Tex. Ins. Code Section 443.261
Qualified Financial Contracts

(a)

Notwithstanding any other provision of this chapter, including any other provision of this chapter permitting the modification of contracts, or other law of this state, a person may not be stayed or prohibited from exercising:

(1)

a contractual right to terminate, liquidate, or close out any netting agreement or qualified financial contract with an insurer because of:

(A)

the insolvency, financial condition, or default of the insurer at any time, provided that the right is enforceable under applicable law other than this chapter; or

(B)

the commencement of a formal delinquency proceeding under this chapter;

(2)

any right under a pledge, security, collateral, or guarantee agreement, or any other similar security arrangement or credit support document, relating to a netting agreement or qualified financial contract; or

(3)

subject to any provision of Section 443.209(b), any right to set off or net out any termination value, payment amount, or other transfer obligation arising under or in connection with a netting agreement or qualified financial contract where the counterparty or its guarantor is organized under the laws of the United States or a state or foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting.

(b)

Upon termination of a netting agreement, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under this chapter shall be transferred to, or on the order of the receiver for, the insurer, even if the insurer is the defaulting party and notwithstanding any provision in the netting agreement that may provide that the nondefaulting party is not required to pay any net or settlement amount due to the defaulting party upon termination. Any limited two-way payment provision in a netting agreement with an insurer that has defaulted is deemed to be a full two-way payment provision as against the defaulting insurer. Any such property or amount is, except to the extent it is subject to one or more secondary liens or encumbrances, a general asset of the insurer.

(c)

In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a proceeding under this chapter, the receiver shall either:

(1)

transfer to one party, other than an insurer subject to a proceeding under this chapter, all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding, including:

(A)

all rights and obligations of each party under each netting agreement and qualified financial contract; and

(B)

all property, including any guarantees or credit support documents, securing any claims of each party under each netting agreement and qualified financial contract; or

(2)

transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in Subdivision (1), with respect to the counterparty and any affiliate of the counterparty.

(d)

If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, the receiver shall use its best efforts to notify any person who is party to the netting agreements or qualified financial contracts of the transfer not later than noon, the receiver’s local time, on the business day following the transfer. For purposes of this subsection, “business day” means a day other than a Saturday, a Sunday, or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed.

(e)

Notwithstanding any other provision of this chapter, a receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract, or any pledge, security, or collateral or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract, that is made before the commencement of a formal delinquency proceeding under this chapter. However, a transfer may be avoided under Section 443.205(a) if the transfer was made with actual intent to hinder, delay, or defraud the insurer, a receiver appointed for the insurer, or existing or future creditors.

(f)

In exercising any of the receiver’s powers under this chapter to disaffirm or repudiate a netting agreement or qualified financial contract, the receiver shall take action with respect to each netting agreement or qualified financial contract and all transactions entered into in connection with the agreement or contract in its entirety. Notwithstanding any other provision of this chapter, any claim of a counterparty against the estate arising from the receiver’s disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding rehabilitation case must be determined and must be allowed or disallowed as if the claim had arisen before the date of the filing of the petition for liquidation or, if a rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for rehabilitation. The amount of the claim must be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract. For purposes of this subsection, the term “actual direct compensatory damages” does not include punitive or exemplary damages, damages for lost profit or lost opportunity, or damages for pain and suffering but does include normal and reasonable costs of cover or other reasonable measures of damages utilized in the derivatives market for the contract and agreement claims.

(g)

For purposes of this section, the term “contractual right” includes any right, whether or not evidenced in writing, arising under:

(1)

statutory or common law;

(2)

a rule or bylaw of a national securities exchange, national securities clearing organization, or securities clearing agency;

(3)

a rule, bylaw, or resolution of the governing body of a contract market or its clearing organization; or

(4)

law merchant.

(h)

The provisions of this section do not apply to persons who are affiliates of the insurer that is the subject of the proceeding.

(i)

All rights of counterparties under this chapter apply to netting agreements and qualified financial contracts entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of that separate account.
Added by Acts 2005, 79th Leg., Ch. 995 (H.B. 2157), Sec. 1, eff. September 1, 2005.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.261 by Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 3B.004(a)(1), eff. September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 3B.004(ii), eff. September 1, 2007.
Redesignated from Insurance Code - Not Codified, Art/Sec 21A.261 by Acts 2007, 80th Leg., R.S., Ch. 921 (H.B. 3167), Sec. 9.004(a)(1), eff. September 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 921 (H.B. 3167), Sec. 9.004(ii), eff. September 1, 2007.

Source: Section 443.261 — Qualified Financial Contracts, https://statutes.­capitol.­texas.­gov/Docs/IN/htm/IN.­443.­htm#443.­261 (accessed May 4, 2024).

443.001
Construction and Purpose 443.002
Conflicts of Law 443.003
Covered Persons 443.004
Definitions 443.005
Jurisdiction and Venue 443.006
Exemption from Fees 443.007
Notice, Hearing, and Appeal on Matters Submitted by Receiver for Receivership Court Approval 443.008
Injunctions and Orders 443.009
Statutes of Limitations 443.010
Cooperation of Officers, Owners, and Employees 443.011
Actions by and Against Receiver 443.012
Unrecorded Obligations and Defenses of Affiliates 443.013
Executory Contracts and Unexpired Leases 443.014
Immunity and Indemnification of Receiver and Assistants 443.015
Approval and Payment of Expenses 443.016
Financial Reporting 443.017
Records 443.051
Receivership Court’s Seizure Order 443.052
Commencement of Formal Delinquency Proceeding 443.053
Return of Summons and Summary Hearing 443.054
Proceedings for Expedited Trial: Continuances, Discovery, Evidence 443.055
Decision and Appeals 443.056
Confidentiality 443.057
Grounds for Conservation, Rehabilitation, or Liquidation 443.058
Entry of Order 443.059
Effect of Petition or Order on Contract or Lease 443.101
Rehabilitation Orders 443.102
Powers and Duties of Rehabilitator 443.103
Rehabilitation Plans 443.104
Termination of Rehabilitation 443.105
Coordination with Guaranty Associations 443.0135
Contracts for Special Deputies 443.151
Liquidation Orders 443.152
Continuance of Coverage 443.153
Sale or Dissolution of Insurer’s Corporate Entity 443.154
Powers of Liquidator 443.155
Notice to Creditors and Others 443.156
Duties of Agents 443.201
Turnover of Assets 443.202
Recovery from Affiliates 443.203
Unauthorized Post-petition Transfers 443.204
Voidable Preferences and Liens 443.205
Fraudulent Transfers and Obligations 443.206
Receiver as Lien Creditor 443.207
Liability of Transferee 443.208
Claims of Holders of Void or Voidable Rights 443.209
Setoffs 443.210
Assessments 443.211
Reinsurer’s Liability 443.212
Recovery of Premiums Owed 443.213
Administration of Deductible Agreements and Policyholder Collateral 443.251
Filing of Claims 443.252
Proof of Claim 443.253
Allowance of Claims 443.254
Claims Under Occurrence Policies, Surety Bonds, and Surety Undertakings 443.255
Allowance of Contingent and Unliquidated Claims 443.256
Special Provisions for Third-party Claims 443.257
Disputed Claims 443.258
Liquidator’s Recommendations to Receivership Court 443.259
Claims of Codebtors 443.260
Secured Creditors’ Claims 443.261
Qualified Financial Contracts 443.301
Priority of Distribution 443.302
Partial and Final Distributions of Assets 443.303
Early Access Payments 443.304
Unclaimed and Withheld Funds 443.351
Condition on Release from Delinquency Proceedings 443.352
Termination of Liquidation Proceedings 443.353
Reopening Receivership 443.354
Disposition of Records During and After Termination of Receivership 443.355
External Audit of the Receiver’s Books 443.401
Ancillary Conservation of Foreign Insurers 443.402
Domiciliary Receivers Appointed in Other States
Green check means up to date. Up to date

Accessed:
May 4, 2024

§ 443.261’s source at texas​.gov