SRC-SLL S.B. 1897 75(R)   BILL ANALYSIS


Senate Research Center   S.B. 1897
By: Sibley
Economic Development
3-26-97
As Filed


DIGEST 

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 in
SECTION 1 (Article 21.39(b), 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.  Requires the commissioner of
insurance (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 adopted by the commissioner
to take into account the date, established in policy or contract or by
company practice, on which unpaid claims are incurred. Requires all
companies that write insurance to which each adopted standard applies to
establish reserves in compliance with the standard.  Deletes existing text
regarding the formula for establishing reserves.  Makes nonsubstantive
changes. 

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.