H.B. No. 774
1-1 AN ACT
1-2 relating to certain technical corrections to the Insurance Code.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 8, Article 1.14-2, Insurance Code, is
1-5 amended by relettering Subsection (d), as added by Section 7.08,
1-6 Chapter 685, Acts of the 73rd Legislature, Regular Session, 1993,
1-7 as Subsection (e) and relettering existing Subsections (e)-(l) to
1-8 read as follows:
1-9 (e) <(d)> A surplus lines insurer may be exempt from the
1-10 minimum capital and surplus requirements of this article if the
1-11 commissioner finds, after a public hearing, that the applicant for
1-12 exemption complies with each of the following conditions:
1-13 1. the insurer has at least $6 million in capital and
1-14 surplus;
1-15 2. the amount of net risk retained after ceding to a
1-16 reinsurer is reasonable and does not exceed 10 percent of the
1-17 capital and surplus of the insurer;
1-18 3. the annual ratio of net written premiums to surplus of
1-19 the insurer does not exceed 2.5 to 1;
1-20 4. the reinsurance company of the insurer is rated at least
1-21 "B+" by the A.M. Best Company;
1-22 5. the ownership interest in the insurer of an agent who
1-23 places insurance with it does not exceed 10 percent;
1-24 6. the officers, directors, or managing head have sufficient
2-1 insurance ability, standing, and good record to render continued
2-2 success of the company probable;
2-3 7. the composition, quality, duration, and liquidity of the
2-4 insurer's investment portfolio are prudent;
2-5 8. the insurer is audited annually by an independent
2-6 certified public accountant who is in good standing with the
2-7 American Institute of Certified Public Accountants and is licensed
2-8 to practice by the Texas State Board of Public Accountancy, and a
2-9 copy of such audit is filed with the commissioner;
2-10 9. the number and type of complaints are not excessive
2-11 relative to the number of insurance policies written; and
2-12 10. the insurer is acting in good faith in applying for an
2-13 exemption.
2-14 The commissioner may continue the exemption in force on an
2-15 annual basis upon the filing of a certificate by the insurer that
2-16 the above conditions remain true and correct. The commissioner may
2-17 hold a public hearing, however, at any time to determine that the
2-18 continued exemption is warranted. The commissioner may waive any
2-19 of the above 10 conditions if in her or his judgment the
2-20 policyholders of the insurer would not be adversely affected
2-21 thereby.
2-22 (f) <(e)> Instead of the minimum capital and surplus
2-23 requirements provided by this section, a group of insurers, which
2-24 group includes unincorporated individual insurers, may maintain a
2-25 trust fund in an amount not less than $50 million as security to
2-26 the full amount of the trust fund for all policyholders and
2-27 creditors in the United States of each member of the group. Except
3-1 as specifically otherwise provided by this subsection, the trust
3-2 fund must comply with the terms and conditions provided by
3-3 Subsection (d) of this section for the trust fund required by that
3-4 subsection.
3-5 (g) <(f)> Every insurer proposing to transact surplus lines
3-6 insurance within this state shall hold a current license or
3-7 authority from its domiciliary state or country to conduct the
3-8 business of insurance. The license or authority from the
3-9 domiciliary state or country must be for the kind or class of
3-10 insurance to be written in this state as surplus lines insurance,
3-11 and satisfactory evidence that the insurer holds the required
3-12 license or authorization must be provided to the Commissioner of
3-13 Insurance.
3-14 (h) <(g)> The insurer must be of good repute and provide
3-15 reasonably prompt service to its policyholders in the payment of
3-16 just losses and claims.
3-17 (i) <(h)> No insurer shall be eligible if the management is
3-18 incompetent or untrustworthy, or so lacking in insurance company
3-19 managerial experience as to make its proposed operation hazardous
3-20 to the insurance-buying public; or if the State Board of Insurance
3-21 has good reason to believe that it is affiliated directly or
3-22 indirectly through ownership, control, reinsurance transactions or
3-23 other insurance or business relations, with any person whose
3-24 business operations are or have been detrimental to policyholders,
3-25 stockholders, investors, creditors or to the public.
3-26 (j) <i> No insurer shall be eligible if the insurer or its
3-27 agents have failed to submit to any fine or penalty levied pursuant
4-1 to statute. No insurer shall be eligible if the insurer is
4-2 obligated to pay and has failed to pay premium taxes in the state.
4-3 The State Board of Insurance may order revocation of insurance
4-4 contracts issued by insurers that do not conform with the
4-5 eligibility requirements of this section.
4-6 (k) <(j)> No new or renewal surplus lines insurance shall be
4-7 placed with any eligible surplus lines insurer which requires as a
4-8 condition precedent to writing such new or renewal insurance that
4-9 the prospective insured or the insured place other insurance not
4-10 procurable as surplus lines insurance with such eligible surplus
4-11 lines insurer.
4-12 (l) <(k)> This section shall not be deemed to cast upon the
4-13 State Board of Insurance any duty or responsibility to determine
4-14 the actual financial condition or claims practice of any unlicensed
4-15 insurer or any unauthorized insurer as defined in Article 1.14-1 of
4-16 this code.
4-17 (m) <(l)> An insurer is not an eligible surplus lines
4-18 insurer unless it is authorized to write the same coverage in the
4-19 jurisdiction in which the insurer is licensed or certificated to do
4-20 business.
4-21 SECTION 2. Article 5.15B(b), Insurance Code, is amended to
4-22 read as follows:
4-23 (b) Information provided with an application under
4-24 Subsection (c) <Section (d)>, Article 5.15, of this code is exempt
4-25 from the disclosure requirements of this article.
4-26 SECTION 3. Article 9.16(2), Insurance Code, is amended to
4-27 read as follows:
5-1 (2) Such reserve shall be cumulative and shall be
5-2 established and shall consist of the following:
5-3 (a) The reserve which has been established
5-4 pursuant to Article 9.12 of this code <9.11 of the Insurance Code>;
5-5 and
5-6 (b) Each insurer which has accumulated the
5-7 maximum unearned premium reserve of One Hundred Thousand Dollars
5-8 ($100,000) required by Article 9.12 of this code <9.11 of the
5-9 Insurance Code> shall reserve a sum equal to three (3%) percent of
5-10 the premiums charged for title insurance contracts; and
5-11 (c) Each insurer which has not accumulated the
5-12 maximum unearned premium reserve of One Hundred Thousand Dollars
5-13 ($100,000) required by Article 9.12 of this code <9.11 of the
5-14 Insurance Code> shall reserve a sum equal to five (5%) percent of
5-15 the premiums charged for title insurance contracts until the
5-16 unearned premium reserve shall have reached a total of One Hundred
5-17 Thousand Dollars ($100,000) and thereafter such insurer shall
5-18 reserve a sum equal to three (3%) percent of the premium charged
5-19 for title insurance contracts; and
5-20 (d) Each domestic insurer shall reserve a sum
5-21 equal to ten (10%) percent of the risk rate charged for title
5-22 insurance contracts on property outside the State of Texas. This
5-23 requirement shall be cumulative of, and not in addition to, the
5-24 reserve requirement that might be imposed upon such insurer in such
5-25 other state or states.
5-26 SECTION 4. Section 6(c), Article 9.48, Insurance Code, is
5-27 amended to read as follows:
6-1 (c) Funds derived from guaranty fees shall be authorized
6-2 only for the payment of the following:
6-3 (1) "covered claims" as defined by Subparagraph (iv)
6-4 of Paragraph A and Paragraphs C and D of Subsection (2), Section 5
6-5 of this article; and
6-6 (2) audit expenses as provided by Paragraph (13)
6-7 <(8)>, Subsection (c), Section 14 of this article.
6-8 SECTION 5. The heading of Section 4A, Article 21.07,
6-9 Insurance Code, is amended to read as follows:
6-10 Sec. 4A. Examination of Applicant for License to Write Life
6-11 Insurance Upon Any One Life in Excess of $7,500 <$5,000.00>.
6-12 SECTION 6. Section 9, Article 3.75, Insurance Code, is
6-13 amended to read as follows:
6-14 Sec. 9. APPLICATION OF CODE. (a) This code applies to
6-15 separate accounts and contracts relating to separate accounts
6-16 except for Subdivisions 2, 6, 7, 8, 9, 11, and 12, Article 3.44, as
6-17 amended; Article 3.44a, as amended; Subdivision 3, Article 3.45;
6-18 Subdivision 1, Section 2, Article 3.50, as amended; Article 11.12,
6-19 as amended; Article 11.13; and Article 11.14, Insurance Code.
6-20 (b) Notwithstanding any other law, or any other provision of
6-21 this article, after the effective date of the repeal of Articles
6-22 3.39 Part III, 3.72, and 3.73, Insurance Code, all separate
6-23 accounts established under such articles are deemed and shall be
6-24 construed to be established under Article 3.75; provided any
6-25 policy, contract, or agreement issued before such repeal in
6-26 accordance with the provisions of such articles, shall be construed
6-27 under and continue to be subject to all provisions of the
7-1 applicable article under which they were issued, as amended and in
7-2 effect at the time of such repeal.
7-3 SECTION 7. The importance of this legislation and the
7-4 crowded condition of the calendars in both houses create an
7-5 emergency and an imperative public necessity that the
7-6 constitutional rule requiring bills to be read on three several
7-7 days in each house be suspended, and this rule is hereby suspended,
7-8 and that this Act take effect and be in force from and after its
7-9 passage, and it is so enacted.