Enrolled Bill Summary

Senate Bill 734	Senate Author:  Carona
Effective:  6-14-13	House Sponsor:  Smithee

            Senate Bill 734 amends the Insurance Code to set out provisions governing the licensing and operation of captive insurance companies. The bill specifies the  types of  insurance that a captive insurance company is authorized to write and provides for a captive insurance company's authority to provide reinsurance. The bill sets out provisions governing the formation of a captive insurance company. The bill prescribes the amount of reserves that a captive insurance company is required to maintain and requires a captive insurance company to use specified accounting principles.

Senate Bill 734 requires an entity to hold a certificate of authority issued by the Texas Department of Insurance before engaging in business as a captive insurance company domiciled in Texas and establishes certain eligibility requirements for such a certificate of authority. The bill requires a captive insurance company to meet capital and surplus requirements in an amount determined by the commissioner of insurance, which may not be less than $250,000. The bill prescribes the information that must be included on an application for a certificate of authority and requires payment of an application fee in the amount of $1,500 or a greater amount set by the commissioner by rule. The bill sets the maximum application fee for a complete application filed on or before December 30, 2018, at $1,500. The bill requires the commissioner to conduct an examination of each applicant and sets out procedures for the commissioner's approval or denial of an application.

Senate Bill 734 establishes annual reporting requirements for a captive insurance company and sets out provisions relating to captive insurance company investments. The bill  requires an amendment to a captive insurance company's certificate of formation to be filed with and approved by the commissioner and requires a captive insurance company to notify the commissioner when issuing policyholder dividends. The bill prohibits a captive insurance company from joining or contributing financially to certain entities and funds. The bill establishes the grounds on which the commissioner is authorized to revoke or suspend a captive insurance company's certificate of authority.

Senate Bill 734 authorizes the commissioner to adopt rules establishing standards to ensure that an affiliated company is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by a captive insurance company and authorizes the commissioner to approve the coverage of such risks by a captive insurance company until the rules are adopted. The bill requires a captive management company to register with the commissioner before providing captive management services to a licensed captive insurance company. The bill establishes that a captive insurance company is subject to premium maintenance tax. The bill requires the commissioner to adopt rules and procedures necessary to implement the bill's provisions relating to the licensing and operation of captive insurance companies. The bill sets out provisions relating to the confidentiality of information filed by an applicant or captive insurance company under the bill's provisions and relating to the redomestication of captive insurance companies.  

Senate Bill 734 imposes an annual premium tax on each captive insurance company that receives gross premiums subject to taxation and sets out provisions relating to the imposition, collection, and reporting of that tax.

Senate Bill 734 amends the Tax Code to clarify a statutory provision that exempts certain insurance organizations, title insurance companies, and title insurance agents from the franchise tax on the basis of insurance premium tax payment.