RS H.B. 1977 75(R)    BILL ANALYSIS


INSURANCE
H.B. 1977
By: Smithee
3-21-97
Committee Report (Unamended)



BACKGROUND 

Current law does not clearly apply the "10% risk limitation" to all
property & casualty insurers. The "10% risk limitation" is a well
established pro-solvency standard that provides that a property & casualty
insurer should not expose itself to a single risk of loss in an amount in
excess of 10% of the insurer's net worth.  This helps ensure that a single
loss event, such as a large fire that destroys an office building, does
not seriously impair the insurer and/or render it insolvent. The bill
would codify a current Attorney General's Opinion.   

PURPOSE
To clarify that the "10% risk limitation" standard applies to all property
& casualty insurers authorized to do business in this state.  (Currently
effective exemptions in the underlying statute would remain intact.) 

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 1(a), article 21.72, Insurance Code, to
clarify that it applies to insurers incorporated under the laws of this
state. 

SECTION 2. - Act takes effect on September 1, 1997.

SECTION 3. - Emergency Clause