By:  Sibley                                           S.B. No. 1913

                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to the application of insurance law to certain service

 1-2     contracts and asset management contracts.


 1-4           SECTION 1.  Subsection (b), Section 2, Article 1.14-1,

 1-5     Insurance Code, is amended to read as follows:

 1-6           (b)  The provisions of this section do not apply to:

 1-7                 (1)  the lawful transaction of surplus lines insurance

 1-8     pursuant to Article 1.14-2;

 1-9                 (2)  the lawful transaction of reinsurance by insurers;

1-10                 (3)  transactions in this state involving a policy

1-11     lawfully solicited, written, and delivered outside of this state

1-12     covering only subjects of insurance not resident, located, or

1-13     expressly to be performed in this state at the time of issuance,

1-14     and which transactions are subsequent to the issuance of such

1-15     policy;

1-16                 (4)  transactions involving contracts of insurance

1-17     independently procured through negotiations occurring entirely

1-18     outside of this state which are reported and on which premium tax

1-19     is paid in accordance with this Article;

1-20                 (5)  transactions in this state involving group life,

1-21     health or accident insurance (other than credit insurance) and

1-22     group annuities where the master policy of such groups was lawfully

1-23     issued and delivered in a state in which the company was authorized

 2-1     to do an insurance business and such transactions are authorized by

 2-2     other statutes of this state;

 2-3                 (6)  lawful transactions by servicing companies of the

 2-4     Texas workers' compensation employers' rejected risk fund pursuant

 2-5     to Section 4.08, Article 5.76-2;

 2-6                 (7)  management and accounting activities in this state

 2-7     on behalf of a non-admitted captive insurance company that insures

 2-8     solely directors' and officers' liability insurance for the

 2-9     directors and officers of its parent and affiliated companies

2-10     and/or the risks of its parent and affiliated companies; provided,

2-11     that this provision does not exempt any insured or insurer from the

2-12     payment of any applicable tax on premiums or any other applicable

2-13     provision in this code; [or]

2-14                 (8)  the issuance of qualified charitable gift

2-15     annuities under Article 1.14-1A of this code;

2-16                 (9)  transactions in this state involving service

2-17     contracts sold by the manufacturer or seller of the property

2-18     covered by the service contract where the manufacturer or seller of

2-19     the property or a third party is the obligor of the service

2-20     contract; provided that, in the case of a third party obligor, the

2-21     third party's obligation is insured by an insurer licensed to do

2-22     business in this state and the third party obligor is acting

2-23     through or with the written agreement of the manufacturer or seller

2-24     of the property.  For purposes of this subdivision, "service

2-25     contract" means a contract or agreement for a separately stated

 3-1     consideration for a specific duration to perform the repair,

 3-2     replacement, or maintenance of property or indemnification for

 3-3     repair, replacement, or maintenance, for the operational or

 3-4     structural failure due to a defect in materials, workmanship, or

 3-5     normal wear and tear, with or without additional provision for

 3-6     incidental payment of indemnity under limited circumstances,

 3-7     including but not limited to towing, rental, and emergency road

 3-8     service, but the term does not include mechanical breakdown

 3-9     insurance agreements sold by a person as defined in Section 2(a),

3-10     Article 21.21 of this code; or

3-11                 (10)  transactions in this state involving asset

3-12     management contracts with owners of capital equipment.  For the

3-13     purposes of this subdivision, "asset management contract" means a

3-14     contract or agreement for a separately stated consideration for a

3-15     specific duration to manage the capital equipment assets of the

3-16     owner of the equipment including, but not limited to, the

3-17     maintenance costs associated with service and repair incidents

3-18     arising from equipment failure, provided the contractor notifies

3-19     the owner of the capital equipment that the asset management

3-20     contract is exempt from the provisions of the Insurance Code.

3-21           SECTION 2.  This Act takes effect September 1, 1997.

3-22           SECTION 3.  The importance of this legislation and the

3-23     crowded condition of the calendars in both houses create an

3-24     emergency and an imperative public necessity that the

3-25     constitutional rule requiring bills to be read on three several

 4-1     days in each house be suspended, and this rule is hereby suspended.