28 TAC §11.806 — what it says, and how the exam tests it

28 TAC §11.806. (a) Subject to compliance with Insurance Code Chapter 843 (concerning Health Maintenance Organizations), this chapter, and other applicable insurance laws and regulations of this state, a domestic HMO, which is a member of a holding company system with assets in an aggregate amount in excess of $1 billion and a tangible net worth of at least $100 million and having affiliates licensed in this state may authorize an affiliated corporation that, if other than the ultimate holding company, is solvent with at least $10 million tangible net worth and whose performance and obligations under a written agreement with the HMO are guaranteed by the ultimate holding company to invest, hold, and administer as agent or nominee on behalf of the domestic HMO bonds, notes, or other evidences of indebtedness that are authorized and permissible investments under Insurance Code Chapter 843 and other applicable insurance laws and regulations of this state that apply to HMOs, and which mature within one year of the date of acquisition. The securities must be invested, held, and administered under a written agreement authorized by the board of directors of the HMO or an authorized committee, and submitted to the commissioner for prior approval. Approval must be based on satisfactory evidence that the agreement will facilitate the operations of the domestic HMO and will not unreasonably diminish the service to or protection of the domestic HMO's enrollees within this state. (b) The agreement must: (1) specify in which office location it will maintain records adequate to identify and verify the securities (or proportionate interest therein) belonging to the HMO; and (2) allow the commissioner or the commissioner's designee to examine all records relating to those securities held subject to the agreement and must agree to furnish these records at the principal office of the HMO within 10 business days of a request by the commissioner or any of the department's commissioned examiners. (c) The HMO may authorize the affiliate to: (1) hold the securities of the HMO in bulk, in certificates issued in the name of the affiliate or its nominee, and to commingle them with securities owned by other affiliates of the affiliate; (2) provide for the securities to be held by a custodian, including the custodian of securities of the affiliate, or in a clearing corporation or the…