SRC-AAA S.B. 1388 75(R) BILL ANALYSIS Senate Research Center S.B. 1388 By: Patterson Economic Development 4-17-97 As Filed DIGEST Currently, Texas title insurers are required to establish minimum statutory premium reserves to pay claims or secure reinsurance in the event of an insolvency. The formulas currently used by title insurers to establish reserve requirements may not be adequate to ensure the financial stability of insurers. This bill would revise the present statutory formulas used to calculate the minimum statutory premium reserves established by domestic title insurers. Additionally, this bill would require insurers to file an actuarial certification annually with the annual statement. PURPOSE As proposed, S.B. 1388 revises the present statutory formulas used to calculate the minimum statutory premium reserves established by domestic title insurers. Additionally, this bill would require insurers to file an actuarial certification annually with the annual statement. RULEMAKING AUTHORITY This bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 9.16, Insurance Code, as follows: Sec. 1. STATUTORY PREMIUM RESERVE REQUIRED. Requires each domestic title insurer doing a title insurance business under this chapter to establish and maintain a statutory premium reserve during the period and for the uses and purposes provided by this article. Requires the reserve required under Subsection (a) to be cumulative. Requires the reserve to be established and to consist of the amounts required under this article. Makes a conforming change. Sec. 2. AMOUNTS ADDED TO RESERVE FOR 1977; REDUCTIONS. Sets forth the calculation for total charges of a domestic title insurer for the 1997 calendar year. Sets forth the calculation of the set aside for a domestic title insurer. Sets forth calculations for additions to the statutory premium reserve set aside for title insurance policies written or assumed during 1997. Sets forth requirements for annual reductions under Subsection (c). Sec. 3. AMOUNTS ADDED TO RESERVE IN CALENDAR YEARS AFTER 1997; REDUCTIONS. Sets forth calculations for amounts added to reserves in calendar years after 1997. Sets forth requirements for annual reductions. Sec. 4. TRANSITIONAL RELEASE; TRANSITIONAL CHARGE. Sets forth calculations for a transitional charge. Sets forth the effects of having a transitional release. Sec. 5. RUNOFF BALANCE. Sets forth requirements and procedures for having a runoff balance. Sec. 6. ACTUARIAL CERTIFICATION. Sets forth requirements for an actuarial certification. Sec. 7. SUPPLEMENTAL RESERVE. Requires each title insurer to establish supplemental reserves in certain amounts. Sets forth the requirements for phasing in supplemental reserves. Deletes existing Subsections (a)-(e). Sec. 8. FOREIGN COMPANIES. Authorizes the commissioner of insurance (commissioner) to require the insurer to maintain adequate reserves as provided by this article in certain situations. Deletes text regarding foreign companies and unearned premium reserves. Sec. 9. MAINTENANCE OF FUND. Requires the statutory premium reserve fund to be held in other securities admissible for investment by life insurance companies. Sec. 10. EFFECT OF INSOLVENCY OR DISSOLUTION. Sets forth the effects of insolvency or dissolution. Makes conforming and nonsubstantive changes. SECTION 2. Provides that this Act applies to reports made by title insurers beginning with reports due for calendar year 1997. SECTION 3. Emergency clause. Effective date: upon passage.