By Counts H.B. No. 2911
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to financial solvency requirements for certain insurers.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 1, Insurance Code, is amended by adding
1-5 Article 1.51 to read as follows:
1-6 Art. 1.51 SELECT COMMITTEE ON THE NAIC
1-7 Sec. 1. (a) DEFINITIONS. In this article, "committee"
1-8 means the select committee on the NAIC established under this
1-9 article.
1-10 (b) "NAIC" means the National Association of Insurance
1-11 Commissioners.
1-12 Sec. 2. COMPOSITION OF COMMITTEE. (a) The committee is
1-13 composed of:
1-14 (1) Three members of the senate, appointed by the
1-15 lieutenant governor; and
1-16 (2) Three members of the house of representatives,
1-17 appointed by the speaker of the house of representatives.
1-18 (b) The committee members shall designate a member of the
1-19 committee to serve as presiding officer of the committee.
1-20 Sec. 3. PURPOSE; DUTIES; MEETINGS. (a) The committee shall
1-21 review the processes involved with the NAIC and the effects upon
1-22 the citizens of Texas. Specifically the committee shall review and
1-23 assess:
2-1 (1) The operations of and conditions associated with
2-2 the NAIC;
2-3 (2) The participation of Texas in the NAIC; and
2-4 (3) The benefits flowing from such participation.
2-5 (b) The committee shall prepare a cost/benefit analysis
2-6 concerning the benefits and participation described in subsection
2-7 (a) above.
2-8 (c) The committee shall meet monthly or as needed to carry
2-9 out its duties under this section.
2-10 (d) The committee may appoint subcommittees, task groups, or
2-11 advisory groups to assist it in its work. Members of these groups
2-12 are not required to be members of the committee.
2-13 Sec. 4. REPORT (a) Not later than December 1, 1996, the
2-14 committee shall issue a report of its findings. The committee
2-15 shall file copies of the report with the Legislative Reference
2-16 Library, the governor's office, the secretary of the senate, the
2-17 chief clerk of the house of representatives, the Texas Department
2-18 of Insurance, and the office of public insurance counsel. The
2-19 Texas Department of Insurance shall make copies of the report
2-20 available to the public at cost.
2-21 (b) The report shall include recommended rule or statutory
2-22 changes to implement the committee's recommendations.
2-23 Sec. 5. EXPENSES. The operating costs of the committee
2-24 shall be paid from funds appropriated to the Texas Department of
2-25 Insurance.
3-1 Sec. 6. COMMITTEE ABOLISHED; EXPIRATION OF ARTICLE. The
3-2 committee is abolished on December 31, 1996.
3-3 SECTION 2. Article 3.10(l), Insurance Code, is amended to
3-4 read as follows:
3-5 (l) An insurer shall account for reinsurance agreements and
3-6 shall record those reinsurance agreements in the insurer's
3-7 financial statement in a manner that accurately reflects the effect
3-8 of the reinsurance agreements on the financial condition of the
3-9 company. The State Board of Insurance may adopt reasonable rules
3-10 relating to the accounting and financial statement requirements of
3-11 this section and the treatment of reinsurance agreements between
3-12 insurance companies, including minimum risk transfer standards,
3-13 asset debits or credits, reinsurance debits or credits, and reserve
3-14 debits or credits relating to the transfer of all or any portion of
3-15 an insurer's risks or liabilities by reinsurance agreements and any
3-16 contingencies arising from reinsurance agreements. A reinsurance
3-17 agreement may contain a provision that allows the offset of mutual
3-18 debts and credits between a ceding insurer and the assuming
3-19 insurer, whether arising out of one or more reinsurance agreements.
3-20 SECTION 3. Article 5.75-1(n), Insurance Code, is amended to
3-21 read as follows:
3-22 (n) An insurer shall account for reinsurance agreements and
3-23 shall record those reinsurance agreements in the insurer's
3-24 financial statement in a manner that accurately reflects the effect
3-25 of the reinsurance agreements on the financial condition of the
4-1 insurer. The State Board of Insurance may adopt reasonable rules
4-2 relating to the accounting and financial statement requirements of
4-3 this subsection and the treatment of reinsurance agreements between
4-4 insurers, including minimum risk transfer standards, asset debits
4-5 or credits, reinsurance debits or credits, and reserve debits or
4-6 credits relating to the transfer of all or any portion of an
4-7 insurer's risks or liabilities by reinsurance agreements and to any
4-8 contingencies arising from reinsurance agreements. Reinsurance
4-9 agreements may contain a provision allowing the offset of mutual
4-10 debts and credits between the ceding insurer and the assuming
4-11 insurer whether arising out of one or more reinsurance agreements.
4-12 SECTION 4. Section 4(c), Article 21.49-1, Insurance Code, is
4-13 amended to read as follows:
4-14 (c) Dividend and Other Distributions. (1) No insurer
4-15 subject to registration under Section 3 shall pay any extraordinary
4-16 dividend or make any other distribution to its shareholders until
4-17 (i) 30 days after the commissioner has received notice of the
4-18 declaration thereof and has not within such period disapproved such
4-19 payment, or (ii) the commissioner shall have approved such payment
4-20 within such 30-day period.
4-21 (2) For purposes of this section an extraordinary
4-22 dividend or distribution includes any dividend or distribution of
4-23 cash or other property, whose fair market value together with that
4-24 of other dividends or distributions made within the preceding 12
4-25 months exceeds the greater of (i) 10 percent (20 percent if such
5-1 insurer is a title insurer) of such insurer's surplus as regards
5-2 policyholders as of the 31st day of December next preceding, or
5-3 (ii) the net gain from operations of such insurer, if such insurer
5-4 is a life or title insurer, or the net <investment> income, if such
5-5 insurer is not a life or title insurer, for the 12-month period
5-6 ending the 31st day of December next preceding, but shall not
5-7 include pro rata distributions of any class of the insurer's own
5-8 securities.
5-9 SECTION 5. Subchapter E, Chapter 21, Insurance Code, is
5-10 amended by adding Article 21.72 to read as follows:
5-11 Art. 21.72 GENERAL REINSURANCE REQUIREMENTS
5-12 Sec. 1. (a) An insurance company incorporated under the
5-13 laws of another state or the United States and authorized to do
5-14 business in this state may not expose itself to any loss or hazard
5-15 on any one risk in an amount that exceeds 10 percent of the
5-16 company's surplus as regards policyholders unless the excess is
5-17 reinsured by the company in another solvent insurer.
5-18 (b) An insurance company incorporated under a jurisdiction
5-19 other than that of this state, another state, or the United States
5-20 and authorized to do business in this state may not expose itself
5-21 to any loss or hazard on any one risk in an amount that exceeds 10
5-22 percent of the company's deposit with the statutory officer in the
5-23 state through which the company gains admission to the United
5-24 States, together with 10 percent of the other surplus to
5-25 policyholders of the company's United States branch, unless the
6-1 excess is reinsured by the company in another solvent insurer.
6-2 Sec. 2. An insurance or reinsurance company authorized to
6-3 transact insurance or reinsurance in this state may reinsure the
6-4 whole or any part of an individual risk in another solvent insurer.
6-5 Sec. 3. This article does not apply to:
6-6 (1) life insurance;
6-7 (2) health insurance;
6-8 (3) annuity contracts;
6-9 (4) title insurance;
6-10 (5) workers' compensation insurance;
6-11 (6) employers' liability insurance coverage; or
6-12 (7) any policy or type of coverage as to which the
6-13 maximum possible loss to the insurer is not readily ascertainable
6-14 on issuance of the policy.
6-15 Sec. 4. Any reinsurance required or permitted by this
6-16 article must comply with Article 5.75-1 of this code.
6-17 SECTION 6. This Act takes effect September 1, 1995.
6-18 SECTION 7. The importance of this legislation and the
6-19 crowded condition of the calendars in both houses create an
6-20 emergency and an imperative public necessity that the
6-21 constitutional rule requiring bills to be read on three several
6-22 days in each house be suspended, and this rule is hereby suspended.