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