RS H.B. 1708 75(R)    BILL ANALYSIS


INSURANCE
H.B. 1708
By: Lewis, Glenn
4-7-97
Committee Report (Unamended)



BACKGROUND 
Property and casualty insurance companies are required to participate in
Guaranty Funds whereby they are assessed and have to pay for the
policyholder claims of insolvent insurance companies. Those companies are
currently allowed a credit for assessments paid against current and future
premium taxes due up to a maximum of 10 % per year for 10 years.  These
credits are not currently assignable to another company in the event of a
merger, acquisition or a contract for assumption reinsurance, which are
transactions normally resulting in a stronger, more solvent insurance
entity and thereby affording more protection for the public.  In addition,
the Department of Insurance currently cannot order the assignment of these
credits in cases involving rehabilitation or liquidation, even though the
ability to do so might provide more funds to pay policyholders and
creditors. 

PURPOSE
The purpose of this bill is to permit the assignment of premium tax
credits among affected insurers in the event of merger, acquisition,
contract for assumption reinsurance or by order of the Commissioner of
Insurance. 

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 21, Article 21.28-C, Insurance Code, as
follows: 

Sec. 21. - RECOGNITION OF ASSESSMENTS IN PREMIUM TAX OFFSET; ASSIGNMENT OF
CREDIT. (a) One hundred percent of any assessment paid by an insurer under
this act shall be used as a premium tax credit under article 4.10 of the
code.  The credit shall be allowed at a rate of 10 percent for 10 years.
Any credit not taken may be shown as an asset in the records of the
insurer. 

(b) Available tax credit may be assigned or transferred among or between
insurers if: 

(1) A merger, acquisition or total assumption of reinsurance among or
between insurers occurs; or 

(2) The commissioner by order approves the transfer.

SECTION 2. - Law applies to credit allowed to the insurer before, on, or
after effective date of act. 

SECTION 3. - Emergency Clause; Effective Date