1-1 By Smithee H.B. No. 1975
1-2 75R5693 PB-F
1-3 AN ACT
1-4 relating to the examination of certain insurance companies.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Article 9.22, Insurance Code, is amended to read
1-7 as follows:
1-8 Art. 9.22. ANNUAL STATEMENT OF TITLE INSURANCE COMPANIES;
1-9 EXAMINATION. (a) Every title insurance company, domestic and
1-10 foreign, operating under the provisions of this Act shall, on or
1-11 before the first of March every year, file with the commissioner
1-12 [Board] a verified statement, in such form as the commissioner
1-13 [Board] may require, setting forth the statement of the business
1-14 done by it during the preceding year, and the condition of its
1-15 affairs as of December 31st preceding.
1-16 (b) Each title insurance company is subject to Articles 1.15
1-17 and 1.16 of this code. [It shall be the duty of the Board,
1-18 biennially, or oftener if it shall be deemed advisable, in person
1-19 or through a duly appointed representative, to make a thorough
1-20 examination of the company's books and affairs and the transactions
1-21 in which it is engaged at the expense of said company, for which
1-22 purpose the Board or its representatives shall have access to the
1-23 books and records of the said company, and shall have the right to
1-24 interrogate and require answer under oath from any officer, agent
1-25 or employee of the said company concerning any matters pertaining
1-26 to the business thereof.]
1-27 SECTION 2. Article 10.33, Insurance Code, is amended to read
1-28 as follows:
1-29 Art. 10.33. EXAMINATION OF DOMESTIC SOCIETIES. (a) Each
1-30 domestic society is subject to Articles 1.15 and 1.16 of this code.
1-31 (b) [The Board of Insurance Commissioners or any person it
1-32 may appoint, shall have the power of visitation and examination
1-33 into the affairs of any domestic society. It may employ assistants
2-1 for the purpose of such examination, and it, or any person it may
2-2 appoint, shall have free access to all the books, papers and
2-3 documents that relate to the business of the society, and may
2-4 summon and qualify as witnesses under oath and examine its
2-5 officers, agents and employees or other persons in relation to the
2-6 affairs, transactions and conditions of the society. The expense
2-7 of such examination shall be paid by the society examined, upon
2-8 statement furnished by the Board of Insurance Commissioners, and
2-9 the examination shall be made at least once in three (3) years.]
2-10 Whenever after examination the commissioner [Board] is satisfied
2-11 that any domestic society has failed to comply with any provisions
2-12 of this chapter, or is exceeding its powers, or is not carrying out
2-13 its contracts in good faith, or is transacting business
2-14 fraudulently; or whenever any domestic society, after the
2-15 existence of one (1) year or more, shall have a membership of less
2-16 than four hundred (400), or shall determine to discontinue
2-17 business, the commissioner [said Board] may present the facts
2-18 relating thereto to the Attorney General, who shall, if he deem the
2-19 circumstances warrant, commence an action in quo warranto in a
2-20 court of competent jurisdiction, and if it shall then appear upon
2-21 the trial that such society should be closed, said society shall be
2-22 enjoined from carrying on any further business and some person
2-23 shall be appointed receiver of such society and shall proceed at
2-24 once to take possession of the books, papers, moneys and other
2-25 assets of the society, and shall forthwith, under the direction of
2-26 the court, proceed to close the affairs of the society, and to
2-27 distribute its funds to those entitled thereto.
2-28 SECTION 3. Article 10.35, Insurance Code, is amended to read
2-29 as follows:
2-30 Art. 10.35. EXAMINATION OF FOREIGN SOCIETIES. The
2-31 commissioner [Board of Insurance Commissioners], or any person
2-32 appointed by the commissioner [whom it may appoint], may examine
2-33 any foreign society transacting or applying for admission to
2-34 transact business in this State. The commissioner [said Board] may
3-1 employ assistants, and the commissioner [it,] or the
3-2 commissioner's appointee [any person it may appoint,] shall have
3-3 free access to all the books, papers and documents that relate to
3-4 the business of the society, and may summon and qualify as
3-5 witnesses under oath and examine its officers, agents and employees
3-6 and other persons in relation to the affairs, transactions and
3-7 conditions of the society. The commissioner [It] may[, in its
3-8 discretion,] accept in lieu of such examination the examination of
3-9 the Insurance Department of the state, territory, district,
3-10 province or country where such society is organized. [The actual
3-11 expense of examiners making such examination shall be paid by the
3-12 society, upon statements furnished by the Board.] If any such
3-13 society or its officers refuse to permit such examination or to
3-14 comply with the provisions of the law relative thereto, the
3-15 authority of such society to write new business in this State shall
3-16 be suspended, or license refused, until satisfactory evidence is
3-17 furnished to the commissioner [the Board of Insurance
3-18 Commissioners] relating to the condition and affairs of the
3-19 society, and during suspension the society shall not write any new
3-20 business in this State. Each foreign society is subject to the
3-21 provisions of Articles 1.15 and 1.16 of this code that are
3-22 applicable to insurance carriers that are not organized under the
3-23 laws of this State but are authorized to transact business in this
3-24 State.
3-25 SECTION 4. Article 13.09, Insurance Code, is amended to read
3-26 as follows:
3-27 Art. 13.09. EXCEPTIONS AND EXEMPTIONS; EXAMINATIONS.
3-28 (a) This chapter shall in no wise affect or apply to companies
3-29 operating as local mutual aids, as fraternal benefit societies,
3-30 reciprocal exchanges, or to foreign assessment companies operating
3-31 under any other law in this State, or any other form of insurance
3-32 other than those corporations carrying on in this State the
3-33 statewide business of mutually protecting or insuring the lives of
3-34 their members by assessments made upon their members. Except as
4-1 expressly provided in this chapter and in Chapter 14 of this code,
4-2 no insurance law of this State shall apply to any corporation
4-3 operating under this chapter, and no law hereafter enacted shall
4-4 apply to them unless they be expressly designated therein.
4-5 (b) Articles 1.15 and 1.16 of this code apply to
4-6 corporations and associations regulated under this chapter.
4-7 SECTION 5. Article 14.16, Insurance Code, is amended to read
4-8 as follows:
4-9 Art. 14.16. EXAMINATION. Articles 1.15 and 1.16 of this code
4-10 apply to corporations and associations regulated under this
4-11 chapter. [In addition to the annual report required by this
4-12 chapter, the State Board of Insurance shall, once in every two (2)
4-13 years or oftener if it deems it advisable, require the books,
4-14 records, accounts, and affairs of any corporation or association
4-15 qualifying and acting under this chapter to be examined and audited
4-16 by an accountant or accountants or examiner designated and
4-17 commissioned by the Board. For the purpose of any examination, the
4-18 Board and the auditors and examiners shall have free access to all
4-19 books, records, papers, and accounts of the corporation; and the
4-20 cost for the time required in making such examination and audit and
4-21 all necessary expenses in connection therewith shall be paid by the
4-22 corporation upon presentation of a bill showing the charges made by
4-23 the Board, which shall include the salaries, traveling expenses,
4-24 hotel bills, and other expenses of such auditors and/or examiners,
4-25 together with all other expenses in connection with such
4-26 examination. Each corporation or association shall be charged with
4-27 the salary of the auditors and examiners for the time required in
4-28 making such examination and the time required in connection with
4-29 going to and coming from the place or places necessary in
4-30 connection with such examination, together with all expenses
4-31 incurred by such auditors and/or examiners, and in addition thereto
4-32 such corporation or association shall be charged by the Board with
4-33 an amount equal to the salaries of the actuaries, examination clerk
4-34 or clerks, stenographers, and all other employees employed in
5-1 connection with the examination work in the Board for the time said
5-2 employees are performing duties in connection with the examination
5-3 of each corporation so examined.]
5-4 [The amounts so collected shall be paid into the State
5-5 Treasury to the credit of the State Board of Insurance operating
5-6 fund and shall be spent as authorized by legislative appropriation
5-7 only on warrants issued by the comptroller of public accounts
5-8 pursuant to duly certified requisitions of the State Board of
5-9 Insurance.]
5-10 [The Commissioner of Insurance or any deputy or examiner
5-11 shall have the right to require any officer, agent, or employee of
5-12 any company or association operating under this law, or any other
5-13 person, to be sworn and to answer under oath any questions
5-14 regarding the affairs or activities of said association or company,
5-15 and said Commissioner deputy, examiner, or auditor is hereby
5-16 authorized to administer such oath.]
5-17 SECTION 6. Article 17.22(a), Insurance Code, is amended to
5-18 read as follows:
5-19 (a) County mutual insurance companies shall be exempt from
5-20 the operation of all insurance laws of this state, except such laws
5-21 as are made applicable by their specific terms or as in this
5-22 Chapter specifically provided. In addition to such other Articles
5-23 as may be made to apply by other Articles of this Code, county
5-24 mutual insurance companies shall be subject to:
5-25 (1) Subdivision 7 of Article 1.10 of this Code; and
5-26 (2) Articles 1.15, 1.15A, 1.16, 1.24, 2.04, 2.05,
5-27 2.08, 2.10, 4.10, 5.12, 5.37, 5.38, 5.39, 5.40, 5.49, 21.21, and
5-28 21.49 of this Code[; and]
5-29 [(3) Article 7064, Revised Statutes].
5-30 SECTION 7. Article 20.21, Insurance Code, is amended to read
5-31 as follows:
5-32 Art. 20.21. [EXAMINATION OF] BOOKS AND RECORDS; EXAMINATION.
5-33 (a) Every such corporation shall keep complete books and records[,
5-34 showing all funds collected and disbursed, and all books and
6-1 records shall be subject to examination by the Board of Insurance
6-2 Commissioners annually, the expense of such examination to be borne
6-3 by said corporation].
6-4 (b) Articles 1.15 and 1.16 of this code apply to
6-5 corporations regulated under this article.
6-6 SECTION 8. Section 5B(a), Article 21.49, Insurance Code, is
6-7 amended to read as follows:
6-8 (a) The association is subject to Articles 1.15 and 1.16 of
6-9 this code [Board shall, once in each two-year period, or more
6-10 often if the Board considers it necessary, examine the financial
6-11 condition of the Association and its abilities to meet its
6-12 liabilities, as well as its compliance with the law of this state
6-13 affecting the conduct of its business. The examination shall be
6-14 made by the Board, one or more examiners, or commission of an
6-15 independent certified public accountant. The Board or its
6-16 commissioned examiners are entitled to free access to all the books
6-17 and records of the Association or agents writing business in the
6-18 Association and may summon and examine under oath officers,
6-19 employees, agents, and any other persons in the state relative to
6-20 the affairs of the Association].
6-21 SECTION 9. Section 10, Article 21.49-3, Insurance Code, is
6-22 amended to read as follows:
6-23 Sec. 10. EXAMINATIONS. The association is subject to
6-24 Articles 1.15 and 1.16 of this code [board shall make an
6-25 examination into the affairs of the association at least annually.
6-26 Such examination shall be conducted, the report thereon filed, and
6-27 expenses borne and paid for, in the manner prescribed in Articles
6-28 1.15 and 1.16 of the Insurance Code].
6-29 SECTION 10. The following laws are repealed:
6-30 (1) Article 17.18, Insurance Code; and
6-31 (2) Section 5B(c), Article 21.49, Insurance Code.
6-32 SECTION 11. This Act takes effect September 1, 1997, and
6-33 applies only to an examination conducted by the Texas Department of
6-34 Insurance on or after that date.
7-1 SECTION 12. The importance of this legislation and the
7-2 crowded condition of the calendars in both houses create an
7-3 emergency and an imperative public necessity that the
7-4 constitutional rule requiring bills to be read on three several
7-5 days in each house be suspended, and this rule is hereby suspended.