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