BILL ANALYSIS C.S.H.B. 2793 By: Shields 03-29-95 Committee Report (Substituted) BACKGROUND Currently, the Texas Insurance Holding Company System Regulatory Act provides regulation for the payment of dividends by property and casualty insurers by defining what constitutes an "extraordinary" dividend whose payment is subject to the prior approval of the commissioner of insurance. Additionally, the Holding Company Act establishes specific amounts an insurer may invest in its subsidiaries or affiliates. PURPOSE As proposed, House Bill 2793 would amend the Texas Insurance Holding Company System Regulatory Act to conform with the National Association of Insurance Commissioners (NAIC) model legislation. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 4(c) (2) of Article 21.49-1, Insurance Code by using "net income" rather than rather than "net investment income". SECTION 2. Amends Section 6(b) of Article 21.49-1, Insurance Code by excluding the investments in a domestic or foreign insurance subsidiaries from the determination of those permitted investments by an insurer in its other subsidiaries or affiliates. SECTION 3. Amends Section 6(d) of Article 21.49-1, Insurance by establishing the qualification of an investment in an affiliate is to be determined before the investment is made and taking into consideration all current debt amounts outstanding and capital invested in such affiliate, net of any returned capital previously invested in the affiliate. SECTION 4. Amends Section 6A of Article 21.49-1, Insurance Code, by providing that the "valuation of investment provisions" applies to financial statement preparation purposes, but does not apply to the initial quantitative investment limitations set forth elsewhere in the article. SECTION 5. Effective Date. SECTION 6. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute to H.B. 2793 under SECTION 1 would delete amending language contained in the filed bill determining whether a dividend or distribution is extraordinary, an insurer other than a life insurer may carry forward net income from the previous two years that has not already been paid out as dividends. Any net income carried forward shall be computed by taking the net income from the second and third preceding calendar years, but not including realized capital gains, less dividends paid in the second and immediate preceding calendars years. SUMMARY OF COMMITTEE ACTION In accordance with House Rules, H.B. 2793 was heard in a public hearing on March 22, 1995. The Chair announced, at the request of the author, H.B. 2793 be left as pending business before the Committee. On March 29, 1995 the Chair laid out H.B. 2793 as pending business before the Committee. The Chair recognized Representative Shields who offered a substitute to H.B. 2793 and moved the Committee adopt the substitute. The Chair heard no objections and the substitute to H.B. 2793 was adopted. The Chair recognized the following persons to testify in support of H.B. 2793: Ross Davidson, USAA; Will D. Davis, USAA. The Chair recognized the following person to testify neutrally on H.B. 2793: A.W. "Woody" Pogue, Texas Department of Insurance. No one testified in opposition to H.B. 2793. The Chair recognized Representative G. Lewis who moved the Committee report H.B. 2793 as substituted to the full House with the recommendation that it do pass and be printed. Representative Dutton seconded the motion and the motion prevailed by the following vote: AYES (6); NAYES (0); ABSENT (3); PNV (0).