By Sibley                                             S.B. No. 1793
         77R9967 PB-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the board of directors of certain guaranty
 1-3     associations.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Section 14(b)(1), Article 9.48, Insurance Code, is
 1-6     amended to read as follows:
 1-7                 (1)  The association shall exercise its powers through
 1-8     a board of directors consisting of nine persons, three of whom must
 1-9     be employees or officers of the insurers, two of whom must be
1-10     employees or officers of the agents, and four of whom must be
1-11     public representatives as defined herein.  The commissioner, or the
1-12     commissioner's designee, shall serve as a nonvoting ex officio
1-13     member of the board of directors.  An ex officio member is not
1-14     subject to the requirements imposed on appointed members under this
1-15     article.  Board members, other than the public representatives,
1-16     shall be chosen to give fair representation to all insurers and
1-17     agents giving due consideration to the various categories of
1-18     premium income, geographical location, and segments of the industry
1-19     represented in this state [Texas].  "Public representative" is an
1-20     individual who (i) has been a resident of this state [Texas] for at
1-21     least five years immediately preceding appointment, (ii) is not
1-22     licensed by the department [State Board of Insurance] or subject to
1-23     the regulation of the department [State Board of Insurance], (iii)
1-24     is not financially involved in an organization subject to the
 2-1     regulation of the department [State Board of Insurance] other than
 2-2     ownership of a policy or contract of insurance, (iv) is not a
 2-3     member of the immediate family of an individual who is financially
 2-4     involved in an organization subject to the regulation of the
 2-5     department [State Board of Insurance], (v) is not engaged in or
 2-6     employed by an entity having a contract with an organization
 2-7     subject to the regulation of the department [State Board of
 2-8     Insurance], (vi) is not employed by, on the board of directors of,
 2-9     or holding elective office by or under the authority of any unit of
2-10     federal, state, or local government or any organization that
2-11     receives a significant part of its funding from any such unit of
2-12     federal, state, or local government, (vii) is not employed by or
2-13     associated with an organization formed for the purpose of
2-14     representing licensees of the department [State Board of Insurance]
2-15     or organizations or individuals subject to the regulation of the
2-16     department [State Board of Insurance], or (viii) is not required to
2-17     register as a lobbyist under Chapter 305, Government Code, by
2-18     virtue of activities on behalf of an association or other
2-19     organization representing the regulated industry. "Immediate
2-20     family" includes parents, spouse, children, brothers, and sisters
2-21     who reside in the same household.  Members of the board shall be
2-22     appointed by the commissioner [State Board of Insurance] to serve
2-23     staggered six-year terms, with the terms of three members expiring
2-24     each odd-numbered year.  Each director shall serve until a
2-25     successor is appointed.  A vacancy on the board shall be filled for
2-26     the unexpired term by the commissioner [State Board of Insurance].
2-27     If any director, other than a public representative, ceases to be
 3-1     an officer or employee of a member insurer or an agent during a
 3-2     term of office, the office is vacant.  All directors are eligible
 3-3     to serve more than one term.
 3-4           SECTION 2. Section 7(a), Article 21.28-C, Insurance Code, is
 3-5     amended to read as follows:
 3-6           (a)  The board of directors of the association is composed of
 3-7     nine persons who serve terms as established in the plan of
 3-8     operation.  Five members shall be selected by member insurers,
 3-9     subject to the approval of the commissioner.  To be eligible to
3-10     serve as an insurance industry board member, a person must be a
3-11     full-time employee of a member insurer.  The remaining members
3-12     shall be representatives of the general public appointed by the
3-13     commissioner.  Vacancies on the board shall be filled for the
3-14     remaining period of the term by a majority vote of the remaining
3-15     board members, subject to the approval of the commissioner.  The
3-16     commissioner, or the commissioner's designee, shall serve as a
3-17     nonvoting ex officio member of the board of directors.  An ex
3-18     officio member is not subject to the requirements imposed on
3-19     appointed members under this article.
3-20           SECTION 3. Section 7(a), Article 21.28-D, Insurance Code, is
3-21     amended to read as follows:
3-22           (a)  The commissioner shall appoint a board of directors of
3-23     the association consisting of nine members, three of whom shall be
3-24     chosen from employees or officers chosen from the 50 member
3-25     companies having the largest total direct premium income based on
3-26     the latest financial statement on file at date of appointment, two
3-27     of whom shall be chosen from the other companies to give fair
 4-1     representation to member insurers based on due consideration of
 4-2     their varying categories of premium income and geographical
 4-3     location, and four of whom shall be representatives of the general
 4-4     public.  The commissioner, or the commissioner's designee, shall
 4-5     serve as a nonvoting ex officio member of the board of directors.
 4-6     An ex officio member is not subject to the requirements imposed on
 4-7     appointed members under this article.  Members serve for six-year
 4-8     staggered terms, with the terms of three members expiring each
 4-9     odd-numbered year.  All directors shall serve until their
4-10     successors are appointed, except that in the case of any vacancy,
4-11     the unexpired term of office shall be filled by the appointment of
4-12     a director by the commissioner.  If a director ceases to be an
4-13     officer or employee of a member insurer during the director's term
4-14     of office, that office becomes vacant until the director's
4-15     successor is appointed.  All directors are eligible to succeed
4-16     themselves in office.  A public representative may not be:
4-17                 (1)  an officer, director, or employee of an insurance
4-18     company, insurance agency, agent, broker, solicitor, adjuster, or
4-19     any other business entity regulated by the department;
4-20                 (2)  a person required to register with the secretary
4-21     of state under Chapter 305, Government Code; or
4-22                 (3)  related to a person described by Subparagraph (1)
4-23     or (2) of this paragraph within the second degree of affinity or
4-24     consanguinity.
4-25           SECTION 4. Section 551.079, Government Code, is amended to
4-26     read as follows:
4-27           Sec. 551.079.  TEXAS DEPARTMENT [STATE BOARD] OF INSURANCE.
 5-1     (a)  The requirements of this chapter do not apply to a meeting of
 5-2     the commissioner of insurance or the commissioner's designee with
 5-3     the board of directors of a guaranty association established under
 5-4     Article 9.48, 21.28-C, or 21.28-D, Insurance Code, [State Board of
 5-5     Insurance] in the discharge of the commissioner's duties and
 5-6     responsibilities to regulate and maintain the solvency of a person
 5-7     regulated by the Texas Department of Insurance [board].
 5-8           (b)  The commissioner of insurance [board] may deliberate and
 5-9     determine the appropriate action to be taken concerning the
5-10     solvency of a person regulated by the Texas Department of Insurance
5-11     [board] in a closed meeting with persons in one or more of the
5-12     following categories:
5-13                 (1)  staff of the Texas Department of Insurance
5-14     [board];
5-15                 (2)  a regulated person;  [or]
5-16                 (3)  representatives of a regulated person; or
5-17                 (4)  members of the board of directors of a guaranty
5-18     association established under Article 9.48, 21.28-C, or 21.28-D,
5-19     Insurance Code.
5-20           SECTION 5. This Act takes effect September 1, 2001.