1-1 By: Smithee (Senate Sponsor - Sibley) H.B. No. 774
1-2 (In the Senate - Received from the House May 8, 1995;
1-3 May 12, 1995, read first time and referred to Committee on Economic
1-4 Development; May 23, 1995, reported favorably by the following
1-5 vote: Yeas 6, Nays 0; May 23, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to certain technical corrections to the Insurance Code.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Section 8, Article 1.14-2, Insurance Code, is
1-11 amended by relettering Subsection (d), as added by Section 7.08,
1-12 Chapter 685, Acts of the 73rd Legislature, Regular Session, 1993,
1-13 as Subsection (e) and relettering existing Subsections (e)-(l) to
1-14 read as follows:
1-15 (e) <(d)> A surplus lines insurer may be exempt from the
1-16 minimum capital and surplus requirements of this article if the
1-17 commissioner finds, after a public hearing, that the applicant for
1-18 exemption complies with each of the following conditions:
1-19 1. the insurer has at least $6 million in capital and
1-20 surplus;
1-21 2. the amount of net risk retained after ceding to a
1-22 reinsurer is reasonable and does not exceed 10 percent of the
1-23 capital and surplus of the insurer;
1-24 3. the annual ratio of net written premiums to surplus of
1-25 the insurer does not exceed 2.5 to 1;
1-26 4. the reinsurance company of the insurer is rated at least
1-27 "B+" by the A.M. Best Company;
1-28 5. the ownership interest in the insurer of an agent who
1-29 places insurance with it does not exceed 10 percent;
1-30 6. the officers, directors, or managing head have sufficient
1-31 insurance ability, standing, and good record to render continued
1-32 success of the company probable;
1-33 7. the composition, quality, duration, and liquidity of the
1-34 insurer's investment portfolio are prudent;
1-35 8. the insurer is audited annually by an independent
1-36 certified public accountant who is in good standing with the
1-37 American Institute of Certified Public Accountants and is licensed
1-38 to practice by the Texas State Board of Public Accountancy, and a
1-39 copy of such audit is filed with the commissioner;
1-40 9. the number and type of complaints are not excessive
1-41 relative to the number of insurance policies written; and
1-42 10. the insurer is acting in good faith in applying for an
1-43 exemption.
1-44 The commissioner may continue the exemption in force on an
1-45 annual basis upon the filing of a certificate by the insurer that
1-46 the above conditions remain true and correct. The commissioner may
1-47 hold a public hearing, however, at any time to determine that the
1-48 continued exemption is warranted. The commissioner may waive any
1-49 of the above 10 conditions if in her or his judgment the
1-50 policyholders of the insurer would not be adversely affected
1-51 thereby.
1-52 (f) <(e)> Instead of the minimum capital and surplus
1-53 requirements provided by this section, a group of insurers, which
1-54 group includes unincorporated individual insurers, may maintain a
1-55 trust fund in an amount not less than $50 million as security to
1-56 the full amount of the trust fund for all policyholders and
1-57 creditors in the United States of each member of the group. Except
1-58 as specifically otherwise provided by this subsection, the trust
1-59 fund must comply with the terms and conditions provided by
1-60 Subsection (d) of this section for the trust fund required by that
1-61 subsection.
1-62 (g) <(f)> Every insurer proposing to transact surplus lines
1-63 insurance within this state shall hold a current license or
1-64 authority from its domiciliary state or country to conduct the
1-65 business of insurance. The license or authority from the
1-66 domiciliary state or country must be for the kind or class of
1-67 insurance to be written in this state as surplus lines insurance,
1-68 and satisfactory evidence that the insurer holds the required
2-1 license or authorization must be provided to the Commissioner of
2-2 Insurance.
2-3 (h) <(g)> The insurer must be of good repute and provide
2-4 reasonably prompt service to its policyholders in the payment of
2-5 just losses and claims.
2-6 (i) <(h)> No insurer shall be eligible if the management is
2-7 incompetent or untrustworthy, or so lacking in insurance company
2-8 managerial experience as to make its proposed operation hazardous
2-9 to the insurance-buying public; or if the State Board of Insurance
2-10 has good reason to believe that it is affiliated directly or
2-11 indirectly through ownership, control, reinsurance transactions or
2-12 other insurance or business relations, with any person whose
2-13 business operations are or have been detrimental to policyholders,
2-14 stockholders, investors, creditors or to the public.
2-15 (j) <i> No insurer shall be eligible if the insurer or its
2-16 agents have failed to submit to any fine or penalty levied pursuant
2-17 to statute. No insurer shall be eligible if the insurer is
2-18 obligated to pay and has failed to pay premium taxes in the state.
2-19 The State Board of Insurance may order revocation of insurance
2-20 contracts issued by insurers that do not conform with the
2-21 eligibility requirements of this section.
2-22 (k) <(j)> No new or renewal surplus lines insurance shall be
2-23 placed with any eligible surplus lines insurer which requires as a
2-24 condition precedent to writing such new or renewal insurance that
2-25 the prospective insured or the insured place other insurance not
2-26 procurable as surplus lines insurance with such eligible surplus
2-27 lines insurer.
2-28 (l) <(k)> This section shall not be deemed to cast upon the
2-29 State Board of Insurance any duty or responsibility to determine
2-30 the actual financial condition or claims practice of any unlicensed
2-31 insurer or any unauthorized insurer as defined in Article 1.14-1 of
2-32 this code.
2-33 (m) <(l)> An insurer is not an eligible surplus lines
2-34 insurer unless it is authorized to write the same coverage in the
2-35 jurisdiction in which the insurer is licensed or certificated to do
2-36 business.
2-37 SECTION 2. Article 5.15B(b), Insurance Code, is amended to
2-38 read as follows:
2-39 (b) Information provided with an application under
2-40 Subsection (c) <Section (d)>, Article 5.15, of this code is exempt
2-41 from the disclosure requirements of this article.
2-42 SECTION 3. Article 9.16(2), Insurance Code, is amended to
2-43 read as follows:
2-44 (2) Such reserve shall be cumulative and shall be
2-45 established and shall consist of the following:
2-46 (a) The reserve which has been established
2-47 pursuant to Article 9.12 of this code <9.11 of the Insurance Code>;
2-48 and
2-49 (b) Each insurer which has accumulated the
2-50 maximum unearned premium reserve of One Hundred Thousand Dollars
2-51 ($100,000) required by Article 9.12 of this code <9.11 of the
2-52 Insurance Code> shall reserve a sum equal to three (3%) percent of
2-53 the premiums charged for title insurance contracts; and
2-54 (c) Each insurer which has not accumulated the
2-55 maximum unearned premium reserve of One Hundred Thousand Dollars
2-56 ($100,000) required by Article 9.12 of this code <9.11 of the
2-57 Insurance Code> shall reserve a sum equal to five (5%) percent of
2-58 the premiums charged for title insurance contracts until the
2-59 unearned premium reserve shall have reached a total of One Hundred
2-60 Thousand Dollars ($100,000) and thereafter such insurer shall
2-61 reserve a sum equal to three (3%) percent of the premium charged
2-62 for title insurance contracts; and
2-63 (d) Each domestic insurer shall reserve a sum
2-64 equal to ten (10%) percent of the risk rate charged for title
2-65 insurance contracts on property outside the State of Texas. This
2-66 requirement shall be cumulative of, and not in addition to, the
2-67 reserve requirement that might be imposed upon such insurer in such
2-68 other state or states.
2-69 SECTION 4. Section 6(c), Article 9.48, Insurance Code, is
2-70 amended to read as follows:
3-1 (c) Funds derived from guaranty fees shall be authorized
3-2 only for the payment of the following:
3-3 (1) "covered claims" as defined by Subparagraph (iv)
3-4 of Paragraph A and Paragraphs C and D of Subsection (2), Section 5
3-5 of this article; and
3-6 (2) audit expenses as provided by Paragraph (13)
3-7 <(8)>, Subsection (c), Section 14 of this article.
3-8 SECTION 5. The heading of Section 4A, Article 21.07,
3-9 Insurance Code, is amended to read as follows:
3-10 Sec. 4A. Examination of Applicant for License to Write Life
3-11 Insurance Upon Any One Life in Excess of $7,500 <$5,000.00>.
3-12 SECTION 6. Section 9, Article 3.75, Insurance Code, is
3-13 amended to read as follows:
3-14 Sec. 9. APPLICATION OF CODE. (a) This code applies to
3-15 separate accounts and contracts relating to separate accounts
3-16 except for Subdivisions 2, 6, 7, 8, 9, 11, and 12, Article 3.44, as
3-17 amended; Article 3.44a, as amended; Subdivision 3, Article 3.45;
3-18 Subdivision 1, Section 2, Article 3.50, as amended; Article 11.12,
3-19 as amended; Article 11.13; and Article 11.14, Insurance Code.
3-20 (b) Notwithstanding any other law, or any other provision of
3-21 this article, after the effective date of the repeal of Articles
3-22 3.39 Part III, 3.72, and 3.73, Insurance Code, all separate
3-23 accounts established under such articles are deemed and shall be
3-24 construed to be established under Article 3.75; provided any
3-25 policy, contract, or agreement issued before such repeal in
3-26 accordance with the provisions of such articles, shall be construed
3-27 under and continue to be subject to all provisions of the
3-28 applicable article under which they were issued, as amended and in
3-29 effect at the time of such repeal.
3-30 SECTION 7. The importance of this legislation and the
3-31 crowded condition of the calendars in both houses create an
3-32 emergency and an imperative public necessity that the
3-33 constitutional rule requiring bills to be read on three several
3-34 days in each house be suspended, and this rule is hereby suspended,
3-35 and that this Act take effect and be in force from and after its
3-36 passage, and it is so enacted.
3-37 * * * * *