RS C.S.H.B. 578 75(R) BILL ANALYSIS INSURANCE C.S.H.B. 578 By: Craddick 3-6-97 Committee Report (Substituted) BACKGROUND Section 21, Insurance Code, establishes the requirements for insurers doing business in Texas. Currently, Texas law requires all out of state insurers to use some form of Texas-based company to do business in this state, through either countersignature or a local recording agent. This added expense could hinder competition in the state. PURPOSE This Bill allows for non-resident insurers to directly do business in this state if the insurers' licence requirements from another state are substantially equivalent to those of this state. RULEMAKING AUTHORITY It is the opinion of the committee that this bill expressly grants rulemaking authority to the Commissioner of Insurance in Section 1 of the bill (Sec. 5, Art. 21.11, Insurance Code) SECTION BY SECTION ANALYSIS SECTION 1. - Amends Article 21.11, Insurance Code, as follows: Art. 21.11 NONRESIDENT AGENT Sec. 1. - NONRESIDENT AGENT LICENSE. (a)Removes requirement for counter signature for out of state agents. Not withstanding Sec. 3(a) and (b) of Article 21.14, Insurance Code, the department can license a person who is not a resident of Texas to be a local agent in accordance with Article 21.14, subject to the limits of this article. (b) Establishes reciprocal arrangements. The commissioner currently has reciprocal arrangement powers and may waive them if the regulations of the state are similar to those of this state. An applicant for license by this article must meet the guidelines as set by Article 21.14, Insurance Code. Sec. 2. - RIGHTS OF LICENSE HOLDER. (a) A license issued to a nonresident of this state is granted the same rights and privileges afforded under the a license issued under Article 21.14, Insurance Code, unless otherwise provided. (b) A person who holds a license issued under this article may not solicit insurance in this state by any method including orally, written, or by electronic communication. (c) The commissioner shall impose on a resident of another state or jurisdiction who is an applicant or holder of a license under this article, a requirement or restriction that: 1. The other state imposes upon their licensees; 2. Is in addition to or stricter than the requirements or restrictions imposed under the insurance law of this state upon a nonresident license holder. (d) Outlines "requirement or restriction" to include: limits on rights or privileges of a person, issues which may effect a commission or other compensation to be paid, or imposes a condition precedent on a person. Sec. 3. - LIMITATIONS (a) This article does not allow: 1. Any agent licensed solely as a broker in the person's or firm's state of residence to be granted a license under this article. 2. An agent issued a license under this article to act as a surplus lines agent under article 1.14-2 of this code, or to act under the powers granted by article 1.14-2 of this code. 3. Any agent or firm who holds a license issued under this article to engage in direct solicitation of insurance within this state. (b) The commissioner shall revoke a license issued under this article if it is found that the licensed was obtained or used for the purposes of transacting through a local agent in a manner that would reflect the out of state agent as acting as a local agent. (c) In the circumstances outlined by subsection (b) the commissioner shall revoke the license of the local agent. (d) A license revoked under subsection (b) or (c) may not be reissued. (e) The commissioner shall order that any insurance issued under under this arrangement shall be cancelled. Sec. 4. - HOME OFFICE EMPLOYEE. - This article does not affect the authority granted under Section 20, Article 21.14, Insurance Code, of an actual full-time home office salaried employee of an insurance carrier to do business in this state. Sec. 5. - The commissioner shall adopt rules to implement this article. SECTION 2. - Repeals Article 21.09, Insurance Code SECTION 3. - Effective Date September 1, 1997. SECTION 4. - Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute establishes non resident licensing requirements for applicants with a valid license from another state or jurisdiction that has licensing requirements substantially equivalent to Texas. The substitute also authorizes the Texas Department of Insurance to waive those requirements and grant the same rights and privileges afforded under Article 21.14, Texas Insurance Code. The substitute establishes license restriction requirements. A licensee (under this article) may not solicit insurance business in this state by any method including oral, written, or electronic communication. Additionally, the substitute does not permit any person licensed solely as a broker in the person's or firm's state to be granted a license under this article. A person licensed under this article may not act as a surplus line agent or perform any act under Article 1.14-2, Texas Insurance Code. The substitute also authorizes the Insurance Commissioner revocation powers if the commissioner determines a license was obtained or is being used for the purpose of transacting insurance through a local recording agent. The substitute provides for a license revoked under this article is not subject to reissuance. The substitute does not affect a licensed home office full time salaried employee of an insurance carrier.