By Smithee                                            H.B. No. 3013
         77R7072 AJA-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the composition and operation of the board of directors
 1-3     of certain insurance guaranty associations.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Section 14(b), Article 9.48, Insurance Code, is
 1-6     amended to read as follows:
 1-7           (b)  Board of directors.  (1) The association shall exercise
 1-8     its powers through a board of directors consisting of the
 1-9     commissioner and nine persons appointed by the commissioner, three
1-10     of whom must be employees or officers of the insurers, two of whom
1-11     must be employees or officers of the agents, and four of whom must
1-12     be public representatives as defined herein.  The commissioner
1-13     serves as an ex officio, nonvoting member of the board.  Board
1-14     members appointed by the commissioner, other than the public
1-15     representatives, shall be chosen to give fair representation to all
1-16     insurers and agents giving due consideration to the various
1-17     categories of premium income, geographical location, and segments
1-18     of the industry represented in Texas. "Public representative" is an
1-19     individual who (i) has been a resident of Texas for at least five
1-20     years immediately preceding appointment, (ii) is not licensed by
1-21     the department [State Board of Insurance] or subject to the
1-22     regulation of the department [State Board of Insurance], (iii) is
1-23     not financially involved in an organization subject to the
1-24     regulation of the department [State Board of Insurance] other than
 2-1     ownership of a policy or contract of insurance, (iv) is not a
 2-2     member of the immediate family of an individual who is financially
 2-3     involved in an organization subject to the regulation of the
 2-4     department [State Board of Insurance], (v) is not engaged in or
 2-5     employed by an entity having a contract with an organization
 2-6     subject to the regulation of the department [State Board of
 2-7     Insurance], (vi) is not employed by, on the board of directors of,
 2-8     or holding elective office by or under the authority of any unit of
 2-9     federal, state, or local government or any organization that
2-10     receives a significant part of its funding from any such unit of
2-11     federal, state, or local government, (vii) is not employed by or
2-12     associated with an organization formed for the purpose of
2-13     representing licensees of the department [State Board of Insurance]
2-14     or organizations or individuals subject to the regulation of the
2-15     department [State Board of Insurance], or (viii) is not required to
2-16     register as a lobbyist under Chapter 305, Government Code, by
2-17     virtue of activities on behalf of an association or other
2-18     organization representing the regulated industry. "Immediate
2-19     family" includes parents, spouse, children, brothers, and sisters
2-20     who reside in the same household.  The appointed members [Members]
2-21     of the board shall be appointed by the commissioner [State Board of
2-22     Insurance] to serve staggered six-year terms, with the terms of
2-23     three members expiring each odd-numbered year.  Each director shall
2-24     serve until a successor is appointed.  A vacancy on the board shall
2-25     be filled for the unexpired term by the commissioner [State Board
2-26     of Insurance].  If an appointed [any] director, other than a public
2-27     representative, ceases to be an officer or employee of a member
 3-1     insurer or an agent during a term of office, the office is vacant.
 3-2     An appointed director may [All directors are eligible to] serve
 3-3     more than one term.
 3-4                 (2)  An appointed director [Directors] may not receive
 3-5     any remuneration or emolument of office but is [are] entitled to
 3-6     reimbursement for the director's [their] actual expenses incurred
 3-7     in performing the director's [their] duties under this article [as
 3-8     directors].
 3-9                 (3)  Each appointed director of the association shall
3-10     file a financial statement with the secretary of state in
3-11     accordance with Sections 3 and 4, Chapter 421, Acts of the 63rd
3-12     Legislature, Regular Session, 1973 (Article 6252-9b, Vernon's Texas
3-13     Civil Statutes).
3-14           SECTION 2. Sections 7(a) and (e), Article 21.28-C, Insurance
3-15     Code, are amended to read as follows:
3-16           (a)  The board of directors of the association is composed of
3-17     the commissioner and nine persons who serve terms as established in
3-18     the plan of operation.  Five members shall be selected by member
3-19     insurers, subject to the approval of the commissioner.  To be
3-20     eligible to serve as an insurance industry board member, a person
3-21     must be a full-time employee of a member insurer.  Four [The
3-22     remaining] members shall be representatives of the general public
3-23     appointed by the commissioner.  The commissioner serves as an ex
3-24     officio, nonvoting member.  Vacancies on the board shall be filled
3-25     for the remaining period of the term by a majority vote of the
3-26     remaining board members, subject to the approval of the
3-27     commissioner.
 4-1           (e)  Each appointed member of the board of directors shall
 4-2     file a financial statement with the secretary of state in
 4-3     accordance with Sections 3 and 4, Chapter 421, Acts of the 63rd
 4-4     Legislature, Regular Session, 1973 (Article 6252-9b, Vernon's Texas
 4-5     Civil Statutes).
 4-6           SECTION 3. Sections 7(a) and (b), Article 21.28-D, Insurance
 4-7     Code, are amended to read as follows:
 4-8           (a)  The commissioner shall appoint a board of directors of
 4-9     the association consisting of nine members, three of whom shall be
4-10     chosen from employees or officers chosen from the 50 member
4-11     companies having the largest total direct premium income based on
4-12     the latest financial statement on file at date of appointment, two
4-13     of whom shall be chosen from the other companies to give fair
4-14     representation to member insurers based on due consideration of
4-15     their varying categories of premium income and geographical
4-16     location, and four of whom shall be representatives of the general
4-17     public.  The commissioner serves as an ex officio, nonvoting member
4-18     of the board of directors.  Appointed members [Members] serve for
4-19     six-year staggered terms, with the terms of three members expiring
4-20     each odd-numbered year.  An appointed member [All directors] shall
4-21     serve until the member's successor is [their successors are]
4-22     appointed, except that in the case of any vacancy, the unexpired
4-23     term of office shall be filled by the appointment of a director by
4-24     the commissioner.  If an appointed [a] director ceases to be an
4-25     officer or employee of a member insurer during the director's term
4-26     of office, that office becomes vacant until the director's
4-27     successor is appointed.  Appointed [All] directors are eligible to
 5-1     succeed themselves in office.  A public representative may not be:
 5-2                 (1)  an officer, director, or employee of an insurance
 5-3     company, insurance agency, agent, broker, solicitor, adjuster, or
 5-4     any other business entity regulated by the department;
 5-5                 (2)  a person required to register with the secretary
 5-6     of state under Chapter 305, Government Code; or
 5-7                 (3)  related to a person described by Subparagraph (1)
 5-8     or (2) of this paragraph within the second degree of affinity or
 5-9     consanguinity.
5-10           (b)  Each appointed director of the association shall file a
5-11     financial statement with the secretary of state in accordance with
5-12     Sections 3 and 4, Chapter 421, Acts of the 63rd Legislature,
5-13     Regular Session, 1973 (Article 6252-9b, Vernon's Texas Civil
5-14     Statutes).
5-15           SECTION 4. Section 551.079, Government Code, is amended to
5-16     read as follows:
5-17           Sec. 551.079.  COMMISSIONER [STATE BOARD] OF INSURANCE. (a)
5-18     The requirements of this chapter do not apply to a meeting of the
5-19     commissioner of insurance [State Board of Insurance] in the
5-20     discharge of the commissioner's responsibilities to regulate and
5-21     maintain the solvency of a person regulated by the board or to
5-22     oversee a guaranty association.
5-23           (b)  The commissioner of insurance or a person designated by
5-24     the commissioner [board] may:
5-25                 (1)  deliberate and determine the appropriate action to
5-26     be taken concerning the solvency of a person regulated by the Texas
5-27     Department of Insurance [board] in a closed meeting with persons in
 6-1     one or more of the following categories:
 6-2                       (A) [(1)]  staff of the department [board];
 6-3                       (B) [(2)]  a regulated person; [or]
 6-4                       (C) [(3)]  representatives of a regulated person;
 6-5     or
 6-6                       (D)  the board of directors of a guaranty
 6-7     association; or
 6-8                 (2)  meet with the board of directors of a guaranty
 6-9     association in a closed meeting the subject of which relates to the
6-10     commissioner's oversight of the guaranty association.
6-11           SECTION 5.  This Act takes effect immediately if it receives
6-12     a vote of two-thirds of all the members elected to each house, as
6-13     provided by Section 39, Article III, Texas Constitution.  If this
6-14     Act does not receive the vote necessary for immediate effect, this
6-15     Act takes effect September 1, 2001.