RS S.B. 1897 75(R)BILL ANALYSIS


INSURANCE
S.B. 1897
By: Sibley (Counts)
5-24-97
Committee Report (Unamended)


BACKGROUND

Currently, insurers are required to maintain loss or claim reserves and
the commissioner of insurance is required to adopt each current formula
for establishing reserves applicable to each line of insurance recommended
by the National Association of Insurance Commissioners.  Some examiners
have attempted to require insurers to set aside reserves for unaccrued
claims, which could potentially hinder the financial stability of a
company.  This bill will require the commissioner of insurance to adopt
reserve standards in accordance with actuarial standards of practice
published by the American Academy of Actuaries, and require the standards
to take into account the date on which unpaid claims are incurred. 

PURPOSE

As proposed, S.B. 1897 requires the commissioner of insurance to adopt
reserves standards in accordance with actuarial standards of practice
published by the American Academy of Actuaries and requires the reserves
standards to take into account the date on which unpaid claims are
incurred. 

RULEMAKING AUTHORITY

Rulemaking authority is granted to the commissioner of insurance to adopt
reserve standards, in SECTION 1 (Article 21.39, Insurance Code) of this
bill. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Article 21.39, Insurance Code, to require every insurer
to maintain reserves in an amount estimated in the aggregate to provide
for the payment of all the insurer's losses or claims incurred on or prior
to the date of the statement, that are unpaid as of that date, and also
reserves in an amount estimated to provide for the expenses of adjustment
or settlement of the unpaid claims.  Authorizes the commissioner of
insurance (commissioner) to adopt appropriate reserve standards to provide
for future incurred claims in accordance with Subsection (b) of this
article.  Requires the commissioner to adopt reserves standards in
accordance with this code and actuarial standards of practice published by
the American Academy of Actuaries.  Requires the standards for accident
and health claim reserves for claims incurred on or prior to the date of
valuation to permit use of date of service as the date of incurred as
determined by a qualified actuary in accordance with actuarial standards
of practice.  Authorizes the commissioner to consider adopting each
current formula for establishing reserves applicable to each line of
insurance recommended by the National Association of Insurance
Commissioners only in accordance with Section (b) of this article.
Deletes existing text regarding the Board of Insurance Commissioners and
all companies writing the line of insurance. 

SECTION 2. (a) Requires the commissioner of insurance, as soon as
practicable after the effective date of this Act, to adopt reserves
standards under Article 21.39, Insurance Code, as amended by this Act. 

(b) Makes application of this Act prospective.

SECTION 3. Emergency clause.
  Effective date: upon passage.