the Treasurer shall
     execute to the company making the deposit a re-
     ceipt therefor,      giving such description       to such
     securities     as will identify      the same; and such
     company shall have the right to advertise             such
     fact, or print a copy of the treasurer’s            receipt
     on the policies      it may issue; and the proper offi-
     cer or agents of each insurance company making such
     deposit shall be permitted,          at all reasonable times,
     to examine such securities          and to detach coupons
     therefrom and to collect         interest   thereon, under
     such reasonable rules and regulations            as may be
     prescribed     by the Treasurer,      and the Commissioner.
     Such deposit when made by any company shall there-
     after be maintained as long as said company shall
     have outstanding any liability           to its policy holders.
     For the purpose of State, county, and municipal taxa-
     tion, the situs of all personal property belonging
     to such companies shall be at the home office              of such
     company.”
           It is apparent that it was the legislative  intention
in the passage of such law that those companies desiring to
avail themselves of the advantages afforded thereby should keep
such deposit with the State Treasurer until all obligations     of
the company had been discharged to its policy holders.     NO pro-
vision is made, however, for subjecting  the deposit,  or ;ayt;rt
thereof, to the payment of the company’s indebtedness.
absence of a statute permitting the garnishment of such funds
we do not believe the same could be subjected to the payment of
debts until and unless the company having such deposits was



                                                                          .
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    Hon. 0. P. Lockhart,     page 3   (O-4054)


    placed in liquidat ion.  There appears no necessity    that the
    bonds deposited thereunder be readily convertible     into cash.
    We cannot say as a matter of law that such bonds cannot be
    used for the purposes of the statute.    We desire to point out,
    however, that the Insurance Commissioner is’ given the power
    and authority to approve the securities   to, be deposited.   You
    fould in the exercise, of the discretion  granted refuse to ac-
    cept such bonds if you ,determlned that three months, twelve
    months or any other period of time before such bonds are sub-
    ject to being cashed, would render the account insufficiently
    liquid to adequately protect the policyholders    for whose bene-
    fit the deposit is being made.
               We do not believe that the “non-transferable”     ~provi-
    sion of the bonds have any effect     on the question here for the
    reason that creditors   could not get possession    of the bonds for
    the purpose of liquidating    their indebtedness   but must look
    onPi to the liquidated   value thereon.
                Article   4740, Revised   Civil   Statutes,   reads:
                “‘iny life insurance ~company now or which’may
         hereafter    be incorporated    under the laws of this
         State~may deposit with the Commissioner for the
         common benefit      of all the holders of its policies
         and annuity bonds, securities        of the kinds in
         which, by the laws of’ this State, it is permitted
         t.o invest or loan its funds, equal to the legal
         reserve on all its outstanding policies        in force,
         which securit~ies shall be held by said Commission-
         er in trust for the purpose and objects herein
         specified.       Any such company may deposit lawful
         money of the United States in lieu of the securities
         above referred to, or any portion thereof,         and may
         also, for the purposes cf such deposit,         convey to
         said Commissioner in trust the real estate in which
         any portion of its said reserve may be lawfully
         invested.      In such. case, said Commissioner shall
         hold the title      thereto in trust until other securi-
         ties in lieu ,thereof shall be deposited with him,
         whereupon he shall reconvey the same to such com-
         pany.     Said Commissioner may cause any such securi-
         ties or real estate to be appraised and valued prior
         to their being deposited with, or conveyed to, him
         in trust as aforesaid,       the reasonable expense of
         ~suce appraisement or valuation to beg paid by the
         company. ‘I
                It ,is our opinion that the bonds in question may be
    deposited   hereunder within the discretion  of the Life Insurance
                                                                            -     .




Hon. 0. P. Lockhart,       page 4    to-4054)


Commissioner for the reasons appearing            hereinabove       in the dia-
cusaion of &ticle   4739, supra.
             Article   b725, Revised Civil Statutes,        consists   of
four paragraphs,     too lengthy to here set out.         It specifikally
provides   the kinds and character        of securities   and the manner
in which Texas life insurance          companies may invest their funds.
It provides    that they may invest their funds in “the bonds of
the United States,v       Bo restrictions      are plaoed upon suoh pro-
vision as to the character        of bonds.
           It 1s~ our opinion that investments    may be made in such
bonds under this statute    sub jact to the right of Insurance    Com-
missioner  to limit the amount th’ereof to the extent necessary
to assure the ability    of the companies to pay off their    obliga-
tions as they mature.
             Article   4759, Revised     Civil   Statutes,      reads:
             “NO foreign    life inaaranco     company or accident
      insurance    company, or life and accident,          health and
      accident,    or life,    health and aocident      insurance
      company, incorporated        by or organized    under the laws
      of any foreign government,         shall transact     business
      in this State,      unless it shall first      deposit     and
      keep deposited     with the Treasurer      of this State,      for
      the benefit    of the policy holders       of auch.company,
      citizens    or residents     of the United States        bonds or
      securities    of the United States       or the State or Texas
      to the amount of one hundred thousand dollars.”
             Artiole   4760, Revised     Civil   Statutes,      provides:
             “The deposit required   by the preceding article
      shall be held liable    to pay the judgments of policy
      holders   in such company, and may be so decreed by
      the court adjudicating     the 8ame.e
             It appears from the two preceding         articles     that it was
the legislative      intent    that the companies embraced therein           should
at all times have on drpoait with the State Treasurer                 assets
readily   convertible      into cash, which the court rendering           judgment
against   such depositing        company might decree subject       to the pay-
ment thereof.      we do not believe       that the bonds in question,         by
reason of their non-transferable           and withdrawal    maturity     Seatures
are sufficiently       liquid within     suoh reasonable time for the pay-
ment of judgments as was anticipated            by the Legislaturs.        We hold
that the bonds in question          cannot be deposited     under this statute.
Hon. 0. P. Lockhart,     page 5   (O-4054)


            Senate Bill 1 5 Acts of the Forty-sixth      Legislature
codified   as Article   5063-1, and since amended with certain re-’
spects with which we are not here concerned,      is a comprehensive
regulatory   bill   embracing the whole field of mutual Insurance.
Section 12 thereof provides for the creation of at least two
separate funds, one of which being the mortuary or relief        fund,
and the other the expense fund.      At least sixty per cent of the
assessments or premiums received     is required to be deposited in
the mortuary fund and held as a reserve to be used for the pay-
ment of claims.      It is further provided that the mortuary fund
may be invested only in such securities      as are a legal invest-
ment for the reserve funds of a stock life insurance company.
            Section   13 of the Article   provides   in part:
               “It Is the primary purpose of this Act to secure
      to the members of the associations     end their benefi-
      ciaries     the full and prompt payment of all claims ac-
      cording to the maximumbenefit provided in their certi-
      ficates.      It is therefore required of all associations
      that all claims under certificates     be paid In full
      within sixty (60) days after receipt     of due proof of
      claims. I8
           Having already held herein that stock life insurance
companies may invest their funds in the bonds in question with
certain limitations,   it is our opinion that the companies sub-
ject to regulation   by Senate Bill 135 may do likewise.   This
right,  of course, is limited by the above quoted Section 13 and
the Commissioner can require liquid assets to the extent neces-
sary to carry out the legislative   mandate to pay the claims
promptly.
                                      Yours very truly
APPROVED   OCT 30, 1941               ATTORNEY
                                             GENERAL
                                                   OF TEXAS
/s/ Grover   Sellers
FIRST ASS1STANT                       By /s/ Lloyd Armstrong
ATTORNEY   GENERAL                    Lloyd Armstrong, Assistant
APPROVED:OPINION COMMITTEE
BY:     BWB, CHAIRMAN
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