By: Swinford H.B. No. 2017
A BILL TO BE ENTITLED
AN ACT
relating to a nonsubstantive revision of statutes relating to the
Texas Department of Insurance, the business of insurance, and
certain related businesses, including conforming amendments,
repeals, and penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. TITLE 4, INSURANCE CODE. The Insurance Code is
amended by adding Title 4 to read as follows:
TITLE 4. REGULATION OF SOLVENCY
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 401. AUDITS AND EXAMINATIONS
CHAPTER 402. DISCLOSURE OF MATERIAL TRANSACTIONS
CHAPTER 403. DIVIDENDS
CHAPTER 404. FINANCIAL CONDITION
[Chapters 405-420 reserved for expansion]
SUBTITLE B. RESERVES AND INVESTMENTS
CHAPTER 421. RESERVES IN GENERAL
CHAPTER 422. ASSET PROTECTION ACT
CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS
CHAPTER 424. INVESTMENTS FOR CERTAIN INSURERS
CHAPTER 425. RESERVES AND INVESTMENTS FOR LIFE
INSURANCE COMPANIES AND RELATED ENTITIES
CHAPTER 426. RESERVES FOR WORKERS' COMPENSATION
INSURANCE COMPANIES
CHAPTER 427. SUBORDINATED INDEBTEDNESS
[Chapters 428-440 reserved for expansion]
SUBTITLE C. DELINQUENT INSURERS
CHAPTER 441. SUPERVISION AND CONSERVATORSHIP
CHAPTER 442. LIQUIDATION, REHABILITATION, REORGANIZATION,
OR CONSERVATION OF INSURERS
[Chapters 443-460 reserved for expansion]
SUBTITLE D. GUARANTY ASSOCIATIONS
CHAPTER 461. GENERAL PROVISIONS
CHAPTER 462. TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY
ASSOCIATION
CHAPTER 463. LIFE, ACCIDENT, HEALTH, AND HOSPITAL SERVICE
INSURANCE GUARANTY ASSOCIATION
[Chapters 464-480 reserved for expansion]
SUBTITLE E. REQUIREMENTS OF OTHER JURISDICTIONS
CHAPTER 481. VOLUNTARY DEPOSITS
[Chapters 482-490 reserved for expansion]
SUBTITLE F. REINSURANCE
CHAPTER 491. GENERAL REINSURANCE REQUIREMENTS
CHAPTER 492. REINSURANCE FOR LIFE, HEALTH, AND ACCIDENT
INSURANCE COMPANIES AND RELATED ENTITIES
CHAPTER 493. REINSURANCE FOR PROPERTY AND CASUALTY INSURERS
CHAPTER 494. REINSURANCE OF AIRCRAFT AND SPACE
EQUIPMENT RISKS
TITLE 4. REGULATION OF SOLVENCY
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 401. AUDITS AND EXAMINATIONS
SUBCHAPTER A. INDEPENDENT AUDIT OF FINANCIAL STATEMENTS
Sec. 401.001. DEFINITIONS
Sec. 401.002. PURPOSE OF SUBCHAPTER
Sec. 401.003. EFFECT OF SUBCHAPTER ON AUTHORITY TO
EXAMINE
Sec. 401.004. FILING AND EXTENSIONS FOR FILING OF
AUDITED FINANCIAL REPORT
Sec. 401.005. ALTERNATIVE FILING FOR CANADIAN OR
BRITISH INSURERS OR HEALTH MAINTENANCE
ORGANIZATIONS
Sec. 401.006. EXEMPTION FOR CERTAIN SMALL INSURERS AND
HEALTH MAINTENANCE ORGANIZATIONS
Sec. 401.007. EXEMPTION FOR CERTAIN FOREIGN OR ALIEN
INSURERS OR HEALTH MAINTENANCE
ORGANIZATIONS
Sec. 401.008. HARDSHIP EXEMPTION
Sec. 401.009. CONTENTS OF AUDITED FINANCIAL REPORT
Sec. 401.010. REQUIREMENTS FOR FINANCIAL STATEMENTS IN
AUDITED FINANCIAL REPORT
Sec. 401.011. QUALIFICATIONS OF ACCOUNTANT; ACCEPTANCE
OF AUDITED FINANCIAL REPORT
Sec. 401.012. HEARING ON ACCOUNTANT QUALIFICATIONS;
REPLACEMENT OF ACCOUNTANT
Sec. 401.013. ACCOUNTANT'S LETTER OF QUALIFICATIONS
Sec. 401.014. REGISTRATION OF ACCOUNTANT
Sec. 401.015. RESIGNATION OR DISMISSAL OF ACCOUNTANT;
STATEMENT CONCERNING DISAGREEMENTS
Sec. 401.016. AUDITED COMBINED OR CONSOLIDATED
FINANCIAL STATEMENTS
Sec. 401.017. NOTICE OF ADVERSE FINANCIAL CONDITION OR
MISSTATEMENT OF FINANCIAL CONDITION
Sec. 401.018. INFORMATION DISCOVERED AFTER DATE OF
AUDITED FINANCIAL REPORT
Sec. 401.019. REPORT ON SIGNIFICANT DEFICIENCIES IN
INTERNAL CONTROL
Sec. 401.020. ACCOUNTANT WORK PAPERS
Sec. 401.021. PENALTY FOR FAILURE TO COMPLY
[Sections 401.022-401.050 reserved for expansion]
SUBCHAPTER B. EXAMINATION OF CARRIERS
Sec. 401.051. DUTY TO EXAMINE CARRIERS
Sec. 401.052. FREQUENCY OF EXAMINATION
Sec. 401.053. EXAMINATION PERIOD
Sec. 401.054. POWERS RELATED TO EXAMINATION
Sec. 401.055. EFFECT OF SUBCHAPTER ON AUTHORITY TO USE
INFORMATION
Sec. 401.056. RULES RELATED TO REPORTS AND HEARINGS
Sec. 401.057. USE OF AUDIT AND WORK PAPERS
Sec. 401.058. CONFIDENTIALITY OF REPORTS AND RELATED
INFORMATION
Sec. 401.059. DETERMINATION OF VALUE
Sec. 401.060. RIGHT TO INFORMATION RELATING TO
DETERMINATION OF VALUE OR MARKET VALUE
Sec. 401.061. DISCIPLINARY ACTION FOR FAILURE TO
COMPLY WITH SUBCHAPTER
Sec. 401.062. STAY OF RULE, ORDER, DECISION, OR
FINDING
[Sections 401.063-401.100 reserved for expansion]
SUBCHAPTER C. EXAMINERS AND ACTUARIES
Sec. 401.101. USE OF DEPARTMENT EXAMINER OR OTHER
QUALIFIED PERSON OR FIRM
Sec. 401.102. LEGISLATIVE INTENT AS TO APPOINTMENT OR
EMPLOYMENT OF EXAMINERS AND ACTUARIES
Sec. 401.103. APPOINTMENT OF EXAMINERS AND ACTUARIES
Sec. 401.104. APPOINTMENT OF EXAMINERS, ACTUARIES, AND
OTHER PERSONS FOR CERTAIN EXAMINATIONS
Sec. 401.105. OATH OF EXAMINERS AND ASSISTANTS
Sec. 401.106. RIGHT OF ACTION ON BOND
[Sections 401.107-401.150 reserved for expansion]
SUBCHAPTER D. EXAMINATION EXPENSES
Sec. 401.151. EXPENSES OF EXAMINATION OF DOMESTIC
INSURER
Sec. 401.152. EXPENSES OF EXAMINATION OF OTHER
INSURERS
Sec. 401.153. REIMBURSEMENT OF EXPENSES OF CERTAIN
PERSONS OR FIRMS
Sec. 401.154. TAX CREDIT AUTHORIZED
Sec. 401.155. ADDITIONAL ASSESSMENTS
Sec. 401.156. DEPOSIT AND USE OF ASSESSMENT AND FEE
[Sections 401.157-401.200 reserved for expansion]
SUBCHAPTER E. CONFIDENTIALITY OF CERTAIN INFORMATION
Sec. 401.201. CONFIDENTIALITY OF EARLY WARNING SYSTEM
INFORMATION
CHAPTER 401. AUDITS AND EXAMINATIONS
SUBCHAPTER A. INDEPENDENT AUDIT OF FINANCIAL STATEMENTS
Sec. 401.001. DEFINITIONS. In this subchapter:
(1) "Accountant" means an independent certified
public accountant or accounting firm that meets the requirements of
Section 401.011.
(2) "Affiliate" has the meaning assigned by Section
823.003.
(3) "Health maintenance organization" means a health
maintenance organization authorized to engage in business in this
state.
(4) "Insurer" means an insurer authorized to engage in
business in this state, including:
(A) a life, health, or accident insurance
company;
(B) a fire and marine insurance company;
(C) a general casualty company;
(D) a title insurance company;
(E) a fraternal benefit society;
(F) a mutual life insurance company;
(G) a local mutual aid association;
(H) a statewide mutual assessment company;
(I) a mutual insurance company other than a
mutual life insurance company;
(J) a farm mutual insurance company;
(K) a county mutual insurance company;
(L) a Lloyd's plan;
(M) a reciprocal or interinsurance exchange;
(N) a group hospital service corporation;
(O) a stipulated premium company; and
(P) a nonprofit legal services corporation.
(5) "Subsidiary" has the meaning assigned by Section
823.003. (V.T.I.C. Art. 1.15A, Secs. 3(1), (2), (5), (6).)
Sec. 401.002. PURPOSE OF SUBCHAPTER. The purpose of this
subchapter is to require an annual audit by an independent
certified public accountant of the financial statements reporting
the financial condition and the results of operations of each
insurer or health maintenance organization. (V.T.I.C. Art. 1.15A,
Sec. 1.)
Sec. 401.003. EFFECT OF SUBCHAPTER ON AUTHORITY TO EXAMINE.
This subchapter does not limit the commissioner's authority to
order or the department's authority to conduct an examination of an
insurer or health maintenance organization under this code or the
commissioner's rules. (V.T.I.C. Art. 1.15A, Sec. 8.)
Sec. 401.004. FILING AND EXTENSIONS FOR FILING OF AUDITED
FINANCIAL REPORT. (a) Unless exempt under Section 401.006,
401.007, or 401.008 and except as otherwise provided by Sections
401.005 and 401.016, an insurer or health maintenance organization
shall:
(1) have an annual audit performed by an accountant;
and
(2) file with the commissioner on or before June 30 an
audited financial report for the preceding calendar year.
(b) The commissioner may require an insurer or health
maintenance organization to file an audited financial report on a
date that precedes June 30. The commissioner must notify the
insurer or health maintenance organization of the filing date not
later than the 90th day before that date.
(c) An insurer or health maintenance organization may
request an extension of the filing date by submitting the request in
writing before the 10th day preceding the filing date. The request
must include sufficient detail for the commissioner to make an
informed decision on the requested extension. The commissioner may
extend the filing date for one or more 30-day periods if the
commissioner determines that there is good cause for the extension
based on a showing by the insurer or health maintenance
organization and the insurer's or health maintenance organization's
accountant of the reasons for requesting the extension. (V.T.I.C.
Art. 1.15A, Secs. 2, 9(a), (b), (c).)
Sec. 401.005. ALTERNATIVE FILING FOR CANADIAN OR BRITISH
INSURERS OR HEALTH MAINTENANCE ORGANIZATIONS. (a) Instead of the
audited financial report required by Section 401.004, an insurer or
health maintenance organization domiciled in Canada or the United
Kingdom may file the insurer's or health maintenance organization's
annual statement of total business on the form filed by the insurer
or health maintenance organization with the appropriate regulatory
authority in the country of domicile. The statement must be audited
by an independent accountant chartered in the country of domicile.
(b) The chartered accountant must be registered with the
commissioner under Section 401.014(a). The registration must be
accompanied by a statement, signed by the accountant, indicating
that the accountant is aware of the requirements of this subchapter
and affirming that the accountant will express the accountant's
opinion in conformity with those requirements. (V.T.I.C. Art.
1.15A, Sec. 10A.)
Sec. 401.006. EXEMPTION FOR CERTAIN SMALL INSURERS AND
HEALTH MAINTENANCE ORGANIZATIONS. (a) An insurer or health
maintenance organization that has less than $1 million in direct
premiums written in this state during a calendar year is exempt from
the requirement to file an audited financial report if the insurer
or health maintenance organization submits an affidavit, made under
oath by one of the insurer's or health maintenance organization's
officers, that specifies the amount of direct premiums written in
this state during that period.
(b) Notwithstanding Subsection (a), the commissioner may
require an insurer or health maintenance organization, other than a
fraternal benefit society that does not have any direct premiums
written in this state for accident and health insurance during a
calendar year, to comply with this subchapter if the commissioner
finds that the insurer's or health maintenance organization's
compliance is necessary for the commissioner to fulfill the
commissioner's statutory responsibilities.
(c) An insurer or health maintenance organization that has
assumed premiums of at least $1 million under reinsurance
agreements is not exempt under Subsection (a). (V.T.I.C. Art.
1.15A, Sec. 4.)
Sec. 401.007. EXEMPTION FOR CERTAIN FOREIGN OR ALIEN
INSURERS OR HEALTH MAINTENANCE ORGANIZATIONS. (a) A foreign or
alien insurer or health maintenance organization that files an
audited financial report in another state in accordance with that
state's requirements for audited financial reports may be exempt
from filing a report under this subchapter if the commissioner
finds that the other state's requirements are substantially similar
to the requirements prescribed by this subchapter.
(b) An insurer or health maintenance organization exempt
under this section shall file with the commissioner a copy of:
(1) the audited financial report, the report on
significant deficiencies in internal controls, and the
accountant's letter of qualifications filed with the other state;
and
(2) any notification of adverse financial conditions
report filed with the other state.
(c) The reports and letter required by Subsection (b)(1)
must be filed in accordance with the filing dates prescribed by
Sections 401.004 and 401.019. The report required by Subsection
(b)(2) must be filed in accordance with the filing date prescribed
by Section 401.017. (V.T.I.C. Art. 1.15A, Sec. 6.)
Sec. 401.008. HARDSHIP EXEMPTION. (a) An insurer or health
maintenance organization that is not eligible for an exemption
under Section 401.006 or 401.007 may apply to the commissioner for a
hardship exemption.
(b) Subject to Subsection (c), the commissioner may grant an
exemption under this section if the commissioner finds, after
reviewing the application, that compliance with this subchapter
would constitute a severe financial or organizational hardship for
the insurer or health maintenance organization. The commissioner
may grant the exemption at any time for one or more specified
periods.
(c) The commissioner may not grant an exemption under this
section if:
(1) the exemption would diminish the department's
ability to monitor the financial condition of the insurer or health
maintenance organization; or
(2) the insurer or health maintenance organization:
(A) during the five-year period preceding the
date the application for the exemption is made:
(i) has been placed under supervision,
conservatorship, or receivership;
(ii) has undergone a change in control, as
described by Section 823.005; or
(iii) has been subject to a significant
number of complaints, as determined by the commissioner;
(B) has been identified by the department as
troubled;
(C) has been or is the subject of a disciplinary
action by the department; or
(D) is not complying with the law or with a rule
adopted by the commissioner. (V.T.I.C. Art. 1.15A, Secs. 7(a),
(b), (c).)
Sec. 401.009. CONTENTS OF AUDITED FINANCIAL REPORT. (a) An
audited financial report required under Section 401.004 must:
(1) describe the financial condition of the insurer or
health maintenance organization as of the end of the most recent
calendar year and the results of the insurer's or health
maintenance organization's operations, changes in financial
position, and changes in capital and surplus for that year;
(2) conform to the statutory accounting practices
prescribed or otherwise permitted by the insurance regulator in the
insurer's or health maintenance organization's state of domicile;
and
(3) include:
(A) the report of an accountant;
(B) a balance sheet that reports admitted assets,
liabilities, capital, and surplus;
(C) a statement of gain or loss from operations;
(D) a statement of cash flows;
(E) a statement of changes in capital and
surplus;
(F) any notes to financial statements;
(G) supplementary data and information,
including any additional data or information required by the
commissioner; and
(H) information required by the department to
conduct the insurer's or health maintenance organization's
examination under Subchapter B.
(b) The notes to financial statements required by
Subsection (a)(3)(F) must include:
(1) a reconciliation of any differences between the
audited statutory financial statements and the annual statements
filed under this code, with a written description of the nature of
those differences;
(2) any notes required by the appropriate National
Association of Insurance Commissioners annual statement
instructions or by generally accepted accounting principles; and
(3) a summary of the ownership of the insurer or health
maintenance organization and that entity's relationship to any
affiliated company.
(c) An insurer or health maintenance organization required
under Section 401.004 to file an audited financial report that does
not retain an independent certified public accountant to perform an
annual audit for the previous year may not be required to include in
the report audited statements of operations, cash flows, or changes
in capital and surplus for the first year. The insurer or health
maintenance organization must include those statements in the
first-year report and label the statements as unaudited. The
insurer or health maintenance organization must include in the
first-year report all other reports described by Section 401.004.
(d) The commissioner shall adopt rules governing the
information to be included in the audited financial report under
Subsection (a)(3)(H). (V.T.I.C. Art. 1.15A, Secs. 10(a), (b), (c),
(e), (f).)
Sec. 401.010. REQUIREMENTS FOR FINANCIAL STATEMENTS IN
AUDITED FINANCIAL REPORT. (a) An accountant must audit the
financial reports provided by an insurer or health maintenance
organization for purposes of an audit under this subchapter. The
accountant who audits the reports must conduct the audit in
accordance with generally accepted auditing standards and must
consider other procedures described in the Financial Condition
Examiner's Handbook adopted by the National Association of
Insurance Commissioners.
(b) The financial statements included in the audited
financial report must be prepared in a form and using language and
groupings substantially the same as those of the relevant sections
of the insurer's or health maintenance organization's annual
statement filed with the commissioner. Beginning in the second
year in which an insurer or health maintenance organization is
required to file an audited financial report, the financial
statements must also be comparative, presenting the amounts as of
December 31 of the reported year and the amounts as of December 31
of the preceding year. (V.T.I.C. Art. 1.15A, Secs. 10(d), 14.)
Sec. 401.011. QUALIFICATIONS OF ACCOUNTANT; ACCEPTANCE OF
AUDITED FINANCIAL REPORT. (a) Except as provided by Subsections
(c) and (d), the commissioner shall accept an audited financial
report from an independent certified public accountant or
accounting firm that:
(1) is a member in good standing of the American
Institute of Certified Public Accountants and is in good standing
with all states in which the accountant or firm is licensed to
practice, as applicable; and
(2) conforms to the American Institute of Certified
Public Accountants Code of Professional Conduct and to the rules of
professional conduct and other rules of the Texas State Board of
Public Accountancy or a similar code.
(b) If the insurer or health maintenance organization is
domiciled in Canada, the commissioner shall accept an audited
financial report from an accountant chartered in Canada. If the
insurer or health maintenance organization is domiciled in Great
Britain, the commissioner shall accept an audited financial report
from an accountant chartered in Great Britain.
(c) A partner or other person responsible for rendering a
report for an insurer or health maintenance organization for seven
consecutive years may not, during the two-year period after that
seventh year, render a report for the insurer or health maintenance
organization or for a subsidiary or affiliate of the insurer or
health maintenance organization that is engaged in the business of
insurance. The commissioner may determine that the limitation
provided by this subsection does not apply to an accountant for a
particular insurer or health maintenance organization if the
insurer or health maintenance organization demonstrates to the
satisfaction of the commissioner that the limitation's application
to the insurer or health maintenance organization would be unfair
because of unusual circumstances. In making the determination, the
commissioner may consider:
(1) the number of partners or individuals the
accountant employs, the expertise of the partners or individuals
the accountant employs, or the number of the accountant's insurance
clients;
(2) the premium volume of the insurer or health
maintenance organization; and
(3) the number of jurisdictions in which the insurer
or health maintenance organization engages in business.
(d) The commissioner may not accept an audited financial
report prepared wholly or partly by an individual who the
commissioner finds:
(1) has been convicted of fraud, bribery, a violation
of the Racketeer Influenced and Corrupt Organizations Act (18
U.S.C. Section 1961 et seq.), or a state or federal criminal offense
involving dishonest conduct;
(2) has violated the insurance laws of this state with
respect to a report filed under this subchapter; or
(3) has demonstrated a pattern or practice of failing
to detect or disclose material information in reports filed under
this subchapter. (V.T.I.C. Art. 1.15A, Secs. 12(a), (b), (c).)
Sec. 401.012. HEARING ON ACCOUNTANT QUALIFICATIONS;
REPLACEMENT OF ACCOUNTANT. The commissioner may hold a hearing to
determine if an accountant is qualified and independent. If, after
considering the evidence presented, the commissioner determines
that an accountant is not qualified and independent for purposes of
expressing an opinion on the financial statements in an audited
financial report filed under this subchapter, the commissioner
shall issue an order directing the insurer or health maintenance
organization to replace the accountant with a qualified and
independent accountant. (V.T.I.C. Art. 1.15A, Secs. 12(d), (e).)
Sec. 401.013. ACCOUNTANT'S LETTER OF QUALIFICATIONS. (a)
The audited financial report required under Section 401.004 must be
accompanied by a letter provided by the accountant who performed
the audit stating:
(1) the accountant's general background and
experience;
(2) the experience of each individual assigned to
prepare the audit in auditing insurers or health maintenance
organizations and whether the individual is an independent
certified public accountant; and
(3) that the accountant:
(A) is properly licensed by an appropriate state
licensing authority, is a member in good standing of the American
Institute of Certified Public Accountants, and is otherwise
qualified under Section 401.011;
(B) is independent from the insurer or health
maintenance organization and conforms to the standards of the
profession contained in the American Institute of Certified Public
Accountants Code of Professional Conduct, the statements of that
institute, and the rules of professional conduct adopted by the
Texas State Board of Public Accountancy, or a similar code;
(C) understands that:
(i) the audited financial report and the
accountant's opinion on the report will be filed in compliance with
this subchapter; and
(ii) the commissioner will rely on the
report and opinion in monitoring and regulating the insurer's or
health maintenance organization's financial position; and
(D) consents to the requirements of Section
401.020 and agrees to make the accountant's work papers available
for review by the department or the department's designee.
(b) Subsection (a)(2) does not prohibit an accountant from
using any staff the accountant considers appropriate if use of that
staff is consistent with generally accepted auditing standards.
(V.T.I.C. Art. 1.15A, Sec. 16A.)
Sec. 401.014. REGISTRATION OF ACCOUNTANT. (a) Not later
than December 31 of the calendar year to be covered by an audited
financial report required by this subchapter, an insurer or health
maintenance organization must register in writing with the
commissioner the name and address of the accountant retained to
prepare the report.
(b) The insurer or health maintenance organization must
include with the registration a statement signed by the accountant:
(1) indicating that the accountant is aware of the
requirements of this subchapter and of the rules of the insurance
department of the insurer's or health maintenance organization's
state of domicile that relate to accounting and financial matters;
and
(2) affirming that the accountant will express the
accountant's opinion on the financial statements in terms of the
statements' conformity to the statutory accounting practices
prescribed or otherwise permitted by the insurance department
described by Subdivision (1) and specifying any exceptions the
accountant believes are appropriate.
(c) The commissioner may not accept an audited financial
report prepared by an accountant who is not registered under this
section.
(d) The commissioner may not accept the registration of a
person who does not qualify under Section 401.011 or does not comply
with the other requirements of this subchapter. (V.T.I.C. Art.
1.15A, Sec. 11.)
Sec. 401.015. RESIGNATION OR DISMISSAL OF ACCOUNTANT;
STATEMENT CONCERNING DISAGREEMENTS. (a) If an accountant who
signed an audited financial report for an insurer or health
maintenance organization resigns as accountant for the insurer or
health maintenance organization or is dismissed by the insurer or
health maintenance organization after the report is filed, the
insurer or health maintenance organization shall notify the
department not later than the fifth business day after the date of
the resignation or dismissal.
(b) Not later than the 10th business day after the date the
insurer or health maintenance organization notifies the department
under Subsection (a), the insurer or health maintenance
organization shall file a written statement with the commissioner
advising the commissioner of any disagreements between the
accountant and the insurer's or health maintenance organization's
personnel responsible for presenting the insurer's or health
maintenance organization's financial statements that:
(1) relate to accounting principles or practices,
financial statement disclosure, or auditing scope or procedures;
(2) occurred during the 24 months preceding the date
of the resignation or dismissal; and
(3) would have caused the accountant to note the
disagreement in connection with the audited financial report if the
disagreement were not resolved to the satisfaction of the
accountant.
(c) The statement required by Subsection (b) must include a
description of disagreements that were resolved to the accountant's
satisfaction and those that were not resolved to the accountant's
satisfaction.
(d) The insurer or health maintenance organization shall
file with the statement required by Subsection (b) a letter signed
by the accountant stating whether the accountant agrees with the
insurer's or health maintenance organization's statement and, if
not, the reasons why the accountant does not agree. If the
accountant fails to provide the letter, the insurer or health
maintenance organization shall file with the commissioner a copy of
a written request to the accountant for the letter. (V.T.I.C. Art.
1.15A, Sec. 12A.)
Sec. 401.016. AUDITED COMBINED OR CONSOLIDATED FINANCIAL
STATEMENTS. (a) An insurer or health maintenance organization
described by Section 401.001(3) or (4) that is required to file an
audited financial report under this subchapter may apply in writing
to the commissioner for approval to file audited combined or
consolidated financial statements instead of separate audited
financial reports if the insurer or health maintenance
organization:
(1) is part of a group of insurers or health
maintenance organizations that uses a pooling arrangement or 100
percent reinsurance agreement that affects the solvency and
integrity of the insurer's or health maintenance organization's
reserves; and
(2) cedes all of the insurer's or health maintenance
organization's direct and assumed business to the pool.
(b) An insurer or health maintenance organization must file
an application under Subsection (a) not later than December 31 of
the calendar year for which the audited combined or consolidated
financial statements are to be filed.
(c) An insurer or health maintenance organization that
receives approval from the commissioner under this section shall
file a columnar combining or consolidating worksheet for the
audited combined or consolidated financial statements that
includes:
(1) the amounts shown on the audited combined or
consolidated financial statements;
(2) the amounts for each insurer or health maintenance
organization stated separately;
(3) the noninsurance operations shown on a combined or
individual basis;
(4) explanations of consolidating and eliminating
entries; and
(5) a reconciliation of any differences between the
amounts shown in the individual insurer or health maintenance
organization columns of the worksheet and comparable amounts shown
on the insurer's or health maintenance organization's annual
statements.
(d) An insurer or health maintenance organization that does
not receive approval from the commissioner to file audited combined
or consolidated financial statements for the insurer or health
maintenance organization and any of the insurer's or health
maintenance organization's subsidiaries or affiliates shall file a
separate audited financial report. (V.T.I.C. Art. 1.15A, Sec. 13.)
Sec. 401.017. NOTICE OF ADVERSE FINANCIAL CONDITION OR
MISSTATEMENT OF FINANCIAL CONDITION. (a) An insurer or health
maintenance organization required to file an audited financial
report under this subchapter shall require the insurer's or health
maintenance organization's accountant to immediately notify the
board of directors of the insurer or health maintenance
organization or the insurer's or health maintenance organization's
audit committee in writing of any determination by that accountant
that:
(1) the insurer or health maintenance organization has
materially misstated the insurer's or health maintenance
organization's financial condition as reported to the commissioner
as of the balance sheet date being audited; or
(2) the insurer or health maintenance organization
does not meet the minimum capital and surplus requirements
prescribed by this code for the insurer or health maintenance
organization as of that date.
(b) An insurer or health maintenance organization that
receives a notice described by Subsection (a) shall:
(1) provide to the commissioner a copy of the notice
not later than the fifth business day after the date the insurer or
health maintenance organization receives the notice; and
(2) provide to the accountant evidence that the notice
was provided to the commissioner.
(c) If the accountant does not receive the evidence required
by Subsection (b)(2) on or before the fifth business day after the
date the accountant notified the insurer or health maintenance
organization under Subsection (a), the accountant shall file with
the commissioner a copy of the accountant's written notice not
later than the 10th business day after the date the accountant
notified the insurer or health maintenance organization.
(d) An accountant is not liable to an insurer or health
maintenance organization or the insurer's or health maintenance
organization's policyholders, shareholders, officers, employees,
directors, creditors, or affiliates for a statement made under this
section if the statement was made in good faith to comply with this
section. (V.T.I.C. Art. 1.15A, Secs. 15(a), (b), (d).)
Sec. 401.018. INFORMATION DISCOVERED AFTER DATE OF AUDITED
FINANCIAL REPORT. If, after the date of an audited financial report
filed under this subchapter, the accountant becomes aware of facts
that might have affected the report, the accountant must take
action as prescribed in Volume 1, AU Section 561, Professional
Standards of the American Institute of Certified Public
Accountants. (V.T.I.C. Art. 1.15A, Sec. 15(c).)
Sec. 401.019. REPORT ON SIGNIFICANT DEFICIENCIES IN
INTERNAL CONTROL. (a) In addition to the audited financial report
required by this subchapter, each insurer or health maintenance
organization shall provide to the commissioner a written report of
significant deficiencies required and prepared by an accountant in
accordance with the Professional Standards of the American
Institute of Certified Public Accountants.
(b) The insurer or health maintenance organization shall
annually file with the commissioner the report required by this
section not later than the 60th day after the date the audited
financial report is filed. The insurer or health maintenance
organization shall also provide a description of remedial actions
taken or proposed to be taken to correct significant deficiencies,
if the actions are not described in the accountant's report.
(c) The report must follow generally the form for
communication of internal control structure matters noted in an
audit described in Statement on Auditing Standard (SAS) No. 60, AU
Section 325, Professional Standards of the American Institute of
Certified Public Accountants. (V.T.I.C. Art. 1.15A, Sec. 16.)
Sec. 401.020. ACCOUNTANT WORK PAPERS. (a) In this
section, "work papers" means the records kept by an accountant of
the procedures followed, the tests performed, the information
obtained, and the conclusions reached that are pertinent to the
accountant's audit of an insurer's or health maintenance
organization's financial statements. The term includes work
programs, analyses, memoranda, letters of confirmation and
representation, abstracts of company documents and schedules, and
commentaries prepared or obtained by the accountant in the course
of auditing the financial statements that support the accountant's
opinion.
(b) An insurer or health maintenance organization required
to file an audited financial report under this subchapter shall
require the insurer's or health maintenance organization's
accountant to make available for review by the department's
examiners the work papers and any record of communications between
the accountant and the insurer or health maintenance organization
relating to the accountant's audit that were prepared in conducting
the audit. The insurer or health maintenance organization shall
require that the accountant retain the work papers and records of
communications until the earlier of:
(1) the date the department files a report on the
examination covering the audit period; or
(2) the seventh anniversary of the date of the last day
of the audit period.
(c) The department may copy and retain the copies of
pertinent work papers when the department's examiners conduct a
review under Subsection (b). The review is considered an
investigation, and work papers obtained during that investigation
may be made confidential by the commissioner, unless the work
papers are admitted as evidence in a hearing before a governmental
agency or in a court. (V.T.I.C. Art. 1.15A, Sec. 17.)
Sec. 401.021. PENALTY FOR FAILURE TO COMPLY. (a) If an
insurer or health maintenance organization fails to comply with
this subchapter, the commissioner shall order that the insurer's or
health maintenance organization's annual audit be performed by a
qualified independent certified public accountant.
(b) The commissioner shall assess against the insurer or
health maintenance organization the cost of auditing the insurer's
or health maintenance organization's financial statement under
this section.
(c) The insurer or health maintenance organization shall
pay to the commissioner the amount of the assessment not later than
the 30th day after the date the commissioner issues the notice of
assessment to the insurer or health maintenance organization.
(d) Money collected under this section shall be deposited to
the credit of the Texas Department of Insurance operating account
for use by the commissioner and the department to pay the expenses
incurred under this subchapter. (V.T.I.C. Art. 1.15A, Sec. 9(d).)
[Sections 401.022-401.050 reserved for expansion]
SUBCHAPTER B. EXAMINATION OF CARRIERS
Sec. 401.051. DUTY TO EXAMINE CARRIERS. (a) The
department or an examiner appointed by the department shall visit
at the carrier's principal office:
(1) each carrier that is organized under the laws of
this state; and
(2) each other carrier that is authorized to engage in
business in this state.
(b) The department or an examiner appointed by the
department may visit the carrier for the purpose of investigating
the carrier's affairs and condition. The department or an examiner
appointed by the department shall examine the carrier's financial
condition and ability to meet the carrier's liabilities and
compliance with the laws of this state that affect the conduct of
the carrier's business.
(c) The department or an examiner appointed by the
department may conduct the visit and examination of a carrier
described by Subsection (a)(2) alone or with representatives of the
insurance supervising departments of other states. (V.T.I.C. Art.
1.15, Sec. 1 (part); Art. 1.19 (part).)
Sec. 401.052. FREQUENCY OF EXAMINATION. (a) The
department shall visit and examine a carrier:
(1) annually during the first three years after the
carrier is organized or incorporated; and
(2) except as provided by Subsection (b), once every
three years after the period described by Subdivision (1), or on a
more frequent basis as the department considers necessary.
(b) If the commissioner determines that the financial
strength of a carrier justifies less frequent examinations than
those required under Subsection (a)(2), the department may conduct
the examination at intervals not less frequent than every five
years. The commissioner shall adopt rules governing the
determination under this subsection of whether the financial
strength of a carrier justifies less frequent examinations.
(V.T.I.C. Art. 1.15, Secs. 1 (part), 10.)
Sec. 401.053. EXAMINATION PERIOD. Unless the department
requests that an examination cover a longer period, the examination
must cover the period beginning on the last day covered by the most
recent examination and ending on December 31 of the year preceding
the year in which the examination is being conducted. (V.T.I.C.
Art. 1.04A (part).)
Sec. 401.054. POWERS RELATED TO EXAMINATION. The
department or the examiner appointed by the department:
(1) has free access, and may require the carrier or the
carrier's agent to provide free access, to all books and papers of
the carrier or the carrier's agent that relate to the carrier's
business and affairs; and
(2) has the authority to summon and examine under
oath, if necessary, an officer, agent, or employee of the carrier or
any other person in relation to the carrier's affairs and
condition. (V.T.I.C. Art. 1.15, Sec. 1 (part); Art. 1.19 (part).)
Sec. 401.055. EFFECT OF SUBCHAPTER ON AUTHORITY TO USE
INFORMATION. This subchapter does not limit the commissioner's
authority to use a final or preliminary examination report, an
examiner's or company's work papers or other documents, or any other
information discovered or developed during an examination in
connection with a legal or regulatory action that the commissioner,
in the commissioner's sole discretion, considers appropriate.
(V.T.I.C. Art. 1.15, Sec. 7.)
Sec. 401.056. RULES RELATED TO REPORTS AND HEARINGS. The
commissioner by rule shall adopt:
(1) procedures governing the filing and adoption of an
examination report;
(2) procedures governing a hearing to be held under
this subchapter; and
(3) guidelines governing an order issued under this
subchapter. (V.T.I.C. Art. 1.15, Sec. 6.)
Sec. 401.057. USE OF AUDIT AND WORK PAPERS. (a) In this
section, "work papers" has the meaning assigned by Section
401.020(a).
(b) In conducting an examination under this subchapter, the
department shall use audits and work papers that the carrier makes
available to the department and that are prepared by an accountant
or accounting firm meeting the qualifications of Section 401.011.
The department may conduct a separate audit of the carrier if
necessary. Work papers developed in the audit shall be maintained
in the manner provided by Sections 401.020(b) and (c).
(c) The carrier shall provide the department with:
(1) the work papers of an accountant or accounting
firm or the carrier; and
(2) a record of any communications between the
accountant or accounting firm and the carrier that relate to an
audit.
(d) The accountant or accounting firm shall deliver the
information described by Subsection (c) to the examiner. The
examiner shall retain the information during the department's
examination of the carrier.
(e) Information obtained under this section is confidential
and may not be disclosed to the public except when introduced as
evidence in a hearing. (V.T.I.C. Art. 1.15, Sec. 8.)
Sec. 401.058. CONFIDENTIALITY OF REPORTS AND RELATED
INFORMATION. (a) A final or preliminary examination report and
any information obtained during an examination are confidential and
are not subject to disclosure under Chapter 552, Government Code.
(b) Subsection (a) applies if the examined carrier is under
supervision or conservatorship. Subsection (a) does not apply to
an examination conducted in connection with a liquidation or
receivership under this code or another insurance law of this
state. (V.T.I.C. Art. 1.15, Sec. 9.)
Sec. 401.059. DETERMINATION OF VALUE. In determining the
value or market value of an investment in or on real estate or an
improvement to real estate by a carrier authorized to engage in
business in this state, the department, in administering this code,
may consider any factor or matter that the department considers
proper and material, including:
(1) an appraisal by a real estate board or other
qualified person;
(2) an affidavit by another person familiar with those
values;
(3) a tax valuation;
(4) the cost of acquisition after deducting for
depreciation and obsolescence;
(5) the cost of replacement;
(6) sales of other comparable property;
(7) enhancement in value from any cause;
(8) income received or to be received; and
(9) any improvements made. (V.T.I.C. Art. 1.15, Sec.
2.)
Sec. 401.060. RIGHT TO INFORMATION RELATING TO
DETERMINATION OF VALUE OR MARKET VALUE. (a) If the department
determines the value or market value of an insurer's investment in
or on real estate or an improvement to real estate, the insurer is
entitled to make a written request for a written finding by the
commissioner in relation to that determination.
(b) Not later than the 10th day after the date the
commissioner receives a request under Subsection (a), the
commissioner shall enter a written order or finding that:
(1) states separately the department's findings on
each factor or matter on which the department relied in making the
determination; and
(2) includes the name and address of each person who
provided evidence relating to a factor or matter on which the
department relied in making the determination.
(c) The commissioner shall provide to the insurer that
requested a written finding under this section a copy of the finding
or order. (V.T.I.C. Art. 1.15, Sec. 3.)
Sec. 401.061. DISCIPLINARY ACTION FOR FAILURE TO COMPLY
WITH SUBCHAPTER. A carrier is subject to disciplinary action under
Chapter 82 if the carrier or the carrier's agent fails or refuses to
comply with:
(1) this subchapter or a rule adopted under this
subchapter; or
(2) a request by the department or an appointed
examiner to be examined or to provide information requested as part
of an examination. (V.T.I.C. Art. 1.15, Sec. 5.)
Sec. 401.062. STAY OF RULE, ORDER, DECISION, OR
FINDING. The filing of a petition under Subchapter D, Chapter 36,
for judicial review of a rule, order, decision, or finding of the
commissioner or department under this subchapter operates as a stay
of the rule, order, decision, or finding until the court directs
otherwise. (V.T.I.C. Art. 1.15, Sec. 4.)
[Sections 401.063-401.100 reserved for expansion]
SUBCHAPTER C. EXAMINERS AND ACTUARIES
Sec. 401.101. USE OF DEPARTMENT EXAMINER OR OTHER QUALIFIED
PERSON OR FIRM. The department may use a salaried department
examiner or may appoint a qualified person or firm to perform an
examination of an insurance organization as provided by law or to
assist in the performance of an examination. (V.T.I.C. Art. 1.04A
(part).)
Sec. 401.102. LEGISLATIVE INTENT AS TO APPOINTMENT OR
EMPLOYMENT OF EXAMINERS AND ACTUARIES. (a) The legislature
recognizes that experienced, highly qualified examiners and
actuaries are necessary for the department to effectively monitor
and regulate the solvency of insurers in this state. It is the
intent of the legislature that the department, in appointing or
employing an examiner or actuary, select a person who:
(1) has substantial experience in financial matters
relating to insurance or other areas of financial activity that are
compatible with the business of insurance; and
(2) is recognized for the outstanding quality of the
person's work in relation to areas of responsibility typically
assigned to an examiner or actuary in the insurance field.
(b) The legislature pledges to provide to the department the
necessary funding to implement this section and to support the
department in the department's efforts to attract the highly
qualified persons necessary to fulfill regulatory responsibilities
relating to insurer solvency assigned to those persons under the
insurance laws of this state. (V.T.I.C. Art. 1.17A.)
Sec. 401.103. APPOINTMENT OF EXAMINERS AND ACTUARIES. (a)
The department shall appoint:
(1) a chief examiner and the number of assistant
examiners the department considers necessary to conduct
examinations of insurance companies, corporations, and
associations at the expense of the insurance company, corporation,
or association as provided by law; and
(2) the number of actuaries the department considers
necessary to:
(A) advise the department in connection with the
performance of the department's duties; and
(B) otherwise aid and counsel the department in
connection with the examinations.
(b) The department may increase or decrease the number of
examiners or actuaries as needed for examination duties. (V.T.I.C.
Art. 1.17 (part).)
Sec. 401.104. APPOINTMENT OF EXAMINERS, ACTUARIES, AND
OTHER PERSONS FOR CERTAIN EXAMINATIONS. (a) The department may
commission a department actuary, the chief examiner, another
department examiner or employee, or any other person to conduct or
assist in the examination of a company that is not organized under
the laws of this state.
(b) The department may compensate a person described by
Subsection (a). If the department compensates the person, the
person may not receive any other compensation while the person is
assigned to the examination.
(c) Except as provided by this section and Section 401.152,
a department actuary or examiner may not continue to serve in that
capacity if the person directly or indirectly accepts employment or
compensation for a service rendered or to be rendered from any
insurance company for any reason. (V.T.I.C. Art. 1.17 (part).)
Sec. 401.105. OATH OF EXAMINERS AND ASSISTANTS. Before
entering into the duties of appointment as an examiner or assistant
examiner, an individual must take and file in the office of the
secretary of state an oath to:
(1) support the constitution of this state;
(2) faithfully conduct the individual's duties of
office;
(3) make fair and impartial examinations;
(4) not accept, directly or indirectly, as a gift or
emolument any pay for the discharge of the individual's duty, other
than the compensation to which the individual is entitled by law;
and
(5) not reveal the condition of a corporation, firm,
or person or any information secured while examining a corporation,
firm, or person to anyone other than:
(A) the department or an authorized
representative of the department; or
(B) as required when testifying in an
administrative hearing under this code or another insurance law of
this state or in court. (V.T.I.C. Art. 1.18 (part).)
Sec. 401.106. RIGHT OF ACTION ON BOND. If an examiner or
assistant examiner knowingly makes a false report or gives any
information in violation of law that relates to an examination of a
corporation, firm, or person, the corporation, firm, or person has
a right of action on a bond authorized under Chapter 653, Government
Code, for the entity's injuries in a suit brought in the name of the
state at the relation of the entity. (V.T.I.C. Art. 1.18 (part).)
[Sections 401.107-401.150 reserved for expansion]
SUBCHAPTER D. EXAMINATION EXPENSES
Sec. 401.151. EXPENSES OF EXAMINATION OF DOMESTIC INSURER.
(a) A domestic insurer examined on behalf of this state by the
department or under the department's authority shall pay the
expenses of the examination in an amount the commissioner certifies
as just and reasonable.
(b) The department shall collect an assessment at the time
of the examination to cover all expenses attributable directly to
that examination, including:
(1) the salaries and expenses of department employees;
and
(2) expenses described by Section 803.007.
(c) The department shall also impose an annual assessment on
domestic insurers in an amount sufficient to meet all other
expenses and disbursements necessary to comply with the laws of
this state relating to the examination of insurers.
(d) In determining the amount of the assessment under
Subsection (c), the department:
(1) shall consider:
(A) the insurer's annual premium receipts or
admitted assets, or both, that are not attributable to 90 percent of
pension plan contracts as defined by Section 818(a), Internal
Revenue Code of 1986; or
(B) the total amount of the insurer's insurance
in force; and
(2) may not consider insurance premiums for insurance
contracted for by a state or federal governmental entity to provide
welfare benefits to designated welfare recipients or contracted for
in accordance with or in furtherance of Title 2, Human Resources
Code, or the federal Social Security Act (42 U.S.C. Section 301 et
seq.).
(e) The amount of all examination and evaluation fees paid
to the state by an insurer in each taxable year shall be allowed as a
credit on the amount of premium taxes due under this subchapter.
(V.T.I.C. Art. 1.16, Secs. (a), (b) (part); Art. 1.19 (part).)
Sec. 401.152. EXPENSES OF EXAMINATION OF OTHER INSURERS.
(a) An insurer not organized under the laws of this state shall
reimburse the department for the salary and expenses of each
examiner participating in an examination of the insurer and for
other department expenses that are properly allocable to the
department's participation in the examination.
(b) An insurer shall pay the expenses under this section
regardless of whether the examination is made only by the
department or jointly with the insurance supervisory authority of
another state.
(c) The insurer shall pay the expenses directly to the
department on presentation of an itemized written statement from
the commissioner.
(d) The commissioner shall determine the salary of an
examiner participating in an examination of an insurer's books or
records located in another state based on the salary rate
recommended by the National Association of Insurance Commissioners
or the examiner's regular salary rate.
(e) The limitations provided by Sections 803.007(1) and
(2)(B) for a domestic company apply to a foreign insurer. (V.T.I.C.
Art. 1.16, Secs. (b) (part), (f) (part).)
Sec. 401.153. REIMBURSEMENT OF EXPENSES OF CERTAIN PERSONS
OR FIRMS. (a) A person or firm appointed by the department to
examine an insurer or to assist in the insurer's examination shall
be paid for those services at the usual and customary rates charged
for those services. The insurer being examined shall pay the fee
for those services.
(b) The commissioner may disapprove the payment of a fee
under Subsection (a) if the fee is excessive in relation to the
services actually performed. (V.T.I.C. Art. 1.04A (part).)
Sec. 401.154. TAX CREDIT AUTHORIZED. An insurer is
entitled to a credit on the amount of premium or other taxes to be
paid by the insurer for all examination fees paid under Section
401.153. The insurer may take the credit for the taxable year
during which the examination fees are paid and may take the credit
to the same extent the insurer may take a credit for examination
fees paid when a salaried department examiner conducts the
examination. (V.T.I.C. Art. 1.04A (part).)
Sec. 401.155. ADDITIONAL ASSESSMENTS. (a) The department
shall impose additional assessments against insurers on a pro rata
basis as necessary to:
(1) cover all expenses and disbursements required by
law; and
(2) comply with this subchapter and Sections 401.103,
401.104, 401.105, and 401.106.
(b) The department shall use any surplus resulting from an
assessment under this section to reduce the amount of subsequent
assessments. (V.T.I.C. Art. 1.16, Sec. (e).)
Sec. 401.156. DEPOSIT AND USE OF ASSESSMENT AND FEE. (a)
The department shall deposit an assessment or fee collected under
this subchapter to the credit of the Texas Department of Insurance
operating account.
(b) Money deposited under this section shall be used to pay
the salaries and expenses of actuaries and examiners and all other
expenses relating to examinations of insurers. (V.T.I.C. Art.
1.16, Secs. (d) (part), (f) (part).)
[Sections 401.157-401.200 reserved for expansion]
SUBCHAPTER E. CONFIDENTIALITY OF CERTAIN INFORMATION
Sec. 401.201. CONFIDENTIALITY OF EARLY WARNING SYSTEM
INFORMATION. Information relating to the financial solvency of an
organization regulated by the department under this code or another
insurance law of this state that is obtained by the department's
early warning system is confidential and is not subject to
disclosure under Chapter 552, Government Code. (V.T.I.C. Art. 1.15B.)
CHAPTER 402. DISCLOSURE OF MATERIAL TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 402.001. APPLICABILITY OF CHAPTER
Sec. 402.002. GENERAL REPORTING REQUIREMENTS
Sec. 402.003. EXCEPTIONS TO REPORTING REQUIREMENTS
Sec. 402.004. REPORT MADE ON NONCONSOLIDATED BASIS
Sec. 402.005. CONFIDENTIALITY OF REPORT
[Sections 402.006-402.050 reserved for expansion]
SUBCHAPTER B. ACQUISITION AND DISPOSITION OF ASSETS
Sec. 402.051. ACQUISITIONS AND DISPOSITIONS CONSIDERED
MATERIAL
Sec. 402.052. ACQUISITIONS AND DISPOSITIONS SUBJECT TO
CHAPTER
Sec. 402.053. CONTENT OF REPORT CONCERNING MATERIAL
ACQUISITIONS AND DISPOSITIONS
[Sections 402.054-402.100 reserved for expansion]
SUBCHAPTER C. NONRENEWAL, CANCELLATION, AND REVISION
OF CEDED REINSURANCE AGREEMENTS
Sec. 402.101. NONRENEWALS, CANCELLATIONS, AND
REVISIONS CONSIDERED MATERIAL
Sec. 402.102. CONDITIONS UNDER WHICH REPORT CONCERNING
NONRENEWAL, CANCELLATION, OR REVISION
REQUIRED
Sec. 402.103. CONDITIONS UNDER WHICH REPORT CONCERNING
NONRENEWAL, CANCELLATION, OR REVISION
NOT REQUIRED
Sec. 402.104. CONTENT OF REPORT CONCERNING MATERIAL
NONRENEWALS, CANCELLATIONS, AND
REVISIONS
CHAPTER 402. DISCLOSURE OF MATERIAL TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 402.001. APPLICABILITY OF CHAPTER. (a) Except as
provided by Subsection (b), this chapter applies to:
(1) each of the following domestic or commercially
domiciled insurers:
(A) a capital stock insurance company;
(B) a mutual insurance company;
(C) a title insurance company;
(D) a fraternal benefit society;
(E) a Lloyd's plan;
(F) a reciprocal or interinsurance exchange;
(G) a group hospital service corporation or a
nonprofit hospital, medical, or dental service corporation;
(H) a risk retention group; and
(I) a nonprofit legal services corporation; and
(2) a domestic or commercially domiciled health
maintenance organization.
(b) This chapter does not apply to a domestic insurer that
engages in the business of insurance only in this state or to a
domestic health maintenance organization that engages in the
business of a health maintenance organization only in this state
until the insurer or health maintenance organization is authorized
to engage in the business of insurance or the business of a health
maintenance organization, as applicable, in another state.
(V.T.I.C. Art. 21.49-8, Sec. 1.)
Sec. 402.002. GENERAL REPORTING REQUIREMENTS. (a) An
insurer or health maintenance organization shall file with the
department a report, including any necessary exhibit or other
attachment, that discloses:
(1) the material acquisition or disposition of assets;
or
(2) the material nonrenewal, cancellation, or
revision of a ceded reinsurance agreement.
(b) The insurer or health maintenance organization shall
file the report required under Subsection (a) not later than the
15th day after the last day of the calendar month in which any
transaction for which a report is required occurs. (V.T.I.C.
Art. 21.49-8, Secs. 2(a) (part), (b), (c).)
Sec. 402.003. EXCEPTIONS TO REPORTING REQUIREMENTS. An
insurer or health maintenance organization is not required to file
a report under Section 402.002 if:
(1) the acquisition or disposition of assets or the
nonrenewal, cancellation, or revision of a ceded reinsurance
agreement is not material; or
(2) the insurer's or health maintenance organization's
material acquisition or disposition of assets or material
nonrenewal, cancellation, or revision of a ceded reinsurance
agreement has been submitted to the commissioner for review,
approval, or information under another provision of this code or
another law, regulation, or requirement. (V.T.I.C. Art. 21.49-8,
Secs. 2(a) (part), 3(a) (part), 4(a) (part).)
Sec. 402.004. REPORT MADE ON NONCONSOLIDATED BASIS. (a) An
insurer or health maintenance organization shall report each
material acquisition or disposition and each material nonrenewal,
cancellation, or revision of a ceded reinsurance agreement on a
nonconsolidated basis unless the insurer or health maintenance
organization:
(1) is part of a consolidated group of insurers or
health maintenance organizations that uses a pooling arrangement or
a 100 percent reinsurance agreement that affects the solvency and
integrity of the insurer's or health maintenance organization's
reserves; and
(2) has ceded substantially all of the insurer's or
health maintenance organization's direct and assumed business to
the pooling arrangement.
(b) For purposes of Subsection (a), an insurer or health
maintenance organization is considered to have ceded substantially
all of the insurer's or health maintenance organization's direct
and assumed business to a pooling arrangement if:
(1) the insurer or health maintenance organization
has, during a calendar year, less than $1 million total direct and
assumed written premiums that are not subject to a pooling
arrangement; and
(2) the net income of the business that is not subject
to the pooling arrangement represents less than five percent of the
insurer's or health maintenance organization's capital and surplus.
(V.T.I.C. Art. 21.49-8, Secs. 3(e), (f), 4(f), (g).)
Sec. 402.005. CONFIDENTIALITY OF REPORT. (a) A report
obtained by or disclosed to the commissioner under this chapter is
confidential and is not subject to a subpoena, other than a grand
jury subpoena.
(b) The report may not be disclosed by the commissioner, the
National Association of Insurance Commissioners, or any other
person without the prior written consent of the affected insurer or
health maintenance organization unless the commissioner, after
providing notice and an opportunity for a hearing to the affected
insurer or health maintenance organization, determines that the
interest of shareholders, holders of policies or evidences of
coverage, or the public will be served by publishing the report. If
the commissioner makes that determination, the department may:
(1) disclose the report to the public; and
(2) publish any part of the report in a manner the
commissioner considers appropriate.
(c) The report may be disclosed to the insurance department
of another state or another authorized governmental agency without
complying with Subsection (b). (V.T.I.C. Article 21.49-8, Sec.
2(d).)
[Sections 402.006-402.050 reserved for expansion]
SUBCHAPTER B. ACQUISITION AND DISPOSITION OF ASSETS
Sec. 402.051. ACQUISITIONS AND DISPOSITIONS CONSIDERED
MATERIAL. For purposes of this chapter, an acquisition, or the
aggregate of a series of related acquisitions during a 30-day
period, or a disposition, or the aggregate of a series of related
dispositions during a 30-day period, is material if it:
(1) is not recurring;
(2) is not in the ordinary course of business; and
(3) involves more than five percent of the reporting
insurer's or health maintenance organization's total admitted
assets as reported in the insurer's or health maintenance
organization's most recent statutory statement filed with the
department. (V.T.I.C. Art. 21.49-8, Sec. 3(a) (part).)
Sec. 402.052. ACQUISITIONS AND DISPOSITIONS SUBJECT TO
CHAPTER. (a) An asset acquisition subject to this chapter
includes a purchase, lease, exchange, merger, consolidation,
succession, or other acquisition of assets, except the construction
or development of real property by or for the reporting insurer or
health maintenance organization or the acquisition of materials for
that purpose.
(b) An asset disposition subject to this chapter includes a
sale, lease, exchange, merger, consolidation, mortgage,
hypothecation, assignment, whether for the benefit of a creditor or
otherwise, abandonment, destruction, or other disposition of
assets. (V.T.I.C. Art. 21.49-8, Secs. 3(b), (c).)
Sec. 402.053. CONTENT OF REPORT CONCERNING MATERIAL
ACQUISITIONS AND DISPOSITIONS. In a report of a material
acquisition or disposition of assets under Section 402.002, an
insurer or health maintenance organization shall disclose:
(1) the date of the transaction;
(2) the manner of acquisition or disposition;
(3) a description of the assets involved;
(4) the nature and amount of the consideration given
or received;
(5) the purpose of the transaction;
(6) the manner by which the amount of consideration
was determined;
(7) the gain or loss recognized or realized as a result
of the transaction; and
(8) the name of each person from whom the assets were
acquired or to whom they were disposed. (V.T.I.C. Art. 21.49-8,
Sec. 3(d).)
[Sections 402.054-402.100 reserved for expansion]
SUBCHAPTER C. NONRENEWAL, CANCELLATION, AND REVISION
OF CEDED REINSURANCE AGREEMENTS
Sec. 402.101. NONRENEWALS, CANCELLATIONS, AND REVISIONS
CONSIDERED MATERIAL. For purposes of this chapter, a nonrenewal,
cancellation, or revision of a ceded reinsurance agreement is
material if, on an annual basis, as reported in an insurer's or
health maintenance organization's most recent statutory statement
filed with the department, the nonrenewal, cancellation, or
revision affects:
(1) for property and casualty business, including
accident and health business when written as property and casualty
business, more than 50 percent of the insurer's or health
maintenance organization's ceded written premium; or
(2) for life, annuity, and accident and health
business, more than 50 percent of the total reserve credit taken for
business ceded by the insurer or health maintenance organization.
(V.T.I.C. Art. 21.49-8, Sec. 4(a) (part).)
Sec. 402.102. CONDITIONS UNDER WHICH REPORT CONCERNING
NONRENEWAL, CANCELLATION, OR REVISION REQUIRED. Except as
provided by Section 402.103, an insurer or health maintenance
organization shall file a report of a material nonrenewal,
cancellation, or revision of ceded reinsurance under Section
402.002, without regard to which party initiated the nonrenewal,
cancellation, or revision, if:
(1) the entire cession has been canceled, nonrenewed,
or revised, and ceded indemnity and loss adjustment expense
reserves after the nonrenewal, cancellation, or revision represent
less than 50 percent of the comparable reserves that would have been
ceded had the nonrenewal, cancellation, or revision not occurred;
(2) an authorized or accredited reinsurer has been
replaced by an unauthorized reinsurer on an existing cession, and
the result of the revision affects more than 10 percent of the
cession; or
(3) a collateral requirement previously established
for an unauthorized reinsurer has been reduced, in that the
requirement to collateralize incurred but unreported claim
reserves has been waived for at least one unauthorized reinsurer
newly participating in an existing cession, and the result of the
revision affects more than 10 percent of the cession. (V.T.I.C.
Art. 21.49-8, Secs. 4(c), (d).)
Sec. 402.103. CONDITIONS UNDER WHICH REPORT CONCERNING
NONRENEWAL, CANCELLATION, OR REVISION NOT REQUIRED. An insurer or
health maintenance organization is not required to file a report
under Section 402.002 if the insurer's or health maintenance
organization's ceded written premium of the total reserve credit
taken for business ceded is, on an annual basis, less than an amount
equal to:
(1) 10 percent of direct and assumed written premiums;
or
(2) 10 percent of the statutory reserve requirement
before a cession. (V.T.I.C. Art. 21.49-8, Sec. 4(b).)
Sec. 402.104. CONTENT OF REPORT CONCERNING MATERIAL
NONRENEWALS, CANCELLATIONS, AND REVISIONS. In a report of a
material nonrenewal, cancellation, or revision of a ceded
reinsurance agreement under Section 402.002, an insurer or health
maintenance organization shall disclose:
(1) the effective date of the nonrenewal,
cancellation, or revision;
(2) a description of the transaction that identifies
the initiator of the transaction;
(3) the purpose of the transaction; and
(4) if applicable, the identity of each replacement reinsurer. (V.T.I.C. Art. 21.49-8, Sec. 4(e).)
CHAPTER 403. DIVIDENDS
SUBCHAPTER A. PAYMENT OF DIVIDENDS
Sec. 403.001. LIMITATION ON DIVIDENDS
Sec. 403.002. DIVIDENDS TO POLICYHOLDERS IN COMMERCIAL
LINES
[Sections 403.003-403.050 reserved for expansion]
SUBCHAPTER B. ESTIMATE OF PROFITS
Sec. 403.051. ESTIMATE OF PROFITS
Sec. 403.052. ESTIMATE OF PROFITS OF CERTAIN INSURERS
Sec. 403.053. ACQUIRED EARNED SURPLUS
[Sections 403.054-403.100 reserved for expansion]
SUBCHAPTER C. PENALTIES
Sec. 403.101. PENALTIES
Sec. 403.102. PENALTIES FOR CERTAIN INSURERS
CHAPTER 403. DIVIDENDS
SUBCHAPTER A. PAYMENT OF DIVIDENDS
Sec. 403.001. LIMITATION ON DIVIDENDS. An insurer
organized under the laws of this state, including a life, health,
fire, marine, or inland marine insurance company, may not pay a
dividend except from surplus profits arising from the insurer's
business. (V.T.I.C. Arts. 21.31 (part), 21.32 (part).)
Sec. 403.002. DIVIDENDS TO POLICYHOLDERS IN COMMERCIAL
LINES. (a) An insurer may pay to a commercial policyholder or
group of commercial policyholders a dividend that covers more than
one class or line of commercial business only:
(1) after the insurer establishes on an aggregate
basis adequate loss reserves for the classes or lines of commercial
insurance included within the dividend; and
(2) if the insurer has sufficient surplus from which
to pay the dividend.
(b) Not later than the 15th day before an insurer pays a
dividend described by Subsection (a), the insurer shall file with
the department notice of the insurer's intent to pay the dividend.
(c) The classes or lines of commercial business for which
dividends are authorized under this section include any commercial
class or line of commercial business regulated by Title 10 or
Chapter 5.
(d) An insurer's limitation of a dividend on one or more
classes or lines of commercial business to a group of commercial
policyholders is not unfair discrimination if the group:
(1) has clearly identifiable underwriting
characteristics; or
(2) is an association or group of business entities
engaged in similar undertakings. (V.T.I.C. Art. 5.41-2.)
[Sections 403.003-403.050 reserved for expansion]
SUBCHAPTER B. ESTIMATE OF PROFITS
Sec. 403.051. ESTIMATE OF PROFITS. An insurer organized
under the laws of this state may not include the following in the
estimate of the insurer's profits for the purpose of paying
dividends under Section 403.001:
(1) the reserve on all unexpired risks computed in the
manner provided by this code;
(2) the amount of all unpaid losses, whether adjusted
or unadjusted; and
(3) all other debts due and payable, or to become due
and payable, by the insurer. (V.T.I.C. Art. 21.31 (part).)
Sec. 403.052. ESTIMATE OF PROFITS OF CERTAIN INSURERS. A
life, health, fire, marine, or inland marine insurance company
organized under the laws of this state may not include the following
in the estimate of the company's profits for the purpose of paying
dividends under Section 403.001:
(1) the reserve on all unexpired risks computed in the
manner provided by this code;
(2) the amount of all unpaid losses, whether adjusted
or unadjusted;
(3) each amount due the company on bonds, mortgages,
stocks, or book-accounts on which no part of the principal or
interest has been paid during the year preceding the estimate of
profits and for which:
(A) a suit for foreclosure or collection has not
been commenced; or
(B) a judgment obtained in a suit for foreclosure
or collection has remained unsatisfied for a period of more than two
years and no interest has been paid on the judgment; and
(4) if no interest has been paid on a judgment
described by Subdivision (3)(B), any interest that is due or
accrued on the judgment and remains unpaid. (V.T.I.C. Art. 21.32
(part).)
Sec. 403.053. ACQUIRED EARNED SURPLUS. (a) This section
applies only to:
(1) a stock domestic insurance company authorized to
engage in the business of life, accident, or health insurance in
this state;
(2) a stock foreign or alien life, health, or accident
insurance company;
(3) a stock insurance company authorized to engage in
the business of property, casualty, or fire insurance; and
(4) a domestic Lloyd's plan, reciprocal or
interinsurance exchange, or title insurance company.
(b) In determining the amount of "surplus profits arising
from the insurer's business" or "earned surplus" for the purpose of
paying dividends to shareholders, the insurer may include the
acquired earned surplus of an insurance subsidiary acquired by the
insurer to the extent that:
(1) the inclusion is permitted by an order of the
commissioner made in accordance with commissioner rules; and
(2) the earned surplus of the acquired subsidiary on
the date of acquisition that exists on the date of the
commissioner's order is not otherwise reflected in the insurer's
earned surplus. (V.T.I.C. Art. 21.32A.)
[Sections 403.054-403.100 reserved for expansion]
SUBCHAPTER C. PENALTIES
Sec. 403.101. PENALTIES. (a) The department may revoke
the charter of an insurer organized under the laws of this state
that pays a dividend in violation of Sections 403.001 and 403.051.
If the department revokes an insurer's charter under this
subsection, the department shall immediately revoke the insurer's
certificate of authority.
(b) Not later than the 10th day before the date on which the
department intends to revoke an insurer's certificate of authority
under this section, the department shall give the insurer written
notice of the department's intent. The notice must include the
specific reasons for the revocation. (V.T.I.C. Art. 21.31 (part).)
Sec. 403.102. PENALTIES FOR CERTAIN INSURERS. The
department may revoke the charter of a life, health, fire, marine,
or inland marine insurance company organized under the laws of this
state that pays a dividend in violation of Sections 403.001 and
403.052. If the department revokes a company's charter under this
section, the department shall immediately revoke the company's certificate of authority. (V.T.I.C. Art. 21.32 (part).)
CHAPTER 404. FINANCIAL CONDITION
SUBCHAPTER A. HAZARDOUS FINANCIAL CONDITION
Sec. 404.001. DEFINITION
Sec. 404.002. APPLICABILITY OF SUBCHAPTER
Sec. 404.003. ORDER TO REMEDY CONDITION
Sec. 404.004. CONSTRUCTION WITH LAW RELATING TO
CAPITAL AND SURPLUS
Sec. 404.005. STANDARDS AND CRITERIA FOR EARLY WARNING
Sec. 404.006. AGREEMENT WITH ANOTHER JURISDICTION
[Sections 404.007-404.050 reserved for expansion]
SUBCHAPTER B. IMPAIRMENT OF STOCK OR SURPLUS
Sec. 404.051. IMPAIRMENT PROHIBITED
Sec. 404.052. DETERMINATION OF IMPAIRMENT
Sec. 404.053. REMEDY FOR IMPAIRMENT
CHAPTER 404. FINANCIAL CONDITION
SUBCHAPTER A. HAZARDOUS FINANCIAL CONDITION
Sec. 404.001. DEFINITION. In this subchapter, "insurer"
includes:
(1) a capital stock insurance company;
(2) a reciprocal or interinsurance exchange;
(3) a Lloyd's plan;
(4) a fraternal benefit society;
(5) a mutual company, including a mutual assessment
company;
(6) a statewide mutual assessment company;
(7) a local mutual aid association;
(8) a burial association;
(9) a county mutual insurance company;
(10) a farm mutual insurance company;
(11) a fidelity, guaranty, or surety company;
(12) a title insurance company;
(13) a stipulated premium company;
(14) a group hospital service corporation;
(15) a health maintenance organization;
(16) a risk retention group; and
(17) any other organization or person engaged in the
business of insurance. (V.T.I.C. Art. 1.32, Sec. 1(a) (part).)
Sec. 404.002. APPLICABILITY OF SUBCHAPTER. This subchapter
applies to a person or organization engaged in the business of
insurance without regard to whether the person or organization is
listed in Section 404.001, unless another statute specifically
cites this subchapter and exempts the person or organization from
this subchapter. (V.T.I.C. Art. 1.32, Sec. 1(a) (part).)
Sec. 404.003. ORDER TO REMEDY CONDITION. (a) If the
financial condition of an insurer, when reviewed as provided by
Subsection (b), indicates a condition that might make the insurer's
continued operation hazardous to the insurer's policyholders or
creditors or to the public, the commissioner may, after notice and
hearing, order the insurer to take action reasonably necessary to
remedy the condition.
(b) The insurer's financial condition must be reviewed
under Subsection (a) in conjunction with one or more of the
following:
(1) the kinds and nature of risks insured;
(2) the loss experience and ownership of the insurer;
(3) the ratio of total annual premium and net
investment income to commission expenses, general insurance
expenses, policy benefits paid, and required policy reserve
increases;
(4) the insurer's method of operation, affiliations,
or investments;
(5) any contracts that lead or may lead to contingent
liability; or
(6) agreements in respect to guaranty and surety.
(c) In an order issued under Subsection (a), the
commissioner may take any action the commissioner considers
reasonably necessary to remedy the condition described by
Subsection (a), including:
(1) requiring an insurer to:
(A) reduce the total amount of present and
potential liability for policy benefits by reinsurance;
(B) reduce the volume of new business accepted;
(C) suspend or limit writing new business for a
period;
(D) reduce general insurance and commission
expenses by specified methods; or
(E) increase the insurer's capital and surplus by
contribution; or
(2) suspending or canceling the insurer's certificate
of authority.
(d) The commissioner may use the remedies available under
Subsection (c) in conjunction with the provisions of Chapter 83 if
the commissioner determines that the financial condition of the
insurer is hazardous and can be reasonably expected to cause
significant and imminent harm to the insurer's policyholders or the
public. (V.T.I.C. Art. 1.32, Sec. 2.)
Sec. 404.004. CONSTRUCTION WITH LAW RELATING TO CAPITAL AND
SURPLUS. The commissioner's authority under Section 404.003 to
require an increase in an insurer's capital and surplus by
contribution, and any capital and surplus requirements imposed by
the commissioner under that section, prevail over:
(1) the capital and surplus requirements of:
(A) Sections 822.054, 822.201-822.203, 822.205,
822.210-822.212, 841.054, 841.201, 841.204, 841.205, 841.207,
884.206, 884.308, and 884.309; and
(B) Subchapter G, Chapter 841;
(2) any other provision of this code or other law
establishing capital and surplus requirements for insurers; and
(3) any rule adopted under a law described by
Subdivision (1) or (2). (V.T.I.C. Art. 1.32, Sec. 2A.)
Sec. 404.005. STANDARDS AND CRITERIA FOR EARLY
WARNING. (a) The commissioner by rule may:
(1) establish uniform standards and criteria for early
warning that the continued operation of an insurer might be
hazardous to the insurer's policyholders or creditors or to the
public; and
(2) establish standards for evaluating the financial
condition of an insurer.
(b) Standards established by the commissioner under this
section must be consistent with the purposes of Section 404.003.
(V.T.I.C. Art. 1.32, Sec. 3.)
Sec. 404.006. AGREEMENT WITH ANOTHER JURISDICTION. The
commissioner may enter into an agreement with the insurance
regulatory authority of another jurisdiction concerning the
management, volume of business, expenses of operation, plans for
reinsurance, rehabilitation, or reorganization, and method of
operations of, and type of risks to be insured by, an insurer that
is:
(1) licensed in the other jurisdiction; and
(2) considered to be in a hazardous financial
condition or in need of a specific remedy that may be imposed by the
commissioner and the insurance regulatory authority of the other
jurisdiction. (V.T.I.C. Art. 1.32, Sec. 4.)
[Sections 404.007-404.050 reserved for expansion]
SUBCHAPTER B. IMPAIRMENT OF STOCK OR SURPLUS
Sec. 404.051. IMPAIRMENT PROHIBITED. (a) The impairment
of the capital stock of a stock insurance company is prohibited.
(b) Impairment of the following surpluses in excess of that
provided by Section 404.053 is prohibited:
(1) the surplus of a stock insurance company; or
(2) the minimum required aggregate surplus of a:
(A) mutual company;
(B) Lloyd's plan; or
(C) reciprocal or interinsurance exchange.
(V.T.I.C. Art. 1.10, Sec. 5 (part).)
Sec. 404.052. DETERMINATION OF IMPAIRMENT. (a) When
determining under this subchapter whether the surplus or the
minimum required aggregate surplus of an insurer is impaired, the
commissioner shall charge against the insurer:
(1) the reinsurance reserve required by the laws of
this state; and
(2) all other debts and claims against the insurer.
(b) This section does not apply to a life insurance company.
(V.T.I.C. Art. 1.10, Sec. 5 (part).)
Sec. 404.053. REMEDY FOR IMPAIRMENT. (a) The
commissioner shall order an insurer to remedy an impairment of the
insurer's surplus, aggregate surplus, or aggregate of guaranty fund
and surplus, as applicable, by bringing the surplus to an
acceptable level specified by the commissioner, or to cease
engaging in business in this state, if the commissioner determines
that:
(1) the surplus required by Section 822.054, 822.202,
822.203, 822.205, 822.210, 822.211, or 822.212 of a stock insurance
company engaged in the kind of insurance business described by the
company's certificate of authority:
(A) is impaired by more than 50 percent; or
(B) is less than the minimum level of surplus
required by risk-based capital and surplus rules adopted by the
commissioner; or
(2) the required aggregate of guaranty fund and
surplus of a Lloyd's plan, or the required aggregate surplus of a
reciprocal or interinsurance exchange or of a mutual company, other
than a life insurance company, engaged in the kind of insurance
business described by the insurer's certificate of authority:
(A) is impaired by more than 25 percent; or
(B) is less than the minimum level of surplus
required by risk-based capital and surplus rules adopted by the
commissioner.
(b) After issuing an order described by Subsection (a), the
commissioner shall immediately institute any proceeding necessary
to determine what further actions the commissioner will take in
relation to the matter. (V.T.I.C. Art. 1.10, Sec. 5 (part).)
[Chapters 405-420 reserved for expansion]
SUBTITLE B. RESERVES AND INVESTMENTS
CHAPTER 421. RESERVES IN GENERAL
Sec. 421.001. RESERVES REQUIRED
Sec. 421.002. CERTIFICATES FROM OTHER STATES
CHAPTER 421. RESERVES IN GENERAL
Sec. 421.001. RESERVES REQUIRED. (a) An insurer shall
maintain reserves in an amount estimated in the aggregate to
provide for the payment of all losses or claims for which the
insurer may be liable and that are:
(1) incurred on or before the date of statement,
whether reported or unreported; and
(2) unpaid as of the date of statement.
(b) In addition to the reserves required by Subsection (a),
an insurer shall maintain reserves in an amount estimated to
provide for the expenses of adjustment or settlement of the losses
or claims described by that subsection.
(c) The commissioner shall adopt each current formula
recommended by the National Association of Insurance Commissioners
for establishing reserves for each line of insurance. Each insurer
writing a line of insurance to which a formula adopted under this
subsection applies shall establish reserves in compliance with that
formula. (V.T.I.C. Art. 21.39.)
Sec. 421.002. CERTIFICATES FROM OTHER STATES. In
computing the reserve liability of an insurer, the commissioner may
accept the certificate of the officer of another state charged with
the duty of supervising the insurer if:
(1) the insurer is organized under the laws of the
other state; and
(2) the certificate shows that the reserve liability
has been computed in accordance with Section 421.001. (V.T.I.C. Art. 21.40.)
CHAPTER 422. ASSET PROTECTION ACT
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 422.001. SHORT TITLE
Sec. 422.002. PURPOSES
Sec. 422.003. DEFINITIONS
Sec. 422.004. APPLICABILITY OF CHAPTER
Sec. 422.005. EXEMPTIONS
Sec. 422.006. CONFLICT WITH OTHER LAW
[Sections 422.007-422.050 reserved for expansion]
SUBCHAPTER B. ENCUMBRANCE OF ASSETS
Sec. 422.051. RESTRICTIONS ON ENCUMBRANCE OF ASSETS
Sec. 422.052. REPORT TO COMMISSIONER
Sec. 422.053. CLAIMANT LIEN ON CERTAIN ASSETS
Sec. 422.054. PREFERENTIAL CLAIMS ON LIQUIDATION
CHAPTER 422. ASSET PROTECTION ACT
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 422.001. SHORT TITLE. This chapter may be cited as
the Asset Protection Act. (V.T.I.C. Art. 21.39-A, Sec. 1.)
Sec. 422.002. PURPOSES. (a) The purposes of this chapter
are to:
(1) require an insurer to maintain unencumbered assets
in an amount equal to the insurer's reserve liabilities;
(2) provide preferential claims against assets in
favor of an owner, beneficiary, assignee, certificate holder, or
third-party beneficiary of an insurance policy; and
(3) prevent the pledge or encumbrance of assets in
excess of certain amounts without a prior written order of the
commissioner.
(b) This chapter and the powers granted and functions
authorized by this chapter shall be exercised to accomplish the
purposes of this chapter. (V.T.I.C. Art. 21.39-A, Secs. 2, 6
(part).)
Sec. 422.003. DEFINITIONS. In this chapter:
(1) "Asset" means any property in which an insurer
owns a legal or equitable interest.
(2) "Claimant" means an owner, beneficiary, assignee,
certificate holder, or third-party beneficiary of an insurance
benefit or right arising from the coverage of an insurance policy to
which this chapter applies.
(3) "Reserve assets" means the assets of an insurer
that are authorized investments for policy reserves under this
code.
(4) "Reserve liabilities" means the liabilities that
an insurer is required under this code to establish for all of the
insurer's outstanding insurance policies. (V.T.I.C. Art. 21.39-A,
Sec. 4.)
Sec. 422.004. APPLICABILITY OF CHAPTER. This chapter
applies to:
(1) the following domestic insurers:
(A) a stock life, health, or accident insurance
company;
(B) a mutual life, health, or accident insurance
company;
(C) a stock fire or casualty insurance company;
(D) a mutual fire or casualty insurance company;
(E) a title insurance company;
(F) a mutual assessment company;
(G) a local mutual aid association;
(H) a local mutual burial association;
(I) a statewide mutual assessment company;
(J) a stipulated premium company;
(K) a fraternal benefit society;
(L) a group hospital service corporation;
(M) a county mutual insurance company;
(N) a Lloyd's plan;
(O) a reciprocal or interinsurance exchange;
(P) a farm mutual insurance company; and
(Q) a mortgage guaranty insurer; and
(2) all kinds of insurance written by an insurer to
which this chapter applies. (V.T.I.C. Art. 21.39-A, Sec. 3
(part).)
Sec. 422.005. EXEMPTIONS. (a) This chapter does not
apply to:
(1) variable contracts for which separate accounts are
required to be maintained;
(2) a reinsurance agreement or any trust account
related to the reinsurance agreement if the agreement and trust
account meet the requirements of Chapter 492 or 493;
(3) an assessment-as-needed company or insurance
coverage written by an assessment-as-needed company;
(4) an insurer while:
(A) the insurer is subject to a conservatorship
order issued by the commissioner; or
(B) a court-appointed receiver is in charge of
the insurer's affairs; or
(5) an insurer's reserve assets that are held,
deposited, pledged, or otherwise encumbered to secure, offset,
protect, or meet the insurer's reserve liabilities established in a
reinsurance agreement under which the insurer reinsures the
insurance policy liabilities of a ceding insurer if:
(A) the ceding insurer and the reinsurer are
authorized to engage in business in this state; and
(B) in accordance with a written agreement
between the ceding insurer and the reinsurer, reserve assets
substantially equal to the reserve liabilities the reinsurer must
establish on the reinsured business are:
(i) deposited by or withheld from the
reinsurer and held in the custody of the ceding insurer, or
deposited and held in a trust account with a state or national bank
domiciled in this state, as security for the payment of the
reinsurer's obligations under the reinsurance agreement;
(ii) held subject to withdrawal by the
ceding insurer; and
(iii) held under the separate or joint
control of the ceding insurer.
(b) Notwithstanding this section, the commissioner may
examine any asset, reinsurance agreement, or deposit arrangement
described by Subsection (a)(5) at any time, in accordance with the
commissioner's authority under this code to examine an insurer.
(V.T.I.C. Art. 21.39-A, Secs. 3 (part), 3A.)
Sec. 422.006. CONFLICT WITH OTHER LAW. If this chapter
conflicts with another law relating to the subject matter or
application of this chapter, this chapter controls. (V.T.I.C.
Art. 21.39-A, Sec. 6 (part).)
[Sections 422.007-422.050 reserved for expansion]
SUBCHAPTER B. ENCUMBRANCE OF ASSETS
Sec. 422.051. RESTRICTIONS ON ENCUMBRANCE OF
ASSETS. (a) An insurer shall at all times maintain unencumbered
assets in an amount equal to the insurer's reserve liabilities.
(b) An insurer may not pledge or otherwise encumber:
(1) the insurer's assets in an amount that exceeds the
amount of the insurer's capital and surplus; or
(2) more than 10 percent of the insurer's reserve
assets.
(c) Notwithstanding any other provision of this section, on
application made to the commissioner, the commissioner may issue a
written order approving the pledge or encumbrance of an insurer's
asset in any amount if the commissioner determines that the pledge
or encumbrance will not adversely affect the insurer's solvency.
(V.T.I.C. Art. 21.39-A, Sec. 5 (part).)
Sec. 422.052. REPORT TO COMMISSIONER. (a) Not later than
the 10th day after the date an insurer pledges or otherwise
encumbers an asset, the insurer shall report in writing to the
commissioner:
(1) the amount and identity of the pledged or
encumbered asset; and
(2) the terms of the transaction.
(b) Annually, or more often as required by the commissioner,
the insurer shall file with the commissioner a statement sworn to by
the insurer's chief executive officer that:
(1) title to assets that equal the amount of the
insurer's reserve liabilities and that are not pledged or otherwise
encumbered is vested in the insurer;
(2) the only assets of the insurer that are pledged or
otherwise encumbered are those identified and reported in the sworn
statement, and no other assets of the insurer are pledged or
otherwise encumbered; and
(3) the terms of the transaction pledging or otherwise
encumbering the assets are those reported in the sworn statement.
(V.T.I.C. Art. 21.39-A, Sec. 5 (part).)
Sec. 422.053. CLAIMANT LIEN ON CERTAIN ASSETS. (a) A
person, corporation, association, or other legal entity that
accepts as security for an insurer's debt or other obligation a
pledge or encumbrance of an asset of the insurer that is not made in
accordance with this chapter is considered to have accepted the
asset subject to a superior, preferential, and automatically
perfected lien in favor of a claimant of the insurer.
(b) Subsection (a) does not apply to an asset of an insurer
in conservatorship or receivership if the commissioner in the
conservatorship proceeding, or the court in which the receivership
is pending, approves the pledge or encumbrance of the asset.
(V.T.I.C. Art. 21.39-A, Sec. 5 (part).)
Sec. 422.054. PREFERENTIAL CLAIMS ON LIQUIDATION. If an
insurer is involuntarily or voluntarily liquidated, a claimant of
the insurer has a prior and preferential claim against all assets of
the insurer other than the assets that have been pledged or
encumbered in accordance with this chapter. All claimants have
equal status, and their prior and preferential claim is superior to
any claim or cause of action against the insurer by any other
person, corporation, association, or legal entity. (V.T.I.C. Art. 21.39-A, Sec. 5 (part).)
CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 423.001. APPLICABILITY OF CHAPTER
Sec. 423.002. AMBIGUITIES AND CONFLICTS WITH OTHER LAW
Sec. 423.003. RULES
[Sections 423.004-423.050 reserved for expansion]
SUBCHAPTER B. TRANSACTIONS WITH MONEY
Sec. 423.051. DEPOSIT AND INVESTMENT OF MONEY
Sec. 423.052. MONEY HELD IN POOLING ACCOUNT
Sec. 423.053. AUTHORITY TO DEPOSIT MONEY IN ACCOUNT OF
REINSURER
[Sections 423.054-423.100 reserved for expansion]
SUBCHAPTER C. TRANSACTIONS WITH OTHER ASSETS
Sec. 423.101. DEFINITION
Sec. 423.102. DEPOSIT AND HOLDING OF SECURITIES
Sec. 423.103. SECURITIES HELD UNDER CUSTODIAL OR TRUST
AGREEMENT
Sec. 423.104. PROOF OF OWNERSHIP OF SECURITIES
Sec. 423.105. MANDATORY DEPOSIT OF SECURITIES;
COMMISSIONER CONTROL
Sec. 423.106. REQUIRED EVIDENCE FOR SECURITIES
Sec. 423.107. ASSETS DEPOSITED WITH CLEARING
CORPORATION
Sec. 423.108. LIMITATION ON ASSETS DEPOSITED WITH
CLEARING CORPORATION
CHAPTER 423. TRANSACTIONS WITH MONEY AND OTHER ASSETS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 423.001. APPLICABILITY OF CHAPTER. (a) This chapter
applies to a domestic insurer regulated under this code, including:
(1) a stock company;
(2) a reciprocal or interinsurance exchange;
(3) a Lloyd's plan;
(4) a fraternal benefit society;
(5) a stipulated premium company;
(6) a mutual insurance company of any kind, including:
(A) a statewide mutual assessment company;
(B) a local mutual aid association;
(C) a burial association;
(D) a county mutual insurance company; and
(E) a farm mutual insurance company; and
(7) any other organization or person engaged in the
business of insurance.
(b) A provision of this code limiting the regulation of an
insurer under this code does not limit the application of this
chapter, except that this chapter does not apply to an insurer that
is exempted from its application by another statute that cites this
chapter. (V.T.I.C. Art. 21.39-B, Sec. 4 (part).)
Sec. 423.002. AMBIGUITIES AND CONFLICTS WITH OTHER
LAW. This chapter controls to the extent of an ambiguity or a
conflict between this chapter and another provision of this code.
(V.T.I.C. Art. 21.39-B, Sec. 4 (part).)
Sec. 423.003. RULES. The commissioner may adopt rules
necessary to implement this chapter. (V.T.I.C. Art. 21.39-B, Sec.
3.)
[Sections 423.004-423.050 reserved for expansion]
SUBCHAPTER B. TRANSACTIONS WITH MONEY
Sec. 423.051. DEPOSIT AND INVESTMENT OF MONEY. A director,
member of a committee, officer, or clerk of a domestic insurer who
has the duty to handle or invest the insurer's money may not:
(1) invest the money other than in the corporate name
of the insurer, except as provided by Section 423.102;
(2) deposit the money unless the deposit is:
(A) in the corporate name of the insurer;
(B) in a pooling account with one or more
affiliates, as described by Section 823.003; or
(C) in accordance with a reinsurance agreement;
(3) borrow the insurer's money;
(4) have any interest in a loan, pledge, security, or
property of the insurer, except as a stockholder; or
(5) take or receive for the individual's use a fee,
brokerage, commission, gift, or other consideration for, or on
account of, a loan made by or on behalf of the insurer. (V.T.I.C.
Art. 21.39-B, Sec. 1 (part).)
Sec. 423.052. MONEY HELD IN POOLING ACCOUNT. (a) Only a
domestic insurer and an affiliate, as described by Section 823.003,
may hold money in a pooling account.
(b) The accounting and operating records and books of the
insurer and affiliate must be adequately detailed to identify
specific insurance policies and policyholders with the money from
premiums received by the insurer that issues the policies.
(V.T.I.C. Art. 21.39-B, Sec. 2 (part).)
Sec. 423.053. AUTHORITY TO DEPOSIT MONEY IN ACCOUNT OF
REINSURER. A reinsurance agreement between a domestic insurer and
an affiliate, as described by Section 823.003, must specifically
authorize the deposit of money from premiums to the account of the
affiliate that assumes the reinsurance. (V.T.I.C. Art. 21.39-B,
Sec. 2 (part).)
[Sections 423.054-423.100 reserved for expansion]
SUBCHAPTER C. TRANSACTIONS WITH OTHER ASSETS
Sec. 423.101. DEFINITION. In this subchapter, "clearing
corporation" means:
(1) a clearing corporation as defined by Section
8.102(a), Business & Commerce Code; or
(2) a clearance system that:
(A) is organized or operating under the laws of
at least one foreign country;
(B) provides for book-entry settlement and
custody of internationally traded securities; and
(C) has been organized and in operation for not
less than 15 consecutive years. (V.T.I.C. Art. 21.39-B, Sec.
5(b).)
Sec. 423.102. DEPOSIT AND HOLDING OF SECURITIES. (a) A
domestic insurer that has securities held in or purchased for the
insurer's general account or separate accounts may deposit the
securities or arrange through an agent, broker, or dealer for
deposit of the securities with a clearing corporation or in the
Federal Reserve book-entry system.
(b) If securities are deposited directly with a clearing
corporation or deposited indirectly through a participating
custodian bank, certificates representing securities of the same
class of the same issuer may be merged and held in bulk, in the name
of a nominee of the clearing corporation, with any other securities
deposited with the clearing corporation by any person, regardless
of the ownership of the securities.
(c) Certificates under Subsection (b) that represent
securities of small denominations may be merged into one or more
certificates of larger denominations.
(d) The records of an agent, broker, dealer, or member bank
through which an insurer holds securities in the Federal Reserve
book-entry system and the records of a custodian bank through which
an insurer holds securities with a clearing corporation must show
that the securities are held for the insurer and show the accounts
for which the securities are held.
(e) A bank must enter into a custodial agreement with an
insurer to be eligible to act as a participating custodian bank for
the insurer under this section. (V.T.I.C. Art. 21.39-B, Sec. 5(a)
(part).)
Sec. 423.103. SECURITIES HELD UNDER CUSTODIAL OR TRUST
AGREEMENT. A domestic insurer's securities that are held under a
custodial agreement or trust agreement with a bank, Federal Home
Loan Bank, or trust company may be issued in the name of a nominee of
the bank, Federal Home Loan Bank, or trust company only if the bank,
Federal Home Loan Bank, or trust company:
(1) has corporate trust powers;
(2) is authorized to act as a custodian or trustee;
(3) is organized under the laws of the United States or
any state of the United States; and
(4) meets one of the following requirements:
(A) is a member of the Federal Reserve System;
(B) is a member of or is eligible to receive
deposits that are insured by the Federal Deposit Insurance
Corporation;
(C) maintains an account with a Federal Reserve
Bank and is subject to supervision and examination by the Board of
Governors of the Federal Reserve System; or
(D) is subject to supervision and examination by
the Federal Housing Finance Board. (V.T.I.C. Art. 21.39-B, Sec. 1
(part).)
Sec. 423.104. PROOF OF OWNERSHIP OF SECURITIES. (a) A
domestic insurer may demonstrate ownership of a security through a
definitive certificate or in accordance with rules adopted under
this section.
(b) The commissioner shall adopt rules under which a
domestic insurer may demonstrate ownership of an uncertificated
security, as defined by Section 8.102(a), Business & Commerce Code,
consistent with common practices of securities exchanges and
markets. The rules must establish:
(1) standards for the types of uncertificated
securities the insurer may hold;
(2) the manner in which the insurer may demonstrate
ownership of the security; and
(3) adequate financial safeguards relating to the
ownership of uncertificated securities. (V.T.I.C. Art. 21.39-B,
Secs. 5(a) (part), 6.)
Sec. 423.105. MANDATORY DEPOSIT OF SECURITIES;
COMMISSIONER CONTROL. (a) An insurer that is required to deposit
securities as a condition of engaging in the business of insurance
in this state may deposit the securities with a clearing
corporation or in the Federal Reserve book-entry system.
(b) Securities under Subsection (a) are under the
commissioner's control and may not be withdrawn by the insurer
without the commissioner's approval. (V.T.I.C. Art. 21.39-B, Sec.
5(c) (part).)
Sec. 423.106. REQUIRED EVIDENCE FOR SECURITIES. (a) An
insurer that deposits securities under Section 423.105 shall
provide evidence to the commissioner to establish that:
(1) the securities are recorded in an account in the
name of:
(A) the participating custodian bank or member
bank through which the insurer deposits the securities with a
clearing corporation or in the Federal Reserve book-entry system;
or
(B) the insurer, if the insurer makes the deposit
directly with the clearing corporation as a direct participant; and
(2) the records of the participating custodian bank,
direct participant, or member bank and of the clearing corporation
show that the securities are under the commissioner's control.
(b) Evidence under Subsection (a)(1) must be issued, as
applicable, by:
(1) the participating custodian bank;
(2) the member bank; or
(3) the insurer, when the insurer makes the deposit
directly with the clearing corporation as a direct participant.
(V.T.I.C. Art. 21.39-B, Sec. 5(c) (part).)
Sec. 423.107. ASSETS DEPOSITED WITH CLEARING CORPORATION.
A domestic insurer may deposit assets with a clearing corporation
only if:
(1) the insurer is a member of an insurance holding
company system that has assets of at least $5 billion, as shown by
annual statements of member insurers for the preceding year;
(2) the insurer uses the clearing corporation only as
a depository for investments in internationally traded securities;
(3) the insurer's total investment in internationally
traded securities under Subdivision (2) does not exceed the
insurer's policyholders' surplus; and
(4) the insurer does not use securities deposited with
the clearing corporation as security for reinsurance. (V.T.I.C.
Art. 21.39-B, Sec. 5(e).)
Sec. 423.108. LIMITATION ON ASSETS DEPOSITED WITH CLEARING
CORPORATION. The commissioner by rule may adopt a reasonable limit
on the percentage of a domestic insurer's assets that may be
deposited with a clearing corporation. The limit may not exceed
five percent of the insurer's total assets, as shown by the
insurer's annual statement filed with the department for the year
preceding the year for which the limit is adopted. (V.T.I.C. Art. 21.39-B, Sec. 5(d).)
CHAPTER 424. INVESTMENTS FOR CERTAIN INSURERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 424.001. DEFINITIONS
Sec. 424.002. INAPPLICABILITY OF CERTAIN LAW
[Sections 424.003-424.050 reserved for expansion]
SUBCHAPTER B. INVESTMENT OF FUNDS IN EXCESS
OF MINIMUM CAPITAL AND SURPLUS
Sec. 424.051. GENERAL INVESTMENT AUTHORITY SPECIFIED
BY LAW
Sec. 424.052. ADDITIONAL GENERAL INVESTMENT AUTHORITY
Sec. 424.053. LIMITATION AS TO SINGLE ISSUER OR
BORROWER
Sec. 424.054. APPLICABILITY OF PERCENTAGE
AUTHORIZATIONS AND LIMITATIONS
Sec. 424.055. WAIVER BY COMMISSIONER OF QUANTITATIVE
LIMITATIONS
Sec. 424.056. WRITTEN INVESTMENT PLAN
Sec. 424.057. INVESTMENT RECORDS
Sec. 424.058. AUTHORIZED INVESTMENTS: FORM OF MINIMUM
CAPITAL AND SURPLUS
Sec. 424.059. AUTHORIZED INVESTMENTS: GOVERNMENT
OBLIGATIONS
Sec. 424.060. AUTHORIZED INVESTMENTS: STOCK OF
NATIONAL OR STATE BANK
Sec. 424.061. AUTHORIZED INVESTMENTS: DEPOSITS IN
CERTAIN FINANCIAL INSTITUTIONS
Sec. 424.062. AUTHORIZED INVESTMENTS: CERTAIN
OBLIGATIONS OF PARTNERSHIP OR
CORPORATION
Sec. 424.063. AUTHORIZED INVESTMENTS: MUTUAL FUNDS
Sec. 424.064. AUTHORIZED INVESTMENTS: REAL PROPERTY
Sec. 424.065. ACTING AS REAL ESTATE BROKER OR
SALESPERSON PROHIBITED
Sec. 424.066. AUTHORIZED INVESTMENTS: OBLIGATIONS
SECURED BY REAL PROPERTY LOANS
Sec. 424.067. AUTHORIZED INVESTMENTS: TRANSPORTATION
EQUIPMENT
Sec. 424.068. AUTHORIZED INVESTMENTS: INVESTMENT IN
FOREIGN JURISDICTION
Sec. 424.069. AUTHORIZED INVESTMENTS: CERTAIN LOANS
Sec. 424.070. AUTHORIZED INVESTMENTS: OBLIGATIONS OF
LOCAL GOVERNMENTAL ENTITIES
Sec. 424.071. AUTHORIZED INVESTMENTS: THE UNIVERSITY
OF TEXAS
Sec. 424.072. AUTHORIZED INVESTMENTS: BONDS ISSUED,
ASSUMED, OR GUARANTEED IN
INTERNATIONAL MARKET
Sec. 424.073. AUTHORIZED INVESTMENTS: INSURER ENGAGED
IN BUSINESS IN FOREIGN COUNTRY
Sec. 424.074. OTHER SPECIFICALLY AUTHORIZED
INVESTMENTS
[Sections 424.075-424.100 reserved for expansion]
SUBCHAPTER C. INVESTMENT POOLS
Sec. 424.101. DEFINITIONS
Sec. 424.102. AUTHORITY TO INVEST IN POOL
Sec. 424.103. INVESTMENT POOL REQUIREMENTS AND
QUALIFICATIONS
Sec. 424.104. AUTHORIZED INVESTMENTS FOR SHORT-TERM
INVESTMENT POOL
Sec. 424.105. SHORT-TERM INVESTMENT POOL: CERTAIN
SHORT-TERM OBLIGATIONS
Sec. 424.106. SHORT-TERM INVESTMENT POOL: CERTAIN
MONEY MARKET FUNDS
Sec. 424.107. AUTHORIZED INVESTMENTS FOR AUTHORIZED
INVESTMENT POOL; LIMITATION
Sec. 424.108. GENERAL INSURER INVESTMENT LIMITATIONS
Sec. 424.109. DESIGNATION OF POOL MANAGER;
QUALIFICATIONS
Sec. 424.110. POOL MANAGER TO MAINTAIN ASSETS; CUSTODY
AGREEMENT
Sec. 424.111. POOLING AGREEMENT PROVISIONS
Sec. 424.112. WITHDRAWALS AND DISTRIBUTIONS
Sec. 424.113. INVESTMENT POOL RECORDS
Sec. 424.114. INSPECTION OF RECORDS
Sec. 424.115. REPORTS OF TRANSACTIONS BETWEEN POOL AND
PARTICIPANT
[Sections 424.116-424.150 reserved for expansion]
SUBCHAPTER D. DOLLAR ROLL, REPURCHASE, REVERSE REPURCHASE,
AND SECURITIES LENDING TRANSACTIONS
Sec. 424.151. DEFINITIONS
Sec. 424.152. TRANSACTIONS AUTHORIZED
Sec. 424.153. PERIOD OF TRANSACTION
Sec. 424.154. CASH REQUIREMENTS
Sec. 424.155. COLLATERAL REQUIREMENTS
Sec. 424.156. PERCENTAGE LIMITATIONS
Sec. 424.157. RULES
[Sections 424.158-424.200 reserved for expansion]
SUBCHAPTER E. RISK CONTROL TRANSACTIONS
Sec. 424.201. DEFINITIONS
Sec. 424.202. RISK CONTROL TRANSACTIONS AUTHORIZED
Sec. 424.203. NOTICE OF INTENT TO ENGAGE IN RISK
CONTROL TRANSACTIONS REQUIRED
Sec. 424.204. TRADING REQUIREMENTS FOR DERIVATIVE
INSTRUMENTS
Sec. 424.205. DERIVATIVE USE PLAN
Sec. 424.206. INTERNAL CONTROL PROCEDURES
Sec. 424.207. ABILITY TO DEMONSTRATE HEDGING
CHARACTERISTICS AND EFFECTIVENESS
Sec. 424.208. OFFSETTING TRANSACTIONS
Sec. 424.209. INCLUSION OF COUNTERPARTY EXPOSURE
AMOUNTS
Sec. 424.210. OVERSIGHT BY COMMISSIONER
Sec. 424.211. AUTHORITY TO ENTER INTO HEDGING
TRANSACTION
Sec. 424.212. AUTHORITY TO ENTER INTO INCOME
GENERATION TRANSACTION
Sec. 424.213. LIMITATION ON SALE OF CALL OPTION ON
ASSETS
Sec. 424.214. LIMITATION ON SALE OF PUT OPTION ON
ASSETS
Sec. 424.215. LIMITATION ON SALE OF CALL OPTION ON
DERIVATIVE INSTRUMENT
Sec. 424.216. LIMITATION ON SALE OF CAP OR FLOOR
Sec. 424.217. AUTHORITY TO ENTER REPLICATION
TRANSACTION
Sec. 424.218. RULES
CHAPTER 424. INVESTMENTS FOR CERTAIN INSURERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 424.001. DEFINITIONS. In this chapter:
(1) "Insurer" means any insurer organized under the
laws of this state other than an insurer writing life, health, and
accident insurance.
(2) "Minimum capital and surplus" means the minimum
amount of capital stock and minimum amount of surplus required of an
insurer under Section 822.054 or 822.210.
(3) "Securities valuation office" means the
Securities Valuation Office of the National Association of
Insurance Commissioners. (V.T.I.C. Art. 2.10, Sec. (e) (part);
Art. 2.10-5, Sec. 1(10).)
Sec. 424.002. INAPPLICABILITY OF CERTAIN LAW. The
definition of "state" assigned by Section 311.005, Government Code,
does not apply to this chapter. (New.)
[Sections 424.003-424.050 reserved for expansion]
SUBCHAPTER B. INVESTMENT OF FUNDS IN EXCESS
OF MINIMUM CAPITAL AND SURPLUS
Sec. 424.051. GENERAL INVESTMENT AUTHORITY SPECIFIED BY
LAW. An insurer may not invest the insurer's funds in excess of
minimum capital and surplus, except that an insurer may invest as
otherwise authorized by this code. (V.T.I.C. Art. 2.10, Sec. (e)
(part).)
Sec. 424.052. ADDITIONAL GENERAL INVESTMENT AUTHORITY. An
insurer may make investments that are not otherwise authorized by
this chapter or otherwise authorized by this code for the insurer
if:
(1) the investment is not specifically prohibited by
law and does not exceed the limits prescribed by this code;
(2) the amount of a single investment under this
section does not exceed five percent of the insurer's capital and
surplus in excess of the insurer's minimum capital and surplus; and
(3) the aggregate amount of all investments made by
the insurer under this section does not exceed five percent of the
insurer's assets. (V.T.I.C. Art. 2.10-1, Sec. (2).)
Sec. 424.053. LIMITATION AS TO SINGLE ISSUER OR BORROWER.
(a) Notwithstanding Sections 424.051, 424.056-424.071, and
424.074, the aggregate amount of an insurer's investments in all or
any type of securities, loans, obligations, or evidences of
indebtedness of a single issuer or borrower, other than investments
described by Subsection (c), may not exceed five percent of the
insurer's total assets.
(b) For purposes of this section, a single issuer or
borrower includes:
(1) the issuer's or borrower's majority-owned
subsidiaries;
(2) the issuer's or borrower's parent; or
(3) the majority-owned subsidiaries of the issuer's or
borrower's parent.
(c) This section does not apply to:
(1) an authorized investment that:
(A) is a direct obligation of or guaranteed by
the full faith and credit of the United States, this state, or a
political subdivision of this state; or
(B) is insured by an agency of the United States
or this state; or
(2) an investment described by Section 424.061 or
424.063. (V.T.I.C. Art. 2.10, Sec. (g) (part).)
Sec. 424.054. APPLICABILITY OF PERCENTAGE AUTHORIZATIONS
AND LIMITATIONS. (a) The percentage authorizations and
limitations established by Sections 424.051, 424.053-424.071, and
424.074 apply only at the time an investment is originally acquired
or a transaction is entered into and do not apply to the insurer or
the investment or transaction after that time.
(b) An investment, once qualified under a law described by
Subsection (a), remains qualified notwithstanding any refinancing,
restructuring, or modification of the investment, except that an
insurer may not refinance, restructure, or modify an investment
solely to circumvent the requirements or limitations of a law
described by Subsection (a). (V.T.I.C. Art. 2.10, Sec. (f).)
Sec. 424.055. WAIVER BY COMMISSIONER OF QUANTITATIVE
LIMITATIONS. (a) Notwithstanding Sections 424.051,
424.056-424.071, and 424.074, the commissioner may waive a
quantitative limitation on any investment authorized by those laws
if:
(1) the insurer seeks the waiver before making the
investment;
(2) a hearing is held to determine whether the waiver
should be granted;
(3) the applicant seeking the waiver establishes that
unreasonable or unnecessary loss or harm will result to the insurer
if the commissioner denies the waiver;
(4) the excess investment will not have a material
adverse effect on the insurer; and
(5) the size of the investment is reasonable in
relation to the insurer's assets, capital, surplus, and
liabilities.
(b) The commissioner's waiver must be in writing and may
treat the resulting excess investment as a nonadmitted asset.
(V.T.I.C. Art. 2.10, Sec. (g) (part).)
Sec. 424.056. WRITTEN INVESTMENT PLAN. (a) Each insurer's
board of directors, or, if the insurer does not have a board of
directors, the corresponding authority designated by the insurer's
charter, bylaws, or plan of operation, shall adopt a written
investment plan consistent with the requirements of:
(1) this chapter;
(2) Sections 822.204, 822.209, 861.258, and 862.002;
and
(3) other statutes governing investments by the
insurer.
(b) The investment plan must:
(1) specify the diversification of the insurer's
investments designed to reduce the risk of large losses, by:
(A) broad categories, such as bonds and real
property loans;
(B) kinds, such as government obligations,
obligations of business entities, mortgage-backed securities, and
real property loans on office, retail, industrial, or residential
properties;
(C) quality;
(D) maturity;
(E) type of industry; and
(F) geographical areas, as to both domestic and
foreign investments;
(2) balance safety of principal with yield and growth;
(3) seek a reasonable relationship of assets and
liabilities as to term and nature; and
(4) be appropriate considering the capital and surplus
and the business conducted by the insurer.
(c) At least annually, the board of directors or
corresponding authority shall review the adequacy of the investment
plan and the implementation of the plan.
(d) An insurer shall maintain the insurer's investment plan
in the insurer's principal office and provide the plan to the
commissioner or the commissioner's designee on request. The
commissioner or the commissioner's designee shall maintain the plan
as a privileged and confidential document. The plan is not subject
to public disclosure. (V.T.I.C. Art. 2.10, Secs. (a), (b), (c).)
Sec. 424.057. INVESTMENT RECORDS. An insurer shall
maintain investment records covering each transaction. The insurer
must be able to demonstrate at all times to the department that the
insurer's investments are within the limitations imposed by the
statutes listed in Section 424.056(a). (V.T.I.C. Art. 2.10, Sec.
(d).)
Sec. 424.058. AUTHORIZED INVESTMENTS: FORM OF MINIMUM
CAPITAL AND SURPLUS. An insurer may invest the insurer's funds in
excess of minimum capital and surplus in any manner authorized by
Section 822.204 for investment of the insurer's minimum capital and
surplus. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.059. AUTHORIZED INVESTMENTS: GOVERNMENT
OBLIGATIONS. An insurer may invest the insurer's funds in excess of
minimum capital and surplus in a bond or other evidence of
indebtedness of any state or of Canada or a province of Canada that:
(1) is issued by the authority of law; and
(2) at the time of purchase:
(A) bears interest; and
(B) is not in default as to principal or
interest. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.060. AUTHORIZED INVESTMENTS: STOCK OF NATIONAL OR
STATE BANK. (a) An insurer may invest the insurer's funds in
excess of minimum capital and surplus in the stock of:
(1) a national bank; or
(2) a state bank of this state whose deposits are
insured by the Federal Deposit Insurance Corporation.
(b) Notwithstanding Subsection (a)(2):
(1) not more than 35 percent of the total outstanding
stock of a single state bank may be purchased by a single insurer;
and
(2) if an insurer has invested the insurer's funds in
35 percent of a state bank's stock under this section, no other
insurer may invest funds in the bank's remaining stock. (V.T.I.C.
Art. 2.10, Sec. (e) (part).)
Sec. 424.061. AUTHORIZED INVESTMENTS: DEPOSITS IN CERTAIN
FINANCIAL INSTITUTIONS. (a) Subject to this section, an insurer
may invest in any type of savings deposit, time deposit,
certificate of deposit, NOW account, or money market account in a
solvent bank, savings and loan association, or credit union that is
organized under the laws of the United States or a state, or in a
branch of one of those financial institutions.
(b) An investment under this section must be made in
accordance with the laws or regulations applicable to the bank,
savings and loan association, or credit union.
(c) The amount of an insurer's deposits in a single bank,
savings and loan association, or credit union may not exceed the
greater of:
(1) 20 percent of the insurer's capital and surplus;
(2) the amount of federal or state deposit insurance
coverage that applies to the deposits; or
(3) 10 percent of the amount of capital, surplus, and
undivided profits of the financial institution receiving the
deposits. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.062. AUTHORIZED INVESTMENTS: CERTAIN OBLIGATIONS
OF PARTNERSHIP OR CORPORATION. (a) Except as provided by this
section, an insurer may invest the insurer's funds in excess of
minimum capital and surplus in a stock, bond, debenture, bill of
exchange, evidence of indebtedness, other commercial note or bill,
or security of any partnership or dividend-paying corporation that:
(1) is incorporated under the laws of the United
States, this state, another state, Canada, or a province of Canada;
(2) is solvent at the time of the investment; and
(3) has not defaulted in the payment of any of the
partnership's or corporation's obligations during the five years
preceding the date of the investment.
(b) Except as provided by Subsection (d), an insurer may
invest the insurer's funds in excess of minimum capital and
surplus, and all reserves required by law, in a stock, bond, or
debenture of any solvent corporation that is incorporated under the
laws of the United States, this state, another state, Canada, or a
province of Canada.
(c) Funds invested under Subsection (a) may not be invested
in the stock of an oil, manufacturing, or mercantile corporation
unless the corporation has, at the time of the investment:
(1) a net worth of at least $250,000, if the
corporation is organized under the laws of this state; or
(2) a combined capital, surplus, and undivided profits
of at least $2.5 million, if the corporation is not organized under
the laws of this state.
(d) An insurer may not invest the insurer's funds in:
(1) the insurer's own stock or in any stock on account
of which the holders or owners of the stock may be liable for an
assessment other than taxes; or
(2) any stock, bond, or other security issued by a
corporation with respect to which a majority of the stock having
voting powers is directly or indirectly owned by or for the benefit
of an officer or director of the insurer, unless the insurer has
been in continuous operation for at least five years. (V.T.I.C.
Art. 2.10, Sec. (e) (part).)
Sec. 424.063. AUTHORIZED INVESTMENTS: MUTUAL FUNDS. An
insurer may invest the insurer's funds in excess of minimum capital
and surplus in shares of a mutual fund engaged in business under the
Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as
amended, if:
(1) the mutual fund is solvent and has at least $1
million of net assets as of the date of the mutual fund's latest
annual or more recent certified audited financial statement; and
(2) the amount of the insurer's investment in a single
mutual fund does not exceed 15 percent of the insurer's capital and
surplus. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.064. AUTHORIZED INVESTMENTS: REAL PROPERTY. (a)
Subject to this section, an insurer may invest the insurer's funds
in excess of minimum capital and surplus in real property to the
extent authorized by other provisions of this code.
(b) An insurer with admitted assets of more than $500
million may own investment real property other than real property
authorized by another provision of this code, or participations in
that other investment real property, if the property is materially
enhanced in value by:
(1) the construction of durable, permanent-type
buildings and other improvements that cost an amount at least equal
to the cost of the real property, excluding buildings and
improvements at the time the property is acquired; or
(2) the construction, commenced before the second
anniversary of the date the real property is acquired, of buildings
and improvements described by Subdivision (1).
(c) The amount invested by an insurer in a single investment
real property and improvements, or in any interest in real property
and improvements, may not exceed five percent of the insurer's
admitted assets in excess of $500 million. The total amount
invested by an insurer in investment real property and improvements
may not exceed 15 percent of the insurer's admitted assets in excess
of $500 million.
(d) Except as provided by Section 862.002, an insurer may
not own, develop, or hold an equity interest in any residential
property or subdivision, single or multiunit family dwelling
property, or undeveloped real property to subdivide for or develop
residential, single or multiunit family dwellings.
(e) The investment authority granted by this section is in
addition to and separate from the investment authority granted by
Section 862.002, except that an insurer may not invest in any real
property that, when added to properties acquired by the insurer
under Section 862.002, would exceed the limitations prescribed by
that section.
(f) An insurer's admitted assets are determined from the
insurer's annual statements that are made as of the December 31 that
precedes the date of the determination and are filed with the
department as required by law. The value of any investment made
under this section is subject to the appraisal requirement of
Section 862.002. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.065. ACTING AS REAL ESTATE BROKER OR SALESPERSON
PROHIBITED. An insurer defined in Section 822.001 or 822.201 or
another insurer specifically made subject to Sections 424.051,
424.053-424.071, and 424.074 may not engage in the business of a
broker or salesperson as defined by Chapter 1101, Occupations Code,
except that the insurer may hold, improve, maintain, manage, rent,
lease, sell, exchange, or convey any of the real property interests
legally owned as investments under this code. (V.T.I.C. Art. 2.10,
Sec. (e) (part).)
Sec. 424.066. AUTHORIZED INVESTMENTS: OBLIGATIONS SECURED
BY REAL PROPERTY LOANS. (a) Subject to this section, an insurer
may invest the insurer's funds in excess of minimum capital and
surplus in a bond, note, or evidence of indebtedness, or a
participation in a bond, note, or evidence of indebtedness, that is
secured by a valid first lien on real property or a leasehold estate
in real property located in the United States or in any state,
commonwealth, territory, or possession of the United States.
(b) The amount of an obligation secured by a first lien on
real property or a leasehold estate in real property may exceed 90
percent of the value of the real property or leasehold estate only
if:
(1) the amount does not exceed 100 percent of the value
of the real property or leasehold estate and the insurer or one or
more wholly owned subsidiaries of the insurer owns, in the
aggregate, a 10 percent or greater equity interest in the real
property or leasehold estate;
(2) the amount does not exceed 95 percent of the value
of the real property and:
(A) the property contains only a dwelling
designed exclusively for occupancy by not more than four families
for residential purposes; and
(B) the portion of the unpaid balance of the
obligation that exceeds 90 percent of the value of the real property
is guaranteed or insured by a mortgage guaranty insurer authorized
to engage in business in this state; or
(3) the amount exceeds 90 percent of the value of the
real property only to the extent the obligation is insured or
guaranteed by:
(A) this state;
(B) the United States;
(C) the Federal Housing Administration under the
National Housing Act (12 U.S.C. Section 1701 et seq.), as amended;
or
(D) any other agency or instrumentality of the
United States.
(c) The term of an obligation secured by a first lien on a
leasehold estate in real property and improvements located on the
property may not exceed a period equal to four-fifths of the
unexpired term of the leasehold estate, and the obligation must
fully amortize during that period. The term of the leasehold estate
may not expire sooner than the 10th anniversary of the expiration
date of the term of the obligation.
(d) An obligation secured by a first lien on a leasehold
estate in real property and improvements located on the property
must be payable in equal monthly, quarterly, semiannual, or annual
payments of principal plus accrued interest to the date of the
principal payment.
(e) An insurer's investment in a single obligation under
this section may not exceed 10 percent of the insurer's capital and
surplus. An insurer's aggregate investments under this section may
not exceed 30 percent of the insurer's assets. (V.T.I.C. Art. 2.10,
Sec. (e) (part).)
Sec. 424.067. AUTHORIZED INVESTMENTS: TRANSPORTATION
EQUIPMENT. An insurer may invest the insurer's funds in excess of
minimum capital and surplus in:
(1) an adequately secured equipment trust obligation,
certificate, or other instrument evidencing an interest in
transportation equipment wholly or partly located in the United
States; and
(2) a right to receive determined portions of rental,
purchase, or other fixed obligatory payments for the use or
purchase of the equipment. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.068. AUTHORIZED INVESTMENTS: INVESTMENT IN
FOREIGN JURISDICTION. (a) In addition to the investments in Canada
authorized by Sections 424.051, 424.058-424.071, and 424.074 and
subject to this section, an insurer may invest the insurer's funds
in excess of minimum capital and surplus in an investment in a
foreign commonwealth, territory, or possession of the United
States, a foreign country other than Canada, or a foreign security
originating in one of those commonwealths, territories,
possessions, or countries, if:
(1) the investment is similar to investments the
insurer is authorized by Sections 424.051, 424.058-424.071, and
424.074 to make within the United States or Canada; and
(2) if a debt obligation, the investment is rated one
or two by the securities valuation office.
(b) The aggregate amount of an insurer's investments under
Sections 424.051, 424.058-424.071, and 424.074 in a single foreign
jurisdiction may not exceed:
(1) as to a foreign jurisdiction that is given a
sovereign debt rating of one by the securities valuation office, 10
percent of the insurer's admitted assets; or
(2) as to any other foreign jurisdiction, five percent
of the insurer's admitted assets.
(c) The amount of investments made under this section may
not exceed the sum of:
(1) the amounts authorized by Section 424.073; and
(2) 20 percent of the insurer's assets.
(d) The combined total of the amount of investments made
under this section, the amount of similar investments made within
the United States and Canada, and any amounts of investments
authorized by Section 424.073 may not exceed any limitation
prescribed by Sections 424.051, 424.058-424.071, and 424.074.
(V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.069. AUTHORIZED INVESTMENTS: CERTAIN LOANS. An
insurer may invest the insurer's funds in excess of minimum capital
and surplus in a loan on the pledge of any mortgage, stock, bond, or
other evidence of indebtedness acceptable as an investment under
Sections 424.051, 424.053-424.071, and 424.074, if the current
value of the mortgage, stock, bond, or other evidence of
indebtedness is at least 25 percent more than the amount of the
loan. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.070. AUTHORIZED INVESTMENTS: OBLIGATIONS OF LOCAL
GOVERNMENTAL ENTITIES. (a) Subject to this section, an insurer may
invest the insurer's funds in excess of minimum capital and surplus
in a bond or other interest-bearing evidence of indebtedness of a:
(1) county or subdivision of a county;
(2) municipality;
(3) road district;
(4) turnpike district or authority;
(5) water district;
(6) school district;
(7) sanitary or navigation district; or
(8) municipally owned revenue water system, sewer
system, or electric utility company with respect to which the
municipality has appropriated, pledged, or otherwise provided for
special revenues to meet the principal and interest payments of the
bond or other evidence of indebtedness.
(b) A bond or other evidence of indebtedness of a navigation
district is an authorized investment under this section only if:
(1) the navigation district is located wholly or
partly in a county that has a population of at least 100,000; and
(2) the interest due on the bond or other evidence of
indebtedness has never been in default. (V.T.I.C. Art. 2.10, Sec.
(e) (part).)
Sec. 424.071. AUTHORIZED INVESTMENTS: THE UNIVERSITY OF
TEXAS. An insurer may invest the insurer's funds in excess of
minimum capital and surplus in an interest-bearing note or bond of
The University of Texas issued under the laws of this state.
(V.T.I.C. Art. 2.10, Sec. (e) (part).)
Sec. 424.072. AUTHORIZED INVESTMENTS: BONDS ISSUED,
ASSUMED, OR GUARANTEED IN INTERNATIONAL MARKET. An insurer may
invest the insurer's funds in excess of minimum capital and surplus
in bonds issued, assumed, or guaranteed by any of the following
international financial institutions in which the United States is
a member:
(1) the Inter-American Development Bank;
(2) the International Bank for Reconstruction and
Development (the World Bank);
(3) the African Development Bank;
(4) the Asian Development Bank; or
(5) the International Finance Corporation. (V.T.I.C.
Art. 2.10-1, Sec. (1).)
Sec. 424.073. AUTHORIZED INVESTMENTS: INSURER ENGAGED IN
BUSINESS IN FOREIGN COUNTRY. (a) Subject to this section, an
insurer authorized by the law of a foreign country to engage in a
line of insurance in which the insurer is authorized to engage in
this state may invest in foreign securities originating in the
foreign country of the same kind as the domestic securities
originating in the United States in which the insurer is authorized
to invest under Sections 424.051, 424.053-424.071, and 424.074.
(b) The aggregate amount of an insurer's investments made
under this section in a single country may not exceed by more than
10 percent at any time the lesser of:
(1) the amount of funds required by the law of the
foreign country to be maintained in securities originating in that
country; or
(2) the amount of total unearned premium reserves,
reinsurance reserves, loss reserves, and any other liabilities
required by the law of this state to be carried by the insurer that
are directly attributable to the particular insurance policies or
contracts on residents or property located in the foreign country.
(c) This section does not authorize an insurer to invest in
a foreign security originating in a foreign country with respect to
which the president of the United States or other federal authority
has refused to exercise the authority to issue guarantees on
projects in the country to citizens or corporations of the United
States against loss by reason of inconvertibility of currency,
expropriation, confiscation, war, revolution, or insurrection
because the foreign country has failed to enter into arrangements
for the security of American property as required by the president
or other federal authority for the issuance of those guarantees.
(V.T.I.C. Art. 2.10-2.)
Sec. 424.074. OTHER SPECIFICALLY AUTHORIZED INVESTMENTS.
An insurer may invest the insurer's funds in excess of minimum
capital and surplus in:
(1) a savings account as authorized by Chapter 65,
Finance Code;
(2) a bond or other indebtedness as authorized by
Sections 435.045 and 435.046, Government Code;
(3) a bond issued under Subchapter B, Chapter 1505,
Government Code;
(4) a bond as authorized by Subchapter B, Chapter 284,
Transportation Code;
(5) a municipal bond issued under Sections 51.038 and
51.039, Water Code;
(6) an insured account or evidence of indebtedness as
authorized by Section 1, Chapter 160, General Laws, Acts of the 43rd
Legislature, Regular Session, 1933 (Article 842a, Vernon's Texas
Civil Statutes);
(7) an insured or guaranteed obligation as authorized
by Chapter 230, Acts of the 49th Legislature, Regular Session, 1945
(Article 842a-1, Vernon's Texas Civil Statutes);
(8) a bond issued under Section 1, Chapter 1, page 427,
General Laws, Acts of the 46th Legislature, Regular Session, 1939
(Article 1269k-1, Vernon's Texas Civil Statutes);
(9) a bond as authorized by Section 24, Chapter 110,
Acts of the 51st Legislature, Regular Session, 1949 (Article
8280-133, Vernon's Texas Civil Statutes);
(10) a bond as authorized by Section 19, Chapter 340,
Acts of the 51st Legislature, Regular Session, 1949 (Article
8280-137, Vernon's Texas Civil Statutes);
(11) a bond as authorized by Section 10, Chapter 398,
Acts of the 51st Legislature, Regular Session, 1949 (Article
8280-138, Vernon's Texas Civil Statutes);
(12) a bond as authorized by Section 18, Chapter 465,
Acts of the 51st Legislature, Regular Session, 1949 (Article
8280-139, Vernon's Texas Civil Statutes); or
(13) another investment specifically authorized by
law. (V.T.I.C. Art. 2.10, Sec. (e) (part).)
[Sections 424.075-424.100 reserved for expansion]
SUBCHAPTER C. INVESTMENT POOLS
Sec. 424.101. DEFINITIONS. In this subchapter:
(1) "Business entity" means an association,
corporation, joint stock company, joint venture, limited liability
company, mutual fund trust, partnership, or other similar form of
business organization, regardless of whether organized for profit.
(2) "Obligation" means:
(A) a bond, note, debenture, trust certificate,
including an equipment certificate, or production payment;
(B) a negotiable bank certificate of deposit,
bankers' acceptance, credit tenant loan, or other loan secured by
financing net leases; or
(C) any other evidence of indebtedness for the
payment of money or participation certificates or other evidences
of an interest in an obligation otherwise described by this
subdivision, whether constituting a general obligation of the
issuer or payable only out of certain revenues or certain funds
pledged or otherwise dedicated for payment.
(3) "Qualified bank" means a national bank, state
bank, or trust company that:
(A) is at all times adequately capitalized as
determined by the standards adopted by the United States banking
regulators; and
(B) is either a member of the Federal Reserve
System or regulated by state banking laws.
(4) "Repurchase transaction," "reverse repurchase
transaction," and "securities lending transaction" have the
meanings assigned by Section 424.151. (V.T.I.C. Art. 2.10-5, Secs.
1(1), (5), (6), (7), (8), (9).)
Sec. 424.102. AUTHORITY TO INVEST IN POOL. An insurer may
acquire investments and participate in an investment pool that is
qualified under Section 424.103(b) and the investments of which are
limited to investments authorized for:
(1) a short-term investment pool under Section
424.104; or
(2) an authorized investment pool under Section
424.107. (V.T.I.C. Art. 2.10-5, Sec. 2.)
Sec. 424.103. INVESTMENT POOL REQUIREMENTS AND
QUALIFICATIONS. (a) An investment pool must be a business entity.
(b) To be qualified, an investment pool must:
(1) have a written pooling agreement and a pool
manager that comply with the requirements of this subchapter; and
(2) comply with Subsection (c).
(c) The investment pool may not:
(1) acquire securities issued, assumed, guaranteed,
or insured by the investing insurer or an affiliate of the investing
insurer;
(2) borrow or incur indebtedness for borrowed money,
except for securities lending and reverse repurchase transactions
that meet the requirements of this subchapter; or
(3) permit the aggregate value of securities loaned or
sold to, purchased from, or invested in a single business entity at
the time of the loan, sale, purchase, or investment to exceed 10
percent of the pool's total assets. (V.T.I.C. Art. 2.10-5, Secs.
5(a), (b), (c), 6(a).)
Sec. 424.104. AUTHORIZED INVESTMENTS FOR SHORT-TERM
INVESTMENT POOL. A short-term investment pool may contain only:
(1) obligations described by Section 424.105;
(2) money market funds described by Section 424.106;
or
(3) repurchase, reverse repurchase, and securities
lending transactions that meet the requirements of Subchapter D.
(V.T.I.C. Art. 2.10-5, Sec. 3(a) (part).)
Sec. 424.105. SHORT-TERM INVESTMENT POOL: CERTAIN
SHORT-TERM OBLIGATIONS. (a) Obligations contained in a short-term
investment pool must meet the requirements of this section.
(b) The obligations must:
(1) have a rating by the securities valuation office
of one or two, or an equivalent rating issued by a nationally
recognized statistical rating organization recognized by the
securities valuation office; or
(2) be issued by an issuer with outstanding
obligations that have a rating described by Subdivision (1).
(c) The obligations must have:
(1) a remaining maturity of 397 days or less or a put
that:
(A) entitles the holder to receive the principal
amount of the obligation; and
(B) may be exercised through maturity at
specified intervals not exceeding 397 days; or
(2) a remaining maturity of three years or less and a
floating interest rate that resets at least quarterly on the basis
of a current short-term index and is not subject to a maximum limit,
if the obligations do not have an interest rate that varies
inversely to market interest rate changes.
(d) For purposes of this section, a current short-term index
is:
(1) a federal funds rate;
(2) the prime rate;
(3) the rate for treasury bills;
(4) the London InterBank Offered Rate; or
(5) the rate for commercial paper. (V.T.I.C. Art.
2.10-5, Secs. 3(a) (part), (b), (c).)
Sec. 424.106. SHORT-TERM INVESTMENT POOL: CERTAIN MONEY
MARKET FUNDS. A short-term investment pool may contain a money
market fund as described by 17 C.F.R. Section 270.2a-7 under the
Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as
amended, that is:
(1) a government money market fund that at all times:
(A) invests only in obligations issued,
guaranteed, or insured by the United States or collateralized
repurchase agreements composed of those obligations; and
(B) qualifies for investment without a reserve
under the Purposes and Procedures Manual of the securities
valuation office or a successor publication; or
(2) a class one money market fund that at all times
qualifies for investment using the bond class one reserve factor
described by the Purposes and Procedures Manual of the securities
valuation office. (V.T.I.C. Art. 2.10-5, Secs. 1(2), (3), (4),
3(a) (part).)
Sec. 424.107. AUTHORIZED INVESTMENTS FOR AUTHORIZED
INVESTMENT POOL; LIMITATION. (a) An authorized investment pool
may contain only investments that a participating insurer is
authorized to acquire by provisions of this code other than this
subchapter.
(b) The insurer's total of proportionate ownership
interests in a single authorized investment held by an authorized
investment pool and the insurer's direct investments in that
authorized investment may not exceed the limit prescribed by the
applicable authorizing provision.
(c) In addition to the limitation described by Subsection
(b), an insurer is subject to the limitations described by Section
424.108. (V.T.I.C. Art. 2.10-5, Sec. 4.)
Sec. 424.108. GENERAL INSURER INVESTMENT LIMITATIONS. An
insurer may not acquire an investment in an investment pool if, as a
result of and after making the investment, the aggregate amount of
investments held by the insurer under this subchapter at the time of
the investment:
(1) in a single investment pool would exceed 10
percent of the insurer's admitted assets;
(2) in all investment pools investing in investments
authorized under Section 424.107 would exceed 25 percent of the
insurer's admitted assets; or
(3) in all investment pools would exceed 35 percent of
the insurer's admitted assets. (V.T.I.C. Art. 2.10-5, Sec. 6(c).)
Sec. 424.109. DESIGNATION OF POOL MANAGER; QUALIFICATIONS.
(a) The pooling agreement for an investment pool must designate a
pool manager.
(b) The pool manager must be organized under the laws of the
United States or a state and must be:
(1) the investing insurer, an affiliated insurer, or a
business entity affiliated with the insurer;
(2) a qualified bank;
(3) a business entity registered under the Investment
Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.), as amended;
(4) the attorney-in-fact of a reciprocal or
interinsurance exchange; or
(5) the United States manager or an affiliate or
subsidiary of the United States manager of a United States branch of
an alien insurer. (V.T.I.C. Art. 2.10-5, Sec. 5(d).)
Sec. 424.110. POOL MANAGER TO MAINTAIN ASSETS; CUSTODY
AGREEMENT. (a) The pool manager shall maintain the assets of the
investment pool in one or more accounts, in the name of or on behalf
of the pool, under a custody agreement with a qualified bank.
(b) The custody agreement must:
(1) state and recognize the claims and rights of each
participant;
(2) acknowledge that the investment pool's underlying
assets are held solely for the benefit of each participant in
proportion to the aggregate amount of the participant's investments
in the pool; and
(3) contain an agreement that the pool's underlying
assets may not be commingled with the general assets of the
custodian qualified bank or any other person. (V.T.I.C. Art.
2.10-5, Sec. 5(f).)
Sec. 424.111. POOLING AGREEMENT PROVISIONS. The pooling
agreement for an investment pool must provide that:
(1) 100 percent of the ownership interests in the pool
must at all times be held by:
(A) an insurer and the insurer's affiliated
insurers;
(B) for a pool investing solely in investments
authorized under Section 424.104, the insurer and the insurer's
subsidiaries and affiliates or any pension or profit-sharing plan
of the insurer and the insurer's subsidiaries and affiliates; or
(C) for a United States branch of an alien
insurer, subsidiaries or affiliates of the insurer's United States
manager;
(2) the pool's underlying assets are held solely for
the benefit of each participant and may not be commingled with the
general assets of the pool manager or any other person;
(3) each participant owns an undivided interest in the
pool's underlying assets in proportion to the aggregate amount of
the participant's interest in the pool; and
(4) a pool participant or, if a pool participant is
insolvent, bankrupt, or in receivership, the participant's
trustee, receiver, conservator, or other successor-in-interest may
withdraw all or any portion of the participant's investment from
the pool under the terms of the pooling agreement. (V.T.I.C. Art.
2.10-5, Sec. 5(g).)
Sec. 424.112. WITHDRAWALS AND DISTRIBUTIONS. (a) A pool
participant must be able to make withdrawals on demand without
penalty or other assessment on any business day, and settlement of
funds must occur within a reasonable and customary period that does
not exceed five business days after a withdrawal.
(b) The pooling agreement must provide that the pool manager
shall make a distribution to a pool participant, at the manager's
discretion:
(1) in cash in an amount equal to the fair market value
at the time of the distribution of the participant's pro rata share
of each of the pool's underlying assets;
(2) in kind in an amount equal to a pro rata share of
each underlying asset; or
(3) in a combination of cash and in-kind distributions
in an amount equal to a pro rata share of each underlying asset.
(c) A distribution under Subsection (b) must be computed
after subtracting all the investment pool's applicable fees and
expenses. (V.T.I.C. Art. 2.10-5, Secs. 6(d), (e), (f).)
Sec. 424.113. INVESTMENT POOL RECORDS. The pool manager
shall compile and maintain:
(1) detailed accounting records that show:
(A) the cash receipts and disbursements
reflecting each pool participant's proportionate investment in the
investment pool; and
(B) a complete description of all the pool's
underlying assets, including the amount, interest rate, and
maturity date, if any, of each of those assets and other appropriate
designations; and
(2) other records that, on a daily basis, allow third
parties to verify each participant's investment in the pool.
(V.T.I.C. Art. 2.10-5, Sec. 5(e).)
Sec. 424.114. INSPECTION OF RECORDS. The pool manager
shall make records of the investment pool available for inspection
by the commissioner. (V.T.I.C. Art. 2.10-5, Sec. 6(g).)
Sec. 424.115. REPORTS OF TRANSACTIONS BETWEEN POOL AND
PARTICIPANT. (a) A transaction between an investment pool and a
pool participant is not subject to Subchapter C, Chapter 823,
except that before entering into a pool, an insurer subject to
Chapter 823 shall give the commissioner the written notice required
under Section 823.103.
(b) The investment pool's investment activities and the
transactions between the pool and a pool participant must be
reported in the registration statement required by Subchapter B,
Chapter 823. (V.T.I.C. Art. 2.10-5, Sec. 6(b).)
[Sections 424.116-424.150 reserved for expansion]
SUBCHAPTER D. DOLLAR ROLL, REPURCHASE, REVERSE REPURCHASE,
AND SECURITIES LENDING TRANSACTIONS
Sec. 424.151. DEFINITIONS. In this subchapter:
(1) "Dollar roll transaction" means two simultaneous
transactions with settlement dates not more than 96 days apart, in
one of which an insurer sells to a business entity, and in the other
of which the insurer is obligated to purchase from the same business
entity, substantially similar securities that are:
(A) mortgage-backed securities issued, assumed,
or guaranteed by the Government National Mortgage Association, the
Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, or a successor to one of those organizations;
or
(B) other mortgage-backed securities referred to
in 15 U.S.C. Section 77r-1 et seq., as amended.
(2) "Repurchase transaction" means a transaction in
which an insurer purchases securities from a business entity that
is obligated to repurchase the purchased securities or equivalent
securities from the insurer at a specified price, either within a
specified period or on demand.
(3) "Reverse repurchase transaction" means a
transaction in which an insurer sells securities to a business
entity and is obligated to repurchase the sold securities or
equivalent securities from the business entity at a specified
price, either within a specified period or on demand.
(4) "Securities lending transaction" means a
transaction in which an insurer lends securities to a business
entity that is obligated to return the loaned securities or
equivalent securities to the insurer, either within a specified
period or on demand. (V.T.I.C. Art. 2.10-3A, Sec. 1.)
Sec. 424.152. TRANSACTIONS AUTHORIZED. An insurer may
engage in dollar roll, repurchase, reverse repurchase, and
securities lending transactions as provided by this subchapter.
(V.T.I.C. Art. 2.10-3A, Sec. 2(a).)
Sec. 424.153. PERIOD OF TRANSACTION. An insurer must enter
into a written agreement for each transaction under this
subchapter, other than a dollar roll transaction. The agreement
must require that the transaction terminate on or before the first
anniversary of the transaction's inception. (V.T.I.C. Art.
2.10-3A, Sec. 2(b).)
Sec. 424.154. CASH REQUIREMENTS. With respect to cash
received in a transaction under this subchapter, an insurer shall:
(1) invest the cash in accordance with this subchapter
and in a manner that recognizes the liquidity needs of the
transaction; or
(2) use the cash for the insurer's general corporate
purposes. (V.T.I.C. Art. 2.10-3A, Sec. 3(a).)
Sec. 424.155. COLLATERAL REQUIREMENTS. (a) While a
transaction under this subchapter is outstanding, the insurer or
the insurer's agent or custodian shall maintain, as to acceptable
collateral received in the transaction, either physically or
through the book-entry system of the Federal Reserve, Depository
Trust Company, Participants Trust Company, or another securities
depository approved by the commissioner:
(1) possession of the collateral;
(2) a perfected security interest in the collateral;
or
(3) in the case of a jurisdiction outside of the United
States, title to, or the rights of a secured creditor to, the
collateral.
(b) The amount of collateral required for repurchase,
reverse repurchase, and securities lending transactions is the
amount required under the Purposes and Procedures Manual of the
securities valuation office or a successor publication. (V.T.I.C.
Art. 2.10-3A, Secs. 3(b), (e).)
Sec. 424.156. PERCENTAGE LIMITATIONS. (a) An insurer may
not enter into a transaction under this subchapter if, as a result
of and after making the transaction, the aggregate amount of
securities loaned or sold to or purchased from:
(1) a single business entity counterparty under this
subchapter would exceed five percent of the insurer's assets; or
(2) all business entities under this subchapter would
exceed 40 percent of the insurer's assets.
(b) In computing the amount sold to or purchased from a
business entity counterparty under a repurchase or reverse
repurchase transaction, effect may be given to netting provisions
under a master written agreement. (V.T.I.C. Art. 2.10-3A, Secs.
3(c), (d).)
Sec. 424.157. RULES. The commissioner may adopt reasonable
rules and issue reasonable orders as necessary to implement this
subchapter. (V.T.I.C. Art. 2.10-3A, Sec. 3(f).)
[Sections 424.158-424.200 reserved for expansion]
SUBCHAPTER E. RISK CONTROL TRANSACTIONS
Sec. 424.201. DEFINITIONS. In this subchapter:
(1) "Acceptable collateral" means:
(A) cash;
(B) cash equivalents;
(C) letters of credit and direct obligations; or
(D) securities that are fully guaranteed as to
principal and interest by the United States.
(2) "Business entity" includes an association, bank,
corporation, joint stock company, joint tenancy, joint venture,
limited liability company, mutual fund, partnership, sole
proprietorship, trust, or other similar form of business
organization, regardless of whether organized for profit.
(3) "Cap" means an agreement obligating the seller to
make payments to the buyer, with each payment based on the amount by
which a reference price or level or the performance or value of one
or more underlying interests exceeds a predetermined number that is
sometimes called the strike rate or strike price.
(4) "Cash equivalent" means an investment or security
that is short-term, highly rated, highly liquid, and readily
marketable. The term includes a money market fund described by
Section 424.106. For purposes of this subdivision, an investment
or security is:
(A) short-term if it has a remaining term to
maturity of one year or less; and
(B) highly rated if it has:
(i) a rating of "P-1" by Moody's Investors
Service, Inc.;
(ii) a rating of "A-1" by the Standard and
Poor's Division of the McGraw Hill Companies, Inc.; or
(iii) an equivalent rating by a nationally
recognized statistical rating organization recognized by the
securities valuation office.
(5) "Collar" means an agreement to receive payments as
the buyer of a cap, floor, or option and to make payments as the
seller of a different cap, floor, or option.
(6)(A) "Counterparty exposure amount" means:
(i) for an over-the-counter derivative
instrument not entered into under a written master agreement that
provides for netting of payments owed by the respective parties,
the market value of the over-the-counter derivative instrument, if
the liquidation of the derivative instrument would result in a
final cash payment to the insurer, or zero, if the liquidation of
the derivative instrument would not result in a final cash payment
to the insurer; or
(ii) for an over-the-counter derivative
instrument entered into under a written master agreement that
provides for netting of payments owed by the respective parties and
for which the counterparty's domiciliary jurisdiction is within the
United States or a foreign jurisdiction listed in the Purposes and
Procedures Manual of the securities valuation office as eligible
for netting, the greater of zero or the net sum payable to the
insurer in connection with all derivative instruments subject to
the written master agreement on the liquidation of the instruments
in the event of the counterparty's default under the master
agreement, if there is no condition precedent to the counterparty's
obligation to make the payment and if there is no setoff of amounts
payable under another instrument or agreement.
(B) For purposes of this subdivision, market
value or the net sum payable, as applicable, must be determined at
the end of the most recent quarter of the insurer's fiscal year and
must be reduced by the market value of acceptable collateral held by
the insurer or a custodian on the insurer's behalf.
(7) "Derivative instrument":
(A) means an agreement, option, or instrument, or
a series or combination of agreements, options, or instruments:
(i) to make or take delivery of, or assume
or relinquish, a specified amount of one or more underlying
interests, or to make a cash settlement instead of making or taking
delivery of, or assuming or relinquishing, a specified amount of an
underlying interest; or
(ii) that has a price, performance, value,
or cash flow based primarily on the actual or expected price, yield,
level, performance, value, or cash flow of one or more underlying
interests;
(B) includes an option, a warrant not otherwise
permitted to be held by the insurer under this subchapter, a cap, a
floor, a collar, a swap, a swaption, a forward, a future, any other
substantially similar agreement, option, or instrument, and a
series or combination of those agreements, options, or instruments;
and
(C) does not include a collateralized mortgage
obligation, another asset-backed security, a principal-protected
structured security, a floating rate security, an instrument that
an insurer would otherwise be authorized to invest in or receive
under a provision of this subchapter other than this subdivision,
or a debt obligation of the insurer.
(8) "Derivative transaction" means a transaction
involving the use of one or more derivative instruments. The term
does not include a dollar roll transaction, repurchase transaction,
reverse repurchase transaction, or securities lending transaction.
(9) "Floor" means an agreement obligating the seller
to make payments to the buyer, each of which is based on the amount
by which a predetermined number that is sometimes called the floor
price or floor rate exceeds a reference level, performance, price,
or value of one or more underlying interests.
(10) "Forward" means an agreement to make or take
delivery in the future of one or more underlying interests, or to
effect a cash settlement, based on the actual or expected level,
performance, price, or value of those interests. The term does not
include a future or a spot transaction effected within a customary
settlement period, a when-issued purchase, or another similar cash
market transaction.
(11) "Future" means an agreement traded on a futures
exchange to make or take delivery of one or more underlying
interests, or to effect a cash settlement, based on the actual or
expected level, performance, price, or value of those interests.
(12) "Futures exchange" means a foreign or domestic
exchange, contract market, or board of trade on which trading in
futures is conducted and that, in the United States, is authorized
to conduct that trading by the Commodity Futures Trading Commission
or a successor to that agency.
(13) "Hedging transaction" means a derivative
transaction entered into and maintained to manage, with respect to
an asset, liability, or portfolio of assets or liabilities, that an
insurer has acquired or incurred or anticipates acquiring or
incurring:
(A) the risk of a change in value, yield, price,
cash flow, or quantity; or
(B) the currency exchange rate risk.
(14) "Income generation transaction" means a
derivative transaction entered into to generate income. The term
does not include a hedging transaction or a replication
transaction.
(15) "Market value" means the price for a security or
derivative instrument obtained from a generally recognized source,
the most recent quotation from a generally recognized source, or if
a generally recognized source does not exist, the price determined
under the terms of the instrument or in good faith by the insurer,
as can be reasonably demonstrated to the commissioner on request,
plus the amount of accrued but unpaid income on the security or
instrument to the extent that amount is not included in the price as
of the date the security or instrument is valued.
(16) "Option" means an agreement giving the buyer the
right to buy or receive, referred to as a "call option," to sell or
deliver, referred to as a "put option," to enter into, extend, or
terminate, or to effect a cash settlement based on the actual or
expected level, performance, price, spread, or value of, one or
more underlying interests.
(17) "Over-the-counter derivative instrument" means a
derivative instrument entered into with a business entity in a
manner other than through a securities exchange or futures exchange
or cleared through a qualified clearinghouse.
(18) "Potential exposure" means:
(A) as to a futures position, the amount of
initial margin required for that position; or
(B) as to a swap, collar, or forward, one-half of
one percent multiplied by the notional amount multiplied by the
square root of the remaining years to maturity.
(19) "Qualified clearinghouse" means a clearinghouse
that:
(A) is subject to the rules of a securities
exchange or a futures exchange; and
(B) provides clearing services, including acting
as a counterparty to each of the parties to a transaction in a
manner that eliminates the parties' credit risk to each other.
(20) "Replication transaction" means a derivative
transaction or a combination of derivative transactions effected
separately or in conjunction with cash market investments included
in the insurer's investment portfolio to replicate the risks and
returns of another authorized transaction, investment, or
instrument or to operate as a substitute for cash market
transactions. The term does not include a hedging transaction.
(21) "Securities exchange" means:
(A) an exchange registered as a national
securities exchange or a securities market registered under the
Securities Exchange Act of 1934 (15 U.S.C. Section 78a et seq.), as
amended;
(B) the Private Offerings, Resales and Trading
through Automated Linkages system; or
(C) a designated offshore securities market as
defined by 17 C.F.R. Section 230.902, as amended.
(22) "Swap" means an agreement to exchange or to net
payments at one or more times based on the actual or expected price,
yield, level, performance, or value of one or more underlying
interests.
(23) "Swaption" means an option to purchase or sell a
swap at a given price and time or at a series of prices and times.
The term does not include a swap with an embedded option.
(24) "Underlying interest" means an asset, liability,
or other interest underlying a derivative instrument or a
combination of those assets, liabilities, or interests. The term
includes a security, currency, rate, index, commodity, or
derivative instrument.
(25) "Warrant" means an instrument under which the
holder has the right to purchase or sell the underlying interest at
a given price and time or at a series of prices and times stated in
the warrant. (V.T.I.C. Art. 2.10-4, Sec. 1.)
Sec. 424.202. RISK CONTROL TRANSACTIONS AUTHORIZED. (a)
Except as provided by Subsection (b), an insurer may engage in a
risk control transaction authorized by this subchapter to:
(1) protect the insurer's assets against the risk of
changing asset values or interest rates;
(2) reduce risk; and
(3) generate income.
(b) An insurer with a statutory net capital and surplus as
determined by the insurer's most recent financial statement
required to be filed with the department that is less than the
minimum amount of capital and surplus required for a new charter and
certificate of authority for the same type of insurer may not engage
in a transaction authorized under this subchapter. (V.T.I.C. Art.
2.10-4, Secs. 2(a), 8(b), (c).)
Sec. 424.203. NOTICE OF INTENT TO ENGAGE IN RISK CONTROL
TRANSACTIONS REQUIRED. (a) Before an insurer with a statutory net
capital and surplus of less than $10 million engages in a
transaction authorized under this subchapter, the insurer shall
file a written notice with the commissioner describing:
(1) the need to engage in the transaction;
(2) the lack of acceptable alternatives; and
(3) the insurer's plan to engage in the transaction.
(b) If the commissioner does not issue an order prohibiting
an insurer who files a notice under Subsection (a) from engaging in
the transaction on or before the 90th day after the date the
commissioner receives the notice, the insurer may engage in the
transaction described in the notice.
(c) For purposes of this section, an insurer's net capital
and surplus are determined by the insurer's most recent financial
statement required to be filed with the department. (V.T.I.C. Art.
2.10-4, Secs. 8(a), (c).)
Sec. 424.204. TRADING REQUIREMENTS FOR DERIVATIVE
INSTRUMENTS. Each derivative instrument must be:
(1) traded on a securities exchange;
(2) entered into with, or guaranteed by, a business
entity;
(3) issued or written by, or entered into with, the
issuer of the underlying interest on which the derivative
instrument is based; or
(4) in the case of futures, traded through a broker who
is:
(A) registered as a futures commission merchant
under the Commodity Exchange Act (7 U.S.C. Section 1 et seq.), as
amended; or
(B) exempt from that registration under 17 C.F.R.
Section 30.10, adopted under the Commodity Exchange Act (7 U.S.C.
Section 1 et seq.), as amended. (V.T.I.C. Art. 2.10-4, Sec. 6.)
Sec. 424.205. DERIVATIVE USE PLAN. (a) Before an insurer
enters into a derivative transaction, the insurer's board of
directors must approve a derivative use plan as part of the
insurer's investment plan otherwise required by law.
(b) The derivative use plan must:
(1) describe investment objectives and risk
constraints, such as counterparty exposure amounts;
(2) define permissible transactions, identifying the
risks to be hedged and the assets or liabilities being replicated;
and
(3) require compliance with the insurer's internal
control procedures established under Section 424.206. (V.T.I.C.
Art. 2.10-4, Sec. 2(b).)
Sec. 424.206. INTERNAL CONTROL PROCEDURES. An insurer that
enters into a derivative transaction shall establish written
internal control procedures that require:
(1) a quarterly report to the board of directors that
reviews:
(A) each derivative transaction entered into,
outstanding, or closed out;
(B) the results and effectiveness of the
derivatives program; and
(C) the credit risk exposure to each counterparty
for over-the-counter derivative transactions based on the
counterparty exposure amount;
(2) a system for determining whether hedging or
replication strategies used by the insurer have been effective;
(3) a system of reports, at least as frequent as
monthly, to the insurer's management, that include:
(A) a description of each derivative transaction
entered into, outstanding, or closed out during the period since
the last report;
(B) the purpose of each outstanding derivative
transaction;
(C) a performance review of the derivative
instrument program; and
(D) the counterparty exposure amount for each
over-the-counter derivative transaction;
(4) a written authorization that identifies the
responsibilities and limitations of authority of each person
authorized to effect and maintain derivative transactions; and
(5) appropriate documentation for each transaction,
including:
(A) the purpose of the transaction;
(B) the assets or liabilities to which the
transaction relates;
(C) the specific derivative instrument used in
the transaction;
(D) for an over-the-counter derivative
transaction, the name of the counterparty and the counterparty
exposure amount; and
(E) for an exchange-traded derivative
instrument, the name of the exchange and the name of the firm that
handled the transaction. (V.T.I.C. Art. 2.10-4, Sec. 2(c).)
Sec. 424.207. ABILITY TO DEMONSTRATE HEDGING
CHARACTERISTICS AND EFFECTIVENESS. An insurer must be able to
demonstrate to the commissioner on request the intended hedging
characteristics and continuing effectiveness of a derivative
transaction or combination of transactions through:
(1) cash flow testing;
(2) duration analysis; or
(3) other appropriate analysis. (V.T.I.C. Art.
2.10-4, Sec. 2(d).)
Sec. 424.208. OFFSETTING TRANSACTIONS. (a) Subject to
this section, an insurer may purchase or sell one or more derivative
instruments to wholly or partly offset a derivative instrument
previously purchased or sold, without regard to the quantitative
limitations of this subchapter.
(b) An offsetting transaction under this section must use
the same type of derivative instrument as the derivative instrument
being offset. (V.T.I.C. Art. 2.10-4, Sec. 2(f).)
Sec. 424.209. INCLUSION OF COUNTERPARTY EXPOSURE AMOUNTS.
The insurer shall include all counterparty exposure amounts in
determining compliance with the limitations of this subchapter.
(V.T.I.C. Art. 2.10-4, Sec. 2(e).)
Sec. 424.210. OVERSIGHT BY COMMISSIONER. (a) Not later
than the 10th day before the date an insurer is scheduled to enter
into an initial hedging transaction, the insurer shall notify the
commissioner in writing that:
(1) the insurer's board of directors has adopted an
investment plan that authorizes hedging transactions; and
(2) each hedging transaction will comply with this
subchapter.
(b) If a hedging transaction does not comply with this
subchapter or if continuing the transaction may create a hazardous
financial condition for the insurer that affects the insurer's
policyholders or creditors or the public, the commissioner may,
after notice and an opportunity for a hearing, order the insurer to
take action that the commissioner determines is reasonably
necessary to:
(1) remedy a hazardous financial condition; or
(2) prevent an impending hazardous financial
condition from occurring. (V.T.I.C. Art. 2.10-4, Secs. 3(a), (d).)
Sec. 424.211. AUTHORITY TO ENTER INTO HEDGING TRANSACTION.
After providing notice under Section 424.210, an insurer may enter
into a hedging transaction under this subchapter if as a result of
and after making the transaction:
(1) the aggregate statement value of all outstanding
caps, floors, options, swaptions, and warrants not attached to
another financial instrument purchased by the insurer under this
subchapter, other than a collar, does not exceed 7.5 percent of the
insurer's assets;
(2) the aggregate statement value of all outstanding
caps, floors, options, swaptions, and warrants written by the
insurer under this subchapter, other than a collar, does not exceed
three percent of the insurer's assets; and
(3) the aggregate potential exposure of all
outstanding collars, forwards, futures, and swaps entered into or
acquired by the insurer under this subchapter does not exceed 6.5
percent of the insurer's assets. (V.T.I.C. Art. 2.10-4, Sec.
3(c).)
Sec. 424.212. AUTHORITY TO ENTER INTO INCOME GENERATION
TRANSACTION. An insurer may enter into an income generation
transaction only if:
(1) as a result of and after making the transaction,
the sum of the following amounts does not exceed 10 percent of the
insurer's assets:
(A) the aggregate statement value of admitted
assets that at the time of the transaction are subject to call or
that generate the cash flows for payments the insurer is required to
make under caps and floors sold by the insurer and that at the time
of the transaction are outstanding under this subchapter;
(B) the statement value of admitted assets
underlying derivative instruments that at the time of the
transaction are subject to calls sold by the insurer and
outstanding under this subchapter; and
(C) the purchase price of assets subject to puts
that at the time of the transaction are outstanding under this
subchapter; and
(2) the transaction is a sale of:
(A) a call option on assets that meets the
requirements of Section 424.213;
(B) a put option on assets that meets the
requirements of Section 424.214;
(C) a call option on a derivative instrument,
including a swaption, that meets the requirements of Section
424.215; or
(D) a cap or floor that meets the requirements of
Section 424.216. (V.T.I.C. Art. 2.10-4, Secs. 4(a), (b), (c).)
Sec. 424.213. LIMITATION ON SALE OF CALL OPTION ON
ASSETS. If an income generation transaction is a sale of a call
option on assets, the insurer must, during the entire period the
option is outstanding, hold, or have a currently exercisable right
to acquire, the underlying assets. (V.T.I.C. Art. 2.10-4, Sec.
4(d).)
Sec. 424.214. LIMITATION ON SALE OF PUT OPTION ON
ASSETS. (a) If an income generation transaction is a sale of a
put option on assets, the insurer must:
(1) during the entire period the option is
outstanding, hold sufficient cash, cash equivalents, or interests
in a short-term investment pool to purchase the underlying assets
on exercise of the option; and
(2) have the ability to hold the underlying assets in
the insurer's portfolio.
(b) If during the entire period the put option is
outstanding the total market value of all put options sold by the
insurer exceeds two percent of the insurer's assets, the insurer
shall set aside, under a custodial or escrow agreement, cash or cash
equivalents that have a market value equal to the amount of the
insurer's put option obligations in excess of two percent of the
insurer's assets. (V.T.I.C. Art. 2.10-4, Sec. 4(e).)
Sec. 424.215. LIMITATION ON SALE OF CALL OPTION ON
DERIVATIVE INSTRUMENT. If an income generation transaction is a
sale of a call option on a derivative instrument, including a
swaption, the insurer must:
(1) during the entire period the call option is
outstanding, hold, or have a currently exercisable right to
acquire, assets generating the cash flow necessary to make any
payment for which the insurer is liable under the underlying
derivative instrument; and
(2) have the ability to enter into the underlying
derivative transaction for the insurer's portfolio. (V.T.I.C. Art.
2.10-4, Sec. 4(f).)
Sec. 424.216. LIMITATION ON SALE OF CAP OR FLOOR. If an
income generation transaction is a sale of a cap or a floor, the
insurer must, during the entire period the cap or floor is
outstanding, hold, or have a currently exercisable right to
acquire, assets generating the cash flow necessary to make any
payment for which the insurer is liable under the cap or floor.
(V.T.I.C. Art. 2.10-4, Sec. 4(g).)
Sec. 424.217. AUTHORITY TO ENTER REPLICATION
TRANSACTION. (a) An insurer may enter into a replication
transaction only with the prior written approval of the
commissioner.
(b) To be eligible for approval by the commissioner:
(1) the insurer must be otherwise authorized to invest
the insurer's funds under this chapter in the asset being
replicated; and
(2) the asset being replicated must be subject to all
the provisions of this subchapter relating to the making of the
transaction by the insurer with respect to that kind of asset as if
the transaction constituted a direct investment by the insurer in
the replicated asset.
(c) The commissioner may adopt rules regarding replication
transactions as necessary to implement this section. (V.T.I.C.
Art. 2.10-4, Sec. 5.)
Sec. 424.218. RULES. The commissioner may adopt rules
consistent with this subchapter that prescribe reasonable limits,
standards, and guidelines for:
(1) the risk control transactions authorized under
this subchapter; and
(2) plans related to those transactions. (V.T.I.C. Art. 2.10-4, Sec. 7.)
CHAPTER 425. RESERVES AND INVESTMENTS FOR LIFE INSURANCE
COMPANIES AND RELATED ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 425.001. SECURITIES IN AMOUNT OF RESERVES
REQUIRED
Sec. 425.002. CERTAIN INSURERS: DEPOSIT OF
SECURITIES, MONEY, OR PROPERTY IN
AMOUNT OF LEGAL RESERVES
Sec. 425.003. CERTAIN INSURERS: REQUIRED DEPOSITS OF
SECURITIES; ADDITIONAL DEPOSITS AND
WITHDRAWALS
Sec. 425.004. RECORDS OF SECURITIES DEPOSITED WITH
DEPARTMENT; REPORT OF VALUE
Sec. 425.005. DEPARTMENT DUTIES REGARDING DEPOSITED
SECURITIES; INSURANCE COMPANY ACCESS
Sec. 425.006. ADDITIONAL RESERVES REQUIRED:
SUBSTANDARD OR EXTRA HAZARDOUS
POLICIES
Sec. 425.007. SUBSCRIPTION TO OR UNDERWRITING PURCHASE
OR SALE OF SECURITIES OR PROPERTY
PROHIBITED; CONTROL OF DISPOSITION OF
PROPERTY
Sec. 425.008. AUTHORIZED INVESTMENTS FOR FOREIGN
COMPANIES
Sec. 425.009. STUDENT LOANS
[Sections 425.010-425.050 reserved for expansion]
SUBCHAPTER B. STANDARD VALUATION LAW
Sec. 425.051. SHORT TITLE
Sec. 425.052. DEFINITIONS
Sec. 425.053. ANNUAL VALUATION OF RESERVES
Sec. 425.054. ACTUARIAL OPINION REQUIRED
Sec. 425.055. SUPPORTING MEMORANDUM FOR ACTUARIAL
OPINION
Sec. 425.056. LIMITATION ON LIABILITY FOR ACTUARIAL
OPINION
Sec. 425.057. DISCIPLINARY ACTION: COMPANY OR PERSON
CERTIFYING OPINION
Sec. 425.058. VALUATION OF POLICY OR CONTRACT:
GENERAL RULE
Sec. 425.059. VALUATION OF CERTAIN ANNUITIES AND PURE
ENDOWMENT CONTRACTS
Sec. 425.060. APPLICABILITY OF CALENDAR YEAR STATUTORY
VALUATION INTEREST RATES
Sec. 425.061. COMPUTATION OF CALENDAR YEAR STATUTORY
VALUATION INTEREST RATE: GENERAL RULE
Sec. 425.062. WEIGHTING FACTORS
Sec. 425.063. REFERENCE INTEREST RATE
Sec. 425.064. COMMISSIONERS RESERVE VALUATION METHOD
Sec. 425.065. COMMISSIONERS ANNUITY RESERVE VALUATION
METHOD
Sec. 425.066. MINIMUM AGGREGATE RESERVES
Sec. 425.067. OPTIONAL RESERVE COMPUTATIONS
Sec. 425.068. RESERVE COMPUTATION: GROSS PREMIUM
CHARGED LESS THAN VALUATION NET
PREMIUM
Sec. 425.069. RESERVE COMPUTATION: INDETERMINATE
PREMIUM PLANS AND CERTAIN OTHER PLANS
Sec. 425.070. COMPUTATION OF RESERVE FOR CERTAIN
POLICIES BY CALENDAR YEAR OF ISSUE
[Sections 425.071-425.100 reserved for expansion]
SUBCHAPTER C. AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR CAPITAL
STOCK LIFE, HEALTH, AND ACCIDENT INSURERS
Sec. 425.101. DEFINITIONS
Sec. 425.102. INAPPLICABILITY OF CERTAIN LAW
Sec. 425.103. APPLICABILITY OF SUBCHAPTER
Sec. 425.104. PURPOSE
Sec. 425.105. WRITTEN INVESTMENT PLAN
Sec. 425.106. INVESTMENT RECORDS; DEMONSTRATION OF
COMPLIANCE
Sec. 425.107. COMMUNITY INVESTMENT REPORT
Sec. 425.108. AUTHORIZED INVESTMENTS AND TRANSACTIONS
IN GENERAL
Sec. 425.109. AUTHORIZED INVESTMENTS: GOVERNMENT
OBLIGATIONS
Sec. 425.110. AUTHORIZED INVESTMENTS: OBLIGATIONS OF
AND OTHER INVESTMENTS IN BUSINESS
ENTITIES
Sec. 425.111. AUTHORIZED INVESTMENTS: BONDS ISSUED,
ASSUMED, OR GUARANTEED IN
INTERNATIONAL MARKET
Sec. 425.112. AUTHORIZED INVESTMENTS: POLICY LOANS
Sec. 425.113. AUTHORIZED INVESTMENTS: DEPOSITS IN
CERTAIN FINANCIAL INSTITUTIONS
Sec. 425.114. AUTHORIZED INVESTMENTS: INSURANCE
COMPANY INVESTMENT POOLS
Sec. 425.115. AUTHORIZED INVESTMENTS: EQUITY
INTERESTS
Sec. 425.116. AUTHORIZED INVESTMENTS: PREFERRED STOCK
Sec. 425.117. AUTHORIZED INVESTMENTS: COLLATERAL
LOANS
Sec. 425.118. AUTHORIZED INVESTMENTS: OBLIGATIONS
SECURED BY REAL PROPERTY LOANS
Sec. 425.119. AUTHORIZED INVESTMENTS: REAL PROPERTY
Sec. 425.120. AUTHORIZED INVESTMENTS: OIL, GAS, AND
MINERALS
Sec. 425.121. AUTHORIZED INVESTMENTS: SECURITIES
LENDING, REPURCHASE, REVERSE
REPURCHASE, AND DOLLAR ROLL
TRANSACTIONS
Sec. 425.122. AUTHORIZED INVESTMENTS: PREMIUM LOANS
Sec. 425.123. AUTHORIZED INVESTMENTS: MONEY MARKET
FUNDS
Sec. 425.124. AUTHORIZED INVESTMENTS: RISK CONTROL
TRANSACTIONS
Sec. 425.125. RISK CONTROL TRANSACTIONS: DEFINITIONS
Sec. 425.126. RISK CONTROL TRANSACTIONS: DERIVATIVE
USE PLAN
Sec. 425.127. RISK CONTROL TRANSACTIONS: INTERNAL
CONTROL PROCEDURES
Sec. 425.128. RISK CONTROL TRANSACTIONS: OVERSIGHT BY
COMMISSIONER
Sec. 425.129. RISK CONTROL TRANSACTIONS: LIMITATIONS
ON INCOME GENERATION TRANSACTIONS
Sec. 425.130. RISK CONTROL TRANSACTIONS: LIMITATIONS
ON REPLICATION TRANSACTIONS
Sec. 425.131. RISK CONTROL TRANSACTIONS: TRADING
REQUIREMENTS
Sec. 425.132. RISK CONTROL TRANSACTIONS: OFFSETTING
TRANSACTIONS
[Sections 425.133-425.150 reserved for expansion]
Sec. 425.151. AUTHORIZED INVESTMENTS: FOREIGN
COUNTRIES AND UNITED STATES
TERRITORIES
Sec. 425.152. AUTHORIZED INVESTMENTS: INVESTMENTS NOT
OTHERWISE SPECIFIED OR PROHIBITED;
INVESTMENTS AUTHORIZED BY OTHER LAW
Sec. 425.153. AUTHORIZED INVESTMENTS: CERTAIN
PREVIOUSLY AUTHORIZED INVESTMENTS
Sec. 425.154. APPLICABILITY OF PERCENTAGE
AUTHORIZATIONS AND LIMITATIONS
Sec. 425.155. QUALIFICATION OF INVESTMENTS
Sec. 425.156. DISTRIBUTIONS, REINSURANCE, AND MERGER
Sec. 425.157. AGGREGATE DIVERSIFICATION REQUIREMENTS
Sec. 425.158. WAIVER BY COMMISSIONER OF QUANTITATIVE
LIMITATIONS
Sec. 425.159. ACCOUNTING PROVISIONS
Sec. 425.160. INVESTMENTS OF CEDING INSURERS
Sec. 425.161. ACTING AS REAL ESTATE BROKER OR
SALESPERSON PROHIBITED
Sec. 425.162. RULES
[Sections 425.163-425.200 reserved for expansion]
SUBCHAPTER D. AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR OTHER
LIFE, HEALTH, AND ACCIDENT INSURERS
Sec. 425.201. DEFINITION
Sec. 425.202. APPLICABILITY OF SUBCHAPTER
Sec. 425.203. LIMITATION ON FUNDS AND OTHER ASSETS
Sec. 425.204. APPROVAL OF INVESTMENTS AND LOANS
REQUIRED
Sec. 425.205. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
GOVERNMENT BONDS
Sec. 425.206. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
CORPORATE BONDS, NOTES, AND DEBENTURES
Sec. 425.207. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
SHARES OF SAVINGS AND LOAN
ASSOCIATIONS
Sec. 425.208. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
BANK AND BANK HOLDING COMPANY STOCKS
Sec. 425.209. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
DEBENTURES OF PUBLIC UTILITY
CORPORATIONS
Sec. 425.210. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
PREFERRED STOCK OF PUBLIC UTILITY
CORPORATIONS
Sec. 425.211. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
BONDS ISSUED, ASSUMED, OR GUARANTEED
IN INTERNATIONAL MARKET
Sec. 425.212. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
SECURITIES OR INVESTMENTS AUTHORIZED
OR DESCRIBED BY SPECIFIC STATUTORY
PROVISION
Sec. 425.213. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
OTHER SECURITIES SPECIFICALLY
AUTHORIZED BY LAW
Sec. 425.214. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
LOANS SECURED BY REAL PROPERTY
Sec. 425.215. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
LOANS SECURED BY CERTAIN COLLATERAL
SECURED BY REAL PROPERTY
Sec. 425.216. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
POLICY LOANS
Sec. 425.217. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
LOANS SECURED BY CERTAIN SECURITIES
Sec. 425.218. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
SECURITIES NOT OTHERWISE SPECIFIED
Sec. 425.219. AUTHORIZED INVESTMENTS FOR POLICY
RESERVES AND SURPLUS: BONDS OF
CERTAIN WATER CONTROL AND IMPROVEMENT
DISTRICTS
Sec. 425.220. AUTHORIZED INVESTMENTS FOR CAPITAL,
SURPLUS, AND CONTINGENCY FUNDS:
CAPITAL STOCK, BONDS, AND OTHER
CORPORATE OBLIGATIONS
Sec. 425.221. AUTHORIZED INVESTMENTS FOR CAPITAL,
SURPLUS, AND CONTINGENCY FUNDS: BONDS
OR NOTES OF EDUCATIONAL OR RELIGIOUS
CORPORATIONS
Sec. 425.222. AUTHORIZED INVESTMENTS FOR CAPITAL,
SURPLUS, AND CONTINGENCY FUNDS: LIFE
INCOME INTERESTS IN QUALIFIED TRUSTS
Sec. 425.223. AUTHORIZED INVESTMENTS FOR CAPITAL,
SURPLUS, AND CONTINGENCY FUNDS:
CAPITAL STOCK OF REINSURER
Sec. 425.224. AUTHORIZED INVESTMENTS FOR CAPITAL,
SURPLUS, AND CONTINGENCY FUNDS: LOANS
SECURED BY CORPORATE STOCK
Sec. 425.225. INVESTMENT IN FOREIGN SECURITIES
Sec. 425.226. INVESTMENT IN STOCK SUBJECT TO
ASSESSMENT PROHIBITED
Sec. 425.227. CERTAIN INVESTMENT POWERS NOT A
RESTRICTION
Sec. 425.228. INVESTMENTS OF CEDING INSURER
Sec. 425.229. AUTHORIZED INVESTMENTS: REAL ESTATE FOR
INSURER'S OFFICES
Sec. 425.230. AUTHORIZED INVESTMENTS: OIL, GAS, AND
MINERALS
Sec. 425.231. AUTHORIZED INVESTMENTS: REAL PROPERTY
ACQUIRED UNDER CERTAIN CIRCUMSTANCES
Sec. 425.232. AUTHORIZED INVESTMENTS: IMPROVED
INCOME-PRODUCING REAL PROPERTY
CHAPTER 425. RESERVES AND INVESTMENTS FOR LIFE INSURANCE
COMPANIES AND RELATED ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 425.001. SECURITIES IN AMOUNT OF RESERVES
REQUIRED. The commissioner, after determining the amount of the
reserves required on all of a life insurance company's policies in
force, shall ensure that the company has at least that amount in
securities of the class and character required by the law of this
state, after all debts and claims against the company and the
minimum capital required by Chapter 841 or 982, as applicable, have
been provided for. (V.T.I.C. Art. 3.32.)
Sec. 425.002. CERTAIN INSURERS: DEPOSIT OF SECURITIES,
MONEY, OR PROPERTY IN AMOUNT OF LEGAL RESERVES. (a) Except as
provided by Subsection (b), a life insurance company incorporated
under the laws of this state may deposit with the department, for
the common benefit of all the holders of the company's policies and
annuity contracts and in an amount equal to the legal reserve on all
the company's outstanding policies and contracts in force,
securities of the character in which the law of this state permits
the company to invest, or against which the law of this state
permits the company to loan, the company's capital, surplus, or
reserves.
(b) A life insurance company may not make a new deposit of
securities after August 28, 1961, except to the extent expressly
required by Section 425.003.
(c) For purposes of this section, securities may be
physically delivered to the department without being accompanied by
a written transfer of a lien securing the securities. A life
insurance company may deposit registered or unregistered United
States government securities under this section.
(d) A life insurance company may deposit lawful money of the
United States instead of all or part of the securities described by
Subsection (a). A company may, for the purposes of the deposit
described by Subsection (a), convey to the department in trust the
real property in which any part of the company's reserve is lawfully
invested. If the company conveys the property, the department
shall hold the title to the property in trust until the company
deposits with the department securities to take the place of the
property, at which time the department shall reconvey the property
to the company.
(e) The department may have any securities or real property
appraised and valued before the securities or real property may be
deposited with or conveyed to the department under this section.
The life insurance company shall pay the reasonable expense of the
appraisal or valuation.
(f) For purposes of state, county, and municipal taxation,
the situs of the deposited securities is the municipality and
county in which the life insurance company's charter requires the
principal business office of the company making the deposit to be
located. (V.T.I.C. Art. 3.16, Secs. 1 (part), 2, 3.)
Sec. 425.003. CERTAIN INSURERS: REQUIRED DEPOSITS OF
SECURITIES; ADDITIONAL DEPOSITS AND WITHDRAWALS. (a) A life
insurance company that, before August 28, 1961, issued or assumed
the obligations of policies or annuity contracts that were
registered as provided by Article 3.18, as that article existed
before August 28, 1961, shall have on deposit with the department
securities of the character described by Section 425.002 in an
amount equal to or greater than the aggregate net value of the
company's outstanding registered policies and annuity contracts in
force.
(b) To comply with Subsection (a), a life insurance company
shall periodically make additional deposits of securities in
amounts of not less than $5,000. A company whose deposits exceed
the aggregate net value of the company's outstanding registered
policies and annuity contracts in force may periodically withdraw
the excess in amounts of not less than $5,000. A company may at any
time withdraw any of the company's deposited securities by
depositing in their place securities of equal value to the
securities replaced and of a character authorized by this chapter.
(c) A life insurance company may at any time collect the
interest, rents, and other income from the company's securities on
deposit.
(d) The net value of each policy or annuity contract subject
to this section is the policy's or contract's value according to the
standard prescribed by state law when the first premium on the
policy or contract is paid, minus the amount of any liens the life
insurance company has against the policy or contract not to exceed
the policy's or contract's value.
(e) The department shall hold a life insurance company's
securities on deposit with the department under this section in
trust for the benefit of all holders of the company's outstanding
policies and annuity contracts that were registered as provided by
Article 3.18, as that article existed before August 28, 1961.
(f) A life insurance company that has outstanding
registered policies or annuity contracts in force may not reinsure
all or any part of that outstanding business, other than in a
company authorized to engage in business in this state. (V.T.I.C.
Art. 3.16, Sec. 1 (part); Art. 3.17.)
Sec. 425.004. RECORDS OF SECURITIES DEPOSITED WITH
DEPARTMENT; REPORT OF VALUE. Each life insurance company that is
required by Section 425.003 to have securities on deposit with the
department shall:
(1) keep records of:
(A) all of the company's outstanding registered
policies and annuity contracts in force; and
(B) the net value of those policies and
contracts; and
(2) not later than the 15th day after the last day of
each calendar month, file with the department a report stating
whether the value of the company's securities on deposit is equal to
or greater than the aggregate net value of the company's registered
policies and annuity contracts outstanding and in force at the end
of the preceding calendar month. (V.T.I.C. Art. 3.18, Secs. 2, 3.)
Sec. 425.005. DEPARTMENT DUTIES REGARDING DEPOSITED
SECURITIES; INSURANCE COMPANY ACCESS. (a) The department shall
keep securities deposited by a life insurance company under
Sections 425.002 and 425.003 in a secure safe-deposit, fireproof
box or vault in the municipality of, or a municipality near the
location of, the company's home office.
(b) The life insurance company's officers may, in
accordance with reasonable rules adopted by the commissioner, have
access to the securities to detach interest coupons, credit
payment, and exchange securities as provided by Section 425.003.
(V.T.I.C. Art. 3.18, Sec. 4.)
Sec. 425.006. ADDITIONAL RESERVES REQUIRED: SUBSTANDARD OR
EXTRA HAZARDOUS POLICIES. (a) If a life insurance company engaged
in business under the laws of this state has written or assumed
risks that are substandard or extra hazardous and has charged more
for the policies under which those risks are written or assumed than
the company's published premium rates, the commissioner shall, in
valuing those policies, compute and charge extra reserves on the
policies as necessary because of the extra hazard assumed and the
extra premium charged.
(b) If the commissioner determines, after notice and
hearing, that a particular risk or class of risks is substandard or
extra hazardous, a life insurance company may not, after the
determination is made, write or assume the particular risk or class
of risks unless the company charges an extra premium as necessary
because of the extra hazard assumed. (V.T.I.C. Art. 3.29.)
Sec. 425.007. SUBSCRIPTION TO OR UNDERWRITING PURCHASE OR
SALE OF SECURITIES OR PROPERTY PROHIBITED; CONTROL OF DISPOSITION
OF PROPERTY. (a) A life insurance company organized under the laws
of this state may not:
(1) subscribe to, or participate in, any underwriting
of the purchase or sale of securities or property;
(2) enter into a transaction described by Subdivision
(1) for a purpose described by Subdivision (1);
(3) sell on account of the company jointly with any
other person, firm, or corporation; or
(4) enter into any agreement to withhold from sale any
of the company's property.
(b) The disposition of the life insurance company's
property must be at all times within the control of the company's
board of directors. (V.T.I.C. Art. 3.39a.)
Sec. 425.008. AUTHORIZED INVESTMENTS FOR FOREIGN
COMPANIES. A foreign company shall invest the company's assets in:
(1) securities or property of the same classes in
which the law of this state permits a domestic insurance company to
invest; or
(2) securities permitted by other law of this state
and approved by the commissioner as being of substantially the same
grade as securities or property in which a domestic insurance
company is permitted to invest. (V.T.I.C. Art. 3.41.)
Sec. 425.009. STUDENT LOANS. A foreign or domestic life
insurance company may make loans to a student enrolled in an
institution of higher education if the principal amount of the loan
is insured by:
(1) the federal government under the Higher Education
Act of 1965 (Pub. L. No. 89-329), as amended; or
(2) the Texas Guaranteed Student Loan Corporation
under Chapter 57, Education Code. (V.T.I.C. Art. 3.41a.)
[Sections 425.010-425.050 reserved for expansion]
SUBCHAPTER B. STANDARD VALUATION LAW
Sec. 425.051. SHORT TITLE. This subchapter may be cited as
the Standard Valuation Law. (V.T.I.C. Art. 3.28, Sec. 1.)
Sec. 425.052. DEFINITIONS. (a) In this subchapter,
"reserves" means reserve liabilities.
(b) As used in this subchapter:
(1) an "issue year basis" of valuation means a
valuation basis under which the interest rate used to determine the
minimum valuation standard for the entire duration of the annuity
or guaranteed interest contract is the calendar year valuation
interest rate for the year of issue or year of purchase of the
annuity or guaranteed interest contract; and
(2) a "change in fund basis" of valuation means a
valuation basis under which the interest rate used to determine the
minimum valuation standard applicable to each change in the fund
held under the annuity or guaranteed interest contract is the
calendar year valuation interest rate for the year of the change in
the fund. (V.T.I.C. Art. 3.28, Secs. 2 (part), 5(c) (part).)
Sec. 425.053. ANNUAL VALUATION OF RESERVES. (a) The
department shall annually value or have valued the reserves for all
outstanding life insurance policies and annuity and pure endowment
contracts of each life insurance company engaged in business in
this state. The department may certify the amount of those
reserves, specifying the mortality table or tables, rate or rates
of interest, and methods, including the net level premium method or
another method, used in computing those reserves.
(b) In computing reserves under Subsection (a), the
department may use group methods and approximate averages for
fractions of a year or otherwise.
(c) Instead of valuing the reserves as required by
Subsection (a) for a foreign or alien company, the department may
accept any valuation made by or for the insurance supervisory
official of another state or jurisdiction if:
(1) the valuation complies with the minimum standard
provided by this subchapter; and
(2) the official accepts as sufficient and valid for
all legal purposes a certificate of valuation made by the
department that states the valuation was made in a specified manner
according to which the aggregate reserves would be at least as large
as they would be if computed in the manner prescribed by the law of
that state or jurisdiction. (V.T.I.C. Art. 3.28, Sec. 2 (part).)
Sec. 425.054. ACTUARIAL OPINION REQUIRED. (a) For
purposes of this section, "qualified actuary" means:
(1) a qualified actuary, as that term is defined by
Section 802.002; or
(2) a person who, before September 1, 1993, satisfied
the requirements of the former State Board of Insurance to submit an
opinion under former Section 2A(a)(1), Article 3.28.
(b) In conjunction with the annual statement and in addition
to other information required by this subchapter, each life
insurance company engaged in business in this state shall annually
submit to the department the opinion of a qualified actuary as to
whether the reserves and related actuarial items held in support of
the policies and contracts specified by commissioner rule:
(1) are computed appropriately;
(2) are based on assumptions that satisfy contractual
provisions;
(3) are consistent with prior reported amounts; and
(4) comply with applicable laws of this state.
(c) The commissioner by rule shall specify the requirements
of an actuarial opinion under Subsection (b), including any matters
considered necessary to the opinion's scope.
(d) The opinion required by this section must:
(1) apply to all of the life insurance company's
business in force, including individual and group health insurance
plans; and
(2) be in the form and contain the substance specified
by commissioner rule and be acceptable to the commissioner.
(e) The commissioner may accept as an opinion required to be
submitted under Subsection (b) by a foreign or alien company the
opinion filed by that company with the insurance supervisory
official of another state if the commissioner determines that the
opinion filed in the other state reasonably meets the requirements
applicable to a company domiciled in this state.
(f) Except as exempted by or as otherwise provided by
commissioner rule, a life insurance company shall include in the
opinion required by Subsection (b) an opinion that states whether
the reserves and related actuarial items held in support of the
policies and contracts specified by commissioner rule adequately
provide for the company's obligations under the policies and
contracts, including the benefits under and expenses associated
with the policies and contracts.
(g) In making the opinion under Subsection (f), the reserves
and related actuarial items are considered in light of the assets
held by the life insurance company with respect to the reserves and
related actuarial items, including:
(1) the investment earnings on the assets; and
(2) the considerations anticipated to be received and
retained under the policies and contracts.
(h) The person who certifies the opinion required by
Subsection (b) must make the opinion required by Subsection (f).
(i) Rules adopted under this section may exempt life
insurance companies that would be exempt from the requirements of
this section under the most recently adopted regulation by the
National Association of Insurance Commissioners entitled "Model
Actuarial Opinion and Memorandum Regulation," or a successor to
that regulation, if the commissioner considers the exemption
appropriate. (V.T.I.C. Art. 3.28, Secs. 2A(a)(1), (2), (3), (b).)
Sec. 425.055. SUPPORTING MEMORANDUM FOR ACTUARIAL OPINION.
(a) A memorandum that, in form and substance, complies with the
commissioner's rules shall be prepared to support each actuarial
opinion required by Section 425.054.
(b) The commissioner may engage an actuary or other
financial specialist as defined by commissioner rule if:
(1) a life insurance company does not provide a
supporting memorandum at the request of the commissioner in the
time specified by rule; or
(2) the company provides a supporting memorandum, but
the commissioner determines that the supporting memorandum does not
meet the standards prescribed by rule or is otherwise unacceptable
to the commissioner.
(c) The actuary or other financial specialist under
Subsection (b) shall:
(1) review the actuarial opinion and the basis for the
opinion; and
(2) prepare the supporting memorandum.
(d) A life insurance company is responsible for the expense
of the actuary or other financial specialist under Subsection (b).
(V.T.I.C. Art. 3.28, Secs. 2A(a)(6), (7).)
Sec. 425.056. LIMITATION ON LIABILITY FOR ACTUARIAL
OPINION. (a) Except in cases of fraud or wilful misconduct or as
provided by Subsection (b), a person who certifies an opinion under
Section 425.054 is not liable for damages to a person, other than
the life insurance company covered by the opinion, for an act,
error, omission, decision, or other conduct with respect to the
person's opinion.
(b) Subsection (a) does not apply to an administrative
penalty imposed under Chapter 84. (V.T.I.C. Art. 3.28, Sec.
2A(a)(4).)
Sec. 425.057. DISCIPLINARY ACTION: COMPANY OR PERSON
CERTIFYING OPINION. A company or person that certifies an opinion
under Section 425.054 and that violates Section 425.054 or 425.055
or rules adopted under those sections is subject to disciplinary
action under Chapter 82. (V.T.I.C. Art. 3.28, Sec. 2A(a)(5).)
Sec. 425.058. VALUATION OF POLICY OR CONTRACT: GENERAL
RULE. (a) Except as otherwise provided by Section 425.059,
425.060, 425.061, 425.062, or 425.063, the minimum standard for the
valuation of an outstanding life insurance policy or annuity or
pure endowment contract issued by a life insurance company on or
after the date on which Chapter 1105 applies to policies issued by
the company, as determined under Section 1105.002(a) or (b), is the
commissioners reserve valuation method described by Sections
425.064, 425.065, and 425.068, computed using the table prescribed
by this section and with interest at 3-1/2 percent or at the
following rate, if applicable:
(1) in the case of a policy or contract issued on or
after June 14, 1973, and before August 29, 1977, other than an
annuity or pure endowment contract, four percent;
(2) in the case of a single premium life insurance
policy issued on or after August 29, 1977, 5-1/2 percent; or
(3) in the case of a life insurance policy issued on or
after August 29, 1977, other than a single premium life insurance
policy, 4-1/2 percent.
(b) Except as provided by Subsection (c), for an ordinary
life insurance policy issued on the standard basis, excluding any
disability or accidental death benefits in the policy, the
applicable table is the Commissioners 1941 Standard Ordinary
Mortality Table, if the policy was issued before the date on which
Section 1105.152 would apply to the policy, as determined under
Section 1105.152(a) or (b), or the Commissioners 1958 Standard
Ordinary Mortality Table, if Section 1105.152 applies to the
policy. For a policy that is issued to insure a female risk:
(1) a modified net premium or present value for a
policy issued before August 29, 1977, may be computed according to
an age not more than three years younger than the insured's actual
age; and
(2) a modified net premium or present value for a
policy issued on or after August 29, 1977, may be computed according
to an age not more than six years younger than the insured's actual
age.
(c) For an ordinary life insurance policy issued on the
standard basis, excluding any disability or accidental death
benefits in the policy, and to which Subchapter B, Chapter 1105,
applies, the applicable table is:
(1) the Commissioners 1980 Standard Ordinary
Mortality Table;
(2) at the insurer's option for one or more specified
life insurance plans, the Commissioners 1980 Standard Ordinary
Mortality Table with Ten-Year Select Mortality Factors; or
(3) any ordinary mortality table adopted after 1980 by
the National Association of Insurance Commissioners that is
approved by commissioner rule for use in determining the minimum
standard valuation for a policy to which this subdivision applies.
(d) For an industrial life insurance policy issued on the
standard basis, excluding any disability or accidental death
benefits in the policy, the applicable table is:
(1) the 1941 Standard Industrial Mortality Table, if
the policy was issued before the date on which Section 1105.153
would apply to the policy as determined under Section 1105.153(a)
or (b); or
(2) if Section 1105.153 applies to the policy:
(A) the Commissioners 1961 Standard Industrial
Mortality Table; or
(B) any industrial mortality table adopted after
1980 by the National Association of Insurance Commissioners that is
approved by commissioner rule for use in determining the minimum
standard of valuation for a policy to which this subdivision
applies.
(e) For an individual annuity or pure endowment contract,
excluding any disability or accidental death benefits in the
policy, the applicable table is the 1937 Standard Annuity Mortality
Table, or at the insurer's option, the Annuity Mortality Table for
1949, Ultimate, or a modification of either table that is approved
by the commissioner.
(f) For a group annuity or pure endowment contract,
excluding any disability or accidental death benefits in the
policy, the applicable table is:
(1) the Group Annuity Mortality Table for 1951;
(2) a modification of that table approved by the
commissioner; or
(3) at the insurance company's option, a table or a
modification of a table prescribed for an individual annuity or
pure endowment contract by Subsection (e).
(g) For total and permanent disability benefits in or
supplementary to an ordinary policy or contract, the applicable
tables are:
(1) for a policy or contract issued on or after January
1, 1966:
(A) the tables of Period 2 disablement rates and
the 1930 to 1950 termination rates of the 1952 Disability Study of
the Society of Actuaries, with due regard to the type of benefit; or
(B) any table of disablement rates and
termination rates adopted after 1980 by the National Association of
Insurance Commissioners that are approved by commissioner rule for
use in determining the minimum standard of valuation for a policy to
which this subdivision applies;
(2) for a policy or contract issued on or after January
1, 1961, and before January 1, 1966:
(A) a table described by Subdivision (1); or
(B) at the insurance company's option, the Class
(3) Disability Table (1926); or
(3) for a policy issued before January 1, 1961, the
Class (3) Disability Table (1926).
(h) A table described by Subsection (g) must, for an active
life, be combined with a mortality table permitted for computing
the reserves for a life insurance policy.
(i) For accidental death benefits in or supplementary to a
policy, the applicable table is:
(1) for a policy issued on or after January 1, 1966:
(A) the 1959 Accidental Death Benefits Table; or
(B) any accidental death benefits table adopted
after 1980 by the National Association of Insurance Commissioners
that is approved by commissioner rule for use in determining the
minimum standard of valuation for a policy to which this
subdivision applies;
(2) for a policy issued on or after January 1, 1961,
and before January 1, 1966:
(A) a table described by Subdivision (1); or
(B) at the insurance company's option, the
Inter-Company Double Indemnity Mortality Table; or
(3) for a policy issued before January 1, 1961, the
Inter-Company Double Indemnity Mortality Table.
(j) A table described by Subsection (i) must be combined
with a mortality table permitted for computing the reserves for a
life insurance policy.
(k) For group life insurance, life insurance issued on the
substandard basis and other special benefits, the applicable table
is a table approved by the commissioner.
(l) Notwithstanding any other law, the minimum reserve
requirements applicable to a policy issued under Chapter 1153 are
met if, in the aggregate, the reserves are maintained at 100 percent
of the 1980 Commissioner's Standard Ordinary Mortality Table, with
interest that does not exceed 5.5 percent. This subsection expires
September 1, 2013. (V.T.I.C. Art. 3.28, Secs. 3 (part), (a), (b),
(c), (d), (e), (f), (g), (h).)
Sec. 425.059. VALUATION OF CERTAIN ANNUITIES AND PURE
ENDOWMENT CONTRACTS. (a) This section applies to an individual
annuity or pure endowment contract issued on or after January 1,
1979, and an annuity or pure endowment purchased on or after January
1, 1979, under a group annuity or pure endowment contract. This
section also applies to an annuity or pure endowment contract
issued by an insurer after the date specified in a written notice:
(1) that was filed with the State Board of Insurance
after June 14, 1973, but before January 1, 1979; and
(2) under which the insurance company filing the
notice elected to comply before January 1, 1979, with former
Section 4, Article 3.28, with respect to individual or group
annuities and pure endowment contracts as specified by the company
in the notice.
(b) Except as provided by Section 425.060, 425.061,
425.062, or 425.063, the minimum standard for the valuation of an
individual or group annuity or pure endowment contract, excluding
any disability or accidental death benefits in the contract, is the
commissioners reserve valuation method described by Sections
425.064 and 425.065, computed using the table prescribed by this
section and with interest at the following interest rate, as
applicable:
(1) for an individual annuity or pure endowment
contract issued before August 29, 1977, other than an individual
single premium immediate annuity contract, four percent;
(2) for an individual single premium immediate annuity
contract issued before August 29, 1977, six percent;
(3) for an individual annuity or pure endowment
contract issued on or after August 29, 1977, other than an
individual single premium immediate annuity contract or an
individual single premium deferred annuity or pure endowment
contract, 4-1/2 percent;
(4) for an individual single premium immediate annuity
contract issued on or after August 29, 1977, 7-1/2 percent;
(5) for an individual single premium deferred annuity
or pure endowment contract issued on or after August 29, 1977, 5-1/2
percent;
(6) for an annuity or pure endowment purchased before
August 29, 1977, under a group annuity or pure endowment contract,
six percent; or
(7) for an annuity or pure endowment purchased on or
after August 29, 1977, under a group annuity or pure endowment
contract, 7-1/2 percent.
(c) For an individual annuity or pure endowment contract
issued before August 29, 1977, the applicable table is:
(1) the 1971 Individual Annuity Mortality Table; or
(2) a modification of that table approved by the
commissioner.
(d) For an individual annuity or pure endowment contract
issued on or after August 29, 1977, including an individual single
premium immediate annuity contract, the applicable table is:
(1) the 1971 Individual Annuity Mortality Table;
(2) an individual annuity mortality table adopted
after 1980 by the National Association of Insurance Commissioners
that is approved by the commissioner by rule for use in determining
the minimum standard of valuation for a specified type of contract
to which this subsection applies; or
(3) a modification of one of those tables approved by
the commissioner.
(e) For an annuity or pure endowment purchased before August
29, 1977, under a group annuity or pure endowment contract, the
applicable table is:
(1) the 1971 Group Annuity Mortality Table; or
(2) a modification of that table approved by the
commissioner.
(f) For an annuity or pure endowment purchased on or after
August 29, 1977, under a group annuity or pure endowment contract,
the applicable table is:
(1) the 1971 Group Annuity Mortality Table;
(2) a group annuity mortality table adopted after 1980
by the National Association of Insurance Commissioners that is
approved by the commissioner by rule for use in determining the
minimum standard of valuation for an annuity or pure endowment to
which this subsection applies; or
(3) a modification of one of those tables approved by
the commissioner. (V.T.I.C. Art. 3.28, Sec. 4.)
Sec. 425.060. APPLICABILITY OF CALENDAR YEAR STATUTORY
VALUATION INTEREST RATES. The calendar year statutory valuation
interest rates as defined by Sections 425.061, 425.062, and 425.063
are the interest rates used in determining the minimum standard for
the valuation of:
(1) a life insurance policy to which Subchapter B,
Chapter 1105, applies;
(2) an individual annuity or pure endowment contract
issued on or after January 1, 1982;
(3) an annuity or pure endowment purchased on or after
January 1, 1982, under a group annuity or pure endowment contract;
or
(4) the net increase, if any, in a calendar year after
January 1, 1982, in amounts held under a guaranteed interest
contract. (V.T.I.C. Art. 3.28, Sec. 5(a).)
Sec. 425.061. COMPUTATION OF CALENDAR YEAR STATUTORY
VALUATION INTEREST RATE: GENERAL RULE. (a) For purposes of
Subsection (b):
(1) R1 is the lesser of R or .09;
(2) R2 is the greater of R or .09;
(3) R is the reference interest rate determined under
Section 425.063; and
(4) W is the weighting factor determined under Section
425.062.
(b) The calendar year statutory valuation interest rate
("I") is determined as provided by this section, with the results
rounded to the nearest one-quarter of one percent:
(1) for life insurance:
I = .03 + W(R1 - .03) + (W/2)(R2 - .09); and
(2) for a single premium immediate annuity or annuity
benefits involving life contingencies arising from another annuity
with a cash settlement option or from a guaranteed interest
contract with a cash settlement option, or for an annuity or
guaranteed interest contract without a cash settlement option, or
for an annuity or guaranteed interest contract with a cash
settlement option that is valued on a change in fund basis:
I = .03 + W(R - .03).
(c) For an annuity or guaranteed interest contract with a
cash settlement option that is valued on an issue year basis, other
than an annuity or contract described by Subsection (b)(2):
(1) the formula prescribed by Subsection (b)(1)
applies to an annuity or guaranteed interest contract with a
guarantee duration determined under Section 425.062(f) greater
than 10 years; and
(2) the formula prescribed by Subsection (b)(2)
applies to an annuity or guaranteed interest contract with a
guarantee duration determined under Section 425.062(f) of 10 years
or less.
(d) Notwithstanding Subsections (b) and (c), if the
calendar year statutory valuation interest rate for a life
insurance policy issued in a calendar year as determined under
Subsection (b) or (c), as applicable, would differ from the
corresponding actual rate for similar policies issued in the
preceding calendar year by less than one-half of one percent, the
calendar year statutory valuation interest rate for the policy is
the corresponding actual rate for the preceding calendar year. For
purposes of this subsection, the calendar year statutory valuation
interest rate for a life insurance policy issued in a calendar year
is determined for 1980 using the reference interest rate defined
for 1979, and is determined for each subsequent calendar year
regardless of whether Subchapter B, Chapter 1105, applies to the
policy. (V.T.I.C. Art. 3.28, Sec. 5(b).)
Sec. 425.062. WEIGHTING FACTORS. (a) This section
prescribes the weighting factors referred to in the formulas
prescribed by Section 425.061.
(b) The weighting factor for a life insurance policy is
determined by the following table: Guarantee Duration (Years) Weighting Factor
10 or less .50
More than 10, but not more than 20 .45
More than 20 .35
(c) For purposes of Subsection (b), the guarantee duration
is the maximum number of years the life insurance can remain in
force on a basis guaranteed in the policy or under options to
convert to life insurance plans with premium rates or nonforfeiture
values, or both, that are guaranteed in the original policy.
(d) The weighting factor for a single premium immediate
annuity or for annuity benefits involving life contingencies
arising from another annuity with a cash settlement option or from a
guaranteed interest contract with a cash settlement option is .80.
(e) The weighting factor for an annuity or a guaranteed
interest contract, other than an annuity or contract to which
Subsection (d) applies, is determined by the following tables:
(1) For an annuity or guaranteed interest contract
that is valued on an issue year basis: Guarantee Duration (Years) Weighting Factor for Plan Type
A B C
5 or less: .80 .60 .50
More than 5, but not more
than 10: .75 .60 .50
More than 10, but not more
than 20: .65 .50 .45
More than 20: .45 .35 .35
(2) For an annuity or guaranteed interest contract
that is valued on a change in fund basis, the factors prescribed by
Subdivision (1) increased by:
Plan Type
A B C
.15 .25 .05
(3) For an annuity or guaranteed interest contract
that is valued on an issue year basis that does not guarantee
interest on considerations received more than one year after issue
or purchase, other than an annuity or contract that does not have a
cash settlement option, or an annuity or guaranteed interest
contract that is valued on a change in fund basis that does not
guarantee interest rates on considerations received more than 12
months after the valuation date, the factors prescribed by
Subdivision (1) or determined under Subdivision (2), as
appropriate, increased by:
Plan Type
A B C
.05 .05 .05
(f) For purposes of Subsection (e):
(1) for an annuity or guaranteed interest contract
with a cash settlement option, the guarantee duration is the number
of years for which the contract guarantees interest rates greater
than the calendar year statutory valuation interest rate for life
insurance policies with guarantee duration greater than 20 years;
and
(2) for an annuity or guaranteed interest contract
without a cash settlement option, the guarantee duration is the
number of years from the issue or purchase date to the date annuity
benefits are scheduled to begin.
(g) For purposes of Subsection (e):
(1) a policy is a "Plan Type A" policy if:
(A) the policyholder may withdraw funds at any
time, but only:
(i) with an adjustment to reflect changes
in interest rates or asset values after the insurance company
receives the funds;
(ii) without an adjustment described by
Subparagraph (i), provided that the withdrawal is in installments
over five years or more; or
(iii) as an immediate life annuity; or
(B) the policyholder is not permitted to withdraw
funds at any time;
(2) a policy is a "Plan Type B" policy if:
(A) before the expiration of the interest rate
guarantee:
(i) the policyholder may withdraw funds,
but only:
(a) with an adjustment to reflect
changes in interest rates or asset values after the insurance
company receives the funds; or
(b) without an adjustment described
by Subsubparagraph (a), provided that the withdrawal is in
installments over five years or more; or
(ii) the policyholder is not permitted to
withdraw funds; and
(B) on the expiration of the interest rate
guarantee, the policyholder may withdraw funds in a single sum or in
installments over less than five years, without an adjustment
described by Paragraph (A)(i); and
(3) a policy is a "Plan Type C" policy if the
policyholder may withdraw funds before the expiration of the
interest rate guarantee in a single sum or in installments over less
than five years:
(A) without an adjustment to reflect changes in
interest rates or asset values after the insurance company receives
the funds; or
(B) subject only to a fixed surrender charge that
is a percentage of the fund stipulated in the contract.
(h) An insurance company may elect to value an annuity or
guaranteed interest contract with a cash settlement option on an
issue year basis or on a change in fund basis. A company must value
an annuity or guaranteed interest contract without a cash
settlement option on an issue year basis. (V.T.I.C. Art. 3.28, Sec.
5(c) (part).)
Sec. 425.063. REFERENCE INTEREST RATE. (a) In this
section, "Moody's Corporate Bond Yield Average" means the Moody's
Corporate Bond Yield Average--Monthly Average Corporates, as
published by Moody's Investors Service, Inc.
(b) Except as provided by Subsection (g), the reference
interest rate for purposes of Section 425.061 is determined as
provided by Subsections (c)-(f).
(c) The reference interest rate for a life insurance policy
is the lesser of the average over a period of 36 months or the
average over a period of 12 months, ending on June 30 of the
calendar year preceding the year of issue, of the Moody's Corporate
Bond Yield Average.
(d) The reference interest rate is the average over a period
of 12 months, ending on June 30 of the calendar year of issue or year
of purchase, of the Moody's Corporate Bond Yield Average for:
(1) a single premium immediate annuity or annuity
benefits involving life contingencies arising from another annuity
with a cash settlement option or from a guaranteed interest
contract with a cash settlement option;
(2) an annuity or guaranteed interest contract with a
cash settlement option, other than an annuity or contract described
by Subdivision (1), that is valued on an issue year basis and has a
guarantee duration as determined under Section 425.062(f) of 10
years or less; or
(3) an annuity or guaranteed interest contract without
a cash settlement option.
(e) The reference interest rate is the lesser of the average
over a period of 36 months or the average over a period of 12 months,
ending on June 30 of the calendar year of issue or purchase, of the
Moody's Corporate Bond Yield Average for an annuity or guaranteed
interest contract with a cash settlement option, other than an
annuity or contract described by Subsection (d)(1), that is valued
on an issue year basis and has a guarantee duration as determined
under Section 425.062(f) greater than 10 years.
(f) The reference interest rate is the average over a period
of 12 months, ending on June 30 of the calendar year of the change in
the fund, of the Moody's Corporate Bond Yield Average, for an
annuity or guaranteed interest contract with a cash settlement
option, other than an annuity or contract described by Subsection
(d)(1), that is valued on a change in fund basis.
(g) At least annually, the commissioner shall:
(1) determine whether the reference interest rates
prescribed by Subsections (c), (d), (e), and (f) continue to be a
reasonably accurate approximation of the average yield achieved
from purchases in the United States in publicly quoted markets of
investment grade fixed term and fixed interest corporate
obligations for the periods referenced in Subsection (c), (d), (e),
or (f), as applicable; and
(2) if the commissioner determines that a reference
interest rate prescribed by Subsection (c), (d), (e), or (f) is not
a reasonably accurate approximation of the average yield described
by Subdivision (1), adopt rules in the manner prescribed by
Chapters 2001 and 2002, Government Code, to prescribe an
alternative method of determining a reference interest rate, as
appropriate, that is a reasonably accurate approximation of that
average yield. (V.T.I.C. Art. 3.28, Secs. 5(d), (e).)
Sec. 425.064. COMMISSIONERS RESERVE VALUATION METHOD. (a)
Except as otherwise provided by Sections 425.065 and 425.068 and
subject to Subsection (b), for the life insurance and endowment
benefits of a policy that provides for a uniform amount of insurance
and that requires the payment of uniform premiums, the reserve
according to the commissioners reserve valuation method is the
difference, if greater than zero, of the present value on the date
of valuation of those future guaranteed benefits, minus the present
value on that date of any future modified net premiums for a policy
described by this subsection. The modified net premiums for a
policy described by this subsection are a uniform percentage of the
respective contract premiums for those benefits, so that the
present value on the policy's issue date of all the modified net
premiums is equal to the sum of:
(1) the present value on that date of those benefits;
and
(2) the difference, if greater than zero, between:
(A) a net level annual premium equal to the
present value on the policy's issue date of the benefits provided
for after the first policy year, divided by the present value on the
policy's issue date of an annuity of one per year, payable on the
first policy anniversary and on each subsequent policy anniversary
on which a premium becomes due; and
(B) a net one-year term premium for the benefits
provided for in the first policy year.
(b) A net level annual premium under Subsection (a)(2)(A)
may not exceed the net level annual premium on the 19-year premium
whole life plan for insurance of the same amount at an age that is
one year older than the age on the policy's issue date.
(c) This subsection applies only to a life insurance policy
issued on or after January 1, 1985, for which the contract premium
for the first policy year exceeds the contract premium for the
second year, for which a comparable additional benefit is not
provided in the first year for the excess premium, and that provides
an endowment benefit, a cash surrender value, or a combination of an
endowment benefit and cash surrender value, in an amount greater
than the excess premium. For purposes of this subsection, the
"assumed ending date" is the first policy anniversary on which the
sum of any endowment benefit and any cash surrender value available
on that date is greater than the excess premium. The reserve
according to the commissioners reserve valuation method for a
policy to which this subsection applies as of any policy
anniversary occurring on or before the assumed ending date is,
except as otherwise provided by Section 425.068, the greater of:
(1) the reserve as of the policy anniversary computed
as prescribed by Subsection (a); or
(2) the reserve as of the policy anniversary computed
as prescribed by Subsection (a) but with:
(A) the value prescribed by Subsection (a)(2)(A)
reduced by 15 percent of the amount of the excess first-year
premium;
(B) each present value of a benefit or premium
determined without reference to a premium or benefit provided under
the policy after the assumed ending date;
(C) the policy assumed to mature on the assumed
ending date as an endowment; and
(D) the cash surrender value provided on the
assumed ending date considered to be an endowment benefit.
(d) In making the comparison required by Subsection (c), the
mortality tables and interest bases described by Sections 425.058,
425.061, 425.062, and 425.063 must be used.
(e) Reserves according to the commissioners reserve
valuation method for the following policies, contracts, and
benefits must be computed by a method consistent with the
principles of this section:
(1) a life insurance policy that provides for a
varying amount of insurance or that requires the payment of varying
premiums;
(2) a group annuity or pure endowment contract
purchased under a retirement or deferred compensation plan
established or maintained by an employer, including a partnership
or sole proprietorship, by an employee organization, or by both,
other than a plan providing individual retirement accounts or
individual retirement annuities under Section 408, Internal
Revenue Code of 1986, and that section's subsequent amendments;
(3) disability or accidental death benefits in a
policy or contract; and
(4) all other benefits, other than life insurance and
endowment benefits in a life insurance policy or benefits provided
by any other annuity or pure endowment contract. (V.T.I.C.
Art. 3.28, Sec. 6.)
Sec. 425.065. COMMISSIONERS ANNUITY RESERVE VALUATION
METHOD. (a) This section applies to an annuity or pure endowment
contract other than a group annuity or pure endowment contract
purchased under a retirement or deferred compensation plan
established or maintained by an employer, including a partnership
or sole proprietorship, by an employee organization, or by both,
other than a plan providing individual retirement accounts or
individual retirement annuities under Section 408, Internal
Revenue Code of 1986, and that section's subsequent amendments.
(b) Reserves according to the commissioners annuity reserve
method for benefits under an annuity or pure endowment contract,
excluding any disability or accidental death benefits in the
contract, are the greatest of the respective excesses of the
present values on the valuation date of the future guaranteed
benefits under the contract at the end of each respective contract
year, including guaranteed nonforfeiture benefits, minus the
present value on the valuation date of any future valuation
considerations derived from future gross considerations that are
required by the contract terms and that become payable before the
end of the respective contract year. The future guaranteed
benefits must be determined by using the mortality table, if any,
and the interest rate or rates specified in the contract for
determining guaranteed benefits. The valuation considerations are
the portions of the respective gross considerations applied under
the contract terms to determine nonforfeiture values. (V.T.I.C.
Art. 3.28, Sec. 7.)
Sec. 425.066. MINIMUM AGGREGATE RESERVES. (a) An
insurance company's aggregate reserves for all life insurance
policies, excluding disability or accidental death benefits,
issued by the company on or after the date on which Chapter 1105
applies to policies issued by the company, as determined under
Section 1105.002(a) or (b), may not be less than the aggregate
reserves computed in accordance with the methods prescribed by
Sections 425.064, 425.065, 425.068, and 425.069 and the mortality
table or tables and interest rate or rates used in computing
nonforfeiture benefits for those policies.
(b) The aggregate reserves of an insurance company to which
this section applies for all policies, contracts, and benefits may
not be less than the aggregate reserves determined to be necessary
to issue a favorable opinion under Section 425.054. (V.T.I.C.
Art. 3.28, Secs. 8, 8A.)
Sec. 425.067. OPTIONAL RESERVE COMPUTATIONS. (a) Reserves
for a policy or contract issued by a life insurance company before
the date on which Chapter 1105 would apply to the policy or
contract, as determined under Section 1105.002(a) or (b), may be
computed, at the company's option, according to any standard that
produces greater aggregate reserves for all those policies and
contracts than the minimum reserves required by the laws applicable
to those policies and contracts immediately before that date.
(b) Reserves for any category, as established by the
commissioner, of policies, contracts, or benefits issued by a life
insurance company on or after the date on which Chapter 1105 applies
to policies, contracts, or benefits issued by the company, as
determined under Section 1105.002(a) or (b), may be computed, at
the company's option, according to any standard that produces
greater aggregate reserves for the category than the minimum
aggregate reserves computed according to the standard provided by
this subchapter, but the interest rate or rates used for those
policies and contracts, other than annuity and pure endowment
contracts, may not be higher than the corresponding interest rate
or rates used in computing any nonforfeiture benefits provided in
those policies or contracts.
(c) An insurance company that has adopted a standard of
valuation that produces greater minimum aggregate reserves than the
aggregate reserves computed according to the standard provided by
this subchapter may, with the commissioner's approval, adopt any
lower standard of valuation that produces aggregate reserves at
least equal to the minimum aggregate reserves computed according to
the standard provided by this subchapter.
(d) For purposes of this section, the holding of additional
reserves previously determined to be necessary to issue a favorable
opinion under Section 425.054 may not be considered to be the
adoption of a higher standard of valuation. (V.T.I.C. Art. 3.28,
Secs. 9, 9A.)
Sec. 425.068. RESERVE COMPUTATION: GROSS PREMIUM CHARGED
LESS THAN VALUATION NET PREMIUM. (a) If in a contract year the
gross premium charged by a life insurance company on a policy or
contract is less than the valuation net premium for the policy or
contract computed by the method used in computing the reserve on the
policy or contract but using the minimum valuation mortality
standards and interest rate, the minimum reserve required for the
policy or contract is the greater of:
(1) the reserve computed according to the mortality
table, interest rate, and method actually used for the policy or
contract; or
(2) the reserve computed by the method actually used
for the policy or contract but using the minimum valuation
mortality standards and interest rate and replacing the valuation
net premium with the actual gross premium in each contract year for
which the valuation net premium exceeds the actual gross premium.
(b) The minimum valuation mortality standards and interest
rate under Subsection (a) are the standards and rate provided by
Sections 425.058, 425.061, 425.062, and 425.063.
(c) This subsection applies only to a life insurance policy
issued on or after January 1, 1985, for which the gross premium for
the first policy year exceeds the gross premium for the second
policy year, for which a comparable additional benefit is not
provided in the first year for the excess premium, and that provides
an endowment benefit, a cash surrender value, or a combination of an
endowment benefit and cash surrender value, in an amount greater
than the excess premium. For a policy to which this subsection
applies, Subsections (a) and (b) shall be applied as if the method
actually used in computing the reserve for the policy were the
method described in Section 425.064, ignoring Section 425.064(c).
The minimum reserve at each policy anniversary is the greater of:
(1) the minimum reserve computed in accordance with
Section 425.064, including Section 425.064(c); or
(2) the minimum reserve computed in accordance with
this section. (V.T.I.C. Art. 3.28, Sec. 10.)
Sec. 425.069. RESERVE COMPUTATION: INDETERMINATE PREMIUM
PLANS AND CERTAIN OTHER PLANS. (a) For a life insurance plan that
provides for future premium determination, the amounts of which are
to be determined by the insurance company based on estimates of
future experience, or a life insurance plan or annuity for which the
minimum reserves cannot be determined by the methods described by
Sections 425.064, 425.065, and 425.068, the reserves held must:
(1) be appropriate in relation to the benefits and the
pattern of premiums for the plan; and
(2) be computed by a method that is consistent with the
principles of this subchapter, as determined by commissioner rule.
(b) Notwithstanding any other provision of state law, the
commissioner must affirmatively approve a policy, contract, or
certificate that provides life insurance under a plan described by
Subsection (a) before the policy, contract, or certificate may be
marketed, issued, delivered, or used in this state. (V.T.I.C.
Art. 3.28, Sec. 11.)
Sec. 425.070. COMPUTATION OF RESERVE FOR CERTAIN POLICIES
BY CALENDAR YEAR OF ISSUE. (a) The reserve for a policy or
contract issued by a life insurance company before the date on which
Chapter 1105 would apply to the policy or contract, as determined
under Section 1105.002(a) or (b), must be computed in accordance
with the terms of the policy or contract and this section.
(b) For a policy issued before January 1, 1910, the
computation must be based on the American Experience Table of
Mortality and 4-1/2 percent annual interest.
(c) For a policy issued on or after January 1, 1910, and
before January 1, 1948, the computation must be based on:
(1) the Actuaries or Combined Experience Table of
Mortality and four percent annual interest, if the interest rate
guaranteed in the policy is four percent annually or higher; or
(2) the American Experience Table of Mortality and
the lower rate specified in the policy, if the policy was issued on
a reserve basis of an interest rate lower than four percent
annually.
(d) For a policy issued on or after January 1, 1948, the
computation must be based on the mortality table and interest rate
specified in the policy, provided that:
(1) the specified interest rate may not exceed 3-1/2
percent annually;
(2) the specified table for a policy, other than an
industrial life insurance policy, is the American Experience Table
of Mortality, the American Men Ultimate Table of Mortality, the
Commissioners 1941 Standard Ordinary Mortality Table, or, for a
policy issued after December 31, 1959, the Commissioners 1958
Standard Ordinary Mortality Table; and
(3) the specified table for an industrial life
insurance policy is the American Experience Table of Mortality, the
Standard Industrial Mortality Table, the Sub-Standard Industrial
Mortality Table, the 1941 Standard Industrial Mortality Table, or
the 1941 Sub-Standard Industrial Mortality Table, or, for a policy
issued after December 31, 1963, the Commissioners 1961 Standard
Industrial Mortality Table.
(e) For a policy, other than an industrial life insurance
policy, issued after December 31, 1959, to insure a female risk, the
computation must be based on any mortality table and interest rate
permitted under Subsection (d) and specified in the policy but may,
at the insurance company's option, be based on an age not more than
three years younger than the insured's actual age.
(f) Except as otherwise provided by Section 425.059 for
coverage purchased under a group annuity or pure endowment contract
to which that section applies, for a policy issued on a substandard
risk, an annuity contract, or a contract or policy for disability
benefits or accidental death benefits, the computation must be
based on the standards and methods adopted by the insurance company
and approved by the commissioner.
(g) For a group insurance policy issued before May 15, 1947,
the computation must be based on the American Men Ultimate Table of
Mortality with interest at the rate of three percent or 3-1/2
percent annually as provided by the policy. The reserve value of a
group insurance policy issued on or after May 15, 1947, and before
January 1, 1961, must be computed on the basis of either the
American Men Ultimate Table of Mortality or the Commissioners 1941
Standard Ordinary Mortality Table with interest at a rate not to
exceed 3-1/2 percent annually as provided by the policy. For a
group insurance policy issued on or after January 1, 1961, the
computation must be based on an interest rate not to exceed 3-1/2
percent annually and the mortality table adopted by the insurance
company with the commissioner's approval. (V.T.I.C. Art. 3.28,
Secs. 3 (part), 12.)
[Sections 425.071-425.100 reserved for expansion]
SUBCHAPTER C. AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR CAPITAL
STOCK LIFE, HEALTH, AND ACCIDENT INSURERS
Sec. 425.101. DEFINITIONS. In this subchapter:
(1) "Assets" means the statutory accounting admitted
assets of an insurance company. The term includes lawful money of
the United States, whether in the form of cash or demand deposits in
solvent banks, savings and loan associations, credit unions, and
branches of those entities, organized under the laws of the United
States or a state of the United States, if held in accordance with
the laws or regulations applicable to those entities. The term does
not include the company's separate accounts that are subject to
Chapter 1152.
(2) "Securities valuation office" means the
Securities Valuation Office of the National Association of
Insurance Commissioners. (V.T.I.C. Art. 3.33, Sec. 7(a); New.)
Sec. 425.102. INAPPLICABILITY OF CERTAIN LAW. The
definition of "state" assigned by Section 311.005, Government Code,
does not apply to this subchapter. (New.)
Sec. 425.103. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter and rules adopted to interpret and implement this
subchapter apply to all domestic insurance companies as defined in
Section 841.001 and to other insurance companies specifically made
subject to this subchapter, including a stipulated premium company
that elects under Section 884.311 to be governed by this
subchapter.
(b) Subchapter D does not apply to an insurance company to
which this subchapter applies.
(c) This subchapter does not limit or restrict investments
in or transactions with or within subsidiaries and affiliates made
under Chapter 823. (V.T.I.C. Art. 3.33, Sec. 1 (part).)
Sec. 425.104. PURPOSE. The purpose of this subchapter is
to protect and further the interests of insureds, insurance
companies, creditors, and the public by providing standards for
development and administration of plans for investment of insurance
companies' assets. (V.T.I.C. Art. 3.33, Sec. 2.)
Sec. 425.105. WRITTEN INVESTMENT PLAN. (a) Each
insurance company's board of directors or, if the company does not
have a board of directors, the corresponding authority designated
by the company's charter, bylaws, or plan of operation, shall adopt
a written investment plan consistent with this subchapter.
(b) The investment plan must:
(1) specify the diversification of the insurance
company's investments, so as to reduce the risk of large losses, by:
(A) broad categories, such as bonds and real
property loans;
(B) kinds, such as government obligations,
obligations of business entities, mortgage-backed securities, and
real property loans on office, retail, industrial, or residential
properties;
(C) quality;
(D) maturity;
(E) industry; and
(F) geographical areas, as to both domestic and
foreign investments;
(2) balance safety of principal with yield and growth;
(3) seek a reasonable relationship of assets and
liabilities as to term and nature; and
(4) be appropriate considering the capital and surplus
and the business conducted by the company.
(c) At least annually, the board of directors or
corresponding authority shall review the adequacy of the investment
plan and the implementation of the plan.
(d) An insurance company shall maintain the company's
investment plan in the company's principal office and provide the
plan to the commissioner or the commissioner's designee on request.
The commissioner or the commissioner's designee shall maintain the
plan as a privileged and confidential document. The plan is not
subject to public disclosure. (V.T.I.C. Art. 3.33, Secs. 3(a), (b)
(part).)
Sec. 425.106. INVESTMENT RECORDS; DEMONSTRATION OF
COMPLIANCE. An insurance company shall maintain investment records
covering each transaction. The company must be able to demonstrate
at all times that the company's investments are within the
limitations imposed by this subchapter. (V.T.I.C. Art. 3.33, Sec.
3(b) (part).)
Sec. 425.107. COMMUNITY INVESTMENT REPORT. (a) The
department shall, after consulting with the insurance industry of
this state and the office of public insurance counsel, develop a
report of insurance industry community investments in this state.
(b) The commissioner may request, and an insurance company
shall provide, information necessary to complete the report
required by this section.
(c) The department shall provide the report required by this
section to the legislature not later than December 1 of each
even-numbered year. (V.T.I.C. Art. 3.33, Sec. 3A.)
Sec. 425.108. AUTHORIZED INVESTMENTS AND TRANSACTIONS IN
GENERAL. (a) Subject to the limitations and restrictions imposed
by this subchapter, and, unless otherwise specified, based on the
insurance company's capital, surplus, and admitted assets as
reported in the company's most recently filed statutory financial
statement, the investments and transactions described by this
subchapter and Subchapter F, Chapter 823, are authorized
investments and transactions for a company subject to this
subchapter.
(b) An insurance company may not make an investment or enter
into a transaction that is not authorized by this subchapter or
Subchapter F, Chapter 823. (V.T.I.C. Art. 3.33, Sec. 4 (part).)
Sec. 425.109. AUTHORIZED INVESTMENTS: GOVERNMENT
OBLIGATIONS. (a) An insurance company may invest in:
(1) a bond, evidence of indebtedness, or other
obligation of the United States;
(2) a bond, evidence of indebtedness, or other
obligation guaranteed as to principal and interest by the full
faith and credit of the United States;
(3) a bond, evidence of indebtedness, or other
obligation of an agency or instrumentality of the United States
government; and
(4) subject to Subsections (b) and (c), a bond,
evidence of indebtedness, or other obligation of a governmental
unit in the United States, Canada, or any province or municipality
of Canada, or of an instrumentality of one of those governmental
units.
(b) An insurance company may not invest in a bond, evidence
of indebtedness, or other obligation under Subsection (a)(4) if the
governmental unit or instrumentality is in default in the payment
of principal of or interest on any of the governmental unit's or
instrumentality's obligations.
(c) An insurance company's investments in the obligations
of a single governmental unit or instrumentality under Subsection
(a)(4) may not exceed 20 percent of the company's capital and
surplus. (V.T.I.C. Art. 3.33, Secs. 4(a), (b).)
Sec. 425.110. AUTHORIZED INVESTMENTS: OBLIGATIONS OF AND
OTHER INVESTMENTS IN BUSINESS ENTITIES. (a) In this section:
(1) "Business entity" includes a sole proprietorship,
corporation, association, general or limited partnership, limited
liability company, joint-stock company, joint venture, trust, or
other form of business organization, regardless of whether
organized for profit, that is organized under the laws of the United
States, another state, Canada, or any district, province, or
territory of Canada.
(2) "Counterparty exposure amount" has the meaning
assigned by Section 425.125.
(b) Subject to this section, an insurance company may invest
in an obligation, including a bond or evidence of indebtedness, a
participation in a bond or evidence of indebtedness, or an
asset-backed security, that is issued, assumed, guaranteed, or
insured by a business entity.
(c) An insurance company's investments in the obligations
or counterparty exposure amounts of a single business entity rated
by the securities valuation office may not exceed 20 percent of the
company's statutory capital and surplus.
(d) An insurance company may not invest in an obligation,
counterparty exposure amount, or preferred stock of a business
entity if, after making the investment:
(1) the aggregate amount of those investments then
held by the company that are rated 3, 4, 5, or 6 by the securities
valuation office would exceed 20 percent of the company's assets;
(2) the aggregate amount of those investments then
held by the company that are rated 4, 5, or 6 by the securities
valuation office would exceed 10 percent of the company's assets;
(3) the aggregate amount of those investments then
held by the company that are rated 5 or 6 by the securities
valuation office would exceed three percent of the company's
assets; or
(4) the aggregate amount of those investments then
held by the company that are rated 6 by the securities valuation
office would exceed one percent of the company's assets.
(e) If an insurance company attains or exceeds the limit of
a rating category referred to in Subsection (d), the company is not
precluded from acquiring investments in other rating categories
subject to the specific and multiple category limits applicable to
those investments.
(f) Notwithstanding Subsections (c)-(e), an insurance
company may invest in an additional obligation of a business entity
in which the company holds one or more obligations if the investment
is made to protect an investment previously made in that business
entity. Obligations invested in under this subsection may not
exceed one-half percent of the company's assets.
(g) This section does not prohibit an insurance company from
investing in an obligation as a result of a restructuring of an
already held obligation or preferred stock that is rated 3, 4, 5, or
6 by the securities valuation office.
(h) An insurance company shall include all counterparty
exposure amounts in determining compliance with the limitations of
this section. (V.T.I.C. Art. 3.33, Secs. 4(c), (u)(5).)
Sec. 425.111. AUTHORIZED INVESTMENTS: BONDS ISSUED,
ASSUMED, OR GUARANTEED IN INTERNATIONAL MARKET. (a) Subject to
this section, an insurance company may invest in bonds issued,
assumed, or guaranteed by:
(1) the Inter-American Development Bank;
(2) the International Bank for Reconstruction and
Development (the World Bank);
(3) the Asian Development Bank;
(4) the State of Israel;
(5) the African Development Bank; and
(6) the International Finance Corporation.
(b) An insurance company's investments in the bonds of a
single entity under this section may not exceed 20 percent of the
company's capital and surplus.
(c) The aggregate of all investments made by an insurance
company under this section may not exceed 20 percent of the
company's assets. (V.T.I.C. Art. 3.33, Sec. 4(d).)
Sec. 425.112. AUTHORIZED INVESTMENTS: POLICY LOANS. An
insurance company may invest in loans on the security of the
company's own policies in an amount that does not exceed the amount
of the reserve values of those policies. (V.T.I.C. Art. 3.33, Sec.
4(e).)
Sec. 425.113. AUTHORIZED INVESTMENTS: DEPOSITS IN CERTAIN
FINANCIAL INSTITUTIONS. (a) Subject to this section, an insurance
company may invest in any type of savings deposit, time deposit,
certificate of deposit, NOW account, or money market account in a
solvent bank, savings and loan association, or credit union that is
organized under the laws of the United States or a state, or in a
branch of one of those financial institutions.
(b) An investment under this section must be made in
accordance with the laws or regulations applicable to the bank,
savings and loan association, or credit union.
(c) The amount of an insurance company's deposits in a
single bank, savings and loan association, or credit union may not
exceed the greater of:
(1) 20 percent of the company's capital and surplus;
(2) the amount of federal or state deposit insurance
coverage that applies to the deposits; or
(3) 10 percent of the amount of capital, surplus, and
undivided profits of the financial institution receiving the
deposits. (V.T.I.C. Art. 3.33, Sec. 4(f).)
Sec. 425.114. AUTHORIZED INVESTMENTS: INSURANCE COMPANY
INVESTMENT POOLS. (a) In this section, "affiliate" means, with
respect to a person, another person that, directly or indirectly
through one or more intermediaries, controls, is controlled by, or
is under common control with the person.
(b) Subject to Subsections (c)-(g), an insurance company
may acquire investments in an investment pool that invests only in:
(1) obligations that have a rating by the securities
valuation office of one or two, or an equivalent rating issued by a
nationally recognized statistical rating organization recognized
by the securities valuation office, or that are issued by an issuer
with outstanding obligations that have a securities valuation
office one or two rating or an equivalent rating described by this
subdivision, and that:
(A) have a remaining maturity of 397 days or less
or a put that:
(i) entitles the holder to receive the
principal amount of the obligation; and
(ii) may be exercised through maturity at
specified intervals not exceeding 397 days; or
(B) have a remaining maturity of three years or
less and a floating interest rate that resets at least quarterly on
the basis of a current short-term index (federal funds, prime rate,
treasury bills, London InterBank Offered Rate, or commercial paper)
and is not subject to a maximum limit, if the obligations do not
have an interest rate that varies inversely to market interest rate
changes;
(2) securities lending, repurchase, and reverse
repurchase transactions that meet the requirements of Section
425.121 and any applicable department rules;
(3) money market funds as authorized by Section
425.123, except that a short-term investment pool may not acquire
investments in a single business entity that exceed 10 percent of
the total assets of the pool; or
(4) investments that an insurance company may make
under this subchapter, if:
(A) the company's proportionate interest in the
amount invested in those investments does not exceed the limits of
this subchapter; and
(B) the aggregate amount of the company's
investments in all investment pools under this subdivision does not
exceed 25 percent of the company's assets.
(c) An insurance company may not acquire an investment in an
investment pool under Subsection (b) if, after making the
investment, the aggregate amount of the company's investments in
all investment pools would exceed 35 percent of the company's
assets.
(d) For an investment in an investment pool to be qualified
under this section, the pool may not:
(1) acquire securities issued, assumed, guaranteed,
or insured by an investing insurer or an affiliate of the investing
insurance company; or
(2) borrow or incur an indebtedness for borrowed
money, except for securities lending and reverse repurchase
transactions.
(e) For an investment pool to be qualified under this
section:
(1) the pool manager must:
(A) be organized under the laws of the United
States or a state and designated as the pool manager in a pooling
agreement; or
(B) be:
(i) the investing insurance company, an
affiliated insurance company, a business entity affiliated with the
investing company, a custodian bank, a business entity registered
under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1
et seq.), as amended;
(ii) in the case of a reciprocal or
interinsurance exchange, the exchange's attorney-in-fact; or
(iii) in the case of a United States branch
of an alien insurance company, the United States manager or an
affiliate or subsidiary of the United States manager;
(2) the pool manager or an entity designated by the
pool manager of the type described by Subdivision (1)(B) must
maintain:
(A) detailed accounting records showing:
(i) the cash receipts and disbursements
reflecting each participant's proportionate investment in the
pool; and
(ii) a complete description of all the
pool's underlying assets, including the amount, interest rate,
maturity date, if any, and other appropriate designations; and
(B) other records that, on a daily basis, allow a
third party to verify each participant's investments in the pool;
and
(3) the assets of the pool must be held in one or more
accounts, in the name or on behalf of the pool, at the principal
office of the pool manager or under a custody agreement or trust
agreement with a custodian bank, provided that the agreement:
(A) states and recognizes the claims and rights
of each participant;
(B) acknowledges that the pool's underlying
assets are held solely for the benefit of each participant in
proportion to the aggregate amount of the participant's investments
in the pool; and
(C) contains an agreement that the pool's
underlying assets may not be commingled with the general assets of
the custodian bank or any other person.
(f) The pooling agreement for each investment pool must be
in writing and must provide that:
(1) 100 percent of the interests in the pool must be
held at all times by the insurance company, the company's
subsidiaries or affiliates, or, in the case of a United States
branch of an alien insurance company, the affiliates or
subsidiaries of the United States manager, and any unaffiliated
insurance company;
(2) the pool's underlying assets may not be commingled
with the general assets of the pool manager or any other person;
(3) in proportion to the aggregate amount of each pool
participant's interest in the pool:
(A) each participant owns an undivided interest
in the pool's underlying assets; and
(B) the pool's underlying assets are held solely
for the benefit of each participant;
(4) a participant, or, in the event of the
participant's insolvency, bankruptcy, or receivership, the
participant's trustee, receiver, conservator, or other successor
in interest, may withdraw all or part of the participant's
investment from the pool under the terms of the pooling agreement;
(5) a withdrawal may be made on demand without penalty
or other assessment on any business day, and settlement of funds
must occur within a reasonable and customary period after the
withdrawal, except that:
(A) in the case of publicly traded securities,
the settlement period may not exceed five business days; and
(B) in the case of securities and investments
other than publicly traded securities, the settlement period may
not exceed 10 business days;
(6) the amount of a distribution under Subdivision (5)
must be computed after subtracting all the pool's applicable fees
and expenses;
(7) the pool manager shall distribute to a
participant, at the manager's discretion:
(A) in cash, an amount that represents the fair
market value of the participant's pro rata share of each of the
pool's underlying assets;
(B) in kind, an amount that represents a pro rata
share of each underlying asset; or
(C) in a combination of cash and in-kind
distributions, an amount that represents a pro rata share in each
underlying asset; and
(8) the pool manager shall make the records of the pool
available for inspection by the commissioner.
(g) An investment in an investment pool is not considered to
be an affiliate transaction under Subchapter C, Chapter 823, but
each pooling agreement is subject to the standards of Section
823.101 and the reporting requirements of Section 823.052.
(V.T.I.C. Art. 3.33, Sec. 4(g).)
Sec. 425.115. AUTHORIZED INVESTMENTS: EQUITY INTERESTS.
(a) In this section, "business entity" means a real estate
investment trust, corporation, limited liability company,
association, limited partnership, joint venture, mutual fund,
trust, joint tenancy, or other similar form of business
organization, regardless of whether organized for profit.
(b) Subject to this section, an insurance company may invest
in an equity interest, including common stock, an equity investment
in an investment company other than a money market fund described by
Section 425.123, a real estate investment trust, a limited
partnership interest, a warrant, another right to acquire an equity
interest that is created by the person that owns or would issue the
equity in which the interest is acquired, and an equity interest in
a business entity that is organized under the laws of the United
States, a state of the United States, Canada, or a province or
territory of Canada.
(c) If a market value from a generally recognized source is
not available for an equity interest, the business entity or other
investment in which the interest is acquired must be subject to:
(1) an annual audit by an independent certified public
accountant; or
(2) another method of valuation acceptable to the
commissioner.
(d) An insurance company may not invest in a partnership as
a general partner except through an investment subsidiary.
(e) An insurance company's investments under this section
in a single business entity, other than a money market fund
described by Section 425.123, may not exceed 15 percent of the
company's capital and surplus.
(f) The aggregate amount of an insurance company's
investments under this section may not exceed 25 percent of the
company's assets. (V.T.I.C. Art. 3.33, Sec. 4(h).)
Sec. 425.116. AUTHORIZED INVESTMENTS: PREFERRED STOCK.
(a) Subject to this section, an insurance company may invest in
preferred stock of a business entity, as defined by Section
425.110.
(b) An insurance company may invest in preferred stock only
if:
(1) the stock is rated by the securities valuation
office; and
(2) the sum of the company's aggregate investment in
preferred stock rated 3, 4, 5, or 6 and the company's investments
under Section 425.110(d) does not exceed the limitations specified
by Section 425.110(d).
(c) An insurance company's investments in the preferred
stock of a single business entity may not exceed 20 percent of the
company's capital and surplus.
(d) The aggregate amount of an insurance company's
investments in preferred stock as to which there is not a sinking
fund for the redemption and retirement of the stock that meets the
standards established by the National Association of Insurance
Commissioners may not exceed 10 percent of the company's assets.
(e) The aggregate amount of an insurance company's
investments under this section may not exceed 40 percent of the
company's assets. (V.T.I.C. Art. 3.33, Sec. 4(i).)
Sec. 425.117. AUTHORIZED INVESTMENTS: COLLATERAL LOANS.
(a) Subject to this section, an insurance company may invest in a
collateral loan secured by:
(1) a first lien on an asset; or
(2) a valid and perfected first security interest in
an asset.
(b) The amount of a loan invested in under this section may
not exceed 80 percent of the value of the collateral asset at any
time during the duration of the loan.
(c) The asset used as collateral for a loan under this
section must be an asset, other than real property described by
Section 425.119, in which the insurance company is authorized by
this subchapter to directly invest. (V.T.I.C. Art. 3.33, Sec.
4(j).)
Sec. 425.118. AUTHORIZED INVESTMENTS: OBLIGATIONS SECURED
BY REAL PROPERTY LOANS. (a) Subject to this section, an insurance
company may invest in a note, an evidence of indebtedness, or a
participation in a note or evidence of indebtedness that is secured
by a valid first lien on real property or a leasehold estate in real
property located in the United States.
(b) The amount of an obligation secured by a first lien on
real property or a leasehold estate in real property may exceed 90
percent of the value of the real property or leasehold estate only
if:
(1) the amount does not exceed 100 percent of the value
of the real property or leasehold estate and the insurance company
or one or more wholly owned subsidiaries of the company owns, in the
aggregate, a 10 percent or greater equity interest in the real
property or leasehold estate;
(2) the amount does not exceed 95 percent of the value
of the real property or leasehold estate and:
(A) the property contains only a dwelling
designed exclusively for occupancy by not more than four families
for residential purposes; and
(B) the portion of the unpaid balance of the
obligation that exceeds 90 percent of the value of the property or
leasehold estate is guaranteed or insured by a mortgage guaranty
insurer authorized to engage in business in this state; or
(3) the amount exceeds 90 percent of the value of the
real property or leasehold estate only to the extent the obligation
is insured or guaranteed by:
(A) the United States;
(B) the Federal Housing Administration under the
National Housing Act (12 U.S.C. Section 1701 et seq.), as amended;
or
(C) this state.
(c) The term of an obligation secured by a first lien on a
leasehold estate in real property may not, as of the date the
obligation is acquired, exceed a period equal to four-fifths of the
unexpired term of the leasehold estate, and the obligation must
fully amortize during that period. The term of the leasehold estate
may not expire sooner than the 10th anniversary of the expiration
date of the term of the obligation.
(d) An obligation secured by a first lien on a leasehold
estate in real property must be payable in one or more installments
of an amount or amounts sufficient to ensure that, at any time after
the expiration of two-thirds of the original term of the
obligation, the principal balance on the obligation is not greater
than the principal balance would have been if the obligation had
been amortized over the original term of the obligation in equal
monthly, quarterly, semiannual, or annual payments of principal and
interest.
(e) If any part of the value of buildings is to be included
in the value of real property or a leasehold estate in real property
to secure an obligation under this section:
(1) the buildings must be covered by adequate property
insurance, including fire and extended coverage insurance, issued
by:
(A) an insurer authorized to engage in business
in this state; or
(B) an insurer recognized as acceptable to issue
that coverage by the insurance regulatory official of the state in
which the real property is located;
(2) the amount of insurance provided by one or more
policies may not be less than the lesser of:
(A) the unpaid balance of the obligation; or
(B) the insurable value of the buildings; and
(3) the loss clause under each policy must be payable
to the insurance company as the company's interest may appear.
(f) To the extent that a note, evidence of indebtedness, or
participation in a note or evidence of indebtedness under this
section represents an equity interest in the underlying real
property:
(1) the value of that equity interest must be
determined at the time the note, evidence of indebtedness, or
participation is executed; and
(2) the portion of the obligation that represents an
equity interest in the property must be designated as an investment
subject to Section 425.119(c).
(g) An insurance company's investment in a single
obligation under this section may not exceed 25 percent of the
company's capital and surplus.
(h) An insurance company may purchase a first lien on real
property after the origination of the lien if:
(1) the first lien is insured by a mortgagee's title
policy issued to the original mortgagee that contains a provision
that inures the policy to the use and benefit of the owners of the
evidence of indebtedness indicated in the policy and to any
subsequent owners of that evidence of indebtedness; and
(2) the company maintains evidence of an assignment or
other transfer of the first lien on real property to the company.
(i) For purposes of Subsection (h)(2), an assignment or
other transfer to the insurance company that is duly recorded in the
county in which the real property is located is presumed to create
legal ownership of the first lien by the company. (V.T.I.C.
Art. 3.33, Sec. 4(k).)
Sec. 425.119. AUTHORIZED INVESTMENTS: REAL PROPERTY. (a)
Subject to this section, an insurance company may invest in a real
property fee simple or leasehold estate located in the United
States.
(b) An insurance company may invest in home and branch
office real property or a participation in home or branch office
real property. At least 30 percent of the available space in a
building used as a home or branch office must be occupied for the
business purposes of the company and the company's affiliates. A
company's aggregate investment in home and branch office real
property may not exceed 20 percent of the company's assets.
(c) An insurance company may invest in real property other
than home and branch office real property or participations in home
and branch office real property. A company's investment under this
subsection in a single piece of property or in an interest in a
single piece of property, including improvements, fixtures, and
equipment relating to the property, may not exceed five percent of
the company's assets.
(d) Investment real property held under Subsection (b) or
(c) must be materially enhanced in value by:
(1) the construction of durable, permanent-type
buildings and other improvements that cost an amount at least equal
to the cost of the real property, excluding buildings and
improvements at the time the real property is acquired; or
(2) the construction, commenced before the second
anniversary of the date the real property is acquired, of buildings
and improvements described by Subdivision (1).
(e) The admissible asset value of each investment in real
property under Subsection (b) or (c) is subject to review and
approval by the commissioner. The commissioner may, at the time the
investment is made or any time the insurance company is being
examined, have the investment appraised by an appraiser appointed
by the commissioner. The company shall pay the reasonable expense
of the appraisal. The expense of the appraisal is considered to be
a part of the expense of examination of the company unless the
company applies for the appraisal to be made. A company may not
increase the valuation of real property described by Subsection (b)
or (c) unless:
(1) the company applies for the increase in valuation;
and
(2) the commissioner approves the increase.
(f) Except as provided by Subsection (g), an insurance
company may not own, develop, or hold an equity interest in any
residential property or subdivision, single or multiunit family
dwelling property, or undeveloped real property to subdivide for or
develop residential or single or multiunit family dwellings.
(g) An insurance company may invest in other real property
acquired:
(1) in good faith to secure a loan previously
contracted for, or for money due;
(2) in satisfaction of a debt previously contracted
for in the course of the company's dealings; or
(3) by purchase at a sale under a judgment or decree of
a court or under a mortgage or other lien held by the company.
(h) Regardless of the manner in which an insurance company
acquires real property under this section, on the sale of the
property, the company may retain indefinitely the fee title to the
mineral estate or any portion of the mineral estate. (V.T.I.C.
Art. 3.33, Sec. 4(l).)
Sec. 425.120. AUTHORIZED INVESTMENTS: OIL, GAS, AND
MINERALS. (a) In this section:
(1) "Producing" means producing oil, gas, or other
minerals in paying quantities. A well that has been shut in is
considered to be producing oil, gas, or other minerals in paying
quantities if shut-in royalties are being paid.
(2) "Production payment" means a right to oil, gas, or
other minerals in place or as produced that entitles the owner of
the right to a specified fraction of production until the owner
receives a specified amount of money, or a specified number of units
of oil, gas, or other minerals.
(3) "Royalty" or "overriding royalty" means a right to
oil, gas, and other minerals in place or as produced that entitles
the owner of the right to a specified fraction of production without
limitation to a specified amount of money or a specified number of
units of oil, gas, or other minerals.
(b) Subject to this section, in addition to and without
limitation on the purposes for which real property may be acquired,
secured, held, or retained under other provisions of this
subchapter, an insurance company may secure, hold, retain, and
convey production payments, producing royalties, and producing
overriding royalties, or participations in production payments,
producing royalties, or producing overriding royalties as an
investment for the production of income.
(c) An insurance company may not carry an asset described by
Subsection (b) in an amount that exceeds 90 percent of the appraised
value of the asset.
(d) A single investment under this section may not exceed 10
percent of the amount of the insurance company's capital and
surplus that exceeds the statutory minimum capital and surplus
applicable to the company.
(e) The aggregate amount of an insurance company's
investments under this section may not exceed 10 percent of the
company's assets as of December 31 preceding the date of the
investment. (V.T.I.C. Art. 3.33, Sec. 4(m).)
Sec. 425.121. AUTHORIZED INVESTMENTS: SECURITIES LENDING,
REPURCHASE, REVERSE REPURCHASE, AND DOLLAR ROLL TRANSACTIONS. (a)
In this section:
(1) "Dollar roll transaction" means two simultaneous
transactions with settlement dates not more than 96 days apart, in
one of which an insurance company sells to a business entity, and in
the other of which the company is obligated to purchase from the
same business entity, substantially similar securities that are:
(A) mortgage-backed securities issued, assumed,
or guaranteed by the Government National Mortgage Association, the
Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, or a successor to one of those organizations;
or
(B) other mortgage-backed securities referred to
in 15 U.S.C. Section 77r-1, as amended.
(2) "Repurchase transaction" means a transaction in
which an insurance company purchases securities from a business
entity that is obligated to repurchase the purchased securities or
equivalent securities from the company at a specified price, either
within a specified period or on demand.
(3) "Reverse repurchase transaction" means a
transaction in which an insurance company sells securities to a
business entity and is obligated to repurchase the sold securities
or equivalent securities from the business entity at a specified
price, either within a specified period or on demand.
(4) "Securities lending transaction" means a
transaction in which an insurance company lends securities to a
business entity that is obligated to return the loaned securities
or equivalent securities to the company, either within a specified
period or on demand.
(b) Subject to this section, an insurance company may engage
in securities lending, repurchase, reverse repurchase, and dollar
roll transactions.
(c) An insurance company must enter into a written agreement
for each transaction under this section, other than a dollar roll
transaction. The agreement must require that the transaction
terminate on or before the first anniversary of the transaction's
inception.
(d) With respect to cash received in a transaction under
this section, an insurance company shall:
(1) invest the cash in accordance with this subchapter
and in a manner that recognizes the liquidity needs of the
transaction; or
(2) use the cash for the company's general corporate
purposes.
(e) While a transaction under this section is outstanding,
the insurance company or the company's agent or custodian shall
maintain, as to acceptable collateral received in the transaction,
either physically or through the book-entry system of the Federal
Reserve, Depository Trust Company, Participants Trust Company, or
another securities depository approved by the commissioner:
(1) possession of the collateral;
(2) a perfected security interest in the collateral;
or
(3) in the case of a jurisdiction outside of the United
States, title to, or rights of a secured creditor to, the
collateral.
(f) The limitations of Sections 425.110 and 425.157(b) do
not apply to the business entity counterparty exposure created by a
transaction under this section. An insurance company may not enter
into a transaction under this section if, as a result of and after
making the transaction:
(1) the aggregate amount of securities loaned or sold
to or purchased from any one business entity counterparty under
this section would exceed five percent of the company's assets; or
(2) the aggregate amount of all securities loaned or
sold to or purchased from all business entities under this section
would exceed 40 percent of the company's assets.
(g) For purposes of Subsection (f)(1), in computing the
amount sold to or purchased from a business entity counterparty
under a repurchase or reverse repurchase transaction, effect may be
given to netting provisions under a master written agreement.
(h) The amount of collateral required for securities
lending, repurchase, and reverse repurchase transactions is the
amount required under the Purposes and Procedures Manual of the
securities valuation office or a successor publication. (V.T.I.C.
Art. 3.33, Secs. 4(q)(a), (b), (c), (d), (e).)
Sec. 425.122. AUTHORIZED INVESTMENTS: PREMIUM LOANS. (a)
Subject to Subsection (b), an insurance company may make loans to
finance the payment of premiums for the company's own insurance
policies or annuity contracts.
(b) The amount of a loan under this section may not exceed
the sum of:
(1) the available cash value of the insurance policy
or annuity contract for which the premium loan is made; and
(2) the amount of any escrowed commissions payable
relating to the insurance policy or annuity contract. (V.T.I.C.
Art. 3.33, Sec. 4(r).)
Sec. 425.123. AUTHORIZED INVESTMENTS: MONEY MARKET FUNDS.
(a) An insurance company may invest in a money market fund as
described by 17 C.F.R. Section 270.2a-7 under the Investment
Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), that is:
(1) a government money market fund that:
(A) invests only in obligations issued,
guaranteed, or insured by the United States government or
collateralized repurchase agreements composed of these
obligations; and
(B) qualifies for investment without a reserve
under the Purposes and Procedures Manual of the securities
valuation office or a successor publication; or
(2) a class one money market fund that qualifies for
investment using the bond class one reserve factor described by the
Purposes and Procedures Manual of the securities valuation office
or a successor publication.
(b) For purposes of complying with Section 425.115, a money
market fund that qualifies for listing in the categories prescribed
by Subsection (a) must conform to the Purposes and Procedures
Manual of the securities valuation office or a successor
publication. (V.T.I.C. Art. 3.33, Sec. 4(s).)
Sec. 425.124. AUTHORIZED INVESTMENTS: RISK CONTROL
TRANSACTIONS. Subject to Sections 425.126-425.132, an insurance
company may use derivative instruments, as defined by Section
425.125, to engage in hedging transactions, replication
transactions, and income generation transactions, as those terms
are defined by Section 425.125. (V.T.I.C. Art. 3.33, Sec. 4(u)
(part).)
Sec. 425.125. RISK CONTROL TRANSACTIONS: DEFINITIONS. In
Sections 425.124-425.132:
(1) "Acceptable collateral" means cash, cash
equivalents, letters of credit, and direct obligations, or
securities that are fully guaranteed as to principal and interest
by the United States government.
(2) "Business entity" includes a sole proprietorship,
corporation, limited liability company, association, partnership,
joint stock company, joint venture, mutual fund, bank, trust, joint
tenancy, or other similar form of business organization, regardless
of whether organized for profit.
(3) "Cap" means an agreement obligating the seller to
make payments to the buyer, with each payment based on the amount by
which a reference price or level or the performance or value of one
or more underlying interests exceeds a predetermined number that is
sometimes called the strike rate or strike price.
(4) "Cash equivalent" means an investment or security
that is short-term, highly rated, highly liquid, and readily
marketable. The term includes a money market fund described by
Section 425.123. For purposes of this subdivision, an investment
or security is:
(A) short-term if it has a remaining term to
maturity of one year or less; and
(B) highly rated if it has:
(i) a rating of "P-1" by Moody's Investors
Service, Inc.;
(ii) a rating of "A-1" by the Standard and
Poor's Division of the McGraw Hill Companies, Inc.; or
(iii) an equivalent rating by a nationally
recognized statistical rating organization recognized by the
securities valuation office.
(5) "Collar" means an agreement to receive payments as
the buyer of an option, cap, or floor and to make payments as the
seller of a different option, cap, or floor.
(6)(A) "Counterparty exposure amount" means:
(i) for an over-the-counter derivative
instrument not entered into under a written master agreement that
provides for netting of payments owed by the respective parties,
the market value of the over-the-counter derivative instrument, if
the liquidation of the derivative instrument would result in a
final cash payment to the insurer, or zero, if the liquidation of
the derivative instrument would not result in a final cash payment
to the insurance company; or
(ii) for an over-the-counter derivative
instrument entered into under a written master agreement that
provides for netting of payments owed by the respective parties,
and for which the counterparty's domiciliary jurisdiction is within
the United States or a jurisdiction outside the United States that
is listed in the Purposes and Procedures Manual of the securities
valuation office as eligible for netting, the greater of zero or the
net sum payable to the company in connection with all derivative
instruments subject to the written master agreement on the
liquidation of the instruments in the event of the counterparty's
default under the master agreement, if there is no condition
precedent to the counterparty's obligation to make the payment and
if there is no setoff of amounts payable under another instrument or
agreement.
(B) For purposes of this subdivision, market
value or the net sum payable, as applicable, must be determined at
the end of the most recent quarter of the insurance company's fiscal
year and must be reduced by the market value of acceptable
collateral held by the company or a custodian on the company's
behalf.
(7) "Derivative instrument":
(A) means an agreement, option, or instrument, or
a series or combinations of agreements, options, or instruments:
(i) to make or take delivery of, or assume
or relinquish, a specified amount of one or more underlying
interests, or to make a cash settlement instead of making or taking
delivery of, or assuming or relinquishing, a specified amount of an
underlying instrument; or
(ii) that has a price, performance, value,
or cash flow based primarily on the actual or expected price, yield,
level, performance, value, or cash flow of one or more underlying
interests;
(B) includes an option, a warrant not otherwise
permitted to be held by the insurance company under this
subchapter, a cap, a floor, a collar, a swap, a swaption, a forward,
a future, any other substantially similar agreement, option, or
instrument, and a series or combination of those agreements,
options, or instruments; and
(C) does not include a collateralized mortgage
obligation, another asset-backed security, a principal-protected
structured security, a floating rate security, an instrument that a
company would otherwise be authorized to invest in or receive under
a provision of this subchapter other than Sections 425.124-425.132,
or a debt obligation of the company.
(8) "Derivative transaction" means a transaction
involving the use of one or more derivative instruments. The term
does not include a dollar roll transaction, repurchase transaction,
reverse repurchase transaction, or securities lending transaction.
(9) "Floor" means an agreement obligating the seller
to make payments to the buyer, each of which is based on the amount
by which a predetermined number that is sometimes called the floor
rate or floor price exceeds a reference price, level, performance,
or value of one or more underlying interests.
(10) "Forward" means an agreement to make or take
delivery in the future of one or more underlying interests, or to
effect a cash settlement, based on the actual or expected price,
level, performance, or value of those interests. The term does not
include a future, a spot transaction effected within a customary
settlement period, a when-issued purchase, or another similar cash
market transaction.
(11) "Future" means an agreement traded on a futures
exchange to make or take delivery of one or more underlying
interests, or to effect a cash settlement based on the actual or
expected price, level, performance, or value of those interests.
(12) "Futures exchange" means a foreign or domestic
exchange, contract market, or board of trade on which trading in
futures is conducted and that, in the United States, is authorized
to conduct that trading by the Commodity Futures Trading Commission
or a successor to that agency.
(13) "Hedging transaction" means a derivative
transaction entered into and maintained to manage, with respect to
an asset, liability, or portfolio of assets or liabilities, that an
insurance company has acquired or incurred or anticipates acquiring
or incurring:
(A) the risk of a change in value, yield, price,
cash flow, or quantity; or
(B) the currency exchange rate risk.
(14) "Income generation transaction" means a
derivative transaction entered into to generate income. The term
does not include a hedging transaction or a replication
transaction.
(15) "Market value" means the price for a security or
derivative instrument obtained from a generally recognized source,
the most recent quotation from a generally recognized source, or if
a generally recognized source does not exist, the price determined
under the terms of the instrument or in good faith by the insurance
company, as can be reasonably demonstrated to the commissioner on
request, plus the amount of accrued but unpaid income on the
security or instrument to the extent that amount is not included in
the price as of the date the security or instrument is valued.
(16) "Option" means an agreement giving the buyer the
right to buy or receive, referred to as a "call option," to sell or
deliver, referred to as a "put option," to enter into, extend, or
terminate, or to effect a cash settlement based on the actual or
expected price, spread, level, performance, or value of, one or
more underlying interests.
(17) "Over-the-counter derivative instrument" means a
derivative instrument entered into with a business entity in a
manner other than through a securities exchange or futures exchange
or cleared through a qualified clearinghouse.
(18) "Potential exposure" means:
(A) as to a futures position, the amount of
initial margin required for that position; or
(B) as to a swap, collar, or forward, one-half of
one percent multiplied by the notional amount multiplied by the
square root of the remaining years to maturity.
(19) "Qualified clearinghouse" means a clearinghouse
that:
(A) is subject to the rules of a securities
exchange or a futures exchange; and
(B) provides clearing services, including acting
as a counterparty to each of the parties to a transaction in a
manner that eliminates the parties' credit risk to each other.
(20) "Replication transaction" means a derivative
transaction or a combination of derivative transactions effected
separately or in conjunction with cash market investments included
in the insurance company's investment portfolio to replicate the
risks and returns of another authorized transaction, investment, or
instrument, or to operate as a substitute for cash market
transactions. The term does not include a hedging transaction.
(21) "Securities exchange" means:
(A) an exchange registered as a national
securities exchange or a securities market registered under the
Securities Exchange Act of 1934 (15 U.S.C. Section 78a et seq.), as
amended;
(B) the Private Offerings, Resales and Trading
through Automated Linkages system; or
(C) a designated offshore securities market as
defined by 17 C.F.R. Section 230.902, as amended.
(22) "Swap" means an agreement to exchange or to net
payments at one or more times based on the actual or expected price,
yield, level, performance, or value of one or more underlying
interests.
(23) "Swaption" means an option to purchase or sell a
swap at a given price and time or at a series of prices and times.
The term does not include a swap with an embedded option.
(24) "Underlying interest" means an asset, liability,
or other interest underlying a derivative instrument or a
combination of those assets, liabilities, or other interests. The
term includes a security, currency, rate, index, commodity, or
derivative instrument.
(25) "Warrant" means an instrument that gives the
holder the right to purchase or sell the underlying interest at a
given price and time or at a series of prices and times outlined in
the warrant agreement. (V.T.I.C. Art. 3.33, Sec. 4(u)(1).)
Sec. 425.126. RISK CONTROL TRANSACTIONS: DERIVATIVE USE
PLAN. (a) Before an insurance company enters into a derivative
transaction, the company's board of directors must approve a
derivative use plan as part of the investment plan required by
Section 425.105.
(b) The derivative use plan must:
(1) describe investment objectives and risk
constraints, such as counterparty exposure amounts;
(2) define permissible transactions identifying the
risks to be hedged or the assets or liabilities being replicated;
and
(3) require compliance with internal control
procedures. (V.T.I.C. Art. 3.33, Sec. 4(u)(2).)
Sec. 425.127. RISK CONTROL TRANSACTIONS: INTERNAL CONTROL
PROCEDURES. An insurance company that enters into a derivative
transaction shall establish written internal control procedures
that provide for:
(1) a quarterly report to the board of directors that
reviews:
(A) each derivative transaction entered into,
outstanding, or closed out;
(B) the results and effectiveness of the
derivatives program; and
(C) the credit risk exposure to each counterparty
for over-the-counter derivative transactions based on the
counterparty exposure amount;
(2) a system for determining whether hedging or
replication strategies used have been effective;
(3) a system of regular reports, at least monthly, to
management that include:
(A) a description of each derivative transaction
entered into, outstanding, or closed out during the period since
the last report;
(B) the purpose of each outstanding derivative
transaction;
(C) a performance review of the derivative
instrument program; and
(D) the counterparty exposure amount for each
over-the-counter derivative transaction;
(4) a written authorization that identifies the
responsibilities and limitations of authority of each person
authorized to effect and maintain derivative transactions; and
(5) appropriate documentation for each transaction,
including:
(A) the purpose of the transaction;
(B) the assets or liabilities to which the
transaction relates;
(C) the specific derivative instrument used in
the transaction;
(D) for an over-the-counter derivative
transaction, the name of the counterparty and the counterparty
exposure amount; and
(E) for an exchange-traded derivative
instrument, the name of the exchange and the name of the firm that
handled the transaction. (V.T.I.C. Art. 3.33, Sec. 4(u)(3).)
Sec. 425.128. RISK CONTROL TRANSACTIONS: OVERSIGHT BY
COMMISSIONER. (a) An insurance company must be able to demonstrate
to the commissioner on request the intended hedging characteristics
and continuing effectiveness of a derivative transaction or
combination of transactions through:
(1) cash flow testing;
(2) duration analysis; or
(3) other appropriate analysis.
(b) Ten days before entering into an initial hedging
transaction, an insurance company shall notify the commissioner in
writing that:
(1) the company's board of directors has adopted an
investment plan that authorizes hedging transactions; and
(2) each hedging transaction will comply with Sections
425.124-425.132.
(c) After providing the notice under Subsection (b), the
insurance company may enter into a hedging transaction under
Section 425.124 if as a result of and after making the transaction:
(1) the aggregate statement value of all outstanding
options other than collars, and of all caps, floors, swaptions, and
warrants under Sections 425.124-425.132 not attached to another
financial instrument purchased by the company does not exceed 7.5
percent of the company's assets;
(2) the aggregate statement value of all outstanding
options other than collars, and of all caps, floors, swaptions, and
warrants written by the company under Sections 425.124-425.132 does
not exceed three percent of the company's assets; and
(3) the aggregate potential exposure of all
outstanding collars, swaps, forwards, and futures entered into or
acquired by the company under Sections 425.124-425.132 does not
exceed 6.5 percent of the company's assets.
(d) If the hedging transaction does not comply with Sections
425.124-425.132, or if continuing the transaction may create a
hazardous financial condition for the insurance company that
affects the company's policyholders or creditors or the public, the
commissioner may, after notice and an opportunity for a hearing,
order the company to take action reasonably necessary to:
(1) remedy a hazardous financial condition; or
(2) prevent an impending hazardous financial
condition from occurring. (V.T.I.C. Art. 3.33, Secs. 4(u)(4),
4(u)(6)(a) (part), (b).)
Sec. 425.129. RISK CONTROL TRANSACTIONS: LIMITATIONS ON
INCOME GENERATION TRANSACTIONS. An insurance company may enter
into an income generation transaction only if:
(1) as a result of and after making the transaction,
the sum of the following amounts does not exceed 10 percent of the
company's assets:
(A) the aggregate statement value of admitted
assets that at the time of the transaction are subject to call or
that generate the cash flows for payments the company is required to
make under caps and floors sold by the company and that at the time
of the transaction are outstanding under Sections 425.124-425.132;
(B) the statement value of admitted assets
underlying derivative instruments that at the time of the
transaction are subject to calls sold by the company and
outstanding under those sections; and
(C) the purchase price of assets subject to puts
that at the time of the transaction are outstanding under those
sections; and
(2) the transaction is one of the following types, is
covered in the manner specified by this subdivision, and meets the
other requirements of this subdivision:
(A) a sale of a call option on assets, if during
the entire period the option is outstanding, the company holds, or
has a currently exercisable right to acquire, the underlying
assets;
(B) a sale of a put option on assets, if:
(i) during the entire period the option is
outstanding, the company holds sufficient cash, cash equivalents,
or interests in a short-term investment pool to purchase the
underlying assets on exercise of the option;
(ii) the company has the ability to hold the
underlying assets in the company's portfolio; and
(iii) during the entire period the option
is outstanding, when the total market value of all put options sold
by the company exceeds two percent of the company's assets, the
company sets aside, under a custodial or escrow agreement, cash or
cash equivalents that have a market value equal to the amount of the
company's put option obligations in excess of two percent of the
company's assets;
(C) a sale of a call option on a derivative
instrument, including a swaption, if:
(i) during the entire period the call
option is outstanding, the company holds, or has a currently
exercisable right to acquire, assets generating the cash flow to
make any payment for which the company is liable under the
underlying derivative instrument; and
(ii) the company has the ability to enter
into the underlying derivative transaction for the company's
portfolio; and
(D) a sale of a cap or floor, if during the entire
period the cap or floor is outstanding, the company holds, or has a
currently exercisable right to acquire, assets generating the cash
flow to make any payment for which the company is liable under the
cap or floor. (V.T.I.C. Art. 3.33, Sec. 4(u)(7).)
Sec. 425.130. RISK CONTROL TRANSACTIONS: LIMITATIONS ON
REPLICATION TRANSACTIONS. (a) An insurance company may enter into
a replication transaction only with the prior written approval of
the commissioner, and only if:
(1) the company would otherwise be authorized to
invest the company's funds under this subchapter in the asset being
replicated; and
(2) the asset being replicated is subject to all the
provisions of this subchapter relating to the making of investments
by the company in that type of asset as if the transaction
constituted a direct investment by the company in the replicated
asset.
(b) The commissioner may adopt fair and reasonable rules
regarding replication transactions to implement this section.
(V.T.I.C. Art. 3.33, Sec. 4(u)(8).)
Sec. 425.131. RISK CONTROL TRANSACTIONS: TRADING
REQUIREMENTS. For purposes of Sections 425.124-425.132, each
derivative instrument must be:
(1) traded on a securities exchange;
(2) entered into with, or guaranteed by, a business
entity;
(3) issued or written by, or entered into with, the
issuer of the underlying interest on which the derivative
instrument is based; or
(4) in the case of futures, traded through a broker
that is:
(A) registered as a futures commission merchant
under the Commodity Exchange Act (7 U.S.C. Section 1 et seq.); or
(B) exempt from that registration under 17 C.F.R.
Section 30.10, adopted under the Commodity Exchange Act. (V.T.I.C.
Art. 3.33, Sec. 4(u)(10).)
Sec. 425.132. RISK CONTROL TRANSACTIONS: OFFSETTING
TRANSACTIONS. (a) Subject to this section, an insurance company
may purchase or sell one or more derivative instruments to wholly or
partly offset a derivative instrument previously purchased or sold,
without regard to the quantitative limitations of Sections
425.124-425.131.
(b) An offsetting transaction under this section must use
the same type of derivative instrument as the derivative instrument
being offset. (V.T.I.C. Art. 3.33, Sec. 4(u)(9).)
[Sections 425.133-425.150 reserved for expansion]
Sec. 425.151. AUTHORIZED INVESTMENTS: FOREIGN COUNTRIES
AND UNITED STATES TERRITORIES. (a) In addition to the investments
within Canada authorized by this subchapter and subject to this
section, an insurance company may make investments within another
foreign country or a commonwealth, territory, or possession of the
United States.
(b) An investment made under this section must be
substantially the same type as an investment authorized to be made
within the United States or Canada by this subchapter.
(c) The sum of the amount of investments made under this
section and the amount of similar investments made within the
United States and Canada may not exceed any limitation imposed by
Sections 425.109-425.121, 425.124-425.132, and 425.152.
(d) The aggregate amount of an insurance company's
investments under this section may not exceed the sum of:
(1) the amount of the company's reserves attributable
to insurance business in force in foreign countries, if any, and any
additional investments required by a foreign country as a condition
of engaging in business in that country; and
(2) 20 percent of the company's assets.
(e) An insurance company may not invest more than 10 percent
of the company's assets in investments denominated in foreign
currency that are not hedged under Sections 425.124-425.132.
(V.T.I.C. Art. 3.33, Sec. 4(n).)
Sec. 425.152. AUTHORIZED INVESTMENTS: INVESTMENTS NOT
OTHERWISE SPECIFIED OR PROHIBITED; INVESTMENTS AUTHORIZED BY OTHER
LAW. (a) Subject to this section, an insurance company may make an
investment that is not otherwise authorized by this subchapter and
that is not specifically prohibited by statute, including any
portion of an investment that exceeds the limits imposed by
Sections 425.109-425.121, 425.124-425.132, and 425.151.
(b) If any aggregate or individual investment limitation
imposed by Sections 425.109-425.121, 425.124-425.132, and 425.151
is exceeded, the excess portion of the investment is considered to
be an investment under Subsection (a).
(c) The insurance company has the burden of establishing the
value of an investment made under Subsection (a).
(d) The amount of a single investment made by an insurance
company under Subsection (a) may not exceed 10 percent of the
company's capital and surplus in excess of the statutory minimum
capital and surplus applicable to that company.
(e) The aggregate amount of an insurance company's
investments under Subsection (a) may not exceed the lesser of:
(1) five percent of the company's assets; or
(2) the amount of the company's capital and surplus
that exceeds the amount of statutory minimum capital and surplus
applicable to that company.
(f) An insurance company may invest in any investment
authorized for an insurance company that is subject to this
subchapter by a provision of this code other than this subchapter or
by another law of this state. (V.T.I.C. Art. 3.33, Secs. 4(o), (p)
(part).)
Sec. 425.153. AUTHORIZED INVESTMENTS: CERTAIN PREVIOUSLY
AUTHORIZED INVESTMENTS. (a) An insurance company may continue to
hold an investment held by the company on January 1, 1986, that does
not conform to the requirements of the investments authorized by
Sections 425.109-425.120, 425.151, and 425.152 if the investment
was legally authorized at the time the investment was made or
acquired or that the company was authorized to hold immediately
before January 1, 1986.
(b) An investment described by Subsection (a) is considered
an authorized investment of the insurance company. A company shall
dispose of the investment at the investment's maturity date, if
any, or within the time prescribed by the law under which the
investment was acquired, if any.
(c) This section does not alter the legal or accounting
status of an investment described by Subsection (a). (V.T.I.C.
Art. 3.33, Sec. 4(p) (part).)
Sec. 425.154. APPLICABILITY OF PERCENTAGE AUTHORIZATIONS
AND LIMITATIONS. The percentage authorizations and limitations
established by this subchapter apply only at the time an investment
is originally acquired or a transaction is entered into and do not
apply to the insurance company or the investment or transaction
after that time, except as provided by Section 425.155. (V.T.I.C.
Art. 3.33, Sec. 4(t) (part).)
Sec. 425.155. QUALIFICATION OF INVESTMENTS. (a) The
qualification or disqualification of an investment under one
section of this subchapter does not prevent the investment from
qualifying, wholly or partly, under another section of this
subchapter. An investment authorized by more than one section may
be held under the authorizing section elected by the insurance
company.
(b) An investment or transaction qualified under any
section of this subchapter at the time the insurance company
acquired the investment or entered into the transaction continues
to be qualified under that section.
(c) An insurance company may elect to transfer at any time
the qualification of an investment, wholly or partly, to the
authority of any section of this subchapter under which the
investment qualifies at the time of the transfer, regardless of
whether the investment originally qualified under that section.
(d) An investment, once qualified under this subchapter,
remains qualified notwithstanding any refinancing, restructuring,
or modification of the investment, except that an insurance company
may not refinance, restructure, or modify an investment to
circumvent the requirements of this subchapter. (V.T.I.C.
Art. 3.33, Secs. 4(t) (part), (w).)
Sec. 425.156. DISTRIBUTIONS, REINSURANCE, AND MERGER. (a)
This subchapter does not prohibit an insurance company from
acquiring additional obligations, securities, or other assets
received as a dividend or as a distribution of assets.
(b) This subchapter does not apply to securities,
obligations, or other assets accepted incident to the workout,
adjustment, restructuring, or similar realization of any kind of
previously authorized investment or transaction if the insurance
company's board of directors or a committee appointed by the board
of directors determines that acceptance of the securities,
obligations, or other assets is in the company's best interests.
(c) This subchapter does not apply to assets acquired under
a lawful agreement of bulk reinsurance, merger, or consolidation if
the assets were legal and authorized investments for the ceding,
merged, or consolidated insurance company.
(d) An obligation, security, or other asset acquired as
permitted by this section is not required to be qualified under any
other section of this subchapter. (V.T.I.C. Art. 3.33, Sec. 4(v).)
Sec. 425.157. AGGREGATE DIVERSIFICATION REQUIREMENTS. (a)
This section takes precedence over Sections 425.109-425.120,
425.122-425.153, and 425.155(a), (b), and (c).
(b) An insurance company's investments in all or any types
of securities, loans, obligations, or evidences of indebtedness of
a single issuer or borrower, including the issuer's or borrower's
majority-owned subsidiaries or parent and the majority-owned
subsidiaries of the issuer's or borrower's parent, may not, in the
aggregate, exceed five percent of the company's assets. This
subsection does not apply to:
(1) authorized investments that:
(A) are direct obligations of, or are guaranteed
by the full faith and credit of, the United States, this state, or a
political subdivision of this state; or
(B) are insured by an agency of the United States
or this state; or
(2) an investment provided for by Section 425.112 or
425.113.
(c) Except as otherwise provided by this subsection, an
insurance company's aggregate investment in real property under
Sections 425.119, 425.120, 425.152, and 425.153 may not exceed
33-1/3 percent of the company's assets. If a company acquires real
property under Section 425.119(g) and that acquisition causes the
company's aggregate real estate investment to exceed the limitation
imposed by this subsection, the company shall, on or before the 10th
anniversary of the date the real property is acquired, dispose of a
sufficient amount of real property to comply with the applicable
limitation. A company that does not dispose of excess real property
as required by this subsection may not admit as an asset the value
of the real property that exceeds the applicable limitation.
(d) If an insurance company's real property acquisitions
exceed the limitation imposed by Subsection (c), the company may
not acquire additional real property under Section 425.119(b) or
(c) or 425.120, 425.152, or 425.153 until the company disposes of
the excess real property as specified by Subsection (c). (V.T.I.C.
Art. 3.33, Sec. 5.)
Sec. 425.158. WAIVER BY COMMISSIONER OF QUANTITATIVE
LIMITATIONS. (a) The commissioner may waive a quantitative
limitation on any investment authorized by Sections
425.109-425.132 and 425.151-425.156 if:
(1) the insurer seeks the waiver before making the
investment;
(2) a hearing is held to determine whether the waiver
should be granted;
(3) the applicant seeking the waiver establishes that
unreasonable or unnecessary loss or harm will result to the company
if the commissioner denies the waiver;
(4) the excess investment will not have a material
adverse effect on the company; and
(5) the size of the investment is reasonable in
relation to the company's assets, capital, surplus, and
liabilities.
(b) The commissioner's waiver must be in writing and may
treat the resulting excess investment as a nonadmitted asset.
(V.T.I.C. Art. 3.33, Sec. 6.)
Sec. 425.159. ACCOUNTING PROVISIONS. (a) Each insurance
company shall maintain reasonable, adequate, and accurate evidence
of the company's ownership of the company's assets and investments.
(b) An insurance company shall evidence the company's
ownership of governmental or corporate securities as provided by
Sections 423.101, 423.102, 423.104(a), 423.105, 423.106, 423.107,
and 423.108.
(c) An insurance company shall hold investments, other than
investments made as a participation in a partnership or joint
venture, only in the company's own name or as otherwise provided by
Chapter 423. (V.T.I.C. Art. 3.33, Secs. 7(b), (c), (d).)
Sec. 425.160. INVESTMENTS OF CEDING INSURERS. (a) Subject
to this section, if a domestic insurance company assumes and
reinsures the business of and takes over the assets of another
domestic insurance company or a foreign company, all assets or
investments of the ceding company that were authorized as proper
assets or investments for the funds of that company and taken over
by the assuming company are considered valid assets or investments
of the assuming company under the laws of this state.
(b) The commissioner must approve assets or investments
described by Subsection (a) and the terms on which those assets or
investments are taken over. The commissioner may require the
assuming insurance company to reasonably dispose of any of those
assets or investments that do not otherwise meet the requirements
of this subchapter within a period that will minimize any financial
loss or other hardship caused by disposing of the asset or
investment. (V.T.I.C. Art. 3.33, Sec. 8.)
Sec. 425.161. ACTING AS REAL ESTATE BROKER OR SALESPERSON
PROHIBITED. A domestic insurance company or another insurance
company specifically made subject to this subchapter may not engage
in the business of a broker or salesperson as defined by Chapter
1101, Occupations Code, except that the company may hold, improve,
maintain, manage, rent, lease, sell, exchange, or convey any of the
real property interests owned as investments under Sections
425.109-425.132 and 425.151-425.153. (V.T.I.C. Art. 3.33, Sec.
10.)
Sec. 425.162. RULES. The commissioner may adopt rules,
minimum standards, or limitations that are fair and reasonable as
appropriate to supplement and implement this subchapter. (V.T.I.C.
Art. 3.33, Sec. 9.)
[Sections 425.163-425.200 reserved for expansion]
SUBCHAPTER D. AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR OTHER
LIFE, HEALTH, AND ACCIDENT INSURERS
Sec. 425.201. DEFINITION. In this subchapter,
"contingency funds" means an insurer's contingency funds over and
above the amount of the insurer's policy reserves. (New.)
Sec. 425.202. APPLICABILITY OF SUBCHAPTER. This subchapter
applies only to an insurer organized under Chapter 881, 884, 885,
886, 887, or 2551, except as specifically provided by those
chapters. (V.T.I.C. Art. 3.33, Sec. 1 (part).)
Sec. 425.203. LIMITATION ON FUNDS AND OTHER ASSETS. (a) An
insurer may not use the insurer's funds to make an investment or
loan that is not authorized by this subchapter.
(b) An insurer may not secure, hold, or convey real property
except as authorized by this subchapter. (V.T.I.C. Art. 3.39,
Parts I (part), II (part); Art. 3.40 (part).)
Sec. 425.204. APPROVAL OF INVESTMENTS AND LOANS REQUIRED.
(a) An insurer may not make an investment unless the investment has
been authorized by the insurer's board of directors or by a
committee responsible for supervising investments.
(b) An insurer may not make a loan other than a policy loan
unless the loan has been authorized by the insurer's board of
directors or by a committee responsible for supervising loans.
(V.T.I.C. Art. 3.39, Part I, Sec. F, Para. 2; Part II, Sec. A, Para.
7.)
Sec. 425.205. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
GOVERNMENT BONDS. (a) Subject to this section, an insurer may
invest any of the insurer's funds and accumulations in:
(1) a bond, treasury bill, note, or certificate of
indebtedness of the United States or any other obligation or
security fully guaranteed as to principal and interest by the full
faith and credit of the United States;
(2) a bond of Canada or a province or municipality of
Canada;
(3) a bond of a state, county, or municipality of the
United States;
(4) a bond or interest-bearing warrant issued by a
county, municipality, school district, or other subdivision that
is:
(A) organized under the laws of a state of the
United States; and
(B) authorized to issue the bond or warrant under
the constitution and laws of that state;
(5) a bond or interest-bearing warrant issued by an
educational institution that is:
(A) organized under the laws of a state of the
United States; and
(B) authorized to issue the bond or warrant under
the constitution and laws of that state;
(6) a bond or warrant, including a revenue or special
obligation, of an educational institution located in a state of the
United States;
(7) a bond or warrant payable from designated revenues
of a municipality, county, drainage district, road district, or
other civil administration, agency, authority, instrumentality, or
subdivision that is:
(A) organized under the laws of a state of the
United States; and
(B) authorized to issue the bond or warrant under
the constitution and laws of that state;
(8) a paving certificate or other certificate or
evidence of indebtedness issued by a municipality in a state of the
United States and secured by a first lien on real estate; and
(9) a bond issued under the Farm Credit Act of 1971 (12
U.S.C. Section 2001 et seq.) that is issued against and secured by
promissory notes or obligations, the payment of which is secured by
mortgage, deed of trust, or other valid lien on unencumbered real
property located in this state.
(b) An insurer may invest in a bond or warrant described by
Subsection (a)(4) or (5) only if the issuer of the bond or warrant
has made legal provision to impose a tax to meet the obligation.
(c) An insurer may invest in a bond or warrant described by
Subsection (a)(6) only if the special revenue or income to meet the
principal and interest payments as they accrue on the obligation
has been appropriated, pledged, or otherwise provided by the
educational institution.
(d) An insurer may invest in a bond or warrant described by
Subsection (a)(7) only if special revenue or income to meet the
principal and interest payments as they accrue on the obligation
has been appropriated, pledged, or otherwise provided by the
municipality or other entity. (V.T.I.C. Art. 3.39, Part I (part),
Sec. A, Paras. 1, 2, 3, 4, 5, 6, 7, 8, 9.)
Sec. 425.206. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
CORPORATE BONDS, NOTES, AND DEBENTURES. (a) Subject to Subsection
(e), an insurer may invest any of the insurer's funds and
accumulations in a first mortgage bond or first lien note on real or
personal property of:
(1) a solvent corporation that has not defaulted in
the payment of any debt during the five years preceding the
investment;
(2) a solvent corporation that has not been in
existence for five consecutive years but whose first mortgage bonds
or first lien notes on real or personal property are fully
guaranteed by a solvent corporation that has not defaulted in the
payment of any debt during the five years preceding the investment;
(3) a solvent corporation that has not been in
existence for five consecutive years but whose first mortgage bonds
or first lien notes on real or personal property are secured by
leases or other contracts executed by a solvent corporation that
has not defaulted in the payment of any debt during the five years
preceding the investment, if the required rentals or other required
payments under the leases or other contracts are sufficient in all
circumstances to pay interest and principal when due on the bonds or
notes; or
(4) a solvent corporation that has not been in
existence for five consecutive years preceding the investment, if:
(A) the corporation has succeeded to the business
and assets and has assumed the liabilities of another corporation;
and
(B) neither the successor corporation or the
corporation succeeded has defaulted in the payment of any debt
during the five years preceding the investment.
(b) Subject to Subsection (e), an insurer may invest any of
the insurer's funds and accumulations in a note or debenture of a
corporation with a net worth of at least $5 million if:
(1) a prior lien in excess of 10 percent of the net
worth of the corporation does not exist against the real or personal
property of the corporation at the time the note or debenture is
issued; and
(2) under the provisions of the indenture providing
for the issuance of the note or debenture, a prior lien that exceeds
10 percent of the net worth of the corporation cannot be created
against the real or personal property of the corporation at the time
the note or debenture is issued.
(c) Subject to Subsection (e), an insurer may invest any of
the insurer's funds and accumulations in a note or debenture of a
solvent corporation that has not been in existence for five
consecutive years if:
(1) a prior lien does not exist against the real or
personal property of the corporation at the time the note or
debenture is issued;
(2) under the provisions of the indenture providing
for the issuance of the note or debenture, a prior lien cannot be
created against the real or personal property of the corporation at
the time the note or debenture is issued; and
(3) the note or debenture is:
(A) secured by a lease or other contract executed
by a solvent corporation that has a net worth of at least $5 million
and has not defaulted in the payment of any debt during the five
years preceding the investment, if the required rentals or other
required payments under the lease or other contract are sufficient
in all circumstances to pay interest and principal when due on the
bond or note; or
(B) fully guaranteed by a corporation described
by Paragraph (A).
(d) Subject to Subsection (e), an insurer may invest any of
the insurer's funds and accumulations in a bond, bill of exchange,
or other commercial note or bill of:
(1) a solvent corporation that has not defaulted in
the payment of any debt during the five years preceding the
investment; or
(2) a solvent corporation that has not been in
existence for the five years preceding the investment, if:
(A) the corporation has succeeded to the business
and assets and has assumed the liabilities of another corporation;
(B) neither the successor corporation or the
corporation succeeded has defaulted in the payment of any debt
during the five years preceding the investment;
(C) the corporation has a net worth of at least
$50 million; and
(D) the corporation does not have long-term
indebtedness that exceeds the corporation's net worth, as evidenced
by the corporation's latest published financial statements or other
financial data available to the public.
(e) The amount of an insurer's investments in the bonds,
notes, debentures, or other obligations of any one corporation may
not exceed five percent of the insurer's admitted assets.
(V.T.I.C. Art. 3.39, Part I, Sec. A, Para. 10.)
Sec. 425.207. AUTHORIZED INVESTMENTS FOR ALL FUNDS: SHARES
OF SAVINGS AND LOAN ASSOCIATIONS. (a) Subject to this section, an
insurer may invest any of the insurer's funds and accumulations in a
share, stock, share or savings account, or investment certificate
of a savings and loan association engaged in business in this state
that is qualified to participate in insurance issued by the Federal
Deposit Insurance Corporation.
(b) An insurer's investment in a savings and loan
association may not exceed 20 percent of the savings and loan
association's total assets. (V.T.I.C. Art. 3.39, Part I, Sec. A,
Para. 11.)
Sec. 425.208. AUTHORIZED INVESTMENTS FOR ALL FUNDS: BANK
AND BANK HOLDING COMPANY STOCKS. (a) Subject to this section, an
insurer may invest any of the insurer's funds and accumulations in:
(1) the stock of a state or national bank that is a
member of the Federal Deposit Insurance Corporation; and
(2) the stock of a bank holding company as defined by
the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et
seq.), as amended by the Bank Holding Company Act Amendments of 1970
(12 U.S.C. Section 1841 et seq. and Section 1971 et seq.).
(b) An insurer's investment in the stock of a bank or bank
holding company may not exceed:
(1) 20 percent of the total outstanding shares of the
stock of the bank or bank holding company; or
(2) 10 percent of the insurer's admitted assets.
(V.T.I.C. Art. 3.39, Part I, Sec. A, Para. 12.)
Sec. 425.209. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
DEBENTURES OF PUBLIC UTILITY CORPORATIONS. (a) Subject to this
section, an insurer may invest any of the insurer's funds and
accumulations in:
(1) a debenture of a solvent public utility
corporation that:
(A) has not defaulted in the payment of any debt
during the five years preceding the investment; and
(B) has not failed in any one of the five years
preceding the investment to have earned, after taxes, including
income taxes, and after deducting proper charges for replacements,
depreciation, and obsolescence, an amount applicable to interest on
the corporation's outstanding indebtedness equal to at least two
times the amount of interest due for that year, or, in the case of
issuance of new debentures, the earnings applicable to interest are
equal to at least two times the amount of annual interest on the
corporation's obligations after giving effect to the new financing;
or
(2) a debenture of a solvent public utility
corporation that has not been in existence for the five years
preceding the investment, if:
(A) the corporation has succeeded to the business
and assets and has assumed the liabilities of another public
utility corporation;
(B) neither the successor corporation or the
corporation succeeded has defaulted in the payment of any debt
during the five years preceding the investment; and
(C) neither the successor corporation or the
corporation succeeded have failed in any one of the five years
preceding the investment to have earned, after taxes, including
income taxes, and after deducting proper charges for replacements,
depreciation, and obsolescence, an amount applicable to interest on
the corporation's outstanding indebtedness equal to at least two
times the amount of interest due for that year, or in the case of
issuance of new debentures, the earnings applicable to interest are
equal to at least two times the amount of annual interest on the
corporation's obligations after giving effect to the new financing.
(b) The amount of an insurer's investment in debentures
under this section may not exceed five percent of the insurer's
admitted assets. (V.T.I.C. Art. 3.39, Part I, Sec. A, Para. 13.)
Sec. 425.210. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
PREFERRED STOCK OF PUBLIC UTILITY CORPORATIONS. (a) Subject to
this section, an insurer may invest any of the insurer's funds and
accumulations in:
(1) preferred stock of a solvent public utility
corporation, the bonds and debentures of which are authorized
investments for the insurer, and that:
(A) has not defaulted in the payment of any debt
during the five years preceding the investment; and
(B) has not failed in any one of the five years
preceding the investment to have earned an amount applicable to the
dividends on the preferred stock equal to at least three times the
amount of dividends due in that year, or, in the case of issuance of
new preferred stock, the earnings applicable to dividends are equal
to at least three times the amount of the annual dividend
requirements after giving effect to the new financing; or
(2) a solvent public utility corporation, the bonds
and debentures of which are authorized investments for the insurer,
and that has not been in existence for the five years preceding the
investment, if:
(A) the corporation has succeeded to the business
and assets and has assumed the liabilities of another public
utility corporation;
(B) neither the successor corporation or the
corporation succeeded has defaulted in the payment of any debt
during the five years preceding the investment; and
(C) neither the successor corporation or the
corporation succeeded have failed in any one of the five years
preceding the investment to have earned an amount applicable to the
dividends on the preferred stock equal to at least three times the
amount of dividends due in that year, or, in the case of issuance of
new preferred stock, the earnings applicable to dividends are equal
to at least three times the amount of the annual dividend
requirements after giving effect to the new financing.
(b) Preferred stock purchased under this section must be of
an issue entitled to first claim on the net earnings of the public
utility corporation, after deducting the amount necessary to
service any outstanding bonds and debentures.
(c) The amount of an insurer's investment in preferred stock
under this section may not exceed 2-1/2 percent of the insurer's
admitted assets. (V.T.I.C. Art. 3.39, Part I, Sec. A, Para. 14.)
Sec. 425.211. AUTHORIZED INVESTMENTS FOR ALL FUNDS: BONDS
ISSUED, ASSUMED, OR GUARANTEED IN INTERNATIONAL MARKET. An insurer
may invest any of the insurer's funds and accumulations in bonds
issued, assumed, or guaranteed by:
(1) the Inter-American Development Bank;
(2) the International Bank for Reconstruction and
Development (the World Bank);
(3) the African Development Bank;
(4) the Asian Development Bank;
(5) the International Finance Corporation; and
(6) the State of Israel. (V.T.I.C. Art. 3.39, Part I,
Sec. A, Para. 15A.)
Sec. 425.212. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
SECURITIES OR INVESTMENTS AUTHORIZED OR DESCRIBED BY SPECIFIC
STATUTORY PROVISION. An insurer may invest any of the insurer's
funds and accumulations in a security or investment authorized or
described by:
(1) Section 65.013, Finance Code;
(2) Sections 435.041-435.047, Government Code;
(3) Subchapter B, Chapter 1505, Government Code;
(4) Chapter 284, Transportation Code;
(5) Section 51.039 or 60.104, Water Code;
(6) Chapter 160, General Laws, Acts of the 43rd
Legislature, Regular Session, 1933 (Article 842a, Vernon's Texas
Civil Statutes);
(7) Chapter 230, Acts of the 49th Legislature, Regular
Session, 1945 (Article 842a-1, Vernon's Texas Civil Statutes);
(8) Chapter 110, Acts of the 51st Legislature, Regular
Session, 1949 (Article 8280-133, Vernon's Texas Civil Statutes);
(9) Chapter 340, Acts of the 51st Legislature, Regular
Session, 1949 (Article 8280-137, Vernon's Texas Civil Statutes);
(10) Chapter 398, Acts of the 51st Legislature,
Regular Session, 1949 (Article 8280-138, Vernon's Texas Civil
Statutes); or
(11) Chapter 465, Acts of the 51st Legislature,
Regular Session, 1949 (Article 8280-139, Vernon's Texas Civil
Statutes). (V.T.I.C. Art. 3.39, Part I, Sec. A, Para. 16.)
Sec. 425.213. AUTHORIZED INVESTMENTS FOR ALL FUNDS: OTHER
SECURITIES SPECIFICALLY AUTHORIZED BY LAW. An insurer may invest
any of the insurer's funds and accumulations in:
(1) an adequately secured equipment trust obligation
or certificate or another adequately secured instrument
evidencing:
(A) an interest in transportation equipment that
is located wholly or partly within the United States; and
(B) a right to receive determined portions of
rental, purchase, or other fixed obligatory payments for the use or
purchase of the transportation equipment; and
(2) any other security as specifically authorized by
law. (V.T.I.C. Art. 3.39, Part I, Sec. A, Para. 17.)
Sec. 425.214. AUTHORIZED INVESTMENTS FOR ALL FUNDS: LOANS
SECURED BY REAL PROPERTY. (a) Subject to this section, an insurer
may loan any of the insurer's funds and accumulations and take as
collateral a first lien on real property to which the title is
valid.
(b) The amount of a loan secured by a first lien on real
property may exceed 75 percent of the property value only if:
(1) the amount does not exceed 90 percent of the
property value and the property contains only a dwelling designed
exclusively for occupancy by not more than four families for
residential purposes; or
(2) the amount does not exceed 95 percent of the
property value and:
(A) the property contains only a dwelling
designed exclusively for occupancy by not more than four families
for residential purposes; and
(B) the portion of the unpaid balance of the loan
that exceeds 80 percent of the property value is guaranteed or
insured by a mortgage guaranty insurer authorized to engage in
business in this state.
(c) An insurer may not originate a loan that exceeds 75
percent of the value of the real property securing the loan.
(d) The aggregate amount of an insurer's loans secured by
first liens on real property to any one corporation, company,
partnership, individual, or any affiliated person or group may not
exceed 10 percent of the insurer's admitted assets. The amount of
any single loan secured by a first lien on real property may not
exceed five percent of the insurer's admitted assets.
(e) The limitations imposed by Subsections (b)-(d) do not
apply to a first lien on real property if the commissioner finds
that:
(1) the making or acquiring of the lien is beneficial
to and protects the interest of the insurer; and
(2) no substantial damage to the insurer's
policyholders and creditors appears probable from the taking or
acquiring of the lien.
(f) Subject to Subsections (g)-(j), an insurer may loan any
of the insurer's funds and accumulations and take as collateral a
first lien on a leasehold estate in:
(1) real property to which the title is valid; and
(2) improvements located on the property to which the
title is valid.
(g) The term of a loan secured by first lien on a leasehold
estate in real property may not, as of the date the loan is made,
exceed a period equal to four-fifths of the unexpired term of the
leasehold estate. The term of the leasehold estate may not expire
sooner than the 10th anniversary of the expiration of the term of
the loan.
(h) A loan secured by a first lien on a leasehold estate in
real property must be payable in equal monthly, quarterly,
semiannual, or annual installments on principal and interest during
a period not to exceed four-fifths of the unexpired term, as of the
date the loan is made, of the leasehold estate.
(i) The restrictions imposed by this section on the value of
the real property securing a loan compared to the amount of the
loan, and on the duration of a loan secured by a leasehold estate in
real property, do not apply to a loan if:
(1) the entire amount of the indebtedness is insured
or guaranteed in any manner by:
(A) the United States;
(B) the Federal Housing Administration under the
National Housing Act (12 U.S.C. Section 1701 et seq.), as amended;
or
(C) this state; or
(2) the difference between the entire amount of the
indebtedness and the portion of the loan insured or guaranteed by an
entity described by Subdivision (1) does not exceed the amount of a
loan permitted by the applicable restriction.
(j) If any part of the value of buildings is to be included
in the value of real property or leasehold estate in real property
to attain the minimum authorized value of the security for a loan
under this section:
(1) the buildings must be insured against loss by fire
by:
(A) an insurer authorized to engage in business
in the state in which the real property is located; or
(B) a company recognized as acceptable for that
purpose by the insurance regulatory official of the state in which
the real property is located;
(2) the amount of insurance coverage may not be less
than 50 percent of the value of the buildings, except that the
insurance coverage is not required to exceed the outstanding
balance owed to the insurer if the outstanding balance of the loan
is less than 50 percent of the value of the buildings; and
(3) the loss clause under the insurance must be
payable to the insurer. (V.T.I.C. Art. 3.39, Part II (part), Sec.
A, Paras. 1, 2, 6, 8.)
Sec. 425.215. AUTHORIZED INVESTMENTS FOR ALL FUNDS: LOANS
SECURED BY CERTAIN COLLATERAL SECURED BY REAL PROPERTY. An insurer
may loan any of the insurer's funds and accumulations and take as
collateral an obligation secured by a first lien on real property or
a leasehold estate that is eligible to secure a loan under Section
425.214. (V.T.I.C. Art. 3.39, Part II, Sec. A, Para. 3.)
Sec. 425.216. AUTHORIZED INVESTMENTS FOR ALL FUNDS: POLICY
LOANS. (a) Subject to Subsection (b), an insurer may loan any of
the insurer's funds and accumulations and take as collateral an
insurance policy issued by the insurer.
(b) A loan on a policy under this section may not exceed the
reserve value of the policy. (V.T.I.C. Art. 3.39, Part II, Sec. A,
Para. 4.)
Sec. 425.217. AUTHORIZED INVESTMENTS FOR ALL FUNDS: LOANS
SECURED BY CERTAIN SECURITIES. An insurer may loan any of the
insurer's funds and accumulations and take as collateral for the
loan any security described by Sections 425.205-425.213 and 425.218
in which the insurer may invest any of the insurer's funds and
accumulations. (V.T.I.C. Art. 3.39, Part II, Sec. A, Para. 5.)
Sec. 425.218. AUTHORIZED INVESTMENTS FOR ALL FUNDS:
SECURITIES NOT OTHERWISE SPECIFIED. (a) Notwithstanding any
express or implied prohibitions, and subject to this section, an
insurer may invest any of the insurer's funds and accumulations in
an investment that does not otherwise qualify under any other
provision of this chapter.
(b) The amount of any one investment by an insurer under
this section may not exceed one percent of the insurer's admitted
assets.
(c) The aggregate amount of investments by an insurer under
this section may not exceed the lesser of:
(1) five percent of the insurer's admitted assets; or
(2) the amount of the insurer's capital and surplus in
excess of $200,000 as shown on the last annual statement filed by
the insurer with the department before the date the investment is
acquired.
(d) Except as provided by another law of this state, this
section does not authorize an insurer to invest any of the insurer's
funds or accumulations in real property. (V.T.I.C. Art. 3.39, Part
I, Sec. A, Para. 15.)
Sec. 425.219. AUTHORIZED INVESTMENTS FOR POLICY RESERVES
AND SURPLUS: BONDS OF CERTAIN WATER CONTROL AND IMPROVEMENT
DISTRICTS. An insurer may invest the insurer's policy reserves and
surplus over and above the insurer's capital in municipal bonds
issued under Section 51.039, Water Code. (V.T.I.C. Art. 3.39, Part
I, Sec. B.)
Sec. 425.220. AUTHORIZED INVESTMENTS FOR CAPITAL, SURPLUS,
AND CONTINGENCY FUNDS: CAPITAL STOCK, BONDS, AND OTHER CORPORATE
OBLIGATIONS. (a) Subject to this section and Section 425.226, an
insurer may invest the insurer's capital, surplus, and contingency
funds in the capital stock, bonds, bills of exchange, or other
commercial notes or bills and securities of:
(1) a solvent corporation that has not defaulted in
the payment of any debt during the five years preceding the
investment; or
(2) a solvent corporation that has not been in
existence for the five years preceding the investment, if:
(A) the corporation has succeeded to the business
and assets and has assumed the liabilities of another corporation;
and
(B) neither the successor corporation nor the
corporation succeeded has defaulted in the payment of any debt
during the five years preceding the investment.
(b) An insurer may not invest in the stock of:
(1) a manufacturing corporation with a net worth of
less than $25,000; or
(2) an oil corporation with a net worth of less than
$500,000.
(c) Except as provided by Subsection (d), an insurer's
investment in the insurer's own capital stock or in the stock of a
single corporation may not be in an amount exceeding 10 percent of
the amount of the insurer's capital, surplus, and contingency
funds.
(d) An insurer may own, and the insurer may invest not more
than 25 percent of the insurer's capital, surplus, and contingency
funds in, the capital stock of a single fire and casualty insurance
company if that investment gives the insurer a majority of the
outstanding stock of the fire and casualty insurance company.
(e) In addition to the investments authorized by this
section and subject to Section 425.226, an insurer may invest in the
capital stock, bonds, and other obligations of one or more solvent
corporations that portion of the insurer's surplus funds that
exceeds the greater of:
(1) 10 percent of the insurer's admitted assets, as
determined from the insurer's latest annual statement on file with
the department; or
(2) the minimum capital and surplus requirements for
incorporating a life insurance company under Chapter 841.
(V.T.I.C. Art. 3.39, Part I, Sec. C, Paras. 1, 3.)
Sec. 425.221. AUTHORIZED INVESTMENTS FOR CAPITAL, SURPLUS,
AND CONTINGENCY FUNDS: BONDS OR NOTES OF EDUCATIONAL OR RELIGIOUS
CORPORATIONS. Subject to Section 425.226, an insurer may invest
the insurer's capital, surplus, and contingency funds in a bond or
note of an educational or religious corporation that has provided
for the payment of a sufficient amount of the first weekly or
monthly revenues of the corporation to an interest and sinking fund
account in a bank or trust company as an independent paying agent.
(V.T.I.C. Art. 3.39, Part I, Sec. C, Para. 2.)
Sec. 425.222. AUTHORIZED INVESTMENTS FOR CAPITAL, SURPLUS,
AND CONTINGENCY FUNDS: LIFE INCOME INTERESTS IN QUALIFIED TRUSTS.
(a) Subject to this section, an insurer may invest the insurer's
capital, surplus, and contingency funds in a life income interest
in a qualified irrevocable express testamentary trust.
(b) For purposes of this section, a trust is a qualified
trust if:
(1) each fee simple recipient of any part of the corpus
of the trust:
(A) is a public charity, church, educational
institution, or scientific institution;
(B) is located in this state; and
(C) is recognized by the United States Internal
Revenue Service as exempt from payment of income taxes;
(2) the corpus of the trust is wholly or partly
composed of interests in real estate, stocks, bonds, debentures,
and other securities of an aggregate total value of at least $5
million; and
(3) the corpus of the trust produces annual income of
at least $100,000.
(c) An insurer's life income interest in a qualified trust
may not exceed 10 percent of the insurer's admitted assets.
(d) Before an insurer may acquire a life income interest in
a qualified trust, the insurer must present evidence satisfactory
to the commissioner that shows:
(1) the interest is subject to transfer and is
recognized as transferable;
(2) the interest is capable of reasonable valuation;
(3) a market for the sale of the interest exists; and
(4) the interest is supported by life insurance in:
(A) an amount not less than the admitted value of
the interest; and
(B) a form approved by the commissioner.
(e) In valuing a life income interest in a qualified trust
on the insurer's books, the insurer may value the interest only on
the basis of the lesser of:
(1) the recognized market established in accordance
with Subsection (d)(3); or
(2) the ratio that the fractional life income interest
in the income of the trust bears to the total market value of the
properties held by the trust that are of a type of property an
insurer may lawfully acquire under the investment statutes of this
state. (V.T.I.C. Art. 3.39, Part I, Sec. C, Para. 4.)
Sec. 425.223. AUTHORIZED INVESTMENTS FOR CAPITAL, SURPLUS,
AND CONTINGENCY FUNDS: CAPITAL STOCK OF REINSURER. (a) Subject to
Subsection (b), an insurer may invest the insurer's capital,
surplus, and contingency funds in not more than 20 percent of the
capital stock of any other insurance company organized under
Chapter 841 whose principal business is the reinsurance, either
wholly or partly, of risks ceded to that insurer by other life
insurance companies.
(b) The aggregate amount of an insurer's investments under
this section may not exceed 10 percent of the insurer's capital,
surplus, and contingency funds.
(c) The investment authorized by this section may be made by
purchase of stock issued and outstanding or by subscription to and
payment for the increase in the capital stock of the reinsurer.
(V.T.I.C. Art. 3.39, Part I, Sec. D.)
Sec. 425.224. AUTHORIZED INVESTMENTS FOR CAPITAL, SURPLUS,
AND CONTINGENCY FUNDS: LOANS SECURED BY CORPORATE STOCK. (a)
Subject to this section, an insurer may loan the insurer's capital,
surplus, and contingency funds and take as collateral the capital
stock, bonds, bills of exchange, or other commercial notes or bills
or the securities of:
(1) a solvent corporation that has not defaulted in
the payment of any debt during the five years preceding the
investment; or
(2) a solvent corporation that has not been in
existence for the five years preceding the investment, if:
(A) the corporation has succeeded to the business
and assets and has assumed the liabilities of another corporation;
and
(B) neither the successor corporation nor the
corporation succeeded has defaulted in the payment of any debt
during the five years preceding the investment.
(b) Subject to this section, an insurer may loan the
insurer's capital, surplus, and contingency funds and take as
collateral the bonds or notes of an educational or religious
corporation that has provided for the payment of a sufficient
amount of the first weekly or monthly revenues of the corporation to
an interest and sinking fund account in a bank or trust company as
an independent paying agent.
(c) The market value of the stock, bills of exchange, other
commercial notes or bills, or securities must be at all times during
the continuance of the loan at least 50 percent more than the amount
loaned on the securities or obligations.
(d) An insurer may not take as collateral for any loan:
(1) the insurer's capital stock;
(2) the stock of a single corporation in an amount that
exceeds 10 percent of the amount of the insurer's own capital,
surplus, and contingency funds;
(3) the stock of a manufacturing corporation with a
net worth of less than $25,000;
(4) the stock of an oil corporation with a net worth of
less than $500,000; or
(5) any stock, the holder or owner of which is or may
become liable for any assessment other than taxes. (V.T.I.C.
Art. 3.39, Part II, Sec. B.)
Sec. 425.225. INVESTMENT IN FOREIGN SECURITIES. (a) An
insurer authorized to engage in business in a foreign country may
invest in securities of that country that are the same kind of
securities as those in the United States in which an insurer is
authorized by this subchapter to invest.
(b) The aggregate amount of an insurer's investments under
this section may not exceed the amount of the insurer's reserves on
the business in force in the foreign country. (V.T.I.C. Art. 3.39,
Part I, Sec. F, Para. 1.)
Sec. 425.226. INVESTMENT IN STOCK SUBJECT TO ASSESSMENT
PROHIBITED. An insurer may not invest any of the insurer's funds in
a stock, the holder or owner of which is or may become liable for any
assessment other than taxes. (V.T.I.C. Art. 3.39, Part I, Sec. F,
Para. 4.)
Sec. 425.227. CERTAIN INVESTMENT POWERS NOT A RESTRICTION.
The investment powers granted by Sections 425.207 and 425.208 may
not be construed as restricting the powers granted by Sections
425.220 and 425.221. (V.T.I.C. Art. 3.39, Part I, Sec. F, Para. 5.)
Sec. 425.228. INVESTMENTS OF CEDING INSURER. (a) Subject
to this section, if a domestic insurer assumes the business and
takes over the assets of another domestic or a foreign insurer, all
investments of the ceding insurer that were authorized, when made,
by the laws of the state in which the ceding insurer was organized
as proper securities for investment of the funds of an insurer and
that are taken over by the assuming insurer are considered to be
valid securities of the assuming insurer under the laws of this
state.
(b) The commissioner must approve investments described by
Subsection (a) and the terms on which those investments are taken
over. The commissioner may require the assuming insurer to dispose
of any of the investments on notice the commissioner considers
reasonable. (V.T.I.C. Art. 3.39, Part I, Sec. F, Para. 3.)
Sec. 425.229. AUTHORIZED INVESTMENTS: REAL ESTATE FOR
INSURER'S OFFICES. (a) Subject to this section, an insurer may
secure, hold, and convey the following real property:
(1) one building site and office building for the
insurer's accommodation in the transaction of the insurer's
business and for lease;
(2) branch office buildings in this state and
elsewhere within the United States in which the insurer is
authorized to engage in business as necessary for the insurer's
convenient accommodation in the transaction of the insurer's
business and for lease; and
(3) parking facilities adjacent to or in the vicinity
of each office building owned by the insurer as reasonably
necessary for the insurer and the building tenants.
(b) An office building described by Subsection (a)(1) may be
on ground on which the insurer owns a lease the term of which
expires not sooner than the 50th anniversary of the date the insurer
acquires the lease. The insurer must own, or be entitled to the use
of, all the improvements on the leased ground. The value of the
improvements must be at least equal to the value of the ground and
at least 20 times the annual average ground rentals payable under
the lease. The office building must have an annual average net
rental of at least twice the annual ground rental. The insurer must
be liable for and shall pay all state and local taxes imposed
against the ground and improvements. For purposes of taxation, the
ground and improvements are considered to be real property owned by
the insurer. The commissioner must approve the acquisition of an
office building on leased ground before the insurer makes the
investment.
(c) The insurer must use at least 50 percent of the space in
each branch office building under Subsection (a)(2) that is
available for occupancy for business purposes for the transaction
of the insurer's business and not for lease to others.
(d) An insurer may make an investment under Subsection
(a)(2) or (3) only in a municipality that has a population of 15,000
or more.
(e) An insurer may not make an investment under this section
if, after making the investment, the insurer's aggregate
investments under this section would exceed 33-1/3 percent of the
insurer's admitted assets as of December 31 preceding the date of
the investment, except that an insurer's aggregate investments
under this section may be increased to an amount not to exceed 50
percent of the insurer's admitted assets if the commissioner
approves the investment in advance, and the investment may be
further increased if the additional increase is paid for only from
surplus funds and is not included as an admitted asset of the
insurer.
(f) The value of each investment under this section is
subject to the approval of the commissioner. The commissioner may,
at the time the investment is made or any time when an examination
of the insurer is being made, have an investment under this section
appraised by an appraiser appointed or approved by the
commissioner. The insurer shall pay the reasonable expense of the
appraisal. The expense of the appraisal is considered to be an
expense of the examination of the insurer. An insurer may not make
any increase in the valuation of real property described by
Subsection (a) unless the increase in valuation is approved by the
commissioner, subject to the conditions imposed by Subsection (e).
(V.T.I.C. Art. 3.40 (part).)
Sec. 425.230. AUTHORIZED INVESTMENTS: OIL, GAS, AND
MINERALS. (a) In this section and Section 425.231:
(1) "Producing" means producing oil, gas, or other
minerals in paying quantities. A well that has been shut in is
considered to be producing oil, gas, or other minerals in paying
quantities if shut-in royalties are being paid.
(2) "Production payment" means a right to oil, gas, or
other minerals in place or as produced that entitles the owner of
the right to a specified fraction of production until the owner
receives a specified amount of money, or a specified number of units
of oil, gas, or other minerals.
(3) "Royalty" or "overriding royalty" means a right to
oil, gas, and other minerals in place or as produced that entitles
the owner of the right to a specified fraction of production without
limitation to a specified amount of money or a specified number of
units of oil, gas, or other minerals.
(b) Subject to this section, in addition to and without
limitation on the purposes for which real property may be acquired,
secured, held, or retained under Section 425.229 or 425.231, an
insurer may secure, hold, retain, and convey production payments,
producing royalties, and producing overriding royalties as an
investment for the production of income.
(c) The aggregate amount of an insurer's investments under
this section, plus the aggregate amount of the insurer's
investments in home office and branch office properties under
Section 425.229, may not exceed the total amount permitted by and is
subject to all of the limitations imposed by Sections 425.229(e)
and (f). For purposes of this subsection, an investment in
production payments, producing royalties, or producing overriding
royalties is considered to be an investment in property described
by Section 425.229.
(d) For the purposes of Section 425.229(f), the
commissioner may establish a value of a production payment,
producing royalty, or producing overriding royalty as the maximum
amount that the insurer purchasing the production payment,
producing royalty, or producing overriding royalty could loan
against a first lien on the production payment, producing royalty,
or producing overriding royalty under Sections 425.214(f)-(h).
(e) An insurer may not make an investment in production
payments, producing royalties, or producing overriding royalties
solely for the production of income if, after making the
investment, the insurer's total investment at cost in the
production payments, producing royalties, or producing overriding
royalties would exceed 10 percent of the insurer's admitted assets
as of December 31 preceding the date of the investment.
(f) If production in paying quantities from a royalty
interest or overriding royalty interest held by an insurer ends,
the insurer shall sell and dispose of the royalty or overriding
royalty not later than the second anniversary of the date the
production ends, unless:
(1) production in paying quantities has resumed; or
(2) the insurer obtains from the commissioner a
certificate stating that the insurer's interests will suffer
materially by the forced sale of the interest.
(g) The commissioner shall state in a certificate under
Subsection (f)(2) the amount of time by which the period for sale is
extended under that subsection. (V.T.I.C. Art. 3.40 (part).)
Sec. 425.231. AUTHORIZED INVESTMENTS: REAL PROPERTY
ACQUIRED UNDER CERTAIN CIRCUMSTANCES. (a) Subject to this
section, an insurer may secure, hold, and convey the following real
property:
(1) real property acquired in good faith as security
for a loan previously contracted or for money due;
(2) real property conveyed to the insurer to satisfy a
debt previously contracted in the course of the insurer's dealings;
and
(3) real property purchased at a sale under a
judgment, court decree, or mortgage or other lien held by the
insurer.
(b) An insurer shall sell and dispose of all property
described by Subsection (a) that is not necessary for the insurer's
accommodation in the convenient transaction of the insurer's
business, other than an interest in minerals or royalties reserved
on the sale of land acquired under Subsection (a) or an interest in
producing royalties or producing overriding royalties otherwise
acquired, not later than the fifth anniversary of:
(1) the date the insurer acquires title to the
property; or
(2) the date the property ceases to be necessary for
the accommodation of the insurer's business.
(c) An insurer may hold property acquired under Subsection
(a) for a period longer than that specified by Subsection (b) if the
insurer obtains a certificate from the commissioner stating that
the insurer's interests will suffer materially by the forced sale
of the property. The commissioner shall state in the certificate
the amount of time by which the period for sale is extended under
this subsection. (V.T.I.C. Art. 3.40 (part).)
Sec. 425.232. AUTHORIZED INVESTMENTS: IMPROVED
INCOME-PRODUCING REAL PROPERTY. (a) In this section, "improved
income-producing real property" includes all commercial and
industrial real property, a substantial portion of which has been
materially enhanced in value by the construction of durable,
permanent-type buildings and other improvements costing an amount
at least equal to the value of the real property, excluding the
buildings and improvements, that is held or acquired by purchase,
lease, or otherwise for the production of income. The term does not
include agricultural, horticultural, farm and ranch, or
residential property, or single or multiunit family dwelling
property.
(b) Notwithstanding Sections 425.229, 425.230, and 425.231,
subject to this section, a domestic insurer may:
(1) invest any of the insurer's funds and
accumulations in improved income-producing real property or any
interest in improved income-producing real property; and
(2) hold, improve, maintain, manage, lease, sell, or
convey improved income-producing real property or an interest in
improved income-producing real property.
(c) The aggregate amount of an insurer's investments in all
income-producing real property, including improvements, may not
exceed 15 percent of the insurer's admitted assets. The amount of
an insurer's investment in a single piece of improved
income-producing real property, including improvements, may not
exceed five percent of the insurer's admitted assets. For purposes
of this subsection, an insurer's admitted assets are determined
from the insurer's annual statement as of the preceding December 31
and filed with the department as required by law. Section
425.229(f) applies to the value of any investment made under this
section.
(d) The investment authority granted by this section is in
addition to that granted by Sections 425.229, 425.230, and 425.231,
except that an insurer may not make an investment in improved
income-producing real property that, when added to the insurer's
investments under Section 425.229, would exceed the limitations
imposed by Section 425.229(e).
(e) This section does not permit an insurer to purchase
undeveloped real property for the purpose of development or subdivision. (V.T.I.C. Art. 3.40-1, Secs. 1, 3.)
CHAPTER 426. RESERVES FOR WORKERS' COMPENSATION
INSURANCE COMPANIES
Sec. 426.001. RESERVES REQUIRED
Sec. 426.002. COMPUTATION OF RESERVES
Sec. 426.003. MAINTENANCE OF RESERVES; NOTICE OF
NONCOMPLIANCE
CHAPTER 426. RESERVES FOR WORKERS' COMPENSATION
INSURANCE COMPANIES
Sec. 426.001. RESERVES REQUIRED. A workers' compensation
insurance company engaged in business in this state shall maintain
reserves in an amount estimated in the aggregate to provide for the
payment of all losses and claims incurred, whether reported or
unreported. The company may not maintain reserves in an amount that
is greater than reasonably necessary for that purpose. (V.T.I.C.
Art. 5.61, Sec. (a) (part).)
Sec. 426.002. COMPUTATION OF RESERVES. Reserves required
by Section 426.001 must be computed in accordance with any rules
adopted by the commissioner to adequately protect insureds, secure
the solvency of the workers' compensation insurance company, and
prevent unreasonably large reserves. (V.T.I.C. Art. 5.61, Sec. (a)
(part).)
Sec. 426.003. MAINTENANCE OF RESERVES; NOTICE OF
NONCOMPLIANCE. (a) If a workers' compensation insurance
company's reserves are determined under this chapter to be:
(1) inadequate, the commissioner shall notify the
company and require the company to establish and maintain
reasonable additional reserves; or
(2) unreasonably large, the commissioner shall notify
the company and require the company to reduce the amount of reserves
to a reasonable amount.
(b) Not later than the 60th day after the date of
notification of noncompliance under Subsection (a), the company
shall:
(1) restore compliance as required by Subsection (a);
and
(2) file a statement of restored compliance,
accompanied by any documentation required by the commissioner. (V.T.I.C. Art. 5.61, Secs. (b), (c).)
CHAPTER 427. SUBORDINATED INDEBTEDNESS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 427.001. APPLICABILITY OF CHAPTER
Sec. 427.002. RULES
[Sections 427.003-427.050 reserved for expansion]
SUBCHAPTER B. LOAN, ADVANCE, AND OTHER INDEBTEDNESS
Sec. 427.051. LOAN OR ADVANCE PERMITTED
Sec. 427.052. SUBORDINATED LIABILITY PERMITTED
Sec. 427.053. APPROVAL OF AGREEMENT REQUIRED
Sec. 427.054. LIABILITY
Sec. 427.055. PAYMENT OF PRINCIPAL OR INTEREST ON
CERTAIN LIABILITIES
CHAPTER 427. SUBORDINATED INDEBTEDNESS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 427.001. APPLICABILITY OF CHAPTER. This chapter
applies to an insurer or health maintenance organization as defined
by Section 401.001. (V.T.I.C. Art. 1.39, Sec. (a).)
Sec. 427.002. RULES. The commissioner shall adopt rules
necessary to implement this chapter. (V.T.I.C. Art. 1.39, Sec.
(f).)
[Sections 427.003-427.050 reserved for expansion]
SUBCHAPTER B. LOAN, ADVANCE, AND OTHER INDEBTEDNESS
Sec. 427.051. LOAN OR ADVANCE PERMITTED. An insurer or
health maintenance organization may obtain a loan or an advance,
repayable with interest, of:
(1) cash;
(2) cash equivalents; or
(3) other assets that have a readily determinable
value and are satisfactory to the commissioner. (V.T.I.C.
Art. 1.39, Sec. (b) (part).)
Sec. 427.052. SUBORDINATED LIABILITY PERMITTED. (a) An
insurer or health maintenance organization may assume a
subordinated liability for repayment of a loan or advance described
by Section 427.051 and payment of interest on the loan or advance if
the insurer or health maintenance organization and the creditor
execute a written agreement stating that the creditor may be paid
only out of that portion of the insurer's or health maintenance
organization's surplus that exceeds the greater of:
(1) a minimum surplus amount set in the agreement; or
(2) a minimum surplus amount of $500,000.
(b) The department or commissioner may not require the
agreement to provide a minimum surplus amount that is different
from the amount described by this section. (V.T.I.C. Art. 1.39,
Sec. (b) (part).)
Sec. 427.053. APPROVAL OF AGREEMENT REQUIRED. (a) An
insurer or health maintenance organization must submit the written
agreement under Section 427.052 to the commissioner for approval of
the form and content of the agreement.
(b) The commissioner must approve or disapprove the
agreement not later than the 30th day after the date the insurer or
health maintenance organization submits the agreement. If the
commissioner fails to act as required by this subsection, the
agreement is considered approved.
(c) An insurer or health maintenance organization may
assume a subordinated liability only after the commissioner has
approved the agreement under this chapter or Subchapter C, Chapter
823. (V.T.I.C. Art. 1.39, Sec. (e) (part).)
Sec. 427.054. LIABILITY. (a) A loan or advance made under
this chapter, including any interest accruing on the loan or
advance, is a legal liability of the insurer or health maintenance
organization, and a liability with respect to the insurer's or
health maintenance organization's financial statement, only to the
extent provided by the terms of the loan or advance agreement.
(b) Notwithstanding Subsection (a), if the loan or advance
agreement provides for a sinking fund out of which the loan or
advance is to be repaid, the loan or advance is a legal liability of
the insurer or health maintenance organization, and a liability
with respect to the insurer's or health maintenance organization's
financial statement, only to the extent of the amounts accumulated
and held in the sinking fund. By agreement of the parties, any
portion of the amounts accumulated in the sinking fund may be
returned to the surplus of the insurer or health maintenance
organization at any time and any amount returned may not be a legal
liability of the insurer or health maintenance organization or a
liability with respect to the insurer's or health maintenance
organization's financial statement. (V.T.I.C. Art. 1.39, Secs.
(c), (d).)
Sec. 427.055. PAYMENT OF PRINCIPAL OR INTEREST ON CERTAIN
LIABILITIES. (a) An insurer or health maintenance organization
may not pay principal or interest on a subordinated liability
assumed under Section 427.052 or Subchapter C, Chapter 823, on or
after September 1, 1995, unless:
(1) the payment complies with a schedule of payments
contained in the agreement approved by the commissioner in
accordance with Section 427.052 or Subchapter C, Chapter 823; or
(2) if the payment does not comply with the schedule of
payments contained in the agreement or the agreement does not
contain a payment schedule, the insurer or health maintenance
organization provides written notice to the commissioner not later
than the 15th day before the scheduled payment date.
(b) A loan, debenture, revenue bond, or advance agreement
issued to an insurer or health maintenance organization before
September 1, 1995, and any subsequent payment of principal or
interest on the indebtedness are governed by the law in effect on
the date of issuance. (V.T.I.C. Art. 1.39, Sec. (e) (part).)
[Chapters 428-440 reserved for expansion]
SUBTITLE C. DELINQUENT INSURERS
CHAPTER 441. SUPERVISION AND CONSERVATORSHIP
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 441.001. FINDINGS AND PURPOSE
Sec. 441.002. DEFINITION
Sec. 441.003. APPLICABILITY OF AND COMPLIANCE WITH
CHAPTER
Sec. 441.004. ACTIONS OF COMMISSIONER
Sec. 441.005. RULES; AUTHORITY FOR ADMINISTRATIVE
ACTION
Sec. 441.006. RULES AND PROCEDURES FOR MERGER OF
INSURERS
Sec. 441.007. CONFLICT WITH OTHER LAWS
Sec. 441.008. INAPPLICABILITY OF CERTAIN
ADMINISTRATIVE PROCEDURE PROVISIONS
[Sections 441.009-441.050 reserved for expansion]
SUBCHAPTER B. DETERMINATION AND NOTICE
Sec. 441.051. CIRCUMSTANCES CONSTITUTING INSOLVENCY OR
DELINQUENCY
Sec. 441.052. CIRCUMSTANCES CONSTITUTING INSURER
EXCEEDING POWERS
Sec. 441.053. NOTICE TO INSURER
[Sections 441.054-441.100 reserved for expansion]
SUBCHAPTER C. SUPERVISION
Sec. 441.101. APPOINTMENT OF SUPERVISOR
Sec. 441.102. TIME FOR COMPLIANCE WITH REQUIREMENTS OF
SUPERVISION
Sec. 441.103. PAYMENT OF CLAIMS
Sec. 441.104. PROHIBITED ACTS DURING SUPERVISION
Sec. 441.105. HEARING ON SUPERVISION; TERMINATION BY
CONSERVATION OR RELEASE
[Sections 441.106-441.150 reserved for expansion]
SUBCHAPTER D. CONSERVATORSHIP
Sec. 441.151. APPOINTMENT OF CONSERVATOR
Sec. 441.152. NOTICE OF CONSERVATORSHIP
Sec. 441.153. POWERS AND DUTIES OF CONSERVATOR
Sec. 441.154. PAYMENT OF CLAIMS
Sec. 441.155. REINSURANCE DURING CONSERVATORSHIP
Sec. 441.156. HEARINGS DURING CONSERVATORSHIP
Sec. 441.157. IMMUNITY
Sec. 441.158. VENUE
Sec. 441.159. DURATION OF CONSERVATORSHIP
Sec. 441.160. RETURN TO MANAGEMENT
[Sections 441.161-441.200 reserved for expansion]
SUBCHAPTER E. PROVISIONS APPLYING TO SUPERVISION AND
CONSERVATORSHIP
Sec. 441.201. CONFIDENTIALITY
Sec. 441.202. COSTS OF SUPERVISION AND CONSERVATORSHIP
Sec. 441.203. COLLECTION OF FEES FROM REHABILITATED
INSURER
Sec. 441.204. REVIEW AND STAY OF CERTAIN ACTS OF
SUPERVISOR OR CONSERVATOR
Sec. 441.205. APPEAL OF CERTAIN ORDERS
Sec. 441.206. EX PARTE MEETING WITH COMMISSIONER
Sec. 441.207. INSURER EMPLOYEES DURING SUPERVISION OR
CONSERVATORSHIP
[Sections 441.208-441.250 reserved for expansion]
SUBCHAPTER F. OUT-OF-STATE INSURERS
Sec. 441.251. APPLICABILITY
Sec. 441.252. APPOINTMENT OF ANCILLARY SUPERVISOR OR
CONSERVATOR
Sec. 441.253. POWERS AND DUTIES OF ANCILLARY
SUPERVISOR OR CONSERVATOR
Sec. 441.254. FAILURE TO COMPLY WITH REQUIREMENTS OF
SUPERVISION
Sec. 441.255. REFERRAL FOR REMEDIAL ACTION
[Sections 441.256-441.300 reserved for expansion]
SUBCHAPTER G. POWERS AND DUTIES OF ATTORNEY GENERAL
Sec. 441.301. REMEDIAL ACTION BY ATTORNEY GENERAL
Sec. 441.302. FORFEITURE AND CANCELLATION OF CHARTER
ON CONCLUSION OF BUSINESS
[Sections 441.303-441.350 reserved for expansion]
SUBCHAPTER H. AGENTS OF RECORD FOR CERTAIN INSUREDS
Sec. 441.351. AGENTS OF RECORD
CHAPTER 441. SUPERVISION AND CONSERVATORSHIP
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 441.001. FINDINGS AND PURPOSE. (a) An insurer
delinquency, or the state's inability to properly proceed in a
threatened delinquency, directly or indirectly affects other
insurers by creating a lack of public confidence in insurance and
insurers. Insurer delinquencies destroy public confidence in the
state's ability to regulate insurers. The harmful results of
insurer delinquencies, including those described by this
subsection, are properly minimized by laws designed to protect and
assist insureds, creditors, and owners.
(b) Placing an insurer in receivership often destroys or
diminishes, or is likely to destroy or diminish, the value of the
insurer's assets, including:
(1) the insurer's insurance account or in-force
business;
(2) the insurer as a going concern; and
(3) the insurer's agency force.
(c) The value of the assets described by Subsection (b)
should be preserved if the circumstances of the insurer's financial
condition warrant an attempt to rehabilitate or conserve the
insurer and the rehabilitation or conservation is otherwise
feasible.
(d) It is a proper concern of this state and proper policy to
attempt to correct or remedy insurer misconduct, ineptness, or
misfortune.
(e) The purpose of this chapter is to:
(1) provide for the rehabilitation and conservation of
insurers by authorizing and requiring supervision and
conservatorship by the commissioner;
(2) authorize action to determine whether an attempt
should be made to rehabilitate and conserve an insurer;
(3) avoid, if possible and feasible, the necessity of
placing an insurer under temporary or permanent receivership;
(4) provide for the protection of an insurer's assets
pending determination of whether the insurer may be successfully
rehabilitated; and
(5) alleviate concerns regarding insurance and
insurers.
(f) Rehabilitation of an insurer might not be accomplished
in every case, but this chapter facilitates and directs an attempt
to rehabilitate an insurer without immediate resort to the harsher
remedy of receivership. If receivership becomes necessary, the
preliminary supervision and conservatorship may prevent a
dissipation of assets, which will benefit policyholders,
creditors, and owners.
(g) For the reasons stated by this section, the substance
and procedures of this chapter are the public policy of this state
and are necessary to the public welfare. That policy and welfare
require the availability of this chapter and the application of
this chapter if circumstances warrant.
(h) This chapter provides, in conjunction with other law, a
generally ordered sequence, and provides for review at each step,
of supervision, concurrent conservatorship and rehabilitation,
including reinsurance, and cessation of the conservatorship by
rehabilitation or by receivership and liquidation if at any time
that cessation is indicated or determined to be appropriate.
(V.T.I.C. Art. 21.28-A, Sec. 1 (part).)
Sec. 441.002. DEFINITION. In this chapter, unless the
purposes of this chapter clearly require or the context clearly
indicates another meaning, "insurer" means a person, organization,
or company, regardless of whether the person or entity is
authorized or admitted, that engages in the business of insurance
or that acts as a principal or agent of a person, organization, or
company engaged in the business of insurance. The term includes a
stock insurance company, reciprocal or interinsurance exchange,
Lloyd's plan, fraternal benefit society, stipulated premium
company, title insurance company, and mutual insurance company of
any kind, including a statewide mutual assessment company, local
mutual aid association, burial association, county mutual
insurance company, and farm mutual insurance company. (V.T.I.C.
Art. 21.28-A, Secs. 2 (part), (a).)
Sec. 441.003. APPLICABILITY OF AND COMPLIANCE WITH
CHAPTER. Compliance with this chapter is a condition of engaging
in the business of insurance in this state. This chapter applies
to, and is a consequence of, any other transaction with respect to
an insurer or insurance. (V.T.I.C. Art. 21.28-A, Sec. 1 (part).)
Sec. 441.004. ACTIONS OF COMMISSIONER. (a) In the event of
an insurer's delinquency or suspected delinquency, the
commissioner, in the commissioner's administrative discretion, may
act under this chapter, another applicable law, or a combination of
this chapter and another applicable law.
(b) If the commissioner determines to act under this chapter
or is directed by a court to act under this chapter, the
commissioner shall comply with the requirements of this chapter.
(V.T.I.C. Art. 21.28-A, Secs. 10, 12(a) (part).)
Sec. 441.005. RULES; AUTHORITY FOR ADMINISTRATIVE ACTION.
(a) The commissioner may:
(1) adopt reasonable rules as necessary to implement
and supplement this chapter and the purposes of this chapter; and
(2) take any administrative action required by the
findings of Section 441.001.
(b) The authority granted by this section may be inferred
from the context of this chapter. (V.T.I.C. Art. 21.28-A, Secs. 1
(part), 11.)
Sec. 441.006. RULES AND PROCEDURES FOR MERGER OF INSURERS.
(a) The commissioner shall adopt rules that encourage the merger of
insurers in weak financial condition with insurers in strong
financial condition in cases in which rehabilitation or
conservation of an insurer would be inefficient or impracticable.
(b) The rules and procedures for conservatorship may not be
used unless the rules and procedures adopted to promote the merger
of insurers in weak financial condition are followed. (V.T.I.C.
Art. 21.28-A, Sec. 1 (part).)
Sec. 441.007. CONFLICT WITH OTHER LAWS. If this chapter
conflicts with any other law, this chapter prevails. (V.T.I.C.
Art. 21.28-A, Sec. 12(a) (part).)
Sec. 441.008. INAPPLICABILITY OF CERTAIN ADMINISTRATIVE
PROCEDURE PROVISIONS. Section 2001.062, Government Code, does not
apply to a hearing conducted under this chapter. (V.T.I.C. Art.
21.28-A, Sec. 3 (part).)
[Sections 441.009-441.050 reserved for expansion]
SUBCHAPTER B. DETERMINATION AND NOTICE
Sec. 441.051. CIRCUMSTANCES CONSTITUTING INSOLVENCY OR
DELINQUENCY. For the purposes of this chapter, the circumstances
in which an insurer is considered insolvent, delinquent, or
threatened with delinquency include circumstances in which the
insurer:
(1) has required surplus, capital, or capital stock
that is impaired to an extent prohibited by law;
(2) continues to write new business when the insurer
does not have the surplus, capital, or capital stock that is
required by law to write new business;
(3) conducts the insurer's business fraudulently; or
(4) attempts to dissolve or liquidate without first
having made provisions satisfactory to the commissioner for
liabilities arising from insurance policies issued by the insurer.
(V.T.I.C. Art. 21.28-A, Secs. 2 (part), (b).)
Sec. 441.052. CIRCUMSTANCES CONSTITUTING INSURER EXCEEDING
POWERS. For the purposes of this chapter, the circumstances in
which an insurer is considered to have exceeded the insurer's
powers include circumstances in which the insurer:
(1) refuses to permit the commissioner, the
commissioner's deputy, or an examiner appointed by the department
to examine the insurer's books, papers, accounts, records, or
affairs;
(2) is organized in this state and removes from the
state books, papers, accounts, or records that are necessary to
examine the insurer;
(3) fails to promptly answer inquiries authorized by
Section 38.001;
(4) fails to comply with an order of the commissioner
to remedy, within the time prescribed by law, a prohibited
deficiency in the insurer's capital, capital stock, or surplus;
(5) without obtaining the commissioner's prior written
approval:
(A) totally reinsures the insurer's entire
outstanding business; or
(B) merges or consolidates substantially all of
the insurer's property or business with another insurer;
(6) continues to write business after the insurer's
certificate of authority has been revoked or suspended; or
(7) is in a condition that makes the insurer's
continuation in business hazardous to the public or to the
insurer's policyholders or certificate holders. (V.T.I.C. Art.
21.28-A, Secs. 2 (part), (c).)
Sec. 441.053. NOTICE TO INSURER. (a) If at any time the
commissioner determines that an insurer is insolvent, has exceeded
the insurer's powers, or has otherwise failed to comply with the
law, the commissioner shall:
(1) notify the insurer of that determination;
(2) provide to the insurer a written list of the
commissioner's requirements to abate the conditions on which that
determination was based; and
(3) if the commissioner determines that the insurer
requires supervision, notify the insurer that the insurer is under
the commissioner's supervision and that the commissioner is
invoking this chapter.
(b) The commissioner may provide the notice and information
to an insurer that agrees to supervision.
(c) The insurer shall comply with the commissioner's
requirements. (V.T.I.C. Art. 21.28-A, Secs. 2 (part), (d) (part),
3 (part).)
[Sections 441.054-441.100 reserved for expansion]
SUBCHAPTER C. SUPERVISION
Sec. 441.101. APPOINTMENT OF SUPERVISOR. The commissioner
may appoint a supervisor to supervise an insurer. (V.T.I.C. Art.
21.28-A, Sec. 4(a) (part).)
Sec. 441.102. TIME FOR COMPLIANCE WITH REQUIREMENTS OF
SUPERVISION. An insurer under supervision must comply with the
commissioner's requirements under Section 441.053 not later than
the 180th day after the date of the commissioner's notice of
supervision. (V.T.I.C. Art. 21.28-A, Sec. 3 (part).)
Sec. 441.103. PAYMENT OF CLAIMS. An insurer under
supervision shall continue to pay claims under an insurance policy
according to the terms of the policy. (V.T.I.C. Art. 21.28-A, Sec.
3 (part).)
Sec. 441.104. PROHIBITED ACTS DURING SUPERVISION. During
supervision, the commissioner may prohibit the insurer from taking
any of the following actions without the prior approval of the
commissioner or supervisor:
(1) disposing of, conveying, or encumbering any of the
insurer's assets or business in force;
(2) withdrawing money from the insurer's bank
accounts;
(3) lending or investing the insurer's money;
(4) transferring the insurer's property;
(5) incurring a debt, obligation, or liability;
(6) merging or consolidating with another company;
(7) entering into a new reinsurance contract or
treaty;
(8) terminating, surrendering, forfeiting,
converting, or lapsing an insurance policy, except for nonpayment
of premiums due; or
(9) releasing, paying, or refunding premium deposits,
accrued cash or loan values, unearned premiums, or other reserves
on an insurance policy. (V.T.I.C. Art. 21.28-A, Sec. 4(a) (part).)
Sec. 441.105. HEARING ON SUPERVISION; TERMINATION BY
CONSERVATION OR RELEASE. (a) On the commissioner's own motion or
the motion of a party of record, a hearing may be scheduled relating
to an insurer under supervision after at least 10 days' written
notice to each party of record. Notice may be waived by the parties
of record.
(b) The commissioner shall place the insurer in
conservatorship if, after the hearing, it is determined that the
insurer:
(1) failed to comply with the commissioner's
requirements;
(2) has not been rehabilitated;
(3) is insolvent; or
(4) appears to have exceeded the insurer's powers.
(c) The commissioner may release the insurer from
supervision if, after the hearing, it is determined that the
insurer:
(1) has been rehabilitated; or
(2) is no longer in a condition that makes the
insurer's continuation in business hazardous to the public or to
the insurer's policyholders or certificate holders. (V.T.I.C. Art.
21.28-A, Sec. 3 (part).)
[Sections 441.106-441.150 reserved for expansion]
SUBCHAPTER D. CONSERVATORSHIP
Sec. 441.151. APPOINTMENT OF CONSERVATOR. (a) The
commissioner may appoint a conservator for an insurer:
(1) if:
(A) after notice and opportunity for hearing, it
is determined that the insurer:
(i) is insolvent;
(ii) appears to have exceeded the insurer's
powers; or
(iii) has failed to comply with any
requirement of the commissioner; or
(B) the insurer agrees to the appointment of a
conservator; and
(2) if it is determined that supervision is inadequate
to rehabilitate the insurer.
(b) The commissioner may appoint a conservator. (V.T.I.C.
Art. 21.28-A, Secs. 2 (part), (d) (part), 5 (part).)
Sec. 441.152. NOTICE OF CONSERVATORSHIP. (a) Not later
than the seventh day after the date the commissioner enters an order
appointing a conservator for an insurer as provided by Section
441.151 or Subchapter F, the commissioner shall publish notice of
the conservatorship in at least one newspaper of general
circulation in each county with a population of at least 100,000.
(b) The notice must include:
(1) the name of the insurer placed in conservatorship;
(2) the date the insurer was placed in conservatorship
in this state;
(3) the reasons for placing the insurer in
conservatorship;
(4) any action with respect to the insurer that is
available to a policyholder; and
(5) any requirement with which a policyholder must
comply. (V.T.I.C. Art. 21.28-A, Sec. 5A.)
Sec. 441.153. POWERS AND DUTIES OF CONSERVATOR. (a) The
conservator appointed for an insurer under Section 441.151 shall
immediately take charge of the insurer and all of the insurer's
property, books, records, and effects, conduct the insurer's
business, and act to remove the causes and conditions that made the
conservatorship order necessary, as directed by the commissioner.
(b) During the conservatorship, the conservator shall
provide reports to the commissioner as required by the commissioner
and may:
(1) take all necessary measures in the conservator's
own name as conservator to preserve, protect, or recover any asset
or property of the insurer, including a claim or cause of action
that the insurer may assert; and
(2) file a suit, or prosecute and defend a suit filed
by or against the insurer, as the conservator considers necessary
to protect all of the interested parties or any property affected by
the suit. (V.T.I.C. Art. 21.28-A, Sec. 5 (part).)
Sec. 441.154. PAYMENT OF CLAIMS. An insurer under
conservatorship shall continue to pay claims under an insurance
policy according to the terms of the policy. (V.T.I.C. Art.
21.28-A, Sec. 9 (part).)
Sec. 441.155. REINSURANCE DURING CONSERVATORSHIP. (a) If
during a conservatorship it appears that the interest of the
insurer's policyholders or certificate holders is best protected by
reinsuring the policies or certificates, the conservator may, with
the approval of or at the direction of the commissioner:
(1) reinsure all or part of the insurer's policies or
certificates with a solvent insurer authorized to engage in
business in this state; and
(2) to the extent that the insurer has reserves
attributable to the reinsured policies or certificates, transfer to
the reinsurer reserves in an amount sufficient to reinsure the
policies or certificates.
(b) A transfer of reserves under this section may not be
considered a preference of a creditor. (V.T.I.C. Art. 21.28-A,
Sec. 5 (part).)
Sec. 441.156. HEARINGS DURING CONSERVATORSHIP. (a) On
the commissioner's own motion or the motion of a party of record, a
hearing relating to an insurer in conservatorship may be scheduled
after at least 10 days' written notice to each party of record.
(b) The notice required by this section may be waived by the
parties of record. (V.T.I.C. Art. 21.28-A, Sec. 5 (part).)
Sec. 441.157. IMMUNITY. A conservator and the
conservator's agents and employees are not liable, and a cause of
action does not arise against the conservator or an agent or
employee, for an action taken or not taken by the conservator,
agent, or employee in connection with the adjustment, negotiation,
or settlement of a claim. (V.T.I.C. Art. 21.28-A, Sec. 5 (part).)
Sec. 441.158. VENUE. (a) A suit against an insurer in
conservatorship or against the conservator may be filed only in
Travis County unless the cause of action is based on the terms of an
insurance policy issued by the insurer.
(b) A conservator appointed under this chapter may file suit
in Travis County against any person to preserve, protect, or
recover any asset or property of the insurer, including a claim or
cause of action that may be asserted by the insurer. (V.T.I.C. Art.
21.28-A, Sec. 8.)
Sec. 441.159. DURATION OF CONSERVATORSHIP. (a) Except as
provided by Subsection (b), a conservator appointed under this
chapter shall complete the conservator's duties as required by this
chapter not later than the 90th day after the date of appointment.
(b) If the commissioner issues written findings that there
is a substantial likelihood of rehabilitation of the insurer in
conservatorship, the commissioner may extend the conservatorship
for additional successive 30-day periods. The total period of
extensions may not exceed 180 consecutive days. A hearing is not
required before the commissioner issues the findings. (V.T.I.C.
Art. 21.28-A, Sec. 9 (part).)
Sec. 441.160. RETURN TO MANAGEMENT. An insurer that is
rehabilitated shall be returned to management or placed under new
management under reasonable conditions that best tend to prevent
defeat of the purposes of the conservatorship. (V.T.I.C. Art.
21.28-A, Sec. 9 (part).)
[Sections 441.161-441.200 reserved for expansion]
SUBCHAPTER E. PROVISIONS APPLYING TO SUPERVISION AND
CONSERVATORSHIP
Sec. 441.201. CONFIDENTIALITY. (a) Hearings and orders,
notices, correspondence, reports, records, and other information
in the department's possession relating to the supervision or
conservatorship of an insurer are confidential during the
supervision or conservatorship. On termination of the supervision
or conservatorship, the information in the department's custody
that relates to the supervision or conservatorship is public
information.
(b) This section does not prohibit access by the department
to hearings or orders, notices, correspondence, reports, records,
or other information.
(c) The provisions of Chapter 2001, Government Code,
relating to discovery apply to the parties of record in a proceeding
under this chapter.
(d) The commissioner may open a proceeding under this
chapter or disclose information that is confidential under this
section to a department, agency, or instrumentality of this state,
another state, or the United States if the commissioner determines
that opening the proceeding or disclosing the information is
necessary or proper to enforce the laws of this state, another
state, or the United States.
(e) An officer or employee of the department is not liable
for a release of information that is confidential under this
section unless it is shown that the release was accomplished with
actual malice.
(f) This section does not apply to information:
(1) if the insurer's insureds are not protected by
Chapter 462, 463, or 2602, or substantially similar statutes; or
(2) on the appointment by a court of a receiver for the
insurer. (V.T.I.C. Art. 21.28-A, Sec. 3A.)
Sec. 441.202. COSTS OF SUPERVISION AND CONSERVATORSHIP.
The commissioner shall determine the costs related to services
provided by a supervisor or conservator under this chapter.
Subject to Section 442.551, the costs shall be charged against the
insurer's assets and paid as determined by the commissioner.
(V.T.I.C. Art. 21.28-A, Sec. 5 (part).)
Sec. 441.203. COLLECTION OF FEES FROM REHABILITATED
INSURER. (a) The commissioner may collect fees from an insurer
described by Section 82.002 that is successfully rehabilitated by
the commissioner. The fees must be in amounts sufficient to cover
the cost of rehabilitating the insurer, but may not exceed that
cost.
(b) The department may use fees collected under this section
only for the rehabilitation of the insurer from which the fees are
collected.
(c) Fees collected under this section shall be deposited in
and expended through the Texas Department of Insurance operating
account.
(d) The commissioner may determine the terms of the
collection or repayment of the fees. (V.T.I.C. Art. 21.28-A, Secs.
17(a) (part), (b).)
Sec. 441.204. REVIEW AND STAY OF CERTAIN ACTS OF SUPERVISOR
OR CONSERVATOR. (a) An insurer under supervision or
conservatorship may request the commissioner or, in the
commissioner's absence, the commissioner's appointed deputy to
review an action taken or proposed to be taken by the supervisor or
conservator.
(b) A request for review under this section must specify the
manner in which the action is believed to not be in the insurer's
best interests.
(c) A request for review under this section stays the
specified action pending review by the commissioner or the
commissioner's deputy. (V.T.I.C. Art. 21.28-A, Sec. 7 (part).)
Sec. 441.205. APPEAL OF CERTAIN ORDERS. The following
orders of the commissioner may be appealed under Subchapter D,
Chapter 36:
(1) an order appointing a supervisor and providing
that the insurer may not engage in certain acts as provided by
Section 441.104;
(2) an order appointing a conservator; and
(3) an order following the review under Section
441.204 of an action of a supervisor or conservator. (V.T.I.C. Art.
21.28-A, Sec. 7 (part).)
Sec. 441.206. EX PARTE MEETING WITH COMMISSIONER.
Notwithstanding any other law, the commissioner may, at the time of
any proceeding or while a proceeding is pending under this chapter,
meet with a supervisor or conservator appointed under this chapter
and with the attorney or other representative of the supervisor or
conservator, without another person present, to implement the
commissioner's duties under this chapter or for the supervisor or
conservator to implement that person's duties under this chapter.
(V.T.I.C. Art. 21.28-A, Sec. 12(b).)
Sec. 441.207. INSURER EMPLOYEES DURING SUPERVISION OR
CONSERVATORSHIP. (a) Notwithstanding any other provision of this
chapter, an insurer may employ an attorney, actuary, and accountant
of the insurer's choice to assist the insurer during supervision.
The supervisor shall authorize payment from the insurer for the
reasonable fees and expenses of the attorney, actuary, or
accountant.
(b) The supervisor, conservator, or commissioner shall, to
the maximum extent possible, use the insurer's employees instead of
outside consultants, actuaries, attorneys, accountants, and other
personnel or department employees to minimize the expense of
rehabilitation or the necessity of fees to cover the cost of
rehabilitation. (V.T.I.C. Art. 21.28-A, Secs. 13, 17(a) (part).)
[Sections 441.208-441.250 reserved for expansion]
SUBCHAPTER F. OUT-OF-STATE INSURERS
Sec. 441.251. APPLICABILITY. This chapter applies to an
insurer engaged in the business of insurance in this state but not
domiciled in this state, regardless of whether the insurer is
authorized to engage in the business of insurance in this state.
(V.T.I.C. Art. 21.28-A, Sec. 6 (part).)
Sec. 441.252. APPOINTMENT OF ANCILLARY SUPERVISOR OR
CONSERVATOR. (a) The commissioner may appoint an ancillary
supervisor or ancillary conservator for the assets located in this
state of an insurer described by Section 441.251 in the same manner
as the commissioner appoints a supervisor or conservator for an
insurer domiciled in this state as provided by this chapter if:
(1) the commissioner makes a determination described
by Section 441.053 with regard to the insurer;
(2) the commissioner determines that the insurer does
not have the minimum surplus, capital, or capital stock required by
this code for similar domestic insurers; or
(3) the insurer agrees to the appointment.
(b) Subject to Section 441.205, the commissioner may
immediately, without prior notice and hearing, appoint an ancillary
conservator for the assets, property, books, and records located in
this state of an insurer described by Section 441.251 if a
conservator, rehabilitator, receiver, liquidator, or equivalent
official is appointed in the state in which the insurer is
domiciled. (V.T.I.C. Art. 21.28-A, Secs. 2 (part), (d), 6 (part).)
Sec. 441.253. POWERS AND DUTIES OF ANCILLARY SUPERVISOR OR
CONSERVATOR. (a) An ancillary supervisor or ancillary conservator
appointed under this subchapter has all the powers provided by
Sections 441.153 and 441.155 with respect to the insurer's assets,
property, books, and records located in this state.
(b) An ancillary conservator appointed under this
subchapter may:
(1) reinsure all or part of the insurer's policies or
certificates in this state with a solvent insurer authorized to
engage in business in this state; and
(2) transfer to the reinsurer as reserves any assets
in the ancillary conservator's possession in an amount sufficient
to reinsure the policies or certificates.
(c) A transfer of assets under this section is not
considered a preference of a creditor. (V.T.I.C. Art. 21.28-A,
Sec. 6 (part).)
Sec. 441.254. FAILURE TO COMPLY WITH REQUIREMENTS OF
SUPERVISION. The failure of an insurer described by Section
441.251 to comply during supervision with the requirements of
Section 441.104 with respect to any asset or policy located in this
state is grounds for the immediate revocation of the insurer's
certificate of authority to engage in business in this state and for
the immediate appointment of an ancillary conservator to take
charge of the insurer's assets located in this state. (V.T.I.C.
Art. 21.28-A, Sec. 6 (part).)
Sec. 441.255. REFERRAL FOR REMEDIAL ACTION. The
commissioner may refer an insurer described by Section 441.251 to
the attorney general for remedial action, including application for
appointment of a receiver under Chapter 442, on any grounds on which
an insurer domiciled in this state may be referred to the attorney
general for remedial action. The commissioner may refer the
insurer at any time, and action against the insurer in the insurer's
state of domicile is not a prerequisite. (V.T.I.C. Art. 21.28-A,
Sec. 6 (part).)
[Sections 441.256-441.300 reserved for expansion]
SUBCHAPTER G. POWERS AND DUTIES OF ATTORNEY GENERAL
Sec. 441.301. REMEDIAL ACTION BY ATTORNEY GENERAL. (a) The
commissioner may, at any time and regardless of whether an insurer
is under supervision or conservatorship, determine that the insurer
is not in a condition to continue business in the interest of the
insurer's policyholders or certificate holders. The commissioner
shall give notice of that determination to the attorney general.
(b) On receipt of notice under Subsection (a), the attorney
general shall file suit in the nature of quo warranto in a court in
Travis County to:
(1) forfeit the insurer's charter; or
(2) require the insurer to comply with the law or prove
to the commissioner that the insurer is solvent, and satisfy the
requirement that the insurer's condition does not make the
continuation of the insurer's business hazardous to the public or
to the insurer's policyholders or certificate holders.
(c) The commissioner may at any time refer an insurer to the
attorney general for the purpose of taking any remedial action,
including applying for the appointment of a receiver under Chapter
442.
(d) Supervision or conservatorship of the insurer is not
required before the attorney general may take remedial action under
this section. (V.T.I.C. Art. 21.28-A, Sec. 5 (part).)
Sec. 441.302. FORFEITURE AND CANCELLATION OF CHARTER ON
CONCLUSION OF BUSINESS. (a) Once all an insurer's policies are
reinsured or terminated and the insurer's affairs are concluded as
provided by this chapter, the commissioner shall report that fact
to the attorney general. On receipt of the report, the attorney
general shall take action necessary to forfeit or cancel the
insurer's charter.
(b) The commissioner shall report to the attorney general
the commissioner's approval of the merger or consolidation of an
insurer with another insurer or the reinsurance of the insurer's
policies. On receipt of the report, the attorney general shall take
action to forfeit or cancel the insurer's charter in the manner
provided for the forfeiture or cancellation of the charter of an
insurer that is totally reinsured or liquidated. (V.T.I.C. Art.
21.28-A, Sec. 5 (part).)
[Sections 441.303-441.350 reserved for expansion]
SUBCHAPTER H. AGENTS OF RECORD FOR CERTAIN INSUREDS
Sec. 441.351. AGENTS OF RECORD. (a) Unless otherwise
prohibited, the supervisor, conservator, or receiver of an insurer
shall provide to the insured's agent of record a copy of each
communication provided to an insured if, in the judgment of the
supervisor, conservator, or receiver, providing the copy will serve
to materially protect the interests of policyholders. The
supervisor, conservator, or receiver may also request the
assistance of any statewide association of insurance agents in
providing to the association's members information that, in the
judgment of the supervisor, conservator, or receiver, may serve to
materially protect policyholders' interests.
(b) If the supervisor, conservator, or receiver sells a
delinquent insurer's policies to another insurer, the purchaser
shall:
(1) recognize the pecuniary interest of the agent of
record in the policies being sold, regardless of whether the
purchaser customarily conducts the purchaser's business through
insurance agents;
(2) conduct the purchaser's business with the insured
through the agent of record; and
(3) provide to the agent of record a written limited
agency contract providing the terms that apply to the conduct of
their business together.
(c) A limited agency contract provided under Subsection (b)
must provide a level of commission that is reasonable, adequate,
and nonconfiscatory.
(d) This subchapter does not prohibit the agent of record
from renewing with another insurer an insurance policy purchased by
an insurer from a delinquent insurer.
(e) This section does not apply to:
(1) a life, accident, or health insurance policy or
contract delivered or issued for delivery by an insurer that is
subject to any provision of a law specified in Section 841.002 or
any provision of Chapter 882, 884, 887, 888, or 982;
(2) a contract or certificate delivered or issued for
delivery by a group hospital service corporation organized under
Chapter 842; or
(3) a contract or evidence of coverage delivered or
issued for delivery by a health maintenance organization operating
under a certificate of authority issued under Chapter 843. (V.T.I.C. Art. 21.28-A, Sec. 4A.)
CHAPTER 442. LIQUIDATION, REHABILITATION, REORGANIZATION, OR
CONSERVATION OF INSURERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 442.001. DEFINITIONS
Sec. 442.002. LIQUIDATION OVERSIGHT DIVISION EMPLOYEES
Sec. 442.003. OVERSIGHT OF SPECIAL DEPUTY RECEIVERS
AND GUARANTY ASSOCIATIONS
Sec. 442.004. CONFLICT WITH OTHER LAW
[Sections 442.005-442.050 reserved for expansion]
SUBCHAPTER B. GENERAL PROVISIONS REGARDING RECEIVER
Sec. 442.051. RECEIVER
Sec. 442.052. APPOINTMENT OF SPECIAL DEPUTY RECEIVER
Sec. 442.053. PERFORMANCE BOND REQUIRED
Sec. 442.054. POWERS OF SPECIAL DEPUTY RECEIVER
Sec. 442.055. RECEIVER CONSIDERED TO ACT ON BEHALF OF
RECEIVERSHIP ESTATE
Sec. 442.056. IMMUNITY
[Sections 442.057-442.100 reserved for expansion]
SUBCHAPTER C. CONDUCT OF DELINQUENCY PROCEEDINGS: GENERAL
PROVISIONS
Sec. 442.101. VENUE
Sec. 442.102. RIGHTS AND LIABILITIES ESTABLISHED AS OF
DATE DELINQUENCY PROCEEDING BEGINS
Sec. 442.103. TITLE TO ASSETS; PRIORITY OF RECEIVER'S
RIGHTS
Sec. 442.104. DUTY OF RECEIVER TO TAKE POSSESSION OF
ASSETS; INVENTORY
Sec. 442.105. AUTHORITY TO REQUIRE BOND TO PROTECT
ASSETS
Sec. 442.106. DELIVERY OF PROPERTY AND RECORDS TO
RECEIVER
Sec. 442.107. DUTY OF RECEIVER TO CONDUCT INSURER'S
BUSINESS
Sec. 442.108. DISPOSAL OF PROPERTY; SETTLING OF CLAIMS
Sec. 442.109. BORROWING ON PLEDGE OF ASSETS
Sec. 442.110. DEPOSITORIES; ACCOUNTING
Sec. 442.111. REPORTS ON STATUS OF PROCEEDING
Sec. 442.112. BUSINESS PLAN REPORTS; OTHER PERIODIC
REPORTS
Sec. 442.113. REPORT TO INSURANCE FRAUD UNIT
Sec. 442.114. PAYMENT OF LIQUIDATION EXPENSES;
OBJECTION
Sec. 442.115. INJUNCTIONS AND OTHER ORDERS
Sec. 442.116. EFFECT OF INJUNCTION OR ORDER: DENIAL
OF CLAIMS AND OTHER DEMANDS
Sec. 442.117. OTHER PENDING ACTIONS; IMMUNITY
Sec. 442.118. EXTENSION OF TIME FOR PLEADING;
INAPPLICABILITY OF CERTAIN LAWS
Sec. 442.119. EXCLUSIVE JURISDICTION OF OTHER ACTIONS
[Sections 442.120-442.150 reserved for expansion]
SUBCHAPTER D. GENERAL SUBPOENA POWERS; WITNESSES
AND PRODUCTION OF RECORDS
Sec. 442.151. SUBPOENA AUTHORITY
Sec. 442.152. SERVICE OF SUBPOENA
Sec. 442.153. ENFORCEMENT OF SUBPOENA
Sec. 442.154. COMPENSATION FOR ATTENDANCE
Sec. 442.155. USE AS EVIDENCE
Sec. 442.156. PROTECTIVE ORDERS
[Sections 442.157-442.200 reserved for expansion]
SUBCHAPTER E. CLAIMS AGAINST RECEIVERSHIP ESTATE
Sec. 442.201. PROOF OF CLAIM REQUIRED; DEADLINE
Sec. 442.202. FORM AND CONTENT OF PROOF OF CLAIM
Sec. 442.203. UNLIQUIDATED OR UNDETERMINED CLAIM OR
DEMAND
Sec. 442.204. THIRD-PARTY CLAIMS AND DEMANDS
Sec. 442.205. OFFSETS
Sec. 442.206. APPROVAL OR REJECTION OF CLAIM
Sec. 442.207. APPEAL OF RECEIVER'S REJECTION OF CLAIM
Sec. 442.208. OBJECTION TO CLAIM BY INTERESTED PARTY
Sec. 442.209. REFERRAL OF CLAIM TO GUARANTY
ASSOCIATION
Sec. 442.210. WORKERS' COMPENSATION CLAIMS
[Sections 442.211-442.250 reserved for expansion]
SUBCHAPTER F. VOIDABLE TRANSFERS OR LIENS
Sec. 442.251. CERTAIN TRANSFERS OR LIENS VOIDABLE
Sec. 442.252. PERSONAL LIABILITY FOR VOIDABLE TRANSFER
OR LIEN
Sec. 442.253. AVOIDANCE OF TRANSFER OR LIEN; RECOVERY
OF PROPERTY
[Sections 442.254-442.300 reserved for expansion]
SUBCHAPTER G. ASSESSMENTS
Sec. 442.301. APPLICATION FOR ASSESSMENT
Sec. 442.302. LEVY
Sec. 442.303. COLLECTION
Sec. 442.304. SUBCHAPTER NOT EXCLUSIVE
[Sections 442.305-442.350 reserved for expansion]
SUBCHAPTER H. REINSURANCE
Sec. 442.351. REINSURER'S LIABILITY
Sec. 442.352. NOTICE OF CLAIM TO REINSURER;
INTERPOSITION OF DEFENSE
[Sections 442.353-442.400 reserved for expansion]
SUBCHAPTER I. RECORDS AND OTHER INFORMATION
Sec. 442.401. USE OF RECORDS AND OTHER INFORMATION AS
EVIDENCE
Sec. 442.402. CERTIFICATES BY RECEIVER
Sec. 442.403. MAINTENANCE OF RECORDS
Sec. 442.404. DISPOSAL OF RECORDS
Sec. 442.405. INAPPLICABILITY OF PUBLIC INFORMATION
LAW
[Sections 442.406-442.450 reserved for expansion]
SUBCHAPTER J. AUDITS
Sec. 442.451. AUDITS OR INVESTIGATIONS OF RECEIVER,
SPECIAL DEPUTY RECEIVER, OR GUARANTY
ASSOCIATION
Sec. 442.452. PLAN AND REPORT REGARDING AUDIT OF
RECEIVER
Sec. 442.453. COURT-ORDERED AUDIT
[Sections 442.454-442.500 reserved for expansion]
SUBCHAPTER K. DISTRIBUTION OF ASSETS: EARLY ACCESS
Sec. 442.501. APPLICATION FOR APPROVAL OF PROPOSAL TO
DISTRIBUTE ASSETS
Sec. 442.502. CONTENTS OF PROPOSAL TO DISTRIBUTE
ASSETS
Sec. 442.503. NOTICE OF APPLICATION
[Sections 442.504-442.550 reserved for expansion]
SUBCHAPTER L. DISTRIBUTION OF ASSETS
Sec. 442.551. PRIORITY OF CLAIMS FOR DISTRIBUTION OF
ASSETS
Sec. 442.552. PAYMENT OF WAGES OF EMPLOYEES OF INSURER
SUBJECT TO TEMPORARY RESTRAINING ORDER
Sec. 442.553. PAYMENT OF WAGES OF EMPLOYEES OF INSURER
SUBJECT TO TEMPORARY INJUNCTION
Sec. 442.554. SECURED CREDITOR
Sec. 442.555. DIVIDEND PAYMENTS
Sec. 442.556. CLAIMANTS OF OTHER STATES OR FOREIGN
COUNTRIES
Sec. 442.557. SETOFF OF DIVIDEND AMOUNT
Sec. 442.558. CLAIMS UNDER SEPARATE ACCOUNTS
ESTABLISHED BY DOMESTIC LIFE INSURANCE
COMPANIES
Sec. 442.559. INTEREST
[Sections 442.560-442.600 reserved for expansion]
SUBCHAPTER M. UNCLAIMED ASSETS
Sec. 442.601. DELIVERY OF UNCLAIMED MONEY TO
DEPARTMENT
Sec. 442.602. RECOVERY OF UNCLAIMED MONEY BY OWNER
Sec. 442.603. APPLICATION FOR DECLARATION OF
ABANDONMENT OF MONEY; NOTICE
Sec. 442.604. HEARING ON APPLICATION FOR DECLARATION
OF ABANDONMENT OF MONEY; JUDGMENT
Sec. 442.605. USE OF CERTAIN UNLIQUIDATED ASSETS;
DEPOSIT OF PROCEEDS IN TRUST
Sec. 442.606. APPLICATION FOR DECLARATION OF
ABANDONMENT OF PROCEEDS IN TRUST;
NOTICE AND HEARING
Sec. 442.607. USE OF ABANDONED MONEY
[Sections 442.608-442.650 reserved for expansion]
SUBCHAPTER N. TRANSFER OR DISPOSAL OF EXCESS ASSETS
Sec. 442.651. TRANSFER OF REMAINING ASSETS OF STOCK
INSURANCE COMPANY TO AGENT
Sec. 442.652. DISPOSAL OF REMAINING ASSETS OF INSURER
OTHER THAN STOCK INSURANCE COMPANY
Sec. 442.653. TRANSFER OF REMAINING ASSETS OF INSURER
TO GUARANTY ASSOCIATION
[Sections 442.654-442.700 reserved for expansion]
SUBCHAPTER O. DURATION AND REOPENING OF RECEIVERSHIP
Sec. 442.701. LIMITATION ON DURATION OF RECEIVERSHIP
Sec. 442.702. REOPENING OF RECEIVERSHIP
[Sections 442.703-442.750 reserved for expansion]
SUBCHAPTER P. ANCILLARY DELINQUENCY PROCEEDINGS
Sec. 442.751. APPOINTMENT OF ANCILLARY RECEIVER
Sec. 442.752. POWERS AND DUTIES OF ANCILLARY RECEIVER
Sec. 442.753. COORDINATION WITH RECEIVER IN OTHER
STATE
Sec. 442.754. APPLICABILITY OF CHAPTER TO ANCILLARY
DELINQUENCY PROCEEDINGS
[Sections 442.755-442.800 reserved for expansion]
SUBCHAPTER Q. AGENCY CONTRACTS WITH CERTAIN INSURERS
Sec. 442.801. REQUIRED CONTRACT PROVISION
Sec. 442.802. DISPOSITION OF PREMIUMS
Sec. 442.803. EFFECT OF SUBCHAPTER ON ACTION BY
RECEIVER AGAINST AGENT
Sec. 442.804. AGENT NOT RECEIVER'S AGENT
CHAPTER 442. LIQUIDATION, REHABILITATION, REORGANIZATION, OR
CONSERVATION OF INSURERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 442.001. DEFINITIONS. (a) In this chapter:
(1) "Assets" means all property, whether specifically
mortgaged, pledged, deposited, or otherwise encumbered for the
security or benefit of specified persons or a limited class or
classes of persons. The term includes all deposits and funds of a
special or trust nature.
(2) "Delinquency proceeding" means a proceeding
initiated in a court of this state against an insurer to liquidate,
rehabilitate, reorganize, or conserve the insurer.
(3) "Insurer" means any organization, corporation, or
person that engages in the business of insurance, other than an
organization, corporation, or person that is specifically made
exempt from the application of this chapter by another statute that
references this chapter. The term includes:
(A) a capital stock company;
(B) a reciprocal or interinsurance exchange;
(C) a Lloyd's plan;
(D) a fraternal benefit society;
(E) a mutual or mutual assessment company of any
kind, including:
(i) a statewide mutual assessment company;
(ii) a local mutual aid association;
(iii) a burial association;
(iv) a county mutual insurance company; and
(v) a farm mutual insurance company; and
(F) a fidelity, guaranty, or surety company.
(4) "Person" means an individual, association,
corporation, partnership, or other private legal entity.
(5) "Receiver" means a person appointed to act as
receiver under Section 442.051. The term includes the commissioner
or a person appointed by the commissioner to act as special deputy
receiver.
(b) For purposes of this chapter, "court" means the court in
which a delinquency proceeding is pending, unless the context
clearly indicates otherwise. (V.T.I.C. Art. 21.28, Secs. 1(a)
(part), (b), (c), (d), (f), (g); New.)
Sec. 442.002. LIQUIDATION OVERSIGHT DIVISION EMPLOYEES.
The employees of the commissioner acting as receiver are employees
of the department for the purposes of:
(1) reporting payroll information to the uniform
statewide accounting system; and
(2) submitting vouchers to the comptroller for the
payment of the employees' salaries. (V.T.I.C. Art. 21.28, Sec.
12A(b).)
Sec. 442.003. OVERSIGHT OF SPECIAL DEPUTY RECEIVERS AND
GUARANTY ASSOCIATIONS. The commissioner shall oversee special
deputy receivers and guaranty associations. (V.T.I.C. Art. 21.28,
Sec. 2(a) (part).)
Sec. 442.004. CONFLICT WITH OTHER LAW. If this chapter
conflicts with any other law, this chapter prevails. (V.T.I.C.
Art. 21.28, Secs. 12A(a-1) (part), 16 (part).)
[Sections 442.005-442.050 reserved for expansion]
SUBCHAPTER B. GENERAL PROVISIONS REGARDING RECEIVER
Sec. 442.051. RECEIVER. If, under a law of this state, a
court of competent jurisdiction finds that a receiver should take
charge of the assets of an insurer domiciled in this state, the
commissioner or a person appointed as a special deputy receiver by
the commissioner under a contract shall act as receiver. (V.T.I.C.
Art. 21.28, Sec. 2(a) (part).)
Sec. 442.052. APPOINTMENT OF SPECIAL DEPUTY RECEIVER. (a)
The commissioner may appoint, set the compensation of, and contract
with one or more qualified special deputy receivers to act for the
commissioner under this code.
(b) The commissioner shall:
(1) specify requirements for the position of special
deputy receiver; and
(2) use a competitive bidding process to select
special deputy receivers.
(c) In making an appointment under this section, the
commissioner shall attempt to reflect the ethnic, racial, and
geographic diversity of the state.
(d) A special deputy receiver serves at the pleasure of the
commissioner. (V.T.I.C. Art. 21.28, Secs. 2(a) (part), 12(b)
(part), (h) (part).)
Sec. 442.053. PERFORMANCE BOND REQUIRED. A special deputy
receiver must file with the commissioner a bond that is:
(1) in an amount established by the commissioner;
(2) payable to the commissioner for the benefit of
injured parties; and
(3) conditioned on:
(A) the faithful performance of the special
deputy receiver's duties; and
(B) the proper accounting for all money and
property received or administered by the special deputy receiver.
(V.T.I.C. Art. 21.28, Sec. 12(a).)
Sec. 442.054. POWERS OF SPECIAL DEPUTY RECEIVER. (a)
Unless restricted by the commissioner, a special deputy receiver
has all the powers of a receiver granted under this code and may
perform any act on behalf of the commissioner as receiver.
(b) If expressly authorized by the commissioner, a special
deputy receiver may employ employees and agents, legal counsel,
actuaries, accountants, appraisers, consultants, and other
personnel the special deputy receiver considers necessary to assist
in the performance of the receiver's duties. The expenses of
employing those persons are expenses of the receivership payable
out of money or other assets of the insurer. (V.T.I.C. Art. 21.28,
Secs. 12(b) (part), (h) (part).)
Sec. 442.055. RECEIVER CONSIDERED TO ACT ON BEHALF OF
RECEIVERSHIP ESTATE. (a) In performing the duties of receiver
under this chapter, the commissioner, a special deputy receiver, or
an agent or employee of the commissioner or special deputy receiver
is considered to act on behalf of the receivership estate.
(b) Chapter 105, Civil Practice and Remedies Code, does not
apply to an action taken under this chapter. (V.T.I.C. Art. 21.28,
Sec. 2(l).)
Sec. 442.056. IMMUNITY. (a) The following persons are not
liable, and a cause of action does not arise against any of the
following persons, for a good faith action or failure to act in
exercising powers and performing duties under this chapter:
(1) the commissioner or an agent or employee of the
commissioner; or
(2) a special deputy receiver or an agent or employee
of the special deputy receiver.
(b) The attorney general shall defend an action to which
Subsection (a) applies that is brought against a person described
by that subsection, including an action brought after the
defendant's service with the commissioner, a special deputy
receiver, or the department has terminated, or after the close of
the receivership out of which the action arises. This subsection
does not require the attorney general to defend a person with
respect to an issue other than the applicability or effect of the
immunity provided by Subsection (a). (V.T.I.C. Art. 21.28, Secs.
2(j), (k).)
[Sections 442.057-442.100 reserved for expansion]
SUBCHAPTER C. CONDUCT OF DELINQUENCY PROCEEDINGS: GENERAL
PROVISIONS
Sec. 442.101. VENUE. Exclusive venue of delinquency
proceedings is in Travis County. (V.T.I.C. Art. 21.28, Sec. 2(i).)
Sec. 442.102. RIGHTS AND LIABILITIES ESTABLISHED AS OF DATE
DELINQUENCY PROCEEDING BEGINS. Except as otherwise directed by the
court or expressly provided by this chapter, the rights and
liabilities of an insurer that is the subject of a delinquency
proceeding and of all other persons interested in the insurer's
estate, including the insurer's creditors, policyholders, members,
officers, directors, shareholders, and agents, are fixed as of the
date of the commencement of the delinquency proceeding, subject to
the provisions of Subchapter E relating to the rights of claimants
holding unliquidated or undetermined claims or demands. (V.T.I.C.
Art. 21.28, Sec. 2(c).)
Sec. 442.103. TITLE TO ASSETS; PRIORITY OF RECEIVER'S
RIGHTS. (a) The assets of an insurer that is the subject of a
delinquency proceeding are in the custody of the court as of the
date of the commencement of the proceeding.
(b) The receiver is vested by operation of law with the
title to all of the insurer's property, contracts, and rights of
action, wherever located, as of the date a court order is entered
directing possession to be taken. The title of the receiver relates
back to the date of the commencement of the delinquency proceeding
unless the court provides otherwise.
(c) A contractual lien or statutory landlord's lien under
Chapter 54, Property Code, that arises after the date of the
commencement of the delinquency proceeding is secondary and
inferior to the rights of the receiver.
(d) The filing or recording of an order described by
Subsection (b) in any record office of the state provides the same
notice as would be provided by a deed, bill of sale, or other
evidence of title filed or recorded by the insurer. (V.T.I.C. Art.
21.28, Sec. 2(b).)
Sec. 442.104. DUTY OF RECEIVER TO TAKE POSSESSION OF
ASSETS; INVENTORY. (a) The receiver shall promptly take
possession of the assets of an insurer that is the subject of a
delinquency proceeding and, as the court directs, manage those
assets in the person's own name as receiver or in the name of the
insurer.
(b) The receiver is responsible for all assets coming into
the receiver's possession.
(c) The receiver shall promptly prepare, in duplicate, an
inventory of the insurer's assets. The receiver shall file one copy
of the inventory with the department and one copy in the office of
the clerk of the court. The copies of the inventory are open for
inspection. (V.T.I.C. Art. 21.28, Secs. 2(a) (part), (d) (part),
(f).)
Sec. 442.105. AUTHORITY TO REQUIRE BOND TO PROTECT ASSETS.
The court may require:
(1) the receiver to provide one or more bonds; and
(2) if considered desirable by the court for the
protection of the assets, a special deputy receiver or other
assistant or employee appointed under this chapter to provide one
or more bonds. (V.T.I.C. Art. 21.28, Sec. 2(d) (part).)
Sec. 442.106. DELIVERY OF PROPERTY AND RECORDS TO RECEIVER.
(a) The officers, directors, shareholders, members, trustees,
managing general agents, agents, administrators, claims adjusters,
managers, attorneys-in-fact, and associate, deputy, or substitute
attorneys-in-fact of a delinquent insurer shall immediately
deliver to the receiver, without cost to the receiver, all
property, books, records, accounts, documents, and other writings
of the delinquent insurer or that relate to the business of the
delinquent insurer.
(b) If by contract or otherwise any property, book, record,
account, document, or other writing is owned by a person described
by Subsection (a), the owner shall copy the item and deliver the
copy to the receiver. The owner shall retain the original until
notification that the item is no longer required in the
administration of the insurer's estate or until another time as the
court, after notice and hearing, directs. A copy is considered to
be a record of the delinquent insurer under Subchapter I. (V.T.I.C.
Art. 21.28, Sec. 4(e).)
Sec. 442.107. DUTY OF RECEIVER TO CONDUCT INSURER'S
BUSINESS. (a) On taking possession of the assets of a delinquent
insurer, the receiver shall, subject to the direction of the court,
immediately begin conducting the insurer's business or taking any
steps necessary to conserve the assets and protect the rights of
policyholders and claimants for the purpose of liquidating,
rehabilitating, reinsuring, reorganizing, or conserving the
affairs of the insurer.
(b) Notwithstanding the requirements of Subsection (a) or
the terms of any insurance contract issued by a delinquent insurer,
the receiver is not required to defend any action against an insured
of a delinquent insurer. (V.T.I.C. Art. 21.28, Sec. 2(e).)
Sec. 442.108. DISPOSAL OF PROPERTY; SETTLING OF CLAIMS.
(a) Except as provided by Subsection (b), the receiver may, subject
to the approval of the court:
(1) sell or otherwise dispose of all or part of the
property of an insurer against whom a delinquency proceeding has
been brought; and
(2) sell or compound all doubtful or uncollectible
debts, or claims owed by or to the insurer, including claims based
on an assessment levied against a member of a mutual insurer, a
reciprocal or interinsurance exchange, or a Lloyd's plan.
(b) Without obtaining the approval of the court, the
receiver may compromise or compound a debt or claim described by
Subsection (a)(2) or sell an item of the insurer's property on terms
the receiver considers to be in the best interest of the insurer if
the amount of the debt or claim or the value of the item of property
does not exceed $10,000, excluding interest.
(c) The receiver may, subject to the approval of the court,
sell, agree to sell, or offer to sell any assets of the insurer to
creditors of the insurer who seek to participate in the purchase of
the assets, to be paid for wholly or partly out of dividends payable
to those creditors. On application of the receiver, the court may
designate representatives to act for those creditors in purchasing,
holding, or otherwise managing those assets, and the receiver may,
subject to the approval of the court, advance the expenses of those
representatives against the security of the claims of those
creditors.
(d) The receiver may, subject to the approval of the court
and the commissioner, as required by this code, sell or otherwise
dispose of the charter or certificate of authority of the insurer
separately from the outstanding liabilities of the insurer.
(V.T.I.C. Art. 21.28, Sec. 2(g).)
Sec. 442.109. BORROWING ON PLEDGE OF ASSETS. (a) To
facilitate the rehabilitation, liquidation, conservation, or
dissolution of an insurer under this chapter, the receiver may,
subject to the approval of the court:
(1) borrow money;
(2) execute, acknowledge, and deliver a note or other
evidence of indebtedness for the loan;
(3) secure the repayment of the loan by the mortgage,
pledge, assignment, or transfer in trust of any or all of the
insurer's property; and
(4) take any other action necessary and proper to
obtain and provide for the repayment of the loan.
(b) The receiver is not under any obligation in the person's
personal capacity or official capacity as receiver to repay any
loan made under this section. (V.T.I.C. Art. 21.28, Sec. 15.)
Sec. 442.110. DEPOSITORIES; ACCOUNTING. (a) Except as
otherwise provided by this section, the receiver shall promptly
deposit all money collected into the Texas Treasury Safekeeping
Trust Company in accordance with procedures established by the
comptroller.
(b) If determined advantageous by the receiver in the
receiver's sound financial judgment, the receiver may deposit the
money in one or more banks or savings and loan associations in this
state insured by a federal agency that provides for deposit
insurance. If the amount deposited exceeds the maximum amount
insured by the appropriate federal agency, the receiver shall,
without the need for court approval, enter into any contracts and
require any security the receiver considers proper to safeguard the
deposit.
(c) The receiver shall account for all money collected or
realized from the assets of each insurer for which the receiver has
been appointed separately from all other money. (V.T.I.C. Art.
21.28, Sec. 2(h).)
Sec. 442.111. REPORTS ON STATUS OF PROCEEDING. The
receiver shall:
(1) file with the department on the department's
request reports showing the operation, receipts, expenditures, and
general condition of any insurer of which the receiver is in charge
at that time;
(2) on request, file a copy of a report described by
Subdivision (1) with the court in which the receivership proceeding
is pending; and
(3) file a final report regarding each insurer that
has been liquidated or handled that:
(A) shows and fully explains all receipts and
expenditures; and
(B) accurately states the disposition of all of
the insurer's assets. (V.T.I.C. Art. 21.28, Sec. 12(c).)
Sec. 442.112. BUSINESS PLAN REPORTS; OTHER PERIODIC
REPORTS. (a) A special deputy receiver shall submit a monthly
written report to the court and the commissioner that states the
special deputy receiver's business plan for the receivership,
including:
(1) the expenses incurred in administering the
receivership during the preceding month and an estimate of those
expenses for the succeeding month;
(2) a cost-benefit analysis of the expenditure of
money other than money spent to pay claims;
(3) a budget of monthly expenses that explains any
variation from the original projection; and
(4) a list of any lawyers or law firms that offered to
represent or represented the special deputy receiver in relation to
the special deputy receiver's duties under this chapter, and any
hours billed or fees paid to a lawyer or law firm that represented
the special deputy receiver.
(b) The special deputy receiver shall submit the business
plan report to the attorney general quarterly, and the attorney
general may make recommendations to the commissioner based on the
report.
(c) In addition to the business plan report, the special
deputy receiver shall submit to the commissioner a monthly report
relating to the special deputy receiver's activities in
administering the receivership.
(d) On written application by the special deputy receiver
and with the approval of the commissioner, the court may suspend the
requirement for monthly reports, or require less frequent reports,
on a showing that the costs of the monthly reports exceed the
benefit derived from those reports. (V.T.I.C. Art. 21.28, Sec.
2(a) (part).)
Sec. 442.113. REPORT TO INSURANCE FRAUD UNIT. A special
deputy receiver shall report to the insurance fraud unit any
information discovered in the administration of a receivership
relating to possible fraudulent, deceptive, or unlawful conduct by
an insurer. (V.T.I.C. Art. 21.28, Sec. 12(i).)
Sec. 442.114. PAYMENT OF LIQUIDATION EXPENSES; OBJECTION.
(a) The commissioner or special deputy receiver shall pay the
compensation of the special deputy receiver and all other expenses
of a liquidation out of the money or other assets of the insurer.
(b) Each month, the receiver shall present to the court an
itemized accounting, sworn to by the receiver, of the expenses. The
court shall approve the accounting unless a party at interest files
an objection on or before the 10th day after the date the accounting
is presented. The objection must specify each item to which the
party objects and the ground for that objection.
(c) The court shall set a hearing on an objection filed
under Subsection (b) and shall notify the parties of the hearing.
The objecting party has the burden of proof to show that an item to
which the party objected is improper, unnecessary, or excessive.
(V.T.I.C. Art. 21.28, Sec. 12(b) (part).)
Sec. 442.115. INJUNCTIONS AND OTHER ORDERS. (a) On
application by the receiver, the receivership court, with or
without notice, may issue:
(1) an injunction restraining the insurer named in the
order, the insurer's officers, directors, shareholders, members,
trustees, agents, employees, policyholders, attorneys, managers,
attorneys-in-fact, including associate, deputy, and substitute
attorneys-in-fact, and all other persons from:
(A) engaging in the insurer's business; or
(B) wasting or disposing of the insurer's
property; or
(2) an order requiring the delivery of the insurer's
assets to the receiver.
(b) At any time during a delinquency proceeding, the
receivership court may issue an injunction or order considered
necessary to prevent:
(1) interference with the receiver or the proceeding;
(2) waste of the insurer's assets;
(3) the initiation or prosecution of an action;
(4) the obtaining of a preference, judgment,
attachment, garnishment, or other lien; or
(5) the making of a levy against the insurer or against
all or part of the insurer's assets. (V.T.I.C. Art. 21.28, Secs.
4(a), (b).)
Sec. 442.116. EFFECT OF INJUNCTION OR ORDER: DENIAL OF
CLAIMS AND OTHER DEMANDS. The receiver for an insurer may deny a
claim, judgment, lien, preference, or demand made or obtained
against the insurer or the receiver after the date of receivership
in derogation of the terms of an injunction or order under Section
442.115 until:
(1) proof of the justness of the claim, judgment,
lien, preference, or demand is made before the receivership court;
and
(2) the court approves the claim, judgment, lien,
preference, or demand. (V.T.I.C. Art. 21.28, Sec. 4(c).)
Sec. 442.117. OTHER PENDING ACTIONS; IMMUNITY. (a) A
judgment or order of a court of this state or of another
jurisdiction in an action pending by or against a delinquent
insurer that is rendered after the commencement of the delinquency
proceeding is not binding on the receiver unless the receiver was
made a party to the action.
(b) A receiver and the receiver's agents and employees are
not liable for, and a cause of action does not arise against the
receiver or the receiver's agents or employees for, an act or
failure to act by the person that relates to the adjustment,
negotiation, or settlement of a claim. (V.T.I.C. Art. 21.28, Sec.
4(f).)
Sec. 442.118. EXTENSION OF TIME FOR PLEADING;
INAPPLICABILITY OF CERTAIN LAWS. (a) The receiver is not required
to plead to any action in which the receiver is a proper plaintiff
or defendant in any court in this state until the first anniversary
of the date the receiver is appointed.
(b) Sections 64.033, 64.052, 64.053, and 64.056, Civil
Practice and Remedies Code, do not apply to an insolvent insurer
being administered under this chapter. (V.T.I.C. Art. 21.28, Sec.
4(g).)
Sec. 442.119. EXCLUSIVE JURISDICTION OF OTHER ACTIONS. The
court of competent jurisdiction of the county in which the
delinquency proceeding is pending has exclusive venue to hear and
determine all actions or proceedings instituted by or against the
insurer or receiver after the commencement of the delinquency
proceeding. (V.T.I.C. Art. 21.28, Sec. 4(h).)
[Sections 442.120-442.150 reserved for expansion]
SUBCHAPTER D. GENERAL SUBPOENA POWERS; WITNESSES
AND PRODUCTION OF RECORDS
Sec. 442.151. SUBPOENA AUTHORITY. The receiver may request
the court to issue ex parte a subpoena to compel the attendance and
testimony of a witness before the receiver and the production of any
book, account, paper, correspondence, or other record relating to a
matter that pertains to the receivership estate. For that purpose:
(1) the court has statewide subpoena power and may
compel attendance of witnesses and production of records before the
receiver at the receiver's offices in Austin; and
(2) the receiver or the receiver's designated
representative may administer oaths, examine witnesses, and
receive evidence. (V.T.I.C. Art. 21.28, Sec. 4(d) (part).)
Sec. 442.152. SERVICE OF SUBPOENA. A subpoena issued under
this subchapter may be served, at the receiver's discretion, by the
receiver, the receiver's authorized agent, a sheriff, or a
constable. The sheriff's or constable's fee for serving the
subpoena is the same as the fee paid the sheriff or constable for
similar services. (V.T.I.C. Art. 21.28, Sec. 4(d) (part).)
Sec. 442.153. ENFORCEMENT OF SUBPOENA. (a) On application
of the receiver in the case of disobedience of a subpoena or the
contumacy of a witness appearing before the receiver or the
receiver's designated representative, the court may issue an order
requiring the person subpoenaed to obey the subpoena, give
evidence, or produce any book, account, paper, correspondence, or
other record relating to the matter in question.
(b) The court may punish as contempt the failure to obey an
order under this section. (V.T.I.C. Art. 21.28, Sec. 4(d) (part).)
Sec. 442.154. COMPENSATION FOR ATTENDANCE. (a) A witness
who is not a party and who is required to appear before the receiver
is entitled to receive:
(1) reimbursement for mileage for traveling to or from
the place where the witness's presence is required, if the place is
more than 25 miles from the witness's place of residence, in the
same amount for each mile as the mileage travel allowance for a
state employee; and
(2) a fee for each day or part of a day the witness is
required to be present as a witness that is equal to the greater of:
(A) $10; or
(B) the per diem travel allowance of a state
employee.
(b) Each disbursement made to pay a fee under Subsection (a)
shall be included and paid in the manner provided for the payment of
other expenses under Sections 442.054, 442.111, and 442.114 and
Subchapter J. (V.T.I.C. Art. 21.28, Sec. 4(d) (part).)
Sec. 442.155. USE AS EVIDENCE. (a) On certification by the
receiver or commissioner under official seal, any book, account,
paper, correspondence, document, or other record produced or
testimony taken under this chapter and held by the receiver is
admissible in evidence in a case without:
(1) prior proof of correctness; or
(2) other proof except the certificate of the receiver
or commissioner that the book, account, paper, correspondence,
document, or other record or the testimony was received from the
person producing the material or testifying.
(b) The certified book, account, paper, correspondence,
document, or other record, or a certified copy of the book, account,
paper, correspondence, document, or other record, is prima facie
evidence of the facts disclosed by that item.
(c) This section does not limit any other provision of this
chapter or any law that provides for the admission or evidentiary
value of evidence. (V.T.I.C. Art. 21.28, Sec. 4(d) (part).)
Sec. 442.156. PROTECTIVE ORDERS. A person served with a
subpoena under this subchapter may file a motion with the court for
a protective order as provided by Rule 192.6, Texas Rules of Civil
Procedure. (V.T.I.C. Art. 21.28, Sec. 4(d) (part).)
[Sections 442.157-442.200 reserved for expansion]
SUBCHAPTER E. CLAIMS AGAINST RECEIVERSHIP ESTATE
Sec. 442.201. PROOF OF CLAIM REQUIRED; DEADLINE. (a) If a
liquidation, rehabilitation, or conservation order has been
entered in a delinquency proceeding, each person who may have a
claim against the insurer as provided by Section 442.551, including
a claimant with a secured claim or a claim based on trust or escrow
funds, must present a proof of claim to the receiver:
(1) at a place specified by the receiver; and
(2) not later than the date specified by the court,
which may not be before the 90th day after the date the order
specifying the date is entered.
(b) The receiver shall notify all persons who may have a
claim against the insurer, as disclosed by the insurer's books and
records, regarding the requirement to present a proof of claim to
the receiver. The notice must:
(1) specify the last day for presenting a proof of
claim; and
(2) be given in a manner determined by the court.
(c) The receiver must receive the required proof of claim
before paying a claim.
(d) If a proof of claim is not presented on or before the
date specified by the court as required by Subsection (a), the claim
may not share in any distribution of the insurer's assets by the
receiver, except that, subject to court approval, the receiver may
accept a claim presented not later than the 90th day after the date
notice is mailed to the person under Subsection (b). (V.T.I.C. Art.
21.28, Secs. 3(a), (b).)
Sec. 442.202. FORM AND CONTENT OF PROOF OF CLAIM. (a) A
proof of claim must be in writing and signed by the claimant and
must include:
(1) a statement of the claim;
(2) a description of the consideration for the claim;
(3) a statement of whether securities are held as
consideration for the claim and, if so, a description of the
securities;
(4) a statement of any right of priority of payment for
the claim or other specific right asserted by the claimant;
(5) a statement of whether a payment has been made on
the claim and, if so, a description of the payment made and the
source of the payment;
(6) a statement that the amount claimed is justly owed
by the insurer to the claimant; and
(7) any other matter that is required by the court in
which the receivership is pending.
(b) A proof of claim must be in a form prescribed by the
receiver, except that the receiver may accept a proof of claim on a
form:
(1) used for proof of claim by the insurer before the
receivership; or
(2) prepared or accepted by a receiver or a guaranty
fund in another state, if the receiver in this state is an ancillary
receiver.
(c) A proof of claim must be made under oath, unless the
receiver waives the oath.
(d) A written instrument on which a claim is based must be
presented with a proof of claim unless lost or destroyed. After the
instrument is presented and until final disposition of the claim,
the receiver may permit the claimant to substitute a copy of the
instrument. If the instrument is lost or destroyed, a statement of
that fact and of the circumstances of the loss or destruction must
be made under oath and presented with the claim.
(e) The receiver may accept from each authorized guaranty
association a single proof of claim combining all claims and
related administrative expenses assigned to that association. A
proof of claim presented by a guaranty association must contain any
other information the receiver requires. (V.T.I.C. Art. 21.28,
Sec. 3(c).)
Sec. 442.203. UNLIQUIDATED OR UNDETERMINED CLAIM OR DEMAND.
(a) A claim based on an unliquidated or undetermined demand must be
presented within the time limit provided by this chapter for
presenting a claim. The claim may not share in any distribution to
claimants until the claim is definitely liquidated, determined, and
allowed. After the claim is liquidated, determined, and allowed,
the claim shares ratably with the claims of the same class in all
subsequent distributions.
(b) For the purposes of this chapter, a claim or demand is
considered unliquidated or undetermined if:
(1) a right of action on the claim or demand accrued as
of the date:
(A) the delinquency proceeding was commenced; or
(B) the insurance policy was canceled, if
applicable; and
(2) the liability on the claim or demand has not been
determined or the amount of the claim or demand has not been
liquidated.
(c) If the receiver is otherwise able to close the
receivership proceeding, the proposed closing is a sufficient
ground to reject any remaining unliquidated or undetermined claim
or demand. The receiver shall notify the claimant of the receiver's
intention to close the proceeding and shall allow liquidation or
determination of those claims during the 60 days after the date of
the notice. If a remaining claim is not liquidated or determined on
or before the 60th day after the date of the notice, the receiver
may reject the claim. (V.T.I.C. Art. 21.28, Sec. 3(d).)
Sec. 442.204. THIRD-PARTY CLAIMS AND DEMANDS. (a) If a
court has entered a liquidation, rehabilitation, or conservation
order in a delinquency proceeding, a person who has a cause of
action against an insured of the insurer under a liability
insurance policy issued by the insurer is entitled to file a claim
with the receiver, regardless of whether the claim is unliquidated
or undetermined.
(b) A claim described by Subsection (a) may be approved if:
(1) it may be reasonably inferred from the proof
presented on the claim that the person would be able to obtain a
judgment on the cause of action against the insured;
(2) the person provides suitable proof that, other
than those already presented, no additional valid claims against
the insurer arising out of the person's cause of action may be made;
and
(3) the total liability of the insurer to all
claimants arising out of the same act of the insured is not greater
than the total liability of the insurer would be if the insurer were
not in liquidation, rehabilitation, or conservation.
(c) A judgment entered against an insured or insurer before
the date of the commencement of the delinquency proceeding may not
be given a priority higher than Class 3 under Section 442.551 unless
the judgment creditor proves to the receiver's satisfaction the
allegations supporting the judgment.
(d) A judgment against an insured taken after the date of
the commencement of a delinquency proceeding with respect to the
insurer may not be considered in the proceeding as evidence of
liability or of the amount of damages. A judgment against an
insured taken by default or by collusion before the commencement of
the delinquency proceeding may not be considered in the proceeding
as conclusive evidence of the liability of the insured on the cause
of action or of the amount of damages to which the person is
entitled. (V.T.I.C. Art. 21.28, Sec. 3(e).)
Sec. 442.205. OFFSETS. (a) Except as provided by
Subsection (b), the receiver shall set off mutual debts and mutual
credits arising out of one or more contracts between the insurer and
another person in connection with a claim or delinquency
proceeding, and the receiver may allow or pay only the balance.
(b) The receiver may not allow an offset in favor of a person
if:
(1) the obligation of the insurer to the person would
not, on the date of the commencement of the delinquency proceeding
or as otherwise provided by Section 442.102, entitle the person to
share as a claimant in the assets of the insurer;
(2) the obligation of the insurer to the person was
purchased by or transferred to the person after the commencement of
the delinquency proceeding or for the purpose of increasing offset
rights;
(3) the obligation of the person is to pay:
(A) an assessment levied against the members of a
mutual insurer, a reciprocal or interinsurance exchange, or a
Lloyd's plan; or
(B) a balance on a subscription to the capital
stock of a stock insurance corporation;
(4) the obligation of the person is as a trustee or
fiduciary; or
(5) the obligation between the person and the insurer
arises from a reinsurance transaction in which the person or the
insurer assumed risks and obligations from the other party and then
ceded to that party substantially the same risks and obligations.
(c) The receiver shall provide a person with an accounting
statement identifying each debt that is due and payable. A person
shall promptly pay to the receiver any amount due and payable to the
insurer against which the person asserts an offset of mutual
credits that may become due and payable from the insurer in the
future. Notwithstanding Subchapter L or any other provision of
this chapter, the receiver shall promptly and fully refund, to the
extent of the person's prior payment, any mutual credits that
become due and payable to the person by the insurer. (V.T.I.C. Art.
21.28, Secs. 3(f), (g).)
Sec. 442.206. APPROVAL OR REJECTION OF CLAIM. (a) The
receiver may approve or reject a claim filed against the insurer.
(b) On a rejection of a claim in whole or in part, the
receiver shall notify the claimant in writing of the rejection.
(V.T.I.C. Art. 21.28, Sec. 3(h) (part).)
Sec. 442.207. APPEAL OF RECEIVER'S REJECTION OF CLAIM. (a)
The receiver's rejection of a claim may be appealed in the court.
The appeal must be brought within three months after the date of
service of notice of the rejection.
(b) If the receiver's action is appealed within the time
prescribed by Subsection (a), review is de novo as if originally
filed in the court and is subject to the rules of procedure and
appeal applicable to civil cases. The appeal is separate from the
delinquency proceeding, and an attempt to appeal the receiver's
action by intervening in the delinquency proceeding does not comply
with this subsection.
(c) If the receiver's action is not appealed within the time
prescribed by Subsection (a), the action is final and not subject to
judicial review. (V.T.I.C. Art. 21.28, Sec. 3(h) (part).)
Sec. 442.208. OBJECTION TO CLAIM BY INTERESTED PARTY. (a)
An interested party may object to a claim not rejected by the
receiver by filing an objection with the receiver.
(b) The receiver shall promptly present the objection to the
court for a determination after notice and hearing. (V.T.I.C. Art.
21.28, Sec. 3(h) (part).)
Sec. 442.209. REFERRAL OF CLAIM TO GUARANTY ASSOCIATION.
Notwithstanding any other provision of this chapter, the receiver
shall refer a claim covered by a guaranty fund created under Chapter
462, 463, or 2602 to the appropriate guaranty association for
processing. (V.T.I.C. Art. 21.28, Sec. 3(i).)
Sec. 442.210. WORKERS' COMPENSATION CLAIMS. (a) The
receiver shall notify the Texas Workers' Compensation Commission
immediately on a finding of insolvency or impairment with regard to
an insurance company that has in force any workers' compensation
coverage in this state.
(b) On receipt of the notice under Subsection (a), the Texas
Workers' Compensation Commission shall submit to the receiver a
list of active cases pending before the commission in which:
(1) the insurance company has accepted liability;
(2) it appears that a bona fide dispute does not exist;
(3) payments were begun before the finding of
insolvency or impairment; and
(4) payment of future or past workers' compensation
benefits is due.
(c) Notwithstanding the other provisions of this
subchapter, the receiver may begin or continue the payment of
claims on cases included in the list submitted under Subsection
(b).
(d) Files and other information delivered by the Texas
Workers' Compensation Commission to the receiver may be delivered
to the Texas Property and Casualty Insurance Guaranty Association.
(e) The Texas Workers' Compensation Commission shall report
to the department any act of a workers' compensation insurance
company that may indicate that the company is financially impaired,
delinquent, or insolvent. (V.T.I.C. Art. 21.28, Secs. 3A(a), (b),
(c), (d) (part), (e).)
[Sections 442.211-442.250 reserved for expansion]
SUBCHAPTER F. VOIDABLE TRANSFERS OR LIENS
Sec. 442.251. CERTAIN TRANSFERS OR LIENS VOIDABLE. A
transfer of or lien on the assets of an insurer is voidable if the
transfer or lien was:
(1) made or created:
(A) within four months before the date of the
commencement of the delinquency proceeding; and
(B) with the intent of giving to a creditor or
enabling the creditor to obtain a greater percentage of the
creditor's debt than is to be given to or obtained by another
creditor of the same class; and
(2) accepted by the creditor having reasonable cause
to believe that a preference described by Subdivision (1)(B) would
occur. (V.T.I.C. Art. 21.28, Sec. 5(a).)
Sec. 442.252. PERSONAL LIABILITY FOR VOIDABLE TRANSFER OR
LIEN. (a) The following persons are personally liable for the
property of the insurer or the benefit of that property received as
a result of a transfer or lien described by Section 442.251:
(1) each director, officer, agent, employee,
shareholder, member, attorney-in-fact, including an associate,
substitute, or deputy attorney-in-fact, underwriter, subscriber,
or other person acting on behalf of the insurer who is concerned in
the transfer or lien; and
(2) each person who, as a result of the transfer or
lien, receives the property of the insurer or the benefit of that
property.
(b) A person who is personally liable under Subsection (a)
shall account to the receiver for the benefit of the creditors of
the insurer. (V.T.I.C. Art. 21.28, Sec. 5(b).)
Sec. 442.253. AVOIDANCE OF TRANSFER OR LIEN; RECOVERY OF
PROPERTY. The receiver may:
(1) avoid a transfer of or lien on the assets of an
insurer that a creditor, shareholder, or member of the insurer
might have avoided; and
(2) recover the transferred property or the value of
that property from the person to whom the property was transferred
or from a person who received the property, unless the transferee or
recipient was a bona fide holder for value before the date of the
commencement of the proceeding. (V.T.I.C. Art. 21.28, Sec. 5(c).)
[Sections 442.254-442.300 reserved for expansion]
SUBCHAPTER G. ASSESSMENTS
Sec. 442.301. APPLICATION FOR ASSESSMENT. (a) Not later
than the fourth anniversary of the date of an order of
rehabilitation or liquidation of a domestic insurer, the receiver
may apply to the court to levy an assessment against the members of
a mutual insurance company, the members of a reciprocal or
interinsurance exchange, or the insureds of a Lloyd's plan who have
been issued an insurance policy that expressly provides that the
policy is subject to assessment.
(b) The application must state:
(1) the reasonable value of the insurer's assets;
(2) the insurer's probable liabilities; and
(3) the probable assessment, if any, necessary to pay
all possible claims and expenses in full, including expenses of
administration and collection. (V.T.I.C. Art. 21.28, Sec. 7(a).)
Sec. 442.302. LEVY. (a) After giving notice in the manner
designated by the court to each member or insured described by
Section 442.301, the court shall consider the application made
under that section and may levy one or more assessments, subject to
Subsection (c).
(b) The assessment or assessments must cover the excess of
the insurer's probable liabilities over the reasonable value of the
insurer's assets, together with the estimated cost of collection
and percentage of uncollectibility of the assessments.
(c) The court may not levy an assessment against a member or
insured with regard to an insurance policy that does not expressly
provide that the policy is subject to assessment. (V.T.I.C. Art.
21.28, Sec. 7(b).)
Sec. 442.303. COLLECTION. After the court enters an order
of assessment under Section 442.302 and after the time for appeal
expires, the receiver shall collect the assessments. The receiver
may bring an action in a court of competent jurisdiction in the
county in which the delinquency proceeding is pending to collect an
assessment. (V.T.I.C. Art. 21.28, Sec. 7(c).)
Sec. 442.304. SUBCHAPTER NOT EXCLUSIVE. The provisions
of this subchapter are in addition to any other remedies for the
levy and collection of assessments. (V.T.I.C. Art. 21.28, Sec.
7(d).)
[Sections 442.305-442.350 reserved for expansion]
SUBCHAPTER H. REINSURANCE
Sec. 442.351. REINSURER'S LIABILITY. (a) If the receiver
has a claim under an insurance policy covered by reinsurance, the
liability of the reinsurer to the receiver under the reinsured
contract may not be reduced because of the delinquency proceeding
against the delinquent insurer, regardless of any contrary
provision in the reinsurance contract, unless:
(1) the reinsurance contract or other written
agreement was entered into before the delinquency proceeding, is
otherwise permitted by law, and specifically provides another payee
of the reinsurance if the ceding insurer becomes insolvent; or
(2) the assuming insurer, with the consent of the
direct insured, has assumed in accordance with an assumption
reinsurance agreement the policy obligations of the ceding insurer:
(A) as direct obligations of the assuming insurer
to the payees under the policy; and
(B) in substitution for the obligations of the
ceding insurer to the payees.
(b) Except as provided by Subsection (a), any reinsurance is
payable to the receiver under a reinsured contract by the assuming
insurer on the basis of:
(1) an approved claim under Section 442.206; and
(2) a claim paid by a guaranty association under
Chapter 462, 463, or 2602 or by the guaranty association of another
state. (V.T.I.C. Art. 21.28, Sec. 10(a).)
Sec. 442.352. NOTICE OF CLAIM TO REINSURER; INTERPOSITION
OF DEFENSE. (a) Within a reasonable time after a claim against
the receiver under an insurance policy covered by reinsurance is
filed in the delinquency proceeding, the receiver shall give
written notice of the pendency of the claim to each affected
reinsurer.
(b) While the claim is pending, an affected reinsurer may,
at the reinsurer's expense, investigate the claim and interpose in
the proceeding in which the claim is to be adjusted any defense the
reinsurer considers available to the delinquent insurer or the
receiver.
(c) Subject to court approval, the expense incurred by an
assuming insurer under Subsection (b) is chargeable against the
delinquent insurer as part of the expense of liquidation to the
extent of a proportionate share of any benefit that may accrue to
the delinquent insurer solely as a result of the defense undertaken
by the assuming insurer. If two or more assuming insurers are
involved in the same claim and a majority in interest elect to
interpose a defense to the claim, the expense shall be apportioned
in accordance with the terms of the reinsurance agreement as if the
expense had been incurred by the ceding insurer. (V.T.I.C. Art.
21.28, Sec. 10(b).)
[Sections 442.353-442.400 reserved for expansion]
SUBCHAPTER I. RECORDS AND OTHER INFORMATION
Sec. 442.401. USE OF RECORDS AND OTHER INFORMATION AS
EVIDENCE. (a) A book, paper, document, or record of a delinquent
insurer received by the receiver and held in the course of the
delinquency proceeding or a certified copy of the book, paper,
document, or record signed and under the official seal of the
commissioner or receiver is admissible in evidence in a case
without proof of correctness or other proof except the certificate
of the commissioner or receiver that the book, paper, document, or
record was received from the custody of the delinquent insurer or
found among the insurer's effects.
(b) The certified original or a certified copy of a book,
paper, document, or record described by this section or Section
442.402 is prima facie evidence of the facts disclosed by the book,
paper, document, or record. (V.T.I.C. Art. 21.28, Secs. 11(a),
(c).)
Sec. 442.402. CERTIFICATES BY RECEIVER. (a) The receiver
may:
(1) certify to the correctness of a book, paper,
document, or record of the receiver's office, including a book,
paper, document, or record described by Section 442.401; and
(2) certify under seal of the commissioner to a fact
contained in a book, paper, document, or record of the department.
(b) A book, paper, document, or record certified as
described by Subsection (a) is admissible in evidence in any case in
which the original would be evidence. (V.T.I.C. Art. 21.28, Sec.
11(b).)
Sec. 442.403. MAINTENANCE OF RECORDS. (a) The receiver
may devise a method for the effective, efficient, and economical
maintenance of the records of the delinquent insurer and of the
receiver's office. The method may include maintaining those
records on any medium approved by the records management division
of the Texas State Library.
(b) A copy of an original record or another record that is
maintained within the scope of this subchapter on a medium approved
by the records management division of the Texas State Library and
that is produced by the receiver or the receiver's authorized
representative under this chapter:
(1) has the same effect as the original record; and
(2) may be used in the same manner as the original
record in a judicial or administrative proceeding in this state.
(c) The receiver may reserve the estate assets for deposit
in an account to be used for the specific purpose of maintenance,
storage, and disposal of records in closed receivership estates.
(V.T.I.C. Art. 21.28, Sec. 11(d).)
Sec. 442.404. DISPOSAL OF RECORDS. On approval by the
court, the receiver may dispose of any records of the delinquent
insurer that are obsolete and unnecessary to the continued
administration of the receivership proceeding. (V.T.I.C. Art.
21.28, Sec. 11(e).)
Sec. 442.405. INAPPLICABILITY OF PUBLIC INFORMATION LAW.
Chapter 552, Government Code, does not apply to any record of a
receivership estate, or to any record of an insurer before the
insurer's receivership, held by the receiver under this chapter.
(V.T.I.C. Art. 21.28, Sec. 11(f).)
[Sections 442.406-442.450 reserved for expansion]
SUBCHAPTER J. AUDITS
Sec. 442.451. AUDITS OR INVESTIGATIONS OF RECEIVER, SPECIAL
DEPUTY RECEIVER, OR GUARANTY ASSOCIATION. (a) The commissioner
shall adopt rules, after submitting the rules to the state auditor
for review and comment, prescribing the audits required for the
receiver, each special deputy receiver, and each guaranty
association established under Chapter 462, 463, or 2602. The rules
must include provisions relating to the scope, frequency, reporting
requirements, and cost of audits.
(b) As determined necessary by the commissioner or the state
auditor to supplement audits conducted under rules adopted under
Subsection (a), the state auditor may conduct audits or
investigations, as defined by Sections 321.0131-321.0136,
Government Code, of the receiver, each special deputy receiver, and
each guaranty association described by Subsection (a). The audited
or investigated entity shall reimburse the state auditor for costs
associated with the audit or investigation. (V.T.I.C. Art. 21.28,
Secs. 12(j), (k).)
Sec. 442.452. PLAN AND REPORT REGARDING AUDIT OF RECEIVER.
(a) The state auditor may conduct an audit of the receiver in
accordance with the audit plan under Chapter 321, Government Code.
The state auditor shall conduct the audit in the manner provided by
that chapter.
(b) The state auditor's report of an audit under this
section may include:
(1) an analysis of:
(A) the overall performance of the receiver;
(B) the receiver's financial operations and
condition;
(C) the receipts and expenditures made in
connection with each audited receivership;
(D) the adequacy of the receiver's bond in
relation to assets, receipts, and expenditures; and
(E) the feasibility of using attorneys employed
by the receiver in all litigation;
(2) the amount of money made available to the receiver
by a guaranty association in connection with each audited
receivership and a detail of the purpose and manner of expenditure
of the money;
(3) the ratio of the total amount of paid claims to the
total costs incurred in connection with each audited receivership;
and
(4) the ratio of the receiver's administrative
expenses to the total costs incurred in connection with each
audited receivership.
(c) The state auditor shall file:
(1) copies of the auditor's report in the manner
required by Section 321.014, Government Code; and
(2) an additional copy of the report with the
department. (V.T.I.C. Art. 21.28, Secs. 12(d), (e), (f).)
Sec. 442.453. COURT-ORDERED AUDIT. (a) A court in which a
receivership action is pending may order an audit of the books and
records of the receiver relating to the receivership. The receiver
shall make the books and records available to the auditor as
required by the court order.
(b) A report of an audit conducted under this section shall
be filed with the department and the appropriate guaranty
association.
(c) The receiver shall pay the expenses of an audit
conducted under this section. (V.T.I.C. Art. 21.28, Sec. 12(g).)
[Sections 442.454-442.500 reserved for expansion]
SUBCHAPTER K. DISTRIBUTION OF ASSETS: EARLY ACCESS
Sec. 442.501. APPLICATION FOR APPROVAL OF PROPOSAL TO
DISTRIBUTE ASSETS. (a) Not later than the 120th day after the
date of the commencement of an insolvency proceeding against an
impaired insurer, the receiver may apply to the court for approval
of a proposal to distribute assets out of marshalled assets as they
become available to a guaranty association or foreign guaranty
association with a Class 1 or Class 2 claim under this chapter.
(b) If the receiver fails to apply for approval within the
period prescribed by Subsection (a), a guaranty association may
apply to the court and request that the receiver submit a proposal
to distribute assets.
(c) If the receiver determines that there are insufficient
assets to distribute, the receiver may file a statement of the
reasons for that determination instead of filing an application
under this section. A statement under this subsection is
considered to be an application by the receiver for purposes of this
section. (V.T.I.C. Art. 21.28, Sec. 7A(a).)
Sec. 442.502. CONTENTS OF PROPOSAL TO DISTRIBUTE
ASSETS. (a) A proposal to distribute assets under Section
442.501 must include provisions for:
(1) reserving amounts sufficient to allow the payment
of Class 1 claims;
(2) to the extent the assets of the insolvent insurer
allow any payment of Class 2 claims, reserving amounts sufficient
to provide equal pro rata distributions to the Class 2 claimants
other than the guaranty associations;
(3) distributing the assets marshalled as of the date
of the proposal and distributing other assets as they become
available;
(4) equitably allocating distributions among guaranty
associations and foreign guaranty associations entitled to
distributions, including providing for:
(A) distributions to the associations in amounts
estimated to be at least equal to the claim payments made or to be
made by the associations for which the associations could assert a
claim against the receiver; and
(B) distributions for the pro rata amount of the
associations' Class 2 claims if the assets, as they become
available for distribution, do not equal or exceed the amount of the
claim payments made or to be made by the associations; and
(5) with regard to an insolvent insurer writing life
or health insurance or annuities, distributing the assets to:
(A) a guaranty association or foreign guaranty
association covering life or health insurance or annuities; or
(B) any other entity or organization reinsuring,
assuming, or guaranteeing insurance policies or contracts under the
laws creating an association described by Paragraph (A).
(b) The proposal to distribute assets must also include
provisions that require:
(1) the receiver to obtain from each guaranty
association described by Subsection (a)(4) an agreement to return
to the receiver on request and on approval by the court any
previously distributed assets, together with income on the assets,
required to pay Class 1 claimants and any federal claimants
asserting priority claims; and
(2) each guaranty association or foreign guaranty
association to make a full report to the receiver, as requested by
the receiver but not more frequently than quarterly, accounting
for:
(A) the assets distributed to the association;
(B) all distributions made from those assets;
(C) any interest earned by the association on
those assets; and
(D) any other matter as the court directs.
(c) A guaranty association or foreign guaranty association
is not required to provide a bond under Subsection (b)(1).
(V.T.I.C. Art. 21.28, Secs. 7A(b), (c), (d).)
Sec. 442.503. NOTICE OF APPLICATION. (a) The receiver
shall give notice of an application for approval of a proposal to
distribute assets to a guaranty association or foreign guaranty
association in, and to the commissioner of insurance of, each of the
states. Notice under this subsection must be deposited in the
United States certified mail, first class postage prepaid, at least
30 days before the date the application is submitted to the court.
(b) The receiver shall also give notice of the application
to reasonably identifiable Class 1 and Class 2 claimants. Notice
under this subsection must be given in a manner the court considers
appropriate, including notice by publication.
(c) The court may act on the application if:
(1) notice has been given as provided by this section;
and
(2) the receiver's proposal to distribute assets
complies with this subchapter. (V.T.I.C. Art. 21.28, Sec. 7A(e).)
[Sections 442.504-442.550 reserved for expansion]
SUBCHAPTER L. DISTRIBUTION OF ASSETS
Sec. 442.551. PRIORITY OF CLAIMS FOR DISTRIBUTION OF
ASSETS. (a) The priorities provided by this section are
established to:
(1) provide for the orderly liquidation of a
receivership estate; and
(2) further the protection of policyholders and
persons making claims under insurance policies.
(b) The priority of distribution of assets from the
insurer's estate must be in accordance with:
(1) the distribution plan approved by the court under
Subchapter K; and
(2) the order of each class as provided by this
section.
(c) Each claim in each class must be paid in full, or an
adequate amount of money must be retained for that payment, before a
payment is made for a claim in the next class.
(d) Subclasses may not be established within a class.
(e) The classes of claims are as follows:
(1) Class 1:
(A) all of the receiver's, conservator's, and
supervisor's costs and expenses of administration, including
repayment of any money spent by the receiver under Section 442.607;
(B) all of a guaranty association's or foreign
guaranty association's costs and expenses of administration
related to a receivership estate and all of the expenses of that
association in handling claims; and
(C) claims of secured creditors to the extent of
the value of the security as provided by Section 442.554;
(2) Class 2:
(A) all claims by policyholders, beneficiaries,
and insureds, and liability claims against insureds covered under
insurance policies and contracts issued by the insurer; and
(B) all claims by a guaranty association or a
foreign guaranty association that are payments of proper
policyholder claims;
(3) Class 3: claims of the federal government that are
not included in Class 2;
(4) Class 4: all other claims of general creditors not
falling within a higher priority under this subchapter, including
claims for taxes and debts due a state or local government that are
unsecured; and
(5) Class 5: claims of surplus or contribution note
holders, debenture holders, or holders of similar obligations and
proprietary claims of shareholders, members, or other owners
according to the terms of the instruments.
(f) For the purpose of Subsection (e)(1)(B), attorney's
fees incurred by a guaranty association or foreign guaranty
association in the defense of an insured under an insurance policy
issued by an impaired insurer are an expense incurred in handling a
claim. (V.T.I.C. Art. 21.28, Secs. 8(a)(1), (2).)
Sec. 442.552. PAYMENT OF WAGES OF EMPLOYEES OF INSURER
SUBJECT TO TEMPORARY RESTRAINING ORDER. (a) The receiver shall pay
as a Class 1 claim under Section 442.551 wages owed to employees of
an insurer against which a temporary restraining order has been
issued under this chapter for services rendered during the period
covered by the order.
(b) The receiver shall pay for services under Subsection (a)
at the rate and in the same manner as if paid by the insurer.
(V.T.I.C. Art. 21.28, Sec. 6 (part).)
Sec. 442.553. PAYMENT OF WAGES OF EMPLOYEES OF INSURER
SUBJECT TO TEMPORARY INJUNCTION. (a) The receiver may pay wages
owed to employees of an insurer against which a temporary
injunction has been issued under this chapter for services rendered
after the issuance of the injunction.
(b) Payment for services under Subsection (a) is an expense
of administration. (V.T.I.C. Art. 21.28, Sec. 6 (part).)
Sec. 442.554. SECURED CREDITOR. (a) The owner of a secured
claim against an insurer for which a receiver has been appointed in
any state may surrender the owner's security and file a claim as a
general creditor, or the claim may be discharged by resort to the
security.
(b) If a claim described by Subsection (a) is discharged by
resort to the security, any deficiency shall be treated as a claim
against the general assets of the insurer on the same basis as a
claim of an unsecured creditor. If the amount of the deficiency was
adjudicated in an ancillary delinquency proceeding as provided by
Subchapter P or by a court of competent jurisdiction in a proceeding
in which the domiciliary receiver was provided with notice and an
opportunity for hearing, the amount is conclusive. If the amount
was not adjudicated as provided by this subsection, the amount
shall be determined in the delinquency proceeding in the
domiciliary state.
(c) The value of any security held by a secured creditor
shall be determined under supervision of the court by:
(1) conversion of the security into money according to
the terms of the agreement under which the security was delivered to
the creditor; or
(2) agreement, arbitration, compromise, or litigation
between the creditor and the receiver. (V.T.I.C. Art. 21.28, Sec.
8(c).)
Sec. 442.555. DIVIDEND PAYMENTS. (a) On the direction and
approval of the court and in accordance with the priorities
provided by this subchapter, the receiver may make periodic
dividend payments, including payments of policyholder claims, to
facilitate the rehabilitation, liquidation, conservation, or
dissolution of an insurer.
(b) The receiver at all times shall reserve sufficient
assets to pay the expenses of administration. (V.T.I.C. Art.
21.28, Sec. 8(b).)
Sec. 442.556. CLAIMANTS OF OTHER STATES OR FOREIGN
COUNTRIES. (a) If a claimant of another state or of a foreign
country is entitled to or receives a dividend on the claim out of a
statutory deposit or the proceeds of a bond or other asset located
in that state or foreign country, the claimant is not entitled to
share in the distribution of any additional dividend from the
receiver until all other claimants of the same class receive an
equal dividend on their claims, regardless of their residence or
the location of the acts or contracts on which the claims are based.
(b) After the other claimants of the same class receive an
equal dividend on their claims, the claimant of the other state or
of the foreign country is entitled to share in the distribution of
additional dividends by the receiver, along with and in the same
manner as all other creditors of the same class, regardless of their
residence. (V.T.I.C. Art. 21.28, Sec. 8(e).)
Sec. 442.557. SETOFF OF DIVIDEND AMOUNT. On the
declaration of a dividend, the receiver shall apply the amount of
the dividend against any debt owed to the insurer by the person
entitled to the dividend. (V.T.I.C. Art. 21.28, Sec. 8(f).)
Sec. 442.558. CLAIMS UNDER SEPARATE ACCOUNTS ESTABLISHED BY
DOMESTIC LIFE INSURANCE COMPANIES. (a) Each claim under a separate
account established under Chapter 1152 shall be satisfied out of
the portion of the assets in the separate account that is equal to
the reserves maintained in the account for the applicable
contracts.
(b) To the extent reserves maintained in a separate account
exceed the amounts needed to satisfy claims under the applicable
contracts, the excess shall be treated as general assets of the
domestic life insurance company. (V.T.I.C. Art. 21.28, Sec. 8(k)
(part).)
Sec. 442.559. INTEREST. Interest does not accrue on a claim
after the date of the commencement of a delinquency proceeding.
(V.T.I.C. Art. 21.28, Sec. 8(d).)
[Sections 442.560-442.600 reserved for expansion]
SUBCHAPTER M. UNCLAIMED ASSETS
Sec. 442.601. DELIVERY OF UNCLAIMED MONEY TO DEPARTMENT.
(a) Except as provided by Subsection (b), any unclaimed dividend on
an approved claim, unclaimed returned assessment, or other
unclaimed money that is subject to distribution to a claimant,
policyholder, or other person and that remains in the possession of
the receiver after payment of the final dividend shall be delivered
to the department at the time the receivership is closed.
(b) If a final dividend is paid less than 90 days before the
date the receivership is closed, the receiver may continue, for a
period not to exceed 90 days from the date the receivership is
closed, any bank account of the receivership from which any
unclaimed dividend might be paid, before the receiver delivers the
unclaimed dividend to the department.
(c) The department shall deposit the money in trust in an
account to be maintained with the comptroller. (V.T.I.C. Art.
21.28, Sec. 8(g).)
Sec. 442.602. RECOVERY OF UNCLAIMED MONEY BY OWNER. (a) On
receipt of satisfactory written and verified proof of ownership not
later than the second anniversary of the date money is deposited
with the comptroller under Section 442.601, the department shall
certify that fact to the comptroller.
(b) On certification under Subsection (a), the comptroller
shall issue a warrant drawn on the state treasury for the money in
favor of each person entitled to the money. (V.T.I.C. Art. 21.28,
Sec. 8(h).)
Sec. 442.603. APPLICATION FOR DECLARATION OF ABANDONMENT OF
MONEY; NOTICE. (a) After money deposited with the comptroller
under Section 442.601 has remained unclaimed for two years, the
receiver may initiate an action to declare the money abandoned and
that the money is the property of the department by filing in the
court of competent jurisdiction in the county in which the
delinquency proceeding is or was pending a notice that the receiver
intends to declare the money abandoned and claim the money as the
property of the department. The action may be for all or part of the
money accumulated in any particular receivership.
(b) The notice must state:
(1) the name of each person entitled to the money;
(2) the person's last known address; and
(3) the nature or source and amount of the money.
(c) On the filing of the notice by the receiver, the court
shall set a date for the hearing on the application that is at least
20 days after the date the notice was filed and shall make a
notation of the date of the hearing on the notice.
(d) A copy of the notice with the judge's notation of the
date of the hearing must be posted on the courthouse door for at
least 20 days before the date a hearing is held on the application.
At least 10 days before the date set for the hearing, notice of the
filing of the application must be published in a newspaper of
general circulation in the county in which the application is
pending. The notice must be addressed to the owners of unclaimed
money in the particular receivership involved in the application
and must state generally that a hearing will be held on the
specified date to declare the money abandoned and that the money is
the property of the department. (V.T.I.C. Art. 21.28, Sec. 8(i)
(part).)
Sec. 442.604. HEARING ON APPLICATION FOR DECLARATION OF
ABANDONMENT OF MONEY; JUDGMENT. (a) At a hearing on an application
filed under Section 442.603, proof to the satisfaction of the court
of the following is prima facie evidence that each person entitled
to money deposited with the comptroller under Section 442.601
intends to abandon the money and that the department is the owner of
the money:
(1) the money, or a check for the money, was sent by
the receiver to the last known address of each person entitled to
the money;
(2) the money, or a check for the money, was returned
unclaimed or the check for the money was not cashed;
(3) the money was delivered to the department as
required by Section 442.601;
(4) the money has remained unclaimed for two years;
and
(5) notice of the filing of the application was
published as required by Section 442.603.
(b) On a finding by the court under Subsection (a), the
court may render judgment accordingly. On receipt of the judgment,
the department shall certify that fact to the comptroller.
(c) On certification under Subsection (b), the comptroller
shall issue a warrant for the money in favor of the department. The
department shall promptly deposit the money in accordance with
Section 442.110, except that the money derived from one insurer is
not required to be kept separate from money derived from another
insurer. (V.T.I.C. Art. 21.28, Sec. 8(i) (part).)
Sec. 442.605. USE OF CERTAIN UNLIQUIDATED ASSETS; DEPOSIT
OF PROCEEDS IN TRUST. (a) Any assets other than cash that remain in
the possession of the receiver after payment of the final dividend
in a receivership estate may be conveyed, transferred, or assigned
to the commissioner to be handled as a trust.
(b) The commissioner may convey, transfer, and assign any
assets, including causes of action, judgments, and claims, and
settle or release causes of action, judgments, claims, and liens on
terms and for amounts the commissioner considers to be in the best
interest of the trust, regardless of whether the assets have
previously or may subsequently come into the commissioner's
possession.
(c) From proceeds derived from any assets described by
Subsection (b), the commissioner or the special deputy receiver
shall defray the costs incident to the sale, settlement, release,
or other transaction by which the proceeds are obtained and deliver
the remainder to the department. The department shall deposit the
money in trust in an account to be maintained with the comptroller
and to be handled, disposed of, and used as provided by Sections
442.606 and 442.607. (V.T.I.C. Art. 21.28, Sec. 8A (part).)
Sec. 442.606. APPLICATION FOR DECLARATION OF ABANDONMENT OF
PROCEEDS IN TRUST; NOTICE AND HEARING. (a) On application by the
commissioner and after notice and hearing, a court of competent
jurisdiction of Travis County may make an order directing
disposition of money deposited in a trust account under Section
442.605(c).
(b) The notice must be addressed to all persons having an
interest, as claimants or otherwise, in the assets of the
particular receivership involved in the application and must state:
(1) the amount of the money and the receivership from
which the money was derived; and
(2) generally that a hearing will be held on the
specified date to determine the disposition of the money, including
a declaration that the money is abandoned and is the property of the
department.
(c) The notice required by Subsection (a) must be:
(1) posted on the courthouse door for at least 20 days
before the date the hearing is held; and
(2) published at least 10 days before the date set for
the hearing in a newspaper of general circulation in Travis County.
(d) If the court finds that money derived from a
receivership is sufficient to justify the reopening of the
receivership and the payment of a dividend, the court may enter an
order to that effect. If the money is insufficient for that
purpose, the court may declare the money abandoned.
(e) A certified copy of a judgment declaring the money
abandoned is sufficient authority for the comptroller to issue a
warrant for the money in favor of the department. On issuance of
the warrant, the department shall promptly deposit the money in
accordance with Section 442.110, except that money derived from one
insurer is not required to be kept separate from money derived from
another insurer. (V.T.I.C. Art. 21.28, Sec. 8A (part).)
Sec. 442.607. USE OF ABANDONED MONEY. (a) The receiver,
with the consent of the department, may spend money deposited by the
department under Sections 442.604 and 442.606 to:
(1) pay expenses of the office of the receiver that are
not properly chargeable to any one receivership or conservatorship
estate; and
(2) continue the administration of a receivership or
conservatorship by the receiver as receiver or conservator, if the
department considers the continuation to be in the best interest of
the receivership or conservatorship estate.
(b) Any money applied under Subsection (a)(2) to a
receivership estate must be repaid from the assets of that estate
before the payment of any additional dividends in that
receivership, including policyholder claims and other claims.
(c) Any money applied under Subsection (a)(2) to a
conservatorship estate must be repaid from the assets of that
estate before the release of that conservatorship for continued
operation. (V.T.I.C. Art. 21.28, Secs. 8(j), 8A (part).)
[Sections 442.608-442.650 reserved for expansion]
SUBCHAPTER N. TRANSFER OR DISPOSAL OF EXCESS ASSETS
Sec. 442.651. TRANSFER OF REMAINING ASSETS OF STOCK
INSURANCE COMPANY TO AGENT. (a) After the receiver has provided
for unclaimed dividends and all of the liabilities of a stock
insurance company, the receiver shall call a meeting of the
shareholders of the insurer by:
(1) publishing notice of the meeting in one or more
newspapers in the county in which the principal office of the
insurer was located; and
(2) giving written notice of the meeting to each
shareholder of record at the shareholder's last known address.
(b) At the meeting, the shareholders shall appoint one or
more agents to take over the liquidation of the insurer for the
benefit of the shareholders. Voting privileges are governed by the
insurer's bylaws. A majority of the shares must be represented at
the agent's appointment. The agent or agents shall execute and file
with the court one or more bonds as approved by the court,
conditioned on the faithful performance of all the duties of the
trust.
(c) Under order of the court, the receiver shall transfer
and deliver to the agent or agents for continued liquidation under
the court's supervision all assets of the insurer remaining in the
possession of the receiver. After the transfer and delivery, the
receiver and the department, and each employee of the receiver or
the department, are discharged from any further liability to the
insurer and the creditors and shareholders of the insurer.
(d) This section does not permit the insurer to continue
engaging in the business of insurance. The charter of the insurer
and each certificate of authority or other permit issued under or in
connection with the charter are ipso facto revoked by the order of
the court directing the receiver to transfer and deliver the
remaining assets of the insurer to the agent or agents. (V.T.I.C.
Art. 21.28, Sec. 9(a).)
Sec. 442.652. DISPOSAL OF REMAINING ASSETS OF INSURER OTHER
THAN STOCK INSURANCE COMPANY. After the receiver has provided for
unclaimed dividends and all of the liabilities of an insurer other
than a stock insurance company, the receiver shall dispose of any
remaining assets as directed by the receivership court. (V.T.I.C.
Art. 21.28, Sec. 9(b).)
Sec. 442.653. TRANSFER OF REMAINING ASSETS OF INSURER TO
GUARANTY ASSOCIATION. (a) Notwithstanding any other provision of
this chapter, in closing a receivership estate, a special deputy
receiver, on approval of the court, may transfer any remaining
asset, cause of action asserted on behalf of the impaired insurer,
judgment, claim, or lien to the appropriate guaranty association.
(b) A transfer under Subsection (a):
(1) is not a preference or voidable transfer; and
(2) is considered a distribution under Sections
442.551(a)-(d).
(c) If the amount realized by the guaranty association is
materially greater than the amount loaned by the guaranty
association to the receivership estate, the court may order the
reopening of the receivership to distribute the excess money.
(d) This subchapter does not transfer any liability of an
impaired insurer to the guaranty association that would not
constitute a claim payable under Chapter 462, 463, or 2602.
(V.T.I.C. Art. 21.28, Sec. 9(c).)
[Sections 442.654-442.700 reserved for expansion]
SUBCHAPTER O. DURATION AND REOPENING OF RECEIVERSHIP
Sec. 442.701. LIMITATION ON DURATION OF RECEIVERSHIP. (a)
Except as otherwise provided by this section, each receivership or
other delinquency proceeding prescribed by this chapter shall be
administered in accordance with Section 64.072, Civil Practice and
Remedies Code.
(b) To the extent the proceeding applies to claims against a
workers' compensation insurance policy or a title insurance policy,
a receivership or other delinquency proceeding shall be
administered continuously for any period necessary to effect the
receivership's or proceeding's purposes, and any arbitrary
limitation on that period provided by another law of this state with
regard to the administration of receiverships or of corporate
affairs generally does not apply to the proceeding.
(c) Instead of the winding up and distribution of a
receivership estate of an insurer without capital stock, the court
shall order revival and reinstatement of the charter, certificates
of authority or other permits, franchises, and management contracts
or other control instruments of the insurer if the insurer's
remaining cash on hand and on deposit, less any outstanding
enforceable liabilities, exceeds the minimum amount of capital and
surplus prescribed for that insurer under Section 822.054, 822.202,
822.210, or 841.054. (V.T.I.C. Art. 21.28, Sec. 9(d).)
Sec. 442.702. REOPENING OF RECEIVERSHIP. (a) If after
the receivership has been closed by final order of the court the
receiver discovers assets not known to the receiver during the
receivership, the receiver shall report the receiver's findings to
the court.
(b) The court may reopen the receivership for continued
liquidation if the court finds that the value of the discovered
assets justifies the reopening. (V.T.I.C. Art. 21.28, Sec. 9(e).)
[Sections 442.703-442.750 reserved for expansion]
SUBCHAPTER P. ANCILLARY DELINQUENCY PROCEEDINGS
Sec. 442.751. APPOINTMENT OF ANCILLARY RECEIVER. (a) On
the petition of the department, a court of competent jurisdiction
in this state shall appoint the commissioner as ancillary receiver
in this state for an insurer domiciled in another jurisdiction if a
receiver should be appointed for that insurer under the laws of this
state.
(b) The department:
(1) may file the petition on the department's own
initiative; and
(2) shall file the petition if at least 10 residents of
this state who have claims against the insurer file one or more
petitions in writing with the department requesting the appointment
of an ancillary receiver. (V.T.I.C. Art. 21.28, Sec. 13 (part).)
Sec. 442.752. POWERS AND DUTIES OF ANCILLARY RECEIVER.
(a) The ancillary receiver is entitled to sue for and possess the
assets of the insurer in this state and has the same powers and
duties with regard to those assets as a receiver of an insurer
domiciled in this state.
(b) On commencement of the delinquency proceeding in this
state, the ancillary receiver is immediately entitled to possession
and control of any special or statutory deposits of the insurer that
are located in this state. The ancillary receiver may use those
deposits:
(1) to pay expenses of the administration of the
receivership proceeding; and
(2) after paying the expenses under Subdivision (1),
to pay approved claims against the deposits. (V.T.I.C. Art. 21.28,
Sec. 13 (part).)
Sec. 442.753. COORDINATION WITH RECEIVER IN OTHER
STATE. If a receiver of a delinquent insurer has been appointed
both in this state and in another state, the receiver in this state
may, under supervision of the receivership court in this state and
regardless of whether the receiver in this state is an ancillary
receiver, contract with the receiver in the other state to
coordinate the administration of the receiverships in the interest
of efficiency and economy in any manner consistent with this
chapter. (V.T.I.C. Art. 21.28, Sec. 14.)
Sec. 442.754. APPLICABILITY OF CHAPTER TO ANCILLARY
DELINQUENCY PROCEEDINGS. The conduct of ancillary delinquency
proceedings under this subchapter is subject to the other
provisions of this chapter. (V.T.I.C. Art. 21.28, Sec. 13 (part).)
[Sections 442.755-442.800 reserved for expansion]
SUBCHAPTER Q. AGENCY CONTRACTS WITH CERTAIN INSURERS
Sec. 442.801. REQUIRED CONTRACT PROVISION. An agency
contract entered into on or after August 27, 1973, by an insurer
writing fire and casualty insurance in this state must contain, or
shall be construed to contain, the following provision:
Notwithstanding any other provision of this
contract, the obligation of the agent to remit written
premiums to the insurer shall be changed on the
commencement of a delinquency proceeding as defined by
Chapter 442, Insurance Code, as amended. After the
commencement of the delinquency proceeding, the
obligation of the agent to remit premiums is limited to
premiums earned before the cancellation date of
insurance policies stated in the order of a court of
competent jurisdiction under Chapter 442, Insurance
Code, canceling the policies. The agent does not owe
and may not be required to remit to the insurer or to
the receiver any premiums that are unearned as of the
cancellation date stated in the order.
(V.T.I.C. Art. 21.11-2, Sec. 1.)
Sec. 442.802. DISPOSITION OF PREMIUMS. (a) On or after
the cancellation date of insurance policies as stated in the
court's order canceling the policies, the agent shall promptly
account to the receiver for:
(1) all unearned premiums to be returned to the
insured or the replacement coverage to be obtained for the insured;
and
(2) the earned premiums to be paid to the receiver.
(b) The agent shall:
(1) promptly return to an insured who paid the
premiums any unearned premiums in the possession of the agent on the
cancellation date of the policy; or
(2) with the approval of the insured, use the unearned
premiums to purchase new coverage for the insured with a different
insurer.
(c) The agent shall promptly remit to the receiver any
earned premiums in the possession of the agent. (V.T.I.C. Art.
21.11-2, Sec. 2.)
Sec. 442.803. EFFECT OF SUBCHAPTER ON ACTION BY RECEIVER
AGAINST AGENT. This subchapter does not prejudice a cause of action
by the receiver against an agent to recover:
(1) unearned premiums that were not returned to
policyholders; or
(2) earned premiums that were not promptly remitted to
the receiver. (V.T.I.C. Art. 21.11-2, Sec. 3.)
Sec. 442.804. AGENT NOT RECEIVER'S AGENT. This subchapter
does not render the agent an agent of the receiver for earned or
unearned premiums. (V.T.I.C. Art. 21.11-2, Sec. 4.)
[Chapters 443-460 reserved for expansion]
SUBTITLE D. GUARANTY ASSOCIATIONS
CHAPTER 461. GENERAL PROVISIONS
Sec. 461.001. APPLICABILITY OF CHAPTER
Sec. 461.002. DISCLOSURE OF GUARANTY FUND
NONPARTICIPATION
Sec. 461.003. FORM OF STATEMENT; PROHIBITION
CHAPTER 461. GENERAL PROVISIONS
Sec. 461.001. APPLICABILITY OF CHAPTER. (a) Except as
provided by Subsection (b), this chapter applies to an insurance
policy, contract, certificate, evidence of coverage, or
application delivered or issued for delivery in this state that is
not covered by an insurance guaranty fund or other solvency
protection arrangement authorized by this code.
(b) This chapter does not apply to:
(1) a fidelity, surety, or guaranty bond; or
(2) marine insurance as defined by Section 1807.001.
(V.T.I.C. Art. 21.28-E, Secs. (a) (part), (c).)
Sec. 461.002. DISCLOSURE OF GUARANTY FUND
NONPARTICIPATION. (a) Each insurance policy, contract,
certificate, evidence of coverage, or application subject to this
chapter must include a statement that, if the insurer is unable to
fulfill the insurer's contractual obligation under the policy,
contract, certificate, or evidence of coverage, the insurer is not
covered by an insurance guaranty fund or other solvency protection
arrangement.
(b) The statement must be in 10-point type and affixed to
the first page of the insurance policy, contract, certificate,
evidence of coverage, or application. (V.T.I.C. Art. 21.28-E, Sec.
(a) (part).)
Sec. 461.003. FORM OF STATEMENT; PROHIBITION. (a) The
commissioner by rule shall promulgate the statement that an insurer
must use to comply with this chapter.
(b) An insurer may not include in an insurance policy,
contract, certificate, evidence of coverage, or application a
statement that does not conform to the appropriate statement prescribed by the commissioner. (V.T.I.C. Art. 21.28-E, Sec. (b).)
CHAPTER 462. TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY
ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 462.001. SHORT TITLE
Sec. 462.002. PURPOSES
Sec. 462.003. CONSTRUCTION
Sec. 462.004. GENERAL DEFINITIONS
Sec. 462.005. DESCRIPTION OF CONTROL
Sec. 462.006. NET DIRECT WRITTEN PREMIUMS
Sec. 462.007. APPLICABILITY IN GENERAL; EXCEPTIONS
Sec. 462.008. APPLICABILITY TO TEXAS MUTUAL INSURANCE
COMPANY
Sec. 462.009. APPLICABILITY TO FORMER TEXAS WORKERS'
COMPENSATION INSURANCE FACILITY AND
SUCCESSOR
Sec. 462.010. CONFLICT WITH OTHER LAWS
Sec. 462.011. IMMUNITY IN GENERAL
Sec. 462.012. IMMUNITY IN RELATION TO CERTAIN REPORTS
AND RECOMMENDATIONS
Sec. 462.013. IMMUNITY IN RELATION TO CERTAIN
NEGOTIATIONS
Sec. 462.014. RULES
Sec. 462.015. INFORMATION PROVIDED BY OR TO
COMMISSIONER
Sec. 462.016. PENALTY FOR FAILURE TO PAY ASSESSMENTS
OR COMPLY WITH PLAN OF OPERATION
Sec. 462.017. APPEALS AND OTHER ACTIONS
[Sections 462.018-462.050 reserved for expansion]
SUBCHAPTER B. GOVERNANCE OF ASSOCIATION
Sec. 462.051. ASSOCIATION AS LEGAL ENTITY; MEMBERSHIP
Sec. 462.052. BOARD OF DIRECTORS
Sec. 462.053. ELIGIBILITY TO SERVE AS PUBLIC
REPRESENTATIVE
Sec. 462.054. ELIGIBILITY TO SERVE AS INDUSTRY
REPRESENTATIVE
Sec. 462.055. TERM; VACANCY
Sec. 462.056. REIMBURSEMENT OF BOARD MEMBERS
Sec. 462.057. FINANCIAL STATEMENT OF BOARD MEMBER
Sec. 462.058. CONFLICT OF INTEREST
Sec. 462.059. MEETING BY CONFERENCE CALL
[Sections 462.060-462.100 reserved for expansion]
SUBCHAPTER C. GENERAL POWERS AND DUTIES OF ASSOCIATION
Sec. 462.101. GENERAL POWERS AND DUTIES
Sec. 462.102. ASSOCIATION NOT IN PLACE OF IMPAIRED
INSURER
Sec. 462.103. PLAN OF OPERATION
Sec. 462.104. NOTICE TO INSUREDS
Sec. 462.105. ACCOUNTS
Sec. 462.106. ADMINISTRATIVE EXPENSES
Sec. 462.107. EXAMINATION OF ASSOCIATION
Sec. 462.108. DEPOSIT OF MONEY
Sec. 462.109. DELEGATION OF POWERS AND DUTIES
Sec. 462.110. EXEMPTION FROM CERTAIN FEES AND TAXES
Sec. 462.111. ACCESS TO RECORDS OF MEMBER INSURER IN
RECEIVERSHIP; ACTUARIAL AND
OPERATIONAL ANALYSIS
Sec. 462.112. BOARD ACCESS TO RECORDS OF IMPAIRED
INSURER
Sec. 462.113. BOARD REPORT ON CONCLUSION OF INSOLVENCY
Sec. 462.114. DUTY OF RECEIVER
[Sections 462.115-462.150 reserved for expansion]
SUBCHAPTER D. ASSESSMENTS IN GENERAL
Sec. 462.151. MAKING OF ASSESSMENT; AMOUNT
Sec. 462.152. MAXIMUM TOTAL ASSESSMENT
Sec. 462.153. REFUND OF CONTRIBUTION
Sec. 462.154. NOTICE OF ASSESSMENT
Sec. 462.155. DEFERMENT
Sec. 462.156. USE OF ASSESSMENTS
Sec. 462.157. TAX CREDIT
Sec. 462.158. ADVANCE AS LOAN
Sec. 462.159. ESTIMATE OF ADDITIONAL MONEY NEEDED ON
IMPAIRMENT OF INSURER
Sec. 462.160. ASSESSMENT FOR ADDITIONAL MONEY FOR
ACCOUNTS
Sec. 462.161. AMOUNT OF ASSESSMENT; PRORATION OF
PAYMENT
Sec. 462.162. MAXIMUM ASSESSMENT OF INSURER;
ADDITIONAL ASSESSMENT AUTHORITY UNDER
CERTAIN CIRCUMSTANCES
Sec. 462.163. PAYMENT OF ASSESSMENT
Sec. 462.164. PARTICIPATION RECEIPTS
Sec. 462.165. ACCOUNTING; REPORTS; REFUND
Sec. 462.166. USE OF EXCESS MONEY IN ACCOUNT
Sec. 462.167. COLLECTION OF ASSESSMENTS
Sec. 462.168. EXEMPTION FOR IMPAIRED INSURER
[Sections 462.169-462.200 reserved for expansion]
SUBCHAPTER E. COVERED CLAIMS; CLAIMANTS
Sec. 462.201. COVERED CLAIMS IN GENERAL
Sec. 462.202. CLAIM FOR UNEARNED PREMIUMS
Sec. 462.203. CERTAIN EXPENSES OF RECEIVERSHIP OR
CONSERVATORSHIP ESTATE COVERED
Sec. 462.204. AFFILIATE MAY NOT BE CLAIMANT
Sec. 462.205. DETERMINATION OF RESIDENCE OF ENTITIES
Sec. 462.206. CLAIMS NOT COVERED: PREMIUM UNDER
RETROSPECTIVE RATING PLAN
Sec. 462.207. CLAIMS NOT COVERED: AMOUNTS DUE CERTAIN
ENTITIES
Sec. 462.208. CLAIMS NOT COVERED: SUPPLEMENTARY
PAYMENT OBLIGATIONS
Sec. 462.209. CLAIMS NOT COVERED: PREJUDGMENT OR
POSTJUDGMENT INTEREST
Sec. 462.210. CLAIMS NOT COVERED: CERTAIN DAMAGES
Sec. 462.211. CLAIMS NOT COVERED: LATE FILED CLAIMS
Sec. 462.212. NET WORTH EXCLUSION
Sec. 462.213. AMOUNT OF INDIVIDUAL COVERED CLAIM;
LIMIT
Sec. 462.214. CERTAIN SHAREHOLDERS' CLAIMS: LIMIT
[Sections 462.215-462.250 reserved for expansion]
SUBCHAPTER F. NONDUPLICATION OF RECOVERY
Sec. 462.251. EXHAUSTION OF RIGHTS UNDER OTHER POLICY
REQUIRED
Sec. 462.252. REDUCTION IN AMOUNT OF COVERED CLAIM FOR
OTHER POLICY
Sec. 462.253. EFFECT ON INSURED OF REDUCTION IN AMOUNT
OF COVERED CLAIM
Sec. 462.254. RECOVERY FROM MORE THAN ONE GUARANTY
ASSOCIATION
Sec. 462.255. CERTAIN CLAIMS SUBJECT TO LIEN OR
SUBROGATION; LIMIT ON TOTAL RECOVERY
[Sections 462.256-462.300 reserved for expansion]
SUBCHAPTER G. ASSOCIATION POWERS AND DUTIES RELATING TO COVERED
CLAIMS
Sec. 462.301. GENERAL POWERS AND DUTIES OF ASSOCIATION
IN CONNECTION WITH PAYMENT OF COVERED
CLAIMS
Sec. 462.302. PAYMENT OF COVERED CLAIMS
Sec. 462.303. CERTAIN DETERMINATIONS NOT BINDING
Sec. 462.304. SERVICING FACILITY
Sec. 462.305. LIMITATION OF ASSOCIATION'S LIABILITY
Sec. 462.306. DISCHARGE OF POLICY OBLIGATION
Sec. 462.307. ASSIGNMENT OF RIGHTS
Sec. 462.308. RECOVERY FROM CERTAIN PERSONS
Sec. 462.309. STAY OF PROCEEDINGS; CERTAIN DECISIONS
NOT BINDING
Sec. 462.310. SETTLEMENT BY ASSOCIATION BINDING;
PRIORITY OF CLAIM AND EXPENSES
Sec. 462.311. REPORT TO RECEIVER
[Sections 462.312-462.350 reserved for expansion]
SUBCHAPTER H. RELEASE FROM RECEIVERSHIP
Sec. 462.351. ISSUANCE OF POLICIES AFTER RELEASE FROM
RECEIVERSHIP
CHAPTER 462. TEXAS PROPERTY AND CASUALTY INSURANCE GUARANTY
ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 462.001. SHORT TITLE. This chapter may be cited as the
Texas Property and Casualty Insurance Guaranty Act. (V.T.I.C. Art.
21.28-C, Sec. 1.)
Sec. 462.002. PURPOSES. The purposes of this chapter are
to:
(1) provide a mechanism for the payment of covered
claims under certain insurance policies to avoid excessive delay in
payment;
(2) avoid financial loss to claimants or policyholders
because of an insurer's impairment;
(3) assist in the detection and prevention of insurer
insolvencies; and
(4) provide an association to assess the cost of that
protection among insurers. (V.T.I.C. Art. 21.28-C, Sec. 2.)
Sec. 462.003. CONSTRUCTION. This chapter shall be
liberally construed to implement the purposes of this chapter
described by Section 462.002, which shall be used to aid and guide
interpretation of this chapter. (V.T.I.C. Art. 21.28-C, Sec. 4.)
Sec. 462.004. GENERAL DEFINITIONS. In this chapter:
(1) "Affiliate" means a person who, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with an impaired insurer
on December 31 of the year preceding the date the insurer becomes an
impaired insurer.
(2) "Association" means the Texas Property and
Casualty Insurance Guaranty Association.
(3) "Board" means the board of directors of the
association.
(4) "Claimant" means an insured making a first-party
claim or a person instituting a liability claim.
(5) "Impaired insurer" means a member insurer that is:
(A) placed in:
(i) temporary or permanent receivership or
liquidation under a court order, including a court order of another
state, based on a finding of insolvency; or
(ii) conservatorship after the
commissioner determines that the insurer is insolvent; and
(B) designated by the commissioner as an impaired
insurer.
(6) "Member insurer" means an insurer, including a
stock insurance company, a mutual insurance company, a Lloyd's
plan, a reciprocal or interinsurance exchange, and a county mutual
insurance company, that:
(A) writes any kind of insurance to which this
chapter applies under Sections 462.007 and 462.008, including
reciprocal or interinsurance exchange contracts; and
(B) holds a certificate of authority to engage in
the business of insurance in this state.
(7) "Person" means an individual, corporation,
partnership, association, or voluntary organization. (V.T.I.C.
Art. 21.28-C, Secs. 5(2), (3), (4), (5) (part), (9), (10), (12).)
Sec. 462.005. DESCRIPTION OF CONTROL. (a) For purposes of
this chapter, control is the power to direct, or cause the direction
of, the management and policies of a person, other than power that
results from an official position with the person or a corporate
office held by the person. The power may be possessed directly or
indirectly by any means, including through the ownership of voting
securities or by contract, other than a commercial contract for
goods or nonmanagement services.
(b) A person is presumed to control another person if the
person directly or indirectly owns, controls, holds with the power
to vote, or holds proxies representing 10 percent or more of the
voting securities of the other person. This presumption may be
rebutted by a showing that the person does not in fact control the
other person. (V.T.I.C. Art. 21.28-C, Sec. 5(7).)
Sec. 462.006. NET DIRECT WRITTEN PREMIUMS. (a) Except as
provided by Subsection (b) and subject to Subsection (c), in this
chapter, "net direct written premiums" means direct premiums
written in this state on insurance policies to which this chapter
applies, less return premiums on those policies and dividends paid
or credited to policyholders on that direct business.
(b) Subject to Subsection (c), for assessing the workers'
compensation line of business, the term "net direct written
premiums" includes the modified annual premium before the
application of a deductible premium credit, less return premiums on
those policies and dividends paid or credited to policyholders on
that direct business.
(c) The term "net direct written premiums" does not include
premiums on contracts between insurers or reinsurers. (V.T.I.C.
Art. 21.28-C, Sec. 5(11).)
Sec. 462.007. APPLICABILITY IN GENERAL; EXCEPTIONS. (a)
Except as provided by Subsection (b), this chapter applies to each
kind of direct insurance.
(b) Except as provided by Subchapter F, this chapter does
not apply to:
(1) life, annuity, health, or disability insurance;
(2) mortgage guaranty, financial guaranty, or other
kinds of insurance offering protection against investment risks;
(3) a fidelity or surety bond, or any other bonding
obligation;
(4) credit insurance, vendors' single-interest
insurance, collateral protection insurance, or similar insurance
protecting a creditor's interest arising out of a creditor-debtor
transaction;
(5) insurance of warranties or service contracts;
(6) title insurance;
(7) ocean marine insurance;
(8) a transaction or combination of transactions
between a person, including an affiliate of the person, and an
insurer, including an affiliate of the insurer, that involves the
transfer of investment or credit risk unaccompanied by the transfer
of insurance risk; or
(9) insurance provided by or guaranteed by government.
(V.T.I.C. Art. 21.28-C, Sec. 3(a).)
Sec. 462.008. APPLICABILITY TO TEXAS MUTUAL INSURANCE
COMPANY. (a) This chapter applies to insurance written through the
Texas Mutual Insurance Company only as provided by this section.
(b) This chapter applies to the Texas Mutual Insurance
Company on a prospective basis on and after January 1, 2000. The
Texas Mutual Insurance Company is only liable for assessments for a
claim with a date of injury that occurs on or after January 1, 2000.
The association, with respect to an insolvency of the Texas Mutual
Insurance Company, is only liable for a claim with a date of injury
that occurs on or after January 1, 2000. (V.T.I.C. Art. 21.28-C,
Sec. 3(b).)
Sec. 462.009. APPLICABILITY TO FORMER TEXAS WORKERS'
COMPENSATION INSURANCE FACILITY AND SUCCESSOR. (a)
Notwithstanding any other provision of this chapter, this chapter
applies to each insurance policy issued under Article 5.76 or
5.76-2, as those articles existed before their repeal.
(b) Notwithstanding any other provision of this chapter,
the stock insurance company that resulted from the transfer of the
former Texas workers' compensation insurance facility is
considered an impaired insurer for purposes of this chapter if any
action described by Section 462.004(5) is taken with respect to the
company.
(c) A claim under an insurance policy described by
Subsection (a) is a covered claim for purposes of this chapter if
the claim is a covered claim for purposes of Sections
462.201-462.203, 462.205-462.210, 462.213, 462.214, and 462.305
without regard to whether the stock insurance company described by
Subsection (b):
(1) issued or assumed the policy; or
(2) was authorized to engage in business in this state
at the time:
(A) the policy was written; or
(B) the company became an impaired insurer.
(d) If a conflict exists between this section and any other
statute relating to the former Texas workers' compensation
insurance facility or the association, this section controls.
(V.T.I.C. Art. 21.28-C, Sec. 26.)
Sec. 462.010. CONFLICT WITH OTHER LAWS. (a) Except as
provided by Subsection (b), if this chapter conflicts with another
statute relating to the association, this chapter controls.
(b) This section does not apply to a conflict between this
chapter and:
(1) Subtitle A, Title 5, Labor Code, except as
described by Subsection (c); or
(2) Subtitle E, Title 10.
(c) This chapter controls with respect to subrogation
rights of an insurance carrier under Chapter 417, Labor Code,
against an impaired insurer's insured or the association.
(V.T.I.C. Art. 21.28-C, Sec. 25.)
Sec. 462.011. IMMUNITY IN GENERAL. (a) Liability does not
exist and a cause of action does not arise against any of the
following persons for any good faith act or omission in performing
the person's powers and duties under this chapter:
(1) the commissioner or the commissioner's
representative;
(2) the association or the association's agent or
employee;
(3) a member insurer;
(4) the board;
(5) the receiver; or
(6) a special deputy receiver or the special deputy
receiver's agent or employee.
(b) The attorney general shall defend any action to which
this section applies that is brought against the commissioner or
the commissioner's representative, the association or the
association's agent or employee, a member insurer or the insurer's
agent or employee, a board member, or a special deputy receiver or
the special deputy receiver's agent or employee, including an
action instituted after the defendant's service with the
association, commissioner, or department has terminated. This
subsection does not require the attorney general to defend a person
with respect to an issue other than the applicability or effect of
the immunity created by Subsection (a). The attorney general is not
required to defend the association or the association's agent or
employee, a member insurer or the member insurer's agent or
employee, a board member, or a special deputy receiver or the
special deputy receiver's agent or employee against an action
regarding the disposition of a claim filed with the association
under this chapter or any issue other than the applicability or
effect of the immunity created by Subsection (a). The association
may contract with the attorney general under Chapter 771,
Government Code, for legal services not covered by this subsection.
(V.T.I.C. Art. 21.28-C, Sec. 16.)
Sec. 462.012. IMMUNITY IN RELATION TO CERTAIN REPORTS AND
RECOMMENDATIONS. Liability does not exist and a cause of action
does not arise against any of the following persons for a statement
made in good faith by the person in a report or recommendation made
under Section 462.111 or 462.113:
(1) the commissioner or the commissioner's
representative;
(2) the association or the association's agent or
employee;
(3) a member insurer; or
(4) the board. (V.T.I.C. Art. 21.28-C, Sec. 13(c).)
Sec. 462.013. IMMUNITY IN RELATION TO CERTAIN NEGOTIATIONS.
(a) Liability does not exist and a cause of action does not arise
against any of the following persons for an act or omission in the
performance of an activity related to the negotiations relating to
the privatization of the former Texas workers' compensation
facility:
(1) the commissioner or the commissioner's
representative;
(2) the association or the association's agent or
employee;
(3) a member insurer; or
(4) a board member.
(b) This section applies to each activity undertaken by a
person described by Subsection (a), regardless of the date of the
act or omission. (V.T.I.C. Art. 21.28-C, Sec. 27.)
Sec. 462.014. RULES. The commissioner shall adopt
reasonable rules as necessary to implement and supplement this
chapter and this chapter's purposes. (V.T.I.C. Art. 21.28-C, Sec.
23.)
Sec. 462.015. INFORMATION PROVIDED BY OR TO COMMISSIONER.
(a) The commissioner shall notify the association of the existence
of an impaired insurer not later than the third day after the date
the commissioner gives notice of the designation of impairment.
The association is entitled to a copy of any complaint seeking an
order of receivership with a finding of insolvency against a member
insurer at the time the complaint is filed with a court.
(b) On the board's request, the commissioner shall provide
the association with a statement of the net direct written premiums
of each member insurer. (V.T.I.C. Art. 21.28-C, Secs. 10(a), (b).)
Sec. 462.016. PENALTY FOR FAILURE TO PAY ASSESSMENTS OR
COMPLY WITH PLAN OF OPERATION. (a) The commissioner shall suspend
or revoke, after notice and hearing, the certificate of authority
to engage in the business of insurance in this state of a member
insurer that:
(1) fails to pay an assessment at the time the
assessment is due; or
(2) otherwise fails to comply with the plan of
operation.
(b) As an alternative to action under Subsection (a), the
commissioner may assess a fine on a member insurer that fails to pay
an assessment at the time the assessment is due. The fine may not
exceed the lesser of:
(1) five percent of the unpaid assessment per month;
or
(2) $100 per month. (V.T.I.C. Art. 21.28-C, Sec.
10(d).)
Sec. 462.017. APPEALS AND OTHER ACTIONS. (a) A final
action or order of the commissioner under this chapter is subject to
judicial review by a court.
(b) Venue in a suit against the commissioner or association
relating to an action or ruling of the commissioner or association
under this chapter is in Travis County. The commissioner or
association is not required to give an appeal bond in an appeal of a
cause of action arising under this chapter. (V.T.I.C. Art.
21.28-C, Secs. 10(f), (g).)
[Sections 462.018-462.050 reserved for expansion]
SUBCHAPTER B. GOVERNANCE OF ASSOCIATION
Sec. 462.051. ASSOCIATION AS LEGAL ENTITY; MEMBERSHIP. (a)
The Texas Property and Casualty Insurance Guaranty Association is a
nonprofit unincorporated legal entity.
(b) The association is composed of all member insurers. A
member insurer must remain a member of the association as a
condition of engaging in the business of insurance in this state.
(V.T.I.C. Art. 21.28-C, Sec. 6 (part).)
Sec. 462.052. BOARD OF DIRECTORS. (a) The association's
powers are exercised through a board of directors consisting of
nine individuals.
(b) Member insurers shall select five insurance industry
board members, subject to the approval of the commissioner. In
approving selections to the board, the commissioner shall consider
whether all member insurers are fairly represented.
(c) Four board members must be public representatives
appointed by the commissioner. (V.T.I.C. Art. 21.28-C, Secs. 6
(part), 7(a) (part), (b).)
Sec. 462.053. ELIGIBILITY TO SERVE AS PUBLIC
REPRESENTATIVE. A board member who is a public representative may
not be:
(1) an officer, director, or employee of an insurer,
insurance agency, agent, broker, adjuster, or any other business
entity regulated by the department;
(2) a person required to register with the Texas
Ethics Commission under Chapter 305, Government Code, in connection
with the person's representation of clients in the field of
insurance; or
(3) related to a person described by Subdivision (1)
or (2) within the second degree of affinity or consanguinity.
(V.T.I.C. Art. 21.28-C, Sec. 7(d).)
Sec. 462.054. ELIGIBILITY TO SERVE AS INDUSTRY
REPRESENTATIVE. To be eligible to serve as an insurance industry
board member, an individual must be a full-time employee of a member
insurer. (V.T.I.C. Art. 21.28-C, Sec. 7(a) (part).)
Sec. 462.055. TERM; VACANCY. (a) A board member serves a
term established by the plan of operation.
(b) The remaining board members, by majority vote, shall
fill a vacancy on the board for the unexpired term, subject to the
commissioner's approval. (V.T.I.C. Art. 21.28-C, Sec. 7(a)
(part).)
Sec. 462.056. REIMBURSEMENT OF BOARD MEMBERS. A board
member may be reimbursed from the assets of the association for
expenses the board member incurs as a board member. (V.T.I.C. Art.
21.28-C, Sec. 7(c).)
Sec. 462.057. FINANCIAL STATEMENT OF BOARD MEMBER. Each
board member shall file with the Texas Ethics Commission a
financial statement as provided by Subchapter B, Chapter 572,
Government Code. (V.T.I.C. Art. 21.28-C, Sec. 7(e).)
Sec. 462.058. CONFLICT OF INTEREST. (a) A director of the
association or a member insurer or other entity represented by the
director may not receive money or another valuable thing directly,
indirectly, or through any substantial interest in any other
corporation, firm, or business unit for negotiating, procuring,
participating in, recommending, or aiding in a reinsurance
agreement, merger, or other transaction, including the purchase,
sale, or exchange of assets, insurance policies, or property made
by the association or the supervisor, conservator, or receiver on
behalf of an impaired insurer.
(b) The director, member insurer, or entity may not be
pecuniarily or contractually interested, as principal,
coprincipal, agent, or beneficiary, directly, indirectly, or
through any substantial interest in any other corporation, firm, or
business unit, in the reinsurance agreement, merger, purchase,
sale, exchange, or other transaction. (V.T.I.C. Art. 21.28-C, Sec.
7(f).)
Sec. 462.059. MEETING BY CONFERENCE CALL. (a)
Notwithstanding Chapter 551, Government Code, the board may hold an
open meeting by telephone conference call if immediate action is
required and convening of a quorum of the board at a single location
is not reasonable or practical.
(b) The meeting is subject to the notice requirements that
apply to other meetings.
(c) The notice of the meeting must specify as the location
of the meeting the location at which meetings of the board are
usually held, and each part of the meeting that is required to be
open to the public must be audible to the public at that location
and must be tape recorded. The tape recording shall be made
available to the public. (V.T.I.C. Art. 21.28-C, Sec. 8(k).)
[Sections 462.060-462.100 reserved for expansion]
SUBCHAPTER C. GENERAL POWERS AND DUTIES OF ASSOCIATION
Sec. 462.101. GENERAL POWERS AND DUTIES. (a) The
association may:
(1) employ or retain persons as necessary to handle
claims and perform other duties of the association;
(2) borrow money necessary to implement this chapter
in accordance with the plan of operation;
(3) sue or be sued;
(4) negotiate and enter into a contract as necessary
to implement this chapter; and
(5) perform other acts as necessary or proper to
implement this chapter.
(b) A contract authorized by Subsection (a)(4) includes a
lump-sum or structured compromise and settlement agreement with a
claimant who has a claim for medical or indemnity benefits for a
period of three years or more, other than a settlement or lump-sum
payment in violation of Subtitle A, Title 5, Labor Code. (V.T.I.C.
Art. 21.28-C, Sec. 8(h) (part).)
Sec. 462.102. ASSOCIATION NOT IN PLACE OF IMPAIRED INSURER.
In performing the association's statutory obligations under this
chapter, the association is not considered:
(1) to be engaged in the business of insurance;
(2) to have assumed or succeeded to a liability of the
impaired insurer; or
(3) to otherwise stand in the place of the impaired
insurer for any purpose, including for the purpose of determining
whether the association is subject to personal jurisdiction of the
courts of another state. (V.T.I.C. Art. 21.28-C, Sec. 8(b)
(part).)
Sec. 462.103. PLAN OF OPERATION. (a) The association shall
perform the association's functions under a plan of operation
necessary or suitable to ensure the fair, reasonable, and equitable
administration of the association. The plan of operation must:
(1) be submitted to and approved in writing by the
commissioner;
(2) establish:
(A) procedures under which the powers and duties
of the association are performed;
(B) procedures for handling assets of the
association;
(C) the amount and method of reimbursing board
members;
(D) acceptable forms of proof of covered claims;
(E) regular places and times for board meetings;
(F) procedures for records to be kept of each
financial transaction of the association, the association's
agents, and the board; and
(G) procedures under which selections for the
board are submitted to the commissioner;
(3) provide:
(A) for the establishment of a claims filing
procedure that includes:
(i) notice by the association to claimants;
(ii) procedures for filing claims seeking
recovery from the association; and
(iii) a procedure for appealing the denial
of claims by the association; and
(B) that a member insurer aggrieved by a final
action or decision of the association may appeal to the
commissioner not later than the 30th day after the date of the
action or decision; and
(4) contain additional provisions necessary or proper
for the execution of the association's powers and duties.
(b) The association shall submit to the commissioner any
amendment to the plan of operation necessary or suitable to ensure
the fair, reasonable, and equitable administration of the
association. The amendment takes effect on the commissioner's
written approval.
(c) If the association does not submit a suitable amendment
to the plan of operation, the commissioner after notice and hearing
shall adopt reasonable rules as necessary or advisable to implement
this chapter. A rule continues in effect until modified by the
commissioner or superseded by an amendment submitted by the
association and approved by the commissioner.
(d) Each member insurer shall comply with the plan of
operation. (V.T.I.C. Art. 21.28-C, Secs. 6 (part), 9(a), (b), (c),
(d), (f).)
Sec. 462.104. NOTICE TO INSUREDS. (a) The commissioner may
require that the association notify an impaired insurer's insureds
and any other interested parties of:
(1) the designation of impairment; and
(2) the insureds' and other parties' rights under this
chapter.
(b) The association shall give notice as the commissioner
directs under this section. The association shall mail the notice
to the last known address, if available. If sufficient information
for notification by mail is not available, notice by publication in
a newspaper of general circulation is sufficient notice. (V.T.I.C.
Art. 21.28-C, Secs. 8(e), 10(c).)
Sec. 462.105. ACCOUNTS. For purposes of administration and
assessment, the association is divided into:
(1) the workers' compensation insurance account;
(2) the automobile insurance account; and
(3) the account for all other lines of insurance to
which this chapter applies. (V.T.I.C. Art. 21.28-C, Sec. 6
(part).)
Sec. 462.106. ADMINISTRATIVE EXPENSES. (a) The
association may use money in the administrative account to pay
administrative costs and other general expenses of the association.
(b) The association may transfer income from investment of
the association's money to the administrative account.
(c) On notification by the association of the amount of any
additional money needed for the administrative account, the
association shall assess member insurers in the manner provided by
Sections 462.159-462.168 for that money. The commissioner shall
consider the net direct written premiums collected in this state
for all lines of business covered by this chapter. An assessment
for administrative expenses incurred by a supervisor or conservator
appointed by the commissioner or a court-appointed receiver for a
nonmember of the association or unauthorized insurer operating in
this state may not exceed $1 million each calendar year. (V.T.I.C.
Art. 21.28-C, Sec. 18(g).)
Sec. 462.107. EXAMINATION OF ASSOCIATION. Not later than
April 30 of each year, the association shall submit an audited
financial statement for the preceding calendar year to the state
auditor in a form approved by the state auditor's office. (V.T.I.C.
Art. 21.28-C, Sec. 14.)
Sec. 462.108. DEPOSIT OF MONEY. The board may deposit the
money the association collects into the Texas Treasury Safekeeping
Trust Company in accordance with procedures established by the
comptroller. The comptroller shall account to the association for
the deposited money separately from all other money. (V.T.I.C.
Art. 21.28-C, Sec. 8(j).)
Sec. 462.109. DELEGATION OF POWERS AND DUTIES. (a) Except
as provided by Subsection (b), the plan of operation may provide
that, on approval of the board and the commissioner, the
association may delegate by contract any or all powers or duties of
the association to a corporation or other organization that:
(1) performs or will perform in two or more states
functions similar to those of the association or the association's
equivalent; and
(2) provides protection not substantially less
favorable and effective than that provided by this chapter.
(b) The association may not delegate a power or duty under
Section 462.101(a)(2), 462.151, 462.154, 462.155, or 462.302(d)
under this section.
(c) The association shall:
(1) reimburse the corporation or other organization as
a servicing facility would be reimbursed; and
(2) pay the corporation or other organization for the
performance of any other functions of the association.
(d) A contract entered into under this section is subject to
the performance standards imposed under Section 442.112. (V.T.I.C.
Art. 21.28-C, Sec. 9(g).)
Sec. 462.110. EXEMPTION FROM CERTAIN FEES AND TAXES. The
association is exempt from payment of all fees and of all taxes
levied by this state or a subdivision of this state, except taxes
levied on real or personal property. (V.T.I.C. Art. 21.28-C, Sec.
15.)
Sec. 462.111. ACCESS TO RECORDS OF MEMBER INSURER IN
RECEIVERSHIP; ACTUARIAL AND OPERATIONAL ANALYSIS. (a) The
association shall have access to the books and records of a member
insurer in receivership to determine the extent of the impact on the
association if the member becomes impaired.
(b) The association may:
(1) perform or cause to be performed an actuarial and
operational analysis of the member insurer; and
(2) prepare a report on matters relating to the impact
or potential impact on the association in the event of impairment.
(c) A report prepared under Subsection (b) is not a public
document. (V.T.I.C. Art. 21.28-C, Sec. 13(a).)
Sec. 462.112. BOARD ACCESS TO RECORDS OF IMPAIRED INSURER.
The receiver or statutory successor of an impaired insurer covered
by this chapter shall give the board or the board's representative:
(1) access to the insurer's records as necessary for
the board to perform the board's functions under this chapter
relating to covered claims; and
(2) copies of those records on the board's request and
at the board's expense. (V.T.I.C. Art. 21.28-C, Sec. 17(b)
(part).)
Sec. 462.113. BOARD REPORT ON CONCLUSION OF INSOLVENCY. On
the conclusion of the insolvency of a domestic insurer with respect
to which the association was obligated to pay covered claims, the
board may:
(1) prepare a report on the history and causes of the
insolvency, based on information available to the association; and
(2) submit the report to the commissioner. (V.T.I.C.
Art. 21.28-C, Sec. 13(b).)
Sec. 462.114. DUTY OF RECEIVER. The receiver shall
periodically submit a list of claims to the association or similar
organization in another state. (V.T.I.C. Art. 21.28-C, Sec. 9(e).)
[Sections 462.115-462.150 reserved for expansion]
SUBCHAPTER D. ASSESSMENTS IN GENERAL
Sec. 462.151. MAKING OF ASSESSMENT; AMOUNT. (a) The
association shall assess member insurers the amount necessary to
pay:
(1) the association's obligations under Section
462.302 and the expenses of handling covered claims subsequent to
an insolvency; and
(2) other expenses authorized by this chapter.
(b) The assessment of each member insurer must be in the
proportion that the net direct written premiums of the insurer for
the calendar year preceding the assessment bear to the net direct
written premiums of all member insurers for that year. (V.T.I.C.
Art. 21.28-C, Sec. 8(c) (part).)
Sec. 462.152. MAXIMUM TOTAL ASSESSMENT. (a) The total
assessment of a member insurer in a year may not exceed an amount
equal to two percent of the insurer's net direct written premiums
for the calendar year preceding the assessment.
(b) If the maximum assessment and the association's other
assets are insufficient in a year to make all necessary payments,
the money available shall be prorated and the association shall pay
the unpaid portion as soon as money becomes available. (V.T.I.C.
Art. 21.28-C, Sec. 8(c) (part).)
Sec. 462.153. REFUND OF CONTRIBUTION. The association may
refund to the member insurers in proportion to the contribution of
each member insurer to the association the amount by which the
association's assets exceed the association's liabilities, if at
the end of a calendar year the board finds that the assets of the
association exceed the liabilities of the association as estimated
by the board for the next year. (V.T.I.C. Art. 21.28-C, Sec. 8(h)
(part).)
Sec. 462.154. NOTICE OF ASSESSMENT. The association shall
notify a member insurer of an assessment not later than the 30th day
before the date the assessment is due. (V.T.I.C. Art. 21.28-C, Sec.
8(c) (part).)
Sec. 462.155. DEFERMENT. (a) The association may defer
wholly or partly an assessment of a member insurer that would cause
the insurer's financial statement to show amounts of capital or
surplus less than the minimum amounts required for a certificate of
authority in any jurisdiction in which the insurer is authorized to
engage in the business of insurance.
(b) The member insurer shall pay the deferred assessment at
the time payment will not reduce capital or surplus below required
minimums. The payment shall be refunded to or credited against
future assessments of any member insurer receiving a larger
assessment because of the deferment, as elected by that insurer.
(c) During a period of deferment, the member insurer may not
pay a dividend to shareholders or policyholders. (V.T.I.C. Art.
21.28-C, Sec. 8(c) (part).)
Sec. 462.156. USE OF ASSESSMENTS. (a) The amounts provided
under assessments made under this chapter supplement the
marshalling of assets by the receiver under Chapter 442 to make
payments on the impaired insurer's behalf.
(b) This section does not require the receiver to exhaust
the assets of the impaired insurer before an assessment is made or
before money derived from an assessment may be used to pay covered
claims. (V.T.I.C. Art. 21.28-C, Sec. 19.)
Sec. 462.157. TAX CREDIT. (a) An insurer is entitled to a
credit against the insurer's premium tax under Chapter 221 for the
total amount of an assessment paid by the insurer under this
chapter.
(b) The tax credit may be taken at a rate of 10 percent each
year for 10 successive years after the date of assessment. At the
option of the insurer, the tax credit may be taken over an
additional number of years.
(c) The balance of a tax credit not claimed in a particular
year may be reflected in the books and records of the insurer as an
admitted asset of the insurer for all purposes, including
exhibition in an annual statement under Section 862.001.
(d) Available credit against premium tax allowed under this
section may be transferred or assigned among insurers if:
(1) a merger, acquisition, or total assumption of
reinsurance among the insurers occurs; or
(2) the commissioner by order approves the transfer or
assignment. (V.T.I.C. Art. 21.28-C, Sec. 21.)
Sec. 462.158. ADVANCE AS LOAN. Money advanced by the
association under this chapter is considered a special fund loan to
the impaired insurer for payment of covered claims and does not
become an asset of the impaired insurer. The loan is repayable to
the extent money from the impaired insurer is available. (V.T.I.C.
Art. 21.28-C, Sec. 18(f).)
Sec. 462.159. ESTIMATE OF ADDITIONAL MONEY NEEDED ON
IMPAIRMENT OF INSURER. (a) If the commissioner determines that an
insurer has become an impaired insurer, the association shall
promptly estimate the amount of additional money, by lines of
business, needed to supplement the immediately available assets of
the impaired insurer to pay covered claims.
(b) The board shall make additional money available as the
actual need arises for each impaired insurer. (V.T.I.C. Art.
21.28-C, Sec. 18(a).)
Sec. 462.160. ASSESSMENT FOR ADDITIONAL MONEY FOR ACCOUNTS.
If the board determines that additional money is needed in any of
the three accounts described by Section 462.105, the board shall
make assessments as needed to produce the necessary money.
(V.T.I.C. Art. 21.28-C, Sec. 18(b) (part).)
Sec. 462.161. AMOUNT OF ASSESSMENT; PRORATION OF PAYMENT.
(a) The association, in determining the proportionate amount to be
paid by individual insurers under an assessment under Section
462.160, shall consider the lines of business written by the
impaired insurer and shall assess individual insurers in proportion
to the ratio that the total net direct written premiums collected in
this state by the insurer for those lines of business bears to the
total net direct written premiums collected by all insurers, other
than impaired insurers, in this state for those lines of business.
(b) The association shall determine the total net direct
written premiums of an individual insurer and of all insurers in the
state from the insurers' annual statements for the year preceding
assessment. (V.T.I.C. Art. 21.28-C, Sec. 18(b) (part).)
Sec. 462.162. MAXIMUM ASSESSMENT OF INSURER; ADDITIONAL
ASSESSMENT AUTHORITY UNDER CERTAIN CIRCUMSTANCES. (a) Except as
otherwise provided by this section, assessments under Section
462.160 during a calendar year may not exceed two percent of each
insurer's net direct written premiums for the preceding calendar
year in the lines of business for which the assessments are made.
(b) In the event of a natural disaster or other catastrophe,
the association may apply to the governor, in the manner prescribed
by the plan of operation, for authority to assess each member
insurer that writes insurance coverage, other than automobile
insurance coverage or workers' compensation insurance coverage, an
additional amount not to exceed two percent of the insurer's net
direct written premiums for the preceding calendar year.
(c) If the maximum assessment in a calendar year does not
provide an amount sufficient for payment of covered claims of
impaired insurers, the association may make assessments in
successive calendar years. (V.T.I.C. Art. 21.28-C, Sec. 18(b)
(part).)
Sec. 462.163. PAYMENT OF ASSESSMENT. An insurer shall pay
the amount of an assessment under Section 462.160 or 462.162(b) to
the association not later than the 30th day after the date the
association gives notice of the assessment. (V.T.I.C. Art.
21.28-C, Sec. 18(c).)
Sec. 462.164. PARTICIPATION RECEIPTS. (a) On receipt from
a member insurer of payment of an assessment or partial assessment
under Section 462.160 or 462.162(b), the association shall provide
the insurer with a participation receipt. A participation receipt
creates liability against the account described by Section 462.105
for the line or lines of business for which the assessment was made.
(b) The account from which an advance is made to an impaired
insurer for the payment of covered claims is a general creditor of
the impaired insurer for the money advanced. With reference to the
remaining balance of an advance not used to pay covered claims, the
claim of the account has preference over other general creditors.
(V.T.I.C. Art. 21.28-C, Secs. 20(a), (b) (part).)
Sec. 462.165. ACCOUNTING; REPORTS; REFUND. (a) The
association, with respect to an impaired insurer, shall adopt
accounting procedures that reflect the use of all money and shall
make a final report of the use of the money to the commissioner. The
final report must state any remaining balance from the money
advanced to an impaired insurer for the payment of covered claims.
(b) The association shall make interim accounting reports
as required by the commissioner or requested by the conservator.
(c) As soon as practicable after completion of the final
report, the association shall refund by line of business the
remaining balance of those advances to the association's accounts.
(V.T.I.C. Art. 21.28-C, Sec. 20(b) (part).)
Sec. 462.166. USE OF EXCESS MONEY IN ACCOUNT. (a) If the
association determines that money in the account described by
Section 462.164(b) for a line of business exceeds the amount
reasonably necessary for efficient future operation under this
chapter, the association shall, after deducting any premium tax
credit taken under Section 462.157, return the excess money pro
rata to the holders of participation receipts:
(1) on which an outstanding balance exists; and
(2) that were issued for an assessment on the same line
of business as the line for which the excess money is found to
exist.
(b) The association shall transfer an excess amount that
exists in the account described by Section 462.164(b) to the
comptroller to be deposited to the credit of the general revenue
fund if:
(1) after a distribution under this section the
association finds that an excess amount still exists; or
(2) participation receipts on which there is an
outstanding balance do not exist. (V.T.I.C. Art. 21.28-C, Sec.
20(c).)
Sec. 462.167. COLLECTION OF ASSESSMENTS. (a) The
commissioner may collect an assessment on behalf of the association
through a suit brought for that purpose.
(b) Venue for a suit under this section is in Travis County.
(c) Either party to the suit may appeal to an appellate
court. The appeal is at once returnable to the appellate court.
The appeal has precedence in the appellate court over all causes of
a different character pending before the court.
(d) The commissioner is not required to give an appeal bond
in any cause of action arising under this section. (V.T.I.C. Art.
21.28-C, Sec. 18(d).)
Sec. 462.168. EXEMPTION FOR IMPAIRED INSURER. An impaired
insurer is exempt from assessment from the date the insurer is
designated an impaired insurer until the date the commissioner
determines that the insurer is no longer an impaired insurer.
(V.T.I.C. Art. 21.28-C, Sec. 18(e).)
[Sections 462.169-462.200 reserved for expansion]
SUBCHAPTER E. COVERED CLAIMS; CLAIMANTS
Sec. 462.201. COVERED CLAIMS IN GENERAL. A claim is a
covered claim if:
(1) the claim is an unpaid claim;
(2) the claim is made under an insurance policy to
which this chapter applies that is:
(A) issued by an insurer authorized to engage in
business in this state; or
(B) assumed by an insurer authorized to engage in
business in this state that issues an assumption certificate to the
insured;
(3) the claim arises out of the policy and is within
the coverage and applicable limits of the policy;
(4) the insurer that issued the policy or assumed the
policy under an assumption certificate issued to the insured is an
impaired insurer; and
(5) the claim:
(A) is made by a liability claimant or insured
who is a resident of this state at the time of the insured event; or
(B) is a first-party claim for damage to property
that is permanently located in this state. (V.T.I.C. Art. 21.28-C,
Sec. 5(8) (part).)
Sec. 462.202. CLAIM FOR UNEARNED PREMIUMS. (a) A claim for
unearned premiums is a covered claim. A covered claim for unearned
premiums may not exceed $25,000.
(b) With respect to a covered claim for unearned premiums, a
person has a covered claim under this chapter if the person is a
resident of this state at the time:
(1) the policy is issued; or
(2) the insurer is determined to be an impaired
insurer. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.203. CERTAIN EXPENSES OF RECEIVERSHIP OR
CONSERVATORSHIP ESTATE COVERED. An administration expense
incurred in processing or paying a claim against a receivership or
conservatorship estate is a covered claim if the impaired insurer
has insufficient assets to pay the expenses of administering the
estate. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.204. AFFILIATE MAY NOT BE CLAIMANT. A person who
is an affiliate of an impaired insurer may not be a claimant of the
insurer. (V.T.I.C. Art. 21.28-C, Sec. 5(5) (part).)
Sec. 462.205. DETERMINATION OF RESIDENCE OF ENTITIES. A
corporation or other entity that is not an individual is considered
to be a resident of the state in which the entity's principal place
of business is located. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.206. CLAIMS NOT COVERED: PREMIUM UNDER
RETROSPECTIVE RATING PLAN. An amount sought as a return of premium
under a retrospective rating plan is not a covered claim. (V.T.I.C.
Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.207. CLAIMS NOT COVERED: AMOUNTS DUE CERTAIN
ENTITIES. (a) Any amount due any reinsurer, insurer,
self-insurer, insurance pool, or underwriting association, as a
subrogation recovery, reinsurance recovery, contribution, or
indemnification, or otherwise, is not a covered claim.
(b) An impaired insurer's insured is not liable, and the
reinsurer, insurer, self-insurer, insurance pool, or underwriting
association is not entitled to sue or continue a suit against the
insured, for a subrogation recovery, reinsurance recovery,
contribution, or indemnification to the extent of the applicable
liability limits of the insurance policy written and issued to the
insured by the insolvent insurer. (V.T.I.C. Art. 21.28-C, Sec.
5(8) (part).)
Sec. 462.208. CLAIMS NOT COVERED: SUPPLEMENTARY PAYMENT
OBLIGATIONS. A supplementary payment obligation, including an
adjustment fee or expense, attorney's fee or expense, court cost,
interest or penalty, or interest or bond premium, incurred before
an insurer is determined to be an impaired insurer is not a covered
claim. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.209. CLAIMS NOT COVERED: PREJUDGMENT OR
POSTJUDGMENT INTEREST. Prejudgment or postjudgment interest that
accrues after an insurer is determined to be an impaired insurer is
not a covered claim. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.210. CLAIMS NOT COVERED: CERTAIN DAMAGES. A claim
against the insured, insurer, guaranty association, receiver,
special deputy receiver, or commissioner for recovery of punitive,
exemplary, extracontractual, or bad-faith damages awarded in a
court judgment against an insured or insurer is not a covered claim.
(V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.211. CLAIMS NOT COVERED: LATE FILED CLAIMS. (a)
Notwithstanding any other provision of this chapter and except as
provided by Subsection (b), a claim filed with the association on a
date that is later than 18 months after the date of the order of
liquidation is not a covered claim.
(b) This section does not apply to a claim for workers'
compensation benefits governed by Title 5, Labor Code, and the
applicable rules of the Texas Workers' Compensation Commission.
(V.T.I.C. Art. 21.28-C, Sec. 8(d) (part).)
Sec. 462.212. NET WORTH EXCLUSION. (a) The association is
not liable to pay a first-party claim of an insured whose net worth
on December 31 of the year preceding the date the insurer becomes an
impaired insurer exceeds $50 million.
(b) For purposes of this section, an insured's net worth
includes the aggregate net worth of the insured and the insured's
parent, subsidiary, and affiliated companies, computed on a
consolidated basis.
(c) This section does not exclude the payment of a covered
claim for workers' compensation benefits otherwise payable under
this chapter. (V.T.I.C. Art. 21.28-C, Sec. 11A.)
Sec. 462.213. AMOUNT OF INDIVIDUAL COVERED CLAIM; LIMIT.
(a) Except as provided by Subsection (b) and Section 462.252, an
individual covered claim may not exceed $300,000.
(b) The association shall pay the full amount of a covered
claim arising out of a workers' compensation claim made under a
workers' compensation insurance policy.
(c) For purposes of this section, an individual covered
claim includes any derivative claims by more than one person that
arise from the same occurrence. The claims shall be considered
collectively as a single claim under this chapter. (V.T.I.C. Art.
21.28-C, Sec. 5(8) (part).)
Sec. 462.214. CERTAIN SHAREHOLDERS' CLAIMS: LIMIT.
Notwithstanding any other provision of this chapter, the
association's liability for shareholder derivative actions or
other claims for economic loss incurred by a claimant in the
claimant's capacity as a shareholder under an insurance policy
placed in force on or after January 1, 1992, is limited to $300,000
for each policy, including defense costs, regardless of the number
of claimants under each policy. (V.T.I.C. Art. 21.28-C, Sec. 5(8)
(part).)
[Sections 462.215-462.250 reserved for expansion]
SUBCHAPTER F. NONDUPLICATION OF RECOVERY
Sec. 462.251. EXHAUSTION OF RIGHTS UNDER OTHER POLICY
REQUIRED. (a) Any person who has a claim under an insurance
policy, other than an impaired insurer's policy, and whose claim
arises from the same facts, injury, or loss giving rise to a claim
against an impaired insurer or the insurer's insured, must first
exhaust the person's rights under the insurance policy, including:
(1) a claim for benefits under a workers' compensation
insurance policy or a claim for indemnity or medical benefits under
a health, disability, uninsured motorist, personal injury
protection, medical payment, liability, or other insurance policy;
and
(2) the right to defense under the insurance policy.
(b) Subsection (a) applies without regard to whether the
insurance policy is issued by a member insurer. (V.T.I.C. Art.
21.28-C, Sec. 12(a) (part).)
Sec. 462.252. REDUCTION IN AMOUNT OF COVERED CLAIM FOR
OTHER POLICY. (a) Except as provided by Subsection (b), an amount
payable as a covered claim under this chapter is reduced by the full
applicable limits of another insurance policy described by Section
462.251, and the association shall receive a full credit in the
amount of the full applicable limits of the other policy.
(b) A covered claim for workers' compensation benefits is
subject to reduction only by a third-party liability recovery under
Section 417.002, Labor Code.
(c) Subject to Section 462.255, the maximum amount payable
by the association is the damages incurred by the claimant, less the
association's credit or offset under this section, except that the
association's liability may not exceed the lesser of:
(1) $300,000; or
(2) the limits of the insurance policy under which the
claim is made. (V.T.I.C. Art. 21.28-C, Sec. 12(a) (part).)
Sec. 462.253. EFFECT ON INSURED OF REDUCTION IN AMOUNT OF
COVERED CLAIM. To the extent that the association's obligation is
reduced by the application of Sections 462.251 and 462.252, the
liability of the person insured by the impaired insurer's policy
for the claim is reduced in the same amount. (V.T.I.C. Art.
21.28-C, Sec. 12(a) (part).)
Sec. 462.254. RECOVERY FROM MORE THAN ONE GUARANTY
ASSOCIATION. (a) Except as provided by Subsections (b) and (c), a
person who has a claim that may be recovered from more than one
insurance guaranty association or the equivalent shall seek
recovery first from the association of the insured's residence.
(b) A claimant shall seek recovery of a first-party claim
for damage to property with a permanent location first from the
association of the location of the property.
(c) A claimant shall seek recovery of a workers'
compensation claim first from the association of the claimant's
residence.
(d) The association has a credit or offset against the
benefits under this chapter in the amount of the claimant's
recovery under this section.
(e) Subject to Section 462.255, the maximum amount payable
by the association is the amount of damages incurred by the
claimant, less the credit or offset, except that the association's
liability may not exceed $300,000. (V.T.I.C. Art. 21.28-C, Sec.
12(b).)
Sec. 462.255. CERTAIN CLAIMS SUBJECT TO LIEN OR
SUBROGATION; LIMIT ON TOTAL RECOVERY. (a) Notwithstanding
Sections 462.252(c) and 462.254(e), if a claimant is seeking
recovery of insurance policy benefits that, had the impaired
insurer not been insolvent, would be subject to lien or subrogation
by any other insurer, including a workers' compensation insurer or
health insurer, regardless of whether the other insurer is
impaired, the association's credit or offset is deducted from the
lesser of the damages incurred by the claimant or the limits of the
policy under which the claim is made.
(b) A claimant's recovery under this chapter may not result
in a total recovery to the claimant that is greater than the
recovery that would have resulted had the impaired insurer not been
insolvent.
(c) Subject to Sections 462.201-462.203, 462.205-462.210,
462.213, 462.214, and 462.305 of this code and Title 5, Labor Code,
a claim for workers' compensation benefits under this chapter may
not result in a recovery to the claimant that is less than the
recovery that would have resulted had the impaired insurer not been
insolvent. (V.T.I.C. Art. 21.28-C, Secs. 12(a-1), (b-1).)
[Sections 462.256-462.300 reserved for expansion]
SUBCHAPTER G. ASSOCIATION POWERS AND DUTIES RELATING TO COVERED
CLAIMS
Sec. 462.301. GENERAL POWERS AND DUTIES OF ASSOCIATION IN
CONNECTION WITH PAYMENT OF COVERED CLAIMS. (a) The association
shall investigate and adjust, compromise, settle, and pay covered
claims to the extent of the association's obligation and deny all
other claims.
(b) The association may review a settlement, release, or
judgment to which an impaired insurer or the impaired insurer's
insured was a party to determine the extent to which the settlement,
release, or judgment may be properly contested. (V.T.I.C. Art.
21.28-C, Sec. 8(d) (part).)
Sec. 462.302. PAYMENT OF COVERED CLAIMS. (a) The
association shall pay covered claims that exist before the
designation of impairment or that arise:
(1) not later than the 30th day after the date of the
designation of impairment;
(2) before the insurance policy expiration date, if
that date is not later than the 30th day after the date of the
designation of impairment; or
(3) before the insured replaces the insurance policy
or causes the policy's cancellation, if the insured does so not
later than the 30th day after the date of the designation of
impairment.
(b) The association satisfies the obligation to pay a
covered claim by paying the claimant the full amount of a covered
claim for benefits.
(c) The association's liability is limited to the payment of
covered claims. The association is not liable for any other claim
or damages against the insured, an impaired insurer, the
association, the receiver, the special deputy receiver, the
commissioner, or the liquidator, including a claim for:
(1) recovery of attorney's fees, prejudgment or
postjudgment interest, or penalties;
(2) extracontractual damages, multiple damages, or
exemplary damages; or
(3) any other amount sought in connection with the
assertion or prosecution of a claim, without regard to whether the
claim is a covered claim, by or on behalf of:
(A) an insured or claimant; or
(B) a provider of goods or services retained by
an insured or claimant.
(d) The association shall pay claims in the order the
association considers reasonable, including paying as claims are
received from the claimants or in groups or categories of claims.
(e) This section does not exclude the payment of workers'
compensation benefits or other liabilities or penalties authorized
by Title 5, Labor Code, arising from the association's processing
and paying workers' compensation benefits after the designation of
impairment. (V.T.I.C. Art. 21.28-C, Secs. 8(a), (c) (part).)
Sec. 462.303. CERTAIN DETERMINATIONS NOT BINDING. (a) The
association is not bound by:
(1) a judgment taken before the designation of
impairment in which an insured under a liability insurance policy
or the insurer failed to exhaust all appeals;
(2) a judgment taken by default or consent against an
insured or the impaired insurer; or
(3) a judgment, settlement, or release entered into by
the insured or the impaired insurer.
(b) A judgment, settlement, or release described by
Subsection (a) is not evidence of liability or of damages in
connection with a claim brought against the association or another
party under this chapter. (V.T.I.C. Art. 21.28-C, Sec. 8(d)
(part).)
Sec. 462.304. SERVICING FACILITY. (a) The association
shall handle claims through the association's employees or through
one or more insurers or other persons designated, subject to the
approval of the commissioner, as servicing facilities.
(b) A member insurer may decline designation as a servicing
facility.
(c) The association shall:
(1) reimburse a servicing facility for:
(A) obligations of the association paid by the
facility; and
(B) expenses incurred by the facility in handling
claims for the association; and
(2) pay the other expenses of the association
authorized by this chapter.
(d) The commissioner may revoke the designation of a
servicing facility if the commissioner finds that servicing
facility is handling claims unsatisfactorily. (V.T.I.C. Art.
21.28-C, Secs. 8(f), (g), 10(e).)
Sec. 462.305. LIMITATION OF ASSOCIATION'S LIABILITY. The
association is not liable to an insured or liability claimant for
the association's failure to settle a liability claim within the
limits of a covered claim under this chapter. A claim described by
this section for failure to settle a liability claim is not a
covered claim. (V.T.I.C. Art. 21.28-C, Sec. 5(8) (part).)
Sec. 462.306. DISCHARGE OF POLICY OBLIGATION. (a) The
association shall discharge an impaired insurer's policy
obligations, including the duty to defend insureds under a
liability insurance policy, to the extent that the policy
obligation is a covered claim under this chapter.
(b) In performing the association's statutory obligations,
the association may also enforce a duty imposed on the insured or
beneficiary under the terms of an insurance policy within the scope
of this chapter. (V.T.I.C. Art. 21.28-C, Sec. 8(b) (part).)
Sec. 462.307. ASSIGNMENT OF RIGHTS. (a) A person
recovering under this chapter assigns to the association the
person's rights:
(1) under the insurance policy; and
(2) to recover for the occurrence that is the basis of
the claim under this chapter under an insurance policy issued by an
unimpaired insurer to the extent of the person's recovery from the
association.
(b) The association may pursue a claim to which the
association is subrogated under Subsection (a) in the association's
own name or in the name of the person recovering under this chapter.
(c) An insured or claimant seeking the protection of this
chapter shall cooperate with the association to the same extent as
that person would have been required to cooperate with the impaired
insurer.
(d) Except as provided by Section 462.308, the association
does not have a cause of action against the impaired insurer's
insured for money the association has paid, other than a cause of
action that the impaired insurer would have had if the money had
been paid by the impaired insurer.
(e) In the case of an impaired insurer operating on a plan
with assessment liability, the payment of a claim of the
association does not reduce the liability of the insured to the
receiver or statutory successor for an unpaid assessment.
(V.T.I.C. Art. 21.28-C, Sec. 11(a).)
Sec. 462.308. RECOVERY FROM CERTAIN PERSONS. (a) The
association is entitled to recover the amount of a covered claim and
the cost of defense paid under this chapter from the person on whose
behalf the payment was made if the person is:
(1) a person:
(A) who is an affiliate of the impaired insurer;
and
(B) whose liability obligations to other persons
are satisfied wholly or partly by payment made under this chapter;
or
(2) an insured:
(A) whose net worth on December 31 of the year
preceding the date the insurer becomes an impaired insurer exceeds
$50 million; and
(B) whose obligations under a liability policy or
contract of insurance written, issued, and placed in force after
January 1, 1992, are satisfied wholly or partly by payment made
under this chapter.
(b) The association is not entitled to recover under
Subsection (a)(2) against an insured who is exempt from federal
income tax under Section 501(a), Internal Revenue Code of 1986, by
being described by Section 501(c)(3) of that code.
(c) For purposes of Subsection (a)(2), an insured's net
worth includes the aggregate net worth of the insured and the
insured's parent, subsidiary, and affiliated companies, computed
on a consolidated basis. (V.T.I.C. Art. 21.28-C, Sec. 11(b).)
Sec. 462.309. STAY OF PROCEEDINGS; CERTAIN DECISIONS NOT
BINDING. (a) To permit the association to properly defend a
pending cause of action, a proceeding in which an impaired insurer
is a party or is obligated to defend a party in a court in this
state, other than a proceeding directly related to the receivership
or instituted by the receiver, is stayed for:
(1) a six-month period beginning on the later of the
date of the designation of impairment or the date an ancillary
proceeding is brought in this state; and
(2) a subsequent period as determined by the court, if
any.
(b) The stay applies to each party to the proceeding and the
proceeding is stayed for all purposes.
(c) A deadline imposed under the Texas Rules of Civil
Procedure or the Texas Rules of Appellate Procedure is tolled
during the stay.
(d) The court in which the delinquency proceeding is pending
has exclusive jurisdiction regarding the application, enforcement,
and extension of the stay and may issue an injunction or another
similar order to enforce the stay.
(e) The commissioner may bring an ancillary delinquency
proceeding under Sections 442.751, 442.752, and 442.754 for the
limited purpose of determining the application, enforcement, and
extension of the stay to an impaired insurer that is not domiciled
in this state.
(f) With respect to a covered claim arising from a judgment,
order, decision, verdict, or finding based on the default of an
impaired insurer or an impaired insurer's failure to defend the
insured, the association, on the association's own behalf or on
behalf of an insured and on application, shall be entitled to:
(1) have the court or administrator that made the
judgment, order, decision, verdict, or finding set aside the
judgment, order, decision, verdict, or finding; and
(2) defend the claim on the merits. (V.T.I.C. Art.
21.28-C, Secs. 17(a), (b) (part).)
Sec. 462.310. SETTLEMENT BY ASSOCIATION BINDING; PRIORITY
OF CLAIM AND EXPENSES. (a) The settlement of a covered claim by the
association or a similar organization in another state binds the
receiver or statutory successor of an impaired insurer.
(b) The court having jurisdiction shall give the covered
claim the same priority against assets of the impaired insurer that
the claim would have had in the absence of this chapter.
(c) The expenses of the association or a similar
organization in another state in handling claims have the same
priority as the receiver's expenses. (V.T.I.C. Art. 21.28-C, Sec.
11(c).)
Sec. 462.311. REPORT TO RECEIVER. The association shall
periodically file with the receiver of an impaired insurer a
statement of covered claims paid by the association and an estimate
of claims anticipated against the association. The statement
preserves the rights of the association against the assets of the
impaired insurer. (V.T.I.C. Art. 21.28-C, Sec. 11(d).)
[Sections 462.312-462.350 reserved for expansion]
SUBCHAPTER H. RELEASE FROM RECEIVERSHIP
Sec. 462.351. ISSUANCE OF POLICIES AFTER RELEASE FROM
RECEIVERSHIP. (a) Except as provided by Subsection (b), an
impaired insurer placed in receivership for which money has been
advanced under this chapter may not be authorized, on release from
receivership, to issue new or renewal insurance policies until the
insurer repays the advances to the association.
(b) On application of the association and after hearing, the
commissioner may permit the insurer to issue new insurance policies
in accordance with the insurer's plan of operation for repayment of
advances.
(c) The commissioner, in approving the plan of operation,
may place restrictions on the issuance of new or renewal insurance
policies as the commissioner considers necessary to implement the plan. (V.T.I.C. Art. 21.28-C, Sec. 22.)
CHAPTER 463. LIFE, ACCIDENT, HEALTH, AND HOSPITAL
SERVICE INSURANCE GUARANTY ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 463.001. SHORT TITLE
Sec. 463.002. PURPOSE
Sec. 463.003. DEFINITIONS
Sec. 463.004. CONSTRUCTION
Sec. 463.005. IMMUNITY
Sec. 463.006. RULES
[Sections 463.007-463.050 reserved for expansion]
SUBCHAPTER B. GOVERNANCE OF AND PARTICIPATION IN ASSOCIATION
Sec. 463.051. PURPOSE AND REGULATION OF ASSOCIATION
Sec. 463.052. REQUIRED PARTICIPATION IN ASSOCIATION
Sec. 463.053. BOARD OF DIRECTORS
Sec. 463.054. ELIGIBILITY TO SERVE AS PUBLIC
REPRESENTATIVE
Sec. 463.055. TERM; VACANCY
Sec. 463.056. COMPENSATION OF BOARD MEMBERS
Sec. 463.057. FINANCIAL STATEMENT OF BOARD MEMBER
Sec. 463.058. CONFLICT OF INTEREST
[Sections 463.059-463.100 reserved for expansion]
SUBCHAPTER C. GENERAL POWERS AND DUTIES OF ASSOCIATION
Sec. 463.101. GENERAL POWERS AND DUTIES
Sec. 463.102. PLAN OF OPERATION; AMENDMENTS
Sec. 463.103. PERSONNEL
Sec. 463.104. ASSOCIATION RECORDS
Sec. 463.105. ACCOUNTS
Sec. 463.106. DELEGATION OF POWERS AND DUTIES
Sec. 463.107. EXEMPTION FROM TAXATION
Sec. 463.108. DETECTION AND PREVENTION OF IMPAIRMENT
AND INSOLVENCY
Sec. 463.109. ASSOCIATION APPEARANCE BEFORE COURT;
INTERVENTION
Sec. 463.110. ANNUAL REPORT
Sec. 463.111. BOARD AND ASSOCIATION ADVICE AND
ASSISTANCE
Sec. 463.112. BOARD ACCESS TO RECORDS
Sec. 463.113. BOARD REPORT AT CONCLUSION OF INSOLVENCY
Sec. 463.114. SUMMARY DOCUMENT; DISCLAIMER
[Sections 463.115-463.150 reserved for expansion]
SUBCHAPTER D. ASSESSMENTS
Sec. 463.151. MAKING AND PAYMENT OF ASSESSMENT
Sec. 463.152. CLASSES OF ASSESSMENTS
Sec. 463.153. AMOUNT OF ASSESSMENTS
Sec. 463.154. DEFERMENT
Sec. 463.155. DEPOSIT OF ASSESSMENTS
Sec. 463.156. CERTIFICATE OF CONTRIBUTION
Sec. 463.157. REFUNDS
Sec. 463.158. USE OF ASSESSMENTS
Sec. 463.159. FAILURE TO PAY; COLLECTION BY
COMMISSIONER
Sec. 463.160. PREMIUM TAX CREDIT FOR CLASS A
ASSESSMENT
Sec. 463.161. PREMIUM TAX CREDIT FOR CLASS B
ASSESSMENT
Sec. 463.162. ASSIGNMENT OR TRANSFER OF CREDIT
Sec. 463.163. INSURED'S LIABILITY UNDER ASSESSMENT
PLAN
[Sections 463.164-463.200 reserved for expansion]
SUBCHAPTER E. COVERAGE PROVIDED BY ASSOCIATION
Sec. 463.201. INSUREDS COVERED
Sec. 463.202. POLICIES AND CONTRACTS COVERED
Sec. 463.203. POLICIES AND CONTRACTS EXCLUDED
Sec. 463.204. OBLIGATIONS EXCLUDED
Sec. 463.205. PROTECTION PROVIDED BY OTHER
JURISDICTION
[Sections 463.206-463.250 reserved for expansion]
SUBCHAPTER F. POWERS AND DUTIES OF ASSOCIATION RELATING
TO IMPAIRED OR INSOLVENT INSURER
Sec. 463.251. IMPAIRED DOMESTIC INSURER
Sec. 463.252. IMPAIRED DOMESTIC, FOREIGN, OR ALIEN
INSURER NOT PAYING CLAIMS
Sec. 463.253. INSOLVENT INSURER
Sec. 463.254. LIFE OR HEALTH INSURANCE POLICIES OR
CONTRACTS
Sec. 463.255. POLICY OR CONTRACT WITH GUARANTEED
INTEREST RATE
Sec. 463.256. ALTERNATIVE POLICY
Sec. 463.257. IMPOSITION OF LIEN OR MORATORIUM
Sec. 463.258. PREMIUM FOR REISSUANCE OF TERMINATED
COVERAGE
Sec. 463.259. PREMIUM DUE DURING RECEIVERSHIP
Sec. 463.260. LIMITS ON AND TERMINATION OF ASSOCIATION
OBLIGATION
Sec. 463.261. ASSIGNMENT OF RIGHTS
[Sections 463.262-463.300 reserved for expansion]
SUBCHAPTER G. OPERATION OF IMPAIRED OR INSOLVENT INSURER
Sec. 463.301. ISSUANCE OR RENEWAL OF POLICIES
FOLLOWING CONSERVATORSHIP OR
RECEIVERSHIP
Sec. 463.302. DISTRIBUTIONS TO SHAREHOLDERS AND
AFFILIATES
Sec. 463.303. ASSETS ATTRIBUTABLE TO COVERED POLICIES
Sec. 463.304. DISTRIBUTION OF OWNERSHIP RIGHTS OF
INSOLVENT INSURER
[Sections 463.305-463.350 reserved for expansion]
SUBCHAPTER H. POWERS AND DUTIES OF COMMISSIONER AND DEPARTMENT
Sec. 463.351. NOTICE OF COMMISSIONER ACTIONS
Sec. 463.352. ADVICE FROM BOARD
Sec. 463.353. EXAMINATION
Sec. 463.354. DEMAND TO CURE IMPAIRMENT
Sec. 463.355. FAILURE TO COMPLY WITH PLAN OF OPERATION
Sec. 463.356. ASSUMPTION OF POWERS AND DUTIES OF
ASSOCIATION
Sec. 463.357. NOTIFICATION OF EFFECT OF CHAPTER
Sec. 463.358. STATEMENT OF PREMIUMS
[Sections 463.359-463.400 reserved for expansion]
SUBCHAPTER I. APPEALS AND OTHER ACTIONS
Sec. 463.401. APPEAL TO COMMISSIONER
Sec. 463.402. VENUE
Sec. 463.403. APPEAL BOND
Sec. 463.404. STAY OF PROCEEDINGS; CERTAIN DECISIONS
NOT BINDING
[Sections 463.405-463.450 reserved for expansion]
SUBCHAPTER J. PROHIBITED PRACTICES
Sec. 463.451. PROHIBITED USE OF PROTECTION PROVIDED BY
CHAPTER
CHAPTER 463. LIFE, ACCIDENT, HEALTH, AND HOSPITAL
SERVICE INSURANCE GUARANTY ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 463.001. SHORT TITLE. This chapter may be cited as
the Life, Accident, Health, and Hospital Service Insurance Guaranty
Association Act. (V.T.I.C. Art. 21.28-D, Sec. 1.)
Sec. 463.002. PURPOSE. The purpose of this chapter is to
protect, subject to certain limitations, a person specified by
Section 463.201 against failure in the performance of a contractual
obligation under a life, accident, or health insurance policy or
annuity contract with respect to which this chapter provides
coverage as determined under Subchapter E, because of the
impairment or insolvency of the member insurer that issued the
policy or contract. (V.T.I.C. Art. 21.28-D, Sec. 2 (part).)
Sec. 463.003. DEFINITIONS. In this chapter:
(1) "Association" means the Life, Accident, Health,
and Hospital Service Insurance Guaranty Association.
(2) "Board" means the board of directors of the
association.
(3) "Contractual obligation" means an obligation
under a policy or contract or certificate under a group policy or
contract, or part of a policy or contract or certificate, for which
coverage is provided under Subchapter E.
(4) "Covered policy" means a policy or contract with
respect to which this chapter provides coverage as determined under
Subchapter E.
(5) "Impaired insurer" means a member insurer that:
(A) is placed under an order of supervision,
liquidation, rehabilitation, or conservation under Chapter 441 or
442 and is designated by the commissioner as an impaired insurer; or
(B) is determined in good faith by the
commissioner to be unable or potentially unable to fulfill the
insurer's contractual obligations.
(6) "Insolvent insurer" means a member insurer that:
(A) has a minimum free surplus, if a mutual
insurance company, or required capital, if a stock insurance
company, that is impaired to an extent prohibited by law; and
(B) the commissioner designates as an insolvent
insurer.
(7) "Member insurer" means an insurer that is required
to participate in the association under Section 463.052.
(8) "Person" means an individual, corporation,
partnership, association, or voluntary organization.
(9) "Premium" means an amount received on a covered
policy, less any premium, consideration, or deposit returned on the
policy, and any dividend or experience credit on the policy. The
term does not include:
(A) an amount received for a part of a policy or
contract for which coverage is not provided under Section 463.202,
except that assessable premiums may not be reduced because of:
(i) an interest limitation provided by
Section 463.203(b)(3); or
(ii) a limitation provided by Section
463.204 with respect to a single individual, participant,
annuitant, or contract holder;
(B) premiums in excess of $5 million on an
unallocated annuity contract not issued under a governmental
retirement plan established under Section 401, 403(b), or 457,
Internal Revenue Code of 1986; or
(C) premiums received from the state treasury or
the United States treasury for insurance for which this state or the
United States contracts to:
(i) provide welfare benefits to designated
welfare recipients; or
(ii) implement Title 2, Human Resources
Code, or the Social Security Act (42 U.S.C. Section 301 et seq.).
(10) "Resident" means a person who resides in this
state at the time a member insurer that owes a contractual
obligation to the person is determined to be impaired or insolvent.
For the purposes of this subdivision:
(A) a person is considered to be a resident of
only one state; and
(B) a person other than an individual is
considered to be a resident of the state in which the person's
principal place of business is located.
(11) "Supplemental contract" means an agreement for
the distribution of policy or contract proceeds.
(12) "Unallocated annuity contract" means an annuity
contract or group annuity certificate that is not issued to and
owned by an individual, except to the extent of any annuity benefits
guaranteed to an individual by an insurer under the contract or
certificate. (V.T.I.C. Art. 21.28-D, Secs. 5(2), (3) (part), (4),
(5), (6), (7) (part), (9), (10), (11), (12), (13); New.)
Sec. 463.004. CONSTRUCTION. This chapter shall be
liberally construed to implement the purpose of this chapter
described by Section 463.002. Section 463.002 shall be used to aid
and guide interpretation of this chapter. (V.T.I.C. Art. 21.28-D,
Sec. 4.)
Sec. 463.005. IMMUNITY. (a) The following persons are not
liable, and a cause of action does not arise against any of the
following persons, for a good faith act or omission in exercising
powers and performing duties under this chapter:
(1) the commissioner or the commissioner's
representative;
(2) the association or the association's agent or
employee;
(3) a member insurer or the insurer's agent or
employee;
(4) a board member;
(5) the receiver; and
(6) a special deputy receiver or the special deputy
receiver's agent or employee.
(b) Immunity under Subsection (a) extends to participation
in an organization of one or more state associations that have
similar purposes and to a similar organization and the
organization's agent or employee.
(c) The attorney general shall defend any action to which
this section applies that is brought against the commissioner or
the commissioner's representative, the association or the
association's agent or employee, a member insurer or the insurer's
agent or employee, a board member, or a special deputy receiver or
the special deputy receiver's agent or employee, including an
action brought after the defendant's service with the association,
commissioner, or department has terminated. This subsection does
not require the attorney general to defend a person with respect to
an issue other than the applicability or effect of the immunity
created by this section. The attorney general is not required to
defend the association or the association's agent or employee, a
member insurer or the insurer's agent or employee, a board member,
or a special deputy receiver or the special deputy receiver's agent
or employee against an action regarding the disposition of a claim
filed with the association under this chapter or any issue other
than the applicability or effect of the immunity created by this
section. The association may contract with the attorney general
under Chapter 771, Government Code, for legal services not covered
by this subsection. (V.T.I.C. Art. 21.28-D, Sec. 17.)
Sec. 463.006. RULES. The commissioner shall adopt
reasonable rules as necessary to carry out and supplement this
chapter and the purposes of this chapter. (V.T.I.C. Art. 21.28-D,
Sec. 21.)
[Sections 463.007-463.050 reserved for expansion]
SUBCHAPTER B. GOVERNANCE OF AND PARTICIPATION IN ASSOCIATION
Sec. 463.051. PURPOSE AND REGULATION OF ASSOCIATION. (a)
The Life, Accident, Health, and Hospital Service Insurance Guaranty
Association is a nonprofit legal entity existing to pay benefits
and continue coverage as provided by this chapter.
(b) The association is subject to the applicable provisions
of this code and other insurance laws of this state and the
immediate supervision of the commissioner. The commissioner may
examine and regulate the association in the same manner as an
insurer under this code. (V.T.I.C. Art. 21.28-D, Secs. 2 (part),
6(a) (part), (b), 15 (part).)
Sec. 463.052. REQUIRED PARTICIPATION IN ASSOCIATION. (a)
As a condition of engaging in the business of insurance in this
state, an insurer, including a mutual assessment company, a local
mutual aid association, a statewide mutual assessment company, and
a stipulated premium company authorized to engage in business in
this state, shall participate as a member of the association if the
insurer holds a certificate of authority to engage in a kind of
insurance business in this state with respect to which this chapter
provides coverage as determined under Subchapter E. The
requirement to participate applies regardless of whether the
insurer's certificate of authority in this state is suspended,
revoked, not renewed, or voluntarily withdrawn.
(b) The following do not participate as member insurers:
(1) a health maintenance organization;
(2) a fraternal benefit society;
(3) a mandatory state pooling plan;
(4) a reciprocal or interinsurance exchange; and
(5) an entity similar to an entity described by
Subdivision (1), (2), (3), or (4). (V.T.I.C. Art. 21.28-D, Secs.
5(7) (part), 6(a) (part).)
Sec. 463.053. BOARD OF DIRECTORS. (a) The association's
powers are exercised through a board of directors consisting of
nine individuals appointed by the commissioner as provided by this
section.
(b) The commissioner shall appoint three board members from
officers or employees of the 50 member insurers having the largest
total direct premium income according to the most recent financial
statement on file on the date of appointment.
(c) To give fair representation to member insurers, the
commissioner shall appoint two board members from member insurers
other than insurers described by Subsection (b), considering the
varying categories of premium income and geographical location.
(d) The commissioner shall appoint four board members who
are public representatives. (V.T.I.C. Art. 21.28-D, Secs. 6(a)
(part), 7(a) (part).)
Sec. 463.054. ELIGIBILITY TO SERVE AS PUBLIC
REPRESENTATIVE. To be eligible to serve as a public
representative, an individual may not:
(1) be an officer, director, or employee of an
insurer, insurance agency, agent, broker, solicitor, adjuster, or
other business entity regulated by the department;
(2) be a person required to register under Chapter
305, Government Code; or
(3) be related within the second degree by affinity or
consanguinity to a person described by Subdivision (1) or (2).
(V.T.I.C. Art. 21.28-D, Sec. 7(a) (part).)
Sec. 463.055. TERM; VACANCY. (a) Board members serve
staggered six-year terms, with the terms of three members expiring
each odd-numbered year. A member may be reappointed.
(b) A board member shall serve until a successor is
appointed.
(c) If a board member who is an officer or employee of a
member insurer ceases to be an officer or employee of the insurer,
the member's office becomes vacant.
(d) The commissioner shall appoint an individual to fill a
vacancy on the board for the unexpired term. (V.T.I.C. Art.
21.28-D, Sec. 7(a) (part).)
Sec. 463.056. COMPENSATION OF BOARD MEMBERS. A board
member may not receive compensation from the association for the
member's services but may be reimbursed from the association's
assets for expenses incurred as a board member. (V.T.I.C. Art.
21.28-D, Sec. 7(c).)
Sec. 463.057. FINANCIAL STATEMENT OF BOARD MEMBER. Each
board member shall file with the Texas Ethics Commission a
financial statement as provided by Subchapter B, Chapter 572,
Government Code. (V.T.I.C. Art. 21.28-D, Sec. 7(b).)
Sec. 463.058. CONFLICT OF INTEREST. (a) In this section,
"transaction on behalf of an impaired insurer" includes a
reinsurance agreement, transaction, merger, purchase, sale,
contribution, or exchange of assets, insurance policies, or
property made by the association or a supervisor, conservator, or
receiver on behalf of an impaired insurer.
(b) A board member may not:
(1) receive money or another thing of value for
negotiating, procuring, participating in, recommending, or aiding
a transaction on behalf of an impaired insurer; or
(2) as a principal, coprincipal, agent, or
beneficiary, have a pecuniary interest in a transaction on behalf
of an impaired insurer.
(c) For the purposes of this section, a board member is
considered to receive a thing of value or have a pecuniary interest
in a transaction on behalf of an impaired insurer regardless of
whether the receipt or interest is direct, indirect, or through a
substantial interest in a corporation, firm, or other business
unit. (V.T.I.C. Art. 21.28-D, Sec. 7(d).)
[Sections 463.059-463.100 reserved for expansion]
SUBCHAPTER C. GENERAL POWERS AND DUTIES OF ASSOCIATION
Sec. 463.101. GENERAL POWERS AND DUTIES. (a) The
association may:
(1) enter into contracts as necessary or proper to
carry out this chapter and the purposes of this chapter;
(2) sue or be sued, including taking:
(A) necessary or proper legal action to:
(i) recover an unpaid assessment under
Subchapter D; or
(ii) settle a claim or potential claim
against the association; or
(B) necessary legal action to avoid payment of an
improper claim;
(3) borrow money to effect the purposes of this
chapter;
(4) exercise, for the purposes of this chapter and to
the extent approved by the commissioner, the powers of a domestic
life, accident, or health insurance company or a group hospital
service corporation, except that the association may not issue an
insurance policy or annuity contract other than to perform the
association's obligations under this chapter; and
(5) to further the association's purposes, exercise
the association's powers, and perform the association's duties,
join an organization of one or more state associations that have
similar purposes.
(b) If not in default, a note or other evidence of
indebtedness of the association is a legal investment for a
domestic insurer and may be carried as an admitted asset. (V.T.I.C.
Art. 21.28-D, Secs. 8(v) (part), (w).)
Sec. 463.102. PLAN OF OPERATION; AMENDMENTS. (a) The
association shall perform the association's functions under a plan
of operation approved by the commissioner. The plan of operation
must:
(1) establish:
(A) procedures for handling the assets of the
association;
(B) the amount and method of reimbursing board
members under Section 463.056;
(C) regular places and times for board meetings,
including telephone conference calls;
(D) procedures for maintaining records of all
financial transactions of the association, the association's
agents, and the board; and
(E) additional procedures for assessments under
Subchapter D; and
(2) contain additional provisions necessary or proper
for the execution of the association's powers and duties.
(b) The association may amend the plan of operation. An
amendment must be approved by the commissioner and takes effect on:
(1) the date the commissioner approves the amendment;
or
(2) the 30th day after the date the amendment is
submitted to the commissioner for approval, if the commissioner
does not approve or disapprove the amendment before the 30th day.
(c) Each member insurer shall comply with the plan of
operation. (V.T.I.C. Art. 21.28-D, Secs. 6(a) (part), 10(a), (b),
(c).)
Sec. 463.103. PERSONNEL. The association may employ or
retain employees or contractors to handle the association's
financial transactions and to perform other functions under this
chapter. (V.T.I.C. Art. 21.28-D, Sec. 8(v) (part).)
Sec. 463.104. ASSOCIATION RECORDS. (a) The association
shall maintain a record of each negotiation or meeting in which the
association or the association's representative discusses the
association's activities in carrying out the powers and duties
under Section 463.101, 463.103, 463.109, or 463.111(c) or
Subchapter F.
(b) A record under Subsection (a) may be made public only
on:
(1) termination of a liquidation, rehabilitation, or
conservation proceeding involving the impaired or insolvent
insurer;
(2) termination of the impairment or insolvency of the
insurer; or
(3) order of a court.
(c) This section does not limit the association's duty to
report on the association's activities as required by Section
463.110. (V.T.I.C. Art. 21.28-D, Sec. 14(b).)
Sec. 463.105. ACCOUNTS. For the purposes of administration
and assessment, the association shall maintain:
(1) an accident, health, and hospital services
insurance account;
(2) a life insurance account;
(3) an annuity account; and
(4) an administrative account. (V.T.I.C. Art.
21.28-D, Sec. 6(a) (part).)
Sec. 463.106. DELEGATION OF POWERS AND DUTIES. (a) The plan
of operation may provide that, on approval of the board and the
commissioner, a power or duty of the association is delegated to a
corporation or other organization that:
(1) performs in two or more states functions similar
to those of the association or the association's equivalent; and
(2) provides protection not substantially less
favorable and effective than that provided by this chapter.
(b) A power or duty under Section 463.261(c) or Subchapter
D, other than a duty under Section 463.161(c), may not be delegated
under this section.
(c) The corporation or other organization to which a power
or duty is delegated shall be:
(1) reimbursed for a payment made on behalf of the
association; and
(2) paid for performing any other function of the
association. (V.T.I.C. Art. 21.28-D, Sec. 10(d).)
Sec. 463.107. EXEMPTION FROM TAXATION. The association is
exempt from payment of all fees and all taxes levied by this state
or a subdivision of this state, except taxes levied on property.
(V.T.I.C. Art. 21.28-D, Sec. 16.)
Sec. 463.108. DETECTION AND PREVENTION OF IMPAIRMENT AND
INSOLVENCY. On a majority vote, the board:
(1) may make recommendations to the commissioner for
detecting and preventing insurer insolvencies; and
(2) shall notify the commissioner of information
indicating that a member insurer may be impaired or insolvent.
(V.T.I.C. Art. 21.28-D, Secs. 12(e), (g).)
Sec. 463.109. ASSOCIATION APPEARANCE BEFORE COURT;
INTERVENTION. (a) The association may appear before a court in
this state with jurisdiction over an impaired or insolvent insurer
concerning which the association is or may become obligated under
this chapter. The association's right to appear applies to:
(1) a proposal for reinsuring, modifying, or
guaranteeing the insurer's policies or contracts;
(2) the determination of the insurer's policies or
contracts and contractual obligations; and
(3) any other matter germane to the association's
powers and duties.
(b) The association may appear or intervene before a court
in another state with jurisdiction over:
(1) an impaired or insolvent insurer concerning which
the association is or may become obligated; or
(2) a third party against whom the association may
have rights through subrogation of the insurer's policyholders.
(V.T.I.C. Art. 21.28-D, Sec. 8(s).)
Sec. 463.110. ANNUAL REPORT. Not later than the 120th day
after the last day of each association fiscal year, the board shall
submit to the commissioner:
(1) a financial report in a form approved by the
commissioner; and
(2) a report of the association's activities during
the preceding fiscal year. (V.T.I.C. Art. 21.28-D, Sec. 15
(part).)
Sec. 463.111. BOARD AND ASSOCIATION ADVICE AND ASSISTANCE.
(a) On a majority vote, the board may report and make
recommendations to the commissioner on any matter germane to:
(1) the solvency, liquidation, rehabilitation, or
conservation of a member insurer; or
(2) the solvency of an insurer seeking to engage in the
business of insurance in this state.
(b) A report or recommendation under Subsection (a) is not a
public document, and Chapter 552, Government Code, does not apply
to the report or recommendation until the insurer that is the
subject of the report or recommendation is designated as impaired.
(c) On the commissioner's request, the association may
assist and advise the commissioner concerning rehabilitation,
payment of claims, continuation of coverage, or the performance of
other contractual obligations of an impaired or insolvent insurer.
(V.T.I.C. Art. 21.28-D, Secs. 8(r), 12(d).)
Sec. 463.112. BOARD ACCESS TO RECORDS. The receiver or
statutory successor of an impaired insurer shall give the board or a
representative of the board:
(1) access to the insurer's records as necessary for
the board to carry out the board's functions under this chapter
relating to covered claims; and
(2) copies of those records on the board's request and
at the board's expense. (V.T.I.C. Art. 21.28-D, Sec. 18 (part).)
Sec. 463.113. BOARD REPORT AT CONCLUSION OF INSOLVENCY.
(a) At the conclusion of an insurer insolvency in which the
association was obligated to pay a covered claim, the board shall
prepare and submit to the commissioner a report containing any
information the board possesses concerning the history and causes
of the insolvency.
(b) The board:
(1) shall cooperate with the boards of directors of
guaranty associations in other states to prepare a report on the
history and causes of the insolvency of a particular insurer; and
(2) may adopt by reference a report prepared by any of
those associations. (V.T.I.C. Art. 21.28-D, Sec. 12(h).)
Sec. 463.114. SUMMARY DOCUMENT; DISCLAIMER. (a) The
association shall prepare a summary document describing the general
purposes and limitations of this chapter and amend the document as
necessary to comply with this chapter. The document must clearly
and conspicuously contain on the document's face a disclaimer that:
(1) states the name and address of the association and
department;
(2) warns the policy or contract holder that:
(A) the association may not cover the policy; or
(B) coverage, if available, is subject to
substantial limitations and exclusions and requires continuous
residence in this state;
(3) states that an insurer and the insurer's agent are
prohibited by law from using the association's existence to sell,
solicit, or induce the purchase of any kind of insurance;
(4) warns the policy or contract holder not to rely on
association coverage in selecting an insurer; and
(5) provides other information the commissioner
prescribes.
(b) The association shall submit the document to the
commissioner for approval.
(c) At the expiration of the 60th day after approval of the
document, an insurer may not deliver a policy or contract with
respect to which this chapter provides coverage as determined under
Subchapter E to a policy or contract holder before a copy of the
summary document is delivered to the policy or contract holder. The
document must also be available on request of a policyholder.
(d) The distribution, delivery, content, or interpretation
of a summary document does not guarantee that a policy or contract
or a policy or contract holder is provided coverage by this chapter
if a member insurer becomes impaired or insolvent. Failure to
receive the document does not give an insured or policy, contract,
or certificate holder any rights greater than those provided by
this chapter.
(e) An insurer or agent may not deliver a policy or contract
described by Section 463.202 that is excluded from the coverage
provided by this chapter by Section 463.203 unless the insurer or
agent, either before or in conjunction with delivery, gives the
policy or contract holder a separate written notice clearly and
conspicuously disclosing that the policy or contract is not covered
by the association.
(f) The commissioner shall specify by rule the form and
content of the disclaimer required by Subsection (a) and the notice
required by Subsection (e). (V.T.I.C. Art. 21.28-D, Secs. 19(b),
(c), (d).)
[Sections 463.115-463.150 reserved for expansion]
SUBCHAPTER D. ASSESSMENTS
Sec. 463.151. MAKING AND PAYMENT OF ASSESSMENT. (a) The
association shall assess member insurers, separately for each
account under Section 463.105, in the amounts and at the times the
board determines necessary to provide money for the association to
exercise the association's powers, perform the association's
duties, and carry out the purposes of this chapter. The association
may not make an assessment to meet the requirements of the
association with respect to an impaired or insolvent insurer until
the assessment is necessary to carry out the purposes of this
chapter. The board shall classify assessments under Section
463.152 and determine the amount of assessments with reasonable
accuracy, recognizing that exact determinations may not always be
possible.
(b) An assessment is due on the date the association
specifies, which may not be earlier than the 30th day after the date
the association gives written notice of the assessment to member
insurers. Interest accrues on an unpaid amount at a rate of 10
percent beginning on the due date.
(c) An insurer whose certificate of authority to engage in
business in this state is revoked or surrendered remains liable for
any unpaid assessment made before the date of the revocation or
surrender. (V.T.I.C. Art. 21.28-D, Secs. 2 (part), 9(a), (g),
(l).)
Sec. 463.152. CLASSES OF ASSESSMENTS. (a) Assessments are
classified as Class A or Class B assessments.
(b) Class A assessments are made to pay:
(1) the association's administrative costs;
(2) administrative expenses that:
(A) are properly incurred under this chapter; and
(B) relate to an unauthorized insurer or to an
entity that is not a member insurer; and
(3) other general expenses not related to a particular
impaired or insolvent insurer.
(c) Class B assessments are made to the extent necessary for
the association to carry out the association's powers and duties
under Sections 463.101, 463.103, 463.109, and 463.111(c) and
Subchapter F with regard to an impaired or insolvent insurer.
(V.T.I.C. Art. 21.28-D, Sec. 9(b).)
Sec. 463.153. AMOUNT OF ASSESSMENTS. (a) The board shall
determine the amount of a Class A assessment for each account under
Section 463.105, considering with respect to member insurers one or
more of the following as shown by annual statements for the year
preceding the date of the assessment:
(1) annual premium receipts;
(2) admitted assets; or
(3) insurance in force.
(b) Class B assessments against a member insurer for each
account under Section 463.105 shall be made in the proportion that
premiums received on all business by the insurer on policies
covered by each account bear to the premiums received on all
business by all assessed member insurers. The amount of a Class B
assessment shall be divided among the separate accounts in the
proportion that the premiums on the policies covered by each
account were received by the impaired or insolvent insurer from all
covered policies during the year preceding the date of the
impairment, as shown in the annual statements for the year
preceding the date of the assessment.
(c) The total amount of assessments on a member insurer for
each account under Section 463.105 may not exceed one percent of the
insurer's premiums on the policies covered by the account in a
single calendar year. If the maximum assessment and the other
assets of the association do not provide in a year an amount
sufficient to carry out the association's responsibilities, the
association shall make necessary additional assessments as soon as
this chapter permits. (V.T.I.C. Art. 21.28-D, Secs. 9(c), (d),
(f), (h) (part), (i) (part).)
Sec. 463.154. DEFERMENT. The association may wholly or
partly defer an assessment of a member insurer if the association
believes payment of the assessment would endanger the ability of
the insurer to fulfill the insurer's contractual obligations. The
amount of the assessment that is deferred may be assessed against
the other member insurers in a manner consistent with this
subchapter. (V.T.I.C. Art. 21.28-D, Secs. 9(h) (part), (i)
(part).)
Sec. 463.155. DEPOSIT OF ASSESSMENTS. The association may
deposit assessments into the Texas Treasury Safekeeping Trust
Company in accordance with procedures established by the
comptroller. The comptroller shall account to the association for
the deposited money separately from all other money. (V.T.I.C.
Art. 21.28-D, Sec. 9(n).)
Sec. 463.156. CERTIFICATE OF CONTRIBUTION. The association
shall issue to each member insurer that pays a Class B assessment a
certificate of contribution, in a form the commissioner prescribes,
for the amount paid. All outstanding certificates are of equal
priority regardless of the amount of the assessment paid or the date
the certificate is issued. (V.T.I.C. Art. 21.28-D, Sec. 9(k).)
Sec. 463.157. REFUNDS. (a) The board may refund to member
insurers the amount by which the association's assets, including
any net realized gains and income from investments, exceed the
amount the board determines is necessary to carry out the
association's obligations regarding that amount during the next
year.
(b) A refund must be made:
(1) by an equitable method established in the plan of
operation; and
(2) in proportion to the contribution of each member
insurer.
(c) The board may retain a reasonable amount to provide for
the association's continuing expenses and for future losses if
refunds are impractical. (V.T.I.C. Art. 21.28-D, Sec. 9(j).)
Sec. 463.158. USE OF ASSESSMENTS. Money from assessments
supplements the marshalling of an impaired insurer's assets to make
payments on the insurer's behalf. (V.T.I.C. Art. 21.28-D, Sec.
9(m).)
Sec. 463.159. FAILURE TO PAY; COLLECTION BY COMMISSIONER.
On failure of a member insurer to pay an assessment when due, the
commissioner may either:
(1) suspend or revoke, after notice and hearing, the
insurer's certificate of authority to engage in the business of
insurance in this state; or
(2) levy a forfeiture in an amount not less than $100
each month or more than five percent of the unpaid assessment each
month. (V.T.I.C. Art. 21.28-D, Sec. 11(c) (part).)
Sec. 463.160. PREMIUM TAX CREDIT FOR CLASS A ASSESSMENT.
The amount of a Class A assessment paid by a member insurer shall be
allowed as a credit on the amount of premium taxes due in the same
manner as a credit is allowed under Section 401.151(e). (V.T.I.C.
Art. 21.28-D, Sec. 9(e).)
Sec. 463.161. PREMIUM TAX CREDIT FOR CLASS B ASSESSMENT.
(a) A member insurer is entitled to show as an admitted asset a
certificate of contribution in the form the commissioner approves
under Section 463.156. Unless the commissioner requires a longer
period, the certificate may be shown at:
(1) for the calendar year of issuance, an amount equal
to the certificate's original face value approved by the
commissioner; and
(2) beginning with the year following the calendar
year of issuance, an amount equal to the certificate's original
face value, reduced by 10 percent a year for each year after the
year of issuance, for a period of 10 years.
(b) An amount written off during a calendar year under
Subsection (a) shall be allowed as a credit against the member
insurer's premium tax owed for business engaged in during that
year. The insurer is not required to write off in a single year an
amount that exceeds the amount of premium tax owed for the business
described by this subsection.
(c) The association shall pay to the commissioner, and the
commissioner shall deliver to the comptroller for deposit to the
credit of the general revenue fund, any amount owed as a refund from
the association under Section 463.157 that was written off and used
for a tax credit under this section. (V.T.I.C. Art. 21.28-D, Secs.
13(a), (b), (c).)
Sec. 463.162. ASSIGNMENT OR TRANSFER OF CREDIT. (a) A
member insurer may assign or transfer a credit against premium tax
to another member insurer if:
(1) an acquisition, merger, or total assumption of
reinsurance occurs between the insurers; or
(2) the commissioner by order approves the assignment
or transfer.
(b) Not later than the later of November 1 or the 60th day
after the date of the assignment or transfer, each member insurer
shall:
(1) report the assignment or transfer to the
comptroller on a form the comptroller prescribes; and
(2) include with the report any documents from the
commissioner that show approval of the assignment or transfer.
(V.T.I.C. Art. 21.28-D, Secs. 13(d), (e).)
Sec. 463.163. INSURED'S LIABILITY UNDER ASSESSMENT PLAN.
This chapter does not reduce the liability for unpaid assessments
of the insureds of an impaired or insolvent insurer operating under
a plan with assessment liability. (V.T.I.C. Art. 21.28-D, Sec.
14(a).)
[Sections 463.164-463.200 reserved for expansion]
SUBCHAPTER E. COVERAGE PROVIDED BY ASSOCIATION
Sec. 463.201. INSUREDS COVERED. (a) This chapter provides
coverage for a policy described by Section 463.202 to a person who
is:
(1) subject to Subsection (b), an owner of or
certificate holder under a policy or contract specified by Section
463.202, or a contract holder under an unallocated annuity
contract; or
(2) a beneficiary, assignee, or payee, other than a
certificate holder under a group policy or contract who is not a
resident, of a person described by Subdivision (1).
(b) Coverage under Subsection (a)(1) applies to a person who
is not a resident, only if:
(1) the insurer that issued the policy or contract is
domiciled in this state;
(2) the insurer never held a certificate of authority
in the state in which the person resides;
(3) the state in which the person resides has an
association similar to the association; and
(4) the person is not eligible for coverage by the
association in the state in which the person resides. (V.T.I.C.
Art. 21.28-D, Sec. 3(a).)
Sec. 463.202. POLICIES AND CONTRACTS COVERED. (a) Except
as limited by this chapter, the coverage provided by this chapter to
a person specified by Section 463.201 applies with respect to the
following policies and contracts issued by a member insurer:
(1) a direct, nongroup life, health, accident,
annuity, or supplemental policy or contract;
(2) a certificate under a direct group policy or
contract;
(3) a group hospital service contract; and
(4) an unallocated annuity contract.
(b) The coverage provided by this chapter also applies with
respect to all other insurance coverage written by the following
entities authorized to engage in business in this state:
(1) a mutual assessment company;
(2) a local mutual aid association;
(3) a statewide mutual assessment company; and
(4) a stipulated premium company.
(c) For the purposes of this section, an annuity contract or
a certificate under a group annuity contract includes:
(1) a guaranteed investment contract;
(2) a deposit administration contract;
(3) an allocated or unallocated funding agreement;
(4) a structured settlement agreement;
(5) a lottery contract; and
(6) an immediate or deferred annuity contract.
(V.T.I.C. Art. 21.28-D, Sec. 3(b).)
Sec. 463.203. POLICIES AND CONTRACTS EXCLUDED. (a) In this
section, "Moody's Corporate Bond Yield Average" means the monthly
average corporates as published by Moody's Investors Service, Inc.,
or any successor to that entity.
(b) This chapter does not provide coverage for:
(1) any part of a policy or contract not guaranteed by
the insurer or under which the risk is borne by the policy or
contract holder;
(2) a policy or contract of reinsurance, unless an
assumption certificate has been issued;
(3) any part of a policy or contract to the extent that
the rate of interest on which that part is based:
(A) as averaged over the period of four years
before the date the association became obligated with respect to
the policy or contract, exceeds a rate of interest determined by
subtracting two percentage points from Moody's Corporate Bond Yield
Average averaged for the same four-year period or for a lesser
period if the policy or contract was issued less than four years
before the date the association became obligated; and
(B) on and after the date the association became
obligated with respect to the policy or contract, exceeds the rate
of interest determined by subtracting three percentage points from
Moody's Corporate Bond Yield Average as most recently available;
(4) a plan or program of an employer, association, or
similar entity to provide life, health, or annuity benefits to the
entity's employees or members to the extent that the plan or program
is self-funded or uninsured, including benefits payable by an
employer, association, or similar entity under:
(A) a multiple employer welfare arrangement as
defined by Section 3, Employee Retirement Income Security Act of
1974 (29 U.S.C. Section 1002);
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services-only contract;
(5) any part of a policy or contract to the extent that
the part provides dividends or experience rating credits or
provides that fees or allowances be paid to any person, including
the policy or contract holder, in connection with the service to or
administration of the policy or contract;
(6) a policy or contract issued in this state by a
member insurer at a time the insurer was not authorized to issue the
policy or contract in this state;
(7) an unallocated annuity contract issued to an
employee benefit plan protected under the federal Pension Benefit
Guaranty Corporation;
(8) any part of an unallocated annuity contract that
is not issued to or in connection with a specific employee, a
benefit plan for a union or association of individuals, or a
governmental lottery; or
(9) any part of a financial guarantee, funding
agreement, or guaranteed investment contract that:
(A) does not contain a mortality guarantee; and
(B) is not issued to or in connection with a
specific employee, a benefit plan, or a governmental lottery.
(V.T.I.C. Art. 21.28-D, Secs. 3(c), 5(8).)
Sec. 463.204. OBLIGATIONS EXCLUDED. A contractual
obligation does not include:
(1) death benefits in an amount in excess of $300,000
or a net cash surrender or net cash withdrawal value in an amount in
excess of $100,000 in the aggregate under one or more policies on a
single life;
(2) an amount in excess of:
(A) $100,000 in the aggregate under one or more
annuity contracts issued to the same holder of individual annuity
policies or to the same annuitant or participant under group
annuity policies; or
(B) $5 million in unallocated annuity contract
benefits with respect to a single contract holder regardless of the
number of those contracts;
(3) an amount in excess of $200,000 in the aggregate
under one or more accident, health, or accident and health
insurance policies on a single life; or
(4) punitive, exemplary, extracontractual, or bad
faith damages, regardless of whether the damages are:
(A) agreed to or assumed by an insurer or
insured; or
(B) imposed by a court. (V.T.I.C. Art. 21.28-D,
Sec. 5(3) (part).)
Sec. 463.205. PROTECTION PROVIDED BY OTHER JURISDICTION.
This chapter does not provide coverage for a resident with respect
to an impaired or insolvent insurer domiciled in another
jurisdiction if guaranty protection is provided to the resident by
the law of that jurisdiction. (V.T.I.C. Art. 21.28-D, Sec. 8(o).)
[Sections 463.206-463.250 reserved for expansion]
SUBCHAPTER F. POWERS AND DUTIES OF ASSOCIATION RELATING
TO IMPAIRED OR INSOLVENT INSURER
Sec. 463.251. IMPAIRED DOMESTIC INSURER. (a) This section
applies only to a member insurer that is an impaired domestic
insurer.
(b) With the commissioner's approval, the association may:
(1) guarantee, assume, or reinsure, or cause to be
guaranteed, assumed, or reinsured, one or more of the insurer's
policies or contracts;
(2) provide money, pledges, notes, guarantees, or
other means proper to:
(A) implement Subdivision (1); and
(B) ensure payment of the insurer's contractual
obligations until action is taken under Subdivision (1); or
(3) loan money to the insurer.
(c) In taking action under Subsection (b), the association
may impose any condition that:
(1) does not impair the insurer's contractual
obligations; and
(2) is approved by:
(A) the commissioner; and
(B) the insurer, except in a conservation or
rehabilitation ordered by a court. (V.T.I.C. Art. 21.28-D, Sec.
8(a).)
Sec. 463.252. IMPAIRED DOMESTIC, FOREIGN, OR ALIEN INSURER
NOT PAYING CLAIMS. (a) This section applies only to a member
insurer that:
(1) is an impaired domestic, foreign, or alien
insurer; and
(2) is not timely paying claims.
(b) Subject to Subsection (d), the association shall:
(1) with respect to the insurer, take one or more
actions that the association is authorized to take under Section
463.251 with respect to an impaired domestic insurer, subject to
the conditions of that section; or
(2) provide substitute benefits instead of the
insurer's contractual obligations as provided by Subsection (c).
(c) A policy or contract owner who claims emergency or
hardship may petition for substitute benefits under standards the
association proposes and the commissioner approves. Substitute
benefits are available only for a health claim, periodic annuity
benefit payment, death benefit, supplemental benefit, or cash
withdrawal.
(d) The association is required to take action under this
section only if:
(1) the laws of the insurer's state of domicile provide
that, until all payments of or on account of the insurer's
contractual obligations are made by all guaranty associations and
all expenses of the associations and interest on those payments and
expenses have been repaid to the associations or a plan of repayment
by the insurer has been approved by the associations:
(A) the delinquency proceeding may not be
dismissed;
(B) the insurer and the insurer's assets may not
be returned to the control of the insurer's shareholders or private
management; and
(C) the insurer may not solicit or accept new
business or have any suspended or revoked certificate of authority
restored;
(2) the insurer is a domestic insurer that has been
placed under an order of rehabilitation by a court in this state;
or
(3) the insurer is a foreign or alien insurer and:
(A) the insurer has been prohibited from
soliciting or accepting new business in this state;
(B) the insurer's certificate of authority has
been suspended or revoked in this state; and
(C) a petition for rehabilitation or liquidation
has been filed in a court in the insurer's state of domicile by the
insurance official of that state. (V.T.I.C. Art. 21.28-D, Secs.
8(b), (c).)
Sec. 463.253. INSOLVENT INSURER. (a) This section applies
only to a member insurer that is an insolvent insurer.
(b) The association shall provide money, pledges,
guarantees, or other means reasonably necessary to discharge the
insurer's duties and to:
(1) guarantee, assume, or reinsure, or cause to be
guaranteed, assumed, or reinsured, the insurer's policies or
contracts; or
(2) ensure payment of the insurer's contractual
obligations. (V.T.I.C. Art. 21.28-D, Sec. 8(d).)
Sec. 463.254. LIFE OR HEALTH INSURANCE POLICIES OR
CONTRACTS. (a) This section applies only when the association is
taking an action under Section 463.252(b)(2) or 463.253 with
respect to a life or health insurance policy or contract.
(b) The association, in accordance with Subsections (c) and
(d), as applicable, shall ensure payment of benefits identical to
the benefits that would have been payable under the policy or
contract of the insurer, at premiums identical to the premiums that
would have been applicable under that policy or contract, except
for terms of conversion and renewability.
(c) For a group policy or contract, the association shall
ensure payment of benefits under Subsection (b) for claims incurred
before the later of:
(1) the earlier of the next renewal date under the
policy or contract or the 45th day after the date the association
becomes obligated with respect to the policy or contract; or
(2) the 30th day after the date the association
becomes obligated with respect to the policy or contract.
(d) For an individual policy, the association shall ensure
payment of benefits under Subsection (b) for claims incurred before
the later of:
(1) the earlier of the next renewal date under the
policy, if any, or the first anniversary of the date the association
becomes obligated with respect to the policy; or
(2) the 30th day after the date the association
becomes obligated with respect to the policy.
(e) The association shall diligently attempt to provide
each known insured or group policyholder with notice before the
30th day before the date the benefits are terminated.
(f) As provided by Subsections (g)-(i), the association
shall make substitute coverage available on an individual basis to:
(1) each known insured under an individual policy, or
the owner if other than the insured; and
(2) each individual who:
(A) was formerly insured under a group policy or
contract; and
(B) is not eligible for replacement group
coverage.
(g) Substitute coverage is available for an individual
policy under Subsection (f) only if the insured or owner was
entitled under law or the terminated policy to continue an
individual policy in force until a specified age or for a specified
period during which the insurer:
(1) was not entitled to unilaterally change a
provision of the policy; or
(2) was entitled only to change a premium by class.
(h) Substitute coverage is available for a group policy or
contract under Subsection (f) only if the formerly insured
individual was entitled under law or the terminated policy or
contract to convert group coverage to individual coverage.
(i) To provide substitute coverage under Subsection (f),
the association may offer to reissue the terminated coverage or
issue an alternative policy. The association shall offer the
reissued or alternative policy without requiring evidence of
insurability. The reissued or alternative policy may not provide
for a waiting period or exclusion that would not have applied under
the terminated policy. The association may reinsure a reissued or
alternative policy. (V.T.I.C. Art. 21.28-D, Secs. 8(e), (f).)
Sec. 463.255. POLICY OR CONTRACT WITH GUARANTEED INTEREST
RATE. In taking an action under Section 463.252(b)(2) or 463.253
with respect to a policy or contract with a guaranteed minimum
interest rate, the association shall ensure the payment or
crediting of a rate of interest consistent with Section
463.203(b)(3). (V.T.I.C. Art. 21.28-D, Sec. 8(l).)
Sec. 463.256. ALTERNATIVE POLICY. (a) An alternative
policy issued by the association must:
(1) be approved by the commissioner;
(2) provide coverage of a kind that the association
determines is similar to the coverage of the policy issued by the
impaired or insolvent insurer;
(3) contain at least the minimum provisions required
by the statutes of this state; and
(4) provide benefits that are not unreasonable in
relation to the premium charged.
(b) The association shall set the premium according to a
table of rates the association adopts. The premium:
(1) must reflect:
(A) the amount of insurance provided; and
(B) each insured's age and class of risk; and
(2) may not reflect any change in an insured's health
occurring after the original policy was most recently underwritten.
(c) The association may adopt various kinds of alternative
policies to issue at a later date without regard to any particular
impairment or insolvency. (V.T.I.C. Art. 21.28-D, Secs. 8(g), (h),
(i).)
Sec. 463.257. IMPOSITION OF LIEN OR MORATORIUM. To carry
out the association's duties under this chapter and with the court's
approval, the association may:
(1) impose a permanent policy or contract lien in
connection with any guarantee, assumption, or reinsurance
agreement if the association determines that:
(A) the amounts that may be assessed under this
chapter are insufficient to ensure full and prompt performance of
the association's duties under this chapter; or
(B) adverse economic or financial conditions
affecting member insurers make imposition of the lien in the public
interest; or
(2) in addition to any contractual provision for
deferral of cash or policy loan value, impose a temporary
moratorium or lien on payment of cash values and policy loans or the
exercise of any other right to withdraw money held in connection
with a policy or contract. (V.T.I.C. Art. 21.28-D, Sec. 8(p).)
Sec. 463.258. PREMIUM FOR REISSUANCE OF TERMINATED
COVERAGE. If the association reissues terminated coverage at a
premium different from the terminated policy's premium, the premium
must:
(1) reflect the amount of insurance provided and the
insured's age and class of risk; and
(2) be approved by the commissioner or a court.
(V.T.I.C. Art. 21.28-D, Sec. 8(j).)
Sec. 463.259. PREMIUM DUE DURING RECEIVERSHIP. After a
court enters an order of receivership with respect to an insolvent
insurer, a premium due for coverage issued by the insurer is owned
by and is payable at the direction of the association. The
association is liable for an unearned premium owed to a policy or
contract owner that arises after the court enters the order.
(V.T.I.C. Art. 21.28-D, Sec. 8(n).)
Sec. 463.260. LIMITS ON AND TERMINATION OF ASSOCIATION
OBLIGATION. (a) The association is not liable for benefits that
exceed the contractual obligations for which the insurer is liable
or would have been liable if not impaired or insolvent.
(b) The association's obligations with respect to coverage
under a policy of an impaired or insolvent insurer or under a
reissued or alternative policy terminate on the date the coverage
or policy is replaced by another similar policy by the
policyholder, the insured, or the association.
(c) If a premium is not paid before the 32nd day after the
date the premium is due under a guaranteed, assumed, alternative,
or reissued policy or contract or substitute coverage, the
association's obligations under the policy, contract, or coverage
terminate, except with respect to a claim incurred or any net cash
surrender value due as provided by this chapter. (V.T.I.C. Art.
21.28-D, Secs. 3(d), 8(k), (m).)
Sec. 463.261. ASSIGNMENT OF RIGHTS. (a) A person receiving
a benefit under this chapter, including a payment of or on account
of a contractual obligation, continuation of coverage, or provision
of substitute or alternative coverage, is considered to have
assigned to the association the rights under, and any cause of
action relating to, the covered policy to the extent of the benefit
received. The association may require a payee, policy or contract
owner, beneficiary, insured, or annuitant to assign the person's
rights and cause of action to the association as a condition of
receiving a right or benefit under this chapter.
(b) The association's subrogation rights under Subsection
(a) have the same priority against the assets of the impaired or
insolvent insurer as that held by the person entitled to receive a
benefit under this chapter.
(c) The association has all common law rights of subrogation
and any other equitable or legal remedy that would have been
available to the impaired or insolvent insurer or holder of a policy
or contract with respect to the policy or contract. (V.T.I.C. Art.
21.28-D, Secs. 8(t), (u).)
[Sections 463.262-463.300 reserved for expansion]
SUBCHAPTER G. OPERATION OF IMPAIRED OR INSOLVENT INSURER
Sec. 463.301. ISSUANCE OR RENEWAL OF POLICIES FOLLOWING
CONSERVATORSHIP OR RECEIVERSHIP. (a) If an assessment has been
made under this chapter for the insurer or guaranty fees have been
provided for the insurer, an impaired insurer placed in
conservatorship or receivership may not issue a new or renewal
insurance policy on release from the conservatorship or
receivership until the insurer has repaid in full the amount of
guaranty fees provided by the association.
(b) Notwithstanding Subsection (a), on application of the
association and after hearing, the commissioner may permit the
insurer to issue new policies as provided by a plan of operation by
the insurer for repayment. In approving the plan, the commissioner
may restrict the issuance of new or renewal policies as necessary to
implement the plan.
(c) The commissioner shall give 10 days' notice of the
hearing to the association. The association and the member insurers
that paid assessments in relation to the impaired insurer are
entitled to appear at and participate in the hearing.
(d) Money recovered against an impaired insurer under this
section shall be repaid to the member insurers that paid
assessments in relation to the impaired insurer on return of the
member insurers' certificates of contribution. (V.T.I.C. Art.
21.28-D, Sec. 14(k).)
Sec. 463.302. DISTRIBUTIONS TO SHAREHOLDERS AND
AFFILIATES. (a) An impaired or insolvent insurer may not make a
distribution to shareholders until the association has recovered
the total amount of valid claims for money spent in carrying out the
association's powers and performing the association's duties under
Section 463.101, 463.103, 463.109, or 463.111(c) or Subchapter F
with respect to that insurer, plus interest on that amount.
(b) Except as otherwise provided by this section, a receiver
appointed under an order of receivership for an insurer domiciled
in this state may recover on behalf of the insurer from an affiliate
that controlled the insurer the amount of any distribution, other
than a stock dividend the insurer paid on the insurer's capital
stock, made during the five years preceding the date of the petition
for liquidation or rehabilitation.
(c) A person who was an affiliate that controlled the
insurer when a distribution described by Subsection (b) was paid is
liable for the amount of the distribution received. A person who
was an affiliate that controlled the insurer when the distribution
was declared is liable for the amount of the distribution the
affiliate would have received if the distribution had been paid
immediately. Two or more persons liable for the same distribution
are jointly and severally liable. If a person liable under this
subsection is insolvent, all of the affiliates that controlled the
insolvent person when the distribution was paid are jointly and
severally liable for any resulting deficiency in the amount
recovered from the insolvent person.
(d) The maximum amount recoverable under Subsections (b)
and (c) is the amount needed in excess of all other available assets
of the insolvent insurer to pay the insurer's contractual
obligations.
(e) The receiver may not recover a distribution to
shareholders under Subsection (b) if the insurer shows that, at the
time the distribution was paid, the distribution was lawful and
reasonable and that the insurer did not know and could not
reasonably have known that the distribution might adversely affect
the ability of the insurer to fulfill the insurer's contractual
obligations. (V.T.I.C. Art. 21.28-D, Secs. 14(e), (f), (g), (h),
(i), (j).)
Sec. 463.303. ASSETS ATTRIBUTABLE TO COVERED POLICIES. (a)
For the purposes of this section, assets attributable to covered
policies are the proportion of the assets that the reserves that
should have been established for the covered policies bear to the
reserves that should have been established for all insurance
policies written by the impaired or insolvent insurer.
(b) To carry out the association's obligations under this
chapter, the association is considered a creditor of the impaired
or insolvent insurer to the extent of assets attributable to
covered policies, less any amount to which the association is
entitled as subrogee under Section 463.261.
(c) Assets of the impaired or insolvent insurer
attributable to covered policies shall be used to continue all
covered policies and pay all contractual obligations of the
impaired or insolvent insurer as required by this chapter.
(V.T.I.C. Art. 21.28-D, Sec. 14(c).)
Sec. 463.304. DISTRIBUTION OF OWNERSHIP RIGHTS OF INSOLVENT
INSURER. In making an equitable distribution of the ownership
rights of an insolvent insurer before the termination of a
receivership, the court:
(1) shall consider the welfare of the policyholders of
the continuing or successor insurer; and
(2) may consider the contributions of the respective
parties, including the association, the shareholders and
policyholders of the insolvent insurer, and any other party with a
bona fide interest. (V.T.I.C. Art. 21.28-D, Sec. 14(d).)
[Sections 463.305-463.350 reserved for expansion]
SUBCHAPTER H. POWERS AND DUTIES OF COMMISSIONER AND DEPARTMENT
Sec. 463.351. NOTICE OF COMMISSIONER ACTIONS. (a) The
commissioner shall:
(1) notify the insurance officials of all the other
states, territories of the United States, and the District of
Columbia by mail not later than the 30th day after the date the
commissioner:
(A) revokes or suspends a member insurer's
certificate of authority; or
(B) issues a formal order requiring a member
insurer to:
(i) restrict the insurer's premium writing;
(ii) withdraw from this state;
(iii) reinsure all or part of the insurer's
business;
(iv) obtain additional contributions to
surplus; or
(v) increase capital, surplus, or another
account for the security of policyholders or creditors;
(2) report to the board when the commissioner:
(A) takes an action described by Subdivision (1)
or receives from another insurance official a report indicating
that a similar action has been taken in another state; or
(B) has reasonable cause to believe from a
completed or continuing examination that a member insurer may be
impaired or insolvent; and
(3) provide to the board the National Association of
Insurance Commissioners Insurance Regulatory Information System
ratios and listings of insurers not included in those ratios.
(b) A report under Subsection (a)(2)(A) must contain all
significant details of the action taken or report received.
(c) The board may use information described by this section
to carry out the board's duties under this chapter. The board shall
keep a report made under this section and the contents of the report
confidential until the commissioner or other lawful authority makes
the report and the contents public. (V.T.I.C. Art. 21.28-D, Secs.
12(a), (b).)
Sec. 463.352. ADVICE FROM BOARD. The commissioner may seek
the board's advice and recommendations on a matter affecting the
commissioner's duties regarding the financial condition of:
(1) a member insurer; or
(2) an insurer applying for a certificate of authority
to engage in the business of insurance in this state. (V.T.I.C.
Art. 21.28-D, Sec. 12(c).)
Sec. 463.353. EXAMINATION. (a) The board by majority vote
may request the commissioner to order an examination of a member
insurer that the board in good faith believes may be impaired or
insolvent. The commissioner shall keep the request on file. The
request is open for public inspection before release of the
examination report to the public.
(b) Not later than the 30th day after the date the
commissioner receives the request, the commissioner shall begin the
examination. The examination may be conducted:
(1) as a National Association of Insurance
Commissioners examination; or
(2) by a person the commissioner designates.
(c) The association shall pay the cost of the examination.
(d) The commissioner shall notify the board when the
examination is completed. The examination report shall be treated
in the same manner as other examination reports. The report may not
be released to the board before the report is released to the
public, except that the commissioner may comply with Section
463.351. (V.T.I.C. Art. 21.28-D, Sec. 12(f).)
Sec. 463.354. DEMAND TO CURE IMPAIRMENT. (a) When an
impairment is declared and the amount of the impairment is
determined, the commissioner shall serve a demand on the impaired
insurer to cure the impairment within a reasonable time.
(b) Notice of the demand under Subsection (a) to the
impaired insurer constitutes notice to any shareholders of the
insurer.
(c) Failure of the impaired insurer to comply promptly with
the demand does not excuse the association from exercising the
association's powers and performing the association's duties under
this chapter. (V.T.I.C. Art. 21.28-D, Sec. 11(b).)
Sec. 463.355. FAILURE TO COMPLY WITH PLAN OF OPERATION. On
failure of a member insurer to comply with the plan of operation,
the commissioner may suspend or revoke, after notice and hearing,
the insurer's certificate of authority to engage in the business of
insurance in this state. (V.T.I.C. Art. 21.28-D, Sec. 11(c)
(part).)
Sec. 463.356. ASSUMPTION OF POWERS AND DUTIES OF
ASSOCIATION. The commissioner may assume the powers and duties of
the association under this chapter with respect to impaired or
insolvent insurers if the association does not within a reasonable
period act as provided by:
(1) Section 463.252(b)(2);
(2) Section 463.253; and
(3) Section 463.254. (V.T.I.C. Art. 21.28-D, Sec.
8(q).)
Sec. 463.357. NOTIFICATION OF EFFECT OF CHAPTER. The
commissioner, as receiver of an impaired insurer, may notify all
interested persons of the effect of this chapter. (V.T.I.C. Art.
21.28-D, Sec. 11(e).)
Sec. 463.358. STATEMENT OF PREMIUMS. On request, the
commissioner shall provide the association with a statement of the
premiums in this state and any other appropriate state for each
member insurer. (V.T.I.C. Art. 21.28-D, Sec. 11(a).)
[Sections 463.359-463.400 reserved for expansion]
SUBCHAPTER I. APPEALS AND OTHER ACTIONS
Sec. 463.401. APPEAL TO COMMISSIONER. (a) Not later than
the 60th day after the date of a final action of the association or
the board, a member insurer may appeal the action to the
commissioner.
(b) A member insurer appealing an assessment shall pay the
assessment to the association. The association may use the money to
meet the association's obligations while the appeal is pending. If
the appeal on the assessment is upheld, the association shall
return to the insurer the amount paid in error or in excess of the
amount the commissioner determines the insurer was obligated to
pay. (V.T.I.C. Art. 21.28-D, Sec. 11(d).)
Sec. 463.402. VENUE. Venue for an action against the
association under this chapter is in Travis County. (V.T.I.C. Art.
21.28-D, Sec. 20(a).)
Sec. 463.403. APPEAL BOND. The association is not required
to give an appeal bond in an appeal of a cause of action under this
chapter. (V.T.I.C. Art. 21.28-D, Sec. 20(b).)
Sec. 463.404. STAY OF PROCEEDINGS; CERTAIN DECISIONS NOT
BINDING. (a) To permit the receiver or association to properly
defend a pending cause of action, a proceeding in which an impaired
insurer is a party or is obligated to defend a party in a court in
this state, other than a proceeding directly related to the
receivership or brought by the receiver, is stayed for:
(1) a six-month period beginning on the later of the
date the insurer is designated as impaired or the date an ancillary
proceeding is brought in this state; and
(2) any subsequent period as determined by the court.
(b) If a covered claim arises from a judgment, order,
verdict, finding, or other decision based on the default of an
impaired insurer or the insurer's failure to defend an insured, the
association on the association's behalf or on behalf of the insured
may apply to the court or administrator that made the decision to
have the decision set aside and is entitled to defend the claim on
the merits. (V.T.I.C. Art. 21.28-D, Sec. 18 (part).)
[Sections 463.405-463.450 reserved for expansion]
SUBCHAPTER J. PROHIBITED PRACTICES
Sec. 463.451. PROHIBITED USE OF PROTECTION PROVIDED BY
CHAPTER. (a) A person may not make, publish, disseminate,
circulate, or place before the public, or directly or indirectly
cause to be made, published, disseminated, circulated, or placed
before the public, a written or oral advertisement, announcement,
or statement that uses the existence of the association to sell,
solicit, or induce the purchase of a kind of insurance with respect
to which this chapter provides coverage.
(b) This section applies to an advertisement, announcement,
or statement made, published, disseminated, circulated, or placed
before the public:
(1) in a newspaper, magazine, or other publication;
(2) in a notice, circular, pamphlet, letter, or
poster;
(3) over a radio or television station; or
(4) in any other manner.
(c) Except as provided by Section 463.114, the use by a
person of the protection provided by this chapter in the sale of
insurance is unfair competition and an unfair practice under
Chapter 541.
(d) This section does not apply to the association or any
other entity that does not sell or solicit insurance. (V.T.I.C.
Art. 21.28-D, Sec. 19(a).)
[Chapters 464-480 reserved for expansion]
SUBTITLE E. REQUIREMENTS OF OTHER JURISDICTIONS
CHAPTER 481. VOLUNTARY DEPOSITS
Sec. 481.001. DEPOSIT WITH COMPTROLLER
Sec. 481.002. APPLICABILITY OF CHAPTER TO CERTAIN
DEPOSITS
Sec. 481.003. DUTIES OF COMPTROLLER
Sec. 481.004. ACCESS TO DEPOSIT
Sec. 481.005. SITUS OF DEPOSIT FOR TAX PURPOSES
Sec. 481.006. WITHDRAWAL OF DEPOSIT
Sec. 481.007. WITHDRAWAL OF DEPOSIT AFTER MERGER,
CONSOLIDATION, OR TOTAL REINSURANCE
Sec. 481.008. RETURN OF DEPOSIT
Sec. 481.009. DELIVERY OF DEPOSIT BY COMPTROLLER
CHAPTER 481. VOLUNTARY DEPOSITS
Sec. 481.001. DEPOSIT WITH COMPTROLLER. (a) An insurer
organized and engaged in business under this code that is required
by another state, country, or province as a condition of engaging in
an insurance business in that state, country, or province to make or
maintain a deposit with an officer of any state, country, or
province may, at the insurer's discretion, voluntarily deposit with
the comptroller cash or securities in an amount that is sufficient
to satisfy the conditions of the other state, country, or province.
(b) Any securities deposited must be approved by the
commissioner as being of a type and character in which the insurer
is authorized by law to invest. (V.T.I.C. Art. 1.10, Sec. 17(a)
(part).)
Sec. 481.002. APPLICABILITY OF CHAPTER TO CERTAIN
DEPOSITS. A voluntary deposit held by the comptroller or the
department that was made by an insurer in this state before May 8,
1959, to gain admission to another state may, at the insurer's
option, be considered to be held under this chapter. (V.T.I.C. Art.
1.10, Sec. 17(b).)
Sec. 481.003. DUTIES OF COMPTROLLER. The comptroller
shall receive a deposit made by an insurer as described by this
chapter and hold it exclusively for the protection of all
policyholders or creditors of the insurer, wherever they are
located, or for the protection of the insurer's policyholders or
creditors in a particular state, country, or province, as
designated by the insurer at the time the insurer makes the deposit.
(V.T.I.C. Art. 1.10, Sec. 17(a) (part).)
Sec. 481.004. ACCESS TO DEPOSIT. In accordance with
reasonable rules adopted by the comptroller and the commissioner,
the proper officer of an insurer making a deposit as described by
this chapter may at a reasonable time:
(1) examine the deposit;
(2) detach coupons from the securities; and
(3) collect interest on the deposit. (V.T.I.C. Art.
1.10, Sec. 17(a) (part).)
Sec. 481.005. SITUS OF DEPOSIT FOR TAX PURPOSES. For
purposes of state, county, or municipal taxation, the situs of
deposited securities is the municipality and county in which the
principal business office of the insurer making the deposit is
fixed by the insurer's charter. (V.T.I.C. Art. 1.10, Sec. 17(a)
(part).)
Sec. 481.006. WITHDRAWAL OF DEPOSIT. (a) An insurer that
makes a deposit as described by this chapter may, at the insurer's
option, withdraw all or part of the deposit if:
(1) the insurer first deposits with the comptroller
other securities of like class as, and of an amount and value equal
to, the securities proposed to be withdrawn; and
(2) the withdrawal and substitution are approved by
the commissioner.
(b) An insurer, without making a substitute deposit under
Subsection (a), may not withdraw all or part of a deposit made as
described by this chapter for the protection of the insurer's
policyholders or creditors in a particular state, country, or
province that requires the deposit unless:
(1) the insurer files with the commissioner evidence
that satisfies the commissioner that the insurer has withdrawn from
business and does not have any unsecured liabilities outstanding or
potential policyholder liabilities or obligations in the other
state, country, or province; and
(2) the commissioner approves the withdrawal.
(c) An insurer, without making a substitute deposit under
Subsection (a), may not withdraw all or part of a deposit made as
described by this chapter for the protection of all of the insurer's
policyholders or creditors, wherever they are located, unless:
(1) the insurer files with the commissioner evidence
that satisfies the commissioner that the insurer does not have any
unsecured liabilities outstanding or potential policy liabilities
or obligations anywhere; and
(2) the commissioner approves the withdrawal.
(V.T.I.C. Art. 1.10, Sec. 17(a) (part).)
Sec. 481.007. WITHDRAWAL OF DEPOSIT AFTER MERGER,
CONSOLIDATION, OR TOTAL REINSURANCE. When two or more insurers
that have two or more deposits made for identical purposes as
described by this chapter or former Article 4739, Revised Statutes,
merge, consolidate, or enter into a total reinsurance contract by
which the ceding insurer is dissolved and the ceding insurer's
assets and liabilities are acquired or assumed by the surviving
insurer, the new, surviving, or reinsuring insurer may withdraw all
of the deposits, except for the deposit of the greatest amount and
value. The new, surviving, or reinsuring insurer must demonstrate
that the deposits are duplicated and that the insurer is the owner
of the deposits. (V.T.I.C. Art. 1.10, Sec. 17(c).)
Sec. 481.008. RETURN OF DEPOSIT. An insurer that has made
a deposit as described by this chapter or former Article 4739,
Revised Statutes, is entitled to a return of the deposit if the
insurer applies for the return of the deposit and demonstrates to
the commissioner that the deposit is no longer required under the
laws of any state, country, or province in which the insurer sought
or gained admission to engage in business based on a certificate of
the deposit. (V.T.I.C. Art. 1.10, Sec. 17(d).)
Sec. 481.009. DELIVERY OF DEPOSIT BY COMPTROLLER. On being
provided a certified copy of the commissioner's order issued under
Section 481.007 or 481.008, the comptroller shall release,
transfer, and deliver the deposit to the owner of the deposit in
accordance with the order. (V.T.I.C. Art. 1.10, Sec. 17(e).)
[Chapters 482-490 reserved for expansion]
SUBTITLE F. REINSURANCE
CHAPTER 491. GENERAL REINSURANCE REQUIREMENTS
SUBCHAPTER A. REINSURANCE
Sec. 491.001. INAPPLICABILITY OF SUBCHAPTER
Sec. 491.002. REINSURANCE PERMITTED
Sec. 491.003. RISK LIMITATION FOR DOMESTIC OR FOREIGN
INSURER
Sec. 491.004. RISK LIMITATION FOR ALIEN INSURER
Sec. 491.005. COMPLIANCE WITH OTHER LAW
[Sections 491.006-491.050 reserved for expansion]
SUBCHAPTER B. COMPUTATION OF REINSURANCE RESERVE
Sec. 491.051. COMPUTATION OF RESERVE FOR INSURER WITH
NO BASIS PRESCRIBED BY LAW
Sec. 491.052. COMPUTATION OF REINSURANCE RESERVES FOR
CERTAIN INSURERS
CHAPTER 491. GENERAL REINSURANCE REQUIREMENTS
SUBCHAPTER A. REINSURANCE
Sec. 491.001. INAPPLICABILITY OF SUBCHAPTER. This
subchapter does not apply to:
(1) life insurance;
(2) health insurance;
(3) annuity contracts;
(4) title insurance;
(5) workers' compensation insurance;
(6) employers' liability insurance coverage; or
(7) any policy or kind of coverage for which the
maximum possible loss to the insurer is not readily ascertainable
on the policy's issuance. (V.T.I.C. Art. 21.72, Sec. 3.)
Sec. 491.002. REINSURANCE PERMITTED. An insurer or
reinsurer authorized to engage in the business of insurance or
reinsurance in this state may reinsure all or part of a single risk
in another solvent insurer. (V.T.I.C. Art. 21.72, Sec. 2.)
Sec. 491.003. RISK LIMITATION FOR DOMESTIC OR FOREIGN
INSURER. An insurer incorporated under the laws of this state,
another state, or the United States and authorized to engage in
business in this state may not expose itself to a loss or hazard on a
single risk in an amount that exceeds 10 percent of the insurer's
surplus for policyholders unless the insurer reinsures the excess
in another solvent insurer. (V.T.I.C. Art. 21.72, Sec. 1(a).)
Sec. 491.004. RISK LIMITATION FOR ALIEN INSURER. An
insurer incorporated under the laws of a jurisdiction other than
this state, another state, or the United States and authorized to
engage in business in this state may not, unless the insurer
reinsures the excess in another solvent insurer, expose itself to a
loss or hazard on a single risk in an amount that exceeds the sum of:
(1) 10 percent of the insurer's deposit with the
statutory officer in the state through which the insurer is
authorized to engage in business in the United States; and
(2) 10 percent of the other surplus for policyholders
of the insurer's United States branch. (V.T.I.C. Art. 21.72, Sec.
1(b).)
Sec. 491.005. COMPLIANCE WITH OTHER LAW. Reinsurance that
is required or permitted by this subchapter must comply with
Chapter 493. (V.T.I.C. Art. 21.72, Sec. 4.)
[Sections 491.006-491.050 reserved for expansion]
SUBCHAPTER B. COMPUTATION OF REINSURANCE RESERVE
Sec. 491.051. COMPUTATION OF RESERVE FOR INSURER WITH NO
BASIS PRESCRIBED BY LAW. For an insurer engaged in the business of
a kind of insurance in this state, for which no basis is prescribed
by law, the department shall compute the reinsurance reserve on the
basis prescribed by Section 862.102 for an insurer writing fire
insurance. (V.T.I.C. Art. 1.10, Sec. 3.)
Sec. 491.052. COMPUTATION OF REINSURANCE RESERVES FOR
CERTAIN INSURERS. (a) On December 31 of each year, or as soon as
practicable after that date, the department shall, in accordance
with Section 491.051, compute the reinsurance reserve for all
unexpired risks of each insurer organized under the laws of this
state or engaged in the business of insurance in this state.
(b) This section does not apply to:
(1) life insurance;
(2) fire insurance;
(3) marine insurance;
(4) inland marine insurance;
(5) lightning insurance; or
(6) tornado insurance. (V.T.I.C. Art. 1.10, Sec. 4.)
CHAPTER 492. REINSURANCE FOR LIFE, HEALTH, AND ACCIDENT INSURANCE
COMPANIES AND RELATED ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 492.001. DEFINITIONS
Sec. 492.002. APPLICABILITY OF CHAPTER
Sec. 492.003. RULES
[Sections 492.004-492.050 reserved for expansion]
SUBCHAPTER B. REINSURANCE
Sec. 492.051. REINSURANCE AUTHORIZED
Sec. 492.052. LIMITATION ON REINSURANCE OF ENTIRE
OUTSTANDING BUSINESS
Sec. 492.053. LIMITATION ON REINSURANCE OF RISKS OF
INSURER WITH LESS THAN MINIMUM CAPITAL
AND SURPLUS
Sec. 492.054. FILING OF REINSURANCE SCHEDULES
Sec. 492.055. ACCOUNTING FOR REINSURANCE CONTRACTS
Sec. 492.056. LIMITATION ON RIGHTS AGAINST REINSURER
[Sections 492.057-492.100 reserved for expansion]
SUBCHAPTER C. CREDIT FOR REINSURANCE
Sec. 492.101. EXCLUSIVE PROCEDURE FOR TAKING CREDIT
FOR REINSURANCE
Sec. 492.102. CREDIT FOR REINSURANCE GENERALLY
Sec. 492.103. ACCREDITED REINSURER
Sec. 492.104. CREDIT FOR FUNDS SECURING REINSURANCE
OBLIGATIONS
Sec. 492.105. ACCEPTABILITY OF CERTAIN LETTERS OF
CREDIT
Sec. 492.106. CREDIT FOR REINSURANCE: DIRECT PAYMENT
ON LIABILITY REQUIRED
Sec. 492.107. REQUEST FOR INFORMATION FROM ASSUMING
INSURER
[Sections 492.108-492.150 reserved for expansion]
SUBCHAPTER D. REQUIREMENTS FOR TRUST CREDIT ALLOWANCE
Sec. 492.151. APPLICABILITY OF SUBCHAPTER
Sec. 492.152. COMPOSITION OF TRUST
Sec. 492.153. FORM OF TRUST
Sec. 492.154. TERMS OF TRUST
Sec. 492.155. REPORTS AND CERTIFICATION
Sec. 492.156. CERTAIN TRUSTEED ASSUMING INSURERS:
REQUIREMENTS FOR REINSURANCE CONTRACT
Sec. 492.157. EXAMINATION OF TRUST AND ASSUMING
INSURER
CHAPTER 492. REINSURANCE FOR LIFE, HEALTH, AND ACCIDENT INSURANCE
COMPANIES AND RELATED ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 492.001. DEFINITIONS. In this chapter:
(1) "Assuming insurer" means an insurer that, under a
reinsurance contract, incurs an obligation to a ceding insurer, the
performance of which is contingent on the ceding insurer's
incurring liability or loss under the ceding insurer's insurance
contract with a third person.
(2) "Qualified United States financial institution"
means an institution that:
(A) is organized or, in the case of a United
States branch or agency office of a foreign banking organization,
licensed, under the laws of the United States or any state of the
United States; and
(B) is regulated, supervised, and examined by a
federal or state authority that has regulatory authority over banks
and trust companies. (V.T.I.C. Art. 3.10, Secs. (e) (part), (k).)
Sec. 492.002. APPLICABILITY OF CHAPTER. (a) Except as
provided by Subsection (b), this chapter applies to:
(1) all life, health, and accident insurance companies
regulated by the department, including:
(A) a stock or mutual life, health, or accident
insurance company;
(B) a fraternal benefit society; and
(C) a nonprofit hospital, medical, or dental
service corporation, including a group hospital service
corporation operating under Chapter 842; and
(2) a health maintenance organization operating under
Chapter 843.
(b) This chapter does not apply to a ceding insurer
domiciled in another state that regulates credit for reinsurance
under statutes, rules, or regulations substantially similar in
substance or effect to this chapter if the ceding insurer on request
provides the commissioner with:
(1) evidence of the similarity in the form of those
statutes, rules, or regulations; and
(2) an interpretation of the statutes, rules, or
regulations and the standards used by the state of domicile.
(V.T.I.C. Art. 3.10, Sec. (a) (part).)
Sec. 492.003. RULES. The commissioner may adopt rules
implementing this chapter. (V.T.I.C. Art. 3.10, Sec. (f).)
[Sections 492.004-492.050 reserved for expansion]
SUBCHAPTER B. REINSURANCE
Sec. 492.051. REINSURANCE AUTHORIZED. (a) An insurer
authorized to engage in the business of insurance in this state may
reinsure in any solvent assuming insurer any risk or part of a risk
that both insurers are authorized to assume.
(b) A life insurance company authorized to engage in
business in this state may provide reinsurance on the same basis as
an insurer described by Section 493.051(b).
(c) The commissioner may adopt necessary and reasonable
rules under Subsection (b) to protect the public interest.
(V.T.I.C. Art. 3.10, Sec. (a) (part); Art. 5.75-1, Secs. (l), (m).)
Sec. 492.052. LIMITATION ON REINSURANCE OF ENTIRE
OUTSTANDING BUSINESS. (a) An insurer may not reinsure the
insurer's entire outstanding business in an assuming insurer unless
the assuming insurer is authorized to engage in the business of
insurance in this state.
(b) Before the date of reinsurance:
(1) the reinsurance contract must be submitted to the
commissioner; and
(2) the commissioner must approve the contract as
fully protecting the interests of all policyholders. (V.T.I.C.
Art. 3.10, Sec. (a) (part).)
Sec. 492.053. LIMITATION ON REINSURANCE OF RISKS OF INSURER
WITH LESS THAN MINIMUM CAPITAL AND SURPLUS. An insurer operating
under Section 841.204 may not reinsure any risk or part of a risk in
an insurer that is not authorized to engage in the business of
insurance in this state. (V.T.I.C. Art. 3.10, Sec. (a) (part).)
Sec. 492.054. FILING OF REINSURANCE SCHEDULES. The
commissioner shall require each insurer to file reinsurance
schedules:
(1) when the insurer makes the insurer's annual
report; and
(2) at other times as the commissioner directs.
(V.T.I.C. Art. 3.10, Sec. (i).)
Sec. 492.055. ACCOUNTING FOR REINSURANCE CONTRACTS. (a)
An insurer shall account for reinsurance contracts and shall record
the contracts in the insurer's financial statements in a manner
that accurately reflects the effect of the contracts on the
insurer's financial condition.
(b) A reinsurance contract may contain a provision allowing
the offset of mutual debts and credits between the ceding insurer
and the assuming insurer, whether arising out of one or more
reinsurance contracts.
(c) The commissioner may adopt reasonable rules relating
to:
(1) the accounting and financial statement
requirements of this section and the treatment of reinsurance
contracts between insurers, including minimum risk transfer
standards, asset debits or credits, reinsurance debits or credits,
and reserve debits or credits relating to the transfer of all or any
part of an insurer's risks or liabilities by reinsurance contracts;
and
(2) any contingencies arising from reinsurance
contracts.
(d) A rule adopted under Subsection (c) after September 1,
1995, applies to:
(1) a reinsurance contract entered into on or after
the effective date of the rule; and
(2) a reinsurance contract that is amended on or after
the effective date of the rule. (V.T.I.C. Art. 3.10, Sec. (l).)
Sec. 492.056. LIMITATION ON RIGHTS AGAINST REINSURER. A
person does not have a right against a reinsurer that is not
specifically stated in:
(1) the reinsurance contract; or
(2) a specific agreement between the reinsurer and the
person. (V.T.I.C. Art. 3.10, Sec. (h).)
[Sections 492.057-492.100 reserved for expansion]
SUBCHAPTER C. CREDIT FOR REINSURANCE
Sec. 492.101. EXCLUSIVE PROCEDURE FOR TAKING CREDIT FOR
REINSURANCE. A ceding insurer may take a credit for reinsurance, as
an asset or as a deduction from liability, only as provided by this
chapter. (V.T.I.C. Art. 3.10, Sec. (a) (part).)
Sec. 492.102. CREDIT FOR REINSURANCE GENERALLY. (a) A
ceding insurer may be allowed credit for reinsurance ceded, as an
asset or as a deduction from liability, only if the reinsurance is
ceded to an assuming insurer that:
(1) is authorized to engage in the business of
insurance or reinsurance in this state;
(2) is accredited as a reinsurer in this state, as
provided by Section 492.103; or
(3) subject to Subchapter D, maintains, in a qualified
United States financial institution that has been granted the
authority to operate with fiduciary powers, a trust fund to pay
valid claims of:
(A) the assuming insurer's United States
policyholders and ceding insurers; and
(B) the policyholders' and ceding insurers'
assigns and successors in interest.
(b) Notwithstanding Subsection (a), a ceding insurer may be
allowed credit for reinsurance ceded to an assuming insurer that
does not meet the requirements of that subsection, but only with
respect to the insurance of risks located in a jurisdiction in which
the reinsurance is required by the jurisdiction's law, including
regulations, to be ceded to an assuming insurer that does not meet
the requirements of that subsection. (V.T.I.C. Art. 3.10, Secs.
(b) (part), (e) (part).)
Sec. 492.103. ACCREDITED REINSURER. For purposes of
Section 492.102(a)(2), an insurer is accredited as a reinsurer in
this state if the insurer:
(1) submits to this state's jurisdiction;
(2) submits to this state's authority to examine the
insurer's books and records;
(3) is domiciled and authorized to engage in the
business of insurance or reinsurance in at least one state or, if
the insurer is a United States branch of an alien assuming insurer,
is entered through and authorized to engage in the business of
insurance or reinsurance in at least one state;
(4) annually files with the department a copy of the
annual statement the insurer files with the insurance department of
the insurer's state of domicile; and
(5) maintains a surplus as regards policyholders in an
amount of at least $20 million. (V.T.I.C. Art. 3.10, Sec. (b)
(part).)
Sec. 492.104. CREDIT FOR FUNDS SECURING REINSURANCE
OBLIGATIONS. (a) Subject to Subsection (b), any asset or deduction
from liability for reinsurance ceded to an assuming insurer that
does not meet the requirements of Section 492.102 shall be allowed
in an amount that does not exceed the liabilities carried by the
ceding insurer and in the amount of funds held by or on behalf of the
ceding insurer under a reinsurance contract with the assuming
insurer, including funds held in trust for the ceding insurer, as
security for the payment of obligations under the contract.
(b) The funds held as security:
(1) must be held in the United States subject to
withdrawal solely by and under the exclusive control of the ceding
insurer or, in the case of a trust, held in a qualified United
States financial institution that has been granted the authority to
operate with fiduciary powers; and
(2) may be in the form of:
(A) cash;
(B) securities that:
(i) are readily marketable over a national
exchange;
(ii) have a maturity date of not later than
one year;
(iii) are listed by the Securities
Valuation Office of the National Association of Insurance
Commissioners; and
(iv) qualify as admitted assets;
(C) subject to Section 492.105, a clean,
irrevocable, unconditional letter of credit, issued or confirmed by
a qualified United States financial institution that has been
determined by the commissioner or the Securities Valuation Office
of the National Association of Insurance Commissioners to meet the
standards of financial condition and standing that are considered
necessary and appropriate to regulate the quality of financial
institutions whose letters of credit will be acceptable to the
commissioner; or
(D) another form of security acceptable to the
commissioner. (V.T.I.C. Art. 3.10, Secs. (d) (part), (e) (part).)
Sec. 492.105. ACCEPTABILITY OF CERTAIN LETTERS OF CREDIT.
A letter of credit issued or confirmed by an institution that meets
the standards prescribed by Section 492.104(b)(2)(C) as of the date
the letter is issued or confirmed, but later fails to meet those
standards, continues to be acceptable as security under Section
492.104 until the earliest of:
(1) the letter's expiration;
(2) the letter's extension, renewal, modification, or
amendment after the date the institution fails to meet those
standards; or
(3) the expiration of the three-month period after the
date the institution fails to meet those standards. (V.T.I.C.
Art. 3.10, Sec. (d) (part).)
Sec. 492.106. CREDIT FOR REINSURANCE: DIRECT PAYMENT ON
LIABILITY REQUIRED. A ceding insurer may not be given credit for
reinsurance ceded, as an asset or as a deduction from liability, in
an accounting or financial statement unless the reinsurance is
payable by the assuming insurer:
(1) on the liability of the ceding insurer under the
contracts reinsured, without diminution because of the ceding
insurer's insolvency; and
(2) directly to the ceding insurer or to the ceding
insurer's domiciliary liquidator or receiver. (V.T.I.C.
Art. 3.10, Sec. (j).)
Sec. 492.107. REQUEST FOR INFORMATION FROM ASSUMING
INSURER. (a) The commissioner may request that an assuming insurer
not meeting the requirements of Section 492.102 file:
(1) financial statements certified and audited by an
independent certified public accountant;
(2) a certified copy of the certificate or letter of
authority from the domiciliary jurisdiction; and
(3) information on the principals and management of
the assuming insurer.
(b) If an assuming insurer does not comply with a request
under this section, the commissioner may issue a directive
prohibiting all authorized insurers from taking credit for business
ceded to the assuming insurer after the effective date of the
directive.
(c) An unauthorized insurer that is included in the most
recent quarterly listing published by the International Insurers
Department of the National Association of Insurance Commissioners
is considered to have complied with a request under this section.
(V.T.I.C. Art. 3.10, Sec. (m).)
[Sections 492.108-492.150 reserved for expansion]
SUBCHAPTER D. REQUIREMENTS FOR TRUST CREDIT ALLOWANCE
Sec. 492.151. APPLICABILITY OF SUBCHAPTER. This subchapter
applies to a trust that is used to qualify for a reinsurance credit
under Section 492.102(a)(3) and to the assuming insurer that
maintains the trust fund. (New.)
Sec. 492.152. COMPOSITION OF TRUST. (a) If the assuming
insurer is a single insurer, the trust must:
(1) consist of a trusteed account representing the
assuming insurer's liabilities attributable to business written in
the United States; and
(2) include a trusteed surplus of at least $20
million.
(b) If the assuming insurer is a group of insurers that
includes an unincorporated individual insurer:
(1) the trust must:
(A) consist of a trusteed account representing
the group's liabilities attributable to business written in the
United States; and
(B) include a trusteed surplus of at least $100
million; and
(2) the group shall make available to the department
an annual certification by the group's domiciliary regulator and
its independent public accountants of each underwriter's solvency.
(V.T.I.C. Art. 3.10, Sec. (b) (part).)
Sec. 492.153. FORM OF TRUST. The trust must be established
in a form approved by the commissioner. (V.T.I.C. Art. 3.10, Sec.
(b) (part).)
Sec. 492.154. TERMS OF TRUST. (a) The trust instrument
must provide that contested claims are valid and enforceable on the
final order of any court in the United States.
(b) The trust must vest legal title to the trust's assets in
the trustees of the trust for:
(1) the trust's United States policyholders and ceding
insurers; and
(2) the policyholders' and ceding insurers' assigns
and successors in interest.
(c) The trust must remain in effect as long as the assuming
insurer has outstanding obligations under a reinsurance contract
subject to the trust. (V.T.I.C. Art. 3.10, Sec. (b) (part).)
Sec. 492.155. REPORTS AND CERTIFICATION. (a) Not later
than February 28 of each year, the trustees of the trust shall:
(1) report to the department in writing, showing the
balance of the trust and listing the trust's investments at the end
of the preceding year; and
(2) certify the date of termination of the trust, if
termination is planned, or certify that the trust will not expire
before December 31 of the year of the report.
(b) To enable the commissioner to determine the sufficiency
of the trust fund under Section 492.102(a)(3), the assuming insurer
shall report to the department not later than March 1 of each year
information substantially the same as the information required to
be reported by an authorized insurer on the National Association of
Insurance Commissioners' Annual Statement form. (V.T.I.C. Art.
3.10, Sec. (b) (part).)
Sec. 492.156. CERTAIN TRUSTEED ASSUMING INSURERS:
REQUIREMENTS FOR REINSURANCE CONTRACT. (a) A ceding insurer may
not be allowed credit under Section 492.102(a)(3) for reinsurance
ceded to an assuming insurer that is not authorized or accredited to
engage in the business of insurance or reinsurance in this state
unless the assuming insurer agrees in the reinsurance contract:
(1) that, if the assuming insurer fails to perform the
assuming insurer's obligations under the reinsurance contract, the
assuming insurer, at the request of the ceding insurer, will:
(A) submit to the jurisdiction of a court in any
state of the United States;
(B) comply with all requirements necessary to
give the court jurisdiction; and
(C) abide by the final decision of that court or,
if the court's decision is appealed, of the appellate court; and
(2) to designate the commissioner or an attorney as an
agent for service of process in any action, suit, or proceeding
instituted by or on behalf of the ceding insurer.
(b) This section is not intended to conflict with or
override a provision in a reinsurance contract that requires the
parties to arbitrate the parties' disputes. (V.T.I.C. Art. 3.10,
Sec. (c).)
Sec. 492.157. EXAMINATION OF TRUST AND ASSUMING INSURER.
The trust and the assuming insurer are subject to examination as
determined by the commissioner. (V.T.I.C. Art. 3.10, Sec. (b) (part).)
CHAPTER 493. REINSURANCE FOR PROPERTY AND
CASUALTY INSURERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 493.001. DEFINITIONS
Sec. 493.002. APPLICABILITY OF CHAPTER
Sec. 493.003. RULES
[Sections 493.004-493.050 reserved for expansion]
SUBCHAPTER B. REINSURANCE
Sec. 493.051. REINSURANCE AUTHORIZED
Sec. 493.052. LIMITATION ON REINSURANCE OF ENTIRE
OUTSTANDING BUSINESS
Sec. 493.053. FILING OF REINSURANCE SCHEDULES
Sec. 493.054. ACCOUNTING FOR REINSURANCE CONTRACTS
Sec. 493.055. LIMITATION ON RIGHTS AGAINST REINSURER
[Sections 493.056-493.100 reserved for expansion]
SUBCHAPTER C. CREDIT FOR REINSURANCE
Sec. 493.101. EXCLUSIVE PROCEDURE FOR TAKING CREDIT
FOR REINSURANCE
Sec. 493.102. CREDIT FOR REINSURANCE GENERALLY
Sec. 493.103. ACCREDITED REINSURER
Sec. 493.104. CREDIT FOR FUNDS SECURING REINSURANCE
OBLIGATIONS
Sec. 493.105. ACCEPTABILITY OF CERTAIN LETTERS OF
CREDIT
Sec. 493.106. CREDIT FOR REINSURANCE: DIRECT PAYMENT
ON LIABILITY REQUIRED
Sec. 493.107. REQUEST FOR INFORMATION FROM ASSUMING
INSURER
[Sections 493.108-493.150 reserved for expansion]
SUBCHAPTER D. REQUIREMENTS FOR TRUST CREDIT ALLOWANCE
Sec. 493.151. APPLICABILITY OF SUBCHAPTER
Sec. 493.152. COMPOSITION OF TRUST
Sec. 493.153. FORM OF TRUST
Sec. 493.154. TERMS OF TRUST
Sec. 493.155. REPORTS AND CERTIFICATION
Sec. 493.156. CERTAIN TRUSTEED ASSUMING INSURERS:
REQUIREMENTS FOR REINSURANCE CONTRACT
Sec. 493.157. EXAMINATION OF TRUST AND ASSUMING
INSURER
CHAPTER 493. REINSURANCE FOR PROPERTY AND
CASUALTY INSURERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 493.001. DEFINITIONS. In this chapter:
(1) "Assuming insurer" means an insurer that, under a
reinsurance contract, incurs an obligation to a ceding insurer, the
performance of which is contingent on the ceding insurer incurring
liability or loss under the ceding insurer's insurance contract
with a third person.
(2) "Qualified United States financial institution"
means an institution that:
(A) is organized or, in the case of a United
States branch or agency office of a foreign banking organization,
licensed, under the laws of the United States or any state of the
United States; and
(B) is regulated, supervised, and examined by a
federal or state authority that has regulatory authority over banks
and trust companies. (V.T.I.C. Art. 5.75-1, Secs. (e)(1) (part),
(2) (part), (j).)
Sec. 493.002. APPLICABILITY OF CHAPTER. (a) Except as
provided by Subsection (b), this chapter applies to all insurers,
including:
(1) a stock or mutual property and casualty insurance
company;
(2) a Mexican casualty insurance company;
(3) a Lloyd's plan;
(4) a reciprocal or interinsurance exchange;
(5) a nonprofit legal service corporation;
(6) a county mutual insurance company;
(7) a farm mutual insurance company;
(8) a risk retention group; and
(9) any insurer writing a line of insurance regulated
by Title 10.
(b) This chapter does not apply to a ceding insurer
domiciled in another state that regulates credit for reinsurance
under statutes, rules, or regulations substantially similar in
substance and effect to this chapter if the ceding insurer on
request provides the commissioner with:
(1) evidence of the similarity in the form of those
statutes, rules, or regulations; and
(2) an interpretation of the standards used by the
state of domicile. (V.T.I.C. Art. 5.75-1, Sec. (a) (part).)
Sec. 493.003. RULES. The commissioner may adopt necessary
and reasonable rules under this chapter to protect the public
interest. (V.T.I.C. Art. 5.75-1, Sec. (m).)
[Sections 493.004-493.050 reserved for expansion]
SUBCHAPTER B. REINSURANCE
Sec. 493.051. REINSURANCE AUTHORIZED. (a) An insurer
authorized to engage in the business of insurance in this state may
reinsure, in any solvent assuming insurer, any risk or part of a
risk that both insurers are authorized by law to assume.
(b) An insurer authorized to engage in business in this
state that writes any line of insurance regulated by Title 10 may
provide reinsurance under this chapter while the insurer is in
compliance with law. (V.T.I.C. Art. 5.75-1, Secs. (a) (part),
(k).)
Sec. 493.052. LIMITATION ON REINSURANCE OF ENTIRE
OUTSTANDING BUSINESS. (a) An insurer may not reinsure the
insurer's entire outstanding business in an assuming insurer unless
the assuming insurer is authorized to engage in the business of
insurance in this state.
(b) Before the date of reinsurance:
(1) the reinsurance contract must be submitted to the
commissioner; and
(2) the commissioner must approve the contract as
fully protecting the interests of all policyholders. (V.T.I.C.
Art. 5.75-1, Sec. (a) (part).)
Sec. 493.053. FILING OF REINSURANCE SCHEDULES. The
commissioner shall require each insurer to file reinsurance
schedules:
(1) when the insurer makes the insurer's annual
report; and
(2) at other times as the commissioner directs.
(V.T.I.C. Art. 5.75-1, Sec. (h).)
Sec. 493.054. ACCOUNTING FOR REINSURANCE CONTRACTS. (a)
An insurer shall account for reinsurance contracts and shall record
the contracts in the insurer's financial statements in a manner
that accurately reflects the effect of the contracts on the
insurer's financial condition.
(b) A reinsurance contract may contain a provision allowing
the offset of mutual debts and credits between the ceding insurer
and the assuming insurer, whether arising out of one or more
reinsurance contracts.
(c) The commissioner may adopt reasonable rules relating
to:
(1) the accounting and financial statement
requirements of this section and the treatment of reinsurance
contracts between insurers, including minimum risk transfer
standards, asset debits or credits, reinsurance debits or credits,
and reserve debits or credits relating to the transfer of all or any
part of an insurer's risks or liabilities by reinsurance contracts;
and
(2) any contingencies arising from reinsurance
contracts. (V.T.I.C. Art. 5.75-1, Sec. (n).)
Sec. 493.055. LIMITATION ON RIGHTS AGAINST REINSURER. A
person does not have a right against a reinsurer that is not
specifically stated in:
(1) the reinsurance contract; or
(2) a specific agreement between the reinsurer and the
person. (V.T.I.C. Art. 5.75-1, Sec. (g).)
[Sections 493.056-493.100 reserved for expansion]
SUBCHAPTER C. CREDIT FOR REINSURANCE
Sec. 493.101. EXCLUSIVE PROCEDURE FOR TAKING CREDIT FOR
REINSURANCE. A ceding insurer may take a credit for reinsurance,
as an asset or as a deduction from liability, only as provided by
this chapter. (V.T.I.C. Art. 5.75-1, Sec. (a) (part).)
Sec. 493.102. CREDIT FOR REINSURANCE GENERALLY. (a) A
ceding insurer may be allowed credit for reinsurance ceded, as an
asset or as a deduction from liability, only if the reinsurance is
ceded to an assuming insurer that:
(1) is authorized to engage in the business of
insurance or reinsurance in this state;
(2) is accredited as a reinsurer in this state, as
provided by Section 493.103; or
(3) subject to Subchapter D, maintains, in a qualified
United States financial institution that has been granted the
authority to operate with fiduciary powers, a trust fund to pay
valid claims of:
(A) the assuming insurer's United States
policyholders and ceding insurers; and
(B) the policyholders' and ceding insurers'
assigns and successors in interest.
(b) Notwithstanding Subsection (a), a ceding insurer may be
allowed credit for reinsurance ceded to an assuming insurer that
does not meet the requirements of that subsection, but only with
respect to the insurance of risks located in a jurisdiction in which
the reinsurance is required by the jurisdiction's law, including
regulations, to be ceded to an assuming insurer that does not meet
the requirements of that subsection. (V.T.I.C. Art. 5.75-1, Secs.
(b) (part), (e)(2) (part).)
Sec. 493.103. ACCREDITED REINSURER. For purposes of
Section 493.102(a)(2), an insurer is accredited as a reinsurer in
this state if the insurer:
(1) submits to this state's jurisdiction;
(2) submits to this state's authority to examine the
insurer's books and records;
(3) is domiciled and authorized to engage in the
business of insurance or reinsurance in at least one state or, if
the insurer is a United States branch of an alien assuming insurer,
is entered through and authorized to engage in the business of
insurance or reinsurance in at least one state;
(4) annually files with the department a copy of the
annual statement the insurer files with the insurance department of
the insurer's state of domicile; and
(5) maintains a surplus as regards policyholders in an
amount of at least $20 million. (V.T.I.C. Art. 5.75-1, Sec. (b)
(part).)
Sec. 493.104. CREDIT FOR FUNDS SECURING REINSURANCE
OBLIGATIONS. (a) Subject to Subsection (b), any asset or deduction
from liability for reinsurance ceded to an assuming insurer that
does not meet the requirements of Section 493.102 shall be allowed
in an amount that does not exceed the liabilities carried by the
ceding insurer and in the amount of funds held by or on behalf of the
ceding insurer under a reinsurance contract with the assuming
insurer, including funds held in trust for the ceding insurer, as
security for the payment of obligations under the contract.
(b) The funds held as security:
(1) must be held in the United States subject to
withdrawal solely by and under the exclusive control of the ceding
insurer or, in the case of a trust, held in a qualified United
States financial institution that has been granted the authority to
operate with fiduciary powers; and
(2) may be in the form of:
(A) cash;
(B) securities that:
(i) are readily marketable over a national
exchange;
(ii) have a maturity date of not later than
one year;
(iii) are listed by the Securities
Valuation Office of the National Association of Insurance
Commissioners; and
(iv) qualify as admitted assets;
(C) subject to Section 493.105, a clean,
irrevocable, unconditional letter of credit, issued or confirmed by
a qualified United States financial institution that has been
determined by the commissioner or the Securities Valuation Office
of the National Association of Insurance Commissioners to meet the
standards of financial condition and standing that are considered
necessary and appropriate to regulate the quality of financial
institutions whose letters of credit will be acceptable to the
commissioner; or
(D) another form of security acceptable to the
commissioner. (V.T.I.C. Art. 5.75-1, Secs. (d) (part), (e)(1)
(part).)
Sec. 493.105. ACCEPTABILITY OF CERTAIN LETTERS OF
CREDIT. A letter of credit issued or confirmed by an institution
that meets the standards prescribed by Section 493.104(b)(2)(C) as
of the date the letter is issued or confirmed, but later fails to
meet those standards, continues to be acceptable as security under
Section 493.104 until the earliest of:
(1) the letter's expiration;
(2) the letter's extension, renewal, modification, or
amendment after the date the institution fails to meet those
standards; or
(3) the expiration of the three-month period after the
date the institution fails to meet those standards. (V.T.I.C. Art.
5.75-1, Sec. (d) (part).)
Sec. 493.106. CREDIT FOR REINSURANCE: DIRECT PAYMENT ON
LIABILITY REQUIRED. (a) A ceding insurer may not be given credit
for reinsurance ceded, as an asset or as a deduction from liability,
in an accounting or financial statement unless the reinsurance is
payable by the assuming insurer:
(1) on the liability of the ceding insurer under the
contracts reinsured, without diminution because of the ceding
insurer's insolvency; and
(2) directly to the ceding insurer or to the ceding
insurer's domiciliary liquidator or receiver.
(b) Subsection (a)(2) does not apply if:
(1) the reinsurance contract specifically provides
that, if the ceding insurer is insolvent, the reinsurance is
payable to a payee other than one described by Subsection (a)(2); or
(2) the assuming insurer, with the direct insured's
consent, has assumed the ceding insurer's policy obligations to the
payee as the assuming insurer's direct obligations to the payee
under the policy as a substitute for the ceding insurer's
obligations. (V.T.I.C. Art. 5.75-1, Sec. (i).)
Sec. 493.107. REQUEST FOR INFORMATION FROM ASSUMING
INSURER. (a) The commissioner may request that an assuming
insurer not meeting the requirements of Section 493.102 file:
(1) financial statements certified and audited by an
independent certified public accountant;
(2) a certified copy of the certificate or letter of
authority from the domiciliary jurisdiction; and
(3) information on the principals and management of
the assuming insurer.
(b) If an assuming insurer does not comply with a request
under this section, the commissioner may issue a directive
prohibiting all authorized insurers from taking credit for business
ceded to the assuming insurer after the effective date of the
directive.
(c) An unauthorized insurer that is included in the most
recent quarterly listing published by the International Insurers
Department of the National Association of Insurance Commissioners
is considered to have complied with a request under this section.
(V.T.I.C. Art. 5.75-1, Sec. (o).)
[Sections 493.108-493.150 reserved for expansion]
SUBCHAPTER D. REQUIREMENTS FOR TRUST CREDIT ALLOWANCE
Sec. 493.151. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to a trust that is used to qualify for a
reinsurance credit under Section 493.102(a)(3) and to the assuming
insurer that maintains the trust fund. (New.)
Sec. 493.152. COMPOSITION OF TRUST. (a) If the assuming
insurer is a single insurer, the trust must:
(1) consist of a trusteed account representing the
assuming insurer's liabilities attributable to business written in
the United States; and
(2) include a trusteed surplus of at least $20
million.
(b) If the assuming insurer is a group of insurers that
includes an unincorporated individual insurer:
(1) the trust must:
(A) consist of a trusteed account representing
the group's liabilities attributable to business written in the
United States; and
(B) include a trusteed surplus of at least $100
million; and
(2) the group shall make available to the department
an annual certification by the group's domiciliary regulator and
its independent public accountants of each underwriter's solvency.
(c) If the assuming insurer is a group of incorporated
insurers under common administration that has continuously engaged
in the business of insurance for at least three years, is under the
supervision of the Department of Trade and Industry of the United
Kingdom, and has an aggregate policyholders' surplus of $10
billion:
(1) the trust must:
(A) consist of a trusteed account representing
the group's several liabilities attributable to business written in
the United States under reinsurance contracts issued in the name of
the group; and
(B) include a trusteed surplus of not less than
$100 million held jointly for the benefit of United States insurers
that have ceded business to any member of the group; and
(2) each member of the group shall make available to
the department an annual certification by the member's domiciliary
regulator and its independent public accountants of each member's
solvency. (V.T.I.C. Art. 5.75-1, Sec. (b) (part).)
Sec. 493.153. FORM OF TRUST. The trust must be established
in a form approved by the commissioner. (V.T.I.C. Art. 5.75-1, Sec.
(b) (part).)
Sec. 493.154. TERMS OF TRUST. (a) The trust instrument
must provide that contested claims are valid and enforceable on the
final order of any court in the United States.
(b) The trust must vest legal title to the trust's assets in
the trustees of the trust for:
(1) the trust's United States policyholders and ceding
insurers; and
(2) the policyholders' and ceding insurers' assigns
and successors in interest.
(c) The trust must remain in effect as long as the assuming
insurer has outstanding obligations under a reinsurance contract
subject to the trust. (V.T.I.C. Art. 5.75-1, Sec. (b) (part).)
Sec. 493.155. REPORTS AND CERTIFICATION. (a) Not later
than February 28 of each year, the trustees of the trust shall:
(1) report to the department in writing, showing the
balance of the trust and listing the trust's investments at the end
of the preceding year; and
(2) certify the date of termination of the trust, if
termination is planned, or certify that the trust will not expire
before December 31 of the year of the report.
(b) To enable the commissioner to determine the sufficiency
of the trust fund under Section 493.102(a)(3), the assuming insurer
shall report to the department not later than March 1 of each year
information substantially the same as the information required to
be reported by an authorized insurer on the National Association of
Insurance Commissioners' Annual Statement form. (V.T.I.C.
Art. 5.75-1, Sec. (b) (part).)
Sec. 493.156. CERTAIN TRUSTEED ASSUMING INSURERS:
REQUIREMENTS FOR REINSURANCE CONTRACT. (a) A ceding insurer may
not be allowed credit under Section 493.102(a)(3) for reinsurance
ceded to an assuming insurer that is not authorized or accredited to
engage in the business of insurance or reinsurance in this state
unless the assuming insurer agrees in the reinsurance contract:
(1) that, if the assuming insurer fails to perform the
assuming insurer's obligations under the reinsurance contract, the
assuming insurer, at the request of the ceding insurer, will:
(A) submit to the jurisdiction of a court in any
state of the United States;
(B) comply with all requirements necessary to
give the court jurisdiction; and
(C) abide by the final decision of that court or,
if the court's decision is appealed, of the appellate court; and
(2) to designate the commissioner or an attorney as an
agent for service of process in any action, suit, or proceeding
instituted by or on behalf of the ceding insurer.
(b) This section is not intended to conflict with or
override a provision in a reinsurance contract that requires the
parties to arbitrate the parties' disputes. (V.T.I.C. Art. 5.75-1,
Sec. (c).)
Sec. 493.157. EXAMINATION OF TRUST AND ASSUMING
INSURER. The trust and the assuming insurer are subject to
examination as determined by the commissioner. (V.T.I.C. Art. 5.75-1, Sec. (b) (part).)
CHAPTER 494. REINSURANCE OF AIRCRAFT AND SPACE EQUIPMENT RISKS
Sec. 494.001. DEFINITIONS
Sec. 494.002. AUTHORITY TO REINSURE
Sec. 494.003. REQUIREMENT FOR CEDING INSURER
CHAPTER 494. REINSURANCE OF AIRCRAFT AND SPACE EQUIPMENT RISKS
Sec. 494.001. DEFINITIONS. In this chapter:
(1) "Aircraft" means an object that is capable of:
(A) moving through the atmosphere, regardless of
whether the object is powered or tethered; and
(B) lifting the weight of the object and an
additional payload.
(2) "Space equipment" means a spacecraft, satellite,
rocket, or other manmade object that may be:
(A) launched from earth into orbit around a
celestial body or for space travel; or
(B) placed into orbit around a celestial body.
(V.T.I.C. Art. 5.75-3, Sec. (a).)
Sec. 494.002. AUTHORITY TO REINSURE. (a) A domestic
insurance company as defined by Section 841.001, alone or together
with another insurer, may reinsure any liability, property,
casualty, collision, personal injury, death, or other risk relating
to, arising from, or incident to the manufacture, ownership,
custody, or operation of an aircraft or any space equipment,
subject to any just and reasonable limitation imposed by the
commissioner.
(b) A limitation imposed by the commissioner must be
consistent with the purposes of this chapter. (V.T.I.C.
Art. 5.75-3, Sec. (b).)
Sec. 494.003. REQUIREMENT FOR CEDING INSURER. To enter
into a reinsurance agreement under this chapter, the ceding insurer
must be authorized to engage in business in this state. (V.T.I.C.
Art. 5.75-3, Sec. (c).)
SECTION 2. TITLE 10, INSURANCE CODE. The Insurance Code is
amended by adding Title 10 to read as follows:
TITLE 10. PROPERTY AND CASUALTY INSURANCE
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 1801. PROPERTY AND CASUALTY INSURANCE LEGISLATIVE
OVERSIGHT COMMITTEE
CHAPTER 1802. PROPERTY AND CASUALTY INSURANCE INITIATIVES
TASK FORCE
CHAPTER 1803. REPORTS OF INSURANCE COVERAGE FOR STATE AGENCIES
CHAPTER 1804. RATES AND FORMS FOR NATIONAL DEFENSE PROJECTS
CHAPTER 1805. JOINT UNDERWRITING AND ADVISORY ORGANIZATIONS
CHAPTER 1806. PROHIBITED PRACTICES AND REBATES
RELATED TO POLICIES
CHAPTER 1807. APPLICABILITY TO MARINE INSURANCE
[Chapters 1808-1900 reserved for expansion]
SUBTITLE B. LIABILITY INSURANCE FOR PHYSICIANS AND
HEALTH CARE PROVIDERS
CHAPTER 1901. PROFESSIONAL LIABILITY INSURANCE FOR PHYSICIANS
AND HEALTH CARE PROVIDERS
CHAPTER 1902. CERTAIN LIABILITY COVERAGE FOR PHYSICIANS AND
HEALTH CARE PROVIDERS
CHAPTER 1903. LOSS CONTROL INFORMATION AND SERVICES
[Chapters 1904-1950 reserved for expansion]
SUBTITLE C. AUTOMOBILE INSURANCE
CHAPTER 1951. GENERAL PROVISIONS: AUTOMOBILE INSURANCE
CHAPTER 1952. POLICY PROVISIONS AND FORMS FOR
AUTOMOBILE INSURANCE
[Chapters 1953-2000 reserved for expansion]
SUBTITLE D. FIRE INSURANCE AND ALLIED LINES,
INCLUDING RESIDENTIAL PROPERTY INSURANCE
CHAPTER 2001. GENERAL PROVISIONS: FIRE INSURANCE
AND ALLIED LINES, INCLUDING RESIDENTIAL
PROPERTY INSURANCE
CHAPTER 2002. POLICY PROVISIONS AND FORMS FOR FIRE INSURANCE
AND ALLIED LINES, INCLUDING RESIDENTIAL
PROPERTY INSURANCE
CHAPTER 2003. PROCEDURES FOR EVALUATING FIRE LOSS RISK
CHAPTER 2004. RESIDENTIAL PROPERTY INSURANCE IN
UNDERSERVED AREAS
CHAPTER 2005. HOME WARRANTY AND HOME PROTECTION INSURANCE
CHAPTER 2006. PREMIUM RATE DISCOUNTS
CHAPTER 2007. ASSESSMENT FOR RURAL FIRE PROTECTION
[Chapters 2008-2050 reserved for expansion]
SUBTITLE E. WORKERS' COMPENSATION INSURANCE
CHAPTER 2051. GENERAL PROVISIONS: WORKERS'
COMPENSATION INSURANCE
CHAPTER 2052. POLICY PROVISIONS AND FORMS FOR WORKERS'
COMPENSATION INSURANCE
CHAPTER 2053. RATES FOR WORKERS' COMPENSATION INSURANCE
CHAPTER 2054. TEXAS MUTUAL INSURANCE COMPANY
[Chapters 2055-2100 reserved for expansion]
SUBTITLE F. OTHER COVERAGE
CHAPTER 2101. COVERAGE FOR AIRCRAFT
[Chapters 2102-2150 reserved for expansion]
SUBTITLE G. POOLS, GROUPS, PLANS, AND SELF-INSURANCE
CHAPTER 2151. TEXAS AUTOMOBILE INSURANCE PLAN ASSOCIATION
CHAPTER 2152. GROUP INSURANCE IN UNDERSERVED AREAS
CHAPTER 2153. GROUP MARKETING OF AUTOMOBILE INSURANCE FOR PERSONS
OVER 55 YEARS OF AGE
CHAPTER 2154. VOLUNTEER FIRE DEPARTMENT MOTOR
VEHICLE SELF-INSURANCE
PROGRAM
[Chapters 2155-2170 reserved for expansion]
CHAPTER 2171. COMMERCIAL GROUP PROPERTY INSURANCE
[Chapters 2172-2200 reserved for expansion]
CHAPTER 2201. RISK RETENTION GROUPS AND PURCHASING GROUPS
CHAPTER 2202. JOINT UNDERWRITING
CHAPTER 2203. MEDICAL LIABILITY INSURANCE JOINT UNDERWRITING
ASSOCIATION
CHAPTER 2204. TEXAS INSURANCE EXCHANGE
CHAPTER 2205. TEXAS CHILD-CARE FACILITY LIABILITY POOL
CHAPTER 2206. RISK MANAGEMENT POOLS FOR CERTAIN
EDUCATIONAL ENTITIES
CHAPTER 2207. EXCESS LIABILITY POOLS FOR COUNTIES AND
CERTAIN EDUCATIONAL ENTITIES
CHAPTER 2208. TEXAS PUBLIC ENTITY EXCESS INSURANCE POOL
CHAPTER 2209. TEXAS NONPROFIT ORGANIZATIONS LIABILITY POOL
CHAPTER 2210. TEXAS WINDSTORM INSURANCE ASSOCIATION
CHAPTER 2211. FAIR PLAN
CHAPTER 2212. SELF-INSURANCE TRUSTS FOR HEALTH CARE
LIABILITY CLAIMS
CHAPTER 2213. SELF-INSURANCE TRUSTS FOR BANKS AND SAVINGS
AND LOAN ASSOCIATIONS
[Chapters 2214-2250 reserved for expansion]
SUBTITLE H. RATEMAKING IN GENERAL
CHAPTER 2251. RATES
CHAPTER 2252. RATE ADMINISTRATION
CHAPTER 2253. RATING TERRITORIES
CHAPTER 2254. PREMIUM REFUND FOR CERTAIN PERSONAL LINES
[Chapters 2255-2300 reserved for expansion]
SUBTITLE I. POLICY FORMS IN GENERAL
CHAPTER 2301. POLICY FORMS
TITLE 10. PROPERTY AND CASUALTY INSURANCE
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 1801. PROPERTY AND CASUALTY INSURANCE LEGISLATIVE
OVERSIGHT COMMITTEE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1801.001. DEFINITION
Sec. 1801.002. SUNSET PROVISION
[Sections 1801.003-1801.050 reserved for expansion]
SUBCHAPTER B. LEGISLATIVE OVERSIGHT COMMITTEE
Sec. 1801.051. COMPOSITION OF COMMITTEE
Sec. 1801.052. MEETINGS
Sec. 1801.053. POWERS AND DUTIES OF COMMITTEE
Sec. 1801.054. REPORT
CHAPTER 1801. PROPERTY AND CASUALTY INSURANCE LEGISLATIVE
OVERSIGHT COMMITTEE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1801.001. DEFINITION. In this chapter, "committee"
means the property and casualty insurance legislative oversight
committee. (V.T.I.C. Art. 21.49-20, Sec. (a).)
Sec. 1801.002. SUNSET PROVISION. The committee is subject
to Chapter 325, Government Code (Texas Sunset Act). Unless
continued in existence as provided by that chapter, the committee
is abolished September 1, 2007. (V.T.I.C. Art. 21.49-20, Sec.
(d).)
[Sections 1801.003-1801.050 reserved for expansion]
SUBCHAPTER B. LEGISLATIVE OVERSIGHT COMMITTEE
Sec. 1801.051. COMPOSITION OF COMMITTEE. (a) The
property and casualty insurance legislative oversight committee is
composed of seven members as follows:
(1) the chair of the Senate Business and Commerce
Committee and the chair of the House Committee on Insurance, who
shall serve as joint presiding officers of the committee;
(2) two members of the senate appointed by the
lieutenant governor;
(3) two members of the house of representatives
appointed by the speaker of the house of representatives; and
(4) the public insurance counsel.
(b) An appointed member of the committee serves at the
pleasure of the appointing official.
(c) In making appointments to the committee, the appointing
officials shall attempt to appoint persons who represent the gender
composition, minority populations, and geographic regions of this
state. (V.T.I.C. Art. 21.49-20, Secs. (b), (c).)
Sec. 1801.052. MEETINGS. The committee shall meet with the
commissioner at least annually. (V.T.I.C. Art. 21.49-20, Sec. (e)
(part).)
Sec. 1801.053. POWERS AND DUTIES OF COMMITTEE. (a) The
committee shall:
(1) receive information about rules proposed by the
department relating to property and casualty insurance and may
submit comments to the commissioner on the proposed rules;
(2) monitor the progress of property and casualty
insurance regulation reform, including:
(A) the fairness of rates, underwriting
guidelines, and rating manuals;
(B) the availability of coverage; and
(C) the effect of rate rollbacks, credit scoring,
and regulation of homeowners and automobile insurance markets;
(3) review recommendations for legislation proposed
by the department; and
(4) review the necessity of having the department
periodically examine the market conduct of an insurer or group of
insurers, including the insurer's or group's:
(A) business practices;
(B) performance; and
(C) operations.
(b) The committee may request reports and other information
from the department as necessary to implement this chapter.
(V.T.I.C. Art. 21.49-20, Secs. (e) (part), (f).)
Sec. 1801.054. REPORT. (a) Not later than November 15 of
each even-numbered year, the committee shall report on the
committee's activities under Sections 1801.052 and 1801.053(a) to:
(1) the governor;
(2) the lieutenant governor; and
(3) the speaker of the house of representatives.
(b) The report must include:
(1) an analysis of any problems caused by property and
casualty insurance regulation reform; and
(2) recommendations of any legislative action
necessary to address those problems and to foster stability,
availability, and competition within the property and casualty insurance industry. (V.T.I.C. Art. 21.49-20, Sec. (g).)
CHAPTER 1802. PROPERTY AND CASUALTY INSURANCE INITIATIVES TASK
FORCE
Sec. 1802.001. PROPERTY AND CASUALTY INSURANCE
INITIATIVES TASK FORCE
CHAPTER 1802. PROPERTY AND CASUALTY INSURANCE INITIATIVES TASK
FORCE
Sec. 1802.001. PROPERTY AND CASUALTY INSURANCE INITIATIVES
TASK FORCE. (a) The commissioner may establish a task force to
study the utility and feasibility of instituting various property
and casualty insurance initiatives in this state.
(b) The initiatives studied may include:
(1) possible coordination with:
(A) the Texas Economic Development Bank to make
certain property and casualty insurance an enterprise zone program
under Chapter 2303, Government Code; and
(B) Neighborhood Housing Service (NHS) programs
to establish voluntary NHS-Insurance Industry Partnerships;
(2) possible insurance agent programs to increase
minority agency access to standard insurance companies, including
minority intern programs with insurance companies;
(3) possible tax incentives for insurance written in
underserved areas; and
(4) a consumer education program designed to increase
the ability of consumers to differentiate among different products
and providers in the property and casualty insurance market. (V.T.I.C. Art. 21.49B.)
CHAPTER 1803. REPORTS OF INSURANCE COVERAGE FOR STATE AGENCIES
Sec. 1803.001. DEFINITIONS
Sec. 1803.002. REPORTING REQUIREMENTS
Sec. 1803.003. FAILURE TO REPORT
Sec. 1803.004. RULES
CHAPTER 1803. REPORTS OF INSURANCE COVERAGE FOR STATE AGENCIES
Sec. 1803.001. DEFINITIONS. In this chapter:
(1) "Insurer" means an insurance company or other
entity that is authorized by the department to engage in the
business of insurance in this state, including:
(A) a reciprocal or interinsurance exchange;
(B) a mutual insurance company;
(C) a county mutual insurance company; and
(D) a Lloyd's plan.
(2) "State agency" has the meaning assigned by Section
412.001, Labor Code. (V.T.I.C. Art. 21.49-15A, Secs. 1(1), (3).)
Sec. 1803.002. REPORTING REQUIREMENTS. (a) Each insurer
that enters into an insurance policy or other contract or agreement
with a state agency for the purchase by the state agency of
property, casualty, or liability insurance coverage, including a
policy, contract, or agreement subject to competitive bidding
requirements, shall report to the State Office of Risk Management
the intended sale of the insurance coverage.
(b) The insurer shall report the intended sale of the
insurance coverage not later than the 30th day before the date the
sale is scheduled to occur in the manner prescribed by the State
Office of Risk Management.
(c) The State Office of Risk Management may require an
insurer to submit copies of insurance forms, policies, and other
relevant information. (V.T.I.C. Art. 21.49-15A, Secs. 2(a), (b),
(c).)
Sec. 1803.003. FAILURE TO REPORT. An insurer that fails to
comply with the reporting requirements of this chapter is subject
to sanctions under Chapter 82. (V.T.I.C. Art. 21.49-15A, Sec.
2(e).)
Sec. 1803.004. RULES. The State Office of Risk Management
shall adopt rules as necessary to implement this chapter. The
office shall consult with the commissioner in adopting rules. (V.T.I.C. Art. 21.49-15A, Sec. 2(d).)
CHAPTER 1804. RATES AND FORMS FOR NATIONAL DEFENSE PROJECTS
Sec. 1804.001. APPLICABILITY OF CHAPTER
Sec. 1804.002. SPECIAL RATES AND RATING PLANS FOR
CASUALTY INSURANCE
Sec. 1804.003. SPECIAL RATES AND FORMS FOR MATERIAL
DAMAGE INSURANCE
CHAPTER 1804. RATES AND FORMS FOR NATIONAL DEFENSE PROJECTS
Sec. 1804.001. APPLICABILITY OF CHAPTER. This chapter
applies only to insurance in relation to a national defense project
in this state. (V.T.I.C. Arts. 5.69 (part), 5.70 (part), 5.71
(part).)
Sec. 1804.002. SPECIAL RATES AND RATING PLANS FOR CASUALTY
INSURANCE. (a) The commissioner may promulgate special rates and
special rating plans for workers' compensation insurance,
automobile insurance, and other lines of casualty insurance, to
apply only to the construction or operation of a national defense
project.
(b) The commissioner may promulgate the special rates and
special rating plans separately for each class of insurance or in
combination for all classes of insurance.
(c) The commissioner may adopt rules as may be necessary,
proper, or advisable to place in effect special rates and special
rating plans promulgated under this section. (V.T.I.C. Art. 5.69
(part).)
Sec. 1804.003. SPECIAL RATES AND FORMS FOR MATERIAL DAMAGE
INSURANCE. (a) The commissioner may promulgate special rates and
forms for fire insurance, windstorm insurance, and other kinds of
material damage insurance required or used on a national defense
project.
(b) The commissioner may adopt rules incidental to the
business described by Subsection (a) and necessary to place in
effect special rates and forms promulgated under this section. (V.T.I.C. Art. 5.70 (part).)
CHAPTER 1805. JOINT UNDERWRITING AND ADVISORY ORGANIZATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1805.001. APPLICABILITY OF CHAPTER
[Sections 1805.002-1805.050 reserved for expansion]
SUBCHAPTER B. ADVISORY ORGANIZATIONS
Sec. 1805.051. LICENSE APPLICATION
Sec. 1805.052. ISSUANCE OF LICENSE; TERM
Sec. 1805.053. INFORMATION REPORTED BY ADVISORY
ORGANIZATION
Sec. 1805.054. INSURER'S AUTHORITY TO SUBSCRIBE TO
ADVISORY ORGANIZATION
Sec. 1805.055. SUBMISSION, RECEIPT, AND USE OF
INFORMATION BY INSURER
Sec. 1805.056. AUDIT
Sec. 1805.057. RATE FILING REVIEW
Sec. 1805.058. PROHIBITED ACTS
Sec. 1805.059. DISCIPLINARY ACTION
Sec. 1805.060. SUNSET REVIEW
Sec. 1805.061. CONFLICT WITH OTHER LAW
[Sections 1805.062-1805.100 reserved for expansion]
SUBCHAPTER C. EXAMINATIONS
Sec. 1805.101. EXAMINATION AUTHORIZED
Sec. 1805.102. EXAMINATION COSTS
Sec. 1805.103. OUT-OF-STATE EXAMINATION
[Sections 1805.104-1805.150 reserved for expansion]
SUBCHAPTER D. CERTAIN PRACTICES IN JOINT UNDERWRITING OR JOINT
REINSURANCE
Sec. 1805.151. AUTHORITY OF COMMISSIONER
CHAPTER 1805. JOINT UNDERWRITING AND ADVISORY ORGANIZATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1805.001. APPLICABILITY OF CHAPTER. This chapter
applies to the kinds of insurance and insurers subject to:
(1) Section 403.002;
(2) Section 941.003 with respect to the application of
a law described by Section 941.003(b)(3) or (c);
(3) Section 942.003 with respect to the application of
a law described by Section 942.003(b)(3) or (c);
(4) Subchapter A, B, C, or D, Chapter 5;
(5) Subchapter H, Chapter 544;
(6) Subchapter A, Chapter 2301;
(7) Chapter 252, 253, 254, 255, 426, 1806, 1807, 2001,
2002, 2003, 2004, 2005, 2006, 2051, 2052, 2053, 2171, 2251, or 2252;
(8) Subtitle B or C, Title 10;
(9) Chapter 406A, Labor Code; or
(10) Chapter 2154, Occupations Code. (V.T.I.C.
Art. 5.75.)
[Sections 1805.002-1805.050 reserved for expansion]
SUBCHAPTER B. ADVISORY ORGANIZATIONS
Sec. 1805.051. LICENSE APPLICATION. (a) A corporation,
unincorporated association, partnership, or individual may file
with the commissioner an application for an advisory organization
license for the kinds of insurance specified in the application.
(b) The applicant must:
(1) file with the commissioner:
(A) a copy of the applicant's:
(i) constitution and bylaws;
(ii) article of agreement or association or
certificate of incorporation; and
(iii) rules governing the applicant's
activities as an advisory organization; and
(B) a statement of qualifications to act as an
advisory organization; and
(2) pay a $100 license fee. (V.T.I.C. Art. 5.73, Sec.
4A(b).)
Sec. 1805.052. ISSUANCE OF LICENSE; TERM. (a) The
commissioner shall issue a license to an applicant the commissioner
determines is qualified, without regard to:
(1) the state of domicile or residence of the
applicant; or
(2) the location of the applicant's place of business.
(b) The commissioner shall grant or deny a license to an
applicant not later than the 60th day after the date the
commissioner receives the application.
(c) A license issued under this subchapter remains in effect
until the commissioner suspends or revokes the license. (V.T.I.C.
Art. 5.73, Secs. 4A(d), (e), (f).)
Sec. 1805.053. INFORMATION REPORTED BY ADVISORY
ORGANIZATION. (a) An advisory organization may file with the
commissioner prospective loss costs, supplementary rating
information, and policy forms. A filing made by an advisory
organization under this section is subject to the provisions of
this code or other insurance laws of this state governing rate
filings.
(b) An advisory organization at least quarterly shall file
with the commissioner a list of:
(1) each subscriber company engaging in business in
this state; and
(2) the products or information the subscriber company
purchases.
(c) On request by the commissioner, an advisory
organization shall provide to the department a summary of the
actuarial assumptions, trend factors, economic factors, and other
criteria used in trending data for companies engaging in business
in this state. (V.T.I.C. Art. 5.73, Secs. 4A(a) (part), (g), (h).)
Sec. 1805.054. INSURER'S AUTHORITY TO SUBSCRIBE TO ADVISORY
ORGANIZATION. An insurer engaging in business in this state may
subscribe to an advisory organization. (V.T.I.C. Art. 5.73, Sec. 1
(part).)
Sec. 1805.055. SUBMISSION, RECEIPT, AND USE OF INFORMATION
BY INSURER. (a) Except as provided by Subsection (b), an insurer
may submit to or receive from an advisory organization the
following only if the advisory organization holds a license issued
under this subchapter:
(1) statistical plans;
(2) historical data;
(3) prospective loss costs;
(4) supplementary rating information;
(5) policy forms and endorsements;
(6) research;
(7) rates of individual insurers that are effective at
the time the information is submitted or received or that were
previously in effect; and
(8) performance of inspections.
(b) An insurer may not:
(1) accept from an advisory organization
recommendations for rates; or
(2) submit to or receive from an advisory organization
recommendations for profit or expenses other than loss adjustment
expenses.
(c) An insurer that subscribes to an advisory organization
may use prospective loss costs, supplementary rating information,
and policy forms filed by the advisory organization under Section
1805.053(a) and may incorporate the information into the insurer's
filings.
(d) Notwithstanding any other law, an insurer that reports
data under this subchapter is not relieved of the responsibility of
reporting that data directly to the department at the department's
request. (V.T.I.C. Art. 5.73, Secs. 1 (part), 2 (part), 4(c),
4A(a) (part), (c).)
Sec. 1805.056. AUDIT. (a) The department shall require
an annual audit of an advisory organization that provides
statistics or other information to the department in a proceeding
to set rates.
(b) The audit must:
(1) be conducted at the expense of the advisory
organization under rules adopted by the commissioner; and
(2) examine the advisory organization's method of
collecting, analyzing, and reporting data to ensure the accuracy of
data.
(c) The audit may examine source documents within
individual companies.
(d) Except for individual company information, an audit is
public information. (V.T.I.C. Art. 5.73, Sec. 4(a).)
Sec. 1805.057. RATE FILING REVIEW. The commissioner may:
(1) review the rate filing of an insurer that relies on
the prospective loss costs provided by an advisory organization;
and
(2) require the insurer to provide the insurer's
actual data and loss experience in addition to the information
provided by the advisory organization. (V.T.I.C. Art. 5.73, Sec.
4B.)
Sec. 1805.058. PROHIBITED ACTS. (a) An advisory
organization may not compile or distribute recommendations for:
(1) rates; or
(2) profit or expenses other than loss adjustment
expenses.
(b) An insurer or advisory organization may not:
(1) attempt to monopolize, combine, or conspire with
another person to monopolize an insurance market;
(2) engage in a boycott, on a concerted basis, of an
insurance market; or
(3) make an agreement with another insurer, advisory
organization, or person if the agreement has the purpose or effect
of restraining trade unreasonably or substantially lessening
competition in the business of insurance. (V.T.I.C. Art. 5.73,
Secs. 2 (part), 3(a), (b).)
Sec. 1805.059. DISCIPLINARY ACTION. (a) If, after a
hearing, the commissioner determines that the furnishing of
specified services by an advisory organization involves an act or
practice that is unfair, unreasonable, or otherwise inconsistent
with this chapter or other applicable laws of this state, the
commissioner may issue a written order:
(1) specifying the manner in which the act or practice
is unfair, unreasonable, or inconsistent with the applicable law;
and
(2) requiring the advisory organization to
discontinue the act or practice.
(b) In addition to any other remedies available at law, the
commissioner may impose a sanction authorized under Chapter 82.
(V.T.I.C. Art. 5.73, Sec. 3(c).)
Sec. 1805.060. SUNSET REVIEW. During the period in which
the Sunset Advisory Commission performs its review of the
department under Chapter 325, Government Code, the commission shall
review the authority granted under this subchapter. (V.T.I.C.
Art. 5.73, Sec. 5.)
Sec. 1805.061. CONFLICT WITH OTHER LAW. To the extent this
subchapter conflicts with Section 2053.052(c), 2053.055, 2053.151,
2053.152, or 2053.153, or Subchapter A or C, Chapter 2053, with
respect to the setting of rates for workers' compensation
insurance, the referenced provision of Chapter 2053 controls.
(V.T.I.C. Art. 5.73, Sec. 6.)
[Sections 1805.062-1805.100 reserved for expansion]
SUBCHAPTER C. EXAMINATIONS
Sec. 1805.101. EXAMINATION AUTHORIZED. (a) As often as
the department determines expedient, the department may examine a
group, association, or other organization referred to in this
chapter, including an advisory organization described by
Subchapter B.
(b) An officer, manager, agent, or employee of the group,
association, or organization may be examined at any time under oath
and shall make available any book, record, account, document, or
agreement governing the method of operation of the group,
association, or organization. (V.T.I.C. Art. 5.73, Sec. 4(b);
Art. 5.74 (part).)
Sec. 1805.102. EXAMINATION COSTS. The group, association,
or other organization shall pay the reasonable costs of an
examination under this subchapter on presentation of a detailed
account of the costs. (V.T.I.C. Art. 5.74 (part).)
Sec. 1805.103. OUT-OF-STATE EXAMINATION. In lieu of an
examination under this subchapter, the department may accept the
report of an examination made by the insurance supervisory official
of another state in accordance with the laws of that state.
(V.T.I.C. Art. 5.74 (part).)
[Sections 1805.104-1805.150 reserved for expansion]
SUBCHAPTER D. CERTAIN PRACTICES IN JOINT UNDERWRITING OR JOINT
REINSURANCE
Sec. 1805.151. AUTHORITY OF COMMISSIONER. If, after a
hearing, the commissioner determines that an activity or practice
of a group, association, or other organization of insurers engaging
in joint underwriting or joint reinsurance is unfair, unreasonable,
or otherwise inconsistent with this chapter or other applicable
law, the commissioner may issue a written order:
(1) specifying the manner in which the activity or
practice is unfair, unreasonable, or inconsistent with the
applicable law; and
(2) requiring the group, association, or organization to discontinue the activity or practice. (V.T.I.C. Art. 5.72.)
CHAPTER 1806. PROHIBITED PRACTICES AND REBATES RELATED TO POLICIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1806.001. DEFINITION
[Sections 1806.002-1806.050 reserved for expansion]
SUBCHAPTER B. PROVISIONS APPLICABLE TO AUTOMOBILE INSURANCE
Sec. 1806.051. APPLICABILITY OF SUBCHAPTER
Sec. 1806.052. CONSTRUCTION OF SUBCHAPTER
Sec. 1806.053. DISCRIMINATIONS OR DISTINCTIONS
Sec. 1806.054. OTHER PROHIBITED INDUCEMENTS
Sec. 1806.055. PROFIT SHARING AUTHORIZED; CERTAIN
PROHIBITIONS
Sec. 1806.056. PROFIT SHARING BASED ON COMBAT DUTY
AUTHORIZED
Sec. 1806.057. PROFIT SHARING WITH MEMBERS OF CERTAIN
ASSOCIATIONS AUTHORIZED
Sec. 1806.058. PARTICIPATING POLICIES
[Sections 1806.059-1806.100 reserved for expansion]
SUBCHAPTER C. PROVISIONS APPLICABLE TO CASUALTY INSURANCE
AND FIDELITY, GUARANTY, AND SURETY BONDS
Sec. 1806.101. DEFINITIONS
Sec. 1806.102. APPLICABILITY OF SUBCHAPTER
Sec. 1806.103. CONSTRUCTION OF SUBCHAPTER
Sec. 1806.104. PROHIBITED ACTS
Sec. 1806.105. PROFIT SHARING AUTHORIZED; CERTAIN
PROHIBITIONS
Sec. 1806.106. PROFIT SHARING WITH CERTAIN
ASSOCIATIONS AUTHORIZED
Sec. 1806.107. ENFORCEMENT
[Sections 1806.108-1806.150 reserved for expansion]
SUBCHAPTER D. PROVISIONS APPLICABLE TO FIRE INSURANCE
AND ALLIED LINES
Sec. 1806.151. APPLICABILITY OF SUBCHAPTER
Sec. 1806.152. CONSTRUCTION OF SUBCHAPTER
Sec. 1806.153. UNJUST DISCRIMINATION; REBATES
Sec. 1806.154. PROFIT SHARING AUTHORIZED
Sec. 1806.155. INSURER LIABILITY ON POLICY ISSUED
WITHOUT AUTHORITY
Sec. 1806.156. ACCEPTANCE OF REBATE OR OTHER
INDUCEMENT; CRIMINAL PENALTY
CHAPTER 1806. PROHIBITED PRACTICES AND REBATES RELATED TO POLICIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1806.001. DEFINITION. In this chapter, "nonprofit
business association" means a business association that is a
nonprofit corporation exempt from federal income taxation under
Section 501(a), Internal Revenue Code of 1986, and its subsequent
amendments by being described as an exempt organization by Section
501(c)(6) of that code. (V.T.I.C. Art. 5.08, Sec. (d) (part); Art.
5.20, Sec. (c) (part).)
[Sections 1806.002-1806.050 reserved for expansion]
SUBCHAPTER B. PROVISIONS APPLICABLE TO AUTOMOBILE INSURANCE
Sec. 1806.051. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to an insurer writing automobile insurance in
this state, including an insurance company, corporation,
reciprocal or interinsurance exchange, mutual insurance company,
association, Lloyd's plan, or other insurer. (V.T.I.C. Art. 5.01,
Sec. (a) (part); Art. 5.08, Sec. (a) (part); Art. 5.09, Sec. (a)
(part).)
Sec. 1806.052. CONSTRUCTION OF SUBCHAPTER. This subchapter
may not be construed to prohibit the modification of rates by a
rating plan that is filed in accordance with the requirements of
Chapter 2251 or Article 5.13-2, as applicable, that has not been
disapproved by the commissioner, and that is designed to encourage
the prevention of accidents, and to account for all relevant
factors inside and outside this state, including the peculiar
hazards and experience of past and prospective individual risks.
(V.T.I.C. Art. 5.09, Sec. (a) (part).)
Sec. 1806.053. DISCRIMINATIONS OR DISTINCTIONS. Except as
provided by Section 1806.056, with respect to business written in
this state:
(1) an insurer may not discriminate or make a
distinction, or permit discrimination or a distinction to be made,
among insureds having like hazards with respect to premiums charged
for, or dividends or other benefits payable under, an insurance
policy;
(2) an insurer or an insurer's agent may not make an
insurance contract or an agreement relating to that insurance,
other than as expressed in the policy; and
(3) an insurer or an insurer's agent or other
representative may not directly or indirectly pay, allow, or give,
or offer to pay, allow, or give, as an inducement to the insured, a
rebate payable on the policy or a special favor or advantage in the
dividends or other benefits to accrue, or anything of value, not
specified in the policy. (V.T.I.C. Art. 5.09, Sec. (a) (part).)
Sec. 1806.054. OTHER PROHIBITED INDUCEMENTS. Except as
provided by Section 1806.055, 1806.056, or 1806.057, an insurer or
an insurer's officer, director, agent, or other representative may
not, for the purpose of writing the insurance of an insured, grant
to the insured or contract with the insured for a special favor or
advantage in dividends or other profits, or commissions or
dividends of commissions or profits to accrue on the policy, or
compensation or other valuable consideration not specified in the
policy, or an inducement not specified in the policy. (V.T.I.C.
Art. 5.08, Sec. (a) (part).)
Sec. 1806.055. PROFIT SHARING AUTHORIZED; CERTAIN
PROHIBITIONS. (a) Section 1806.054 does not prohibit an insurer
from sharing earned profits with the insurer's policyholders under
a profit sharing agreement contained in the policy if:
(1) the insurer shares profits uniformly among those
insured under the policy; and
(2) the insurer distributes earnings equitably among
those insureds under the terms of the policy.
(b) An insurer may not:
(1) discriminate in the distribution of profits among
insureds of the same class;
(2) distribute the profit to an insured before the
expiration of the policy; or
(3) establish a class of insureds for the distribution
of profits, except on the commissioner's approval.
(c) A violation of this section is unjust discrimination and
rebating.
(d) The commissioner may revoke the certificate of
authority of an insurer that violates this section or the license of
an agent who violates this section. (V.T.I.C. Art. 5.08, Sec. (b).)
Sec. 1806.056. PROFIT SHARING BASED ON COMBAT DUTY
AUTHORIZED. (a) This subchapter does not prohibit an insurer, on
approval by the commissioner, from distributing to policyholders
who are on active duty in the United States Armed Forces any
estimated profits resulting from service by those policyholders in
a foreign country in a combat theater of operations after January 1,
1990.
(b) An insurer that elects to make distributions under this
section must:
(1) file a written description of the insurer's
distribution program with the commissioner for approval; and
(2) notify the commissioner in writing of each
distribution made under the program.
(c) If the commissioner does not act on the insurer's
distribution program on or before the fifth business day after the
date the commissioner receives the insurer's description of the
program, the distribution program is considered approved.
(d) An insurer may distribute estimated profits among
policyholders under this section based on:
(1) the time served by a policyholder in a combat
theater of operations;
(2) the location of the policyholder's military
service;
(3) the duration of the applicable insurance policy;
or
(4) any other reasonable basis. (V.T.I.C. Art. 5.08,
Sec. (c); Art. 5.09, Sec. (b).)
Sec. 1806.057. PROFIT SHARING WITH MEMBERS OF CERTAIN
ASSOCIATIONS AUTHORIZED. (a) Section 1806.054 does not prohibit
an insurer, on approval by the commissioner, from sharing profits
with policyholders who are part of a group program established by a
nonprofit business association and who participate in the group
program because of membership in the association.
(b) An insurer that elects to make distributions under this
section must:
(1) file a written description of the insurer's
distribution program with the commissioner for approval; and
(2) notify the commissioner in writing of each
distribution made under the program.
(c) If the commissioner does not act on the insurer's
distribution program on or before the fifth business day after the
date the commissioner receives the insurer's description of the
program, the distribution program is considered approved.
(V.T.I.C. Art. 5.08, Sec. (d) (part).)
Sec. 1806.058. PARTICIPATING POLICIES. (a) This
subchapter, Subtitle C, and Subchapter A, Chapter 5, may not be
construed to prohibit:
(1) a stock company, mutual insurance company,
reciprocal or interinsurance exchange, or Lloyd's plan from
operating under this subchapter, Subchapter A, Chapter 5, and
Subtitle C; or
(2) a stock company, mutual insurance company,
reciprocal or interinsurance exchange, or Lloyd's plan from issuing
participating policies.
(b) A distribution of profits or dividends to insureds may
not take effect or be paid until the commissioner approves the
distribution. The commissioner may not approve a distribution of
profits or dividends until the insurer has provided adequate
reserves. The reserves must be computed on the same basis for all
classes of insurers operating under this subchapter, Subtitle C,
and Subchapter A, Chapter 5. (V.T.I.C. Art. 5.07.)
[Sections 1806.059-1806.100 reserved for expansion]
SUBCHAPTER C. PROVISIONS APPLICABLE TO CASUALTY INSURANCE
AND FIDELITY, GUARANTY, AND SURETY BONDS
Sec. 1806.101. DEFINITIONS. In this subchapter:
(1) "Insurance" includes a suretyship.
(2) "Policy" includes a bond. (V.T.I.C. Art. 5.20,
Sec. (d).)
Sec. 1806.102. APPLICABILITY OF SUBCHAPTER. (a) Except
as provided by Subsections (b) and (c), this subchapter applies to
an insurer, including a corporation, reciprocal or interinsurance
exchange, mutual insurance company, association, Lloyd's plan, or
other organization, writing casualty insurance or writing
fidelity, surety, or guaranty bonds, on risks or operations in this
state.
(b) This subchapter does not apply to:
(1) a farm mutual insurance company or association
regulated under Chapter 911; or
(2) a county mutual insurance company regulated under
Chapter 912.
(c) This subchapter does not apply to the writing of:
(1) automobile insurance;
(2) life, health, or accident insurance;
(3) professional liability insurance;
(4) reinsurance;
(5) aircraft insurance;
(6) fraternal benefit insurance;
(7) fire insurance;
(8) workers' compensation insurance;
(9) marine insurance, including noncommercial inland
marine insurance and ocean marine insurance;
(10) title insurance;
(11) explosion insurance, except insurance against
loss from personal injury or property damage resulting accidentally
from:
(A) a steam boiler;
(B) a heater or pressure vessel;
(C) an electrical device;
(D) an engine; or
(E) all machinery and appliances used in
connection with or in the operation of a boiler, heater, vessel,
electrical device, or engine described by Paragraphs (A)-(D); or
(12) insurance coverage for any of the following
conditions or risks:
(A) weather or climatic conditions, including
lightning, tornado, windstorm, hail, cyclone, rain, or frost and
freeze;
(B) earthquake or volcanic eruption;
(C) smoke or smudge;
(D) excess or deficiency of moisture;
(E) flood;
(F) the rising water of an ocean or an ocean's
tributary;
(G) bombardment, invasion, insurrection, riot,
civil war or commotion, military or usurped power, or any order of a
civil authority made to prevent the spread of a conflagration,
epidemic or catastrophe;
(H) vandalism or malicious mischief;
(I) strike or lockout;
(J) water or other fluid or substance resulting
from:
(i) the breakage or leakage of a sprinkler,
pump, or other apparatus erected for extinguishing fire, or a water
pipe or other conduit or container; or
(ii) casual water entering a building
through a leak or opening in the building or by seepage through
building walls; or
(K) accidental damage to a sprinkler, pump, fire
apparatus, pipe, or other conduit or container described by
Paragraph (J)(i). (V.T.I.C. Art. 5.13, Secs. (a) (part), (b),
(c).)
Sec. 1806.103. CONSTRUCTION OF SUBCHAPTER. (a) This
subchapter does not limit in any manner the kinds or classes of
insurance that an insurer may write under an appropriate statute or
the insurer's charter or certificate of authority.
(b) This subchapter may not be construed to prohibit the
modification of rates by a rating plan that complies with Chapter
2251 or Article 5.13-2, as applicable. (V.T.I.C. Art. 5.13, Sec.
(d); Art. 5.20, Sec. (b) (part).)
Sec. 1806.104. PROHIBITED ACTS. (a) Except as otherwise
provided by this subchapter, an insurer, an insurer's employee, or
a broker or agent may not knowingly:
(1) issue an insurance policy that is not in
accordance with an applicable filing that is filed and in effect
under Chapter 2251 or 2301 or Article 5.13-2; or
(2) charge, demand, or receive a premium on an
insurance policy that is not in accordance with an applicable
filing that is filed and in effect under Chapter 2251 or 2301 or
Article 5.13-2.
(b) Except as provided in an applicable filing that is filed
and in effect under Chapter 2251 or 2301 or Article 5.13-2, an
insurer, an insurer's employee, or a broker or agent may not
directly or indirectly pay, allow, or give, or offer to pay, allow,
or give, as an inducement to insurance, or after insurance has been
written, a rebate, discount, abatement, credit or reduction of the
premium stated in an insurance policy, or a special favor or
advantage in the dividends or other benefits to accrue on the
policy, or any valuable consideration or inducement, not specified
in the policy.
(c) An insured named in an insurance policy or an employee
of an insured may not knowingly receive or accept, directly or
indirectly, a rebate, discount, abatement, credit, or reduction of
the premium stated in an insurance policy, or a special favor or
advantage or valuable consideration or inducement. (V.T.I.C. Art.
5.20, Sec. (a).)
Sec. 1806.105. PROFIT SHARING AUTHORIZED; CERTAIN
PROHIBITIONS. (a) This subchapter does not prohibit an insurer
from sharing earned profits with the insurer's policyholders in
accordance with a profit sharing agreement contained in the policy,
provided that any profit sharing under the policy with those
insureds must be uniform among the insureds and may consist only of
the equitable distribution of earnings among the insureds in
accordance with the terms of the policy.
(b) An insurer may not:
(1) discriminate in the distribution of profits among
insureds of the same class;
(2) distribute the profit to an insured before the
expiration of the policy; or
(3) establish a class of insureds for the distribution
of profits, except on the commissioner's approval.
(c) A distribution of profits or dividends to an insured may
not take effect or be distributed until:
(1) adequate reserves are provided, as computed on the
same basis for all classes of insurers to which this subchapter
applies; and
(2) the commissioner approves the distribution.
(V.T.I.C. Art. 5.20, Sec. (b) (part).)
Sec. 1806.106. PROFIT SHARING WITH CERTAIN ASSOCIATIONS
AUTHORIZED. (a) This subchapter does not prohibit an insurer, on
approval by the commissioner, from sharing profits with
policyholders who are part of a group program established by a
nonprofit business association and who participate in the group
program because of membership in the association.
(b) An insurer that elects to make distributions under this
section must:
(1) file a written description of the insurer's
distribution program with the commissioner for approval; and
(2) notify the commissioner in writing of each
distribution made under the program.
(c) If the commissioner does not act on the insurer's
distribution program on or before the fifth business day after the
date the commissioner receives the insurer's description of the
program, the distribution program is considered approved.
(V.T.I.C. Art. 5.20, Sec. (c) (part).)
Sec. 1806.107. ENFORCEMENT. (a) A violation of this
subchapter is unjust discrimination and rebating.
(b) The commissioner may revoke the certificate of
authority of an insurer that violates this subchapter or the
license of an agent who violates this subchapter. (V.T.I.C. Art.
5.20, Sec. (b) (part).)
[Sections 1806.108-1806.150 reserved for expansion]
SUBCHAPTER D. PROVISIONS APPLICABLE TO FIRE INSURANCE
AND ALLIED LINES
Sec. 1806.151. APPLICABILITY OF SUBCHAPTER. (a) Each
insurance policy or contract insuring property in this state
against loss by fire, including a policy or contract or portion of a
policy or contract that insures the shore end of a marine risk
against loss by fire, must be issued in accordance with:
(1) this subchapter;
(2) Section 403.002;
(3) Subchapter C, Chapter 5;
(4) Subchapter H, Chapter 544; and
(5) Chapters 252, 2001, 2002, 2003, 2004, 2005, 2006,
and 2171.
(b) An insurer issuing an insurance policy or contract
described by Subsection (a), including a fire insurance company,
marine insurance company, fire and marine insurance company, and
fire and tornado insurance company, is governed by the laws
described by Subsection (a).
(c) This section applies to an insurer or to an insurance
policy or contract regardless of:
(1) the kind and character of property insured;
(2) whether the property is:
(A) fixed or movable;
(B) stationary or in transit; or
(C) consigned or billed for shipment inside or
outside the boundaries of this state or to a foreign country;
(3) whether the insurer is organized:
(A) under the laws of this state, another state,
territory, or possession of the United States, or a foreign
country; or
(B) by authority of the federal government; or
(4) the kind of insurer or the name of the insurer
issuing the policy or contract. (V.T.I.C. Art. 5.27 (part).)
Sec. 1806.152. CONSTRUCTION OF SUBCHAPTER. (a) This
subchapter, Subtitle D, and Subchapter C, Chapter 5, may not be
construed to deal with the collection of premiums, but each insurer
may make rules and regulations the insurer considers just between
the insurer and the insurer's agents and policyholders.
(b) A bona fide extension of credit may not be construed as
discrimination or as a violation of this subchapter. (V.T.I.C.
Art. 5.42 (part).)
Sec. 1806.153. UNJUST DISCRIMINATION; REBATES. (a) An
insurer or an insurer's officer, director, agent, or other
representative may not grant or contract for a special favor or
advantage in:
(1) dividends or other profits to accrue on an
insurance policy;
(2) commissions in the dividends or other profits to
accrue on an insurance policy;
(3) commissions or division of commission; or
(4) a position, valuable consideration, or inducement
not specified in an insurance policy.
(b) An insurer may not directly or indirectly give, sell, or
purchase or offer to give, sell, or purchase as an inducement to
insurance or in connection with insurance:
(1) stocks, bonds, or other securities of an insurer
or other corporation, partnership, or individual;
(2) dividends or profits that have accrued or will
accrue on stocks, bonds, or other securities of an insurer or other
corporation, partnership, or individual; or
(3) anything of value not specified in the policy.
(c) An insurer or an insurer's officer, director, agent, or
other representative that violates this section has engaged in
unjust discrimination. (V.T.I.C. Art. 5.41, Sec. (a) (part).)
Sec. 1806.154. PROFIT SHARING AUTHORIZED. (a) Section
1806.153 does not prohibit an insurer from sharing profits with the
insurer's policyholders if:
(1) a profit sharing agreement is placed on or in the
face of the policy;
(2) the profit sharing is uniform and does not
discriminate among individuals or among classes; and
(3) the profit is not distributed to an insured before
the expiration of the insurance policy.
(b) An insurer or an insurer's officer, director, agent, or
other representative that violates this section has engaged in
unjust discrimination. (V.T.I.C. Art. 5.41, Sec. (a) (part).)
Sec. 1806.155. INSURER LIABILITY ON POLICY ISSUED WITHOUT
AUTHORITY. (a) If an insurer or an insurer's agent issues an
insurance policy without authority and the policyholder sustains a
loss or damage covered under the policy, the insurer is liable to
the policyholder under the policy in the same manner and to the same
extent as if the insurer had been authorized to issue the policy,
although the policy was issued in violation of this code.
(b) This section may not be construed to give an insurer the
authority to issue an insurance policy or contract other than as
provided by this code. (V.T.I.C. Art. 5.41, Sec. (a) (part).)
Sec. 1806.156. ACCEPTANCE OF REBATE OR OTHER INDUCEMENT;
CRIMINAL PENALTY. (a) A person commits an offense if the person
knowingly receives or accepts from an insurer, an insurer's agent,
broker, or other representative, or any other person a rebate of
premium payable on an insurance policy, or a special favor or
advantage in dividends or other financial profits accrued or to
accrue on the policy, or any valuable consideration, position or
inducement not specified in the policy.
(b) An offense under this section is punishable by:
(1) a fine of not more than $100;
(2) confinement in jail for not more than 90 days; or
(3) both a fine and confinement under this subsection. (V.T.I.C. Art. 5.41-1.)
CHAPTER 1807. APPLICABILITY TO MARINE INSURANCE
Sec. 1807.001. DEFINITIONS
Sec. 1807.002. INAPPLICABILITY OF CERTAIN LAWS TO
MARINE INSURANCE; EXCEPTION
CHAPTER 1807. APPLICABILITY TO MARINE INSURANCE
Sec. 1807.001. DEFINITIONS. In this chapter:
(1) "Insurable property and interests" includes:
(A) goods, freights, and cargoes;
(B) merchandise;
(C) effects;
(D) disbursements;
(E) profits;
(F) money, bullion, and precious stones;
(G) securities;
(H) choses in action;
(I) evidences of debt;
(J) valuable papers; and
(K) bottomry and respondentia interests.
(2) "Marine insurance" means:
(A) insurance and reinsurance that covers:
(i) loss or damage to:
(a) a hull, vessel, or craft of any
kind, an aid to navigation, a dry dock, or a marine railway, whether
complete, under construction, or awaiting construction; or
(b) insurable property and interests
in respect to, appertaining to, or in connection with a risk or
peril of navigation, transit, or transportation:
(1) on or under a sea, lake, or
river or other water, in the air, or on land in connection with or
incident to export, import, or waterborne risks;
(2) while being assembled,
packed, crated, baled, compressed, or similarly prepared for
shipment;
(3) while awaiting shipment; or
(4) during any delay, storage,
or transshipment or reshipment incident to the initial shipment;
(ii) a marine builder or repairer risk;
(iii) a marine protection or indemnity
risk; or
(iv) a war risk regarding any insurable
property or interest described by this section; and
(B) insurance defined as marine insurance by
another statute, lawful custom, or rule adopted by the
commissioner. (V.T.I.C. Art. 5.53 (part).)
Sec. 1807.002. INAPPLICABILITY OF CERTAIN LAWS TO MARINE
INSURANCE; EXCEPTION. (a) The following provisions do not apply to
marine insurance:
(1) Sections 36.002, 37.051, 403.002, 492.051, and
501.159;
(2) Subchapter H, Chapter 544;
(3) Chapters 5, 252, 253, 493, 494, 1804, 1805, 1806,
and 2171; and
(4) Subtitles B, C, D, E, F, H, and I.
(b) Subsection (a) does not apply to:
(1) a farm mutual insurance company operating under
Chapter 911;
(2) a mutual insurance company engaged in business
under Chapter 12, Title 78, Revised Statutes, before that chapter's
repeal by Section 18, Chapter 40, Acts of the 41st Legislature, 1st
Called Session, 1929, as amended by Section 1, Chapter 60, General
Laws, Acts of the 41st Legislature, 2nd Called Session, 1929, that
retains the rights and privileges under the repealed law to the
extent provided by those sections; or
(3) a county mutual insurance company operating under
Chapter 912. (V.T.I.C. Arts. 5.53 (part), 5.54 (part).)
[Chapters 1808-1900 reserved for expansion]
SUBTITLE B. LIABILITY INSURANCE FOR PHYSICIANS AND
HEALTH CARE PROVIDERS
CHAPTER 1901. PROFESSIONAL LIABILITY INSURANCE FOR
PHYSICIANS AND HEALTH CARE PROVIDERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1901.001. DEFINITIONS
Sec. 1901.002. APPLICABILITY OF CHAPTER
Sec. 1901.003. APPLICABILITY OF OTHER LAW
Sec. 1901.004. ANNUAL REPORTS
Sec. 1901.005. RULES
[Sections 1901.006-1901.050 reserved for expansion]
SUBCHAPTER B. RATE STANDARDS
Sec. 1901.051. CONSIDERATIONS IN SETTING RATES
Sec. 1901.052. GROUPING OF RISKS
Sec. 1901.053. MODIFICATION OF CLASSIFICATION RATES
Sec. 1901.054. LIMITATIONS ON RATES
Sec. 1901.055. CLAIM SURCHARGE
Sec. 1901.056. ABSOLUTE RATES PROHIBITED
Sec. 1901.057. CONSIDERATIONS IN APPROVING RATES
[Sections 1901.058-1901.100 reserved for expansion]
SUBCHAPTER C. REVIEW OF RATES
Sec. 1901.101. RECONSIDERATION OF RATES AND PREMIUMS
Sec. 1901.102. APPEAL
[Sections 1901.103-1901.150 reserved for expansion]
SUBCHAPTER D. BEST PRACTICES FOR NURSING HOMES
Sec. 1901.151. BEST PRACTICES
Sec. 1901.152. CONSIDERATION OF BEST PRACTICES IN
SETTING RATES
Sec. 1901.153. STANDARD OF CARE FOR CIVIL ACTIONS NOT
ESTABLISHED
[Sections 1901.154-1901.200 reserved for expansion]
SUBCHAPTER E. POLICY FORMS
Sec. 1901.201. STANDARDIZED POLICY FORMS; APPROVAL OF
OTHER FORMS
[Sections 1901.202-1901.250 reserved for expansion]
SUBCHAPTER F. COVERAGE
Sec. 1901.251. PREMIUM BASIS
Sec. 1901.252. COVERAGE FOR EXEMPLARY DAMAGES
Sec. 1901.253. NOTICE OF PREMIUM INCREASE,
CANCELLATION, OR NONRENEWAL
CHAPTER 1901. PROFESSIONAL LIABILITY INSURANCE FOR
PHYSICIANS AND HEALTH CARE PROVIDERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1901.001. DEFINITIONS. In this chapter:
(1) "Health care provider" means:
(A) a person, partnership, professional
association, corporation, facility, or institution, or an officer,
employee, or agent of the person or entity acting in the course and
scope of authority, employment, or agency, as applicable, if the
person or entity is licensed or chartered by this state to provide
health care as:
(i) a registered nurse;
(ii) a hospital;
(iii) a dentist;
(iv) a podiatrist;
(v) a chiropractor;
(vi) an optometrist or therapeutic
optometrist;
(vii) a pharmacist;
(viii) a veterinarian;
(ix) a not-for-profit kidney dialysis
center;
(x) a blood bank that is a nonprofit
corporation chartered to operate a blood bank and is accredited by
the American Association of Blood Banks;
(xi) a for-profit or not-for-profit nursing
home; or
(xii) a for-profit or not-for-profit
assisted living facility; or
(B) a health care practitioner or facility that
the commissioner, in accordance with Section 2203.103(b),
determines is eligible for coverage under this chapter.
(2) "Hospital" means a public or private institution
licensed under Chapter 241 or 577, Health and Safety Code.
(3) "Physician" means a person licensed to practice
medicine in this state. (V.T.I.C. Art. 5.15-1, Sec. 2.)
Sec. 1901.002. APPLICABILITY OF CHAPTER. This chapter
applies to:
(1) an insurer authorized to write or engaged in
writing professional liability insurance for a physician or health
care provider; and
(2) a rating organization acting on behalf of an
insurer described by Subdivision (1). (V.T.I.C. Art. 5.15-1, Sec.
1.)
Sec. 1901.003. APPLICABILITY OF OTHER LAW. Chapters 2251
and 2301 and Article 5.13-2 apply to rates and forms for
professional liability insurance for physicians and health care
providers under this chapter. (V.T.I.C. Art. 5.15-1, Sec. 4(a).)
Sec. 1901.004. ANNUAL REPORTS. (a) An insurer that
issues professional liability insurance policies covering
physicians and health care providers shall file annually with the
commissioner a report of:
(1) all claims and the amounts of those claims;
(2) amounts of claims reserves;
(3) investment income of the insurer derived from
medical professional liability premiums;
(4) information relating to amounts of judgments and
settlements paid on claims; and
(5) other information required by the commissioner.
(b) The commissioner may promulgate a form on which the
information under Subsection (a) must be reported. The form must
require that the information be reported in an accurate manner and
be reasonably calculated to:
(1) facilitate interpretation; and
(2) protect the confidentiality of the physician or
health care provider. (V.T.I.C. Art. 5.15-1, Sec. 5.)
Sec. 1901.005. RULES. The commissioner shall establish by
rule:
(1) criteria that insurers must follow in establishing
reconsideration procedures under Section 1901.101; and
(2) standards and procedures to be followed in the
review of rates and premiums by the commissioner. (V.T.I.C.
Art. 5.15-1, Sec. 4B(c).)
[Sections 1901.006-1901.050 reserved for expansion]
SUBCHAPTER B. RATE STANDARDS
Sec. 1901.051. CONSIDERATIONS IN SETTING RATES. (a) In
setting rates, an insurer shall consider:
(1) past and prospective loss and expense experience
for all professional liability insurance for physicians and health
care providers written in this state, subject to Subsection (b);
(2) a reasonable margin for underwriting profit and
contingencies;
(3) investment income; and
(4) dividends or savings allowed or returned by the
insurer to the insurer's policyholders or members.
(b) If the department finds that the group or risk to be
insured is not of sufficient size to be credible, an insurer must
also consider in setting rates past and prospective loss and
expense experience for all professional liability insurance for
physicians and health care providers written outside this state.
(V.T.I.C. Art. 5.15-1, Sec. 3 (part).)
Sec. 1901.052. GROUPING OF RISKS. In setting rates, an
insurer may group risks by classification, rating schedule, or any
other reasonable method. (V.T.I.C. Art. 5.15-1, Sec. 3 (part).)
Sec. 1901.053. MODIFICATION OF CLASSIFICATION RATES. (a)
An insurer may modify classification rates to produce rates for
individual risks in accordance with rating plans that establish
standards for measuring variations in hazards or expense
provisions.
(b) The standards may measure any difference among risks
that can be demonstrated to have a probable effect on losses or
expenses. (V.T.I.C. Art. 5.15-1, Sec. 3 (part).)
Sec. 1901.054. LIMITATIONS ON RATES. (a) Rates set under
this chapter may not be excessive or inadequate, as described by
this section, or unreasonable or unfairly discriminatory.
(b) A rate is not excessive unless:
(1) the rate is unreasonably high for the insurance
coverage provided; and
(2) a reasonable degree of competition does not exist
in the area with respect to the classification to which the rate
applies.
(c) A rate is not inadequate unless the rate is unreasonably
low for the insurance coverage provided and:
(1) is insufficient to sustain projected losses and
expenses; or
(2) the use of the rate has or, if continued, will have
the effect of destroying competition or creating a monopoly.
(V.T.I.C. Art. 5.15-1, Sec. 3 (part).)
Sec. 1901.055. CLAIM SURCHARGE. A claim surcharge
assessed by an insurer against a physician or health care provider
under a professional liability insurance policy may be based only
on claims actually paid by an insurer as a result of:
(1) a settlement; or
(2) an adverse judgment or decision of a court.
(V.T.I.C. Art. 5.15-1, Sec. 9.)
Sec. 1901.056. ABSOLUTE RATES PROHIBITED. (a) In this
section, "absolute rates" means rates, rating plans, or rating
classifications that are filed under Chapter 2251 or Article 5.13-2
by an insurer or authorized rating organization and that are
required to be used, to the exclusion of all others, by each insurer
authorized to write policies.
(b) A provision of this chapter, Chapter 2251, or Article
5.13-2 relating to the regulation of rates, rating plans, and
rating classifications for professional liability insurance for
physicians and health care providers does not:
(1) give the commissioner the power to promulgate
uniform or absolute rates; or
(2) prevent different insurers or organizations
authorized to file rates from filing different rates for risks in a
given classification or modified rates for individual risks made in
accordance with rating plans. (V.T.I.C. Art. 5.15-1, Sec. 4(b).)
Sec. 1901.057. CONSIDERATIONS IN APPROVING RATES. In
approving rates under this chapter, the commissioner shall consider
the impact of risk management courses taken by physicians and
health care providers in this state. (V.T.I.C. Art. 5.15-1, Sec. 3
(part).)
[Sections 1901.058-1901.100 reserved for expansion]
SUBCHAPTER C. REVIEW OF RATES
Sec. 1901.101. RECONSIDERATION OF RATES AND
PREMIUMS. (a) Each insurer to which this chapter applies shall
adopt a procedure for reconsideration of a rate or premium charged a
physician or health care provider for professional liability
insurance coverage.
(b) The procedure must include:
(1) an opportunity for a hearing before officers or
employees who have responsibility for determining rates and
premiums to be charged for professional liability insurance; and
(2) a requirement that the insurer reconsider the rate
or premium and provide the physician or health care provider a
written explanation of the rate or premium being charged.
(V.T.I.C. Art. 5.15-1, Sec. 4B(a).)
Sec. 1901.102. APPEAL. A physician or health care provider
that is not satisfied with a decision under procedures established
under Section 1901.101 may appeal to the commissioner for:
(1) a review of the rate or premium; and
(2) a determination of whether the rate or premium
being charged complies with criteria under Sections
1901.051-1901.054 and 1901.057. (V.T.I.C. Art. 5.15-1, Sec.
4B(b).)
[Sections 1901.103-1901.150 reserved for expansion]
SUBCHAPTER D. BEST PRACTICES FOR NURSING HOMES
Sec. 1901.151. BEST PRACTICES. (a) The commissioner
shall adopt best practices for risk management and loss control
that may be used by for-profit and not-for-profit nursing homes.
(b) In developing or amending the best practices, the
commissioner shall consult with the Health and Human Services
Commission and a task force appointed by the commissioner.
(c) The task force must be composed of representatives of:
(1) insurers that write professional liability
insurance for nursing homes;
(2) the Texas Medical Liability Insurance
Underwriting Association;
(3) nursing homes; and
(4) consumers. (V.T.I.C. Art. 5.15-4, Secs. (a),
(c).)
Sec. 1901.152. CONSIDERATION OF BEST PRACTICES IN SETTING
RATES. In setting rates for professional liability insurance
applicable to a for-profit or not-for-profit nursing home, an
insurer or the Texas Medical Liability Insurance Underwriting
Association may consider whether the nursing home adopts and
implements the best practices adopted under this subchapter.
(V.T.I.C. Art. 5.15-4, Sec. (b).)
Sec. 1901.153. STANDARD OF CARE FOR CIVIL ACTIONS NOT
ESTABLISHED. The best practices for risk management and loss
control adopted under this subchapter do not establish standards of
care for nursing homes applicable in a civil action against a
nursing home. (V.T.I.C. Art. 5.15-4, Sec. (d).)
[Sections 1901.154-1901.200 reserved for expansion]
SUBCHAPTER E. POLICY FORMS
Sec. 1901.201. STANDARDIZED POLICY FORMS; APPROVAL OF OTHER
FORMS. (a) The commissioner shall prescribe standardized policy
forms for occurrence, claims-made, and claims-paid professional
liability insurance policies for physicians and health care
providers.
(b) An insurer may not use a form other than a standardized
policy form in writing professional liability insurance for
physicians and health care providers unless the form has been
approved by the commissioner.
(c) An insurer writing professional liability insurance for
physicians and health care providers may use an endorsement if the
endorsement has been filed with and approved by the commissioner.
(V.T.I.C. Art. 5.15-1, Sec. 4(c).)
[Sections 1901.202-1901.250 reserved for expansion]
SUBCHAPTER F. COVERAGE
Sec. 1901.251. PREMIUM BASIS. An insurer may not write a
professional liability insurance policy under this chapter on less
than an annual premium basis. (V.T.I.C. Art. 5.15-1, Sec. 6.)
Sec. 1901.252. COVERAGE FOR EXEMPLARY DAMAGES. (a) Except
as provided by Subsection (b), a medical professional liability
insurance policy issued to or renewed for a physician or health care
provider in this state may not include coverage for exemplary
damages that may be assessed against the physician or health care
provider.
(b) The commissioner may approve an endorsement form that
provides for coverage for exemplary damages for use on a medical
professional liability insurance policy issued to:
(1) a hospital; or
(2) a for-profit or not-for-profit nursing home or
assisted living facility. (V.T.I.C. Art. 5.15-1, Sec. 8.)
Sec. 1901.253. NOTICE OF PREMIUM INCREASE, CANCELLATION, OR
NONRENEWAL. (a) An insurer that issues a professional liability
insurance policy for a physician or health care provider must
provide to the insured written notice of at least 90 days if the
insurer intends to:
(1) increase the premiums on the policy; or
(2) cancel or not renew the policy for a reason other
than for nonpayment of premiums or because the insured is no longer
licensed.
(b) If the insurer intends to increase the premiums, the
insurer shall state in the notice the amount of the increase.
(c) If the insurer intends to cancel or not renew the
policy, the insurer shall state in the notice the reason for
cancellation or nonrenewal.
(d) An insurer may provide notice of cancellation under this
section only within the first 90 days from the effective date of the policy. (V.T.I.C. Art. 5.15-1, Sec. 7.)
CHAPTER 1902. CERTAIN LIABILITY COVERAGE FOR
PHYSICIANS AND HEALTH CARE PROVIDERS
Sec. 1902.001. DEFINITIONS
Sec. 1902.002. COVERAGE FOR PHYSICIANS OR HEALTH CARE
PROVIDERS UNDER VENDOR ENDORSEMENTS
OR CERTAIN POLICIES
Sec. 1902.003. EXCLUSIONS AND LIMITATIONS ON COVERAGE
UNDER VENDOR ENDORSEMENTS PROHIBITED
CHAPTER 1902. CERTAIN LIABILITY COVERAGE FOR
PHYSICIANS AND HEALTH CARE PROVIDERS
Sec. 1902.001. DEFINITIONS. In this chapter:
(1) "Health care provider" has the meaning assigned
by Section 1901.001.
(2) "Manufacturer" has the meaning assigned by Section
82.001, Civil Practice and Remedies Code.
(3) "Physician" has the meaning assigned by Section
1901.001. (New; V.T.I.C. Art. 5.15-1, Sec. 11 (part).)
Sec. 1902.002. COVERAGE FOR PHYSICIANS OR HEALTH CARE
PROVIDERS UNDER VENDOR ENDORSEMENTS OR CERTAIN POLICIES. A
physician or health care provider is considered a vendor for
purposes of coverage under a vendor's endorsement or a
manufacturer's general liability or products liability policy.
(V.T.I.C. Art. 5.15-1, Sec. 11 (part).)
Sec. 1902.003. EXCLUSIONS AND LIMITATIONS ON COVERAGE UNDER
VENDOR ENDORSEMENTS PROHIBITED. An insurer may not exclude or
otherwise limit coverage for physicians or health care providers
under a vendor's endorsement issued to a manufacturer. (V.T.I.C. Art. 5.15-1, Sec. 11 (part).)
CHAPTER 1903. LOSS CONTROL INFORMATION AND SERVICES
SUBCHAPTER A. LOSS CONTROL SERVICES FOR
PROFESSIONAL LIABILITY INSURANCE FOR HOSPITALS
Sec. 1903.001. DEFINITION
Sec. 1903.002. INAPPLICABILITY OF SUBCHAPTER
Sec. 1903.003. LOSS CONTROL SERVICES REQUIRED
Sec. 1903.004. SANCTIONS
Sec. 1903.005. RULES
[Sections 1903.006-1903.050 reserved for expansion]
SUBCHAPTER B. LOSS CONTROL INFORMATION FOR GENERAL AND CERTAIN
PROFESSIONAL LIABILITY INSURANCE
Sec. 1903.051. LOSS CONTROL INFORMATION REQUIRED
Sec. 1903.052. SANCTIONS
Sec. 1903.053. RULES
[Sections 1903.054-1903.100 reserved for expansion]
SUBCHAPTER C. CIVIL PROCEEDINGS
Sec. 1903.101. IMMUNITY FROM LIABILITY
Sec. 1903.102. LOSS CONTROL INFORMATION NOT
DISCOVERABLE OR ADMISSIBLE
CHAPTER 1903. LOSS CONTROL INFORMATION AND SERVICES
SUBCHAPTER A. LOSS CONTROL SERVICES FOR
PROFESSIONAL LIABILITY INSURANCE FOR HOSPITALS
Sec. 1903.001. DEFINITION. In this subchapter, "hospital"
means a public or private institution licensed under Chapter 241 or
577, Health and Safety Code. (V.T.I.C. Art. 5.15-2, Sec. (e).)
Sec. 1903.002. INAPPLICABILITY OF SUBCHAPTER. This
subchapter and Subchapter C do not apply to insurance policies that
provide excess coverage issued by the Texas Medical Liability
Insurance Underwriting Association under Chapter 2203, or to those
policies if the policies are serviced by an insurer acting as a
servicing carrier under an agreement entered into between the
association and the insurer and approved by the commissioner.
(V.T.I.C. Art. 5.15-2, Sec. (f).)
Sec. 1903.003. LOSS CONTROL SERVICES REQUIRED. (a) Before
writing professional liability insurance for a hospital in this
state, an insurer must maintain or provide loss control facilities
that:
(1) provide loss control services reasonably
commensurate with the risks, exposures, and experience of the
insured's business;
(2) are adequate to provide loss control services
required by the nature of the policyholder's operations; and
(3) include surveys, recommendations, training
programs, consultations, and analyses of accident causes.
(b) To provide the facilities required by this section, the
insurer may:
(1) employ qualified personnel;
(2) retain qualified independent contractors;
(3) contract with the policyholder to provide
qualified loss control personnel and services; or
(4) use a combination of methods described by this
subsection.
(c) Independent contractors and other personnel described
by Subsection (b) must have the qualifications of a field safety
representative. A field safety representative must be an
individual who:
(1) holds a:
(A) bachelor's degree in science or engineering;
(B) bachelor of arts degree in nursing;
(C) bachelor of science degree in nursing,
pharmacy, or physical therapy; or
(D) master's degree in hospital administration;
(2) is a licensed engineer;
(3) is a certified safety professional;
(4) is a certified industrial hygienist;
(5) has at least 10 years' experience in occupational
safety and health; or
(6) has completed a course of training in loss control
services approved by the department. (V.T.I.C. Art. 5.15-2, Secs.
(a), (b).)
Sec. 1903.004. SANCTIONS. (a) If there is evidence that
reasonable loss control services are not being maintained or
provided by an insurer as required by this subchapter or are not
being used by the insurer in a reasonable manner to prevent injury
to patients of the insurer's policyholders, the commissioner shall
order a hearing to determine whether the insurer is not in
compliance with this subchapter.
(b) If it is determined that the insurer is not in
compliance, the commissioner may impose any sanction authorized by
Chapter 82. (V.T.I.C. Art. 5.15-2, Sec. (c).)
Sec. 1903.005. RULES. The commissioner may adopt
reasonable rules for the enforcement of this subchapter after
holding a public hearing on the proposed rules. (V.T.I.C. Art.
5.15-2, Sec. (d).)
[Sections 1903.006-1903.050 reserved for expansion]
SUBCHAPTER B. LOSS CONTROL INFORMATION FOR GENERAL AND CERTAIN
PROFESSIONAL LIABILITY INSURANCE
Sec. 1903.051. LOSS CONTROL INFORMATION REQUIRED. (a)
Before writing professional liability insurance, including medical
professional liability insurance, for insureds other than
hospitals or general liability insurance in this state, an insurer
must provide to the insurer's policyholders loss control
information reasonably commensurate with the risks, exposures, and
experience of the insured's business.
(b) To provide the information described by Subsection (a)
or services, the insurer may:
(1) employ qualified personnel;
(2) retain qualified independent contractors;
(3) contract with the policyholder to provide
qualified loss control personnel and services; or
(4) use a combination of methods described by this
subsection. (V.T.I.C. Art. 5.15-3, Secs. (a), (b).)
Sec. 1903.052. SANCTIONS. (a) If there is evidence that
reasonable loss control information is not being provided by an
insurer as required by this subchapter or is not being used by the
insurer in a reasonable manner to reduce losses, the commissioner
shall order a hearing to determine whether the insurer is not in
compliance with this subchapter.
(b) If it is determined that the insurer is not in
compliance, the commissioner may impose any sanction authorized by
Chapter 82. (V.T.I.C. Art. 5.15-3, Sec. (c).)
Sec. 1903.053. RULES. After opportunity for a hearing, the
commissioner may adopt reasonable rules for the enforcement of this
subchapter. (V.T.I.C. Art. 5.15-3, Sec. (d).)
[Sections 1903.054-1903.100 reserved for expansion]
SUBCHAPTER C. CIVIL PROCEEDINGS
Sec. 1903.101. IMMUNITY FROM LIABILITY. (a) An insurer
or an agent or employee of the insurer is not liable, and a cause of
action does not arise against the insurer, agent, or employee, for
an accident based on an allegation that the accident was caused or
could have been prevented by a program, information, inspection, or
other activity or service undertaken by the insurer to prevent
accidents or to control losses, as applicable, in connection with
the operations of the insured.
(b) The immunity from liability provided by this section
does not affect the liability of an insurer as otherwise provided in
an insurance policy. (V.T.I.C. Art. 5.15-2, Sec. (g); Art. 5.15-3,
Sec. (e).)
Sec. 1903.102. LOSS CONTROL INFORMATION NOT DISCOVERABLE OR
ADMISSIBLE. Loss control information provided by an insurer to an
insured is not discoverable or admissible as evidence in a civil
proceeding. (V.T.I.C. Art. 5.15-2, Sec. (h); Art. 5.15-3, Sec.
(f).)
[Chapters 1904-1950 reserved for expansion]
SUBTITLE C. AUTOMOBILE INSURANCE
CHAPTER 1951. GENERAL PROVISIONS: AUTOMOBILE INSURANCE
Sec. 1951.001. RATES FOR AUTOMOBILE INSURANCE
Sec. 1951.002. RULES
Sec. 1951.003. FORMER MILITARY VEHICLES
Sec. 1951.004. CRIMINAL PENALTY
CHAPTER 1951. GENERAL PROVISIONS: AUTOMOBILE INSURANCE
Sec. 1951.001. RATES FOR AUTOMOBILE INSURANCE. Rates for
personal and commercial automobile insurance in this state are
determined as provided by Chapter 2251 and Article 5.13-2.
(V.T.I.C. Art. 5.11, Sec. (c) (part).)
Sec. 1951.002. RULES. The commissioner may adopt and
enforce reasonable rules necessary to carry out the provisions of
this subtitle. (V.T.I.C. Art. 5.10.)
Sec. 1951.003. FORMER MILITARY VEHICLES. (a) In this
section, "former military vehicle" has the meaning assigned by
Section 504.502, Transportation Code.
(b) A rating plan that includes a classification applicable
to antique, privately owned passenger vehicles that are maintained
primarily for use in exhibitions, club activities, parades, or
other functions of public interest and that may be used
occasionally for other purposes must include in that classification
former military vehicles maintained for those uses. (V.T.I.C.
Art. 5.01-3.)
Sec. 1951.004. CRIMINAL PENALTY. (a) An insurer, or an
officer or representative of an insurer, commits an offense if the
insurer, officer, or representative violates:
(1) Section 1951.001, 1951.002, 1952.051, 1952.052,
1952.053, 1952.054, or 1952.055;
(2) Subchapter B, Chapter 1806;
(3) Chapter 254; or
(4) Article 5.01, 5.02, 5.03, 5.05, 5.06, 5.10, or
5.11.
(b) An offense under this section is a misdemeanor
punishable by a fine of not less than $100 or more than $500. (V.T.I.C. Art. 5.12-1 (part).)
CHAPTER 1952. POLICY PROVISIONS AND FORMS FOR
AUTOMOBILE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1952.001. APPLICABILITY OF CHAPTER
[Sections 1952.002-1952.050 reserved for expansion]
SUBCHAPTER B. POLICY FORMS AND PROVISIONS IN GENERAL
Sec. 1952.051. POLICY FORMS FOR AUTOMOBILE INSURANCE
Sec. 1952.052. USE OF PREVIOUSLY APPROVED OR ADOPTED
POLICY FORMS AUTHORIZED
Sec. 1952.053. WITHDRAWAL OF APPROVAL
Sec. 1952.054. REQUIRED DISCLOSURES REGARDING
SHORT-TERM POLICIES
Sec. 1952.055. CERTIFICATE OF INSURANCE AS SUBSTITUTE
FOR INSURANCE POLICY
Sec. 1952.056. REQUIRED PROVISION: COVERAGE FOR
CERTAIN SPOUSES
Sec. 1952.057. PROHIBITED PROVISION: PAYMENT ON
CONVICTION FOR DRUG OFFENSE
Sec. 1952.058. LOSS CONTROL INFORMATION AND SERVICES
REQUIRED
[Sections 1952.059-1952.100 reserved for expansion]
SUBCHAPTER C. UNINSURED OR UNDERINSURED MOTORIST COVERAGE
Sec. 1952.101. UNINSURED OR UNDERINSURED MOTORIST
COVERAGE REQUIRED
Sec. 1952.102. UNINSURED MOTOR VEHICLE
Sec. 1952.103. UNDERINSURED MOTOR VEHICLE
Sec. 1952.104. REQUIRED PROVISIONS RELATING TO
UNINSURED OR UNDERINSURED MOTORIST
COVERAGE
Sec. 1952.105. LIABILITY LIMITS
Sec. 1952.106. RECOVERY UNDER UNDERINSURED MOTORIST
COVERAGE
Sec. 1952.107. RECOVERY UNDER COLLISION OR COMBINED
COVERAGE
Sec. 1952.108. INSURER'S RIGHT OF RECOVERY
Sec. 1952.109. BURDEN OF PROOF IN DISPUTE
Sec. 1952.110. VENUE
[Sections 1952.111-1952.150 reserved for expansion]
SUBCHAPTER D. PERSONAL INJURY PROTECTION COVERAGE
Sec. 1952.151. PERSONAL INJURY PROTECTION
Sec. 1952.152. PERSONAL INJURY PROTECTION COVERAGE
REQUIRED
Sec. 1952.153. MAXIMUM REQUIRED AMOUNT OF PERSONAL
INJURY PROTECTION
Sec. 1952.154. LOSS OF INCOME BENEFITS
Sec. 1952.155. BENEFITS PAYABLE WITHOUT REGARD TO
FAULT OR COLLATERAL SOURCE; EFFECT ON
SUBROGATION
Sec. 1952.156. PAYMENT OF BENEFITS
Sec. 1952.157. ACTION FOR FAILURE TO PAY BENEFITS
Sec. 1952.158. EXCLUSION OF BENEFITS
Sec. 1952.159. OFFSET AGAINST LIABILITY CLAIM
Sec. 1952.160. INAPPLICABILITY TO ACCIDENT OR HEALTH
INSURANCE
Sec. 1952.161. CERTAIN COVERAGE UNAFFECTED
[Sections 1952.162-1952.200 reserved for expansion]
SUBCHAPTER E. SHORT-TERM LIABILITY INSURANCE FOR
CERTAIN MOTORISTS
Sec. 1952.201. APPLICABILITY OF SUBCHAPTER
Sec. 1952.202. DEFINITIONS
Sec. 1952.203. SHORT-TERM LIABILITY INSURANCE PROGRAM
Sec. 1952.204. AGENT LICENSE REQUIRED
Sec. 1952.205. SALE OF SHORT-TERM LIABILITY INSURANCE
POLICIES
[Sections 1952.206-1952.250 reserved for expansion]
SUBCHAPTER F. GARAGE INSURANCE
Sec. 1952.251. DEFINITIONS
Sec. 1952.252. GARAGE INSURANCE
[Sections 1952.253-1952.300 reserved for expansion]
SUBCHAPTER G. REPAIR OF MOTOR VEHICLES
Sec. 1952.301. LIMITATION ON PARTS, PRODUCTS, OR
REPAIR PERSONS OR FACILITIES
PROHIBITED
Sec. 1952.302. PROHIBITED ACTS IN CONNECTION WITH
REPAIR OF MOTOR VEHICLE
Sec. 1952.303. CONTRACTS BETWEEN INSURER AND REPAIR
PERSON OR FACILITY
Sec. 1952.304. PROVISION OF INFORMATION REGARDING
REPAIRS
Sec. 1952.305. NOTICE OF RIGHTS REGARDING REPAIR OF
MOTOR VEHICLE
Sec. 1952.306. COMPLAINTS
Sec. 1952.307. RULES
CHAPTER 1952. POLICY PROVISIONS AND FORMS FOR
AUTOMOBILE INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1952.001. APPLICABILITY OF CHAPTER. Except as
provided by Section 1952.201, this chapter applies to an insurer
writing automobile insurance in this state, including an insurance
company, corporation, reciprocal or interinsurance exchange,
mutual insurance company, association, Lloyd's plan, or other
insurer. (V.T.I.C. Art. 5.01, Sec. (a) (part).)
[Sections 1952.002-1952.050 reserved for expansion]
SUBCHAPTER B. POLICY FORMS AND PROVISIONS IN GENERAL
Sec. 1952.051. POLICY FORMS FOR AUTOMOBILE INSURANCE.
Notwithstanding Subsections (1)-(4) and (7), Article 5.06, policy
forms and endorsements for automobile insurance in this state are
regulated under Chapter 2301 and Article 5.13-2. (V.T.I.C. Art.
5.06, Sec. 12(a).)
Sec. 1952.052. USE OF PREVIOUSLY APPROVED OR ADOPTED POLICY
FORMS AUTHORIZED. An insurer may continue to use a policy form or
endorsement approved or adopted by the commissioner under Article
5.06 before June 11, 2003, on notification in writing to the
commissioner that the insurer will continue to use the policy form
or endorsement. (V.T.I.C. Art. 5.06, Sec. (12)(b).)
Sec. 1952.053. WITHDRAWAL OF APPROVAL. The commissioner
may, after notice and hearing, withdraw the commissioner's approval
of a policy or endorsement form that was approved by the
commissioner under Article 5.06. (V.T.I.C. Art. 5.06, Sec. (8).)
Sec. 1952.054. REQUIRED DISCLOSURES REGARDING SHORT-TERM
POLICIES. (a) An insurance policy or other document evidencing
proof of purchase of a personal automobile insurance policy written
for a term of less than 30 days may not be used to obtain an original
or renewal driver's license, an automobile registration or license
plates, or a motor vehicle inspection certificate. An insurance
policy or other document described by this subsection must contain
the following statement:
TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A
MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR
RENEWAL DRIVER'S LICENSE, OR AN AUTOMOBILE
REGISTRATION OR LICENSE PLATES.
(b) Before accepting any premium or fee for a personal
automobile insurance policy or binder for a term of less than 30
days, an agent or insurer must make the following written
disclosure to the applicant or insured:
TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO
OBTAIN A MOTOR VEHICLE INSPECTION CERTIFICATE, AN
ORIGINAL OR RENEWAL DRIVER'S LICENSE, OR AN AUTOMOBILE
REGISTRATION OR LICENSE PLATES.
(V.T.I.C. Art. 5.06, Secs. (9) (part), (10) (part).)
Sec. 1952.055. CERTIFICATE OF INSURANCE AS SUBSTITUTE FOR
INSURANCE POLICY. (a) An insurer that complies with applicable
requirements may issue and deliver a certificate of insurance as a
substitute for issuing and delivering an insurance policy adopted
or approved by the commissioner. The certificate must:
(1) be in the form prescribed by the commissioner; and
(2) refer to and identify the policy form for which the
certificate is substituted.
(b) A certificate under this section represents the
insurance policy and, when issued, is evidence that the certificate
holder is insured under the identified policy form. The
certificate is subject to the same limitations, conditions,
coverages, selection of options, and other provisions provided in
the policy, and the certificate must show and adequately reference
that policy information. The certificate or subsequent attachments
to the certificate must refer to all endorsements to the policy.
(c) A certificate under this section must be executed in the
same manner as though an insurance policy were issued. If an
insurer substitutes a certificate for a policy, the insurer shall
simultaneously provide the insured receiving the certificate with
an outline of coverages in the form and content approved by the
commissioner. At the insured's request, the insurer shall provide
the insured with a copy of the policy.
(d) The commissioner may adopt rules necessary to implement
this section, including a rule limiting the application of this
section to private passenger automobile insurance policies.
(V.T.I.C. Art. 5.06, Secs. (5), (6).)
Sec. 1952.056. REQUIRED PROVISION: COVERAGE FOR CERTAIN
SPOUSES. A personal automobile insurance policy or any similar
policy form adopted or approved by the commissioner under Article
5.06 or filed under Subchapter B, Chapter 2301, that covers
liability arising out of ownership, maintenance, or use of a motor
vehicle of a spouse who is otherwise insured by the policy must
contain a provision to continue coverage for the spouse during a
period of separation in contemplation of divorce. (V.T.I.C.
Art. 5.06-6.)
Sec. 1952.057. PROHIBITED PROVISION: PAYMENT ON CONVICTION
FOR DRUG OFFENSE. (a) An insurer may not deliver or issue for
delivery in this state an automobile insurance policy that provides
payment on final conviction of the named insured for loss for a
covered motor vehicle seized by federal or state law enforcement
officers as evidence in a case against the named insured under
Chapter 481, Health and Safety Code, or under the federal
Controlled Substances Act (21 U.S.C. Section 801 et seq.).
(b) For purposes of this section, a named insured for:
(1) an individual automobile insurance policy is the
person named on the declaration page of the policy and the person's
spouse; and
(2) an automobile insurance policy other than an
individual policy is the company or corporation named on the
declaration page of the policy and any officer, director, or
shareholder of that company or corporation. (V.T.I.C.
Art. 5.06-5.)
Sec. 1952.058. LOSS CONTROL INFORMATION AND SERVICES
REQUIRED. (a) An insurer must provide loss control information as
a prerequisite to writing commercial automobile liability
insurance in this state.
(b) The insurer shall provide to the insurer's
policyholders loss control information reasonably commensurate
with the risks, exposures, and experience of the insured's
business. To provide loss control information or services, the
insurer may:
(1) employ qualified personnel;
(2) retain qualified independent contractors;
(3) contract with the policyholder to provide
qualified loss control personnel and services; or
(4) use a combination of methods described by this
subsection.
(c) If there is evidence that an insurer is not providing
reasonable loss control information or is not using that
information in a reasonable manner to reduce losses, the
commissioner shall order a hearing to determine whether the insurer
is in compliance with this section. If the commissioner determines
that the insurer is not in compliance, the commissioner may impose
any sanction authorized by Chapter 82.
(d) An insurer or an agent or employee of the insurer is not
liable, and a cause of action does not arise against the insurer,
agent, or employee, for any accident based on the allegation that
the accident was caused or could have been prevented by a program,
information, inspection, or other activity or service undertaken by
the insurer for the prevention of accidents in connection with
operations of the insured. The immunity provided by this
subsection does not affect the liability of an insurer for
compensation or as otherwise provided in an insurance policy.
(e) Loss control information an insurer provides to an
insured under this section is not subject to discovery and is not
admissible as evidence in any civil proceeding.
(f) The commissioner, after holding a public hearing on the
proposed rules, may adopt reasonable rules for the enforcement of
this section. (V.T.I.C. Art. 5.06-4.)
[Sections 1952.059-1952.100 reserved for expansion]
SUBCHAPTER C. UNINSURED OR UNDERINSURED MOTORIST COVERAGE
Sec. 1952.101. UNINSURED OR UNDERINSURED MOTORIST COVERAGE
REQUIRED. (a) In this section, "uninsured or underinsured
motorist coverage" means the provisions of an automobile liability
insurance policy that provide for coverage in at least the limits
prescribed by Chapter 601, Transportation Code, that protects
insureds who are legally entitled to recover from owners or
operators of uninsured or underinsured motor vehicles damages for
bodily injury, sickness, disease, or death, or property damage
resulting from the ownership, maintenance, or use of any motor
vehicle.
(b) An insurer may not deliver or issue for delivery in this
state an automobile liability insurance policy, including a policy
provided through the Texas Automobile Insurance Plan Association
under Chapter 2151, that covers liability arising out of the
ownership, maintenance, or use of any motor vehicle unless the
insurer provides uninsured or underinsured motorist coverage in the
policy or supplemental to the policy.
(c) The coverage required by this subchapter does not apply
if any insured named in the insurance policy rejects the coverage in
writing. Unless the named insured requests in writing the coverage
required by this subchapter, the insurer is not required to provide
that coverage in or supplemental to a renewal insurance policy if
the named insured rejected the coverage in connection with an
insurance policy previously issued to the insured by the same
insurer or by an affiliated insurer. (V.T.I.C. Art. 5.06-1, Sec.
(1).)
Sec. 1952.102. UNINSURED MOTOR VEHICLE. (a) For purposes
of the coverage required by this subchapter, "uninsured motor
vehicle," subject to the terms of the coverage, is considered to
include an insured motor vehicle as to which the insurer providing
liability insurance is unable because of insolvency to make payment
with respect to the legal liability of the insured within the limits
specified in the insurance.
(b) The commissioner may, in the policy forms filed under
Subchapter B, Chapter 2301, allow "uninsured motor vehicle" to be
defined or, in policy forms adopted under Article 5.06, define
"uninsured motor vehicle," to exclude certain motor vehicles whose
operators are in fact uninsured. (V.T.I.C. Art. 5.06-1, Secs.
(2)(a), (c).)
Sec. 1952.103. UNDERINSURED MOTOR VEHICLE. For purposes
of the coverage required by this subchapter, "underinsured motor
vehicle" means an insured motor vehicle on which there is
collectible liability insurance coverage with limits of liability
for the owner or operator that were originally lower than, or have
been reduced by payment of claims arising from the same accident to,
an amount less than the limit of liability stated in the
underinsured coverage of the insured's policy. (V.T.I.C.
Art. 5.06-1, Sec. (2)(b).)
Sec. 1952.104. REQUIRED PROVISIONS RELATING TO UNINSURED OR
UNDERINSURED MOTORIST COVERAGE. The portion of a policy form
adopted under Article 5.06 or filed as provided by Subchapter B,
Chapter 2301, to provide coverage under this subchapter must:
(1) provide that, regardless of the number of persons
insured, policies or bonds applicable, vehicles involved, or claims
made, the total aggregate limit of liability to any one person who
sustains bodily injury or property damage as the result of a single
occurrence may not exceed the limit of liability for those
coverages as stated in the insurance policy and that the total
aggregate limit of liability to all claimants, if more than one, may
not exceed the total limit of liability per occurrence as stated in
the policy;
(2) provide for the exclusion of the recovery of
damages for bodily injury or property damage, or both, resulting
from the intentional acts of the insured; and
(3) require that, for the insured to recover under the
uninsured motorist coverage if the owner or operator of any motor
vehicle that causes bodily injury or property damage to the insured
is unknown, actual physical contact must have occurred between the
motor vehicle owned or operated by the unknown person and the person
or property of the insured. (V.T.I.C. Art. 5.06-1, Sec. (2)(d).)
Sec. 1952.105. LIABILITY LIMITS. (a) The limits of
liability for bodily injury, sickness, disease, or death must be
offered to an insured in the amounts desired by the insured, but not
in amounts greater than the limits of liability specified in the
bodily injury liability provisions of the insured's policy.
(b) Subject to a deductible amount of $250, coverage for
property damage must be offered to an insured in the amounts desired
by the insured, but not in amounts greater than the limits of
liability specified in the property damage liability provisions of
the insured's policy.
(c) Notwithstanding Subsections (a) and (b), amounts of
liability limits for bodily injury, sickness, disease, or death and
amounts for coverage for property damage may not be offered in
amounts less than those prescribed by Chapter 601, Transportation
Code. (V.T.I.C. Art. 5.06-1, Secs. (3), (4)(a).)
Sec. 1952.106. RECOVERY UNDER UNDERINSURED MOTORIST
COVERAGE. Underinsured motorist coverage must provide for payment
to the insured of all amounts that the insured is legally entitled
to recover as damages from owners or operators of underinsured
motor vehicles because of bodily injury or property damage, not to
exceed the limit specified in the insurance policy, and reduced by
the amount recovered or recoverable from the insurer of the
underinsured motor vehicle. (V.T.I.C. Art. 5.06-1, Sec. (5).)
Sec. 1952.107. RECOVERY UNDER COLLISION OR COMBINED
COVERAGE. (a) An insured who has collision coverage and
uninsured or underinsured property damage liability coverage may
recover under the coverage the insured chooses.
(b) If neither the collision coverage or the uninsured or
underinsured property damage liability coverage is sufficient
alone to cover all damage resulting from a single occurrence, the
insured may recover under both coverages. If recovering under both
coverages, the insured shall designate one coverage as the primary
coverage and pay the deductible applicable to that coverage. The
primary coverage must be exhausted before any recovery is made
under the secondary coverage.
(c) If both the primary and secondary coverages are used to
pay damages from a single occurrence, the insured may not be
required to pay the deductible applicable to the secondary coverage
when the amount of the deductible otherwise applicable to the
secondary coverage is the same as or less than the amount of the
deductible applicable to the primary coverage. If both coverages
are used to pay damages from a single occurrence and the amount of
the deductible otherwise applicable to the secondary coverage is
greater than the amount of the deductible applicable to the primary
coverage, the insured shall pay the difference between the amount
of the two deductibles with respect to the secondary coverage.
(d) The insured may not recover under both the primary and
secondary coverages more than the actual damages suffered.
(V.T.I.C. Art. 5.06-1, Sec. (4)(b).)
Sec. 1952.108. INSURER'S RIGHT OF RECOVERY. (a) An insurer
that makes a payment to any person under any coverage required by
this subchapter is subject to the terms of that coverage and, to the
extent of the payment, is entitled to the proceeds of any settlement
or judgment resulting from the exercise of any right of recovery of
the person to whom the payment is made against any person or
organization legally responsible for the bodily injury, sickness,
disease, or death for which the payment is made, including the
proceeds recoverable from the assets of an insolvent insurer.
(b) If, under an insurance policy issued under this
subchapter, an insurer makes a payment as a result of the insolvency
of another insurer:
(1) the insolvent insurer's insured shall be given
credit to the extent of the paying insurer's payment in any judgment
obtained against the insured with respect to the insured's legal
liability for damages described by Subsection (a); and
(2) subject to Subchapter F, Chapter 462, the paying
insurer has the right to proceed directly against the insolvent
insurer or that insurer's receiver, and in pursuing that right the
paying insurer has any rights that the insolvent insurer's insured
might otherwise have had if the insured had made the payment.
(V.T.I.C. Art. 5.06-1, Sec. (6).)
Sec. 1952.109. BURDEN OF PROOF IN DISPUTE. The insurer has
the burden of proof in a dispute as to whether a motor vehicle is
uninsured. (V.T.I.C. Art. 5.06-1, Sec. (7).)
Sec. 1952.110. VENUE. Notwithstanding Section 15.032,
Civil Practice and Remedies Code, an action against an insurer in
relation to the coverage provided under this subchapter, including
an action to enforce that coverage, may be brought only in the
county in which:
(1) the policyholder or beneficiary instituting the
action resided at the time of the accident involving the uninsured
or underinsured motor vehicle; or
(2) the accident occurred. (V.T.I.C. Art. 5.06-1,
Sec. (8).)
[Sections 1952.111-1952.150 reserved for expansion]
SUBCHAPTER D. PERSONAL INJURY PROTECTION COVERAGE
Sec. 1952.151. PERSONAL INJURY PROTECTION. "Personal
injury protection" consists of provisions of an automobile
liability insurance policy that provide for payment to the named
insured in the policy, members of the insured's household, and any
authorized operator or passenger of the named insured's motor
vehicle, including a guest occupant, of all reasonable expenses
that:
(1) arise from an accident;
(2) are incurred not later than the third anniversary
of the date of the accident; and
(3) are for:
(A) necessary medical, surgical, x-ray, or
dental services, including prosthetic devices, and necessary
ambulance, hospital, professional nursing, or funeral services;
(B) in the case of an income producer,
replacement of income lost as the result of the accident; or
(C) in the case of a person injured in the
accident who was not an income or wage producer at the time of the
accident, reimbursement of necessary and reasonable expenses
incurred for essential services ordinarily performed by the injured
person for care and maintenance of the family or family household.
(V.T.I.C. Art. 5.06-3, Sec. (b) (part).)
Sec. 1952.152. PERSONAL INJURY PROTECTION COVERAGE
REQUIRED. (a) An insurer may not deliver or issue for delivery in
this state an automobile liability insurance policy, including a
policy provided through the Texas Automobile Insurance Plan
Association under Chapter 2151, that covers liability arising out
of the ownership, maintenance, or use of any motor vehicle unless
the insurer provides personal injury protection coverage in the
policy or supplemental to the policy.
(b) The coverage required by this subchapter does not apply
if any insured named in the insurance policy rejects the coverage in
writing. Unless the named insured requests in writing the coverage
required by this subchapter, the insurer is not required to provide
that coverage in or supplemental to a renewal insurance policy if
the named insured rejected the coverage in connection with an
insurance policy previously issued to the insured by the same
insurer or by an affiliated insurer. (V.T.I.C. Art. 5.06-3, Sec.
(a).)
Sec. 1952.153. MAXIMUM REQUIRED AMOUNT OF PERSONAL INJURY
PROTECTION. This subchapter does not require an insurer to provide
personal injury protection coverage in an amount that exceeds
$2,500 for all benefits, in the aggregate, for each person.
(V.T.I.C. Art. 5.06-3, Sec. (b) (part).)
Sec. 1952.154. LOSS OF INCOME BENEFITS. An insurer
providing loss of income benefits under coverage required by this
subchapter may require that the insured, as a condition of
receiving those benefits, provide the insurer with reasonable
medical proof of the insured's injury causing loss of income.
(V.T.I.C. Art. 5.06-3, Sec. (b) (part).)
Sec. 1952.155. BENEFITS PAYABLE WITHOUT REGARD TO FAULT OR
COLLATERAL SOURCE; EFFECT ON SUBROGATION. (a) The benefits under
coverage required by this subchapter are payable without regard to:
(1) the fault or nonfault of the named insured or
recipient in causing or contributing to the accident; and
(2) any collateral source of medical, hospital, or
wage continuation benefits.
(b) An insurer paying benefits under coverage required by
this subchapter does not have a right of subrogation or claim
against any other person or insurer to recover any benefits by
reason of the alleged fault of the other person in causing or
contributing to the accident. (V.T.I.C. Art. 5.06-3, Sec. (c).)
Sec. 1952.156. PAYMENT OF BENEFITS. (a) Subject to the
requirements of this section and Section 1952.157, an insurer shall
pay benefits under the coverage required by this subchapter
periodically as claims for those benefits arise, but not later than
the 30th day after the date the insurer receives satisfactory proof
of a claim.
(b) The coverage required by this subchapter may:
(1) prescribe a period of not less than six months
after the date of an accident within which the original proof of
loss with respect to a claim for benefits must be presented to the
insurer; and
(2) provide that an insurer may require reasonable
medical proof of an alleged recurrence of an injury for which an
original claim for benefits was made if a lapse occurs in the period
of total disability or in the medical treatment of an injured person
who:
(A) has received benefits under that coverage;
and
(B) subsequently claims additional benefits
based on the alleged recurrence.
(c) The aggregate benefits payable under the coverage
required by this subchapter to any person may not exceed the maximum
limits prescribed in the insurance policy. (V.T.I.C. Art. 5.06-3,
Sec. (d) (part).)
Sec. 1952.157. ACTION FOR FAILURE TO PAY BENEFITS. (a) If
the insurer fails to pay benefits under the coverage required by
this subchapter when due, the person entitled to those benefits may
bring an action in contract to recover the benefits.
(b) If the insurer is required to pay benefits described by
Subsection (a), the person entitled to the benefits is entitled to
recover reasonable attorney's fees, a penalty of 12 percent, and
interest at the legal rate from the date those amounts became
overdue. (V.T.I.C. Art. 5.06-3, Sec. (d) (part).)
Sec. 1952.158. EXCLUSION OF BENEFITS. An insurer shall
exclude benefits to an insured or the insured's personal
representative under the coverage required by this subchapter if
the insured's conduct contributed to the injury the insured
sustained and that conduct:
(1) involved intentionally causing injury to the
insured; or
(2) occurred while committing a felony or while
seeking to elude lawful apprehension or arrest by a law enforcement
official. (V.T.I.C. Art. 5.06-3, Sec. (e).)
Sec. 1952.159. OFFSET AGAINST LIABILITY CLAIM. (a) If a
liability claim is made by a guest or passenger described by Section
1952.151 against the owner or operator of the motor vehicle in which
the guest or passenger was riding or against the owner's or
operator's liability insurer, the owner or operator of the motor
vehicle or the owner's or operator's liability insurer is entitled
to an offset, credit, or deduction against any award made to the
guest or passenger in an amount equal to the amounts paid by the
owner, the operator, or the owner's or operator's automobile
liability insurer to the guest or passenger under personal injury
protection.
(b) This subchapter does not authorize a direct action
against a liability insurer if that right does not presently exist
at law. (V.T.I.C. Art. 5.06-3, Sec. (h).)
Sec. 1952.160. INAPPLICABILITY TO ACCIDENT OR HEALTH
INSURANCE. This subchapter applies only to an automobile insurance
policy subject to this subtitle or Subchapter A, Chapter 5, and does
not apply to any other accident or health insurance policy,
regardless of whether the accident or health insurance policy
provides indemnity against automobile-connected injuries.
(V.T.I.C. Art. 5.06-3, Sec. (f).)
Sec. 1952.161. CERTAIN COVERAGE UNAFFECTED. This
subchapter does not:
(1) affect the offering of medical payments coverage,
disability benefits, or accidental death benefits, as presently
prescribed by the commissioner; or
(2) prevent an insurer from providing benefits broader
than the minimum benefits described by this subchapter, subject to
the rules prescribed by the commissioner. (V.T.I.C. Art. 5.06-3,
Sec. (g).)
[Sections 1952.162-1952.200 reserved for expansion]
SUBCHAPTER E. SHORT-TERM LIABILITY INSURANCE FOR
CERTAIN MOTORISTS
Sec. 1952.201. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to an insurer authorized to write automobile
insurance in this state, including an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other entity. (V.T.I.C. Art. 5.01C, Sec. 1(1).)
Sec. 1952.202. DEFINITIONS. In this subchapter:
(1) "Motor vehicle" means any private passenger
vehicle or utility type vehicle that has a gross weight of not more
than 25,000 pounds.
(2) "Short-term liability insurance policy" means an
insurance policy that:
(A) provides coverage for at least 24 hours but
not for more than one week;
(B) meets the requirements of Chapter 601,
Transportation Code;
(C) covers liability for bodily injury, death,
and property damage arising from the use or operation of a motor
vehicle; and
(D) is not insurance assigned to an authorized
insurer by the Texas Automobile Insurance Plan Association under
Section 2151.102(a). (V.T.I.C. Art. 5.01C, Secs. 1(2), (3).)
Sec. 1952.203. SHORT-TERM LIABILITY INSURANCE PROGRAM. (a)
The commissioner by rule may establish a program to provide for the
sale of short-term liability insurance policies to nonresident
motorists who are visiting this state.
(b) The commissioner may negotiate an agreement with any
insurer under which the insurer will sell insurance policies
described by this section. (V.T.I.C. Art. 5.01C, Sec. 2.)
Sec. 1952.204. AGENT LICENSE REQUIRED. A person
representing an insurer in selling short-term liability insurance
policies under this subchapter must be licensed under Title 13.
(V.T.I.C. Art. 5.01C, Sec. 3.)
Sec. 1952.205. SALE OF SHORT-TERM LIABILITY INSURANCE
POLICIES. An insurer selling short-term liability insurance
policies under this subchapter shall use policy forms adopted by
the commissioner under Article 5.06 or filed and in effect as
provided by Subchapter B, Chapter 2301, as applicable, unless the
insurer is exempt from using those forms. (V.T.I.C. Art. 5.01C,
Sec. 4.)
[Sections 1952.206-1952.250 reserved for expansion]
SUBCHAPTER F. GARAGE INSURANCE
Sec. 1952.251. DEFINITIONS. In this subchapter:
(1) "Garage customer" means a person or organization
other than:
(A) the named insured under a garage insurance
policy;
(B) an employee, director, officer, shareholder,
partner, or agent of the named insured; or
(C) a resident of the same household as:
(i) the named insured; or
(ii) an employee, director, officer,
shareholder, partner, or agent of the named insured.
(2) "Garage insurance" means automobile insurance as
defined by Article 5.01 issued to a named insured who is engaged in
the business of selling, servicing, or repairing motor vehicles as
defined by commissioner rule or order. (V.T.I.C. Art. 5.06-2, Sec.
(1) (part).)
Sec. 1952.252. GARAGE INSURANCE. (a) A garage insurance
policy may provide that a garage customer is not an insured under
the policy and that the coverage under the policy does not apply to
a garage customer except to the extent that any other insurance
coverage that is collectible and available to the garage customer
is not equal to the minimum financial responsibility limits
specified by Chapter 601, Transportation Code.
(b) Notwithstanding any provision to the contrary in
another insurance policy as to whether the insurance coverage
described by Subsection (a) that is provided under that policy is
primary, excess, or contingent insurance, or otherwise, the other
insurance coverage is the primary insurance as to the garage
customer.
(c) A garage insurance policy containing a provision
described by Subsection (a) may not cover a garage customer except
to the extent permitted by this section, notwithstanding the terms
of the other insurance policy providing coverage described by
Subsection (a). (V.T.I.C. Art. 5.06-2, Secs. (1) (part), (2).)
[Sections 1952.253-1952.300 reserved for expansion]
SUBCHAPTER G. REPAIR OF MOTOR VEHICLES
Sec. 1952.301. LIMITATION ON PARTS, PRODUCTS, OR REPAIR
PERSONS OR FACILITIES PROHIBITED. (a) Except as provided by rules
adopted by the commissioner, under an automobile insurance policy
that is delivered, issued for delivery, or renewed in this state, an
insurer may not directly or indirectly limit the insurer's coverage
under a policy covering damage to a motor vehicle by:
(1) specifying the brand, type, kind, age, vendor,
supplier, or condition of parts or products that may be used to
repair the vehicle; or
(2) limiting the beneficiary of the policy from
selecting a repair person or facility to repair damage to the
vehicle.
(b) In settling a liability claim by a third party against
an insured for property damage claimed by the third party, an
insurer may not require the third-party claimant to have repairs
made by a particular repair person or facility or to use a
particular brand, type, kind, age, vendor, supplier, or condition
of parts or products. (V.T.I.C. Art. 5.07-1, Secs. (a), (g).)
Sec. 1952.302. PROHIBITED ACTS IN CONNECTION WITH REPAIR OF
MOTOR VEHICLE. In connection with the repair of damage to a motor
vehicle covered under an automobile insurance policy, an insurer,
an employee or agent of an insurer, an insurance adjuster, or an
entity that employs an insurance adjuster may not:
(1) solicit or accept a referral fee or gratuity in
exchange for referring a beneficiary or third-party claimant to a
repair person or facility to repair the damage;
(2) state or suggest, either orally or in writing, to a
beneficiary that the beneficiary must use a specific repair person
or facility or a repair person or facility identified on a preferred
list compiled by an insurer for the damage repair or parts
replacement to be covered by the policy; or
(3) restrict the right of a beneficiary or third-party
claimant to choose a repair person or facility by requiring the
beneficiary or third-party claimant to travel an unreasonable
distance to repair the damage. (V.T.I.C. Art. 5.07-1, Sec. (b).)
Sec. 1952.303. CONTRACTS BETWEEN INSURER AND REPAIR PERSON
OR FACILITY. (a) A contract between an insurer and a repair person
or facility, including an agreement under which the repair person
or facility agrees to extend discounts for parts or labor to the
insurer in exchange for referrals by the insurer, may not result in
a reduction of coverage under an insured's automobile insurance
policy.
(b) The commissioner may adopt rules under Chapter 542 with
respect to any fraudulent activity of any party to an agreement
described by Subsection (a). (V.T.I.C. Art. 5.07-1, Secs. (c),
(h).)
Sec. 1952.304. PROVISION OF INFORMATION REGARDING
REPAIRS. An insurer may not prohibit a repair person or facility
from providing a beneficiary or third-party claimant with
information that states:
(1) the description, manufacturer, or source of the
parts used; and
(2) the amounts charged to the insurer for the parts
and related labor. (V.T.I.C. Art. 5.07-1, Sec. (d).)
Sec. 1952.305. NOTICE OF RIGHTS REGARDING REPAIR OF MOTOR
VEHICLE. (a) At the time a motor vehicle is presented to an
insurer, an insurance adjuster, or other person in connection with
a claim for damage repair, the insurer, insurance adjuster, or
other person shall provide to the beneficiary or third-party
claimant notice of the provisions of this subchapter.
(b) The commissioner shall adopt a rule establishing the
method or methods insurers must use to comply with the notice
provisions of this section. (V.T.I.C. Art. 5.07-1, Sec. (e).)
Sec. 1952.306. COMPLAINTS. A beneficiary, third-party
claimant, or repair person or facility may submit a written,
documented complaint to the department with respect to an alleged
violation of this subchapter. (V.T.I.C. Art. 5.07-1, Sec. (f).)
Sec. 1952.307. RULES. Rules adopted by the commissioner to
implement this subchapter must include requirements that:
(1) any limitation described by Section 1952.301(a) be
clearly and prominently displayed on the face of the insurance
policy or certificate in lieu of an insurance policy; and
(2) the insured give written consent to a limitation
described by Section 1952.301(a) after the insured is notified
orally and in writing of the limitation at the time the insurance
policy is purchased. (V.T.I.C. Art. 5.07-1, Sec. (i).)
[Chapters 1953-2000 reserved for expansion]
SUBTITLE D. FIRE INSURANCE AND ALLIED LINES,
INCLUDING RESIDENTIAL PROPERTY INSURANCE
CHAPTER 2001. GENERAL PROVISIONS: FIRE INSURANCE AND ALLIED
LINES, INCLUDING RESIDENTIAL PROPERTY INSURANCE
Sec. 2001.001. APPLICABILITY OF SUBTITLE
Sec. 2001.002. RATES
Sec. 2001.003. AUTHORITY TO REQUIRE SWORN STATEMENTS
Sec. 2001.004. AUTHORITY TO INSPECT AND TAKE TESTIMONY
REGARDING RECORDS
Sec. 2001.005. AUTHORITY TO REQUIRE PROVISION OF DATA
Sec. 2001.006. REPORT OF INFORMATION RELATING TO
CERTAIN FIRE LOSSES
Sec. 2001.007. CRIMINAL PENALTY
Sec. 2001.008. IMMUNITY FROM PROSECUTION
Sec. 2001.009. LIMITATION ON COMPENSATION AND EXPENSES
Sec. 2001.010. PUBLIC GUIDE RELATING TO COMMERCIAL
PROPERTY RATING
CHAPTER 2001. GENERAL PROVISIONS: FIRE INSURANCE AND ALLIED
LINES, INCLUDING RESIDENTIAL PROPERTY INSURANCE
Sec. 2001.001. APPLICABILITY OF SUBTITLE. (a) Each
insurance policy or contract insuring property in this state
against loss by fire, including a policy or contract or portion of a
policy or contract that insures the shore end of a marine risk
against loss by fire, must be issued in accordance with:
(1) this chapter;
(2) Section 403.002;
(3) Subchapter C, Chapter 5;
(4) Subchapter H, Chapter 544;
(5) Subchapter D, Chapter 1806; and
(6) Chapters 252, 2002, 2003, 2004, 2005, 2006, and
2171.
(b) An insurer issuing an insurance policy or contract
described by Subsection (a), including a fire insurance company,
marine insurance company, fire and marine insurance company, and
fire and tornado insurance company, is governed by the laws
described by Subsection (a).
(c) This section applies to an insurer or to an insurance
policy or contract regardless of:
(1) the kind and character of property insured;
(2) whether the property is:
(A) fixed or movable;
(B) stationary or in transit; or
(C) consigned or billed for shipment inside or
outside the boundaries of this state or to a foreign country;
(3) whether the insurer is organized:
(A) under the laws of this state, another state,
territory, or possession of the United States, or a foreign
country; or
(B) by authority of the federal government; or
(4) the kind of insurer or the name of the insurer
issuing the policy or contract. (V.T.I.C. Art. 5.27 (part).)
Sec. 2001.002. RATES. (a) Rates for all lines of insurance
subject to a law described by Section 2001.001(a) are determined as
provided by Chapter 2251 and Article 5.13-2.
(b) The requirement imposed by Subsection (a) does not
affect the requirement for the commissioner to conduct inspections
of commercial property and prescribe a manual of rules and rating
schedules for commercial property under a law described by Section
2001.001(a). (V.T.I.C. Art. 5.25, Sec. (b); Art. 5.28, Sec. (d).)
Sec. 2001.003. AUTHORITY TO REQUIRE SWORN STATEMENTS. For
an insurer described by Section 2001.001, the department may
require from the insurer or a director, officer, representative, or
agent of the insurer a sworn statement covering any period that
states:
(1) the rates and premiums collected for fire
insurance on each class of risks and on all property in this state;
(2) the causes of fire, if known to the insurer or
individual or if the insurer or individual possesses relevant
information or data or can obtain the information or data at
reasonable expense; and
(3) all necessary facts and information to allow the
department to determine enforcement and to enforce a law described
by Section 2001.001(a). (V.T.I.C. Art. 5.28, Sec. (a) (part).)
Sec. 2001.004. AUTHORITY TO INSPECT AND TAKE TESTIMONY
REGARDING RECORDS. (a) The commissioner or a person authorized by
the commissioner may:
(1) visit:
(A) a general, local, or other office of an
insurer engaged in the business of insurance in this state;
(B) the insurer's home office located outside
this state, if applicable; and
(C) the office of any of the insurer's officers,
directors, agents, or other representatives; and
(2) require the insurer or an officer, director,
agent, or other representative of the insurer to produce for
inspection by the commissioner or the commissioner's authorized
representative all of the books, records, and papers of the
insurer, officer, director, agent, or representative.
(b) The commissioner or the commissioner's authorized
representative may:
(1) examine and make or have made copies of the books,
records, and papers described by Subsection (a); and
(2) take testimony under oath regarding the books,
records, and papers and compel the attendance of witnesses for that
purpose. (V.T.I.C. Art. 5.28, Sec. (b).)
Sec. 2001.005. AUTHORITY TO REQUIRE PROVISION OF DATA. The
department may require:
(1) any or all of the fire insurance companies engaged
in the business of insurance in this state to jointly or separately
provide to the department any data the company or companies
possess, including maps, tariffs, inspection reports, and any data
affecting fire insurance risks in this state or any part of this
state; and
(2) any two or more of those companies or any joint
agents or representatives of the companies to provide to the
department for use in implementing a law described by Section
2001.001(a) any data the companies, agents, or representatives
possess. (V.T.I.C. Art. 5.28, Sec. (c).)
Sec. 2001.006. REPORT OF INFORMATION RELATING TO CERTAIN
FIRE LOSSES. (a) The state fire marshal, a fire marshal of a
political subdivision of this state, the chief of a fire department
in this state, or a peace officer in this state may request an
insurer investigating a fire loss of property in which damages or
losses exceed $1,000 to release information in the insurer's
possession relating to that loss. The insurer shall release the
requested information and cooperate with the official. The
requested information may include only:
(1) an insurance policy relevant to the fire loss
under investigation and any application for a policy;
(2) policy premium payment records;
(3) the history of the insured's previous claims for
fire loss; and
(4) material relating to the investigation of the
loss, including:
(A) statements of any person;
(B) proof of loss; or
(C) other relevant evidence.
(b) This section does not authorize a public official or
agency to adopt or require any type of periodic report by an
insurer.
(c) An insurer that has reason to suspect that a fire loss to
the property of a person insured by the insurer was caused by
incendiary means and that receives a request for information under
Subsection (a) shall:
(1) notify the requesting official and provide the
official with all relevant material acquired during the insurer's
investigation of the fire loss;
(2) cooperate with and take any action requested of
the insurer by a law enforcement agency; and
(3) permit a person ordered by a court to inspect any
of the insurer's records relating to the insurance policy and the
loss.
(d) In the absence of fraud or malice, an insurer or a person
who provided information on the insurer's behalf is not liable for
damages in a civil action or subject to criminal prosecution for an
oral or written statement made or any other action taken that is
necessary to supply information required under this section.
(e) An official or a department or agency employee who
receives information under this section shall maintain the
confidentiality of the information until the information is
required to be released in a criminal or civil proceeding.
(f) An official described by Subsection (a) may be required
to testify as to any information in the official's possession
regarding the fire loss of property in a civil action in which a
person seeks recovery for the loss from an insurer under an
insurance policy.
(g) A person may not intentionally:
(1) refuse to release information requested under
Subsection (a);
(2) refuse to notify the fire marshal of a fire loss
required to be reported under Subsection (c);
(3) refuse to provide the fire marshal with relevant
information required to be provided under Subsection (c); or
(4) fail to maintain the confidentiality of
information that is confidential under Subsection (e). (V.T.I.C.
Art. 5.46.)
Sec. 2001.007. CRIMINAL PENALTY. (a) An officer or
director of a fire insurance company described by Section 2001.001,
or an agent or person acting on behalf of or employed by a fire
insurance company described by Section 2001.001, commits an offense
if the officer, director, agent, or person intentionally:
(1) performs or causes to be performed, alone or in
conjunction with a corporation, company, or person, an act
prohibited by a law described by Section 2001.001(a);
(2) fails to perform an act required to be performed by
a law described by Section 2001.001(a);
(3) permits an act prohibited by a law described by
Section 2001.001(a); or
(4) otherwise violates a law described by Section
2001.001(a).
(b) An offense under this section is a misdemeanor
punishable by a fine of not less than $300 or more than $1,000.
(V.T.I.C. Art. 5.48-1.)
Sec. 2001.008. IMMUNITY FROM PROSECUTION. (a) A person is
not excused from giving testimony or producing evidence when
legally required at the trial of another person charged with
violating a law relating to fire insurance on the ground that the
testimony or evidence may incriminate the person under the laws of
this state.
(b) A person may not be prosecuted or subjected to a penalty
or forfeiture for or because of a transaction, matter, or thing
about which the person testifies or produces evidence under this
section. (V.T.I.C. Art. 5.48-2.)
Sec. 2001.009. LIMITATION ON COMPENSATION AND EXPENSES.
The total amount of necessary compensation for experts, clerical
personnel, and other department employees and necessary expenses,
including travel expenses, incurred by the department in
implementing the laws described by Section 2001.001(a) may not
exceed the amount of the assessments on the gross premiums of all
fire insurance companies engaged in the business of insurance in
this state. (V.T.I.C. Art. 5.51 (part).)
Sec. 2001.010. PUBLIC GUIDE RELATING TO COMMERCIAL PROPERTY
RATING. (a) In this section, "rating agency" means a public or
private legal entity that is authorized to conduct commercial
property rating in this state.
(b) The commissioner shall make available to the public a
generalized guide that:
(1) summarizes the procedures used by the department
or other rating agency to rate nonresidential commercial buildings
in this state; and
(2) specifies how different construction elements and
techniques used in a building project affect the insurance rating
of the completed building.
(c) The commissioner may charge a reasonable fee to cover
the administrative costs of producing and distributing the guide.
(d) The commissioner shall review the information in the
guide in January of each odd-numbered year and shall revise the
guide as necessary to incorporate any changes that have occurred in
the preceding biennium that affect the information. (V.T.I.C. Art. 5.25-1.)
CHAPTER 2002. POLICY PROVISIONS AND FORMS FOR FIRE INSURANCE AND
ALLIED LINES, INCLUDING RESIDENTIAL PROPERTY INSURANCE
SUBCHAPTER A. POLICY PROVISIONS
Sec. 2002.001. ENDORSEMENTS REDUCING AMOUNT OF
COVERAGE
Sec. 2002.002. LIEN ON INSURED PROPERTY
Sec. 2002.003. COVERAGES FOR SPOUSES AND FORMER
SPOUSES
Sec. 2002.004. JEWELRY COVERAGE
Sec. 2002.005. COINSURANCE CLAUSES
Sec. 2002.006. PROVISIONS GOVERNING CERTAIN CONDITIONS
OR RISKS
[Sections 2002.007-2002.050 reserved for expansion]
SUBCHAPTER B. POLICY FORMS
Sec. 2002.051. POLICY FORMS AND ENDORSEMENTS FOR
RESIDENTIAL PROPERTY INSURANCE
Sec. 2002.052. APPLICABILITY OF OTHER LAW TO
RESIDENTIAL PROPERTY INSURANCE
[Sections 2002.053-2002.100 reserved for expansion]
SUBCHAPTER C. ITEMS PROVIDED TO POLICYHOLDER IN CONNECTION WITH
INSURANCE POLICY
Sec. 2002.101. RATE ANALYSIS
Sec. 2002.102. NOTICE OF RENEWAL
CHAPTER 2002. POLICY PROVISIONS AND FORMS FOR FIRE INSURANCE AND
ALLIED LINES, INCLUDING RESIDENTIAL PROPERTY INSURANCE
SUBCHAPTER A. POLICY PROVISIONS
Sec. 2002.001. ENDORSEMENTS REDUCING AMOUNT OF
COVERAGE. An insurer may not use an endorsement to a policy form to
which Article 5.35, Subchapter B, or Subchapter B, Chapter 2301,
applies that reduces the amount of coverage that would otherwise be
provided under the policy unless:
(1) the insured requests the endorsement; or
(2) the insurer provides the policyholder with a
written explanation of the change made by the endorsement before
the effective date of the change. (V.T.I.C. Art. 5.36.)
Sec. 2002.002. LIEN ON INSURED PROPERTY. A provision in an
insurance policy issued by an insurer subject to this subtitle or
Subchapter C, Chapter 5, is void if the provision states that the
encumbrance of the insured property by a lien of any character at
the time of or after the policy's issuance renders the policy void.
(V.T.I.C. Art. 5.37.)
Sec. 2002.003. COVERAGES FOR SPOUSES AND FORMER SPOUSES. A
homeowners insurance policy or fire insurance policy promulgated
under Article 5.35 or filed and in effect as provided by Subchapter
B, Chapter 2301, may not be delivered, issued for delivery, or
renewed in this state unless the policy contains the following
language: "It is understood and agreed that this policy, subject to
all other terms and conditions contained in this policy, when
covering residential community property, as defined by state law,
shall remain in full force and effect as to the interest of each
spouse covered, irrespective of divorce or change of ownership
between the spouses unless excluded by endorsement attached to this
policy until the expiration of the policy or until canceled in
accordance with the terms and conditions of this policy."
(V.T.I.C. Art. 5.35-1.)
Sec. 2002.004. JEWELRY COVERAGE. (a) In this section,
"personal property insurance" means insurance against damage to or
loss of tangible personal property, including coverage provided in
a homeowners insurance policy, residential fire and allied lines
insurance policy, or farm and ranch owners insurance policy.
(b) This section applies to each insurer that provides
personal property insurance in this state, including a county
mutual insurance company, farm mutual insurance company, Lloyd's
plan, and reciprocal or interinsurance exchange.
(c) An insurer that provides personal property insurance
coverage in this state for jewelry may elect to pay either:
(1) the stated value of the jewelry item; or
(2) the actual cost of replacing the jewelry item with
one of like kind and quality. (V.T.I.C. Art. 5.35-2.)
Sec. 2002.005. COINSURANCE CLAUSES. (a) Except as
otherwise provided by this section, an insurer subject to this
subtitle or Subchapter C, Chapter 5, may not issue an insurance
policy or contract covering property in this state that contains a
clause that:
(1) requires the insured to obtain or maintain a
larger amount of insurance than expressed in the policy or
contract; or
(2) in any way provides that the insured is liable as a
coinsurer with the insurer issuing the policy or contract for any
part of the loss or damage that may be caused by fire to the property
described in the policy or contract.
(b) A clause described by Subsection (a) is void.
(c) A coinsurance clause may be included in an insurance
policy written on cotton, grain, or other products in the process of
marketing, shipping, storing, or manufacturing.
(d) An insured may be given an option to accept an insurance
policy or contract that contains a clause described by Subsection
(a) covering a class of property other than the property described
by Subsection (c), a private dwelling, or a stock of merchandise
offered for sale at retail that has a value of less than $10,000, if
the insured is allowed a reduction in the premium rate for the
policy or contract. A clause to which this subsection applies is
valid and binding. The commissioner may promulgate the premium
rates that apply to a coinsurance clause under this subsection.
(e) The commissioner by order may authorize or require the
use of any form of coinsurance clause in connection with an
insurance policy that insures against the hazards of tornado,
windstorm, and hail on any class of property. The commissioner may
adopt rules with reference to:
(1) coinsurance clauses authorized or required by this
subsection and the use of those clauses; and
(2) credits in premium rates for the use of
coinsurance clauses authorized or required by this subsection.
(V.T.I.C. Art. 5.38.)
Sec. 2002.006. PROVISIONS GOVERNING CERTAIN CONDITIONS OR
RISKS. (a) This chapter; Sections 403.002, 2001.001-2001.006,
2001.009, and 2001.010; Subchapter H, Chapter 544; Subchapter D,
Chapter 1806; Chapters 2003, 2004, 2006, and 2171; and Articles
5.25, 5.25A, 5.25-3, 5.26, 5.27, 5.28, 5.29, 5.30, 5.31, 5.32,
5.34, 5.35, 5.39, 5.40, and 5.41 govern the following in the same
manner and to the same extent those provisions govern fire
insurance and fire insurance rates:
(1) insurance coverage for any of the following
conditions or risks:
(A) weather or climatic conditions, including
lightning, tornado, windstorm, hail, cyclone, rain, or frost and
freeze;
(B) earthquake or volcanic eruption;
(C) smoke or smudge;
(D) excess or deficiency of moisture;
(E) flood;
(F) the rising water of an ocean or an ocean's
tributary;
(G) bombardment, invasion, insurrection, riot,
civil war or commotion, military or usurped power, or any order of a
civil authority made to prevent the spread of a conflagration,
epidemic or catastrophe;
(H) vandalism or malicious mischief;
(I) strike or lockout;
(J) explosion, as provided by Subsection (b);
(K) water or other fluid or substance resulting
from:
(i) the breakage or leakage of a sprinkler,
pump, or other apparatus erected for extinguishing fire, or a water
pipe or other conduit or container; or
(ii) casual water entering a building
through a leak or opening in the building or by seepage through
building walls; or
(L) accidental damage to a sprinkler, pump, fire
apparatus, pipe, or other conduit or container described by
Paragraph (K)(i);
(2) premium rates in this state for the insurance
described by Subdivision (1); and
(3) all matters pertaining to the insurance described
by Subdivision (1), except as provided by this section with respect
to marine insurance as defined by Section 1807.001.
(b) In this section:
(1) "explosion" includes:
(A) the explosion of a pressure vessel, other
than a steam boiler of more than 15 pounds pressure, in a building
designed and used solely for residential purposes by not more than
four families;
(B) an explosion of any kind originating outside
of an insured building or outside of the building containing the
insured property;
(C) the explosion of a pressure vessel that does
not contain steam or that is not operated with steam coils or steam
jets; and
(D) an electric disturbance causing or
concomitant with an explosion in public service or public utility
property; and
(2) insurance coverage for explosion does not include
coverage for loss of or damage to any property of the insured
resulting from the explosion of or injury to:
(A) a boiler, heater, or other fired pressure
vessel;
(B) an unfired pressure vessel;
(C) a pipe or container connected with a boiler
or vessel described by Paragraph (A) or (B);
(D) an engine, turbine, compressor, pump, or
wheel;
(E) an apparatus generating, transmitting, or
using electricity; or
(F) any other machinery or apparatus connected
with or operated by a boiler, vessel, or machine described by
Paragraphs (A)-(E).
(c) This section does not apply to:
(1) a farm mutual insurance company operating under
Chapter 911;
(2) a county mutual insurance company operating under
Chapter 912;
(3) a mutual insurance company engaged in business
under Chapter 12, Title 78, Revised Statutes, before that chapter's
repeal by Section 18, Chapter 40, Acts of the 41st Legislature, 1st
Called Session, 1929, as amended by Section 1, Chapter 60, General
Laws, Acts of the 41st Legislature, 2nd Called Session, 1929, that
retains the rights and privileges under the repealed law to the
extent provided by those sections;
(4) the making of inspections or issuance of
certificates of inspections on a boiler, apparatus, or machinery
described by Subsection (b)(2), whether insured or otherwise; or
(5) the insurance of a vessel or craft, its cargo,
marine builder's risk, marine protection and indemnity, or another
risk commonly insured under a marine insurance policy, as
distinguished from an inland marine insurance policy. (V.T.I.C.
Art. 5.52, Secs. (a), (c); Art. 5.53 (part); Art. 5.54 (part).)
[Sections 2002.007-2002.050 reserved for expansion]
SUBCHAPTER B. POLICY FORMS
Sec. 2002.051. POLICY FORMS AND ENDORSEMENTS FOR
RESIDENTIAL PROPERTY INSURANCE. Notwithstanding Subsections
(a)-(j), Article 5.35, policy forms and endorsements for
residential property insurance in this state are regulated under
Subchapter A, Chapter 2301, and Article 5.13-2. (V.T.I.C. Art.
5.35, Sec. (k)(1), as added Acts 78th Leg., R.S., Ch. 206.)
Sec. 2002.052. APPLICABILITY OF OTHER LAW TO RESIDENTIAL
PROPERTY INSURANCE. An insurer may continue to use a policy form
or endorsement promulgated, approved, or adopted by the
commissioner under Article 5.35 before June 11, 2003, on
notification in writing to the commissioner that the insurer will
continue to use the policy form or endorsement. (V.T.I.C.
Art. 5.35, Sec. (k)(2), as added Acts 78th Leg., R.S., Ch. 206.)
[Sections 2002.053-2002.100 reserved for expansion]
SUBCHAPTER C. ITEMS PROVIDED TO POLICYHOLDER IN CONNECTION WITH
INSURANCE POLICY
Sec. 2002.101. RATE ANALYSIS. (a) On issuing a fire
insurance policy, an insurer engaged in the business of fire
insurance in this state shall provide the policyholder with a
written analysis of the rate or premium charged for the policy
showing the items of charge and credit that determine the rate or
premium.
(b) Subsection (a) does not apply if the insurer has
previously provided the policyholder with an analysis of the rate
or premium. (V.T.I.C. Art. 5.30, Sec. (a) (part).)
Sec. 2002.102. NOTICE OF RENEWAL. (a) An insurer,
including a farm mutual insurance company, county mutual insurance
company, Lloyd's plan, or reciprocal or interinsurance exchange,
that renews a homeowners insurance policy, fire and residential
allied lines insurance policy, farm and ranch owners insurance
policy, or farm and ranch insurance policy must provide the
policyholder with written notice of any difference between each
form of the policy offered to the policyholder on renewal and the
form of the policy held immediately before renewal.
(b) A notice provided under this section must be written in
plain language.
(c) The commissioner may adopt rules as necessary to implement this section. (V.T.I.C. Art. 5.45.)
CHAPTER 2003. PROCEDURES FOR EVALUATING FIRE LOSS RISK
SUBCHAPTER A. EVALUATING FIRE LOSS RISK
Sec. 2003.001. FIRE LOSS INFORMATION
Sec. 2003.002. FIRE SUPPRESSION RATINGS FOR BORDER
MUNICIPALITIES
Sec. 2003.003. CREDIT FOR REDUCING FIRE HAZARD
Sec. 2003.004. POLICYHOLDER CREDIT FOR REDUCING HAZARD
[Sections 2003.005-2003.050 reserved for expansion]
SUBCHAPTER B. MUNICIPAL FIRE LOSS LISTS
Sec. 2003.051. ANNUAL LIST OF INSURED FIRE LOSSES BY
MUNICIPALITY
Sec. 2003.052. MUNICIPALITY'S REQUEST FOR LIST; RETURN
REPORT
Sec. 2003.053. LIST CORRECTIONS; USE
Sec. 2003.054. CHARGE FOR LIST AND FIRE RECORD SYSTEM
Sec. 2003.055. DEPARTMENT AUTHORITY TO REQUIRE
PROVISION OF FIRE LOSS INFORMATION
Sec. 2003.056. DISCRETIONARY PROVISION OF LIST
[Sections 2003.057-2003.100 reserved for expansion]
SUBCHAPTER C. VOLUNTARY INSPECTION PROGRAM
Sec. 2003.101. DEFINITIONS
Sec. 2003.102. RIGHT TO VOLUNTARY INSPECTION OF
PROPERTY CONDITION
Sec. 2003.103. PLAN OF OPERATION
Sec. 2003.104. ELIGIBLE INSPECTORS
Sec. 2003.105. PRESUMPTION OF INSURABILITY
Sec. 2003.106. ENFORCEMENT
Sec. 2003.107. RULES
CHAPTER 2003. PROCEDURES FOR EVALUATING FIRE LOSS RISK
SUBCHAPTER A. EVALUATING FIRE LOSS RISK
Sec. 2003.001. FIRE LOSS INFORMATION. (a) The department
shall ascertain as soon as practicable the annual fire loss in this
state.
(b) The department shall, in a manner that will aid in
determining equitable insurance rates and methods to reduce annual
fire loss and insurance rates of this state or subdivisions of this
state:
(1) obtain, make, and maintain records regarding the
annual fire loss in this state; and
(2) collect data concerning the annual fire loss as
necessary to enable the department to classify:
(A) fire losses in this state;
(B) the causes of those fire losses;
(C) the amount of the premiums collected for fire
loss for each class of risk; and
(D) the amount paid for the fire losses.
(c) The commissioner may designate one or more advisory
organizations or other agencies to gather, audit, and compile the
fire loss experience of insurers. The insurers shall bear the costs
incurred under this subsection.
(d) To implement this section, the department may:
(1) employ clerical personnel, inspectors, experts,
and other assistants; and
(2) incur other necessary expenses. (V.T.I.C.
Art. 5.25, Sec. (a) (part).)
Sec. 2003.002. FIRE SUPPRESSION RATINGS FOR BORDER
MUNICIPALITIES. In assigning or evaluating a fire suppression
rating for a municipality at or near the border between this state
and another state or the United Mexican States, the commissioner
shall consider the existence and capabilities of a fire department
or volunteer fire department that:
(1) serves an adjoining or nearby municipality in the
other state or the United Mexican States; and
(2) by agreement or by long-standing practice provides
fire suppression services to the municipality in this state.
(V.T.I.C. Art. 5.25-3 (part).)
Sec. 2003.003. CREDIT FOR REDUCING FIRE HAZARD. The
commissioner may give a locality, municipality, or other political
subdivision credit for:
(1) each fire hazard that the locality, municipality,
or other political subdivision reduces or removes;
(2) additional fire-fighting equipment, increased
police protection, or any other equipment or improvement that tends
to reduce the fire hazard of the locality, municipality, or other
political subdivision; and
(3) a good fire record made by the locality,
municipality, or other political subdivision. (V.T.I.C.
Art. 5.33, Sec. (a).)
Sec. 2003.004. POLICYHOLDER CREDIT FOR REDUCING
HAZARD. (a) The commissioner may require an insurer to give
credit to a policyholder for a hazard that the policyholder reduces
or removes.
(b) For purposes of this section, the following actions
constitute a reduction in hazard by a policyholder:
(1) the installation of a new standard fire hydrant
approved by the department within the required distance of a risk,
as prescribed by the department; or
(2) the use of compressed air foam technology in
fire-fighting equipment.
(c) The insurer shall give credit in the proportion that the
hazard is reduced or removed and shall refund to the policyholder
the proportional part of the unearned premium charged for the
hazard that is reduced or removed. (V.T.I.C. Art. 5.33, Secs. (b),
(c), (d).)
[Sections 2003.005-2003.050 reserved for expansion]
SUBCHAPTER B. MUNICIPAL FIRE LOSS LISTS
Sec. 2003.051. ANNUAL LIST OF INSURED FIRE LOSSES BY
MUNICIPALITY. (a) The department shall compile for each
municipality in this state a list for distribution to the
municipality of the insured fire and lightning losses that:
(1) exceed $100; and
(2) are paid in the municipality for the preceding
statistical year under policy forms:
(A) adopted or approved by the commissioner and
authorized for use by Section 2301.052(b); or
(B) filed and in effect as provided by Section
2301.052(a).
(b) Each list must include:
(1) the name of each person recovering a loss under a
policy form described by Subsection (a);
(2) the address or location where the loss occurred;
and
(3) the amount paid by the insurer on the loss.
(c) The department shall develop each list from information
obtained from insurer reports of individual losses during the
statistical year. (V.T.I.C. Art. 5.25-2, Secs. 1, 2.)
Sec. 2003.052. MUNICIPALITY'S REQUEST FOR LIST; RETURN
REPORT. (a) The department shall provide to a municipality a copy
of the list compiled under Section 2003.051 for the municipality on
the request of the municipality or the municipality's authorized
agent or fire marshal.
(b) Each municipality shall investigate the information
contained in the list to determine the losses actually occurring
within the limits of the municipality. The municipality shall
report to the department:
(1) a list of the losses that actually occurred within
the limits of the municipality;
(2) a list of the losses that did not occur within the
limits of the municipality; and
(3) other evidence essential to establishing the
losses occurring in the municipality. (V.T.I.C. Art. 5.25-2, Secs.
3, 4.)
Sec. 2003.053. LIST CORRECTIONS; USE. The department
shall:
(1) make changes that the department considers
appropriate to correct the list compiled under Section 2003.051 for
a municipality; and
(2) use the corrected list to determine the fire
record credit or debit for the municipality for the next year.
(V.T.I.C. Art. 5.25-2, Sec. 5.)
Sec. 2003.054. CHARGE FOR LIST AND FIRE RECORD SYSTEM. The
commissioner shall set and collect a charge for compiling and
providing a list under this subchapter and as the commissioner
considers appropriate for administering the fire record system.
(V.T.I.C. Art. 5.25-2, Sec. 6.)
Sec. 2003.055. DEPARTMENT AUTHORITY TO REQUIRE PROVISION OF
FIRE LOSS INFORMATION. To accumulate statistical information for
the control and prevention of fires, the department may require
each municipality in this state and each insurer engaged in
business in this state to provide to the department a complete and
accurate report that lists all fire and lightning losses occurring
in this state that are reflected in the municipality's or insurer's
records. (V.T.I.C. Art. 5.25-2, Sec. 7.)
Sec. 2003.056. DISCRETIONARY PROVISION OF LIST. The
department is not required to provide a list compiled under this
subchapter if the fire record system is not in effect. (V.T.I.C.
Art. 5.25-2, Sec. 8.)
[Sections 2003.057-2003.100 reserved for expansion]
SUBCHAPTER C. VOLUNTARY INSPECTION PROGRAM
Sec. 2003.101. DEFINITIONS. In this subchapter:
(1) "Inspection" means a physical inspection of
property for which residential property insurance is sought.
(2) "Inspection certificate" means a certificate
issued under this subchapter by an inspector indicating that the
condition of property meets or exceeds minimum standards.
(3) "Inspector" means a person authorized by the
commissioner to perform inspections under this subchapter.
(4) "Minimum standards" means the standards adopted by
the commissioner by rule regarding the insurability of property
under this subchapter.
(5) "Residential property insurance" means insurance
against loss to real or tangible personal property at a fixed
location that is provided though a homeowners insurance policy, a
residential fire and allied lines insurance policy, or a farm and
ranch owners insurance policy. (V.T.I.C. Art. 5.33B, Sec. 2.)
Sec. 2003.102. RIGHT TO VOLUNTARY INSPECTION OF PROPERTY
CONDITION. A person with an insurable interest in real or tangible
personal property at a fixed location who desires to purchase
residential property insurance may obtain an independent
inspection of the condition of the property by an inspector
authorized to perform inspections under this subchapter. (V.T.I.C.
Art. 5.33B, Sec. 1.)
Sec. 2003.103. PLAN OF OPERATION. (a) The commissioner
shall adopt a plan of operation for the voluntary inspection
program.
(b) The plan of operation must include rules and standards
for the voluntary inspection program, including:
(1) the manner and scope of the inspections to be
performed;
(2) the contents of the written evaluation report;
(3) the form of the inspection certificate to be
issued;
(4) the term during which an inspection certificate is
valid;
(5) rules for the certification or licensing of
persons authorized to perform inspections under the program; and
(6) the fee that may be charged a person requesting an
inspection under the program. (V.T.I.C. Art. 5.33B, Sec. 3(a)
(part).)
Sec. 2003.104. ELIGIBLE INSPECTORS. Persons who may be
certified or licensed to perform inspections under this subchapter
include:
(1) a person licensed to perform real property
inspections under Chapter 1102, Occupations Code; and
(2) a designated employee or agent of a county or
municipality that chooses to establish a voluntary inspection
program to inspect residential properties within the territorial
limits of the county or municipality. (V.T.I.C. Art. 5.33B, Sec.
3(a) (part).)
Sec. 2003.105. PRESUMPTION OF INSURABILITY. (a) The
existence of an inspection certificate issued under this subchapter
creates a presumption that the condition of the property inspected
is adequate for the issuance of residential property insurance.
(b) If an inspection certificate is used in whole or in part
to determine insurability, an insurer may require as a condition of
issuing a residential property insurance policy that the applicant
for that insurance provide a written statement that there has not
been a material or substantial change to the property condition
since the date of the inspection certificate.
(c) An insurer who receives an inspection certificate may
not use the condition of the property as grounds to refuse to issue
or renew residential property insurance unless the insurer:
(1) reinspects the property; and
(2) specifies the areas of deficiency in the insurer's
declination letter. (V.T.I.C. Art. 5.33B, Sec. 4.)
Sec. 2003.106. ENFORCEMENT. The commissioner by rule may
provide for the use of any disciplinary procedure authorized by
this code to:
(1) maintain the integrity of the voluntary inspection
program; or
(2) ensure compliance with this subchapter. (V.T.I.C.
Art. 5.33B, Sec. 5.)
Sec. 2003.107. RULES. In addition to the plan of operation
adopted under Section 2003.103, the commissioner may adopt rules
that are appropriate to accomplish the purposes of this subchapter. (V.T.I.C. Art. 5.33B, Sec. 6.)
CHAPTER 2004. RESIDENTIAL PROPERTY INSURANCE IN UNDERSERVED AREAS
Sec. 2004.001. DEFINITION
Sec. 2004.002. DESIGNATION OF UNDERSERVED AREAS
Sec. 2004.003. AUTHORIZATION FOR ISSUANCE OF INSURANCE
Sec. 2004.004. EXCLUSION OF CERTAIN COVERAGE
Sec. 2004.005. AVAILABILITY OF COVERAGE
Sec. 2004.006. POLICY FORMS
Sec. 2004.007. INAPPLICABILITY OF CERTAIN LAWS TO
PREMIUMS
Sec. 2004.008. RATES
CHAPTER 2004. RESIDENTIAL PROPERTY INSURANCE IN UNDERSERVED AREAS
Sec. 2004.001. DEFINITION. In this chapter, "residential
property insurance" means insurance against loss to real or
tangible personal property at a fixed location that is provided
through a homeowners insurance policy, residential fire and allied
lines insurance policy, or farm and ranch owners insurance policy.
(V.T.I.C. Art. 5.35-3, Sec. 1(a) (part).)
Sec. 2004.002. DESIGNATION OF UNDERSERVED AREAS. (a) The
commissioner by rule may designate an area as an underserved area
for residential property insurance.
(b) In determining which areas to designate as underserved,
the commissioner shall consider:
(1) whether residential property insurance is not
reasonably available to a substantial number of owners of insurable
property in the area; and
(2) any other relevant factor as determined by the
commissioner. (V.T.I.C. Art. 5.35-3, Sec. 1(a) (part).)
Sec. 2004.003. AUTHORIZATION FOR ISSUANCE OF
INSURANCE. An insurer authorized to write property or casualty
insurance in this state, including a Lloyd's plan and a reciprocal
or interinsurance exchange, that writes residential property
insurance in this state may write that insurance on forms adopted
under this chapter. (V.T.I.C. Art. 5.35-3, Sec. 2.)
Sec. 2004.004. EXCLUSION OF CERTAIN COVERAGE. Insurance
provided under this chapter may not include windstorm and hail
insurance coverage for a risk eligible for that coverage under
Chapter 2210. (V.T.I.C. Art. 5.35-3, Sec. 1(b).)
Sec. 2004.005. AVAILABILITY OF COVERAGE. In a designated
underserved area, each insurer described by Section 2004.003 shall
provide to the insurer's agents, and the agents shall offer to all
insureds, the full range of coverages prescribed under this chapter
subject to the insurer's applicable rates and underwriting
guidelines. (V.T.I.C. Art. 5.35-3, Sec. 5.)
Sec. 2004.006. POLICY FORMS. (a) The commissioner shall
adopt policy forms for residential property insurance that are
specifically for use in designated underserved areas. The policy
forms must include a basic policy covering fire and allied lines
perils with endorsements providing additional coverage at the
insured's option.
(b) An insurer writing insurance in an underserved area may
use the policy forms adopted under this chapter. (V.T.I.C.
Art. 5.35-3, Sec. 3.)
Sec. 2004.007. INAPPLICABILITY OF CERTAIN LAWS TO
PREMIUMS. The premium for an insurance policy written under this
chapter is not:
(1) subject to tax under Chapter 221; and
(2) considered net direct premiums under Section
2210.003(7). (V.T.I.C. Art. 5.35-3, Secs. 6, 7.)
Sec. 2004.008. RATES. Rates for coverage provided under
this chapter are determined according to the provisions of this
code applicable to the insurer providing the coverage. (V.T.I.C. Art. 5.35-3, Sec. 4.)
CHAPTER 2005. HOME WARRANTY AND HOME
PROTECTION INSURANCE
Sec. 2005.001. DEFINITIONS
Sec. 2005.002. AUTHORIZATION TO WRITE CERTAIN
INSURANCE
Sec. 2005.003. MANNER OF REGULATION
Sec. 2005.004. LIMITS OF COVERAGE
CHAPTER 2005. HOME WARRANTY AND HOME
PROTECTION INSURANCE
Sec. 2005.001. DEFINITIONS. In this chapter:
(1) "Home protection insurance" means coverage
insuring a purchaser of a home protection service or product
against actual property loss.
(2) "Home protection service or product" means a
service or product used for the protection of residential property,
including a service or product provided by a person regulated under
Chapter 1702, Occupations Code.
(3) "Home warranty insurance" means coverage:
(A) insuring performance by a builder of
residential property of the builder's warranty obligations to a
purchaser of the residential property; or
(B) insuring against named defects arising from
failure of the builder to construct residential property in
accordance with specified construction standards. (V.T.I.C. Art.
5.53-A, Sec. 2.)
Sec. 2005.002. AUTHORIZATION TO WRITE CERTAIN INSURANCE.
An insurer authorized to engage in the business of fire insurance
and allied lines or inland marine insurance may write home warranty
insurance or home protection insurance in this state. (V.T.I.C.
Art. 5.53-A, Sec. 1(a).)
Sec. 2005.003. MANNER OF REGULATION. Home warranty
insurance or home protection insurance is not inland marine
insurance, but is governed in the same manner and to the same extent
as inland marine insurance. (V.T.I.C. Art. 5.53-A, Sec. 1(b).)
Sec. 2005.004. LIMITS OF COVERAGE. The amount of coverage
under a home protection insurance policy may not exceed $2,000 for any single occurrence. (V.T.I.C. Art. 5.53-A, Sec. 1(c).)
CHAPTER 2006. PREMIUM RATE DISCOUNTS
SUBCHAPTER A. OPTIONAL PREMIUM DISCOUNT FOR USE OF INSULATING
CONCRETE FORM SYSTEM
Sec. 2006.001. DEFINITIONS
Sec. 2006.002. OPTIONAL PREMIUM DISCOUNT
Sec. 2006.003. PROPERTY INSPECTION
Sec. 2006.004. PREMIUM DISCOUNT; EXCEPTION
Sec. 2006.005. RULES
[Sections 2006.006-2006.050 reserved for expansion]
SUBCHAPTER B. OPTIONAL PREMIUM DISCOUNT FOR CERTAIN RESIDENTIAL
PROPERTY INSURANCE POLICIES
Sec. 2006.051. DEFINITIONS
Sec. 2006.052. OPTIONAL PREMIUM DISCOUNT
Sec. 2006.053. APPROVAL OF ACTUARIALLY JUSTIFIED
PREMIUM DISCOUNT
Sec. 2006.054. LIMIT ON PREMIUM DISCOUNT
Sec. 2006.055. RULES AND GUIDELINES
CHAPTER 2006. PREMIUM RATE DISCOUNTS
SUBCHAPTER A. OPTIONAL PREMIUM DISCOUNT FOR USE OF INSULATING
CONCRETE FORM SYSTEM
Sec. 2006.001. DEFINITIONS. In this subchapter:
(1) "Applicant" includes:
(A) an applicant for new insurance coverage; and
(B) a policyholder renewing insurance coverage.
(2) "Insulating concrete form system" means a building
construction system primarily used to frame exterior walls in which
polystyrene foam forms are placed in the walls of a structure under
construction and filled with concrete and steel reinforcing
material to become a permanent part of the structure.
(3) "Insurer" means an insurer authorized to write
property and casualty insurance in this state, including:
(A) a county mutual insurance company;
(B) a farm mutual insurance company;
(C) a Lloyd's plan; and
(D) a reciprocal or interinsurance exchange.
(V.T.I.C. Art. 5.33E, Sec. 1.)
Sec. 2006.002. OPTIONAL PREMIUM DISCOUNT. (a) In
accordance with the rules adopted by the commissioner under this
subchapter, an insurer may grant to an applicant a discount in the
applicant's homeowners insurance premiums for insured property on
receipt of written verification from the applicant that the
property was constructed with an insulating concrete form system.
(b) The commissioner by rule shall prescribe the
requirements for determining that a structure was constructed with
an insulating concrete form system.
(c) Verification under this section must comply with the
requirements prescribed by the commissioner. (V.T.I.C.
Art. 5.33E, Secs. 2, 3(a) (part).)
Sec. 2006.003. PROPERTY INSPECTION. (a) If determined
necessary by the commissioner, the rules adopted under this
subchapter may require an inspection of the property to be insured.
(b) The applicant shall pay the costs of a required
inspection. (V.T.I.C. Art. 5.33E, Sec. 3(b).)
Sec. 2006.004. PREMIUM DISCOUNT; EXCEPTION. (a) The
commissioner by rule shall establish the premium discount under
this subchapter based on sound actuarial principles.
(b) The commissioner may approve a premium discount greater
or less than the discount established by rule under Subsection (a)
if:
(1) the insurer files the proposed discount with the
department; and
(2) the commissioner determines that the proposed
discount is actuarially justified. (V.T.I.C. Art. 5.33E, Sec. 4.)
Sec. 2006.005. RULES. The commissioner may adopt rules as
necessary to implement this subchapter in addition to other rules
adopted under this subchapter. (V.T.I.C. Art. 5.33E, Sec.
3(a)(part).)
[Sections 2006.006-2006.050 reserved for expansion]
SUBCHAPTER B. OPTIONAL PREMIUM DISCOUNT FOR CERTAIN RESIDENTIAL
PROPERTY INSURANCE POLICIES
Sec. 2006.051. DEFINITIONS. In this subchapter:
(1) "Affiliate" means an entity classified as an
affiliate under Section 823.003.
(2) "Insurer" means an insurer authorized to write
residential property insurance, including:
(A) a county mutual insurance company;
(B) a farm mutual insurance company;
(C) a Lloyd's plan; and
(D) a reciprocal or interinsurance exchange.
(3) "Residential property insurance" means property
or property and casualty insurance covering a dwelling, including:
(A) homeowners insurance;
(B) residential fire and allied lines insurance;
(C) farm and ranch insurance; and
(D) farm and ranch owners insurance. (V.T.I.C.
Art. 5.43, Sec. (a).)
Sec. 2006.052. OPTIONAL PREMIUM DISCOUNT. (a) Except as
provided by Section 2006.053, an insurer that issues a residential
property insurance policy may:
(1) discount the premiums that would otherwise be
charged for the policy by not less than three percent if the
policyholder:
(A) has continuously been a residential property
insurance policyholder with the insurer or an affiliate of the
insurer; and
(B) has not filed a residential property
insurance claim during the three years before the effective date of
the policy; and
(2) increase the amount of the discount by one percent
for each subsequent year in which the policyholder:
(A) has been a residential property insurance
policyholder with the insurer or an affiliate of the insurer; and
(B) has not filed a residential property
insurance claim.
(b) This section applies regardless of whether any of the
policies that continuously covered the policyholder was a different
kind of residential property insurance policy from the policy
eligible for the premium discount. (V.T.I.C. Art. 5.43, Secs. (b),
(d).)
Sec. 2006.053. APPROVAL OF ACTUARIALLY JUSTIFIED PREMIUM
DISCOUNT. The commissioner may approve a premium discount filed
with the department that is greater or less than the discount
specified by this subchapter if the commissioner determines the
discount is actuarially justified. (V.T.I.C. Art. 5.43, Sec. (e)
(part).)
Sec. 2006.054. LIMIT ON PREMIUM DISCOUNT. An insurer that
provides a premium discount under this subchapter is not required
to provide the discount in an amount that exceeds 10 percent of the
premiums that would otherwise be charged for the residential
property insurance policy. (V.T.I.C. Art. 5.43, Sec. (c).)
Sec. 2006.055. RULES AND GUIDELINES. (a) The commissioner
shall adopt rules as necessary to implement this subchapter.
(b) The commissioner by rule shall establish guidelines
under which an insurer that provides a premium discount under this
subchapter shall determine the appropriate discount based on sound actuarial principles. (V.T.I.C. Art. 5.43, Sec. (e) (part).)
CHAPTER 2007. ASSESSMENT FOR RURAL FIRE PROTECTION
Sec. 2007.001. APPLICABILITY OF CHAPTER
Sec. 2007.002. ASSESSMENT
Sec. 2007.003. DETERMINATION OF ASSESSMENT
Sec. 2007.004. DATES OF ASSESSMENT AND PAYMENT
Sec. 2007.005. RECOVERY OF ASSESSMENT
Sec. 2007.006. NOTICE TO POLICYHOLDERS
Sec. 2007.007. VOLUNTEER FIRE DEPARTMENT ASSISTANCE
FUND
Sec. 2007.008. RULES; COOPERATION
Sec. 2007.009. EXPIRATION OF CHAPTER
CHAPTER 2007. ASSESSMENT FOR RURAL FIRE PROTECTION
Sec. 2007.001. APPLICABILITY OF CHAPTER. This chapter
applies only to an insurer that:
(1) is authorized to engage in business in this state,
including a stock company, mutual insurance company, farm mutual
insurance company, county mutual insurance company, Lloyd's plan,
and reciprocal or interinsurance exchange; and
(2) writes a policy of:
(A) homeowners insurance;
(B) fire insurance;
(C) farm and ranch owners insurance;
(D) private passenger automobile physical damage
insurance;
(E) commercial automobile physical damage
insurance; or
(F) commercial multiple peril insurance.
(V.T.I.C. Art. 5.102, Secs. 1(1), (2) (part), 2.)
Sec. 2007.002. ASSESSMENT. The comptroller shall assess
against all insurers to which this chapter applies a combined total
of $15 million for each 12-month period. (V.T.I.C. Art. 5.102,
Sec. 3(a) (part).)
Sec. 2007.003. DETERMINATION OF ASSESSMENT. (a) In this
section, "net direct premium" means the gross direct premium
written and reported by an insurer on annual financial statements
on:
(1) an insurance policy described by Section
2007.001(2), other than a commercial multiple peril policy; and
(2) the nonliability portion of a commercial multiple
peril policy.
(b) Each insurer shall pay a portion of the assessment in
the proportion that the insurer's net direct premiums for the
period for which the assessment is made bear to the aggregate net
direct premiums written in this state by all insurers for that
period. (V.T.I.C. Art. 5.102, Secs. 1(2) (part), 3(a) (part).)
Sec. 2007.004. DATES OF ASSESSMENT AND PAYMENT. (a) The
comptroller shall assess insurers under this chapter on or before
September 1 of each year.
(b) An insurer shall pay the amount of the insurer's
assessment on or after the 60th day after the date the comptroller
assesses the insurer. (V.T.I.C. Art. 5.102, Secs. 3(b), (c).)
Sec. 2007.005. RECOVERY OF ASSESSMENT. An insurer may
recover an assessment under this chapter by:
(1) reflecting the assessment as an expense in a rate
filing required under this code; or
(2) charging the insurer's policyholders. (V.T.I.C.
Art. 5.102, Sec. 3(d).)
Sec. 2007.006. NOTICE TO POLICYHOLDERS. (a) An insurer
that recovers an assessment by charging the insurer's policyholders
under Section 2007.005 shall provide notice to each policyholder
regarding the amount of the assessment being recovered.
(b) The notice may be included on:
(1) a declarations page;
(2) a renewal certificate; or
(3) a billing statement.
(c) The commissioner by rule may adopt a form for providing
the notice. (V.T.I.C. Art. 5.102, Sec. 3(e).)
Sec. 2007.007. VOLUNTEER FIRE DEPARTMENT ASSISTANCE
FUND. The comptroller shall credit assessments collected under
this chapter to the volunteer fire department assistance fund
created under Section 614.104, Government Code. (V.T.I.C.
Art. 5.102, Sec. 3(f).)
Sec. 2007.008. RULES; COOPERATION. (a) The comptroller
and the commissioner shall adopt rules as necessary to implement
this chapter.
(b) The comptroller and the department shall cooperate as
necessary to implement this chapter. (V.T.I.C. Art. 5.102, Sec.
4.)
Sec. 2007.009. EXPIRATION OF CHAPTER. This chapter
expires September 1, 2011. (V.T.I.C. Art. 5.102, Sec. 5.)
[Chapters 2008-2050 reserved for expansion]
SUBTITLE E. WORKERS' COMPENSATION INSURANCE
CHAPTER 2051. GENERAL PROVISIONS: WORKERS' COMPENSATION INSURANCE
SUBCHAPTER A. APPLICABILITY AND CONSTRUCTION
Sec. 2051.001. DEFINITION
Sec. 2051.002. CONSTRUCTION OF CERTAIN LAWS
[Sections 2051.003-2051.050 reserved for expansion]
SUBCHAPTER B. COMPENSATION AND EXPENSES
Sec. 2051.051. LIMITATION ON COMPENSATION AND EXPENSES
[Sections 2051.052-2051.100 reserved for expansion]
SUBCHAPTER C. POLICYHOLDER DUTIES
Sec. 2051.101. DISCLOSURE BY POLICYHOLDER REQUIRED
[Sections 2051.102-2051.150 reserved for expansion]
SUBCHAPTER D. DUTIES AND PROHIBITED ACTS; ENFORCEMENT
Sec. 2051.151. NOTICE OF CLAIMS INFORMATION TO
POLICYHOLDER REQUIRED; ADMINISTRATIVE
PENALTY
Sec. 2051.152. PROHIBITED ACTS BY PERSON;
ADMINISTRATIVE PENALTY
Sec. 2051.153. LIABILITY OF POLICYHOLDER FOR
ADDITIONAL PREMIUM
Sec. 2051.154. PROHIBITED ACT BY INSURER;
ADMINISTRATIVE PENALTY
Sec. 2051.155. SANCTION OF AGENT REQUIRED
Sec. 2051.156. CANCELLATION OF CERTIFICATE OF
AUTHORITY REQUIRED
Sec. 2051.157. PENALTY FOR CERTAIN VIOLATIONS
[Sections 2051.158-2051.200 reserved for expansion]
SUBCHAPTER E. RULES
Sec. 2051.201. RULEMAKING AUTHORITY: WORKERS'
COMPENSATION INSURANCE
CHAPTER 2051. GENERAL PROVISIONS: WORKERS' COMPENSATION INSURANCE
SUBCHAPTER A. APPLICABILITY AND CONSTRUCTION
Sec. 2051.001. DEFINITION. In this chapter, "insurance
company" means a stock company, mutual insurance company,
reciprocal or interinsurance exchange, or Lloyd's plan authorized
to engage in the business of workers' compensation insurance in
this state. (V.T.I.C. Art. 5.63.)
Sec. 2051.002. CONSTRUCTION OF CERTAIN LAWS. The
following shall be construed and applied independently of any other
law that relates to insurance rates and forms or prescribes the
duties of the commissioner or the department:
(1) this chapter;
(2) Subchapter D, Chapter 5;
(3) Chapter 251, as that chapter relates to workers'
compensation insurance;
(4) Chapters 255, 426, 2052, and 2053; and
(5) Chapter 406A, Labor Code. (V.T.I.C. Art. 5.66
(part).)
[Sections 2051.003-2051.050 reserved for expansion]
SUBCHAPTER B. COMPENSATION AND EXPENSES
Sec. 2051.051. LIMITATION ON COMPENSATION AND EXPENSES.
The total amount of necessary compensation of experts, clerical
personnel, and other department employees, necessary travel
expenses, and other expenses necessarily incurred to implement the
purposes of the laws referenced in Sections 2051.002(1), (2), (3),
(4), and (5) may not exceed the total amount assessed and collected
from insurance companies writing workers' compensation insurance
in this state. (V.T.I.C. Art. 5.67 (part).)
[Sections 2051.052-2051.100 reserved for expansion]
SUBCHAPTER C. POLICYHOLDER DUTIES
Sec. 2051.101. DISCLOSURE BY POLICYHOLDER REQUIRED. (a) A
policyholder shall fully disclose to the policyholder's insurance
company:
(1) information concerning the policyholder's
ownership, change of ownership, operations, or payroll; and
(2) the policyholder's records relating to workers'
compensation insurance.
(b) The commissioner shall adopt rules necessary to
implement this section. (V.T.I.C. Art. 5.65B, Secs. (a), (d).)
[Sections 2051.102-2051.150 reserved for expansion]
SUBCHAPTER D. DUTIES AND PROHIBITED ACTS; ENFORCEMENT
Sec. 2051.151. NOTICE OF CLAIMS INFORMATION TO POLICYHOLDER
REQUIRED; ADMINISTRATIVE PENALTY. (a) Except as otherwise
provided by Subsection (b), an insurance company that writes
workers' compensation insurance in this state shall notify a
policyholder of a claim that is filed against the policyholder's
policy and, after the initial notice, the company shall notify the
policyholder of:
(1) any proposal to settle the claim; or
(2) on receipt of a written request from the
policyholder, any administrative or judicial proceeding relating
to the resolution of the claim, including a benefit review
conference conducted by the Texas Workers' Compensation
Commission.
(b) A policyholder may waive the notice required by
Subsection (a).
(c) An insurance company that writes workers' compensation
insurance in this state, on the written request of a policyholder,
shall provide to the policyholder:
(1) a list of:
(A) claims charged against the policy; and
(B) payments made and reserves established on
each claim; and
(2) a statement explaining the effect of claims on
premium rates.
(d) The insurance company shall provide the information
described by Subsection (c) in writing not later than the 30th day
after the date the company receives the policyholder's written
request for the information. For purposes of this subsection,
information is considered to be provided to the policyholder on the
date the information is:
(1) received by the United States Postal Service; or
(2) personally delivered to the policyholder.
(e) An insurance company that fails to comply with this
section commits a Class D administrative violation under Subtitle
A, Title 5, Labor Code. (V.T.I.C. Art. 5.65A.)
Sec. 2051.152. PROHIBITED ACTS BY PERSON; ADMINISTRATIVE
PENALTY. (a) A person commits an administrative violation if the
person:
(1) to obtain workers' compensation insurance coverage
for the person or another person, intentionally or knowingly:
(A) makes a false statement;
(B) misrepresents or conceals a material fact;
(C) makes a false entry in, fabricates, alters,
conceals, or destroys a document; or
(D) conspires to commit an act listed in
Paragraph (A), (B), or (C); or
(2) intentionally and knowingly obtains or maintains:
(A) workers' compensation insurance coverage
from an insurer that is not authorized to engage in business in this
state; or
(B) alternative coverage from an insurer in
violation of this code.
(b) An administrative violation under Subsection (a) is
punishable by an administrative penalty not to exceed $5,000
assessed in accordance with the procedures established for an
administrative violation under Chapter 415, Labor Code.
(c) Each day an administrative violation under Subsection
(a)(2) occurs or continues is a separate violation. (V.T.I.C.
Art. 5.65C, Secs. (a), (b), (f).)
Sec. 2051.153. LIABILITY OF POLICYHOLDER FOR ADDITIONAL
PREMIUM. (a) If a policyholder commits an administrative
violation under Section 2051.152 and obtains workers' compensation
insurance coverage at a premium that is less than the premium that
would have been charged if the policyholder had not committed the
administrative violation, the policyholder is liable to the insurer
for:
(1) the difference between the premium due and the
premium actually charged; and
(2) reasonable interest and attorney's fees.
(b) For the purposes of this section, "insurer" includes the
Texas Mutual Insurance Company. (V.T.I.C. Art. 5.65C, Sec. (d).)
Sec. 2051.154. PROHIBITED ACT BY INSURER; ADMINISTRATIVE
PENALTY. (a) An insurer commits an administrative violation if the
insurer directly or indirectly requires a person to apply for or
purchase an insurance policy, other than a workers' compensation
insurance policy, as a condition of issuing a workers' compensation
insurance policy.
(b) An insurer that violates this section is subject to
administrative penalties under Chapter 84. (V.T.I.C. Art. 5.65C,
Sec. (e).)
Sec. 2051.155. SANCTION OF AGENT REQUIRED. The
commissioner shall impose a sanction in accordance with Chapter 82
against an agent who commits an administrative violation under
Section 2051.152 or 2051.154. (V.T.I.C. Art. 5.65C, Sec. (c).)
Sec. 2051.156. CANCELLATION OF CERTIFICATE OF AUTHORITY
REQUIRED. The commissioner shall cancel an insurance company's
certificate of authority to engage in the business of workers'
compensation insurance in this state on a second conviction of an
officer or representative of the company for violating a provision
of a law referenced in Section 2051.002(1), (2), (3), (4), or (5)
relating to that business. (V.T.I.C. Art. 5.64.)
Sec. 2051.157. PENALTY FOR CERTAIN VIOLATIONS. An officer
or other representative of an insurance company is subject to a fine
of not less than $100 or more than $500 if the officer or other
representative violates any provision of the following relating to
the company's business:
(1) Subchapter A or B;
(2) Section 2051.156 or 2051.201;
(3) Chapter 426 or 2052;
(4) Subchapter A, C, or D, Chapter 2053;
(5) Section 2053.051, 2053.052, 2053.053, or
2053.055; or
(6) Article 5.66. (V.T.I.C. Art. 5.68-1.)
[Sections 2051.158-2051.200 reserved for expansion]
SUBCHAPTER E. RULES
Sec. 2051.201. RULEMAKING AUTHORITY: WORKERS'
COMPENSATION INSURANCE. The commissioner may adopt and enforce all
reasonable rules as are necessary to carry out the provisions of a
law referenced in Section 2051.002(1), (2), (3), (4), or (5). (V.T.I.C. Art. 5.62.)
CHAPTER 2052. POLICY PROVISIONS AND FORMS FOR WORKERS'
COMPENSATION INSURANCE
Sec. 2052.001. DEFINITION
Sec. 2052.002. STANDARD POLICY FORMS AND UNIFORM POLICY;
EXCEPTIONS
Sec. 2052.003. AGREEMENT REQUIRED TO BE CONTAINED IN
APPLICATION AND POLICY
Sec. 2052.004. POLICYHOLDER DIVIDENDS
CHAPTER 2052. POLICY PROVISIONS AND FORMS FOR WORKERS'
COMPENSATION INSURANCE
Sec. 2052.001. DEFINITION. In this chapter, "insurance
company" means a stock company, mutual insurance company,
reciprocal or interinsurance exchange, or Lloyd's plan authorized
to engage in the business of workers' compensation insurance in
this state. (V.T.I.C. Art. 5.63.)
Sec. 2052.002. STANDARD POLICY FORMS AND UNIFORM POLICY;
EXCEPTIONS. (a) The commissioner shall prescribe standard policy
forms and a uniform policy for workers' compensation insurance.
(b) In writing workers' compensation insurance in this
state, an insurance company may not use a form other than one
prescribed under this section unless the form is an endorsement:
(1) appropriate to the company's plan of operation;
and
(2) submitted to and approved by the department.
(V.T.I.C. Arts. 5.56 (part), 5.57 (part).)
Sec. 2052.003. AGREEMENT REQUIRED TO BE CONTAINED IN
APPLICATION AND POLICY. (a) A contract or other agreement with
respect to workers' compensation insurance coverage that is not
contained in the application and policy required by this chapter
violates this subtitle and is void.
(b) An insurance company that uses a contract or other
agreement described by Subsection (a) engages in conduct that
constitutes sufficient grounds for the revocation of the company's
certificate of authority to write workers' compensation insurance
in this state. (V.T.I.C. Art. 5.57 (part).)
Sec. 2052.004. POLICYHOLDER DIVIDENDS. (a) Subject to
Subsections (b) and (c), this subtitle and Article 5.66 may not be
construed to prohibit an insurance company, including the Texas
Mutual Insurance Company, from issuing participating policies.
(b) A policyholder dividend under a workers' compensation
insurance policy:
(1) does not take effect until approved by the
department; and
(2) may not be approved by the department until the
insurance company provides adequate reserves.
(c) For purposes of Subsection (b), reserves must be
computed on the same basis for all classes of insurance companies
operating under this subtitle and Article 5.66. (V.T.I.C. Art. 5.60, Sec. (c).)
CHAPTER 2053. RATES FOR WORKERS' COMPENSATION INSURANCE
SUBCHAPTER A. RATE FILINGS
Sec. 2053.001. DEFINITIONS
Sec. 2053.002. RATE STANDARDS
Sec. 2053.003. RATE FILING AND SUPPORTING INFORMATION
Sec. 2053.004. PUBLIC INSPECTION OF INFORMATION
Sec. 2053.005. EFFECTIVE DATE OF RATE; HEARING
Sec. 2053.006. DISAPPROVAL OF RATE FILING; HEARING
Sec. 2053.007. DISAPPROVAL OF RATE; HEARING
Sec. 2053.008. EFFECT OF DISAPPROVAL ORDER
Sec. 2053.009. GRIEVANCE
Sec. 2053.010. ADMINISTRATIVE PENALTY
[Sections 2053.011-2053.050 reserved for expansion]
SUBCHAPTER B. RATE ADMINISTRATION
Sec. 2053.051. HAZARD CLASSIFICATION SYSTEM
Sec. 2053.052. EXPERIENCE RATING PLAN
Sec. 2053.053. USE OF HAZARD CLASSIFICATIONS REQUIRED
Sec. 2053.054. USE OF INCURRED CLAIMS EXPERIENCE IN
FUTURE RATINGS REQUIRED
Sec. 2053.055. RATE ADJUSTMENT
[Sections 2053.056-2053.100 reserved for expansion]
SUBCHAPTER C. STATISTICAL PLANS; AGENT
Sec. 2053.101. STATISTICAL PLANS FOR REPORTING LOSS
EXPERIENCE AND OTHER DATA
Sec. 2053.102. TREATMENT OF PAYMENTS UNDER STATISTICAL
PLAN
Sec. 2053.103. STATISTICAL AGENT
[Sections 2053.104-2053.150 reserved for expansion]
SUBCHAPTER D. REPORTING REQUIREMENTS AND EXCHANGE OF INFORMATION
Sec. 2053.151. WORKERS' COMPENSATION CLAIMS REPORTS
AND INFORMATION
Sec. 2053.152. UPDATE AND TRANSMISSION OF CLAIMS
REPORTS
Sec. 2053.153. EXCHANGE OF INFORMATION AND
CONSULTATION WITH OTHERS
Sec. 2053.154. LOSS STATEMENT AND PAYROLL REPORT
[Sections 2053.155-2053.200 reserved for expansion]
SUBCHAPTER E. OPTIONAL DEDUCTIBLE PLANS
Sec. 2053.201. DEFINITION
Sec. 2053.202. ESTABLISHMENT OF OPTIONAL DEDUCTIBLE
PLANS
Sec. 2053.203. PAYMENT OF CLAIMS; REIMBURSEMENT
Sec. 2053.204. RATE REDUCTION
Sec. 2053.205. PROHIBITED CONDUCT
Sec. 2053.206. VIOLATION OF SUBCHAPTER
[Sections 2053.207-2053.250 reserved for expansion]
SUBCHAPTER F. PREMIUM INCENTIVES AND SURCHARGE
FOR SMALL EMPLOYERS
Sec. 2053.251. DEFINITIONS
Sec. 2053.252. PLAN FOR PREMIUM DISCOUNT AND SURCHARGE
Sec. 2053.253. ELIGIBILITY FOR PREMIUM DISCOUNT
Sec. 2053.254. ASSESSMENT OF PREMIUM SURCHARGE
Sec. 2053.255. MAXIMUM DISCOUNT AND ASSESSMENT
Sec. 2053.256. DISCOUNTS AND SURCHARGES NOT CUMULATIVE
CHAPTER 2053. RATES FOR WORKERS' COMPENSATION INSURANCE
SUBCHAPTER A. RATE FILINGS
Sec. 2053.001. DEFINITIONS. In this subchapter:
(1) "Filer" means an insurance company that files
rates, prospective loss costs, or supplementary rating information
under this subchapter.
(2) "Insurance company" means a person authorized to
engage in the business of workers' compensation insurance in this
state. The term includes the Texas Mutual Insurance Company.
(3) "Prospective loss cost" means that portion of a
rate that:
(A) does not include a provision for expenses or
profit, other than loss adjustment expenses; and
(B) is based on historical aggregate losses and
loss adjustment expenses projected by development to the ultimate
value of those losses and expenses and projected through trending
to a future point in time.
(4) "Rate" means the cost of workers' compensation
insurance per exposure unit, whether expressed as a single number
or as a prospective loss cost, adjusted to account for the treatment
of expenses, profit, and individual insurance company variation in
loss experience, before applying individual risk variations based
on loss or expense considerations. The term does not include a
minimum premium.
(5) "Supplementary rating information" means any
manual, rating plan or schedule, plan of rules, rating rule,
classification system, territory code or description, or other
similar information required to determine the applicable premium
for an insured. The term includes increased limits factors,
classification relativities, deductible relativities, and other
similar factors and relativities.
(6) "Supporting information" means:
(A) the experience and judgment of the filer and
the experience or information of other insurance companies;
(B) the interpretation of any other information
on which the filer relied;
(C) a description of methods used in making a
rate; and
(D) any other information the department
requires to be filed. (V.T.I.C. Art. 5.55, Secs. 1(1), (2), (3),
(4), (6), (7).)
Sec. 2053.002. RATE STANDARDS. (a) In setting rates, an
insurance company shall consider:
(1) past and prospective loss cost experience;
(2) operation expenses;
(3) investment income;
(4) a reasonable margin for profit and contingencies;
and
(5) any other relevant factor.
(b) A rate may not be excessive, inadequate, or unfairly
discriminatory.
(c) An insurance company may:
(1) group risks by classification to establish rates
and minimum premiums; and
(2) modify classification rates to produce rates for
individual risks in accordance with rating plans that establish
standards for measuring variations in those risks on the basis of
any factor listed in Subsection (a).
(d) In setting rates that apply only to policyholders in
this state, an insurance company shall use available premium, loss,
claim, and exposure information from this state to the full extent
that the information is actuarially credible. The insurance
company may use experience from outside this state as necessary to
supplement information from this state that is not actuarially
credible. (V.T.I.C. Art. 5.55, Secs. 2(b), (c), (d), (e).)
Sec. 2053.003. RATE FILING AND SUPPORTING INFORMATION. (a)
Each insurance company shall file with the department all rates,
supplementary rating information, and reasonable and pertinent
supporting information for risks written in this state.
(b) An insurance company may not make a filing described by
Subsection (a) more frequently than once every six months.
(V.T.I.C. Art. 5.55, Sec. 3(a) (part).)
Sec. 2053.004. PUBLIC INSPECTION OF INFORMATION. Each
filing made, including any supporting information filed, under this
subchapter is open to public inspection as of the date the filing is
made. (V.T.I.C. Art. 5.55, Sec. 4.)
Sec. 2053.005. EFFECTIVE DATE OF RATE; HEARING. (a) A
filer shall designate the date a rate proposed in a filing made
under Section 2053.003 is to take effect. Subject to Subsections
(b)-(d), the rate does not take effect until the department
receives all necessary information required for the filing.
(b) A filing made under Section 2053.003 takes effect on the
date designated by the filer under Subsection (a) unless the
department, not later than the 30th day after the date the
department receives the filing, notifies the filer that the filing
is missing specific required information. The filer must provide
the missing information not later than the 30th day after the date
the filer is notified under this subsection.
(c) If the filer in good faith believes that information
requested under Subsection (b) has already been provided to the
department, the filer may request a hearing. The commissioner
shall hold the hearing not later than the 30th day after the date
the department receives the request for a hearing.
(d) The commissioner shall issue an order not later than the
30th day after the date of the hearing under Subsection (c). If the
commissioner determines that the filing is still missing required
information, the commissioner shall specify in the order the
information that is missing. (V.T.I.C. Art. 5.55, Secs. 3(a)
(part), (b).)
Sec. 2053.006. DISAPPROVAL OF RATE FILING; HEARING. (a)
The commissioner shall disapprove a rate filing made under Section
2053.003 if the commissioner determines that the filing does not
meet the standards established under this subchapter.
(b) If the commissioner disapproves a rate filing, the
commissioner shall issue an order specifying in what respects the
filing fails to meet the requirements of this subchapter.
(c) A filer whose rate filing is disapproved is entitled to
a hearing on written request made to the department not later than
the 30th day after the date the order disapproving the filing takes
effect. (V.T.I.C. Art. 5.55, Sec. 5.)
Sec. 2053.007. DISAPPROVAL OF RATE; HEARING. (a) The
commissioner may issue an order after a hearing disapproving a rate
that is in effect. The commissioner must provide the insurance
company that filed the rate written notice of the hearing not later
than the 10th day before the date of the hearing.
(b) The commissioner shall issue an order disapproving a
rate under Subsection (a) not later than the 15th day after the
close of the hearing. The order must:
(1) specify in what respects the rate fails to meet the
requirements of this subchapter; and
(2) state the date further use of the rate is
prohibited.
(c) An order issued under this section does not affect an
insurance policy made or issued in accordance with this code before
the expiration of the period stated in the order. (V.T.I.C. Art.
5.55, Sec. 6.)
Sec. 2053.008. EFFECT OF DISAPPROVAL ORDER. (a) If a
workers' compensation insurance policy is issued and the
commissioner subsequently disapproves the rate or filing that
governs the premium charged on the policy, the policyholder may:
(1) continue the policy at the original rate;
(2) cancel the policy without penalty; or
(3) enter into an agreement with the insurance company
issuing the policy to amend the policy to reflect the premium that
would have been charged based on the insurance company's most
recently approved rate.
(b) An amendment under Subsection (a)(3) may not take effect
before the date further use of the rate is prohibited under an order
issued under Section 2053.007. (V.T.I.C. Art. 5.55, Sec. 7(a).)
Sec. 2053.009. GRIEVANCE. (a) The office of public
insurance counsel or an insured who is aggrieved with respect to a
filing made under Section 2053.003 that is in effect may apply to
the department in writing for a hearing on the filing. The
application must specify the grounds for the applicant's grievance.
(b) The commissioner shall hold a hearing on an application
filed under Subsection (a) not later than the 30th day after the
date the department receives the application if the department
determines that:
(1) the application is made in good faith;
(2) the applicant would be aggrieved as alleged if the
grounds specified in the application were established; and
(3) the grounds specified in the application otherwise
justify holding the hearing.
(c) The department shall provide written notice of a hearing
under Subsection (b) to the applicant and to each insurance company
that made the filing not later than the 10th day before the date of
the hearing. The notice must specify:
(1) which of the grounds specified in the application
are in question; and
(2) whether the insurance company's entire filing will
be considered at the hearing or whether the hearing is limited to
consideration of the grounds specified in the application.
(d) If, after the hearing, the commissioner determines that
the filing does not meet the requirements of this subchapter, the
commissioner shall issue an order specifying:
(1) in what respects the filing fails to meet those
requirements;
(2) the date the filing is no longer in effect, which
must be within a reasonable period that is not less than 60 days
after the date the order is issued; and
(3) whether the order applies with respect to all
insureds affected by the filing or only with respect to the
applicant, if the applicant was an aggrieved insured.
(e) The department shall send copies of the order issued
under Subsection (d) to the applicant and each affected insurance
company.
(f) An order issued under Subsection (d) does not affect an
insurance policy or contract made or issued before the expiration
of the period stated in the order. (V.T.I.C. Art. 5.55, Secs. 3(c),
(d).)
Sec. 2053.010. ADMINISTRATIVE PENALTY. (a) The
commissioner may assess an administrative penalty against an
insurance company if the commissioner determines, based on a
pattern of charges for premiums, that the company is consistently
overcharging or undercharging the company's policyholders for
workers' compensation insurance.
(b) An administrative penalty under this section must be:
(1) assessed in accordance with Section 415.021, Labor
Code; and
(2) set by the commissioner in an amount reasonable
and necessary to deter overcharging or undercharging of
policyholders. (V.T.I.C. Art. 5.55, Sec. 7(b).)
[Sections 2053.011-2053.050 reserved for expansion]
SUBCHAPTER B. RATE ADMINISTRATION
Sec. 2053.051. HAZARD CLASSIFICATION SYSTEM. (a) For
workers' compensation insurance, the department shall:
(1) determine hazards by class; and
(2) establish classification relativities applicable
to an employer's payroll in each of the classes at levels adequate
to the risks to which the relativities apply.
(b) The classification relativities established under
Subsection (a)(2):
(1) must be designed to encourage safety;
(2) may be territorially based; and
(3) may reflect a difference in losses between
employers of high wage earners and employers of low wage earners
within the same class.
(c) The department shall revise the classification system
at least once every five years. (V.T.I.C. Art. 5.60, Secs. (a), (d)
(part).)
Sec. 2053.052. EXPERIENCE RATING PLAN. (a) The
commissioner shall adopt a uniform experience rating plan for
workers' compensation insurance. The plan must:
(1) encourage accident prevention; and
(2) account for:
(A) the peculiar hazard and experience of
individual risks, past and prospective, inside and outside this
state; and
(B) any other relevant factor.
(b) The commissioner shall revise the rating plan at least
once every five years.
(c) The commissioner may adopt reasonable rules and plans
requiring the interchange of loss experience necessary for the
application of the rating plan. (V.T.I.C. Art. 5.58, Sec. (h); Art.
5.60, Secs. (b), (d) (part).)
Sec. 2053.053. USE OF HAZARD CLASSIFICATIONS REQUIRED. A
stock company, mutual insurance company, reciprocal or
interinsurance exchange, or Lloyd's plan authorized to engage in
the business of workers' compensation insurance in this state may
not use hazard classifications other than the classifications
established by the department. (V.T.I.C. Arts. 5.56 (part), 5.63.)
Sec. 2053.054. USE OF INCURRED CLAIMS EXPERIENCE IN FUTURE
RATINGS REQUIRED. (a) Regardless of a change in a policyholder's
ownership, control, management, or operations, incurred claims
experience must be used in future ratings to ensure that an employer
does not evade an unfavorable or high-cost experience.
(b) On application by an affected party, the department may
modify a rating under Subsection (a) on proof that a change in a
policyholder's management or operations is clearly designed to
result in a probable reduction of the insured's loss experience.
(c) The commissioner shall adopt rules necessary to
implement this section. (V.T.I.C. Art. 5.65B, Secs. (a) (part),
(b), (c), (d).)
Sec. 2053.055. RATE ADJUSTMENT. If the commissioner
determines that an insurance company's rates do not meet with the
standards imposed by Section 2053.002, the commissioner may order
the insurance company to adjust the rates to meet those standards.
An insurance company may appeal an order under this section in
accordance with Subchapter D, Chapter 36. (V.T.I.C. Art. 5.58,
Sec. (a) (part).)
[Sections 2053.056-2053.100 reserved for expansion]
SUBCHAPTER C. STATISTICAL PLANS; AGENT
Sec. 2053.101. STATISTICAL PLANS FOR REPORTING LOSS
EXPERIENCE AND OTHER DATA. The commissioner shall develop and may
periodically modify reasonable statistical plans for workers'
compensation insurance to be used by each insurance company in
recording and reporting the insurance company's loss experience and
other data required by the department, so that the total loss and
expense experience of all insurance companies is made available at
least annually in the form and detail necessary to assist in
determining whether an insurance company's rates meet the standards
imposed under Section 2053.002. (V.T.I.C. Art. 5.58, Sec. (a)
(part).)
Sec. 2053.102. TREATMENT OF PAYMENTS UNDER STATISTICAL
PLAN. A statistical plan developed under Section 2053.101 must
require the following payments to be reported separately and not to
be considered as a loss or expense for purposes of computing a
premium rate modifier or surcharge of an insured:
(1) a direct payment made by an insurance company to
influence public policy; and
(2) any amount paid by an insurance company:
(A) as damages in an action against the insurance
company for malice or bad faith; or
(B) as a fine or penalty. (V.T.I.C. Art. 5.58,
Sec. (e).)
Sec. 2053.103. STATISTICAL AGENT. (a) The commissioner
may designate or contract with a qualified organization to serve as
the statistical agent for the commissioner under this subchapter as
provided by Subchapter E, Chapter 38.
(b) The statistical agent may provide to one or more
advisory organizations any information provided by the agent to the
commissioner under this subchapter. (V.T.I.C. Art. 5.58, Sec. (a)
(part).)
[Sections 2053.104-2053.150 reserved for expansion]
SUBCHAPTER D. REPORTING REQUIREMENTS AND EXCHANGE OF INFORMATION
Sec. 2053.151. WORKERS' COMPENSATION CLAIMS REPORTS AND
INFORMATION. (a) The following information must be reported on
each workers' compensation claim:
(1) the hazard classification of the affected
employee;
(2) the date of injury;
(3) the social security number of the claimant;
(4) the severity classification of the claim,
including separate classifications for:
(A) claims in which death benefits are paid;
(B) claims in which lifetime income benefits are
paid;
(C) claims in which only temporary income
benefits are paid;
(D) claims in which impairment income benefits
are paid;
(E) claims in which supplemental income benefits
are paid; and
(F) claims in which only medical benefits are
paid;
(5) the amount paid in periodic payments;
(6) the amount paid in lump-sum payments;
(7) the amount paid for:
(A) temporary income benefits;
(B) impairment income benefits;
(C) supplemental income benefits; and
(D) death and burial benefits;
(8) the total amount paid for:
(A) income, death, or burial benefits; and
(B) medical benefits;
(9) the total amount of incurred losses for:
(A) income, death, or burial benefits; and
(B) medical benefits;
(10) the amount paid to:
(A) doctors and other health care providers; and
(B) hospitals and other health care facilities;
and
(11) other information required by the commissioner.
(b) For purposes of Subsection (a), the commissioner shall
establish standards and procedures for categorizing insurance and
medical benefits required to be reported on each workers'
compensation claim. In establishing the standards, the
commissioner shall consult with the Texas Workers' Compensation
Commission to ensure that the data collection methodology will
yield data necessary for research and medical cost containment
efforts.
(c) The commissioner may allow the information required by
Subsection (a) to be reported in the aggregate for each risk for
claims in which benefit payments are less than $5,000. The
commissioner may adjust the $5,000 threshold for aggregate
reporting to account for inflationary changes.
(d) A person may not distribute or otherwise disclose a
social security number or any other information collected under
Subsection (a) that would disclose the identity of a claimant.
(V.T.I.C. Art. 5.58, Secs. (b), (c), (d), (g).)
Sec. 2053.152. UPDATE AND TRANSMISSION OF CLAIMS REPORTS.
(a) An insurance company, in accordance with the filing
requirements of a statistical plan developed under Section
2053.101, shall update and transmit to the commissioner or the
commissioner's statistical agent a claims report filed under
Section 2053.151.
(b) Each insurance company that writes at least one-half of
one percent of the workers' compensation insurance in this state
shall report the company's data in a compatible electronic format
prescribed by the commissioner. The commissioner shall take
necessary measures to ensure the accuracy of the data and the
adequacy of the electronic format for the data. (V.T.I.C. Art.
5.58, Sec. (f).)
Sec. 2053.153. EXCHANGE OF INFORMATION AND CONSULTATION
WITH OTHERS. To further the uniform administration of rating laws
relating to workers' compensation insurance, the commissioner and
each insurance company may:
(1) exchange information and experience data with the
National Association of Insurance Commissioners and with insurance
supervisory officials, insurance companies, and advisory
organizations in other states; and
(2) consult and cooperate with a person or entity
described by Subdivision (1) with respect to ratemaking and the
application of rating systems. (V.T.I.C. Art. 5.58, Sec. (i).)
Sec. 2053.154. LOSS STATEMENT AND PAYROLL REPORT. (a) For
purposes of this section, "insurance company" means a stock
company, mutual insurance company, reciprocal or interinsurance
exchange, or Lloyd's plan authorized to engage in the business of
workers' compensation insurance in this state. The term includes
the Texas Mutual Insurance Company.
(b) The department may require an insurance company to
submit a sworn statement or report showing:
(1) the payroll reported to the insurance company;
(2) incurred losses by classification; and
(3) other information the department determines may be
necessary to implement the department's duties.
(c) The department shall prescribe the necessary forms for a
statement or report required by Subsection (b) with consideration
of the methods and forms used for similar purposes in other states
so that uniformity of statistics will not be affected. (V.T.I.C.
Arts. 5.59, 5.63.)
[Sections 2053.155-2053.200 reserved for expansion]
SUBCHAPTER E. OPTIONAL DEDUCTIBLE PLANS
Sec. 2053.201. DEFINITION. In this subchapter, "insurance
company" means a stock company, mutual insurance company,
reciprocal or interinsurance exchange, or Lloyd's plan authorized
to engage in the business of workers' compensation insurance in
this state. (V.T.I.C. Art. 5.63.)
Sec. 2053.202. ESTABLISHMENT OF OPTIONAL DEDUCTIBLE PLANS.
(a) The department shall require each insurance company writing
workers' compensation insurance in this state to offer at least
three optional deductible plans adopted under this section that
allow a policyholder to self-insure for the amount of the
deductible.
(b) The commissioner by rule shall allow an employer to
enter into an agreement with an insurer for a negotiated deductible
that exceeds the highest deductible available under a plan
described by Subsection (a). (V.T.I.C. Art. 5.55C, Secs. (a),
(b).)
Sec. 2053.203. PAYMENT OF CLAIMS; REIMBURSEMENT. (a) An
insurance company issuing a deductible policy under this subchapter
shall service all claims that arise during the policy period,
including those claims payable, wholly or partly, from the
deductible amount.
(b) A deductible policy must provide that:
(1) the insurance company issuing the policy shall pay
all benefits that are payable from the deductible amount; and
(2) the policyholder shall make reimbursements
periodically, rather than at the time claim costs are incurred.
(c) The commissioner shall adopt rules to provide for
adequate security for reimbursement of the amount paid by an
insurance company that is payable from the deductible amount.
(V.T.I.C. Art. 5.55C, Secs. (d), (e).)
Sec. 2053.204. RATE REDUCTION. (a) The department shall
perform an actuarial analysis to determine the amount of rate
reduction applicable to a deductible policy under this subchapter
as compared to a standard workers' compensation insurance policy
without a deductible.
(b) In years subsequent to the year in which the actuarial
analysis described by Subsection (a) is performed, the department
shall determine the amount of rate reduction according to rating
procedures adopted by the commissioner.
(c) When establishing procedures for the computation of
experience modifiers, the commissioner may allow the exclusion of
any claim amount paid under a deductible by an employer. (V.T.I.C.
Art. 5.55C, Sec. (c).)
Sec. 2053.205. PROHIBITED CONDUCT. A person who is
employed by a policyholder who self-insures the deductible amount
as provided by this subchapter may not be required to pay any
portion of the deductible amount or be harassed, discharged, or
otherwise discriminated against because the person, in good faith:
(1) is considering initiating or has initiated a
workers' compensation claim;
(2) has retained a representative to represent the
person regarding a claim;
(3) has testified or will testify at an administrative
or judicial proceeding under Subtitle A, Title 5, Labor Code;
(4) has reported a hazardous working condition or
hazardous practice to the Texas Workers' Compensation Commission;
or
(5) has taken or is considering taking any other
action that may result in a requirement that the policyholder pay a
deductible amount through a self-insurance plan. (V.T.I.C. Art.
5.55C, Secs. (f), (g)(1).)
Sec. 2053.206. VIOLATION OF SUBCHAPTER. (a) A person
commits a Class A administrative violation under Subtitle A, Title
5, Labor Code, if the person engages in conduct that violates this
subchapter.
(b) Liability for damages for a violation of this subchapter
is determined exclusively under Subtitle A, Title 5, Labor Code.
(V.T.I.C. Art. 5.55C, Secs. (g)(2), (h).)
[Sections 2053.207-2053.250 reserved for expansion]
SUBCHAPTER F. PREMIUM INCENTIVES AND SURCHARGE
FOR SMALL EMPLOYERS
Sec. 2053.251. DEFINITIONS. In this subchapter:
(1) "Insurance company" means a stock company, mutual
insurance company, reciprocal or interinsurance exchange, or
Lloyd's plan authorized to engage in the business of workers'
compensation insurance in this state.
(2) "Premium" means workers' compensation insurance
premium.
(3) "Small employer" means an employer:
(A) who is not experience-rated by the department
for workers' compensation insurance purposes; and
(B) whose annual premium is less than $5,000.
(V.T.I.C. Art. 5.55B, Sec. (a); Art. 5.63; New.)
Sec. 2053.252. PLAN FOR PREMIUM DISCOUNT AND SURCHARGE.
The commissioner shall adopt a plan under which each insurance
company writing workers' compensation insurance in this state
shall:
(1) grant a premium discount to a small employer who
qualifies for a discount under this subchapter; and
(2) assess a surcharge as provided by Section
2053.254. (V.T.I.C. Art. 5.55B, Sec. (b) (part).)
Sec. 2053.253. ELIGIBILITY FOR PREMIUM DISCOUNT. (a) A
small employer who has not experienced a compensable employee
lost-time injury during the most recent one-year period for which
statistics are available shall receive a discount of 10 percent on
the amount of the employer's premium.
(b) A small employer who has not experienced a compensable
employee lost-time injury during the most recent two-year period
for which statistics are available shall receive a discount of 15
percent on the amount of the employer's premium.
(c) A small employer who has experienced one or more
compensable employee lost-time injuries during the most recent
one-year period for which statistics are available is not eligible
for a discount on the amount of the employer's premium. (V.T.I.C.
Art. 5.55B, Secs. (c), (d), (e).)
Sec. 2053.254. ASSESSMENT OF PREMIUM SURCHARGE. A small
employer who has experienced two or more compensable employee
lost-time injuries during the most recent one-year period for which
statistics are available shall be assessed a surcharge of 10
percent on the amount of the employer's premium. (V.T.I.C. Art.
5.55B, Secs. (b) (part), (f).)
Sec. 2053.255. MAXIMUM DISCOUNT AND ASSESSMENT. For any
annual premium, a small employer may not:
(1) receive a discount of more than 15 percent; or
(2) be required to pay a surcharge of more than 10
percent. (V.T.I.C. Art. 5.55B, Sec. (g) (part).)
Sec. 2053.256. DISCOUNTS AND SURCHARGES NOT CUMULATIVE.
(a) The discounts and surcharges established under this subchapter
are not cumulative.
(b) A small employer is entitled to receive the discount
under this subchapter in addition to any lesser deviation in the
rate used to write an insurance policy under Sections 2053.051 and 2053.052(a) and (b). (V.T.I.C. Art. 5.55B, Sec. (g) (part).)
CHAPTER 2054. TEXAS MUTUAL INSURANCE COMPANY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2054.001. DEFINITIONS
Sec. 2054.002. REFERENCE TO TEXAS WORKERS'
COMPENSATION INSURANCE FUND
Sec. 2054.003. OPERATION AS DOMESTIC MUTUAL INSURANCE
COMPANY
Sec. 2054.004. INSURANCE COMPANY UNDER TEXAS WORKERS'
COMPENSATION ACT
Sec. 2054.005. APPLICABILITY OF CODE
Sec. 2054.006. AUTHORITY OF COMMISSIONER AND
DEPARTMENT
Sec. 2054.007. APPLICABILITY OF OPEN MEETINGS LAW
Sec. 2054.008. APPLICABILITY OF PUBLIC INFORMATION LAW
Sec. 2054.009. CONFLICTS WITH CERTAIN INSURANCE LAWS
[Sections 2054.010-2054.050 reserved for expansion]
SUBCHAPTER B. BOARD OF DIRECTORS
Sec. 2054.051. BOARD OF DIRECTORS; COMPOSITION
Sec. 2054.052. QUALIFICATIONS
Sec. 2054.053. PRESIDING OFFICER; OTHER OFFICERS
Sec. 2054.054. TERMS
Sec. 2054.055. VACANCIES
Sec. 2054.056. GROUNDS FOR REMOVAL
Sec. 2054.057. PROCEDURES FOR REMOVAL
Sec. 2054.058. COMMITTEES AND SUBCOMMITTEES
Sec. 2054.059. MEETINGS
Sec. 2054.060. QUORUM
Sec. 2054.061. COMPENSATION
[Sections 2054.062-2054.100 reserved for expansion]
SUBCHAPTER C. MANAGEMENT OF COMPANY
Sec. 2054.101. GENERAL POWERS OF BOARD
Sec. 2054.102. GENERAL DUTIES OF BOARD RELATING TO
WORKERS' COMPENSATION INSURANCE
Sec. 2054.103. APPOINTMENT OF PRESIDENT
Sec. 2054.104. APPOINTMENT OF INTERNAL AUDITOR
Sec. 2054.105. PERSONAL LIABILITY OF BOARD MEMBERS,
OFFICERS, AND EMPLOYEES
Sec. 2054.106. PRINCIPAL OFFICE
Sec. 2054.107. CERTAIN RELATIONSHIPS WITH OTHER
INSURERS PROHIBITED
Sec. 2054.108. PROGRAM AND FACILITY ACCESSIBILITY
[Sections 2054.109-2054.150 reserved for expansion]
SUBCHAPTER D. OPERATION OF COMPANY; FINANCIAL ADMINISTRATION
Sec. 2054.151. PURPOSES OF COMPANY
Sec. 2054.152. PAYMENT OF TAXES, FEES, AND OTHER
CHARGES
Sec. 2054.153. MEMBERSHIP IN TEXAS PROPERTY AND
CASUALTY INSURANCE GUARANTY
ASSOCIATION
Sec. 2054.154. COMPANY ASSETS; STATE LIABILITY
Sec. 2054.155. REQUIRED RESERVES
Sec. 2054.156. RATIO OF CERTAIN PREMIUMS TO SURPLUS
Sec. 2054.157. DISSOLUTION PROHIBITED
[Sections 2054.158-2054.200 reserved for expansion]
SUBCHAPTER E. EXAMINATIONS, REPORTS, AND FILINGS
Sec. 2054.201. EXAMINATION BY DEPARTMENT
Sec. 2054.202. PROVIDING INFORMATION TO LEGISLATURE
Sec. 2054.203. ANNUAL ACCOUNTING OF MONEY RECEIVED AND
DISBURSED
Sec. 2054.204. ANNUAL STATEMENTS
Sec. 2054.205. PUBLICATION AND FILING OF AUDITED
REPORT
Sec. 2054.206. ADDITIONAL REPORTS
Sec. 2054.207. PERIODIC REPORTS TO BOARD
[Sections 2054.208-2054.250 reserved for expansion]
SUBCHAPTER F. GENERAL POWERS AND DUTIES RELATING TO INSURANCE
Sec. 2054.251. RATEMAKING AUTHORITY
Sec. 2054.252. AMOUNTS OF RATES
Sec. 2054.253. MULTITIERED PREMIUM SYSTEMS
Sec. 2054.254. CASH DIVIDENDS; CREDIT ON RENEWAL
PREMIUM
Sec. 2054.255. APPOINTMENT OF AGENT NOT REQUIRED
Sec. 2054.256. WORK PRODUCT INFORMATION
Sec. 2054.257. PAYMENT OF COMMISSION TO AGENT
[Sections 2054.258-2054.300 reserved for expansion]
SUBCHAPTER G. ISSUANCE OF COVERAGE
Sec. 2054.301. APPLICATION FOR COVERAGE
Sec. 2054.302. POLICY FORMS
Sec. 2054.303. DENIAL OF COVERAGE BASED ON CREDIT RISK
Sec. 2054.304. CANCELLATION AND NONRENEWAL
[Sections 2054.305-2054.350 reserved for expansion]
SUBCHAPTER H. COMPANY AS INSURER OF LAST RESORT
Sec. 2054.351. INSURER OF LAST RESORT
Sec. 2054.352. REQUIRED DECLINATION OF CERTAIN RISKS
Sec. 2054.353. REQUIRED INSURANCE OF CERTAIN COMMONLY
OWNED OR CONTROLLED ENTITIES
Sec. 2054.354. DEVELOPMENT AND PUBLICATION OF CERTAIN
INFORMATION
[Sections 2054.355-2054.400 reserved for expansion]
SUBCHAPTER I. APPEALS
Sec. 2054.401. APPEAL OF CERTAIN ACTIONS AND DECISIONS
Sec. 2054.402. REVIEW OF BOARD DECISION BY
COMMISSIONER
Sec. 2054.403. APPEAL OF COMMISSIONER'S DECISION
[Sections 2054.404-2054.450 reserved for expansion]
SUBCHAPTER J. CONTROL OF FRAUD AND OTHER VIOLATIONS
Sec. 2054.451. IDENTIFICATION AND INVESTIGATION
PROGRAM FOR FRAUD AND OTHER
VIOLATIONS
Sec. 2054.452. INVESTIGATIONS; COORDINATION WITH
COMMISSION
Sec. 2054.453. RESTITUTION PAYABLE TO COMPANY
Sec. 2054.454. DEPOSIT AND USE OF PENALTIES COLLECTED
BY COMMISSION
Sec. 2054.455. FUNDING AGREEMENTS FOR CRIMINAL
PROSECUTIONS
Sec. 2054.456. IMMUNITY FOR CERTAIN ACTIONS
[Sections 2054.457-2054.500 reserved for expansion]
SUBCHAPTER K. ACCIDENT PREVENTION
Sec. 2054.501. DEFINITION
Sec. 2054.502. REQUIREMENTS FOR PREVENTION OF INJURIES
Sec. 2054.503. GROUNDS FOR CANCELLATION OR DENIAL OF
COVERAGE
Sec. 2054.504. SAFETY CONSULTATION FOR CERTAIN
INSUREDS
Sec. 2054.505. SAFETY CONSULTATION PROCEDURES
Sec. 2054.506. SAFETY CONSULTANT REPORT
Sec. 2054.507. ACCIDENT PREVENTION PLAN
Sec. 2054.508. ACCIDENT INVESTIGATIONS; OTHER
MONITORING
Sec. 2054.509. FOLLOW-UP INSPECTION
Sec. 2054.510. CANCELLATION OF COVERAGE BY COMPANY;
IMPOSITION OF ADMINISTRATIVE PENALTY
Sec. 2054.511. CONTINUING COMPLIANCE WITH SUBCHAPTER
Sec. 2054.512. FEES FOR SERVICES
Sec. 2054.513. ENFORCEMENT OF SUBCHAPTER
[Sections 2054.514-2054.550 reserved for expansion]
SUBCHAPTER L. PUBLIC INTEREST INFORMATION AND COMPLAINT PROCEDURES
Sec. 2054.551. PUBLIC INTEREST INFORMATION
Sec. 2054.552. COMPLAINTS
Sec. 2054.553. COMPLAINT RECORD
CHAPTER 2054. TEXAS MUTUAL INSURANCE COMPANY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2054.001. DEFINITIONS. In this chapter:
(1) "Board" means the board of directors of the
company.
(2) "Commission" means the Texas Workers' Compensation
Commission.
(3) "Company" means the Texas Mutual Insurance
Company.
(4) "Workers' compensation insurance" means insurance
for a risk under:
(A) Subtitle A, Title 5, Labor Code;
(B) Chapter 504, Labor Code;
(C) the Longshore and Harbor Workers'
Compensation Act (33 U.S.C. Section 901 et seq.);
(D) the Federal Mine Safety and Health Act of
1977 (30 U.S.C. Section 801 et seq.);
(E) the Defense Base Act (42 U.S.C. Sections
1651-1654);
(F) the federal Employers' Liability Act (45
U.S.C. Section 51 et seq.);
(G) the Nonappropriated Fund Instrumentalities
Act (5 U.S.C. Sections 8171-8173);
(H) the Outer Continental Shelf Lands Act (43
U.S.C. Section 1331 et seq.); or
(I) the Merchant Marine Act of 1920 (46 App.
U.S.C. Section 861 et seq.). (V.T.I.C. Art. 5.76-3, Secs. 1(1),
(2), (3), (5).)
Sec. 2054.002. REFERENCE TO TEXAS WORKERS' COMPENSATION
INSURANCE FUND. A reference in state law to the Texas Workers'
Compensation Insurance Fund means the Texas Mutual Insurance
Company. (V.T.I.C. Art. 5.76-3, Sec. 2(a) (part).)
Sec. 2054.003. OPERATION AS DOMESTIC MUTUAL INSURANCE
COMPANY. (a) The company operates as a domestic mutual insurance
company under Chapter 883. The company is subject to that chapter,
but is not subject to Chapter 826.
(b) The company:
(1) has the legal rights of a mutual insurance company
operating under Chapter 883 and of an individual in this state; and
(2) may bring a suit in the company's own name without
any procedural prerequisites to the exercise of that power.
(c) The company is not a state agency. (V.T.I.C. Art.
5.76-3, Secs. 2(a) (part), (b) (part), (h), 21(c).)
Sec. 2054.004. INSURANCE COMPANY UNDER TEXAS WORKERS'
COMPENSATION ACT. The company is an insurance company for purposes
of Subtitle A, Title 5, Labor Code. (V.T.I.C. Art. 5.76-3, Sec.
21(a).)
Sec. 2054.005. APPLICABILITY OF CODE. The company is
subject to this code. (V.T.I.C. Art. 5.76-3, Sec. 18(c) (part).)
Sec. 2054.006. AUTHORITY OF COMMISSIONER AND
DEPARTMENT. (a) The commissioner may regulate the company to the
same extent that the commissioner may regulate a mutual insurance
company.
(b) The company is subject to the jurisdiction of the
commissioner and department in the same manner as a private
insurance company. (V.T.I.C. Art. 5.76-3, Secs. 18(c) (part),
21(b).)
Sec. 2054.007. APPLICABILITY OF OPEN MEETINGS
LAW. (a) Except as otherwise provided by Subsection (b), Chapter
551, Government Code, applies to the company.
(b) The board may hold closed meetings to consider:
(1) information relating to claims, rates, or the
company's underwriting guidelines; or
(2) other information that would give advantage to a
competitor or bidder. (V.T.I.C. Art. 5.76-3, Sec. 2(d) (part).)
Sec. 2054.008. APPLICABILITY OF PUBLIC INFORMATION
LAW. (a) In this section, "investigation file" means information
the company compiles or maintains with respect to a company
investigation authorized by law.
(b) To the extent consistent with this section, Chapter 552,
Government Code, applies to the company.
(c) The board may refuse to disclose:
(1) information relating to claims, rates, or the
company's underwriting guidelines; or
(2) other information that would give advantage to a
competitor or bidder.
(d) Except as provided by Subsection (e), a company
investigation file:
(1) is confidential and not subject to required
disclosure under Chapter 552, Government Code; and
(2) may be disclosed only:
(A) in a criminal proceeding;
(B) in a hearing conducted by the commission;
(C) on a judicial determination of good cause; or
(D) to a governmental agency, political
subdivision, or regulatory body if the disclosure is necessary or
proper for the enforcement of a law of this state, another state, or
the United States.
(e) Disclosure of information in an investigation file that
is contained in or derived from a claim file, an employer injury
report, or an occupational disease report is governed by any
confidentiality provision applicable to that information.
(V.T.I.C. Art. 5.76-3, Secs. 2(d) (part), 10.)
Sec. 2054.009. CONFLICTS WITH CERTAIN INSURANCE LAWS. To
the extent of a conflict between this chapter and Chapter 883 or
another law of this state applicable to a nonlife mutual insurance
company, this chapter prevails. (V.T.I.C. Art. 5.76-3, Sec. 2(b)
(part).)
[Sections 2054.010-2054.050 reserved for expansion]
SUBCHAPTER B. BOARD OF DIRECTORS
Sec. 2054.051. BOARD OF DIRECTORS; COMPOSITION. (a) The
company is governed by a board composed of nine members.
(b) The governor, with the advice and consent of the senate,
shall appoint five board members. The company's policyholders
shall elect the remaining members. (V.T.I.C. Art. 5.76-3, Sec.
3(a) (part).)
Sec. 2054.052. QUALIFICATIONS. (a) Each board member must
be a resident of this state.
(b) An individual may not serve as a board member if the
individual, another individual related to the individual within the
second degree by consanguinity or affinity, or another individual
residing in the same household with the individual:
(1) is registered or licensed under this code or is
required to be registered or licensed under this code;
(2) is employed by or acts as a consultant to a person
registered or licensed under this code or required to be registered
or licensed under this code;
(3) owns, controls, has a financial interest in, or
participates in the management of an organization registered or
licensed under this code or required to be registered or licensed
under this code;
(4) receives a substantial tangible benefit from the
company or the department; or
(5) is an officer, employee, or consultant of an
association in the field of insurance.
(c) Subsection (b) does not prohibit an individual from
serving as a board member if the individual is only a policyholder
or a consumer of insurance or insurance products.
(d) An individual who is ineligible to serve on the board
under Subsection (b) may not serve as a board member until the first
anniversary of the date the condition that makes the individual
ineligible ends. (V.T.I.C. Art. 5.76-3, Secs. 3(a) (part), (d),
(h), (i).)
Sec. 2054.053. PRESIDING OFFICER; OTHER OFFICERS. (a) The
governor shall designate a board member as the presiding officer to
serve in that capacity at the pleasure of the governor.
(b) The board members shall elect annually any other
officers the board considers necessary to perform the board's
duties. (V.T.I.C. Art. 5.76-3, Sec. 3(k) (part).)
Sec. 2054.054. TERMS. (a) Board members serve staggered
six-year terms, with the terms of three members expiring July 1 of
each odd-numbered year.
(b) A board member whose term has expired shall continue to
serve until the member's successor is appointed by the governor or
is elected by the company's policyholders, as applicable.
(V.T.I.C. Art. 5.76-3, Sec. 3(b).)
Sec. 2054.055. VACANCIES. (a) The governor shall fill a
vacancy in the appointed board members by appointment with the
advice and consent of the senate.
(b) A vacancy in the elected board members shall be filled
as provided by the company's bylaws.
(c) If a vacancy occurs before the date the vacating
member's term expires, the successor member shall be appointed or
elected for a term that expires on the same date as the vacating
member's term. (V.T.I.C. Art. 5.76-3, Sec. 3(c).)
Sec. 2054.056. GROUNDS FOR REMOVAL. (a) It is a ground for
removal from the board if a member:
(1) does not have at the time of appointment or
election the qualifications required by Section 2054.052;
(2) does not maintain during service on the board the
qualifications required by Section 2054.052;
(3) cannot because of illness or disability discharge
the member's duties for a substantial part of the term for which the
member is appointed or elected; or
(4) is absent from more than half of the regularly
scheduled board meetings that the member is eligible to attend
during a calendar year.
(b) The validity of a board action is not affected by the
fact that it is taken when a ground for removal of a board member
exists. (V.T.I.C. Art. 5.76-3, Secs. 3(e), (f).)
Sec. 2054.057. PROCEDURES FOR REMOVAL. (a) If the
president of the company has knowledge that a potential ground for
removal of a board member exists, the president shall notify the
presiding officer of the board of the potential ground.
(b) If the potential ground for removal involves an
appointed board member, the presiding officer shall notify the
governor and the attorney general that a potential ground for
removal exists.
(c) If the potential ground for removal involves the
presiding officer, the president shall notify the next highest
board officer, who shall notify the governor and the attorney
general that a potential ground for removal exists.
(d) If the potential ground for removal involves an elected
board member, the board shall act on the potential ground for
removal as provided by the company's bylaws. (V.T.I.C. Art.
5.76-3, Sec. 3(g).)
Sec. 2054.058. COMMITTEES AND SUBCOMMITTEES. The board may
create committees and subcommittees. (V.T.I.C. Art. 5.76-3, Sec.
3(k) (part).)
Sec. 2054.059. MEETINGS. (a) The board shall hold a
meeting at least once each calendar quarter, at other times at the
call of the presiding officer, and at times established by the
company's bylaws.
(b) A special meeting may be called by any two board members
on two days' notice. (V.T.I.C. Art. 5.76-3, Sec. 3(l).)
Sec. 2054.060. QUORUM. Five board members constitute a
quorum. (V.T.I.C. Art. 5.76-3, Sec. 3(m).)
Sec. 2054.061. COMPENSATION. A board member is entitled to
receive:
(1) fees for service on the board commensurate with
industry standards; and
(2) actual and necessary travel expenses and any other
expense incurred in performing the member's duties. (V.T.I.C. Art.
5.76-3, Sec. 3(j).)
[Sections 2054.062-2054.100 reserved for expansion]
SUBCHAPTER C. MANAGEMENT OF COMPANY
Sec. 2054.101. GENERAL POWERS OF BOARD. The board has full
authority over the company and may:
(1) perform any act necessary or convenient to
administer the company or in connection with the company's
insurance business; and
(2) function in all aspects as the governing body of a
domestic mutual insurance company. (V.T.I.C. Art. 5.76-3, Sec.
4(a) (part).)
Sec. 2054.102. GENERAL DUTIES OF BOARD RELATING TO WORKERS'
COMPENSATION INSURANCE. The board shall:
(1) provide for engaging in the business of workers'
compensation insurance and for the delivery in this state of
workers' compensation insurance to the same extent as any other
insurance company engaging in the business of workers' compensation
insurance in this state;
(2) propose rates for workers' compensation insurance
issued by the company; and
(3) exercise any other authority necessary to engage
in the business of workers' compensation insurance. (V.T.I.C. Art.
5.76-3, Sec. 4(a) (part).)
Sec. 2054.103. APPOINTMENT OF PRESIDENT. (a) The board
shall appoint a president who serves at the pleasure of the board.
(b) The president must have proven successful experience as
an executive at the general management level in the business of
insurance.
(c) The president shall receive compensation as set by the
board. (V.T.I.C. Art. 5.76-3, Sec. 4(d).)
Sec. 2054.104. APPOINTMENT OF INTERNAL AUDITOR. The board
shall appoint an internal auditor who serves at the pleasure of the
board. (V.T.I.C. Art. 5.76-3, Sec. 4(c).)
Sec. 2054.105. PERSONAL LIABILITY OF BOARD MEMBERS,
OFFICERS, AND EMPLOYEES. In connection with the administration,
management, or conduct of the company, the company's business, or a
related matter, a board member, the president, or an officer or
employee of the company is not personally liable in the
individual's private capacity for an act performed or a contract or
other obligation entered into or undertaken in the individual's
official capacity in good faith and without intent to defraud.
(V.T.I.C. Art. 5.76-3, Sec. 6.)
Sec. 2054.106. PRINCIPAL OFFICE. The board shall maintain
the company's principal office in Travis County. (V.T.I.C. Art.
5.76-3, Sec. 3(n).)
Sec. 2054.107. CERTAIN RELATIONSHIPS WITH OTHER INSURERS
PROHIBITED. The company may not have:
(1) an affiliate, spin-off, or subsidiary that writes
a line of insurance other than workers' compensation insurance; or
(2) interlocking boards of directors with an insurer
that writes a line of insurance other than workers' compensation
insurance. (V.T.I.C. Art. 5.76-3, Sec. 4(b).)
Sec. 2054.108. PROGRAM AND FACILITY ACCESSIBILITY. (a)
The company shall comply with federal and state laws that relate to
program and facility accessibility.
(b) The president shall prepare and maintain a written plan
that describes the manner in which an individual who does not speak
English can be provided reasonable access to the company's programs
and services.
(c) The board shall develop and implement policies that
provide the public with a reasonable opportunity to appear before
the board and to speak on any issue under the company's
jurisdiction. (V.T.I.C. Art. 5.76-3, Secs. 19(c), (d).)
[Sections 2054.109-2054.150 reserved for expansion]
SUBCHAPTER D. OPERATION OF COMPANY; FINANCIAL ADMINISTRATION
Sec. 2054.151. PURPOSES OF COMPANY. The company shall:
(1) serve as a competitive force in the marketplace;
(2) guarantee the availability of workers'
compensation insurance in this state; and
(3) serve as an insurer of last resort as provided by
Subchapter H. (V.T.I.C. Art. 5.76-3, Sec. 2(c).)
Sec. 2054.152. PAYMENT OF TAXES, FEES, AND OTHER CHARGES.
The company shall pay the following in the same manner as a domestic
mutual insurance company authorized to engage in the business of
insurance and to write workers' compensation insurance in this
state:
(1) taxes, including maintenance and premium taxes;
(2) fees; and
(3) payments due in lieu of taxes. (V.T.I.C. Art.
5.76-3, Secs. 11(a), (b).)
Sec. 2054.153. MEMBERSHIP IN TEXAS PROPERTY AND CASUALTY
INSURANCE GUARANTY ASSOCIATION. (a) In this section,
"association" means the Texas Property and Casualty Insurance
Guaranty Association.
(b) The company is:
(1) a member of and protected by the association; and
(2) subject to assessment under Chapter 462.
(c) Notwithstanding Subsection (b), the company is liable
only for an assessment by the association regarding a claim with a
date of injury occurring on or after January 1, 2000, and the
association, with respect to an insolvency of the company, is
liable only for a claim with a date of injury occurring on or after
that date. (V.T.I.C. Art. 5.76-3, Secs. 11(c), (d).)
Sec. 2054.154. COMPANY ASSETS; STATE LIABILITY. (a) All
money, revenues, and other assets of the company belong solely to
the company and are governed by the laws applicable to domestic
mutual insurance companies.
(b) The state:
(1) covenants with the company's policyholders,
persons receiving workers' compensation benefits, and the company's
creditors that the state will not borrow, appropriate, or direct
payments from the company's money, revenues, or other assets for
any purpose; and
(2) has no liability or responsibility to those
policyholders, persons receiving benefits, or creditors if the
company is placed in conservatorship or receivership or becomes
insolvent. (V.T.I.C. Art. 5.76-3, Sec. 12(a).)
Sec. 2054.155. REQUIRED RESERVES. The company shall
establish and maintain reserves for losses on an actuarially sound
basis in accordance with Chapter 426. (V.T.I.C. Art. 5.76-3, Sec.
12(b).)
Sec. 2054.156. RATIO OF CERTAIN PREMIUMS TO SURPLUS. The
company shall maintain a ratio of net written premiums on policies
written after reinsurance to surplus of not more than three to one.
(V.T.I.C. Art. 5.76-3, Sec. 12(c).)
Sec. 2054.157. DISSOLUTION PROHIBITED. The company may
not be dissolved. (V.T.I.C. Art. 5.76-3, Sec. 2(j).)
[Sections 2054.158-2054.200 reserved for expansion]
SUBCHAPTER E. EXAMINATIONS, REPORTS, AND FILINGS
Sec. 2054.201. EXAMINATION BY DEPARTMENT. (a) The
department shall examine the company in the manner and under the
conditions specified by Chapters 86 and 401 for the examination of
insurers.
(b) The company shall pay the costs of the examination.
(V.T.I.C. Art. 5.76-3, Secs. 18(a), (b).)
Sec. 2054.202. PROVIDING INFORMATION TO LEGISLATURE. The
company shall provide requested information to each appropriate
legislative committee in the manner requested by the committee.
(V.T.I.C. Art. 5.76-3, Sec. 4(e).)
Sec. 2054.203. ANNUAL ACCOUNTING OF MONEY RECEIVED AND
DISBURSED. Each year, the company shall prepare a complete and
detailed written report accounting for all money the company
received and disbursed during the preceding fiscal year. (V.T.I.C.
Art. 5.76-3, Sec. 2(i).)
Sec. 2054.204. ANNUAL STATEMENTS. (a) The company shall
file annual statements with the department and commission in the
same manner as is required of other workers' compensation insurance
companies.
(b) The department shall include in the department's annual
report under Section 32.021 a report on the company's condition.
(V.T.I.C. Art. 5.76-3, Sec. 12(e).)
Sec. 2054.205. PUBLICATION AND FILING OF AUDITED REPORT.
The board shall:
(1) publish an independently audited report analyzing
the company's activities and fiscal condition during the preceding
fiscal year; and
(2) file the audited report with the department for
submission simultaneously with its annual financial report.
(V.T.I.C. Art. 5.76-3, Sec. 16(a).)
Sec. 2054.206. ADDITIONAL REPORTS. The company shall file
with the department and the commission all reports required of
other workers' compensation insurance companies. (Art. 5.76-3,
Sec. 16(b).)
Sec. 2054.207. PERIODIC REPORTS TO BOARD. The president
shall make periodic reports to the board regarding:
(1) the company's status; and
(2) the company's investments. (V.T.I.C. Art. 5.76-3,
Sec. 13.)
[Sections 2054.208-2054.250 reserved for expansion]
SUBCHAPTER F. GENERAL POWERS AND DUTIES RELATING TO INSURANCE
Sec. 2054.251. RATEMAKING AUTHORITY. (a) Except as
provided by this section, the board may propose rates to be charged
by the company for insurance.
(b) The board shall engage the services of an independent
actuary who is a member in good standing with the Casualty Actuarial
Society or the American Academy of Actuaries to develop and
recommend actuarially sound rates.
(c) The company is subject to the requirements of Subchapter
A, Chapter 2053, and shall include the recommendations of the
independent actuary as part of the company's filing under that
subchapter. (V.T.I.C. Art. 5.76-3, Sec. 7(a).)
Sec. 2054.252. AMOUNTS OF RATES. Rates charged by the
company for insurance must be set in amounts sufficient, when
invested, to:
(1) carry all claims to maturity;
(2) meet the reasonable expenses of conducting the
company's business; and
(3) maintain a reasonable surplus. (V.T.I.C. Art.
5.76-3, Sec. 7(b).)
Sec. 2054.253. MULTITIERED PREMIUM SYSTEMS. (a)
Notwithstanding any other provision of this code or another
insurance law of this state, the company may establish multitiered
premium systems to price workers' compensation insurance policies
to:
(1) insureds in the company's competitive programs;
and
(2) insureds to whom policies are offered by the
company under Subchapter H.
(b) The systems may provide for a higher or lower premium
payment by an insured based on:
(1) the company's evaluation of the underwriting
characteristics of the individual risk; and
(2) the appropriate premium to be charged for the
policy coverages.
(c) The systems must be filed in accordance with Subchapter
A, Chapter 2053. (V.T.I.C. Art. 5.76-3, Sec. 7(c).)
Sec. 2054.254. CASH DIVIDENDS; CREDIT ON RENEWAL PREMIUM.
(a) The company may pay a cash dividend or allow a credit on the
renewal premium for a policyholder insured with the company, other
than a policyholder insured under Subchapter H.
(b) Payment of a cash dividend or allowance of a credit:
(1) must be made in accordance with criteria approved
by the board, which may consider the policyholder's safety record
and performance; and
(2) may be made only with the department's prior
approval . (V.T.I.C. Art. 5.76-3, Sec. 12(d).)
Sec. 2054.255. APPOINTMENT OF AGENT NOT REQUIRED. (a)
Notwithstanding any other provision of this code or another
insurance law of this state, the company is not required to appoint
a general property and casualty agent to act as an agent for the
company.
(b) An agent who transacts business with the company acts as
an agent for the applicant and not as an agent for the company,
unless the company and the agent have entered into a written
agreement for the agent to act on behalf of the company. (V.T.I.C.
Art. 5.76-3, Sec. 5(d).)
Sec. 2054.256. WORK PRODUCT INFORMATION. (a) Information
submitted to the company by an insurance agent on behalf of an
employer, including a policy expiration date, is the work product
of the agent. The company may not use the information in any
marketing or direct sales activity.
(b) Except as otherwise required or permitted by Chapter
552, Government Code, the company may not provide to an insurance
agent information obtained from another insurance agent.
(c) This section does not prevent:
(1) an employer from designating another insurance
agent or the company as the agent of record; or
(2) the company from using information submitted to
the company under this section for underwriting or a fraud
investigation. (V.T.I.C. Art. 5.76-3, Sec. 5(e).)
Sec. 2054.257. PAYMENT OF COMMISSION TO AGENT. The company
shall pay an insurance agent a reasonable commission on a workers'
compensation insurance policy that is written through the agent.
(V.T.I.C. Art. 5.76-3, Sec. 5(c).)
[Sections 2054.258-2054.300 reserved for expansion]
SUBCHAPTER G. ISSUANCE OF COVERAGE
Sec. 2054.301. APPLICATION FOR COVERAGE. An application
to the company for workers' compensation insurance coverage must
be:
(1) made on the form prescribed by the company; and
(2) submitted directly by the applicant or by a
general property and casualty agent on behalf of the applicant.
(V.T.I.C. Art. 5.76-3, Sec. 5(a).)
Sec. 2054.302. POLICY FORMS. The company shall use the
uniform policy and standard policy forms prescribed by the
department under Section 2052.002. (V.T.I.C. Art. 5.76-3, Sec.
14.)
Sec. 2054.303. DENIAL OF COVERAGE BASED ON CREDIT
RISK. The company may refuse to write insurance coverage for an
applicant that the company identifies as a credit risk unless the
applicant, before a policy is issued:
(1) pays the total estimated premium and related
charges; or
(2) provides security for payment of the total
estimated premium and related charges. (V.T.I.C. Art. 5.76-3, Sec.
5(b).)
Sec. 2054.304. CANCELLATION AND NONRENEWAL. The company
may cancel or refuse to renew coverage on a policyholder as provided
by Section 406.008, Labor Code. (V.T.I.C. Art. 5.76-3, Sec. 15.)
[Sections 2054.305-2054.350 reserved for expansion]
SUBCHAPTER H. COMPANY AS INSURER OF LAST RESORT
Sec. 2054.351. INSURER OF LAST RESORT. (a) Except as
provided by Section 2054.304 and this subchapter, the company may
not refuse to insure a risk that tenders:
(1) the necessary premium; and
(2) any applicable accident prevention service fee.
(b) If an applicant would be rejected for workers'
compensation insurance under the company's underwriting standards,
the company may not reject the risk, but shall insure the risk at a
higher premium as provided by the company's requirements. The
company may require the risk to meet other conditions considered
necessary to protect the company's interests. (V.T.I.C. Art.
5.76-4, Secs. (a), (b).)
Sec. 2054.352. REQUIRED DECLINATION OF CERTAIN RISKS. (a)
In this section, "good faith" means honesty in fact in any conduct
or transaction.
(b) The company shall decline to insure a risk if:
(1) insuring the risk would cause the company to
exceed the premium-to-surplus ratios established by Section
2054.156; or
(2) the risk is not, in good faith, entitled to
insurance through the company. (V.T.I.C. Art. 5.76-4, Sec. (d).)
Sec. 2054.353. REQUIRED INSURANCE OF CERTAIN COMMONLY OWNED
OR CONTROLLED ENTITIES. If the company suspects fraud or
identifies conditions that may result in acts of fraud, the company
may require an applicant for workers' compensation insurance
coverage who is identified as a risk for purposes of Section
2054.351(b) to insure all business entities that are commonly owned
or controlled by the applicant. (V.T.I.C. Art. 5.76-4, Sec. (g).)
Sec. 2054.354. DEVELOPMENT AND PUBLICATION OF CERTAIN
INFORMATION. (a) The company shall develop statistical and other
information as necessary to allow the company to distinguish
between the company's:
(1) writings in the voluntary market; and
(2) writings as the insurer of last resort.
(b) The department shall develop and publish classification
relativities specifically designed for the risks insured under this
subchapter.
(c) On request, the company shall report statistical or
other information developed under Subsection (a) to:
(1) the department; or
(2) any successor entity for research and oversight of
the workers' compensation system of this state. (V.T.I.C. Art.
5.76-4, Secs. (c), (e), (h).)
[Sections 2054.355-2054.400 reserved for expansion]
SUBCHAPTER I. APPEALS
Sec. 2054.401. APPEAL OF CERTAIN ACTIONS AND DECISIONS.
(a) An act or decision by the company to deny, cancel, or refuse to
renew a policy or risk insured under Subchapter H may be appealed to
the board not later than the 30th day after the date the affected
party receives actual notice that the act occurred or the decision
was made.
(b) The company shall:
(1) not later than the 30th day after the date the
request for hearing is made, hear the appeal; and
(2) not later than the 10th day before the date of the
hearing, notify the appellant in writing of the time and place of
the hearing.
(c) Not later than the 30th day after the last day of the
hearing, the board shall affirm, reverse, or modify the act or
decision appealed to the board.
(d) Unless the board specifically orders otherwise, a
hearing under this section does not suspend the operation of an act
or decision of the company. (V.T.I.C. Art. 5.76-3, Sec. 2(e).)
Sec. 2054.402. REVIEW OF BOARD DECISION BY COMMISSIONER.
(a) A board decision under Section 2054.401 is subject to review by
the commissioner in the manner provided by Chapter 2001, Government
Code.
(b) The commissioner's review of a board decision does not
suspend the operation of an act or decision of the company unless
the commissioner specifically orders the suspension on a showing by
an aggrieved party of:
(1) immediate, irreparable injury, loss, or damage;
and
(2) probable success on the merits. (V.T.I.C. Art.
5.76-3, Sec. 2(f).)
Sec. 2054.403. APPEAL OF COMMISSIONER'S DECISION. (a) A
person aggrieved by a decision of the commissioner under Section
2054.402 may appeal the decision to a district court.
(b) Judicial review under this section is governed by the
substantial evidence rule. (V.T.I.C. Art. 5.76-3, Sec. 2(g).)
[Sections 2054.404-2054.450 reserved for expansion]
SUBCHAPTER J. CONTROL OF FRAUD AND OTHER VIOLATIONS
Sec. 2054.451. IDENTIFICATION AND INVESTIGATION PROGRAM
FOR FRAUD AND OTHER VIOLATIONS. (a) The company shall develop and
implement a program to identify and investigate acts of fraud and
violations of this code relating to workers' compensation insurance
by applicants, policyholders, claimants, agents, insurers, health
care providers, or other persons.
(b) The company shall cooperate with the commission to
compile and maintain information necessary to detect practices or
patterns of conduct that violate this code relating to workers'
compensation insurance or that violate Subtitle A, Title 5, Labor
Code. (V.T.I.C. Art. 5.76-3, Sec. 9(a).)
Sec. 2054.452. INVESTIGATIONS; COORDINATION WITH
COMMISSION. (a) The company may investigate cases of suspected
fraud and violations of this code relating to workers' compensation
insurance.
(b) The company may:
(1) coordinate the company's investigations with those
conducted by the commission to avoid duplication of efforts; and
(2) refer to the commission a case that is not
otherwise resolved by the company so that the commission may:
(A) perform any further investigation necessary
under the circumstances;
(B) conduct administrative violation
proceedings; and
(C) assess and collect penalties and
restitution. (V.T.I.C. Art. 5.76-3, Sec. 9(b).)
Sec. 2054.453. RESTITUTION PAYABLE TO COMPANY. Restitution
collected under Section 2054.452(b) must be paid to the company.
(V.T.I.C. Art. 5.76-3, Sec. 9(d).)
Sec. 2054.454. DEPOSIT AND USE OF PENALTIES COLLECTED BY
COMMISSION. A penalty collected under Section 2054.452(b):
(1) must be deposited in the general revenue fund to
the credit of the commission; and
(2) may be appropriated only to the commission to
offset the costs of the program under Section 2054.451. (V.T.I.C.
Art. 5.76-3, Sec. 9(e).)
Sec. 2054.455. FUNDING AGREEMENTS FOR CRIMINAL
PROSECUTIONS. The company may enter into funding agreements with
local prosecutors to prosecute offenses against the company.
(V.T.I.C. Art. 5.76-3, Sec. 9(c).)
Sec. 2054.456. IMMUNITY FOR CERTAIN ACTIONS. The company,
the board, and company employees are not liable in a civil action
for an action taken in good faith in executing a duty under this
subchapter, including identifying or referring a person for
investigation of or prosecution for a possible administrative
violation or criminal offense. (V.T.I.C. Art. 5.76-3, Sec. 9(f).)
[Sections 2054.457-2054.500 reserved for expansion]
SUBCHAPTER K. ACCIDENT PREVENTION
Sec. 2054.501. DEFINITION. In this subchapter, "division"
means the commission's division of workers' health and safety.
(New.)
Sec. 2054.502. REQUIREMENTS FOR PREVENTION OF INJURIES.
The company may make and enforce requirements for the prevention of
injuries to an employee of a policyholder or applicant for
insurance under this chapter. On reasonable notice, a policyholder
or applicant shall grant representatives of the company, the
commission, or the department free access to the premises of the
policyholder or applicant during regular working hours for purposes
of this section. (V.T.I.C. Art. 5.76-3, Sec. 8(a).)
Sec. 2054.503. GROUNDS FOR CANCELLATION OR DENIAL OF
COVERAGE. A failure or refusal by a policyholder or applicant for
insurance to comply with a requirement prescribed by the company
under Section 2054.502, or a failure or refusal to fully disclose
all information pertinent to insuring or servicing the policyholder
or applicant, constitutes sufficient grounds for the company to
cancel a policy or deny an application. (V.T.I.C. Art. 5.76-3,
Sec. 8(b).)
Sec. 2054.504. SAFETY CONSULTATION FOR CERTAIN
INSUREDS. (a) A policyholder who is insured under Subchapter H
shall obtain a safety consultation:
(1) if the policyholder:
(A) has a Texas experience modifier greater than
1.25;
(B) has a national experience modifier greater
than 1.25 and estimated premium allocable to this state of $2,500 or
more; or
(C) does not have an experience modifier but has
had a loss ratio greater than 0.70 in at least two of the three most
recent policy years for which information is available; or
(2) as required by the company, if the policyholder:
(A) has been in business for less than three
years; and
(B) meets the criteria established by the company
for a safety consultation.
(b) The criteria under Subsection (a)(2)(B) may include:
(1) the number and classification of employees;
(2) the policyholder's industry; and
(3) the policyholder's previous workers' compensation
experience in this state or another jurisdiction. (V.T.I.C. Art.
5.76-3, Secs. 8(c), (d).)
Sec. 2054.505. SAFETY CONSULTATION PROCEDURES. Not later
than the 30th day after the effective date of a policy, the
policyholder shall obtain a safety consultation required under
Section 2054.504 from a safety consultant. The safety consultant
must be:
(1) the company;
(2) the division; or
(3) a professional source approved for that purpose by
the division. (V.T.I.C. Art. 5.76-3, Sec. 8(e) (part).)
Sec. 2054.506. SAFETY CONSULTANT REPORT. A safety
consultant acting under this subchapter shall file a written report
with the commission and the policyholder specifying any hazardous
condition or practice identified in the safety consultation.
(V.T.I.C. Art. 5.76-3, Sec. 8(e) (part).)
Sec. 2054.507. ACCIDENT PREVENTION PLAN. (a) If a safety
consultant identifies a hazardous condition or practice, the
policyholder and the safety consultant shall develop a specific
accident prevention plan that addresses the condition or practice.
(b) The safety consultant may approve an existing accident
prevention plan.
(c) The policyholder shall comply with the accident
prevention plan. (V.T.I.C. Art. 5.76-3, Sec. 8(f).)
Sec. 2054.508. ACCIDENT INVESTIGATIONS; OTHER
MONITORING. The division may:
(1) investigate an accident that occurs at a work site
of a policyholder for whom an accident prevention plan was
developed under Section 2054.507; and
(2) otherwise monitor as the division determines
necessary the implementation of the accident prevention plan.
(V.T.I.C. Art. 5.76-3, Sec. 8(g).)
Sec. 2054.509. FOLLOW-UP INSPECTION. (a) Not earlier than
the 90th day after or later than the sixth month after the date an
accident prevention plan is developed under Section 2054.507, the
division shall conduct a follow-up inspection of the policyholder's
premises in accordance with rules adopted by the commission.
(b) The commission may require the participation of the
safety consultant who performed the initial consultation and
developed the accident prevention plan.
(c) If the division determines that a policyholder has
complied with the terms of the accident prevention plan or has
implemented other accepted corrective measures, the division shall
certify that determination.
(d) If the division determines that a policyholder has
failed or refuses to implement the accident prevention plan or
other suitable hazard abatement measures, the policyholder may
elect to cancel coverage not later than the 30th day after the date
of the determination. (V.T.I.C. Art. 5.76-3, Sec. 8(h) (part).)
Sec. 2054.510. CANCELLATION OF COVERAGE BY COMPANY;
IMPOSITION OF ADMINISTRATIVE PENALTY. (a) If a policyholder
described by Section 2054.509(d) does not elect to cancel coverage
as provided by that section:
(1) the company may cancel the coverage; or
(2) the commission may impose an administrative
penalty on the policyholder.
(b) The amount of an administrative penalty under
Subsection (a)(2) may not exceed $5,000. Each day of noncompliance
constitutes a separate violation.
(c) In imposing an administrative penalty, the commission
may consider any matter that justice may require and shall
consider:
(1) the seriousness of the violation, including the
nature, circumstances, consequences, extent, and gravity of the
prohibited act;
(2) the history and extent of previous administrative
violations;
(3) the demonstrated good faith of the violator,
including actions taken to rectify the consequences of the
prohibited act;
(4) any economic benefit resulting from the prohibited
act; and
(5) the penalty necessary to deter future violations.
(d) A penalty collected under this section must be:
(1) deposited in the general revenue fund to the
credit of the commission; or
(2) reappropriated to the commission to offset the
costs of implementing and administering this subchapter. (V.T.I.C.
Art. 5.76-3, Secs. 8(h) (part), (i).)
Sec. 2054.511. CONTINUING COMPLIANCE WITH SUBCHAPTER. The
procedures established under this subchapter must be followed each
year the policyholder meets the criteria established by Section
2054.504(a)(1). (V.T.I.C. Art. 5.76-3, Sec. 8(j).)
Sec. 2054.512. FEES FOR SERVICES. The commission shall:
(1) charge a policyholder for the reasonable cost of
services provided to the policyholder under Sections 2054.505,
2054.506, 2054.507, 2054.509, and 2054.510(a); and
(2) set the fees for the services at a
cost-reimbursement level, including a reasonable allocation of the
commission's administrative costs. (V.T.I.C. Art. 5.76-3, Sec.
8(k).)
Sec. 2054.513. ENFORCEMENT OF SUBCHAPTER. The compliance
and practices division of the commission shall enforce compliance
with this subchapter through the administrative violation
proceedings under Chapter 415, Labor Code. (V.T.I.C. Art. 5.76-3,
Sec. 8(l).)
[Sections 2054.514-2054.550 reserved for expansion]
SUBCHAPTER L. PUBLIC INTEREST INFORMATION AND COMPLAINT PROCEDURES
Sec. 2054.551. PUBLIC INTEREST INFORMATION. (a) The
company shall prepare information of public interest describing the
functions of the company and the procedures by which complaints are
submitted to and resolved by the company.
(b) The company shall make the information available to the
public and appropriate state agencies. (V.T.I.C. Art. 5.76-3, Sec.
19(a).)
Sec. 2054.552. COMPLAINTS. (a) The company shall
establish methods by which consumers and service recipients are
notified of the name, mailing address, and telephone number of the
company for the purpose of directing a complaint to the company.
(b) The company may provide for the notice:
(1) by a supplement or endorsement to a written
policy;
(2) on a sign prominently displayed in the place of
business of each regional office of the company; or
(3) in a bill for services provided by the company.
(V.T.I.C. Art. 5.76-3, Sec. 19(b).)
Sec. 2054.553. COMPLAINT RECORD. (a) The company shall
keep information about each written complaint filed with the
company. The information must include:
(1) the date the complaint is received;
(2) the name of the complainant;
(3) the subject matter of the complaint;
(4) a record of each person contacted in relation to
the complaint;
(5) a summary of the results of the review or
investigation of the complaint; and
(6) for a complaint for which the company takes no
action, an explanation of the reason the complaint was closed
without action.
(b) For each written complaint the company receives and has
authority to resolve, the company shall:
(1) provide the company's policies and procedures
relating to complaint investigation and resolution to the person
filing the complaint and each person or entity that is a subject of
the complaint; and
(2) at least quarterly and until final disposition of
the complaint, notify the person filing the complaint and each
person or entity that is a subject of the complaint of the status of
the complaint unless the notification would jeopardize an
undercover investigation. (V.T.I.C. Art. 5.76-3, Sec. 20.)
[Chapters 2055-2100 reserved for expansion]
SUBTITLE F. OTHER COVERAGE
CHAPTER 2101. COVERAGE FOR AIRCRAFT
Sec. 2101.001. APPLICABILITY OF CHAPTER
Sec. 2101.002. FILING OF POLICY FORMS AND ENDORSEMENTS
MAY BE REQUIRED
Sec. 2101.003. DISAPPROVAL OF POLICY FORM OR
ENDORSEMENT
Sec. 2101.004. CERTAIN CONTRACTS OR OTHER AGREEMENTS
VOID
Sec. 2101.005. RULES
CHAPTER 2101. COVERAGE FOR AIRCRAFT
Sec. 2101.001. APPLICABILITY OF CHAPTER. This chapter
applies only to aircraft hull and aircraft liability insurance.
(V.T.I.C. Art. 5.90 (part).)
Sec. 2101.002. FILING OF POLICY FORMS AND ENDORSEMENTS MAY
BE REQUIRED. If the commissioner finds that a public need exists
to regulate the insurance subject to this chapter, the commissioner
by order may require each insurer issuing that insurance in this
state to file with the department each policy form and endorsement
the insurer uses to write the insurance. (V.T.I.C. Art. 5.90
(part).)
Sec. 2101.003. DISAPPROVAL OF POLICY FORM OR ENDORSEMENT.
(a) The commissioner may disapprove the use of a policy form or
endorsement filed under this chapter.
(b) After the commissioner disapproves a policy form or
endorsement, an insurer may not use the form or endorsement.
(V.T.I.C. Art. 5.90 (part).)
Sec. 2101.004. CERTAIN CONTRACTS OR OTHER AGREEMENTS
VOID. (a) A contract or other agreement is void if the contract
or agreement is not written into:
(1) the application for an insurance policy subject to
this chapter; or
(2) the policy.
(b) A contract or other agreement that is void under
Subsection (a) is:
(1) a violation of this chapter; and
(2) sufficient cause to revoke the insurer's
certificate of authority to write aircraft insurance in this state.
(V.T.I.C. Art. 5.90 (part).)
Sec. 2101.005. RULES. When the commissioner acts under
this chapter, the commissioner may adopt any rules that are
necessary to carry out the provisions of this chapter or Chapter 251
or 256. (V.T.I.C. Art. 5.92.)
[Chapters 2102-2150 reserved for expansion]
SUBTITLE G. POOLS, GROUPS, PLANS, AND SELF-INSURANCE
CHAPTER 2151. TEXAS AUTOMOBILE INSURANCE PLAN ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2151.001. DEFINITIONS
[Sections 2151.002-2151.050 reserved for expansion]
SUBCHAPTER B. TEXAS AUTOMOBILE INSURANCE PLAN ASSOCIATION
Sec. 2151.051. NATURE AND COMPOSITION OF ASSOCIATION
Sec. 2151.052. AUTHORITY OF GOVERNING COMMITTEE
Sec. 2151.053. MEMBERSHIP OF GOVERNING COMMITTEE
Sec. 2151.054. ELIGIBILITY TO SERVE AS INSURER
REPRESENTATIVE
Sec. 2151.055. INELIGIBILITY TO SERVE AS PUBLIC MEMBER
Sec. 2151.056. IMMUNITY FROM LIABILITY
[Sections 2151.057-2151.100 reserved for expansion]
SUBCHAPTER C. POWERS AND DUTIES OF ASSOCIATION
Sec. 2151.101. POWERS OF NONPROFIT CORPORATION
Sec. 2151.102. ASSIGNMENT OF INSURANCE; ELIGIBILITY
Sec. 2151.103. ASSESSMENTS
[Sections 2151.104-2151.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2151.151. CONTENTS OF PLAN OF OPERATION;
AMENDMENTS
Sec. 2151.152. CORRECTIVE ACTION TO PLAN OF OPERATION
Sec. 2151.153. INCENTIVE PROGRAMS
Sec. 2151.154. ASSIGNMENT DISTRIBUTION PLAN
[Sections 2151.155-2151.200 reserved for expansion]
SUBCHAPTER E. RATES FOR INSURANCE; HEARING
Sec. 2151.201. RATE STANDARDS
Sec. 2151.202. RATE FILINGS
Sec. 2151.203. RECORDING AND REPORTING OF PREMIUM,
LOSS, AND EXPENSE EXPERIENCE
Sec. 2151.204. NOTICE OF FILING
Sec. 2151.205. OPPORTUNITY TO REVIEW FILING
Sec. 2151.206. HEARING ON FILING
Sec. 2151.207. ACTION OF COMMISSIONER ON FILING
Sec. 2151.208. AMENDED FILING
Sec. 2151.209. OPPORTUNITY TO REVIEW AMENDED FILING
Sec. 2151.210. HEARING ON AMENDED FILING
Sec. 2151.211. APPEAL
Sec. 2151.212. HEARINGS BY DEPARTMENT
CHAPTER 2151. TEXAS AUTOMOBILE INSURANCE PLAN ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2151.001. DEFINITIONS. In this chapter:
(1) "Association" means the Texas Automobile
Insurance Plan Association.
(2) "Authorized insurer" means an insurer authorized
by the department to write automobile liability coverage under this
title. Except as provided by Section 2251.204, the term does not
include a county mutual insurance company organized under Chapter
912.
(3) "Insurance" means an insurance policy that meets
the requirements of Chapter 601, Transportation Code. (V.T.I.C.
Art. 21.81, Secs. 1(1), (2), (3).)
[Sections 2151.002-2151.050 reserved for expansion]
SUBCHAPTER B. TEXAS AUTOMOBILE INSURANCE PLAN ASSOCIATION
Sec. 2151.051. NATURE AND COMPOSITION OF ASSOCIATION. (a)
The Texas Automobile Insurance Plan Association is a nonprofit
corporate body composed of all authorized insurers.
(b) Each authorized insurer must be a member of the
association as a condition of the insurer's authority to write
automobile liability insurance in this state. (V.T.I.C.
Art. 21.81, Sec. 2(a) (part).)
Sec. 2151.052. AUTHORITY OF GOVERNING COMMITTEE. The
association is administered by a governing committee under a plan
of operation. (V.T.I.C. Art. 21.81, Secs. 2(b) (part), 3(a)
(part).)
Sec. 2151.053. MEMBERSHIP OF GOVERNING COMMITTEE. The
governing committee is composed of 15 members selected as follows:
(1) eight members who represent the interests of
insurers, elected by the association members according to a method
the members determine;
(2) five public members, nominated by the office of
public insurance counsel and selected by the commissioner; and
(3) two members who are general property and casualty
agents, as required by the plan of operation. (V.T.I.C.
Art. 21.81, Sec. 2(b) (part).)
Sec. 2151.054. ELIGIBILITY TO SERVE AS INSURER
REPRESENTATIVE. To be eligible to serve on the governing committee
as a representative of insurers, an individual must be a full-time
employee of an authorized insurer. (V.T.I.C. Art. 21.81, Sec.
2(c).)
Sec. 2151.055. INELIGIBILITY TO SERVE AS PUBLIC MEMBER. An
individual may not serve on the governing committee as a public
member if the individual, another individual related to that
individual within the second degree by consanguinity or affinity,
or another individual residing in the same household with that
individual:
(1) is required to be registered or licensed under
this code or another insurance law of this state;
(2) is employed by or acts as a consultant to a person
required to be registered or licensed or required to hold a
certificate of authority under this code or another insurance law
of this state;
(3) is the owner of, has a financial interest in, or
participates in the management of an organization required to be
registered or licensed or required to hold a certificate of
authority under this code or another insurance law of this state;
(4) is an officer, employer, or consultant of an
association in the field of insurance; or
(5) is required to register as a lobbyist under
Chapter 305, Government Code. (V.T.I.C. Art. 21.81, Sec. 2(d).)
Sec. 2151.056. IMMUNITY FROM LIABILITY. (a) The
association, a member of the governing committee, or an employee of
the association is not personally liable for:
(1) an act performed in good faith within the scope of
the person's authority as determined under this chapter or the plan
of operation; or
(2) damages occasioned by the person's official act or
omission except an act or omission that is corrupt or malicious.
(b) The association shall provide counsel to defend an
action brought against a member of the governing committee or an
employee because of the person's official act or omission
regardless of whether the person has terminated service with the
association when the action is instituted.
(c) This section is cumulative of and does not affect or
modify a common law or statutory privilege or immunity. (V.T.I.C.
Art. 21.81, Sec. 6.)
[Sections 2151.057-2151.100 reserved for expansion]
SUBCHAPTER C. POWERS AND DUTIES OF ASSOCIATION
Sec. 2151.101. POWERS OF NONPROFIT CORPORATION. (a) The
association has the powers granted to a nonprofit corporation under
the Business Organizations Code.
(b) Notwithstanding Subsection (a), on or before December
31, 2009, the association has the powers granted to a nonprofit
corporation under the Texas Non-Profit Corporation Act (Article
1396-1.01 et seq., Vernon's Texas Civil Statutes) or the Business
Organizations Code, as applicable.
(c) This subsection and Subsection (b) expire December 31,
2009. (V.T.I.C. Art. 21.81, Sec. 3(a) (part).)
Sec. 2151.102. ASSIGNMENT OF INSURANCE; ELIGIBILITY. (a)
The association shall provide for the assignment of insurance to an
authorized insurer for a person required by Chapter 601,
Transportation Code, to show proof of financial responsibility for
the future.
(b) An applicant is not eligible for insurance through the
association unless the applicant and the servicing agent certify as
part of the application to the association that the applicant has
been rejected for insurance by at least two insurers that are
authorized to engage in business in this state and that are writing
automobile insurance in this state. (V.T.I.C. Art. 21.81, Sec. 4.)
Sec. 2151.103. ASSESSMENTS. (a) The association may
assess authorized insurers to provide money to operate the
association.
(b) The amount assessed against an authorized insurer must
be in proportion to the insurer's writing of automobile liability
insurance in this state.
(c) The association may bring an action to collect an
assessment against an authorized insurer that does not pay the
assessment within a reasonable time. In addition, the association
may report an authorized insurer's failure to pay the assessment to
the commissioner. The commissioner may institute a disciplinary
action against the insurer under Chapter 82. (V.T.I.C. Art. 21.81,
Sec. 3(a) (part).)
[Sections 2151.104-2151.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2151.151. CONTENTS OF PLAN OF OPERATION; AMENDMENTS.
(a) The plan of operation must:
(1) provide for the efficient, economical, fair, and
nondiscriminatory administration of the association; and
(2) provide a means by which insurance may be provided
in accordance with Section 2151.102(a).
(b) Subject to the commissioner's approval, the governing
committee may amend the plan of operation. (V.T.I.C. Art. 21.81,
Secs. 1(4), 3(b), (c).)
Sec. 2151.152. CORRECTIVE ACTION TO PLAN OF OPERATION. If
the commissioner at any time believes that any part of the plan of
operation is inconsistent with the purposes of Chapter 601,
Transportation Code, the commissioner shall notify the governing
committee in writing so that the governing committee may take
corrective action. (V.T.I.C. Art. 21.81, Sec. 3(d).)
Sec. 2151.153. INCENTIVE PROGRAMS. (a) The plan of
operation must include incentive programs to encourage authorized
insurers to write insurance on a voluntary basis and to minimize the
use of the association as a means to obtain insurance.
(b) One incentive program must target underserved
geographic areas, which the commissioner by rule shall designate.
In designating underserved areas, the commissioner shall consider
with respect to an area:
(1) the availability of insurance;
(2) the number of uninsured drivers;
(3) the number of drivers insured through the
association; and
(4) any other relevant factor.
(c) The incentive programs are effective on the
commissioner's approval. (V.T.I.C. Art. 21.81, Sec. 3(e).)
Sec. 2151.154. ASSIGNMENT DISTRIBUTION PLAN. (a) The
plan of operation must include a voluntary, competitive limited
assignment distribution plan that allows an authorized insurer to
contract directly with a servicing insurer to accept assignments to
the servicing insurer by the association.
(b) A servicing insurer must be authorized to write
automobile insurance in this state and must:
(1) have written automobile liability insurance in
this state for at least five years; or
(2) be currently engaged as a servicing insurer for
assigned risk automobile business in at least one other state.
(c) After notice and hearing, the commissioner may prohibit
an insurer from acting as a servicing insurer.
(d) An authorized insurer and a servicing insurer shall
determine through negotiation the terms of a contract described by
this section, including the buy-out fee.
(e) The governing committee may:
(1) adopt reasonable rules for the conduct of business
under a contract described by this section; and
(2) establish reasonable standards of eligibility for
servicing insurers. (V.T.I.C. Art. 21.81, Sec. 3(f).)
[Sections 2151.155-2151.200 reserved for expansion]
SUBCHAPTER E. RATES FOR INSURANCE; HEARING
Sec. 2151.201. RATE STANDARDS. Rates for insurance
provided under this chapter must be:
(1) just, reasonable, adequate, not excessive, not
confiscatory, and not unfairly discriminatory for the risks to
which the rates apply; and
(2) sufficient to carry all claims to maturity and
meet the expenses incurred in the writing and servicing of the
business. (V.T.I.C. Art. 21.81, Sec. 5(a) (part).)
Sec. 2151.202. RATE FILINGS. (a) The association shall
file annually with the department rates to be charged for insurance
provided through the association for approval by the commissioner.
(b) The association may not file rates under this section
more than once in any 12-month period. (V.T.I.C. Art. 21.81, Sec.
5(c) (part).)
Sec. 2151.203. RECORDING AND REPORTING OF PREMIUM, LOSS,
AND EXPENSE EXPERIENCE. (a) The commissioner shall adopt
reasonable rules and statistical plans for the recording and
reporting of premium, loss, and expense experience and other
required data by each authorized insurer. The premium, loss, and
expense experience must be reported separately for business
assigned to the insurer.
(b) Each authorized insurer shall use the statistical plans
adopted under this section to record and report premium, loss, and
expense experience and other required data in accordance with the
rules adopted by the commissioner.
(c) In approving rates under this subchapter, the
commissioner shall consider the reports collected under the
statistical plan regarding aggregated premiums earned and losses
and expenses incurred in the writing of automobile insurance
through the association. (V.T.I.C. Art. 21.81, Sec. 5(a) (part),
(b).)
Sec. 2151.204. NOTICE OF FILING. (a) The department
shall file with the secretary of state for publication in the Texas
Register notice that a filing has been made under Section 2151.202
not later than the seventh day after the date the filing is received
by the department.
(b) The notice must include information relating to:
(1) the availability of the filing for public
inspection at the department during regular business hours;
(2) the procedures for obtaining copies of the filing;
(3) procedures for making written comments related to
the filing; and
(4) the time, place, and date of the hearing scheduled
under Section 2151.206. (V.T.I.C. Art. 21.81, Sec. 5(f).)
Sec. 2151.205. OPPORTUNITY TO REVIEW FILING. Before
approving, disapproving, or modifying a filing made under Section
2151.202, the commissioner must provide to all interested persons a
reasonable opportunity to:
(1) review the filing;
(2) obtain a copy of the filing on payment of any
legally required copying cost; and
(3) submit to the commissioner written comments,
analyses, or information related to the filing. (V.T.I.C.
Art. 21.81, Sec. 5(d).)
Sec. 2151.206. HEARING ON FILING. (a) Not later than the
45th day after the date the department receives a filing required by
Section 2151.202, the commissioner shall schedule a hearing at
which interested persons may present written or oral comments
relating to the filing.
(b) The association, the public insurance counsel, and any
other interested person or entity that submits proposed changes or
actuarial analyses may ask questions of any person testifying at
the hearing.
(c) A hearing held under this section is not a contested
case hearing under Chapter 2001, Government Code. (V.T.I.C. Art.
21.81, Sec. 5(e).)
Sec. 2151.207. ACTION OF COMMISSIONER ON FILING. (a) After
the conclusion of the hearing under Section 2151.206, the
commissioner shall approve, disapprove, or modify the filing in
writing.
(b) If the commissioner disapproves a filing, the
commissioner shall state in writing the reasons for the disapproval
and the criteria to be met by the association to obtain approval.
(V.T.I.C. Art. 21.81, Sec. 5(g) (part).)
Sec. 2151.208. AMENDED FILING. The association may file
with the commissioner an amended filing to comply with the
commissioner's comments not later than the 10th day after the date
the association receives the commissioner's written disapproval.
(V.T.I.C. Art. 21.81, Sec. 5(g) (part).)
Sec. 2151.209. OPPORTUNITY TO REVIEW AMENDED FILING.
Before approving or disapproving an amended filing, the
commissioner must provide to all interested persons a reasonable
opportunity, in the same manner an opportunity is provided under
Section 2151.205, to:
(1) review the amended filing;
(2) obtain a copy of the amended filing on payment of
any legally required copying cost; and
(3) submit to the commissioner written comments or
information related to the amended filing. (V.T.I.C. Art. 21.81,
Sec. 5(h) (part).)
Sec. 2151.210. HEARING ON AMENDED FILING. (a) The
commissioner may hold a hearing in the manner provided by Section
2151.206 not later than the 20th day after the date the department
receives an amended filing.
(b) Not later than the 10th day after the date the hearing on
the amended filing is concluded, the commissioner shall approve or
disapprove the amended filing.
(c) Not later than the 30th day after the date the amended
filing is received by the department, the commissioner shall
disapprove the amended filing or the filing is considered approved.
(d) The requirements provided under Sections 2151.204 and
2151.207 apply to a hearing conducted under this section.
(V.T.I.C. Art. 21.81, Sec. 5(h) (part).)
Sec. 2151.211. APPEAL. (a) A person aggrieved by a
decision of the commissioner under this subchapter may appeal the
decision not later than the 30th day after the date of the decision.
(b) An appeal of a commissioner's decision under this
subchapter must be made in accordance with Subchapter D, Chapter
36. (V.T.I.C. Art. 21.81, Sec. 5(i).)
Sec. 2151.212. HEARINGS BY DEPARTMENT. Subchapter B,
Chapter 40, does not apply to this subchapter. (V.T.I.C. Art. 21.81, Sec. 5(c) (part).)
CHAPTER 2152. GROUP INSURANCE IN UNDERSERVED AREAS
Sec. 2152.001. DEFINITION
Sec. 2152.002. DESIGNATION OF UNDERSERVED AREAS
Sec. 2152.003. AUTHORIZATION FOR ISSUANCE OF GROUP
INSURANCE IN UNDERSERVED AREA
Sec. 2152.004. EXCLUSION OF CERTAIN COVERAGE
Sec. 2152.005. FORMATION OF GROUP
Sec. 2152.006. RATES
Sec. 2152.007. POLICY FORMS AND CERTIFICATES
Sec. 2152.008. RULES
CHAPTER 2152. GROUP INSURANCE IN UNDERSERVED AREAS
Sec. 2152.001. DEFINITION. In this chapter, "residential
property insurance" means insurance against loss to real or
tangible personal property at a fixed location that is provided
through a homeowners policy, residential fire and allied lines
policy, or farm and ranch owners policy. (V.T.I.C. Art. 21.79, Sec.
1(a) (part).)
Sec. 2152.002. DESIGNATION OF UNDERSERVED AREAS. (a) The
commissioner by rule may designate an area as an underserved area
for personal automobile insurance or residential property
insurance.
(b) In determining which areas to designate as underserved,
the commissioner shall consider:
(1) whether the insurance described by Subsection (a)
is not reasonably available to a substantial number of insurable
risks and the availability of insurance in general; and
(2) any other relevant factor as determined by the
commissioner. (V.T.I.C. Art. 21.79, Sec. 1(a) (part).)
Sec. 2152.003. AUTHORIZATION FOR ISSUANCE OF GROUP
INSURANCE IN UNDERSERVED AREA. An insurer authorized to write
property or casualty insurance in this state, including a Lloyd's
plan and a reciprocal or interinsurance exchange, that writes
personal automobile insurance or residential property insurance in
this state may write the personal automobile insurance or
residential property insurance on a group basis in an underserved
area designated by the commissioner. (V.T.I.C. Art. 21.79, Sec.
2.)
Sec. 2152.004. EXCLUSION OF CERTAIN COVERAGE. Group
insurance provided under this chapter may not include windstorm and
hail insurance coverage for a risk eligible for that coverage under
Chapter 2210. (V.T.I.C. Art. 21.79, Sec. 1(b).)
Sec. 2152.005. FORMATION OF GROUP. A group may be formed
solely to purchase insurance subject to this chapter. (V.T.I.C.
Art. 21.79, Sec. 3.)
Sec. 2152.006. RATES. Rates for coverage provided under
this chapter are subject to the applicable statutes relating to the
insurers providing the coverage. (V.T.I.C. Art. 21.79, Sec. 5.)
Sec. 2152.007. POLICY FORMS AND CERTIFICATES. The
commissioner shall adopt policy forms and certificates for use in
underserved areas designated by the commissioner under this
chapter. (V.T.I.C. Art. 21.79, Sec. 4.)
Sec. 2152.008. RULES. In addition to other rules adopted
under this chapter, the commissioner may adopt any rules that are
appropriate and necessary to implement this chapter. (V.T.I.C. Art. 21.79, Sec. 6.)
CHAPTER 2153. GROUP MARKETING OF AUTOMOBILE INSURANCE
FOR PERSONS OVER 55 YEARS OF AGE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2153.001. DEFINITIONS
Sec. 2153.002. APPLICABILITY OF CERTAIN PROVISIONS
Sec. 2153.003. RULES
[Sections 2153.004-2153.050 reserved for expansion]
SUBCHAPTER B. CONDITIONS FOR ISSUANCE
OF GROUP AUTOMOBILE INSURANCE
Sec. 2153.051. AUTHORIZATION FOR ISSUANCE OF GROUP
AUTOMOBILE INSURANCE
Sec. 2153.052. ELIGIBILITY OF GROUP
Sec. 2153.053. ELIGIBILITY OF GROUP MEMBER
Sec. 2153.054. GUARANTEED ISSUE
Sec. 2153.055. INSURER QUALIFICATIONS
Sec. 2153.056. VEHICLES COVERED
Sec. 2153.057. INDIVIDUAL POLICIES
Sec. 2153.058. GROUP PAYMENT OF PREMIUMS
Sec. 2153.059. LIMITATIONS ON CANCELING INSURANCE
[Sections 2153.060-2153.100 reserved for expansion]
SUBCHAPTER C. RECORDS, RATES, AND FORMS
Sec. 2153.101. MAINTENANCE OF RECORDS
Sec. 2153.102. RATES
Sec. 2153.103. POLICY FORMS
CHAPTER 2153. GROUP MARKETING OF AUTOMOBILE INSURANCE
FOR PERSONS OVER 55 YEARS OF AGE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2153.001. DEFINITIONS. In this chapter:
(1) "Group automobile insurance" means automobile
insurance that:
(A) covers individuals who are over 55 years of
age; and
(B) is offered under a group marketing plan.
(2) "Group marketing" means the marketing of group
automobile insurance to an eligible group under Section 2153.052.
(V.T.I.C. Art. 21.77, Secs. 2(1) (part), (2) (part).)
Sec. 2153.002. APPLICABILITY OF CERTAIN PROVISIONS.
Sections 4001.051 and 4001.053 do not apply to a group
participating in a group marketing plan under this chapter.
(V.T.I.C. Art. 21.77, Sec. 10.)
Sec. 2153.003. RULES. The commissioner may adopt any rules
necessary to carry out the provisions of this chapter. (V.T.I.C.
Art. 21.77, Sec. 9.)
[Sections 2153.004-2153.050 reserved for expansion]
SUBCHAPTER B. CONDITIONS FOR ISSUANCE
OF GROUP AUTOMOBILE INSURANCE
Sec. 2153.051. AUTHORIZATION FOR ISSUANCE OF GROUP
AUTOMOBILE INSURANCE. An insurer may issue group automobile
insurance in this state if the conditions of Sections 2153.054(b),
2153.055-2153.059, and 2153.103 are met. (V.T.I.C. Art. 21.77,
Sec. 5(a).)
Sec. 2153.052. ELIGIBILITY OF GROUP. (a) To be eligible
for group marketing, a group must:
(1) have existed for at least six months before the
date the group automobile insurance is purchased; and
(2) be organized for a purpose other than to become an
insurance group under this chapter.
(b) The group may include any group that is actuarially
credible for underwriting purposes. (V.T.I.C. Art. 21.77, Sec. 3.)
Sec. 2153.053. ELIGIBILITY OF GROUP MEMBER. A member of a
group described by Section 2153.052 is eligible to participate in a
group marketing plan if the member is:
(1) in good standing with the group;
(2) over 55 years of age; and
(3) authorized to operate a motor vehicle in this
state. (V.T.I.C. Art. 21.77, Sec. 4.)
Sec. 2153.054. GUARANTEED ISSUE. (a) An insurer shall
issue group automobile insurance:
(1) on a guaranteed basis under a single insurance
program; and
(2) without individual underwriting selection or
individual proof of insurability.
(b) An insurer that issues group automobile insurance and
the insured group shall accept for participation in the group
marketing plan any member of the group who is eligible under Section
2153.053 and who wants to participate. (V.T.I.C. Art. 21.77, Secs.
2(2) (part), 5(b).)
Sec. 2153.055. INSURER QUALIFICATIONS. To qualify to
write group automobile insurance, an insurer:
(1) must be authorized to engage in the business of
automobile insurance in this state;
(2) must also be engaged in the business of writing
automobile insurance for independent individual risks; and
(3) may not be organized solely to provide group
automobile insurance. (V.T.I.C. Art. 21.77, Secs. 2(1) (part), (2)
(part), 5(c).)
Sec. 2153.056. VEHICLES COVERED. A group marketing plan
must provide that a motor vehicle is eligible for group automobile
insurance coverage only if the vehicle is owned by a group member or
the member's spouse jointly or severally. (V.T.I.C. Art. 21.77,
Sec. 5(g).)
Sec. 2153.057. INDIVIDUAL POLICIES. An insurer shall
issue an individual policy to each participating group member.
(V.T.I.C. Art. 21.77, Secs. 5(d) (part), (e) (part).)
Sec. 2153.058. GROUP PAYMENT OF PREMIUMS. An insurer shall
provide group automobile insurance under an agreement under which
the group periodically pays the premiums on the policies to the
insurer. (V.T.I.C. Art. 21.77, Sec. 5(e) (part).)
Sec. 2153.059. LIMITATIONS ON CANCELING INSURANCE. (a) An
insurer may not cancel the insurance of a group member unless:
(1) the member fails to pay the premiums; or
(2) the insurance for the entire group is canceled.
(b) An insurer that cancels insurance under Subsection (a)
shall provide to each group member whose insurance is canceled the
same notice of cancellation the insurer provides for cancellation
of individual automobile insurance policies. (V.T.I.C.
Art. 21.77, Sec. 5(f).)
[Sections 2153.060-2153.100 reserved for expansion]
SUBCHAPTER C. RECORDS, RATES, AND FORMS
Sec. 2153.101. MAINTENANCE OF RECORDS. An insurer that
writes insurance under a group marketing plan shall maintain
separate experience data on the group marketing plan business,
including complete records of premium income, losses, and expenses,
so that the experience may be fairly ascertained. (V.T.I.C.
Art. 21.77, Sec. 6.)
Sec. 2153.102. RATES. Rates for group automobile
insurance are determined in the manner provided by Chapter 2251 and
Article 5.13-2, to the extent that those laws apply. (V.T.I.C.
Art. 21.77, Sec. 7.)
Sec. 2153.103. POLICY FORMS. An insurer that writes group
automobile insurance shall use policy forms:
(1) prescribed by the commissioner and authorized for
use by Section 2301.052(b); or
(2) filed and in effect as provided by Section 2301.052(a). (V.T.I.C. Art. 21.77, Secs. 5(d) (part), 8.)
CHAPTER 2154. VOLUNTEER FIRE DEPARTMENT MOTOR VEHICLE
SELF-INSURANCE PROGRAM
Sec. 2154.001. DEFINITIONS
Sec. 2154.002. MOTOR VEHICLE SELF-INSURANCE PROGRAM
Sec. 2154.003. SELF-INSURANCE POOL; COVERAGE
Sec. 2154.004. PARTICIPATION IN SELF-INSURANCE POOL
Sec. 2154.005. VOLUNTEER FIRE DEPARTMENT
SELF-INSURANCE FUND
Sec. 2154.006. LIMITATION ON STATE'S LIABILITY
Sec. 2154.007. SELF-INSURANCE FEE
Sec. 2154.008. LEGAL REPRESENTATION
CHAPTER 2154. VOLUNTEER FIRE DEPARTMENT MOTOR VEHICLE
SELF-INSURANCE PROGRAM
Sec. 2154.001. DEFINITIONS. In this chapter:
(1) "Fund" means the volunteer fire department
self-insurance fund established under Section 2154.005.
(2) "Program" means the volunteer fire department
motor vehicle self-insurance program administered under this
chapter.
(3) "Service" means the Texas Forest Service of The
Texas A&M University System.
(4) "Volunteer fire department" means a fire
department operated by the fire department's members on a
not-for-profit basis. The term includes a fire department that is
exempt from federal income tax under Section 501(a), Internal
Revenue Code of 1986, by being listed as an exempt organization in
Section 501(c)(3) of that code. (V.T.I.C. Art. 21.61, Sec. 1.)
Sec. 2154.002. MOTOR VEHICLE SELF-INSURANCE PROGRAM. (a)
The service shall administer a volunteer fire department
self-insurance program that:
(1) identifies and evaluates risks arising from the
use of motor vehicles by volunteer fire departments;
(2) maintains a loss-prevention and loss-control
program to reduce risks arising from the use of motor vehicles by
volunteer fire departments;
(3) consolidates and administers volunteer fire
department risk management and self-insurance programs; and
(4) provides motor vehicle self-insurance coverage in
accordance with Section 2154.003.
(b) The service may employ staff to administer the program.
(c) The director of the service may adopt rules to implement
and administer the program. (V.T.I.C. Art. 21.61, Secs. 2, 3.)
Sec. 2154.003. SELF-INSURANCE POOL; COVERAGE. (a) The
program shall administer a self-insurance pool to provide coverage
for motor vehicles a volunteer fire department uses for fire
fighting.
(b) The coverage may indemnify an official, employee,
member, or volunteer of a volunteer fire department for liability
arising from the use of a covered motor vehicle in performing the
person's fire-fighting duties. The maximum limits of coverage are:
(1) for bodily injury or death:
(A) $100,000 for each person; and
(B) $300,000 for each single occurrence; and
(2) for injury to or destruction of property, $100,000
for each single occurrence.
(c) Self-insurance coverage provided under this section may
be funded only from money available from the fund.
(d) The director of the service may establish:
(1) eligibility requirements for participation in
coverage under this section; and
(2) equipment and safety standards for the motor
vehicles to be covered under this section.
(e) Coverage limits of self-insurance provided under this
section must be based on the liquidity of the fund after deducting
the cost of administering this chapter. (V.T.I.C. Art. 21.61,
Secs. 4(a), (b), (c), 5(d), (e).)
Sec. 2154.004. PARTICIPATION IN SELF-INSURANCE POOL. (a)
To participate in coverage provided under Section 2154.003, a
volunteer fire department must submit a written request to the
program.
(b) The director of the program shall approve the request
for participation if each motor vehicle to be covered meets the
eligibility requirements and equipment and safety standards
established under Section 2154.003(d). (V.T.I.C. Art. 21.61, Sec.
4(d).)
Sec. 2154.005. VOLUNTEER FIRE DEPARTMENT SELF-INSURANCE
FUND. (a) The fund is an account in the general revenue fund.
(b) The fund is composed of:
(1) money collected under Section 2154.007; and
(2) interest accruing on money in the fund.
(c) Money in the fund may be spent only for:
(1) funding self-insurance under the program; or
(2) administering this chapter, including paying the
salaries and expenses of staff for the program and the fund.
(V.T.I.C. Art. 21.61, Secs. 5(a), (b), (c).)
Sec. 2154.006. LIMITATION ON STATE'S LIABILITY. The state's
liability for a loss covered by self-insurance provided under this
chapter is limited to the assets of the fund, and the state is not
otherwise liable for that loss. (V.T.I.C. Art. 21.61, Sec. 5(f).)
Sec. 2154.007. SELF-INSURANCE FEE. (a) The service may
assess and collect a reasonable fee from participating volunteer
fire departments to provide self-insurance coverage under this
chapter. In establishing the amount of the fee, the service shall
consider the amount that could be charged to the volunteer fire
department for similar insurance coverage provided to that
department in accordance with this code.
(b) Fees collected under this section shall be deposited to
the credit of the fund. (V.T.I.C. Art. 21.61, Sec. 6.)
Sec. 2154.008. LEGAL REPRESENTATION. (a) The service may
employ an attorney to represent a volunteer fire department or an
official, employee, member, or volunteer of a volunteer fire
department in a liability action for which insurance coverage is
provided under this chapter.
(b) The attorney general may not provide the services
described by Subsection (a). (V.T.I.C. Art. 21.61, Sec. 7.)
[Chapters 2155-2170 reserved for expansion]
CHAPTER 2171. COMMERCIAL GROUP PROPERTY INSURANCE
Sec. 2171.001. DEFINITION
Sec. 2171.002. AUTHORIZATION FOR ISSUANCE
Sec. 2171.003. POLICY FORM FILINGS
Sec. 2171.004. RATE FILINGS
Sec. 2171.005. IDENTIFICATION OF INSURED REQUIRED
CHAPTER 2171. COMMERCIAL GROUP PROPERTY INSURANCE
Sec. 2171.001. DEFINITION. In this chapter, "large risk"
means an insured described by Section 2301.004. (V.T.I.C.
Art. 5.41-3, Secs. (a) (part), (b) (part).)
Sec. 2171.002. AUTHORIZATION FOR ISSUANCE. An insurer may
write commercial group property insurance for:
(1) a group of businesses that constitutes a large
risk if the members of the group have clearly identifiable
underwriting characteristics; or
(2) an association that constitutes a large risk if
the members of the association are engaged in similar undertakings.
(V.T.I.C. Art. 5.41-3, Sec. (a) (part).)
Sec. 2171.003. POLICY FORM FILINGS. (a) An insurer shall
file a policy form with the commissioner before using the form for a
group of businesses or an association described by Section 2171.002
in which each member of the group or association is not a large
risk.
(b) A filing made under this section is for informational
purposes only. (V.T.I.C. Art. 5.41-3, Sec. (b) (part).)
Sec. 2171.004. RATE FILINGS. An insurer shall file with
the commissioner in accordance with Chapter 2251 the following
information for commercial group property insurance written under
this chapter in this state:
(1) rates;
(2) supplementary rating information; and
(3) pertinent supporting information. (V.T.I.C.
Art. 5.41-3, Sec. (c).)
Sec. 2171.005. IDENTIFICATION OF INSURED REQUIRED. An
insurer filing a policy form under Section 2171.003 or rates and
related information under Section 2171.004 shall clearly identify
the group of businesses or the association to be insured. (V.T.I.C.
Art. 5.41-3, Sec. (d).)
[Chapters 2172-2200 reserved for expansion]
CHAPTER 2201. RISK RETENTION GROUPS AND PURCHASING GROUPS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2201.001. PURPOSE OF CHAPTER
Sec. 2201.002. GENERAL DEFINITIONS
Sec. 2201.003. LIABILITY DEFINED
Sec. 2201.004. AGENT LICENSE REQUIRED
Sec. 2201.005. EXEMPTION FROM CERTAIN REQUIREMENTS
Sec. 2201.006. AUTHORITY OF COMMISSIONER
Sec. 2201.007. ANNUAL REPORT TO COMMISSIONER
Sec. 2201.008. RULES
[Sections 2201.009-2201.050 reserved for expansion]
SUBCHAPTER B. RISK RETENTION GROUP QUALIFICATIONS
Sec. 2201.051. GENERAL QUALIFICATIONS OF RISK
RETENTION GROUP
Sec. 2201.052. NAME OF GROUP
Sec. 2201.053. STATUS AS LIABILITY INSURER REQUIRED
Sec. 2201.054. QUALIFICATIONS REGARDING AUTHORITY OF
CERTAIN ENTITIES TO ENGAGE IN
BUSINESS
Sec. 2201.055. QUALIFICATIONS REGARDING MEMBERSHIP
Sec. 2201.056. AUTHORIZED ACTIVITIES
[Sections 2201.057-2201.100 reserved for expansion]
SUBCHAPTER C. RISK RETENTION GROUPS
CHARTERED IN THIS STATE
Sec. 2201.101. ELIGIBILITY REQUIREMENTS
Sec. 2201.102. CHARTER APPLICATION
Sec. 2201.103. PLAN OF OPERATION; REVISIONS
Sec. 2201.104. FILING FEE
[Sections 2201.105-2201.150 reserved for expansion]
SUBCHAPTER D. RISK RETENTION GROUPS
NOT CHARTERED IN THIS STATE
Sec. 2201.151. COMPLIANCE REQUIRED
Sec. 2201.152. PREREQUISITES TO OFFERING INSURANCE
Sec. 2201.153. REQUIREMENTS FOR CONTINUING BUSINESS
Sec. 2201.154. FILING FEES
Sec. 2201.155. PAYMENT OF TAXES
Sec. 2201.156. EXAMINATION OF FINANCIAL CONDITION;
DISSOLUTION OR DELINQUENCY
PROCEEDINGS
Sec. 2201.157. APPLICABILITY OF STATE LAWS PROHIBITING
CERTAIN ACTS OR PRACTICES
Sec. 2201.158. INJUNCTIVE RELIEF
[Sections 2201.159-2201.200 reserved for expansion]
SUBCHAPTER E. PROVISIONS REGULATING GENERAL OPERATION
OF RISK RETENTION GROUPS
Sec. 2201.201. SCOPE OF AUTHORITY
Sec. 2201.202. PLAN OF OPERATION
Sec. 2201.203. AGENT TO VERIFY AUTHORITY
Sec. 2201.204. APPLICABILITY OF CERTAIN REQUIREMENTS
FOR LIABILITY INSURERS
Sec. 2201.205. RISK RETENTION GROUP PARTICIPATION IN
INSOLVENCY GUARANTY FUND PROHIBITED
Sec. 2201.206. REQUIRED NOTICE
Sec. 2201.207. PROHIBITED ACTIVITIES
Sec. 2201.208. INJUNCTIVE RELIEF
Sec. 2201.209. PENALTIES
[Sections 2201.210-2201.250 reserved for expansion]
SUBCHAPTER F. PURCHASING GROUPS
Sec. 2201.251. GENERAL QUALIFICATIONS OF PURCHASING
GROUP
Sec. 2201.252. DETERMINATION OF LOCATION
Sec. 2201.253. LIMITATIONS ON AUTHORITY
Sec. 2201.254. APPLICATION OF STATE LAW
Sec. 2201.255. NOTICE TO COMMISSIONER; FILING FEE
Sec. 2201.256. REGISTRATION REQUIREMENT; FEES
Sec. 2201.257. PAYMENT OF PREMIUM TAXES
Sec. 2201.258. PURCHASING GROUP PARTICIPATION IN
INSOLVENCY GUARANTY FUND PROHIBITED;
EXCEPTION
Sec. 2201.259. REQUIRED NOTICE
CHAPTER 2201. RISK RETENTION GROUPS AND PURCHASING GROUPS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2201.001. PURPOSE OF CHAPTER. The purpose of this
chapter is to:
(1) regulate the formation and operation of risk
retention groups and purchasing groups in this state formed under:
(A) the Product Liability Risk Retention Act of
1981 (15 U.S.C. Section 3901 et seq.); or
(B) the Liability Risk Retention Act of 1986 (15
U.S.C. Section 3901 et seq.); and
(2) protect the public by the appropriate regulation
of groups described by Subdivision (1) to the extent permitted by
law. (V.T.I.C. Art. 21.54, Sec. 1.)
Sec. 2201.002. GENERAL DEFINITIONS. In this chapter:
(1) "Agent" includes the terms "agent" and "broker" as
used in the Liability Risk Retention Act of 1986 (15 U.S.C. Section
3901 et seq.).
(2) "Hazardous financial condition" means a condition
in which a risk retention group, based on the group's present or
reasonably anticipated financial condition and although the group
is not yet financially impaired or insolvent, is unlikely to be able
to:
(A) meet obligations to policyholders with
respect to known claims and reasonably anticipated claims; or
(B) pay other obligations in the normal course of
business.
(3) "Insurance" means primary insurance, excess
insurance, reinsurance, surplus lines insurance, and any other
arrangement for transferring and distributing risk that is
determined to be insurance under the laws of this state.
(4) "State" means any state of the United States or the
District of Columbia. (V.T.I.C. Art. 21.54, Secs. 2(4), (11),
(12), (13).)
Sec. 2201.003. LIABILITY DEFINED. (a) In this chapter,
except as provided by Subsection (b) or as otherwise provided by
this chapter:
(1) "Completed operations liability" means liability,
including liability for activities that are completed or abandoned
before the date of the occurrence giving rise to the liability,
arising out of the installation, maintenance, or repair of any
product at a site that is not owned or controlled by:
(A) a person who performs that work; or
(B) a person who hires an independent contractor
to perform that work.
(2) "Liability" means legal liability for damages,
including costs of defense, legal costs, fees, and other claims
expenses, incurred because of personal injury, property damage, or
other damage or loss to another person resulting from or arising out
of:
(A) a product, trade, or business, regardless of
whether the business operates for profit;
(B) operations, premises, or services, including
professional services; or
(C) any activity of:
(i) a state or local government; or
(ii) an agency or political subdivision of
a state or local government.
(3) "Product liability" means liability for damages
incurred because of any personal injury, death, emotional harm,
consequential economic damage, or property damage, including
damage resulting from the loss of use of property, arising out of
the manufacture, design, importation, distribution, packaging,
labeling, lease, or sale of a product, but does not include the
liability of any person for those damages if the product involved
was in the possession of that person when the incident giving rise
to the claim occurred.
(b) In this chapter, "liability" does not include:
(1) liability for damages incurred because of personal
injury, property damage, or other damage or loss resulting from a
personal, familial, or household activity or responsibility; or
(2) an employer's liability with respect to the
employer's employees other than legal liability under the Federal
Employers' Liability Act (45 U.S.C. Section 51 et seq.). (V.T.I.C.
Art. 21.54, Secs. 2(3), (5), (6), (7).)
Sec. 2201.004. AGENT LICENSE REQUIRED. (a) A person, firm,
partnership, or corporation may not act or offer to act as an agent
for, or aid in any manner in the solicitation, negotiation, or
placement of insurance on behalf of, a risk retention group or
purchasing group operating in this state or a group member in this
state without first obtaining a license as an agent under:
(1) Chapter 4051, if a resident of this state; or
(2) Chapter 4056, if a nonresident of this state.
(b) A person, firm, partnership, or corporation must comply
with Chapter 981 before the person, firm, partnership, or
corporation, on behalf of a purchasing group or a group member in
this state:
(1) acts or offers to act as an agent for an insurer
not authorized to engage in business in this state; or
(2) aids in any manner in the solicitation,
negotiation, or placement of insurance with an insurer not
authorized to engage in business in this state. (V.T.I.C. Art.
21.54, Secs. 10(a), (b).)
Sec. 2201.005. EXEMPTION FROM CERTAIN REQUIREMENTS. (a) A
provision of Chapter 981, 4055, or 4056 does not apply to an agent
described by Subsection (b) if the provision:
(1) requires residency in this state;
(2) requires countersignatures;
(3) prohibits the solicitation of insurance in this
state by a nonresident or the payment of commissions to a
nonresident; or
(4) prohibits a nonresident from acting as a surplus
or excess lines agent.
(b) The exemption provided by Subsection (a) applies to an
agent licensed under Chapter 981, 4055, or 4056 who is acting on
behalf of a risk retention group or purchasing group operating in
this state or a group member in this state in providing or placing
liability insurance for risks located in this state. (V.T.I.C.
Art. 21.54, Sec. 10(c).)
Sec. 2201.006. AUTHORITY OF COMMISSIONER. (a) To enforce
the laws of this state, the commissioner may use any authority
provided by this code that is not specifically preempted by the
Product Liability Risk Retention Act of 1981, as amended by the
Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901 et
seq.), including the authority to investigate, issue a subpoena,
conduct a deposition or hearing, issue an order, and impose a
penalty.
(b) The commissioner shall rely on the procedural laws and
rules of this state with regard to an investigation, an
administrative proceeding, or litigation. (V.T.I.C. Art. 21.54,
Secs. 12(a), (b).)
Sec. 2201.007. ANNUAL REPORT TO COMMISSIONER. An agent
licensed as required by Section 2201.004 shall report to the
commissioner not later than March 1 of each year the activities and
scope of services being provided to a risk retention group or
purchasing group. The report must be made in accordance with rules
adopted by the commissioner. (V.T.I.C. Art. 21.54, Sec. 10(e).)
Sec. 2201.008. RULES. The commissioner may adopt rules
relating to risk retention groups and purchasing groups that are
necessary to carry out this chapter. (V.T.I.C. Art. 21.54, Sec.
15.)
[Sections 2201.009-2201.050 reserved for expansion]
SUBCHAPTER B. RISK RETENTION GROUP QUALIFICATIONS
Sec. 2201.051. GENERAL QUALIFICATIONS OF RISK RETENTION
GROUP. A risk retention group must be a corporation or other
limited liability association that:
(1) is organized primarily to assume and spread, and
engages primarily in assuming and spreading, all or any portion of
the liability exposure of the group's members; and
(2) otherwise meets the qualifications of this
subchapter. (V.T.I.C. Art. 21.54, Sec. 2(10) (part).)
Sec. 2201.052. NAME OF GROUP. A risk retention group must
include in its name the phrase "risk retention group." (V.T.I.C.
Art. 21.54, Sec. 2(10) (part).)
Sec. 2201.053. STATUS AS LIABILITY INSURER REQUIRED. A
corporation or other limited liability association must be
chartered and authorized to engage in the business of insurance as a
liability insurer under the laws of any state to act as a risk
retention group. (V.T.I.C. Art. 21.54, Sec. 2(10) (part).)
Sec. 2201.054. QUALIFICATIONS REGARDING AUTHORITY OF
CERTAIN ENTITIES TO ENGAGE IN BUSINESS. (a) In this section,
"completed operations liability" and "product liability" have the
meanings assigned by the Product Liability Risk Retention Act of
1981 (15 U.S.C. Section 3901 et seq.) before the effective date of
the Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901 et
seq.).
(b) Notwithstanding Section 2201.053, a corporation or
other limited liability association may be considered a risk
retention group if:
(1) before January 1, 1985, the corporation or
association:
(A) was chartered and authorized to engage in the
business of insurance under the laws of Bermuda or the Cayman
Islands; and
(B) had certified to the commissioner, director,
or superintendent of insurance of at least one state that it
satisfied the capitalization requirements of that state; and
(2) since January 1, 1985, the corporation or
association has been continuously engaged in business solely to
continue to provide insurance to cover completed operations
liability or product liability. (V.T.I.C. Art. 21.54, Sec. 2(10)
(part).)
Sec. 2201.055. QUALIFICATIONS REGARDING MEMBERSHIP. (a) A
risk retention group must be composed of members who are engaged in
similar or related businesses or activities with respect to the
liability to which those members are exposed by virtue of any
related, similar, or common product, trade, business, operations,
premises, or services.
(b) A risk retention group must have:
(1) as members, only persons who are provided
insurance by the group; or
(2) as the sole owner, an organization that has:
(A) as members, only persons who comprise the
membership of the group; and
(B) as owners, only persons who comprise the
membership of the group and are provided insurance by the group.
(c) A risk retention group may not exclude a person from
membership in the group solely to provide a competitive advantage
for group members over that person. (V.T.I.C. Art. 21.54, Sec.
2(10) (part).)
Sec. 2201.056. AUTHORIZED ACTIVITIES. (a) A risk
retention group may provide:
(1) liability insurance for assuming and spreading all
or any portion of the liability of the group's members; and
(2) reinsurance with respect to the liability of
another risk retention group, or a member of that group, engaged in
businesses or activities that meet the requirements of Section
2201.055(a) for membership in the group providing reinsurance.
(b) A risk retention group may not engage in activities that
include providing insurance other than the insurance described by
Subsection (a). (V.T.I.C. Art. 21.54, Sec. 2(10) (part).)
[Sections 2201.057-2201.100 reserved for expansion]
SUBCHAPTER C. RISK RETENTION GROUPS
CHARTERED IN THIS STATE
Sec. 2201.101. ELIGIBILITY REQUIREMENTS. Except as
otherwise provided by this chapter, a risk retention group that
applies to be chartered in this state must:
(1) be chartered and authorized to engage in the
business of insurance under Chapter 822, 861, 883, or 942; and
(2) comply with all the laws, rules, and requirements,
including Chapter 804, applicable to insurers authorized to engage
in business under those chapters and with Subchapter D to the extent
those requirements do not limit the laws, rules, or requirements of
this state. (V.T.I.C. Art. 21.54, Secs. 3(a), (b), as amended Acts
70th Leg., R.S., Ch. 46.)
Sec. 2201.102. CHARTER APPLICATION. (a) A risk retention
group that applies to be chartered in this state shall provide to
the commissioner with the application for charter the following in
accordance with rules adopted by the commissioner:
(1) the group's name;
(2) the identity of the group's initial members;
(3) the identity of the individuals who organized the
group or who will provide administrative services or otherwise
influence or control the group's activities;
(4) the amount and nature of initial capitalization;
(5) the coverages to be afforded; and
(6) the states in which the group intends to operate.
(b) Immediately on receipt of an application for charter,
the commissioner shall provide summary information concerning the
filing, including the information provided under Subsection (a), to
the National Association of Insurance Commissioners. (V.T.I.C.
Art. 21.54, Secs. 3(d), (e).)
Sec. 2201.103. PLAN OF OPERATION; REVISIONS. (a) Except as
provided by Subsection (b), before a risk retention group chartered
in this state may offer insurance in any state, the group must
submit to the commissioner for approval a plan of operation as
described by Section 2201.202.
(b) A risk retention group is not required to submit a plan
of operation under this section with respect to any kind or
classification of liability insurance that:
(1) was defined in the Product Liability Risk
Retention Act of 1981 (15 U.S.C. Section 3901 et seq.), as that Act
existed before October 27, 1986; and
(2) was offered before October 27, 1986, by any risk
retention group that had been chartered and operating for at least
three years before that date.
(c) The risk retention group must submit a revision of the
group's plan of operation to the commissioner and the commissioner
must approve the revision before the group:
(1) offers an additional line of insurance in this
state or in any other state; or
(2) effects a change in the group's operations as
described in the plan of operation. (V.T.I.C. Art. 21.54, Secs.
3(b), as amended Acts 70th Leg., R.S., Ch. 115, (c).)
Sec. 2201.104. FILING FEE. (a) In addition to all other
fees imposed on an insurer chartered and authorized to engage in
business under Chapter 822, 861, 883, or 942, a risk retention group
chartered in this state shall pay a filing fee in an amount not to
exceed $1,000 as set by rules adopted by the commissioner.
(b) Fees collected under this section shall be deposited to
the credit of the Texas Department of Insurance operating account
to pay expenses incurred by the commissioner under Sections
2201.102 and 2201.103. (V.T.I.C. Art. 21.54, Sec. 3(f).)
[Sections 2201.105-2201.150 reserved for expansion]
SUBCHAPTER D. RISK RETENTION GROUPS
NOT CHARTERED IN THIS STATE
Sec. 2201.151. COMPLIANCE REQUIRED. A risk retention group
chartered and authorized to engage in business in another state,
Bermuda, or the Cayman Islands shall comply with this subchapter to
engage in business as a risk retention group in this state.
(V.T.I.C. Art. 21.54, Sec. 4(a).)
Sec. 2201.152. PREREQUISITES TO OFFERING INSURANCE. (a)
Before offering insurance in this state, a risk retention group not
chartered in this state must submit to the commissioner:
(1) a statement that:
(A) identifies the state or states in which the
group is chartered and authorized to engage in business as a
liability insurer, the date of charter, and the group's principal
place of business; and
(B) provides any other information the
commissioner requires to verify that the group qualifies as a risk
retention group under Subchapter B, including information on the
group's membership;
(2) except as provided by Subsection (b), a copy of the
group's plan of operation, as described by Section 2201.202, and
revisions of that plan submitted to the state in which the group is
chartered and authorized to engage in business; and
(3) a statement of registration that designates the
commissioner as the group's agent for the purpose of receiving
service of legal documents or process as provided by Chapter 804.
(b) A risk retention group is not required to submit a plan
of operation under this section with respect to any line or
classification of liability insurance that:
(1) was defined in the Product Liability Risk
Retention Act of 1981 (15 U.S.C. Section 3901 et seq.), as that Act
existed before October 27, 1986; and
(2) was offered before October 27, 1986, by any risk
retention group that had been chartered and operating for at least
three years before that date. (V.T.I.C. Art. 21.54, Sec. 4(b).)
Sec. 2201.153. REQUIREMENTS FOR CONTINUING BUSINESS. (a)
A risk retention group not chartered in this state that engages in
business in this state shall submit to the commissioner:
(1) a copy of the group's financial statement
submitted to the state in which the group is chartered and
authorized to engage in business;
(2) a copy of each examination of the group as
certified by the commissioner, director, or superintendent of
insurance of another state or other public official conducting the
examination;
(3) on the commissioner's request, a copy of any audit
performed with respect to the group; and
(4) any other information required to verify that the
group continues to qualify as a risk retention group under
Subchapter B.
(b) A financial statement submitted under Subsection (a)(1)
must:
(1) be certified by an independent public accountant;
and
(2) contain a statement of opinion on loss and loss
adjustment expense reserves made:
(A) under criteria established by the National
Association of Insurance Commissioners; and
(B) by a member of the American Academy of
Actuaries or a qualified loss reserve specialist. (V.T.I.C. Art.
21.54, Sec. 4(d).)
Sec. 2201.154. FILING FEES. (a) The commissioner by rule
shall impose a filing fee in an amount not to exceed $500 for filing
the items described by Sections 2201.152(a)(1) and (2).
(b) The commissioner by rule may impose a filing fee in an
amount not to exceed $500 for filing the financial statement under
Section 2201.153(a)(1). A risk retention group shall provide to
the comptroller all information the comptroller requests in
connection with the reporting, collection, enforcement, and
administration of the fee.
(c) Fees collected under this section shall be deposited to
the credit of the Texas Department of Insurance operating account.
(V.T.I.C. Art. 21.54, Secs. 4(c), (e), (f) (part).)
Sec. 2201.155. PAYMENT OF TAXES. (a) A risk retention
group not chartered in this state is liable for the payment of
premium and maintenance taxes and taxes on premiums of direct
business for risks located in this state and shall report to the
commissioner the net premiums written for risks located in this
state. The group is subject to taxation, and any fine or penalty
related to that taxation, on the same basis as a foreign admitted
insurer in accordance with Chapters 4, 201, 202, 203, 221, 222, 224,
227, and 251-257.
(b) A risk retention group shall provide to the comptroller
all information the comptroller requests in connection with the
reporting, collection, enforcement, and administration of taxes
under this section. (V.T.I.C. Art. 21.54, Sec. 4(f) (part).)
Sec. 2201.156. EXAMINATION OF FINANCIAL CONDITION;
DISSOLUTION OR DELINQUENCY PROCEEDINGS. (a) A risk retention
group not chartered in this state must submit to an examination by
the commissioner to determine the group's financial condition if
the commissioner of insurance of the jurisdiction in which the
group is chartered and authorized to engage in business has not
initiated an examination on or before the 60th day after the date
the commissioner of this state requests an examination.
(b) The commissioner shall:
(1) coordinate the examination under Subsection (a) to
avoid unjustified repetition; and
(2) conduct the examination in an expeditious manner
under Sections 401.051, 401.052, 401.054-401.062, 401.103-401.106,
401.151, 401.152, 401.155, and 401.156 and Chapters 86 and 803 in
accordance with the National Association of Insurance
Commissioners Financial Condition Examiner's Handbook.
(c) A risk retention group not chartered in this state that
engages in business in this state must comply with an order issued
in a voluntary dissolution proceeding or in a delinquency
proceeding commenced by the commissioner or by a commissioner of
another jurisdiction if, after an examination under this section,
there is a finding that the group is financially impaired.
(V.T.I.C. Art. 21.54, Secs. 4(i), (j).)
Sec. 2201.157. APPLICABILITY OF STATE LAWS PROHIBITING
CERTAIN ACTS OR PRACTICES. (a) A risk retention group not
chartered in this state shall comply with the laws of this state
relating to deceptive, false, or fraudulent acts or practices,
including Chapters 541 and 543.
(b) A risk retention group not chartered in this state and
the group's agents and representatives shall comply with Chapter
542. (V.T.I.C. Art. 21.54, Secs. 4(g), (h).)
Sec. 2201.158. INJUNCTIVE RELIEF. (a) A risk retention
group not chartered in this state must comply with the terms of an
injunction issued by a court of this state or any other state based
on a finding that the group is in a hazardous financial condition or
is financially impaired.
(b) Injunctive relief must be issued by a court if the
commissioner seeks to enjoin a risk retention group not chartered
in this state from:
(1) violating the law of this state prohibiting
deceptive, false, or fraudulent acts or practices;
(2) soliciting or selling insurance to a person who is
not eligible for membership in the group; or
(3) soliciting or selling insurance or operating when
the group is in a hazardous financial condition or is financially
impaired. (V.T.I.C. Art. 21.54, Secs. 4(k), 12(c).)
[Sections 2201.159-2201.200 reserved for expansion]
SUBCHAPTER E. PROVISIONS REGULATING GENERAL OPERATION
OF RISK RETENTION GROUPS
Sec. 2201.201. SCOPE OF AUTHORITY. A risk retention group
may engage in the business of insurance in this state only:
(1) as a risk retention group; and
(2) to conduct the activities described in this
chapter. (V.T.I.C. Art. 21.54, Sec. 5(d).)
Sec. 2201.202. PLAN OF OPERATION. A plan of operation
submitted to the commissioner under Section 2201.103 or 2201.152
must be in the form of an analysis that presents the expected
activities and results of a risk retention group, including, at a
minimum:
(1) information sufficient to verify that the group's
members are engaged in businesses or activities that are similar or
related with respect to the liability to which those members are
exposed by virtue of any related, similar, or common product,
trade, business, operations, premises, or services;
(2) for each state in which the group intends to
operate, the coverages, deductibles, coverage limits, rates, and
rating classification systems for each line of insurance the group
intends to offer;
(3) historical and expected loss experience of the
proposed members and national experience of similar exposures to
the extent that this experience is reasonably available;
(4) pro forma financial statements and projections;
(5) appropriate opinions, including a determination
of minimum premium or participation levels required to begin
operations and to prevent a hazardous financial condition, by:
(A) a qualified, independent casualty actuary
who is a member in good standing of the American Academy of
Actuaries; or
(B) an individual who the commissioner
recognizes as having comparable training and experience;
(6) identification of management, underwriting and
claims procedures, marketing methods, managerial oversight
methods, and investment policies; and
(7) other matters prescribed by the insurance laws of
the state in which the group is chartered. (V.T.I.C. Art. 21.54,
Sec. 2(8).)
Sec. 2201.203. AGENT TO VERIFY AUTHORITY. Before placing
business with a risk retention group, each agent shall secure from
the appropriate insurance regulatory authority a certified copy of
the certificate of authority verifying that the insurer is
authorized in the insurer's domiciliary jurisdiction to write the
liability insurance policy the agent proposes to procure from the
insurer. (V.T.I.C. Art. 21.54, Sec. 10(d).)
Sec. 2201.204. APPLICABILITY OF CERTAIN REQUIREMENTS FOR
LIABILITY INSURERS. A risk retention group authorized to engage in
business in this state under Subchapter C or D must participate on
the same basis as a liability insurer holding a certificate of
authority to engage in the business of insurance in this state in:
(1) the Texas Windstorm Insurance Association;
(2) joint underwriting associations;
(3) mandatory liability and assigned risk pools; and
(4) residual market facilities. (V.T.I.C. Art. 21.54,
Sec. 11(c).)
Sec. 2201.205. RISK RETENTION GROUP PARTICIPATION IN
INSOLVENCY GUARANTY FUND PROHIBITED. A risk retention group may
not be required or permitted to join or contribute financially to
any insurance insolvency guaranty fund or similar mechanism in this
state. A risk retention group, and any of the group's insureds or
claimants against an insured, may not receive any benefit from an
insurance insolvency guaranty fund or similar mechanism in this
state for a claim arising under an insurance policy issued by the
group. (V.T.I.C. Art. 21.54, Sec. 11(a).)
Sec. 2201.206. REQUIRED NOTICE. (a) Any policy issued by a
risk retention group must contain in 10-point type on the front page
and on the declarations page the following notice:
NOTICE
This policy is issued by your risk retention
group. Your risk retention group may not be
subject to all of the insurance laws and
regulations of your state. State insurance
insolvency guaranty funds are not available
for your risk retention group.
(b) Each person, firm, partnership, or corporation licensed
under Chapter 981, 4051, or 4056 shall inform each prospective
insured on business to be placed with a risk retention group of the
notice required by Subsection (a). (V.T.I.C. Art. 21.54, Secs.
5(a), 10(f) (part).)
Sec. 2201.207. PROHIBITED ACTIVITIES. A risk retention
group may not:
(1) solicit or sell insurance to any person who is not
eligible for membership in the group;
(2) solicit or sell insurance or operate if the group
is in a hazardous financial condition or is financially impaired;
or
(3) engage in business in this state if an insurer is
directly or indirectly a member or owner of the group, unless all of
the group members are insurers. (V.T.I.C. Art. 21.54, Secs. 5(b),
(c).)
Sec. 2201.208. INJUNCTIVE RELIEF. An order issued by a
United States district court enjoining a risk retention group from
soliciting or selling insurance or operating in any state, in all
states, or in any territory or possession of the United States on a
finding that the group is in a hazardous financial condition, is
financially impaired, or is insolvent is enforceable in the courts
of this state. (V.T.I.C. Art. 21.54, Sec. 14.)
Sec. 2201.209. PENALTIES. (a) A risk retention group that
is authorized to engage in business in this state under Subchapter C
or D and that violates this chapter is subject to all sanctions and
penalties applicable to an insurer that holds a certificate of
authority under Chapters 822 and 861, including revocation of the
authority to engage in business in this state.
(b) A risk retention group not chartered in this state that
violates this chapter is also subject to any fine or penalty
applicable to a foreign admitted insurer generally, including
revocation of the authority to engage in business in this state.
(c) A risk retention group engaging in business in this
state that is not authorized to engage in business under Subchapter
C or D is considered an unauthorized insurer and is subject to
Section 823.457, Subchapters A-P, Chapter 442, and Chapters 101,
441, 804, and 801, other than Section 801.056. (V.T.I.C. Art.
21.54, Secs. 4(m), 13.)
[Sections 2201.210-2201.250 reserved for expansion]
SUBCHAPTER F. PURCHASING GROUPS
Sec. 2201.251. GENERAL QUALIFICATIONS OF PURCHASING GROUP.
(a) A purchasing group must:
(1) have as one of the group's purposes the purchase of
liability insurance on a group basis;
(2) be composed of members whose businesses or
activities are similar or related with respect to the liability to
which those members are exposed by virtue of any related, similar,
or common product, trade, business, operations, premises, or
services; and
(3) purchase group liability insurance only for the
group's members and only to cover the members' similar or related
liability exposure as described in Subdivision (2).
(b) A purchasing group may be domiciled in any state.
(V.T.I.C. Art. 21.54, Sec. 2(9).)
Sec. 2201.252. DETERMINATION OF LOCATION. (a) For
purposes of this subchapter, a purchasing group is considered to be
located in the state in which the highest aggregate premiums are in
force on the date the group insurance policy is written or renewed.
The group's location is ascertained on each placement or renewal of
insurance by the group with an insurer or risk retention group.
(b) For purposes of this section, a group insurance policy
is considered to be renewed annually. (V.T.I.C. Art. 21.54, Sec.
2(14).)
Sec. 2201.253. LIMITATIONS ON AUTHORITY. (a) A purchasing
group located in this state may not purchase liability insurance
from a risk retention group that is not chartered in a state or from
an insurer that does not hold a certificate of authority to engage
in the business of insurance in this state unless the purchase is
effected through a licensed agent acting under Chapter 981.
(b) A purchasing group may not offer insurance policy
coverage declared unlawful by the Texas Supreme Court. (V.T.I.C.
Art. 21.54, Secs. 8(a), (c).)
Sec. 2201.254. APPLICATION OF STATE LAW. (a) A purchasing
group meeting the criteria established under the Liability Risk
Retention Act of 1986 (15 U.S.C. Section 3901 et seq.) is exempt
from any law of this state that:
(1) relates to the creation of groups for the purchase
of insurance;
(2) requires countersignatures;
(3) prohibits group purchasing; or
(4) discriminates against a purchasing group or the
group's members.
(b) An insurer is exempt from any law of this state that
prohibits providing or offering to provide to a purchasing group or
the group's members advantages based on the group's or members' loss
and expense experience that are not afforded to other persons with
respect to rates, policy forms, coverages, or other matters.
(c) A purchasing group is subject to all other applicable
laws of this state. (V.T.I.C. Art. 21.54, Sec. 6.)
Sec. 2201.255. NOTICE TO COMMISSIONER; FILING FEE.
(a) Before engaging in business in this state, a purchasing group
must provide notice to the commissioner. The notice must:
(1) identify the state in which the group is
domiciled;
(2) specify the lines and classifications of liability
insurance the group intends to purchase;
(3) specify the method by which and the persons, if
any, through whom insurance will be offered to group members whose
risks are located in this state;
(4) identify the insurer from which the group intends
to purchase group insurance and the domicile of that insurer;
(5) identify the group's principal place of business
and, if ascertainable at the time of filing, the group's location;
and
(6) provide other information the commissioner
requires to verify that the group qualifies as a purchasing group
under Section 2201.251.
(b) The commissioner by rule shall impose a filing fee in an
amount not to exceed $100 for filing notice under this section.
Fees collected under this subsection shall be deposited to the
credit of the Texas Department of Insurance operating account.
(V.T.I.C. Art. 21.54, Sec. 7(a).)
Sec. 2201.256. REGISTRATION REQUIREMENT; FEES. (a) A
purchasing group shall register with and designate the commissioner
or other appropriate authority as the group's agent solely for the
purpose of receiving service of legal documents or process unless
the group:
(1) was domiciled before April 1, 1986, in any state of
the United States and is domiciled on and after October 27, 1986, in
any state of the United States;
(2) before October 27, 1986, purchased the group's
insurance from an insurer authorized to engage in business in any
state, and after October 27, 1986, purchased the group's insurance
from an insurer authorized to engage in business in any state;
(3) was a purchasing group under the requirements of
the Product Liability Risk Retention Act of 1981 (15 U.S.C. Section
3901 et seq.) before October 27, 1986; and
(4) does not purchase insurance that was not
authorized for purposes of an exemption under that Act as effective
before October 27, 1986.
(b) The commissioner by rule may impose a fee in an amount
not to exceed $50 for each document served on the commissioner and
forwarded to the purchasing group. Fees collected under this
subsection shall be deposited to the credit of the Texas Department
of Insurance operating account. (V.T.I.C. Art. 21.54, Sec. 7(b).)
Sec. 2201.257. PAYMENT OF PREMIUM TAXES. (a) Premiums paid
for coverage of risks located in this state by a purchasing group or
any group member are subject to taxation at the same rate and
subject to the same interest, fines, and penalties for nonpayment
that apply to premiums paid for similar coverage by other insureds.
(b) Title 3 is used to compute applicable tax rates for a
purchasing group or any group member that pays premiums for
coverage of risks located in this state to:
(1) an insurer holding a certificate of authority to
engage in the business of insurance in this state; or
(2) a risk retention group authorized to engage in
business in this state.
(c) To the extent that a purchasing group or group member
pays premiums as described by Subsection (b), the insurer or risk
retention group receiving those premiums shall remit the tax to the
department.
(d) Chapter 225 is used to compute applicable tax rates for
a purchasing group or any group member that pays premiums for
coverage of risks located in this state to an eligible surplus lines
insurer. If a purchasing group or member pays those premiums, the
surplus lines agent shall report and remit the tax. If the agent
does not remit the tax, the purchasing group shall remit the tax.
(V.T.I.C. Art. 21.54, Sec. 9.)
Sec. 2201.258. PURCHASING GROUP PARTICIPATION IN
INSOLVENCY GUARANTY FUND PROHIBITED; EXCEPTION. (a) A claim
against a purchasing group or a group member may not be paid from
any insurance insolvency guaranty fund or similar mechanism in this
state.
(b) A purchasing group, a group member, or any claimant
against the group or group member may not receive any benefit from
an insurance insolvency guaranty fund or similar mechanism in this
state for a claim arising under an insurance policy procured
through the group unless the policy is underwritten by an insurer
authorized to engage in business in this state that, at the time of
the policy's issuance:
(1) has capital and surplus of at least $25 million; or
(2) is a member of a company group that has combined
capital and surplus of at least $25 million. (V.T.I.C. Art. 21.54,
Sec. 11(b).)
Sec. 2201.259. REQUIRED NOTICE. (a) A purchasing group
that obtains liability insurance from an insurer or a risk
retention group shall provide notice to each group member that has a
risk located in this state that the risk is not protected by an
insurance insolvency guaranty fund in this state and that the
insurer or risk retention group may not be subject to all the
insurance laws and rules of this state.
(b) Each person, firm, partnership, or corporation licensed
under Chapter 981, 4051, or 4056 shall inform each prospective
insured on business to be written through a purchasing group of the
notice required by Subsection (a). (V.T.I.C. Art. 21.54, Secs. 8(b), 10(f) (part).)
CHAPTER 2202. JOINT UNDERWRITING
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2202.001. DEFINITIONS
Sec. 2202.002. INAPPLICABILITY OF CHAPTER
Sec. 2202.003. DEPOSIT OF FEES
Sec. 2202.004. CERTAIN APPROPRIATIONS FROM GENERAL
REVENUE FUND PROHIBITED
[Sections 2202.005-2202.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ACT AS JOINT UNDERWRITING ASSOCIATION
Sec. 2202.051. CERTIFICATE OF AUTHORITY REQUIRED
Sec. 2202.052. APPLICATION FOR CERTIFICATE OF
AUTHORITY
Sec. 2202.053. ISSUANCE OF CERTIFICATE OF AUTHORITY
Sec. 2202.054. TERM OF CERTIFICATE OF AUTHORITY
Sec. 2202.055. RENEWAL OF CERTIFICATE OF AUTHORITY
Sec. 2202.056. FEE FOR CERTIFICATE OF AUTHORITY
Sec. 2202.057. RECIPROCITY
[Sections 2202.058-2202.100 reserved for expansion]
SUBCHAPTER C. POWERS AND DUTIES OF JOINT UNDERWRITING
ASSOCIATION
Sec. 2202.101. AUTHORITY TO ACT
Sec. 2202.102. NOTIFICATION OF CERTAIN INFORMATION
REQUIRED
Sec. 2202.103. MAINTENANCE OF INFORMATION
[Sections 2202.104-2202.150 reserved for expansion]
SUBCHAPTER D. AUDIT AND EXAMINATION REQUIREMENTS
Sec. 2202.151. ANNUAL AUDIT
Sec. 2202.152. EXAMINATION BY COMMISSIONER
[Sections 2202.153-2202.200 reserved for expansion]
SUBCHAPTER E. DISCIPLINARY ACTIONS AND
PROCEDURES; ENFORCEMENT
Sec. 2202.201. GROUNDS FOR DENIAL OF CERTIFICATE OF
AUTHORITY OR FOR DISCIPLINARY ACTION
Sec. 2202.202. DENIAL OF CERTIFICATE OF AUTHORITY OR
DISCIPLINARY ACTION
Sec. 2202.203. NOTICE AND HEARING
Sec. 2202.204. ISSUANCE OF ORDER
Sec. 2202.205. APPEAL
Sec. 2202.206. APPLICATION AFTER DENIAL, REFUSAL, OR
REVOCATION
Sec. 2202.207. ADDITIONAL SANCTIONS; INJUNCTION
CHAPTER 2202. JOINT UNDERWRITING
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2202.001. DEFINITIONS. In this chapter:
(1) "Insurer" means any insurance company,
corporation, reciprocal or interinsurance exchange, mutual
association, county mutual insurance company, Lloyd's plan, or
other insurer authorized to engage in business in this state. The
term does not include an insurer that writes only life, health, or
accident insurance, variable life insurance, or variable annuity
contracts.
(2) "Joint underwriting association" means a
voluntary unincorporated association of insurers authorized to
engage in business in this state that has been authorized by the
association's member insurers to act on behalf of the member
insurers in joint underwriting or in issuing syndicate insurance
policies on a several, but not joint, basis. (V.T.I.C. Art.
21.49-3b, Secs. 2(3), (4).)
Sec. 2202.002. INAPPLICABILITY OF CHAPTER. This chapter
does not apply to the transaction of life, health, or accident
insurance business. (V.T.I.C. Art. 21.49-3b, Sec. 15.)
Sec. 2202.003. DEPOSIT OF FEES. Fees collected under this
chapter shall be deposited to the credit of the Texas Department of
Insurance operating account. (V.T.I.C. Art. 21.49-3b, Sec. 16
(part).)
Sec. 2202.004. CERTAIN APPROPRIATIONS FROM GENERAL REVENUE
FUND PROHIBITED. The legislature may not appropriate money from
the general revenue fund to administer this chapter, other than
fees collected under this chapter and deposited to the credit of the
Texas Department of Insurance operating account. (V.T.I.C. Art.
21.49-3b, Sec. 16 (part).)
[Sections 2202.005-2202.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ACT AS JOINT UNDERWRITING ASSOCIATION
Sec. 2202.051. CERTIFICATE OF AUTHORITY REQUIRED. An
association of insurers may not act as a joint underwriting
association in this state on behalf of the association's member
insurers unless the association holds a certificate of authority
issued under this chapter. (V.T.I.C. Art. 21.49-3b, Sec. 3.)
Sec. 2202.052. APPLICATION FOR CERTIFICATE OF
AUTHORITY. (a) An association of insurers that applies for a
certificate of authority under this chapter must file a written
application on forms prescribed by the commissioner.
(b) The application must include:
(1) the names and addresses of the association's
officers and directors;
(2) a copy of the association's constitution, articles
of agreement or association, bylaws, rules, powers of attorney, or
other agreements governing the association's activities;
(3) a list of the insurers authorized to engage in
business in this state who are association members and the
addresses of those insurers' principal administrative offices;
(4) the name and address of a resident of this state
who will act as the association's agent for receipt of notices or
orders of the commissioner and for service of process; and
(5) other information as required by the commissioner.
(c) At least one officer of the association must swear to
the application. (V.T.I.C. Art. 21.49-3b, Sec. 4.)
Sec. 2202.053. ISSUANCE OF CERTIFICATE OF AUTHORITY. The
commissioner shall issue a certificate of authority to a joint
underwriting association that complies with the requirements of
this chapter. (V.T.I.C. Art. 21.49-3b, Sec. 5.)
Sec. 2202.054. TERM OF CERTIFICATE OF AUTHORITY. Unless
renewed, a certificate of authority issued under this chapter
expires on the third anniversary of the date the certificate is
issued. (V.T.I.C. Art. 21.49-3b, Sec. 11 (part).)
Sec. 2202.055. RENEWAL OF CERTIFICATE OF AUTHORITY. (a) An
applicant for the renewal of a certificate of authority must file an
application for renewal with the commissioner and pay the renewal
fee on or before the date the certificate expires.
(b) The applicant shall file a list of the names and
addresses of the association's officers and directors and a list of
the association's member insurers with the application for renewal.
At least one officer of the association must swear to the list.
(c) A renewed certificate of authority expires on the third
anniversary of the renewal date. (V.T.I.C. Art. 21.49-3b, Secs.
8(a), 11 (part).)
Sec. 2202.056. FEE FOR CERTIFICATE OF AUTHORITY. (a) An
applicant for the issuance or renewal of a certificate of authority
must pay a nonrefundable fee in an amount set by the commissioner
when the applicant files the application.
(b) The fee may not exceed $200. (V.T.I.C. Art. 21.49-3b,
Sec. 12.)
Sec. 2202.057. RECIPROCITY. The commissioner may waive
any requirement for a certificate of authority for an applicant who
holds a certificate of authority from another state if the other
state has requirements for a certificate of authority that are
substantially equivalent to the requirements of this state.
(V.T.I.C. Art. 21.49-3b, Sec. 6.)
[Sections 2202.058-2202.100 reserved for expansion]
SUBCHAPTER C. POWERS AND DUTIES OF JOINT UNDERWRITING
ASSOCIATION
Sec. 2202.101. AUTHORITY TO ACT. A joint underwriting
association may:
(1) act only on behalf of association members who are
authorized to engage in business in this state; and
(2) engage in only those activities the association is
authorized to perform by the association members. (V.T.I.C.
Art. 21.49-3b, Sec. 7.)
Sec. 2202.102. NOTIFICATION OF CERTAIN INFORMATION
REQUIRED. An association holding a certificate of authority under
this chapter shall notify the commissioner of a change in the
information required to be filed under Section 2202.052 not later
than the 30th day after the date the change takes effect. (V.T.I.C.
Art. 21.49-3b, Sec. 8(b).)
Sec. 2202.103. MAINTENANCE OF INFORMATION. (a) A joint
underwriting association shall maintain at the association's
principal administrative office adequate records of all
transactions.
(b) The association shall maintain the records in
accordance with prudent recognized industry standards of
recordkeeping.
(c) The commissioner or the commissioner's designated
representative is entitled to access to records maintained under
Subsection (a) for examination, audit, and inspection.
(d) Trade secrets, including the identity and addresses of
policyholders and certificate holders, are confidential, except
that the commissioner may use information otherwise confidential in
proceedings instituted against an association. (V.T.I.C. Art.
21.49-3b, Sec. 9.)
[Sections 2202.104-2202.150 reserved for expansion]
SUBCHAPTER D. AUDIT AND EXAMINATION REQUIREMENTS
Sec. 2202.151. ANNUAL AUDIT. An independent certified
public accountant shall annually audit the books of accounts of a
joint underwriting association as provided by Subchapter A, Chapter
401. A copy of the audit must be filed with the commissioner.
(V.T.I.C. Art. 21.49-3b, Sec. 10(a).)
Sec. 2202.152. EXAMINATION BY COMMISSIONER. (a) The
commissioner may require an examination of a joint underwriting
association as often as the commissioner considers necessary. The
association shall pay the reasonable costs of the examination on
presentation to the association of a detailed account of the costs
of the examination.
(b) The association's officers and employees may be
examined under oath at any time and shall exhibit on request all
books, records, accounts, documents, or agreements governing the
association's operations.
(c) Instead of the examination, the commissioner may accept
the report of an examination made by the insurance supervisory
official of another state under the laws of that state. (V.T.I.C.
Art. 21.49-3b, Sec. 10(b).)
[Sections 2202.153-2202.200 reserved for expansion]
SUBCHAPTER E. DISCIPLINARY ACTIONS AND
PROCEDURES; ENFORCEMENT
Sec. 2202.201. GROUNDS FOR DENIAL OF CERTIFICATE OF
AUTHORITY OR FOR DISCIPLINARY ACTION. The commissioner may deny an
application for a certificate of authority or discipline a
certificate holder under this subchapter if the commissioner finds
that the applicant or certificate holder, or an officer or director
of an applicant or certificate holder:
(1) wilfully violated or participated in the violation
of this chapter or any other insurance law of this state;
(2) intentionally made a material misstatement in the
original or renewal application;
(3) obtained or attempted to obtain the certificate by
fraud or misrepresentation;
(4) misappropriated, converted to a personal or other
inappropriate use, or illegally withheld money required to be held
in a fiduciary capacity;
(5) has been convicted of a felony or convicted of a
misdemeanor of which criminal fraud is an essential element; or
(6) is incompetent or untrustworthy. (V.T.I.C. Art.
21.49-3b, Sec. 13 (part).)
Sec. 2202.202. DENIAL OF CERTIFICATE OF AUTHORITY OR
DISCIPLINARY ACTION. If the commissioner finds that a ground for a
denial of a certificate of authority or disciplinary action under
Section 2202.201 exists, the commissioner may:
(1) deny the application for the certificate; or
(2) suspend, revoke, or refuse to renew the
certificate of authority. (V.T.I.C. Art. 21.49-3b, Sec. 13
(part).)
Sec. 2202.203. NOTICE AND HEARING. (a) Before the
commissioner may deny an application for a certificate of authority
or discipline a certificate holder under this subchapter, the
commissioner must:
(1) give notice by certified mail to the applicant or
certificate holder; and
(2) set a date on which the applicant or certificate
holder may appear to be heard and produce evidence.
(b) A hearing under Subsection (a) may not be set for a date
that is earlier than the 20th day or later than the 30th day after
the date the notice is mailed.
(c) The notice must contain specific reasons for the hearing
and a list of the matters to be considered at the hearing.
(d) At the hearing, the commissioner or a department
employee designated to conduct the hearing may:
(1) administer oaths, require the appearance of
witnesses, and examine any person under oath; and
(2) on the commissioner's initiative or on the request
of the applicant or certificate holder, require the production of
books, records, or papers relevant to the inquiry. (V.T.I.C. Art.
21.49-3b, Secs. 13 (part), 14(a).)
Sec. 2202.204. ISSUANCE OF ORDER. On the termination of
the hearing, the findings shall be written and filed with the
department. The commissioner shall issue an order showing the
findings approved by the commissioner and shall send the order by
certified mail to the applicant or certificate holder. (V.T.I.C.
Art. 21.49-3b, Sec. 14(b).)
Sec. 2202.205. APPEAL. If the commissioner denies an
application for a certificate of authority as provided by this
chapter or suspends, revokes, or refuses to renew a certificate at a
hearing as provided by this chapter, the applicant or certificate
holder may appeal the commissioner's action as provided by
Subchapter D, Chapter 36. (V.T.I.C. Art. 21.49-3b, Sec. 14(c).)
Sec. 2202.206. APPLICATION AFTER DENIAL, REFUSAL, OR
REVOCATION. (a) Except as provided by Subsection (b), an applicant
for a certificate of authority or certificate holder whose
certificate of authority has been denied, refused, or revoked under
this chapter may not file another application for a certificate of
authority before the first anniversary of the effective date of the
denial, refusal, or revocation.
(b) If an applicant or certificate holder seeks judicial
review of a denial, refusal, or revocation, the applicant or
certificate holder may not file another application for a
certificate of authority before the first anniversary of the date
of a final court order or decree affirming the denial, refusal, or
revocation.
(c) If an applicant files an application after the date
specified by this section, the commissioner may refuse the
application unless the applicant shows good cause why the denial of
the previous application or the refusal to renew or the revocation
of the original certificate of authority should not be a bar to the
issuance of a new certificate. (V.T.I.C. Art. 21.49-3b, Sec.
14(d).)
Sec. 2202.207. ADDITIONAL SANCTIONS; INJUNCTION. (a) An
association that violates this chapter or a rule or order adopted
under this chapter is subject to sanctions under Chapter 82.
(b) The attorney general, a district or county attorney, or
the commissioner may institute proceedings for an injunction or any
other proceeding necessary to enforce this chapter. (V.T.I.C. Art. 21.49-3b, Sec. 17.)
CHAPTER 2203. MEDICAL LIABILITY INSURANCE JOINT UNDERWRITING
ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2203.001. SHORT TITLE
Sec. 2203.002. DEFINITIONS
Sec. 2203.003. IMMUNITY
Sec. 2203.004. APPLICABILITY OF OTHER LAW
Sec. 2203.005. RELATIONSHIP TO SURPLUS LINES INSURANCE
[Sections 2203.006-2203.050 reserved for expansion]
SUBCHAPTER B. ASSOCIATION ADMINISTRATION AND OPERATION
Sec. 2203.051. PURPOSE OF ASSOCIATION
Sec. 2203.052. BOARD OF DIRECTORS
Sec. 2203.053. PLAN OF OPERATION
Sec. 2203.054. AMENDMENTS TO PLAN OF OPERATION
Sec. 2203.055. JOINT UNDERWRITING ASSOCIATION
MEMBERSHIP
Sec. 2203.056. ANNUAL STATEMENT; ADDITIONAL
INFORMATION
[Sections 2203.057-2203.100 reserved for expansion]
SUBCHAPTER C. ELIGIBILITY FOR COVERAGE
Sec. 2203.101. GENERAL ELIGIBILITY
Sec. 2203.102. INSURER OF LAST RESORT FOR CERTAIN
NURSING HOMES AND ASSISTED LIVING
FACILITIES
Sec. 2203.103. ELIGIBILITY OF OTHER HEALTH CARE
PRACTITIONERS AND FACILITIES
Sec. 2203.104. APPLICATION FOR COVERAGE
[Sections 2203.105-2203.150 reserved for expansion]
SUBCHAPTER D. ASSOCIATION COVERAGE
Sec. 2203.151. POWERS RELATING TO MEDICAL LIABILITY
INSURANCE COVERAGE
Sec. 2203.152. POLICY LIMITS
Sec. 2203.153. FOLLOWING FORM EXCESS LIABILITY
COVERAGE
Sec. 2203.154. PUNITIVE DAMAGES EXCLUDED
Sec. 2203.155. INSTALLMENT PLAN
Sec. 2203.156. TERM OF POLICY; NOTICE OF CERTAIN
CHANGES
[Sections 2203.157-2203.200 reserved for expansion]
SUBCHAPTER E. RATES AND POLICY FORMS
Sec. 2203.201. APPLICABILITY OF OTHER LAW TO RATES AND
POLICY FORMS
Sec. 2203.202. RATE STANDARDS
Sec. 2203.203. DISCOUNT FOR CERTAIN HEALTH CARE
PROVIDERS
[Sections 2203.204-2203.250 reserved for expansion]
SUBCHAPTER F. FINANCIAL PARTICIPATION BY MEMBERS AND POLICYHOLDERS
Sec. 2203.251. DEFICIT RECOUPMENT
Sec. 2203.252. ASSESSMENT OF POLICYHOLDERS FOR DEFICIT
RECOUPMENT
Sec. 2203.253. LIMITATION ON REIMBURSEMENT BY MEMBER
FOR DEFICIT RECOUPMENT
Sec. 2203.254. CONTRIBUTION BY MEMBERS FOR SOUND
FINANCIAL OPERATION
Sec. 2203.255. REIMBURSEMENT OF ASSESSMENT OR
CONTRIBUTION; PREMIUM TAX CREDIT
Sec. 2203.256. STANDARDS FOR RECOUPMENT PROVISIONS
[Sections 2203.257-2203.300 reserved for expansion]
SUBCHAPTER G. POLICYHOLDER'S STABILIZATION RESERVE FUNDS
Sec. 2203.301. POLICYHOLDER'S STABILIZATION RESERVE
FUND FOR PHYSICIANS AND CERTAIN
HEALTH CARE PROVIDERS
Sec. 2203.302. POLICYHOLDER'S STABILIZATION RESERVE
FUND CHARGE FOR PHYSICIANS AND
CERTAIN HEALTH CARE PROVIDERS
Sec. 2203.303. POLICYHOLDER'S STABILIZATION RESERVE
FUND FOR NURSING HOMES AND ASSISTED
LIVING FACILITIES
Sec. 2203.304. POLICYHOLDER'S STABILIZATION RESERVE
FUND CHARGE FOR NURSING HOMES AND
ASSISTED LIVING FACILITIES
Sec. 2203.305. SEPARATE FUNDS
[Sections 2203.306-2203.350 reserved for expansion]
SUBCHAPTER H. REVENUE BOND PROGRAM
Sec. 2203.351. PURPOSE
Sec. 2203.352. DEFINITIONS
Sec. 2203.353. APPLICABILITY OF OTHER LAWS
Sec. 2203.354. ISSUANCE OF BONDS AUTHORIZED
Sec. 2203.355. LIMITATION ON AMOUNT OF BONDS
Sec. 2203.356. TERMS OF ISSUANCE
Sec. 2203.357. CONTENTS OF BOND RESOLUTION;
ADMINISTRATION OF ACCOUNTS
Sec. 2203.358. SOURCE OF PAYMENT
Sec. 2203.359. SURCHARGE FEE
Sec. 2203.360. EXEMPTION FROM TAXATION
Sec. 2203.361. AUTHORIZED INVESTMENTS
Sec. 2203.362. STATE PLEDGE REGARDING BOND OWNER
RIGHTS AND REMEDIES
Sec. 2203.363. PAYMENT ENFORCEABLE BY MANDAMUS
[Sections 2203.364-2203.400 reserved for expansion]
SUBCHAPTER I. APPEALS
Sec. 2203.401. DEFINITION
Sec. 2203.402. APPEAL TO BOARD OF DIRECTORS; HEARING
Sec. 2203.403. DECISION OF BOARD OF DIRECTORS
Sec. 2203.404. APPEAL TO COMMISSIONER; HEARING
Sec. 2203.405. COMMISSIONER'S DECISION
Sec. 2203.406. APPEAL OF COMMISSIONER'S DECISION
CHAPTER 2203. MEDICAL LIABILITY INSURANCE JOINT UNDERWRITING
ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2203.001. SHORT TITLE. This chapter may be cited as
the Texas Medical Liability Insurance Underwriting Association
Act. (V.T.I.C. Art. 21.49-3, Sec. 1.)
Sec. 2203.002. DEFINITIONS. In this chapter:
(1) "Assisted living facility" means a for-profit or
not-for-profit assisted living facility.
(2) "Association" means the joint underwriting
association established under this chapter.
(3) "Board of directors" means the board of directors
of the association.
(4) "Health care provider" means:
(A) a person, partnership, professional
association, corporation, facility, or institution licensed or
chartered by this state to provide health care, as defined in
Section 74.001(a)(10), Civil Practice and Remedies Code, as:
(i) a registered nurse, dentist,
podiatrist, pharmacist, chiropractor, or optometrist;
(ii) a hospital;
(iii) a nursing home;
(iv) a radiation therapy center that is
independent of any other medical treatment facility, is licensed by
the Department of State Health Services in that agency's capacity
as the Texas Radiation Control Agency under Chapter 401, Health and
Safety Code, and is in compliance with the regulations adopted
under that chapter;
(v) a blood bank that is a nonprofit
corporation chartered to operate a blood bank and is accredited by
the American Association of Blood Banks;
(vi) a nonprofit corporation that is
organized for the delivery of health care to the public and is
certified under Chapter 162, Occupations Code;
(vii) a health center, as defined by 42
U.S.C. Section 254b, as amended; or
(viii) an assisted living facility; or
(B) an officer, employee, or agent of an entity
listed in Paragraph (A) acting in the course and scope of that
person's office, employment, or agency.
(5) "Medical liability insurance" means primary and
excess liability insurance coverage against:
(A) the legal liability of the insured; and
(B) loss, damage, or expense incident to a claim
arising out of the death or injury of a person as the result of
negligence in rendering or failing to render professional service
by a health care provider or physician who is in a category eligible
for coverage by the association.
(6) "Net direct premiums" means gross direct premiums
written on automobile liability and other liability insurance
written under this code, less:
(A) policyholder dividends;
(B) return premiums for the unused or unabsorbed
portion of premium deposits; and
(C) return premiums on canceled contracts
written on the liability risks.
(7) "Nursing home" means a for-profit or
not-for-profit nursing home.
(8) "Physician" means a person licensed to practice
medicine in this state. (V.T.I.C. Art. 21.49-3, Secs. 2(1), (2),
(3), (5), (6); Art. 21.49-3d, Sec. 2(1); New.)
Sec. 2203.003. IMMUNITY. Liability does not exist on the
part of, and a cause of action does not arise against, the
association, an association agent or employee, an insurer, an agent
licensed under this code, the commissioner or department, or an
authorized representative of the commissioner or department for a
statement made in good faith by any of them:
(1) in a report or communication concerning risks
insured or to be insured through the association; or
(2) at an administrative hearing conducted in
connection with the report or communication. (V.T.I.C. Art.
21.49-3, Sec. 8.)
Sec. 2203.004. APPLICABILITY OF OTHER LAW. The association
is subject to Sections 401.051, 401.052, 401.054-401.062, 401.151,
401.152, 401.155, and 401.156 and Subchapter A, Chapter 86.
(V.T.I.C. Art. 21.49-3, Sec. 10.)
Sec. 2203.005. RELATIONSHIP TO SURPLUS LINES INSURANCE.
The association is not an authorized insurer for purposes of
Chapter 981 with respect to medical liability insurance for
physicians. (V.T.I.C. Art. 21.49-3, Sec. 3(a) (part).)
[Sections 2203.006-2203.050 reserved for expansion]
SUBCHAPTER B. ASSOCIATION ADMINISTRATION AND OPERATION
Sec. 2203.051. PURPOSE OF ASSOCIATION. The association
provides medical liability insurance on a self-supporting basis.
(V.T.I.C. Art. 21.49-3, Sec. 3(a) (part).)
Sec. 2203.052. BOARD OF DIRECTORS. (a) The association is
governed by a board of directors composed of the following nine
members:
(1) five representatives of insurers that are required
to be association members, elected by association members;
(2) one physician, appointed by the Texas Medical
Association or a successor to that association;
(3) one representative of hospitals, appointed by the
Texas Hospital Association or a successor to that association; and
(4) two public members, appointed by the commissioner.
(b) The board members serve one-year terms beginning on
October 1 of each year. (V.T.I.C. Art. 21.49-3, Sec. 6.)
Sec. 2203.053. PLAN OF OPERATION. (a) The association
operates under a plan of operation adopted by the commissioner.
(b) The plan of operation must:
(1) provide for economic, fair, and nondiscriminatory
administration;
(2) provide for the prompt and efficient provision of
medical liability insurance; and
(3) contain other provisions, including provisions
relating to:
(A) the establishment of necessary facilities;
(B) the association's management;
(C) the assessment of members and policyholders
to defray losses and expenses;
(D) the administration of the policyholder's
stabilization reserve funds;
(E) commission arrangements;
(F) reasonable and objective underwriting
standards;
(G) the acceptance, assumption, and cession of
reinsurance;
(H) the appointment of servicing insurers; and
(I) procedures for determining amounts of
insurance to be provided by the association.
(c) The plan of operation must direct that any revenue
exceeding expenditures that remains in the association's funds at
the close of the association's fiscal year, after the association
reimburses members' contributions in accordance with Section
2203.255(a), be added to the association's reserves. (V.T.I.C.
Art. 21.49-3, Secs. 3(c)(1) (part), (2) (part), (3).)
Sec. 2203.054. AMENDMENTS TO PLAN OF OPERATION. Amendments
to the plan of operation:
(1) shall be made at the commissioner's direction; or
(2) may be made by the board of directors, subject to
the commissioner's approval. (V.T.I.C. Art. 21.49-3, Sec.
3(c)(4).)
Sec. 2203.055. JOINT UNDERWRITING ASSOCIATION MEMBERSHIP.
(a) The association is composed of each insurer, including a
Lloyd's plan and a reciprocal or interinsurance exchange,
authorized to write and writing liability insurance, including
automobile liability insurance, on a direct basis in this state,
other than:
(1) a farm mutual insurance company authorized under
Chapter 911; and
(2) a county mutual insurance company authorized under
Chapter 912.
(b) An insurer that is a member of the association must
remain a member as a condition of the insurer's authority to engage
in the business of the insurance described by Subsection (a).
(c) Each association member participates in the writings,
expenses, and losses of the association in the proportion that the
net direct premiums of the member, excluding the portion of
premiums attributable to the operation of the association, written
during the preceding calendar year bears to the aggregate net
direct premiums written in this state by all association members.
(d) The association shall annually determine a member's
participation in the association on the basis of the net direct
premiums written by the member during the preceding calendar year,
as reported in the annual statements and other reports the member
files as required by the department. (V.T.I.C. Art. 21.49-3, Secs.
3(a) (part), 5(b) (part).)
Sec. 2203.056. ANNUAL STATEMENT; ADDITIONAL INFORMATION.
(a) Not later than March 1 of each year, the association shall file
with the department a statement that contains information regarding
the association's transactions, condition, operations, and affairs
during the preceding calendar year.
(b) The statement must:
(1) contain the matters and information required by
the department; and
(2) be in the form approved by the department.
(c) The department at any time may require the association
to provide additional information regarding the association's
transactions or condition, or any related matter considered to be:
(1) material; and
(2) of assistance in evaluating the scope, operation,
and experience of the association. (V.T.I.C. Art. 21.49-3, Sec.
9.)
[Sections 2203.057-2203.100 reserved for expansion]
SUBCHAPTER C. ELIGIBILITY FOR COVERAGE
Sec. 2203.101. GENERAL ELIGIBILITY. (a) The commissioner
shall by order establish the categories of physicians and health
care providers that are eligible to obtain insurance coverage from
the association. The commissioner may revise the order to:
(1) include as eligible for that coverage other
categories of physicians and health care providers; or
(2) exclude from eligibility for that coverage
particular categories of physicians and health care providers.
(b) If a category of physicians or health care providers is
excluded from eligibility to obtain insurance coverage from the
association, the commissioner may determine, after notice of at
least 10 days and a hearing, that medical liability insurance is not
otherwise available. On that determination, the previously
excluded category is eligible to obtain insurance coverage from the
association. (V.T.I.C. Art. 21.49-3, Secs. 3A(a), (b).)
Sec. 2203.102. INSURER OF LAST RESORT FOR CERTAIN NURSING
HOMES AND ASSISTED LIVING FACILITIES. (a) A nursing home or
assisted living facility not otherwise eligible for insurance
coverage from the association under Section 2203.101 is eligible
for that coverage if the home or facility demonstrates, in
accordance with the requirements of the association, that the home
or facility:
(1) made a verifiable effort to obtain insurance
coverage from authorized insurers and eligible surplus lines
insurers; and
(2) was unable to obtain substantially equivalent
insurance coverage and rates.
(b) In consultation with the Department of Aging and
Disability Services, the commissioner by rule shall adopt minimum
rating standards for for-profit nursing homes and for-profit
assisted living facilities that must be met before a for-profit
nursing home or for-profit assisted living facility may obtain
insurance coverage through the association. The standards must
promote the highest practical level of care for residents of the
nursing homes and assisted living facilities. (V.T.I.C. Art.
21.49-3, Secs. 3A(c), (d).)
Sec. 2203.103. ELIGIBILITY OF OTHER HEALTH CARE
PRACTITIONERS AND FACILITIES. (a) In this section:
(1) "Health care" includes a medical or health care
service, including an examination, treatment, medical diagnosis,
or evaluation, and care provided in an inpatient, outpatient, or
residential setting.
(2) "Health care facility" means a facility providing
health care, other than a facility described by Section
2203.002(4).
(3) "Health care practitioner" means an individual,
other than an individual described by Section 2203.002(4), who:
(A) is licensed to provide health care; or
(B) is not licensed to provide health care but
provides health care under the direction or supervision of a
licensed individual.
(b) After notice and opportunity for hearing, the
commissioner may:
(1) determine that appropriate liability insurance
coverage written by insurers authorized to engage in business in
this state is not reasonably available to a type of health care
practitioner or health care facility; and
(2) by order designate that type of health care
practitioner or health care facility to be included as a health care
provider eligible to receive coverage under this chapter.
(c) A health care practitioner or facility designated under
Subsection (b) is entitled to receive insurance coverage under this
chapter in accordance with Chapter 1901 in the same manner as other
health care providers described by Section 2203.002 and Section
1901.001.
(d) The commissioner's order may indicate whether a health
care practitioner or facility designated under Subsection (b) is
included under the policyholder's stabilization reserve fund
established under Section 2203.301 or 2203.303 or whether a
separate policyholder's stabilization reserve fund is created. A
separate policyholder's stabilization reserve fund established
under this subsection operates in the same manner as a
policyholder's stabilization reserve fund created under Section
2203.303. (V.T.I.C. Art. 21.49-3, Sec. 3B.)
Sec. 2203.104. APPLICATION FOR COVERAGE. (a) A health
care provider or physician included in a category eligible for
insurance coverage by the association is entitled to apply to the
association for the coverage. An agent authorized under Chapter
4051 may apply on behalf of an applicant.
(b) The association shall issue a medical liability
insurance policy to an applicant:
(1) if the association determines that:
(A) the applicant meets the underwriting
standards of the association prescribed by the plan of operation;
and
(B) there is no unpaid and uncontested premium,
policyholder's stabilization reserve fund charge, or assessment
due from the applicant for prior insurance, as shown by the
insured's failure to pay or to object in writing to the charges on
or before the 30th day after the date of the billing; and
(2) on receipt of the premium and the policyholder's
stabilization reserve fund charge, or the portion of the premium
and charge prescribed by the plan of operation. (V.T.I.C. Art.
21.49-3, Secs. 4(a)(1), (2) (part).)
[Sections 2203.105-2203.150 reserved for expansion]
SUBCHAPTER D. ASSOCIATION COVERAGE
Sec. 2203.151. POWERS RELATING TO MEDICAL LIABILITY
INSURANCE COVERAGE. (a) Under this chapter and the plan of
operation, the association, on behalf of the association members,
may:
(1) issue, or cause to be issued, medical liability
insurance policies to applicants, including primary, excess, and
incidental coverages, subject to the limits specified in the plan
of operation and Section 2203.152;
(2) underwrite medical liability insurance and adjust
and pay losses related to that insurance, or appoint servicing
insurers to perform those functions;
(3) either or both accept and refuse the assumption of
reinsurance from association members; and
(4) cede and purchase reinsurance.
(b) The association may provide general liability insurance
coverage to be issued in connection with medical liability
insurance issued by the association. (V.T.I.C. Art. 21.49-3, Secs.
3(b) (part), (d).)
Sec. 2203.152. POLICY LIMITS. The association may not
issue one or more policies insuring an individual or organization
for an amount exceeding $1 million for each occurrence and $3
million in the aggregate for a year. (V.T.I.C. Art. 21.49-3, Sec.
3(b) (part).)
Sec. 2203.153. FOLLOWING FORM EXCESS LIABILITY COVERAGE.
Excess liability insurance coverage written for a physician or
health care provider by the association under this chapter must be
written as following form excess liability insurance to the
physician's or provider's primary insurance coverage. (V.T.I.C.
Art. 21.49-3, Sec. 4(c).)
Sec. 2203.154. PUNITIVE DAMAGES EXCLUDED. The association
may not issue or renew a medical liability insurance policy for a
physician or health care provider under this chapter that includes
coverage for punitive damages assessed against the physician or
health care provider. (V.T.I.C. Art. 21.49-3, Sec. 4(d).)
Sec. 2203.155. INSTALLMENT PLAN. The association may offer
an installment payment plan for insurance coverage obtained through
the association. (V.T.I.C. Art. 21.49-3, Sec. 4(e).)
Sec. 2203.156. TERM OF POLICY; NOTICE OF CERTAIN CHANGES.
(a) A policy issued by the association must be for a term of one
year or less, as determined by the association.
(b) Section 1901.253 does not apply to a medical liability
insurance policy issued by the association for a term of less than
one year.
(c) The association shall ensure that appropriate written
notice is provided to the insured for a policy described by
Subsection (b) if the association intends to:
(1) increase the premiums on the policy; or
(2) cancel or not renew the policy for a reason other
than for nonpayment of premiums or because the insured is no longer
licensed. (V.T.I.C. Art. 21.49-3, Secs. 4(a)(2) (part), (f).)
[Sections 2203.157-2203.200 reserved for expansion]
SUBCHAPTER E. RATES AND POLICY FORMS
Sec. 2203.201. APPLICABILITY OF OTHER LAW TO RATES AND
POLICY FORMS. (a) Except as provided by Subsection (b) and subject
to Section 2203.203, the following laws govern the rates, rating
plans, rating rules, rating classifications, territories, and
policy forms applicable to the insurance written by the association
and related statistics:
(1) Section 36.002(1);
(2) Subchapter B, Chapter 5;
(3) Subchapters A and C, Chapter 1806;
(4) Subchapter A, Chapter 2301;
(5) Chapter 251, as that chapter relates to casualty
insurance and fidelity, guaranty, and surety bond insurance;
(6) Chapter 253;
(7) Chapters 2251 and 2252; and
(8) Subtitle B.
(b) If a provision of a law described by Subsections
(a)(1)-(8) conflicts with a provision of this chapter, this chapter
prevails. (V.T.I.C. Art. 21.49-3, Sec. 4(b)(1) (part).)
Sec. 2203.202. RATE STANDARDS. (a) In determining rates,
rating plans, rating rules, rating classifications, territories,
and policy forms, the association shall consider:
(1) the past and prospective loss and expense
experience for medical professional liability insurance, inside
and outside this state, of all of the association members;
(2) trends in the frequency and severity of losses;
(3) the association's investment income; and
(4) other information the commissioner may require.
(b) Rates, rating plans, and rating rules must be based on:
(1) the association's loss and expense experience; and
(2) other information based on that experience the
department considers appropriate.
(c) The resultant premium rates must be:
(1) actuarially sound; and
(2) computed to be self-supporting. (V.T.I.C. Art.
21.49-3, Secs. 4(b)(1) (part), (4) (part).)
Sec. 2203.203. DISCOUNT FOR CERTAIN HEALTH CARE PROVIDERS.
(a) The rates applicable to professional liability insurance
coverage provided by the association for not-for-profit nursing
homes and not-for-profit assisted living facilities must reflect a
discount of 30 percent from the rates for the same coverage provided
to others in the same category of insureds.
(b) The commissioner shall ensure compliance with this
section. (V.T.I.C. Art. 21.49-3, Sec. 4(b)(6).)
[Sections 2203.204-2203.250 reserved for expansion]
SUBCHAPTER F. FINANCIAL PARTICIPATION BY MEMBERS AND POLICYHOLDERS
Sec. 2203.251. DEFICIT RECOUPMENT. (a) This section
applies to a deficit sustained in a single year by the association
with respect to:
(1) physicians and health care providers, other than
nursing homes and assisted living facilities; or
(2) a nursing home or assisted living facility.
(b) The deficit must be recouped in accordance with the plan
of operation and the rating plan in effect when the deficit is
sustained under one or more of the following procedures, in this
sequence:
(1) a contribution from the policyholder's
stabilization reserve fund established under Section 2203.301 or
the policyholder's stabilization reserve fund established under
Section 2203.303, as appropriate, until the respective fund is
exhausted;
(2) an assessment on the policyholders in accordance
with Section 2203.252; or
(3) an assessment on the members in accordance with
Sections 2203.055(c) and (d) and 2203.253. (V.T.I.C. Art. 21.49-3,
Sec. 4(b)(3) (part).)
Sec. 2203.252. ASSESSMENT OF POLICYHOLDERS FOR DEFICIT
RECOUPMENT. (a) Each policyholder within the group of physicians
and health care providers, other than nursing homes and assisted
living facilities, or within the group of nursing homes and
assisted living facilities, has contingent liability for a
proportionate share of an assessment made under this chapter of
policyholders in the applicable group.
(b) If a deficit, as computed under the plan of operation,
is sustained with respect to a group described by Subsection (a) in
a single year, the board of directors shall levy an assessment only
on the policyholders in the applicable group who held policies in
force at any time during the two most recently completed calendar
years:
(1) before the date the assessment is levied; and
(2) in which the association was issuing policies.
(c) The aggregate amount of an assessment under Subsection
(b) must be equal to the amount of the deficit not recouped under
Section 2203.251(b)(1) from the applicable policyholder's
stabilization reserve fund. Subject to Subsection (d), each
policyholder in the applicable group shall be assessed for a
portion of the deficit that reflects the proportion that the earned
premium on the policies of that policyholder bears to the total
earned premium for all policies of the association in the
applicable group in the two most recently completed calendar years.
(d) The maximum aggregate assessment on each policyholder
in the applicable group may not exceed the annual premium for the
liability insurance policy most recently in effect. (V.T.I.C. Art.
21.49-3, Sec. 5(a).)
Sec. 2203.253. LIMITATION ON REIMBURSEMENT BY MEMBER FOR
DEFICIT RECOUPMENT. (a) An association member is not obligated in
a single year to reimburse the association for the member's
proportionate share of the deficits from the association's
operations in that year in an amount that exceeds one percent of the
member's policyholder surplus. The aggregate amount not reimbursed
in accordance with this subsection shall be reallocated among the
other association members. The association shall reallocate that
amount in accordance with the method of determining a member's
participation under Sections 2203.055(c) and (d), after excluding
the total net direct premiums of all members not sharing in the
excess deficits.
(b) If the deficits from the association's operations
allocated to all association members in a calendar year exceed one
percent of all members' respective policyholder surplus, the
association shall allocate to each member the amount of the
deficits in accordance with the method of determining a member's
participation under Sections 2203.055(c) and (d). (V.T.I.C. Art.
21.49-3, Sec. 5(b) (part).)
Sec. 2203.254. CONTRIBUTION BY MEMBERS FOR SOUND FINANCIAL
OPERATION. If sufficient funds are not available for the sound
financial operation of the association, each association member
shall contribute to the financial requirements of the association
in accordance with Sections 2203.055(c) and (d), 2203.252, and
2203.253, as authorized and considered necessary by the department.
A contribution under this section is in addition to:
(1) an assessment paid in accordance with the plan of
operation under Section 2203.053(b); and
(2) a contribution from a policyholder's stabilization
reserve fund. (V.T.I.C. Art. 21.49-3, Sec. 4(b)(5) (part).)
Sec. 2203.255. REIMBURSEMENT OF ASSESSMENT OR
CONTRIBUTION; PREMIUM TAX CREDIT. (a) Subject to commissioner
approval, the association shall reimburse an assessment or
contribution, with interest at a rate approved by the commissioner,
to:
(1) the association members; or
(2) the state, to the extent that the members have
recouped their assessments using premium tax credits as provided by
Subsection (c).
(b) Pending recoupment or reimbursement of an assessment or
contribution paid by a member to the association, the unrepaid
balance of the assessment or contribution may be reflected in the
member's books and records as an admitted asset of the member for
all purposes, including exhibition in an annual statement under
Section 862.001.
(c) To the extent a member has paid one or more assessments
and has not received reimbursement from the association in
accordance with Subsection (a), a credit against premium taxes
under Chapter 221 is allowed at a rate of 20 percent a year for five
successive years following the year in which the deficit was
sustained. At the member's option, the tax credit may be taken over
an additional number of years. (V.T.I.C. Art. 21.49-3, Secs.
4(b)(3) (part), (5) (part).)
Sec. 2203.256. STANDARDS FOR RECOUPMENT PROVISIONS. A
provision for recoupment must be based on:
(1) the association's loss and expense experience; and
(2) other information based on that experience the
department considers appropriate. (V.T.I.C. Art. 21.49-3, Sec.
4(b)(4) (part).)
[Sections 2203.257-2203.300 reserved for expansion]
SUBCHAPTER G. POLICYHOLDER'S STABILIZATION RESERVE FUNDS
Sec. 2203.301. POLICYHOLDER'S STABILIZATION RESERVE FUND
FOR PHYSICIANS AND CERTAIN HEALTH CARE PROVIDERS. (a) The
policyholder's stabilization reserve fund for physicians and
health care providers other than nursing homes and assisted living
facilities is collected and administered by the association as
provided by this section, Section 2203.302, and the plan of
operation.
(b) The policyholder's stabilization reserve fund shall be:
(1) credited with all policyholder's stabilization
reserve fund charges collected under Section 2203.302;
(2) charged with any deficit sustained by physicians
and health care providers, other than nursing homes and assisted
living facilities, from the association's operation during the
previous year;
(3) treated as a liability of the association along
with, and in the same manner as, premium and loss reserves; and
(4) valued annually by the board of directors as of the
close of the preceding year. (V.T.I.C. Art. 21.49-3, Secs. 4A(a)
(part), (c), (e).)
Sec. 2203.302. POLICYHOLDER'S STABILIZATION RESERVE FUND
CHARGE FOR PHYSICIANS AND CERTAIN HEALTH CARE PROVIDERS. (a) Each
policyholder other than a nursing home or assisted living facility
shall pay annually into the policyholder's stabilization reserve
fund under Section 2203.301 a charge that:
(1) is in an amount established annually by advisory
directors chosen by physicians and health care providers, other
than nursing homes and assisted living facilities, eligible for
insurance through the association in accordance with the plan of
operation;
(2) is in proportion to each premium payment due for
liability insurance through the association; and
(3) is separately stated in the policy.
(b) A charge stated in a policy as required by Subsection
(a)(3) is not:
(1) a part of premiums; or
(2) subject to premium taxation or a servicing fee,
acquisition cost, or any other similar charge.
(c) If the association offers an installment payment plan
for coverage obtained through the association, the association may:
(1) permit payment of the policyholder's stabilization
reserve fund charge under this section on an installment basis; or
(2) require the policyholder to pay the charge as an
annual lump sum.
(d) Collections of the policyholder's stabilization reserve
fund charge under this section shall continue until the net balance
of the policyholder's stabilization reserve fund under Section
2203.301 is not less than the projected sum of premiums for
physicians and health care providers, other than nursing homes and
assisted living facilities, to be written in the year following the
valuation date. (V.T.I.C. Art. 21.49-3, Secs. 4A(b), as amended
Acts 78th Leg., R.S., Chs. 56, 141, (d).)
Sec. 2203.303. POLICYHOLDER'S STABILIZATION RESERVE FUND
FOR NURSING HOMES AND ASSISTED LIVING FACILITIES. (a) The
policyholder's stabilization reserve fund for nursing homes and
assisted living facilities is collected and administered by the
association as provided by this section, Section 2203.304, and the
plan of operation.
(b) The policyholder's stabilization reserve fund shall be:
(1) credited with:
(A) all policyholder's stabilization reserve
fund charges collected under Section 2203.304; and
(B) the net earnings on liability insurance
policies issued to nursing homes and assisted living facilities;
(2) charged with any deficit sustained by nursing
homes and assisted living facilities from the association's
operation during the previous year;
(3) treated as a liability of the association along
with, and in the same manner as, premium and loss reserves; and
(4) valued annually by the board of directors as of the
close of the preceding year.
(c) The policyholder's stabilization reserve fund under
this section, and any earnings of the fund, are state funds and
shall be held by the comptroller outside the state treasury on
behalf of, and with legal title in, the department. No part of the
fund or the earnings of the fund may inure to the benefit of an
association member, a policyholder, or another individual. The
fund assets may be used in accordance with the association's plan of
operation only to implement this chapter and for the purposes of the
association, including to make payment to satisfy, wholly or
partly, the liability of the association regarding a claim made on a
policy written by the association.
(d) Notwithstanding Sections 11, 12, and 13, Article
21.49-3, the policyholder's stabilization reserve fund under this
section may be terminated only by law.
(e) Notwithstanding Section 11, Article 21.49-3, on
termination of the policyholder's stabilization reserve fund under
this section, all assets of the fund shall be transferred to the
general revenue fund to be appropriated for purposes related to
ensuring the provision of the kinds of liability insurance coverage
that the association may provide under this chapter to nursing
homes and assisted living facilities. (V.T.I.C. Art. 21.49-3,
Secs. 4B(a) (part), (c), (e), (f), (g), (h).)
Sec. 2203.304. POLICYHOLDER'S STABILIZATION RESERVE FUND
CHARGE FOR NURSING HOMES AND ASSISTED LIVING FACILITIES. (a) Each
policyholder that is a nursing home or assisted living facility
shall pay annually into the policyholder's stabilization reserve
fund under Section 2203.303 a charge that:
(1) is in an amount established annually by advisory
directors chosen by nursing homes and assisted living facilities
eligible for insurance through the association in accordance with
the plan of operation;
(2) is in proportion to each premium payment due for
liability insurance through the association; and
(3) is separately stated in the policy.
(b) A charge stated in a policy as required by Subsection
(a)(3) is not:
(1) a part of premiums; or
(2) subject to premium taxation or a servicing fee,
acquisition cost, or any other similar charge.
(c) If the association offers an installment payment plan
for coverage obtained through the association, the association may:
(1) permit payment of the policyholder's stabilization
reserve fund charge under this section on an installment basis; or
(2) require the policyholder to pay the charge as an
annual lump sum.
(d) Collections of the policyholder's stabilization reserve
fund charge under this section shall continue only until the net
balance of the policyholder's stabilization reserve fund under
Section 2203.303 is not less than the projected sum of premiums for
nursing homes and assisted living facilities to be written in the
year following the valuation date. (V.T.I.C. Art. 21.49-3, Secs.
4B(b), as amended Acts 78th Leg., R.S., Chs. 56, 141, (d).)
Sec. 2203.305. SEPARATE FUNDS. The policyholder's
stabilization reserve fund for physicians and health care providers
other than nursing homes and assisted living facilities described
by Section 2203.301 is separate from the policyholder's
stabilization reserve fund for nursing homes and assisted living
facilities described by Section 2203.303. (V.T.I.C. Art. 21.49-3,
Secs. 4A(a) (part), 4B(a) (part).)
[Sections 2203.306-2203.350 reserved for expansion]
SUBCHAPTER H. REVENUE BOND PROGRAM
Sec. 2203.351. PURPOSE. The legislature finds that the
issuance of bonds to provide a method to raise funds to provide
professional liability insurance for nursing homes and assisted
living facilities in this state through the association is to
benefit the public and to further a public purpose. (V.T.I.C. Art.
21.49-3d, Sec. 1.)
Sec. 2203.352. DEFINITIONS. In this subchapter:
(1) "Board" means the board of directors of the Texas
Public Finance Authority.
(2) "Bond resolution" means the resolution or order
authorizing bonds to be issued under this subchapter. (V.T.I.C.
Art. 21.49-3d, Secs. 2(2), (3).)
Sec. 2203.353. APPLICABILITY OF OTHER LAWS. The following
laws apply to bonds issued under this subchapter to the extent
consistent with this subchapter:
(1) Chapters 1201, 1202, 1204, 1205, 1231, 1232, and
1371, Government Code; and
(2) Subchapter A, Chapter 1206, Government Code.
(V.T.I.C. Art. 21.49-3d, Secs. 3(b), 4.)
Sec. 2203.354. ISSUANCE OF BONDS AUTHORIZED. On behalf of
the association and subject to Section 2203.355, the Texas Public
Finance Authority shall issue revenue bonds to:
(1) fund the policyholder's stabilization reserve fund
for nursing homes and assisted living facilities under Section
2203.303;
(2) pay costs related to issuing the bonds; and
(3) pay other costs related to the bonds as determined
by the board. (V.T.I.C. Art. 21.49-3d, Sec. 3(a).)
Sec. 2203.355. LIMITATION ON AMOUNT OF BONDS. The Texas
Public Finance Authority may issue on behalf of the association
bonds in a total amount not to exceed $75 million. (V.T.I.C. Art.
21.49-3d, Sec. 5.)
Sec. 2203.356. TERMS OF ISSUANCE. (a) Bonds issued under
this subchapter may be issued at a public or private sale.
(b) Bonds must:
(1) be issued in the name of the association; and
(2) mature not more than 10 years after the date
issued. (V.T.I.C. Art. 21.49-3d, Sec. 6.)
Sec. 2203.357. CONTENTS OF BOND RESOLUTION; ADMINISTRATION
OF ACCOUNTS. (a) In a bond resolution, the board may:
(1) provide for the flow of funds and the
establishment, maintenance, and investment of funds and special
accounts with regard to the bonds, including an interest and
sinking fund account, a reserve account, and other accounts; and
(2) make additional covenants with regard to the bonds
and the designated income and receipts of the association pledged
to the payment of the bonds.
(b) The association shall administer the accounts in
accordance with this chapter. (V.T.I.C. Art. 21.49-3d, Secs. 7,
8.)
Sec. 2203.358. SOURCE OF PAYMENT. (a) Bonds issued under
this subchapter are payable only from:
(1) the surcharge fee established under Section
2203.359; or
(2) other sources the association is authorized to
levy and charge and from which the association is authorized to
collect in connection with paying any portion of the bonds.
(b) The bonds are obligations solely of the association and
do not create a pledge, gift, or loan of the faith, credit, or
taxing authority of this state.
(c) Each bond must:
(1) include a statement that the state is not
obligated to pay any amount on the bond and that the faith, credit,
and taxing authority of this state are not pledged, given, or loaned
to those payments; and
(2) state on the bond's face that the bond:
(A) is payable solely from the revenue pledged
for that purpose; and
(B) is not a legal or moral obligation of the
state. (V.T.I.C. Art. 21.49-3d, Sec. 9.)
Sec. 2203.359. SURCHARGE FEE. (a) A surcharge fee is
assessed against:
(1) each association member; and
(2) the association.
(b) The commissioner shall set the surcharge fee in an
amount sufficient to pay all debt service on the bonds issued under
this subchapter. Each association member and the association shall
pay the surcharge fee as required by the commissioner by rule.
(c) The comptroller shall collect the surcharge fee and the
department shall reimburse the comptroller in the manner described
by Section 201.052.
(d) The commissioner, in consultation with the comptroller,
may coordinate payment and collection of the surcharge fee with
other payments made by association members and collected by the
comptroller.
(e) Except as provided by Subsection (f), as a condition of
engaging in the business of insurance in this state, an association
member agrees that, if the member leaves the liability insurance
market in this state, the member remains obligated to pay the
member's share of the surcharge fee assessed under this section
until the bonds are retired. The amount assessed against a member
under this subsection must be:
(1) proportionate to the member's share of the
liability insurance market, including automobile liability
insurance, in this state as of the last complete reporting period
before the date the member ceases to engage in the liability
insurance business in this state; and
(2) based on the member's gross premiums for liability
insurance, including automobile liability insurance, for the
member's last reporting period.
(f) An association member is not required to pay the
proportionate amount under Subsection (e) in any year in which the
surcharge fee assessed against association members continuing to
write liability insurance in this state is sufficient to service
the bond obligation. (V.T.I.C. Art. 21.49-3d, Sec. 10.)
Sec. 2203.360. EXEMPTION FROM TAXATION. Bonds issued under
this subchapter, any interest from the bonds, and all assets
pledged to secure the payment of the bonds are exempt from taxation
by the state or a political subdivision of this state. (V.T.I.C.
Art. 21.49-3d, Sec. 11.)
Sec. 2203.361. AUTHORIZED INVESTMENTS. Bonds issued under
this subchapter are authorized investments under Subchapter B,
Chapter 424, and Subchapter D, Chapter 425. (V.T.I.C. Art.
21.49-3d, Sec. 12.)
Sec. 2203.362. STATE PLEDGE REGARDING BOND OWNER RIGHTS AND
REMEDIES. (a) The state pledges to and agrees with the owners of
bonds issued in accordance with this subchapter that the state will
not limit or alter the rights vested in the association to fulfill
the terms of agreements made with the owners or impair the rights
and remedies of the owners until the following obligations are
fully discharged:
(1) the bonds;
(2) any bond premium;
(3) interest; and
(4) all costs and expenses related to an action or
proceeding by or on behalf of the owners.
(b) The association may include the state's pledge and
agreement under Subsection (a) in an agreement with the owners of
the bonds. (V.T.I.C. Art. 21.49-3d, Sec. 13.)
Sec. 2203.363. PAYMENT ENFORCEABLE BY MANDAMUS. A writ of
mandamus and any other legal or equitable remedy are available to a
party in interest to require the association or another party to
fulfill an agreement or perform a function or duty under:
(1) this subchapter;
(2) the Texas Constitution; or
(3) a bond resolution. (V.T.I.C. Art. 21.49-3d, Sec.
14.)
[Sections 2203.364-2203.400 reserved for expansion]
SUBCHAPTER I. APPEALS
Sec. 2203.401. DEFINITION. In this subchapter, "act"
includes a ruling or decision. (New.)
Sec. 2203.402. APPEAL TO BOARD OF DIRECTORS; HEARING. (a)
A person insured or applying for insurance under this chapter, the
person's authorized representative, or an affected insurer that may
be aggrieved by an act of the association may appeal to the board of
directors not later than the 30th day after the date the act occurs.
At the time the person is notified of the act, the association shall
provide to the person written notice of the person's right to appeal
under this subsection.
(b) The board of directors shall:
(1) hear an appeal brought under Subsection (a) not
later than the 30th day after the date the board of directors
receives the appeal; and
(2) give not less than 10 days' written notice of the
time and place of the hearing to the person bringing the appeal or
the person's authorized representative. (V.T.I.C. Art. 21.49-3,
Secs. 7(a), (b) (part).)
Sec. 2203.403. DECISION OF BOARD OF DIRECTORS. (a) Not
later than the 10th day after the date of the hearing under Section
2203.402(b), the board of directors shall affirm, reverse, or
modify the board's previous action or the appealed act.
(b) At the time the person is notified of the final action of
the board of directors, the association shall provide to the person
written notice of the person's right to appeal under Section
2203.404. (V.T.I.C. Art. 21.49-3, Sec. 7(b) (part).)
Sec. 2203.404. APPEAL TO COMMISSIONER; HEARING. (a) Not
later than the 30th day after the date of the final action of the
board of directors under Section 2203.403, a person insured or
applying for insurance aggrieved by that final action may appeal to
the commissioner by making a written request for a hearing.
(b) The appeal shall be heard not later than the 30th day
after the date the appeal is received. The person bringing the
appeal or the person's authorized representative must be given
written notice of the time and place of the hearing on or before the
10th day before the date of the hearing. (V.T.I.C. Art. 21.49-3,
Sec. 7(c) (part).)
Sec. 2203.405. COMMISSIONER'S DECISION. (a) Not later
than the 30th day after the date of the hearing under Section
2203.404, the commissioner shall affirm, reverse, or modify the
appealed act.
(b) Pending the hearing and decision, the commissioner may
suspend or postpone the effective date of a rule or of the act
appealed. (V.T.I.C. Art. 21.49-3, Sec. 7(c) (part).)
Sec. 2203.406. APPEAL OF COMMISSIONER'S DECISION. (a) The
association or a person aggrieved by an order or decision of the
commissioner may appeal in accordance with Subchapter D, Chapter
36.
(b) At the time the person is notified of the commissioner's
order or decision, the commissioner shall provide to the person
written notice of the person's right to appeal under this section. (V.T.I.C. Art. 21.49-3, Sec. 7(d).)
CHAPTER 2204. TEXAS INSURANCE EXCHANGE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2204.001. DEFINITIONS
Sec. 2204.002. EXEMPTION
Sec. 2204.003. RULES
[Sections 2204.004-2204.050 reserved for expansion]
SUBCHAPTER B. OPERATION AND MANAGEMENT
Sec. 2204.051. PURPOSE OF EXCHANGE; SPECIFIC
AUTHORIZATION FOR CERTAIN INSURANCE
Sec. 2204.052. OPERATION OF EXCHANGE
Sec. 2204.053. CONSTITUTION AND BYLAWS
Sec. 2204.054. DIRECTORS
[Sections 2204.055-2204.100 reserved for expansion]
SUBCHAPTER C. FINANCES
Sec. 2204.101. TAXES
Sec. 2204.102. INVESTMENTS IN MEMBER OR AGENT
Sec. 2204.103. COVERAGE BY GUARANTY FUNDS
CHAPTER 2204. TEXAS INSURANCE EXCHANGE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2204.001. DEFINITIONS. In this chapter:
(1) "Directors" means the board of directors of the
exchange.
(2) "Exchange" means the Texas Insurance Exchange.
(3) "Member" means a person, firm, corporation, or
underwriting syndicate authorized by the directors to insure or
reinsure risks through the exchange. (V.T.I.C. Art. 1.14-3, Secs.
1(1), (3), (4).)
Sec. 2204.002. EXEMPTION. (a) This chapter, Chapters 251
and 261, and rules adopted by the commissioner or comptroller, as
applicable, apply to the exchange, a member, and insurance and
reinsurance written through the exchange, except to the extent
exempted by rules adopted by the commissioner or comptroller, as
applicable.
(b) An exemption may not be:
(1) unfairly discriminatory; or
(2) detrimental to the solvency of an insurer
authorized to engage in the business of insurance in this state.
(V.T.I.C. Art. 1.14-3, Sec. 9.)
Sec. 2204.003. RULES. The commissioner shall adopt rules
for the operation and management of the exchange. (V.T.I.C.
Art. 1.14-3, Sec. 4 (part).)
[Sections 2204.004-2204.050 reserved for expansion]
SUBCHAPTER B. OPERATION AND MANAGEMENT
Sec. 2204.051. PURPOSE OF EXCHANGE; SPECIFIC AUTHORIZATION
FOR CERTAIN INSURANCE. (a) The exchange shall provide a facility
for underwriting:
(1) reinsurance of any kind of insurance;
(2) direct insurance of any kind of risk located
entirely outside the United States;
(3) direct insurance of any kind of risk that:
(A) is located in another state; and
(B) qualifies for placement under the excess and
surplus lines requirements of the jurisdiction in which the risk is
located; and
(4) a risk located in this state that has been
submitted to and certified as rejected by a committee representing
at least three and not more than seven insurers authorized to engage
in the business of insurance in this state and subject to conditions
imposed by rules adopted by the commissioner.
(b) For purposes of Chapter 101, insurance or reinsurance a
member writes to cover a risk described by Subsection (a)(4) is
considered to be specifically authorized by the laws of this state.
(V.T.I.C. Art. 1.14-3, Secs. 3, 11.)
Sec. 2204.052. OPERATION OF EXCHANGE. The exchange shall
operate under:
(1) a constitution and bylaws adopted by the exchange
and approved by the department; and
(2) rules adopted by the commissioner under Section
2204.003. (V.T.I.C. Art. 1.14-3, Secs. 2, 5(a).)
Sec. 2204.053. CONSTITUTION AND BYLAWS. (a) In this
section:
(1) "Principal office" means an office at which
officers and personnel who are engaged in administration,
underwriting, claims adjustment, policyholders' service,
marketing, accounting, recordkeeping, and support services are
located.
(2) "Subscriber" means a person, firm, corporation, or
other organization that, on payment of fees or dues required by the
constitution and bylaws, the directors designate as a subscriber.
(b) The constitution and bylaws of the exchange must provide
for:
(1) the election of nine directors, four of whom
represent the public interest and are not members, subscribers, or
agents of the exchange;
(2) the locations of the principal offices of the
exchange and the members in this state for transacting business
described by Section 2204.051(a);
(3) the submission by the exchange, members, and
applicants for membership in the exchange of financial information
required by rules adopted by the commissioner;
(4) the establishment and maintenance by the exchange
of a security fund in a form and amount specified by rules adopted
by the commissioner;
(5) the voting power of members; and
(6) members' rights and duties, including the manner
of conducting business, financial stability, dues, membership
fees, mandatory arbitration, and any other matter necessary or
appropriate to conduct business authorized by this chapter.
(c) For an agent transacting business on the exchange to
participate in the operation and management of the exchange, the
constitution and bylaws of the exchange must provide for the voting
power and other rights granted to a nonprofit corporation under the
Business Organizations Code.
(c-1) Notwithstanding Subsection (c), on or before December
31, 2009, for an agent transacting business on the exchange to
participate in the operation and management of the exchange, the
constitution and bylaws of the exchange must provide for the voting
power and other rights granted to a nonprofit corporation under the
Texas Non-Profit Corporation Act (Article 1396-1.01 et seq.,
Vernon's Texas Civil Statutes) or the Business Organizations Code,
as applicable.
(c-2) This subsection and Subsection (c-1) expire January
1, 2010.
(d) In a manner that complies with the requirements adopted
under this section, the exchange may, with the department's
approval, amend the exchange's constitution or bylaws in accordance
with the terms of the constitution and bylaws.
(e) The constitution, a bylaw, or an amendment to the
constitution or a bylaw is invalid without the department's
approval. (V.T.I.C. Art. 1.14-3, Secs. 1(5), 5(b), (c), (d), (e).)
Sec. 2204.054. DIRECTORS. (a) The directors shall
operate and manage the exchange in accordance with rules adopted
under Section 2204.003.
(b) The directors shall be elected by the members and any
other person authorized by the exchange's constitution and bylaws
to vote in an election of directors.
(c) At least two-thirds of the directors must be citizens of
the United States. (V.T.I.C. Art. 1.14-3, Secs. 4 (part), 6.)
[Sections 2204.055-2204.100 reserved for expansion]
SUBCHAPTER C. FINANCES
Sec. 2204.101. TAXES. (a) Except as provided by this
section and Chapters 251 and 261, the exchange is not subject to
state or local taxes that are measured by income, premiums, or gross
receipts.
(b) A direct premium written, procured, or received by a
member through the exchange on a risk located in this state is:
(1) considered written, procured, or received by the
exchange; and
(2) subject to the premium taxes imposed under
Subtitle B, Title 3.
(c) Premium taxes shall be reported, paid, and administered
as provided by Subtitle B, Title 3.
(d) The exchange and the members are considered insurers for
purposes of:
(1) Sections 201.052, 201.053, and 201.054;
(2) Chapters 4, 202, 203, 221, 222, 224, 227, 251, 257,
and 1109; and
(3) Section 171.0525, Tax Code. (V.T.I.C. Art.
1.14-3, Sec. 7.)
Sec. 2204.102. INVESTMENTS IN MEMBER OR AGENT. (a) The
commissioner by rule may establish limitations on investments in a
member.
(b) An investment, directly or indirectly, in a member by an
agent transacting business on the exchange or in an agent
transacting business on the exchange by a member is limited in the
aggregate to:
(1) less than 20 percent of the total investment in the
member or agent; or
(2) a lesser amount provided by a rule adopted by the
commissioner. (V.T.I.C. Art. 1.14-3, Sec. 10.)
Sec. 2204.103. COVERAGE BY GUARANTY FUNDS. (a) The
performance of a contractual obligation of the exchange or a member
entered into under this chapter is not covered by an insurance
guaranty fund provided by the laws of this state.
(b) This section does not apply to the security fund
established under Section 2204.053(b)(4). (V.T.I.C. Art. 1.14-3, Sec. 12.)
CHAPTER 2205. TEXAS CHILD-CARE FACILITY LIABILITY POOL
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2205.001. DEFINITIONS
Sec. 2205.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE
Sec. 2205.003. DEPARTMENT AND COMMISSIONER SUPERVISION
[Sections 2205.004-2205.050 reserved for expansion]
SUBCHAPTER B. CREATION OF POOL
Sec. 2205.051. CREATION OF POOL
Sec. 2205.052. PARTICIPATION IN POOL
Sec. 2205.053. SELECTION OF TEMPORARY BOARD
[Sections 2205.054-2205.100 reserved for expansion]
SUBCHAPTER C. PLAN OF OPERATION
Sec. 2205.101. TIME FOR CREATION OF PLAN OF OPERATION
Sec. 2205.102. CONTENTS OF PLAN OF OPERATION
Sec. 2205.103. APPROVAL OF PLAN OF OPERATION
[Sections 2205.104-2205.150 reserved for expansion]
SUBCHAPTER D. BOARD OF TRUSTEES
Sec. 2205.151. GOVERNANCE OF POOL
Sec. 2205.152. TERMS; VACANCY
Sec. 2205.153. PERFORMANCE BOND REQUIRED
Sec. 2205.154. COMPENSATION
Sec. 2205.155. OFFICERS; MEETINGS
Sec. 2205.156. GENERAL POWERS AND DUTIES OF BOARD
Sec. 2205.157. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES
[Sections 2205.158-2205.200 reserved for expansion]
SUBCHAPTER E. OPERATION OF POOL
Sec. 2205.201. GENERAL POWERS AND DUTIES OF POOL
Sec. 2205.202. POOL MANAGER; PERFORMANCE BOND REQUIRED
Sec. 2205.203. GENERAL POWERS AND DUTIES OF POOL
MANAGER
Sec. 2205.204. PERSONNEL
Sec. 2205.205. PERFORMANCE BOND AUTHORIZED
Sec. 2205.206. IMMUNITY OF EMPLOYEES AND CONTRACTORS
FROM CERTAIN LIABILITIES
Sec. 2205.207. OFFICE; RECORDS
Sec. 2205.208. ANNUAL AUDIT
[Sections 2205.209-2205.250 reserved for expansion]
SUBCHAPTER F. TEXAS CHILD-CARE FACILITY LIABILITY FUND
Sec. 2205.251. FUND CREATION; MANAGEMENT
Sec. 2205.252. CONTRIBUTIONS
Sec. 2205.253. USES OF FUND
Sec. 2205.254. DEPOSITORY BANK
[Sections 2205.255-2205.300 reserved for expansion]
SUBCHAPTER G. POOL COVERAGE
Sec. 2205.301. SCOPE OF COVERAGE
Sec. 2205.302. BASIS OF COVERAGE
Sec. 2205.303. RATES AND LIMITS OF COVERAGE
Sec. 2205.304. COVERAGE PERIOD
Sec. 2205.305. NONRENEWAL OF COVERAGE
Sec. 2205.306. SUBSEQUENT COVERAGE
Sec. 2205.307. PAYMENT OF CLAIMS AND JUDGMENTS
CHAPTER 2205. TEXAS CHILD-CARE FACILITY LIABILITY POOL
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2205.001. DEFINITIONS. In this chapter:
(1) "Board" means the board of trustees of the pool.
(2) "Child-care facility" has the meaning assigned by
Section 42.002, Human Resources Code.
(3) "Fund" means the Texas child-care facility
liability fund.
(4) "Pool" means the Texas Child-Care Facility
Liability Pool. (V.T.I.C. Art. 21.49-18, Sec. 1.)
Sec. 2205.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE. (a) Except as provided by this section and Section
2205.003(b), the pool is not engaged in the business of insurance
under this code or other state law, and this code and other state
insurance laws do not apply to the pool.
(b) The pool is subject to:
(1) this chapter;
(2) the requirements of this code or commissioner
rules relating to reporting liability claims information; and
(3) the requirements of Chapter 2251 and Article
5.13-2 relating to making, filing, and approving rates. (V.T.I.C.
Art. 21.49-18, Secs. 20(a), (b) (part).)
Sec. 2205.003. DEPARTMENT AND COMMISSIONER SUPERVISION.
(a) The pool is subject to the department's continuing supervision
relating to the pool's solvency.
(b) The commissioner may set minimum requirements to ensure
the capability of the pool to satisfy the pool's obligations.
(V.T.I.C. Art. 21.49-18, Secs. 20(b) (part), (c).)
[Sections 2205.004-2205.050 reserved for expansion]
SUBCHAPTER B. CREATION OF POOL
Sec. 2205.051. CREATION OF POOL. (a) The Texas Child-Care
Facility Liability Pool is created when the governing bodies of 10
or more child-care facilities agree in writing to participate in
the pool.
(b) The pool provides liability insurance coverage for
child-care facilities as provided by this chapter. (V.T.I.C. Art.
21.49-18, Secs. 2, 3(a) (part).)
Sec. 2205.052. PARTICIPATION IN POOL. A child-care
facility is entitled to coverage from the pool if the facility:
(1) submits a complete application;
(2) provides other information required by the pool;
(3) meets the underwriting standards established by
the pool; and
(4) pays the premiums required for the coverage.
(V.T.I.C. Art. 21.49-18, Sec. 4.)
Sec. 2205.053. SELECTION OF TEMPORARY BOARD. At the time
the governing bodies of the child-care facilities enter into the
written agreement under Section 2205.051, the governing bodies
shall select nine individuals to:
(1) serve as the temporary board; and
(2) draft the plan of operation for the pool.
(V.T.I.C. Art. 21.49-18, Sec. 5(a).)
[Sections 2205.054-2205.100 reserved for expansion]
SUBCHAPTER C. PLAN OF OPERATION
Sec. 2205.101. TIME FOR CREATION OF PLAN OF OPERATION. (a)
Not later than the 30th day after the date the last member of the
temporary board is selected, the temporary board shall meet to
prepare a plan of operation for the pool.
(b) The temporary board shall complete and adopt the plan of
operation not later than the 90th day after the date the last member
of the temporary board is selected. (V.T.I.C. Art. 21.49-18, Secs.
5(b), (d).)
Sec. 2205.102. CONTENTS OF PLAN OF OPERATION. (a) Subject
to the requirements of this chapter, the plan of operation must
include:
(1) the organizational structure of the pool,
including:
(A) the method of selecting the board;
(B) the board's methods of procedure and
operation; and
(C) a summary of the methods for managing and
operating the pool;
(2) a description of the contributions and other
financial arrangements necessary to cover the initial expenses of
the pool and estimates, supported by statistical information, of
the amounts of those contributions or other financial arrangements;
(3) underwriting standards and procedures for
evaluating risks;
(4) a requirement that each participant in the pool
receive continuing training in the methods of controlling liability
losses;
(5) procedures for purchasing reinsurance;
(6) procedures and guidelines for:
(A) establishing premium rates for and maximum
limits of excess liability coverage available from the pool;
(B) negotiating and paying settlements,
defending claims, and paying judgments; and
(C) managing and investing the fund;
(7) procedures for:
(A) processing and paying claims; and
(B) defraying losses or expenses of the pool;
(8) guidelines for nonrenewal of coverage;
(9) the minimum capital and surplus to be maintained
by the pool; and
(10) the minimum standards for reserve requirements
for the pool.
(b) The plan of operation may include any matter relating to
the organization and operation of the pool or to the pool's
finances. (V.T.I.C. Art. 21.49-18, Sec. 5(c).)
Sec. 2205.103. APPROVAL OF PLAN OF OPERATION. (a) On
completion of the plan of operation, the temporary board shall
submit the plan to the department for examination, suggested
changes, and final approval.
(b) The department shall approve the plan of operation on
the determination that the pool is able and will continue to be able
to pay valid claims made against the pool. (V.T.I.C. Art. 21.49-18,
Sec. 5(e).)
[Sections 2205.104-2205.150 reserved for expansion]
SUBCHAPTER D. BOARD OF TRUSTEES
Sec. 2205.151. GOVERNANCE OF POOL. (a) The pool is
governed by a board of trustees composed of nine members selected as
provided by the plan of operation.
(b) Not later than the 15th day after the date the
department approves the plan of operation, the initial regular
board must be selected as provided by the plan of operation. The
members of the initial regular board shall take office not later
than the 30th day after the date the plan of operation is adopted.
(V.T.I.C. Art. 21.49-18, Secs. 5(g), 6(a).)
Sec. 2205.152. TERMS; VACANCY. (a) Board members serve
two-year terms. The terms expire as provided by the plan of
operation.
(b) A vacancy on the board shall be filled as provided by the
plan of operation. (V.T.I.C. Art. 21.49-18, Secs. 6(b), (c).)
Sec. 2205.153. PERFORMANCE BOND REQUIRED. (a) Each board
member shall execute a bond in the amount required by the plan of
operation. The bond must be payable to the pool and conditioned on
the faithful performance of the member's duties.
(b) The pool shall pay the cost of the bond executed under
this section. (V.T.I.C. Art. 21.49-18, Sec. 6(d).)
Sec. 2205.154. COMPENSATION. A board member is not
entitled to compensation for the member's service on the board.
(V.T.I.C. Art. 21.49-18, Sec. 6(e).)
Sec. 2205.155. OFFICERS; MEETINGS. (a) The board shall
elect from the board's membership a presiding officer and other
officers as provided by the plan of operation.
(b) Each officer serves a one-year term that expires as
provided by the plan of operation.
(c) The board shall meet at the call of the presiding
officer and at times established by the board's rules. (V.T.I.C.
Art. 21.49-18, Secs. 6(f), (g).)
Sec. 2205.156. GENERAL POWERS AND DUTIES OF BOARD. (a) The
board shall:
(1) approve contracts, other than liability insurance
contracts issued by the pool to child-care facilities; and
(2) adopt premium rate schedules and policy forms for
the pool.
(b) The board may:
(1) adopt rules as necessary for the operation of the
pool;
(2) delegate specific responsibilities to the pool
manager; and
(3) with the department's approval, amend the plan of
operation as necessary to ensure the orderly management and
operation of the pool. (V.T.I.C. Art. 21.49-18, Secs. 5(f) (part);
7(a) (part), (b).)
Sec. 2205.157. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES. A board member is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment against a child-care
facility covered by the pool. (V.T.I.C. Art. 21.49-18, Sec. 6(h).)
[Sections 2205.158-2205.200 reserved for expansion]
SUBCHAPTER E. OPERATION OF POOL
Sec. 2205.201. GENERAL POWERS AND DUTIES OF POOL. (a) The
pool shall:
(1) issue primary and excess liability coverage to
each child-care facility entitled to coverage under this chapter;
(2) collect premiums for coverage issued or renewed by
the pool;
(3) process and pay valid claims;
(4) maintain detailed information regarding the pool;
and
(5) establish a plan to conduct loss control training
or contract with an outside entity to establish continuing training
and inspections programs designed to reduce the potential liability
losses of pool participants.
(b) The pool may:
(1) enter into contracts;
(2) purchase reinsurance;
(3) cancel or refuse to renew coverage; and
(4) perform any other act necessary to implement this
chapter, the plan of operation, or a rule adopted by the board.
(V.T.I.C. Art. 21.49-18, Sec. 11.)
Sec. 2205.202. POOL MANAGER; PERFORMANCE BOND
REQUIRED. (a) The board shall appoint a pool manager who serves at
the pleasure of the board, and the board shall supervise the pool
manager's activities.
(b) The pool manager shall execute a bond in the amount
determined by the board. The bond must be payable to the pool and
conditioned on the faithful performance of the pool manager's
duties. (V.T.I.C. Art. 21.49-18, Secs. 7(a) (part); 8(a) (part),
(b).)
Sec. 2205.203. GENERAL POWERS AND DUTIES OF POOL MANAGER.
(a) The pool manager shall direct the general operation of the pool
and perform other duties as directed by the board.
(b) The pool manager shall:
(1) receive and approve applications for liability
coverage from the pool;
(2) negotiate contracts for the pool; and
(3) prepare proposed policy forms for board approval.
(c) The pool manager may refuse to renew the coverage of a
child-care facility insured by the pool that fails to meet the
guidelines included in the plan of operation. (V.T.I.C. Art.
21.49-18, Secs. 8(a) (part), (c) (part), (d).)
Sec. 2205.204. PERSONNEL. (a) The pool manager may
employ or contract with persons as necessary to assist the board and
the pool manager in implementing the powers and duties of the pool.
(b) The board must approve:
(1) the compensation paid to a pool employee; and
(2) a contract made with a person under this section.
(V.T.I.C. Art. 21.49-18, Secs. 9(a), (b).)
Sec. 2205.205. PERFORMANCE BOND AUTHORIZED. The board may
require an employee or a person with whom the pool manager contracts
under Section 2205.204 to execute a bond in an amount determined by
the board. The bond must be payable to the board and conditioned on
the faithful performance of the employee's or other person's duties
to the pool. (V.T.I.C. Art. 21.49-18, Sec. 9(c).)
Sec. 2205.206. IMMUNITY OF EMPLOYEES AND CONTRACTORS FROM
CERTAIN LIABILITIES. An employee or a person with whom the pool
manager contracts under Section 2205.204 is not liable with respect
to a claim or judgment against a child-care facility covered by the
pool. (V.T.I.C. Art. 21.49-18, Sec. 9(d).)
Sec. 2205.207. OFFICE; RECORDS. (a) The pool shall
maintain the pool's principal office in Austin, Texas.
(b) Records and other information relating to the operation
of the pool must be maintained in the pool's principal office.
(V.T.I.C. Art. 21.49-18, Sec. 10.)
Sec. 2205.208. ANNUAL AUDIT. The board shall require an
annual audit of the pool's capital, surplus, and reserves. The
audit must be conducted by an actuary who is a member of the
American Academy of Actuaries or a similar national organization of
actuaries recognized by the board. (V.T.I.C. Art. 21.49-18, Sec.
12(h).)
[Sections 2205.209-2205.250 reserved for expansion]
SUBCHAPTER F. TEXAS CHILD-CARE FACILITY LIABILITY FUND
Sec. 2205.251. FUND CREATION; MANAGEMENT. (a) The Texas
child-care facility liability fund is established on the creation
of the pool.
(b) The fund is composed of:
(1) premiums paid by child-care facilities for
coverage provided by the pool;
(2) contributions and other money received by the pool
to cover the initial expenses of the fund;
(3) investments of the fund and money earned from
those investments; and
(4) any other money received by the pool.
(c) The pool manager, under the general supervision of the
board, shall manage and invest the money in the fund in the manner
provided by the plan of operation.
(d) Money earned by the investment of money in the fund must
be deposited in the fund or reinvested for the fund. (V.T.I.C. Art.
21.49-18, Secs. 12(a), (b), (c); 13.)
Sec. 2205.252. CONTRIBUTIONS. The board shall determine
the amount of contributions necessary to meet the initial expenses
of the pool. The board shall make this determination based on the
information provided by the plan of operation. (V.T.I.C. Art.
21.49-18, Sec. 14.)
Sec. 2205.253. USES OF FUND. (a) Administrative expenses
of the pool may be paid from the fund. Payments for administrative
expenses during a fiscal year may not exceed 10 percent of the total
amount of the money in the fund during that fiscal year.
(b) Money in the fund may not be used to pay:
(1) punitive damages; or
(2) a fine or penalty imposed for a violation of:
(A) a statute;
(B) a rule of a state agency; or
(C) an ordinance or order of a local government.
(c) A claim or judgment may be paid from the fund under
excess liability insurance coverage only if all benefits payable
under any other underlying liability insurance policy covering that
claim or judgment are exhausted. (V.T.I.C. Art. 21.49-18, Secs.
12(d), (e), (f).)
Sec. 2205.254. DEPOSITORY BANK. (a) The board may select
one or more banks to serve as a depository for the fund.
(b) A depository bank must provide security before money in
the fund may be deposited in the bank in an amount that exceeds the
maximum amount secured by the Federal Deposit Insurance
Corporation. The security must be in an amount sufficient to secure
the excess amount of the deposit. (V.T.I.C. Art. 21.49-18, Sec.
12(g).)
[Sections 2205.255-2205.300 reserved for expansion]
SUBCHAPTER G. POOL COVERAGE
Sec. 2205.301. SCOPE OF COVERAGE. (a) The pool shall
insure a child-care facility and the facility's officers and
employees against liability for acts and omissions under the laws
of this state by the officers and employees in their official or
employment capacities.
(b) The pool shall provide to a child-care facility that
qualifies under this chapter and the plan of operation:
(1) primary liability insurance coverage in an amount
not to exceed $300,000; and
(2) excess liability insurance coverage in an amount
that the board determines is actuarially sound.
(c) The pool may participate in evaluating, settling, and
defending a claim against a child-care facility insured by the
pool.
(d) The pool is liable in an amount not to exceed the limit
of coverage provided to a child-care facility on a claim made
against the facility. (V.T.I.C. Art. 21.49-18, Sec. 3.)
Sec. 2205.302. BASIS OF COVERAGE. The pool may provide
liability insurance coverage on a claims-made basis or an
occurrence basis. (V.T.I.C. Art. 21.49-18, Sec. 17.)
Sec. 2205.303. RATES AND LIMITS OF COVERAGE. (a) To
ensure that the pool is actuarially sound, the board shall:
(1) set the premium rates charged; and
(2) determine the maximum limits of coverage provided.
(b) The pool manager, for the board's consideration, shall:
(1) collect and compile statistical information
relating to the liability coverage provided by the pool, including
relevant loss, expense, and premium information, and other
necessary information;
(2) prepare the proposed premium rate schedules for
the approval of the board; and
(3) prepare the maximum limits of coverage.
(c) The board shall periodically reexamine the rate
schedules and the maximum limits of coverage.
(d) The pool manager shall make available to the public the
information described by Subsection (b)(1). (V.T.I.C. Art.
21.49-18, Secs. 8(c) (part), 15.)
Sec. 2205.304. COVERAGE PERIOD. A child-care facility
that accepts coverage provided by the pool shall maintain that
coverage for at least 24 consecutive months following the date the
pool issued the coverage. (V.T.I.C. Art. 21.49-18, Sec. 16(a).)
Sec. 2205.305. NONRENEWAL OF COVERAGE. (a) Except as
provided by Subsection (b), the pool may refuse to renew the
coverage of a child-care facility that fails to comply with the
pool's underwriting standards.
(b) The pool may not refuse to renew the coverage of a
child-care facility during the first 24 months following the date
the facility is first provided coverage by the pool if the facility
maintains the underwriting standards established by the plan of
operation. (V.T.I.C. Art. 21.49-18, Sec. 18.)
Sec. 2205.306. SUBSEQUENT COVERAGE. A child-care facility
that voluntarily discontinues coverage provided by the pool is not
eligible to subsequently obtain coverage from the pool for at least
12 months following the date the coverage is discontinued.
(V.T.I.C. Art. 21.49-18, Sec. 16(b).)
Sec. 2205.307. PAYMENT OF CLAIMS AND JUDGMENTS. (a) If
money in the fund would be exhausted by the payment of all final and
settled claims and final judgments during a fiscal year, the pool
shall prorate the amount paid to each person having the claim or
judgment.
(b) If the amount paid by the pool is prorated under this
section, each person described by Subsection (a) shall receive an
amount equal to the percentage that the amount owed to that person
by the pool bears to the total amount owed, outstanding, and payable
by the pool.
(c) The pool shall pay in the next fiscal year the remaining
amount that is due and unpaid to a person who receives a prorated payment under this section. (V.T.I.C. Art. 21.49-18, Sec. 19.)
CHAPTER 2206. RISK MANAGEMENT POOLS FOR CERTAIN EDUCATIONAL
ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2206.001. DEFINITIONS
Sec. 2206.002. APPLICABILITY OF OTHER LAWS
[Sections 2206.003-2206.050 reserved for expansion]
SUBCHAPTER B. SCHOOL DISTRICT RISK MANAGEMENT POOL
Sec. 2206.051. CREATION OF SCHOOL DISTRICT RISK
MANAGEMENT POOL
Sec. 2206.052. PARTICIPATION IN POOL
Sec. 2206.053. ORGANIZATIONAL MEETING; SELECTION OF
TEMPORARY BOARD
[Sections 2206.054-2206.100 reserved for expansion]
SUBCHAPTER C. JUNIOR COLLEGE DISTRICT RISK MANAGEMENT POOL
Sec. 2206.101. CREATION OF JUNIOR COLLEGE DISTRICT
RISK MANAGEMENT POOL
Sec. 2206.102. PARTICIPATION IN POOL
Sec. 2206.103. ORGANIZATIONAL MEETING; SELECTION OF
TEMPORARY BOARD
[Sections 2206.104-2206.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2206.151. TIME FOR CREATION OF PLAN OF OPERATION
Sec. 2206.152. CONTENTS OF PLAN OF OPERATION
[Sections 2206.153-2206.200 reserved for expansion]
SUBCHAPTER E. BOARD OF TRUSTEES
Sec. 2206.201. BOARD OF TRUSTEES
Sec. 2206.202. GENERAL AUTHORITY OF BOARD; RULES
Sec. 2206.203. PERSONNEL; CONTRACTS FOR SERVICES
Sec. 2206.204. PERFORMANCE BOND REQUIRED
Sec. 2206.205. IMMUNITY FROM CERTAIN LIABILITIES
[Sections 2206.206-2206.250 reserved for expansion]
SUBCHAPTER F. RISK MANAGEMENT FUND
Sec. 2206.251. FUND CREATION; MANAGEMENT
Sec. 2206.252. USES OF FUND
[Sections 2206.253-2206.300 reserved for expansion]
SUBCHAPTER G. PREMIUM RATES AND COVERAGE; REINSURANCE
Sec. 2206.301. PREMIUM RATES AND COVERAGE LIMITS
Sec. 2206.302. GUARANTEED ISSUANCE OF INITIAL
COVERAGE; RISK MANAGEMENT
Sec. 2206.303. REINSURANCE
CHAPTER 2206. RISK MANAGEMENT POOLS FOR CERTAIN EDUCATIONAL
ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2206.001. DEFINITIONS. In this chapter:
(1) "Board" means the board of trustees of a pool.
(2) "Fund" means a risk management fund.
(3) "Junior college district" means a junior college
district created under the laws of this state.
(4) "Pool" means a risk management pool created under
this chapter.
(5) "School district" means a public school district
created under the laws of this state. (V.T.I.C. Art. 21.49-17,
Secs. 1(1), (2), (4), (5), (6).)
Sec. 2206.002. APPLICABILITY OF OTHER LAWS. (a) Except
as provided by Subsection (b), a pool is not considered insurance
under this code or other laws of this state, and the department does
not have jurisdiction over the pool.
(b) The pool:
(1) shall collect the necessary information and file
with the department the reports required by Subchapter D, Chapter
38; and
(2) is subject to Chapter 541 and Section 543.001.
(V.T.I.C. Art. 21.49-17, Sec. 15.)
[Sections 2206.003-2206.050 reserved for expansion]
SUBCHAPTER B. SCHOOL DISTRICT RISK MANAGEMENT POOL
Sec. 2206.051. CREATION OF SCHOOL DISTRICT RISK MANAGEMENT
POOL. (a) The boards of trustees of five or more school districts
may create the school district risk management pool by adopting a
resolution to create the pool.
(b) The school district risk management pool insures each
school district that purchases coverage in the pool against
liability under law for the district's acts and omissions.
(c) Not more than one school district risk management pool
may be created under this subchapter. (V.T.I.C. Art. 21.49-17,
Secs. 2(b) (part), (c) (part), (e) (part).)
Sec. 2206.052. PARTICIPATION IN POOL. (a) A school
district that meets the criteria established by the school district
risk management pool in the pool's plan of operation may:
(1) purchase coverage from the pool; and
(2) use district money to pay the fees, contributions,
or premiums required to participate in the pool and obtain the
coverage.
(b) A junior college district may not participate in the
school district risk management pool. (V.T.I.C. Art. 21.49-17,
Secs. 2(d) (part), 3 (part).)
Sec. 2206.053. ORGANIZATIONAL MEETING; SELECTION OF
TEMPORARY BOARD. (a) On authorization to create the school
district risk management pool as provided by Section 2206.051, the
board of trustees of each school district adopting a resolution to
create the pool shall select one representative to meet with
representatives of the other school districts adopting the
resolution.
(b) At the meeting, the representatives shall:
(1) adopt guidelines for developing an organizational
plan for the pool; and
(2) select nine individuals to serve as a temporary
board for the pool. (V.T.I.C. Art. 21.49-17, Secs. 4(a) (part),
(b).)
[Sections 2206.054-2206.100 reserved for expansion]
SUBCHAPTER C. JUNIOR COLLEGE DISTRICT RISK MANAGEMENT POOL
Sec. 2206.101. CREATION OF JUNIOR COLLEGE DISTRICT RISK
MANAGEMENT POOL. (a) The board of trustees of five or more junior
college districts may create the junior college district risk
management pool by adopting a resolution to create the pool.
(b) The junior college district risk management pool
insures each junior college district that purchases coverage in the
pool against liability under law for the district's acts and
omissions.
(c) Not more than one junior college district risk
management pool may be created under this subchapter. (V.T.I.C.
Art. 21.49-17, Secs. 2(b) (part), (c) (part), (e) (part).)
Sec. 2206.102. PARTICIPATION IN POOL. (a) A junior
college district that meets the criteria established by the junior
college district risk management pool in the pool's plan of
operation may:
(1) purchase coverage from the pool; and
(2) use district money to pay the fees, contributions,
or premiums required to participate in the pool and obtain the
coverage.
(b) A school district may not participate in the junior
college district risk management pool. (V.T.I.C. Art. 21.49-17,
Secs. 2(d) (part), 3 (part).)
Sec. 2206.103. ORGANIZATIONAL MEETING; SELECTION OF
TEMPORARY BOARD. (a) On authorization to create the junior
college district risk management pool as provided by Section
2206.101, the board of trustees of each junior college district
adopting a resolution to create the pool shall select one
representative to meet with representatives of the other junior
college districts adopting the resolution.
(b) At the meeting, the representatives shall:
(1) adopt guidelines for developing an organizational
plan for the pool; and
(2) select nine individuals to serve as a temporary
board for the pool. (V.T.I.C. Art. 21.49-17, Secs. 4(a) (part),
(b).)
[Sections 2206.104-2206.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2206.151. TIME FOR CREATION OF PLAN OF
OPERATION. (a) Not later than the 30th day after the date the
temporary board of a pool is selected, the temporary board shall
meet and begin preparing a detailed plan of operation for the pool.
(b) The temporary board shall complete the plan of operation
not later than the 90th day after the date the temporary board is
selected. (V.T.I.C. Art. 21.49-17, Secs. 5(a), (c).)
Sec. 2206.152. CONTENTS OF PLAN OF OPERATION. (a) Subject
to the requirements of this chapter, a pool's plan of operation must
include:
(1) the organizational structure of the pool,
including:
(A) the number of regular board members;
(B) the method of selecting the board members;
(C) the board's method of procedure and
operation; and
(D) a summary of the method for managing and
operating the pool;
(2) a description of the fees, contributions, or
financial arrangements necessary to cover the initial expenses of
the pool and estimates, supported by statistical data, of the
amounts of those fees, contributions, or other financial
arrangements;
(3) underwriting guidelines and procedures for
evaluating risks;
(4) procedures for purchasing reinsurance;
(5) methods, procedures, and guidelines for
establishing:
(A) premium rates for pool coverage; and
(B) pool coverage limits;
(6) procedures for processing and paying claims;
(7) methods and procedures for defraying losses and
expenses of the pool;
(8) methods, procedures, and guidelines for managing
and investing the money in the fund created for the pool;
(9) minimum capital and surplus to be maintained by
the pool; and
(10) minimum standards for reserve requirements for
the pool.
(b) The plan of operation may include any matter relating to
the organization and operation of the pool and the pool's finances.
(V.T.I.C. Art. 21.49-17, Sec. 5(b).)
[Sections 2206.153-2206.200 reserved for expansion]
SUBCHAPTER E. BOARD OF TRUSTEES
Sec. 2206.201. BOARD OF TRUSTEES. (a) A pool is governed
by a board of trustees as provided by the plan of operation.
(b) Not later than the 15th day after the date the temporary
board of a pool completes the plan of operation, the initial regular
board must be selected and take office as provided by the plan.
(c) An individual serving on the board who is an officer or
employee of a school district or junior college district covered by
the pool performs duties on the board as additional duties required
of the individual's original office or employment. (V.T.I.C. Art.
21.49-17, Secs. 6(a), (b), (c).)
Sec. 2206.202. GENERAL AUTHORITY OF BOARD; RULES. (a) A
board is responsible for the general administration and operation
of the pool and the pool's fund.
(b) The board may:
(1) exercise powers and enter into contracts necessary
to implement this chapter and the plan of operation; and
(2) adopt rules to implement this chapter and the plan
of operation. (V.T.I.C. Art. 21.49-17, Secs. 6(d), 10, 14.)
Sec. 2206.203. PERSONNEL; CONTRACTS FOR SERVICES. (a) A
board may employ a fund manager and other persons necessary to
implement this chapter and the plan of operation.
(b) The board may employ or contract with a person or
insurer for underwriting, accounting, claims, and other services.
(V.T.I.C. Art. 21.49-17, Sec. 11.)
Sec. 2206.204. PERFORMANCE BOND REQUIRED. (a) Each board
member and each board employee who has authority over money in the
fund or money collected or invested by the pool shall execute a bond
in an amount determined by the board. The bond must be payable to
the pool and conditioned on the faithful performance of the
person's duties.
(b) The pool shall pay the cost of a bond executed under
Subsection (a). (V.T.I.C. Art. 21.49-17, Sec. 6(f).)
Sec. 2206.205. IMMUNITY FROM CERTAIN LIABILITIES. A board
member or board employee is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment made against a school
district or junior college district covered by the pool. (V.T.I.C.
Art. 21.49-17, Sec. 6(e).)
[Sections 2206.206-2206.250 reserved for expansion]
SUBCHAPTER F. RISK MANAGEMENT FUND
Sec. 2206.251. FUND CREATION; MANAGEMENT. (a) Immediately
after taking office, an initial regular board shall create a risk
management fund. The fund must include:
(1) fees, contributions, and premiums collected by the
pool;
(2) investments of money in the fund;
(3) interest earned on investments made by the pool;
and
(4) all other income received by the pool.
(b) The board shall manage and invest the money in the fund
in the manner provided by the plan of operation. (V.T.I.C. Art.
21.49-17, Secs. 7(a), (b).)
Sec. 2206.252. USES OF FUND. (a) The money in a pool's
fund:
(1) shall be used to pay liability claims and
judgments against school districts or junior college districts that
participate in the pool, not to exceed the limits of the coverage
provided by the pool; and
(2) may be used to pay the administrative and
management costs of the pool and the fund, not to exceed the limits
provided in the plan of operation.
(b) On the board's approval, a pool may pay commissions from
the fund. (V.T.I.C. Art. 21.49-17, Secs. 7(c), 13.)
[Sections 2206.253-2206.300 reserved for expansion]
SUBCHAPTER G. PREMIUM RATES AND COVERAGE; REINSURANCE
Sec. 2206.301. PREMIUM RATES AND COVERAGE LIMITS. A pool's
board shall determine the premium rates charged by the pool and pool
coverage limits to ensure that the pool and the fund are actuarially
sound. (V.T.I.C. Art. 21.49-17, Sec. 8.)
Sec. 2206.302. GUARANTEED ISSUANCE OF INITIAL COVERAGE;
RISK MANAGEMENT. (a) Subject to Subsection (b), a school
district or junior college district that applies for initial
coverage through a pool is entitled to that coverage for a period of
not less than one year, regardless of loss history. The board may
approve a longer period for the initial coverage.
(b) For a school district or junior college district to
obtain initial coverage, the board may require that the district
participate in a risk management appraisal and comply with the
recommendations resulting from the appraisal.
(c) If complying with the recommended risk management
techniques resulting from the appraisal does not reduce the school
district's or junior college district's losses during the initial
coverage period sufficiently to meet the pool's underwriting
standards, the board may deny the district subsequent coverage
through the pool.
(d) The pool may assess a surcharge to a school district or
junior college district covered during the initial coverage period
if the district does not meet the basic underwriting guidelines for
the pool. (V.T.I.C. Art. 21.49-17, Sec. 12.)
Sec. 2206.303. REINSURANCE. A board may purchase
reinsurance for a risk covered through the pool. (V.T.I.C. Art. 21.49-17, Sec. 9.)
CHAPTER 2207. EXCESS LIABILITY POOLS FOR COUNTIES AND CERTAIN
EDUCATIONAL ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2207.001. DEFINITIONS
Sec. 2207.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE
[Sections 2207.003-2207.050 reserved for expansion]
SUBCHAPTER B. COUNTY EXCESS LIABILITY POOL
Sec. 2207.051. CREATION OF COUNTY EXCESS LIABILITY
POOL
Sec. 2207.052. PARTICIPATION IN OTHER POOLS NOT
PERMITTED
Sec. 2207.053. SELECTION OF TEMPORARY BOARD
[Sections 2207.054-2207.100 reserved for expansion]
SUBCHAPTER C. SCHOOL DISTRICT EXCESS LIABILITY POOL
Sec. 2207.101. CREATION OF SCHOOL DISTRICT EXCESS
LIABILITY POOL
Sec. 2207.102. PARTICIPATION IN OTHER POOLS NOT
PERMITTED
Sec. 2207.103. SELECTION OF TEMPORARY BOARD
[Sections 2207.104-2207.150 reserved for expansion]
SUBCHAPTER D. JUNIOR COLLEGE DISTRICT EXCESS LIABILITY POOL
Sec. 2207.151. CREATION OF JUNIOR COLLEGE DISTRICT
EXCESS LIABILITY POOL
Sec. 2207.152. PARTICIPATION IN OTHER POOLS NOT
PERMITTED
Sec. 2207.153. SELECTION OF TEMPORARY BOARD
[Sections 2207.154-2207.200 reserved for expansion]
SUBCHAPTER E. PLAN OF OPERATION
Sec. 2207.201. TIME FOR CREATION OF PLAN OF OPERATION
Sec. 2207.202. CONTENTS OF PLAN OF OPERATION
[Sections 2207.203-2207.250 reserved for expansion]
SUBCHAPTER F. BOARD OF TRUSTEES
Sec. 2207.251. BOARD OF TRUSTEES
Sec. 2207.252. TERMS; VACANCY
Sec. 2207.253. PERFORMANCE BOND REQUIRED
Sec. 2207.254. COMPENSATION
Sec. 2207.255. OFFICERS; MEETINGS
Sec. 2207.256. GENERAL POWERS AND DUTIES OF BOARD
Sec. 2207.257. ANNUAL AUDIT; REPORT
Sec. 2207.258. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES
[Sections 2207.259-2207.300 reserved for expansion]
SUBCHAPTER G. OPERATION OF POOL
Sec. 2207.301. GENERAL POWERS AND DUTIES OF POOL
Sec. 2207.302. POOL MANAGER; PERFORMANCE BOND REQUIRED
Sec. 2207.303. GENERAL POWERS AND DUTIES OF POOL
MANAGER
Sec. 2207.304. PERSONNEL
Sec. 2207.305. PERFORMANCE BOND AUTHORIZED
Sec. 2207.306. IMMUNITY OF EMPLOYEES AND CONTRACTORS
FROM CERTAIN LIABILITIES
Sec. 2207.307. OFFICE; RECORDS
[Sections 2207.308-2207.350 reserved for expansion]
SUBCHAPTER H. EXCESS LIABILITY FUND
Sec. 2207.351. FUND CREATION; MANAGEMENT
Sec. 2207.352. CONTRIBUTIONS
Sec. 2207.353. USES OF FUND
Sec. 2207.354. DEPOSITORY BANK
[Sections 2207.355-2207.400 reserved for expansion]
SUBCHAPTER I. POOL COVERAGE
Sec. 2207.401. ENTITLEMENT TO COVERAGE
Sec. 2207.402. SCOPE OF COVERAGE
Sec. 2207.403. BASIS OF COVERAGE
Sec. 2207.404. RATES AND LIMITS OF COVERAGE
Sec. 2207.405. USE OF ENTITY MONEY FOR POOL COVERAGE
AUTHORIZED
Sec. 2207.406. COVERAGE PERIOD
Sec. 2207.407. NONRENEWAL OF COVERAGE
Sec. 2207.408. SUBSEQUENT COVERAGE
Sec. 2207.409. PAYMENT OF CLAIMS AND JUDGMENTS
CHAPTER 2207. EXCESS LIABILITY POOLS FOR COUNTIES AND CERTAIN
EDUCATIONAL ENTITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2207.001. DEFINITIONS. In this chapter:
(1) "Board" means the board of trustees of a pool.
(2) "County" means a county in this state.
(3) "Fund" means an excess liability fund.
(4) "Junior college district" means a junior college
district created under the laws of this state.
(5) "Pool" means an excess liability pool created
under this chapter.
(6) "School district" means a public school district
created under the laws of this state. (V.T.I.C. Art. 21.49-13,
Secs. 1(1), (2), (3), (4), (5), (6).)
Sec. 2207.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE. (a) Except as provided by Subsection (b), a pool is not
engaged in the business of insurance under this code or other laws
of this state, and the department does not have jurisdiction over a
pool.
(b) A pool:
(1) shall collect the necessary information and file
with the department the reports required by Subchapter D, Chapter
38; and
(2) is subject to Chapter 541 and Section 543.001.
(V.T.I.C. Art. 21.49-13, Sec. 22.)
[Sections 2207.003-2207.050 reserved for expansion]
SUBCHAPTER B. COUNTY EXCESS LIABILITY POOL
Sec. 2207.051. CREATION OF COUNTY EXCESS LIABILITY
POOL. (a) The county judges of five or more counties may, on
written agreement, create a county excess liability pool.
(b) The county excess liability pool provides excess
liability insurance coverage as provided by this chapter and the
pool's plan of operation.
(c) Not more than one county excess liability pool may be
created under this subchapter. (V.T.I.C. Art. 21.49-13, Secs. 2(b)
(part), (c), (d) (part).)
Sec. 2207.052. PARTICIPATION IN OTHER POOLS NOT PERMITTED.
A county may participate only in a pool created for counties.
(V.T.I.C. Art. 21.49-13, Sec. 2(d) (part).)
Sec. 2207.053. SELECTION OF TEMPORARY BOARD. At the time a
written agreement is executed under Section 2207.051, the county
judges of each county executing the agreement to create the pool
shall select nine individuals to:
(1) serve as a temporary board; and
(2) draft the plan of operation for the pool.
(V.T.I.C. Art. 21.49-13, Sec. 6(a).)
[Sections 2207.054-2207.100 reserved for expansion]
SUBCHAPTER C. SCHOOL DISTRICT EXCESS LIABILITY POOL
Sec. 2207.101. CREATION OF SCHOOL DISTRICT EXCESS LIABILITY
POOL. (a) Acting on behalf of their boards, the presidents of the
boards of trustees of five or more school districts may, on written
agreement, create a school district excess liability pool.
(b) The school district excess liability pool provides
excess liability insurance coverage as provided by this chapter and
the pool's plan of operation.
(c) Not more than one school district excess liability pool
may be created under this subchapter. (V.T.I.C. Art. 21.49-13,
Secs. 2(b) (part), (c), (d) (part).)
Sec. 2207.102. PARTICIPATION IN OTHER POOLS NOT PERMITTED.
A school district may participate only in a pool created for school
districts. (V.T.I.C. Art. 21.49-13, Sec. 2(d) (part).)
Sec. 2207.103. SELECTION OF TEMPORARY BOARD. At the time a
written agreement is executed under Section 2207.101, the
presidents of the boards of trustees of each school district
executing the agreement to create the pool shall select nine
individuals to:
(1) serve as a temporary board; and
(2) draft the plan of operation for the pool.
(V.T.I.C. Art. 21.49-13, Sec. 6(a).)
[Sections 2207.104-2207.150 reserved for expansion]
SUBCHAPTER D. JUNIOR COLLEGE DISTRICT EXCESS LIABILITY POOL
Sec. 2207.151. CREATION OF JUNIOR COLLEGE DISTRICT EXCESS
LIABILITY POOL. (a) Acting on behalf of their boards, the
presiding officers of the boards of trustees of five or more junior
college districts may, on written agreement, create a junior
college district excess liability pool.
(b) The junior college district excess liability pool
provides excess liability insurance coverage as provided by this
chapter and the pool's plan of operation.
(c) Not more than one junior college district excess
liability pool may be created under this subchapter. (V.T.I.C.
Art. 21.49-13, Secs. 2(b) (part), (c), (d) (part).)
Sec. 2207.152. PARTICIPATION IN OTHER POOLS NOT PERMITTED.
A junior college district may participate only in a pool created for
junior college districts. (V.T.I.C. Art. 21.49-13, Sec. 2(d)
(part).)
Sec. 2207.153. SELECTION OF TEMPORARY BOARD. At the time a
written agreement is executed under Section 2207.151, the presiding
officers of the boards of trustees of each junior college district
executing the agreement to create the pool shall select nine
individuals to:
(1) serve as a temporary board; and
(2) draft the plan of operation for the pool.
(V.T.I.C. Art. 21.49-13, Sec. 6(a).)
[Sections 2207.154-2207.200 reserved for expansion]
SUBCHAPTER E. PLAN OF OPERATION
Sec. 2207.201. TIME FOR CREATION OF PLAN OF OPERATION. (a)
Not later than the 30th day after the date the temporary board of a
pool is selected, the temporary board shall meet to prepare a
detailed plan of operation for the pool.
(b) The temporary board shall complete and adopt the plan of
operation not later than the 90th day after the date the temporary
board is selected. (V.T.I.C. Art. 21.49-13, Secs. 6(b), (d).)
Sec. 2207.202. CONTENTS OF PLAN OF OPERATION. (a) Subject
to the requirements of this chapter, a pool's plan of operation must
include:
(1) the organizational structure of the pool,
including:
(A) the method of selecting the board;
(B) the board's method of procedure and
operation; and
(C) a summary of the method for managing and
operating the pool;
(2) a description of the contributions and other
financial arrangements necessary to cover the initial expenses of
the pool and estimates, supported by statistical data, of the
amounts of those contributions or other financial arrangements;
(3) underwriting standards and procedures for
evaluating risks;
(4) procedures for purchasing reinsurance;
(5) methods, procedures, and guidelines for:
(A) establishing the premium rates for and
maximum limits of excess liability insurance coverage available
from the pool; and
(B) managing and investing money in the fund
created for the pool;
(6) procedures for processing and paying claims;
(7) methods and procedures for defraying losses and
expenses of the pool;
(8) guidelines for nonrenewal of coverage;
(9) minimum capital and surplus to be maintained by
the pool; and
(10) minimum standards for reserve requirements for
the pool.
(b) The plan of operation may include any matter relating to
the organization and operation of the pool or to the pool's
finances. (V.T.I.C. Art. 21.49-13, Sec. 6(c).)
[Sections 2207.203-2207.250 reserved for expansion]
SUBCHAPTER F. BOARD OF TRUSTEES
Sec. 2207.251. BOARD OF TRUSTEES. (a) A pool is governed
by a board of trustees composed of nine members selected as provided
by the plan of operation.
(b) Not later than the 15th day after the date the temporary
board of a pool adopts the plan of operation, the initial regular
board must be selected as provided by the plan. The members of the
initial regular board shall take office not later than the 30th day
after the date the plan of operation is adopted.
(c) An individual serving on the board who is an officer or
employee of a county, school district, or junior college district
covered by the pool performs duties on the board as additional
duties required of the individual's original office or employment.
(V.T.I.C. Art. 21.49-13, Secs. 6(e), 7(a), (d).)
Sec. 2207.252. TERMS; VACANCY. (a) Board members serve
two-year terms that expire at the time provided by the plan of
operation.
(b) A vacancy on the board shall be filled as provided by the
plan of operation. (V.T.I.C. Art. 21.49-13, Secs. 7(b), (c).)
Sec. 2207.253. PERFORMANCE BOND REQUIRED. (a) Each board
member shall execute a bond in the amount required by the plan of
operation. The bond must be payable to the pool and conditioned on
the faithful performance of the member's duties.
(b) The pool shall pay the cost of the bond executed under
this section. (V.T.I.C. Art. 21.49-13, Sec. 7(e).)
Sec. 2207.254. COMPENSATION. A board member is not
entitled to compensation for the member's service on the board.
(V.T.I.C. Art. 21.49-13, Sec. 7(f).)
Sec. 2207.255. OFFICERS; MEETINGS. (a) The board shall
select from the board members a presiding officer, an assistant
presiding officer, and a secretary who serve one-year terms that
expire as provided by the plan of operation.
(b) The board shall hold meetings at the call of the
presiding officer and at times established by the board's rules.
(c) A majority of the board members constitutes a quorum.
(V.T.I.C. Art. 21.49-13, Secs. 7(g), (h), (i).)
Sec. 2207.256. GENERAL POWERS AND DUTIES OF BOARD. (a) In
addition to other duties provided by the plan of operation, the
board shall:
(1) approve contracts other than excess liability
insurance contracts issued by the pool to a county, school
district, or junior college district, as applicable;
(2) adopt premium rate schedules and policy forms for
the pool; and
(3) receive service of summons on behalf of the pool.
(b) The board may:
(1) adopt necessary rules, including rules to
implement this chapter;
(2) delegate specific responsibilities to the pool
manager; and
(3) amend the plan of operation to ensure the orderly
management and operation of the pool. (V.T.I.C. Art. 21.49-13,
Secs. 7(j) (part), (k), 11.)
Sec. 2207.257. ANNUAL AUDIT; REPORT. (a) Each year as
provided by the plan of operation, the board shall have an actuary
audit the capital, surplus, and reserves of the pool and prepare a
formal report for the pool and the members of the pool.
(b) The actuary must be a member of the American Academy of
Actuaries. (V.T.I.C. Art. 21.49-13, Sec. 13(h).)
Sec. 2207.258. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES. A board member is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment against a county, school
district, or junior college district covered by the applicable
pool. (V.T.I.C. Art. 21.49-13, Sec. 7(l).)
[Sections 2207.259-2207.300 reserved for expansion]
SUBCHAPTER G. OPERATION OF POOL
Sec. 2207.301. GENERAL POWERS AND DUTIES OF POOL. (a) A
pool shall:
(1) issue excess liability insurance coverage to each
county, school district, or junior college district entitled to
coverage under this chapter;
(2) collect premiums for coverage issued or renewed by
the pool;
(3) process and pay valid claims; and
(4) maintain detailed data regarding the pool.
(b) The pool may:
(1) enter into contracts;
(2) purchase reinsurance;
(3) cancel or refuse to renew coverage; and
(4) perform any other act necessary to implement this
chapter, the plan of operation, or a rule adopted by the board.
(V.T.I.C. Art. 21.49-13, Sec. 12.)
Sec. 2207.302. POOL MANAGER; PERFORMANCE BOND
REQUIRED. (a) The board shall appoint a pool manager who serves at
the pleasure of the board, and the board shall supervise the pool
manager's activities.
(b) The pool manager is entitled to receive the compensation
authorized by the board.
(c) The pool manager shall execute a bond in the amount
determined by the board. The bond must be payable to the pool and
conditioned on the faithful performance of the pool manager's
duties.
(d) The pool shall pay the cost of the bond executed under
this section. (V.T.I.C. Art. 21.49-13, Secs. 7(j) (part), 8(a),
(b), (c).)
Sec. 2207.303. GENERAL POWERS AND DUTIES OF POOL
MANAGER. (a) The pool manager shall manage and conduct the
affairs of the pool under the general supervision of the board and
shall perform any other duties as directed by the board.
(b) In addition to any other duties provided by the board,
the pool manager shall:
(1) receive and pass on applications for excess
liability insurance coverage from the pool;
(2) negotiate contracts for the pool; and
(3) prepare and submit to the board for approval
proposed policy forms for coverage from the pool.
(c) The pool manager may refuse to renew the coverage of a
county, school district, or junior college district insured by the
pool based on the guidelines included in the plan of operation.
(V.T.I.C. Art 21.49-13, Secs. 8(d), (e) (part), (f).)
Sec. 2207.304. PERSONNEL. (a) The pool manager shall
employ or contract with persons necessary to assist the board and
the pool manager in implementing the powers and duties of the pool.
(b) The board must approve:
(1) the compensation paid to a pool employee; and
(2) a contract made with a person under this section.
(V.T.I.C. Art. 21.49-13, Secs. 9(a), (b).)
Sec. 2207.305. PERFORMANCE BOND AUTHORIZED. The board may
require an employee or a person with whom the pool manager contracts
under Section 2207.304 to execute a bond in an amount determined by
the board. The bond must be payable to the board and conditioned on
the faithful performance of the employee's or other person's duties
to the pool. (V.T.I.C. Art. 21.49-13, Sec. 9(c).)
Sec. 2207.306. IMMUNITY OF EMPLOYEES AND CONTRACTORS FROM
CERTAIN LIABILITIES. An employee or a person with whom the pool
manager contracts under Section 2207.304 is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment against a county, school
district, or junior college district covered by the applicable
pool. (V.T.I.C. Art. 21.49-13, Sec. 9(d).)
Sec. 2207.307. OFFICE; RECORDS. (a) A pool shall maintain
the pool's principal office in Austin, Texas.
(b) Records, files, and other documents and information
relating to the pool must be maintained in the pool's principal
office. (V.T.I.C. Art. 21.49-13, Sec. 10.)
[Sections 2207.308-2207.350 reserved for expansion]
SUBCHAPTER H. EXCESS LIABILITY FUND
Sec. 2207.351. FUND CREATION; MANAGEMENT. (a) On creation
of a pool, the initial regular board shall create an excess
liability fund.
(b) The fund is composed of:
(1) premiums paid by counties, school districts, or
junior college districts, as applicable, for coverage provided by
the pool;
(2) contributions and other money received by the pool
to cover the initial expenses of the fund;
(3) investments of the fund and money earned from
those investments; and
(4) any other money received by the pool.
(c) The pool manager shall manage the fund under the general
supervision of the board. The fund manager, under the general
supervision of the board, shall manage and invest the money in the
fund in the manner provided by the plan of operation.
(d) Money earned by the investment of money in the fund must
be deposited in the fund or reinvested for the fund. (V.T.I.C. Art.
21.49-13, Secs. 13(a), (b), (c), 14.)
Sec. 2207.352. CONTRIBUTIONS. The board shall determine
the amount of any contributions necessary to meet the initial
expenses of the pool. The board shall make this determination based
on the data provided by the plan of operation. (V.T.I.C.
Art. 21.49-13, Sec. 15.)
Sec. 2207.353. USES OF FUND. (a) Administrative expenses
of the pool may be paid from the fund. Payments for administrative
expenses during a fiscal year of the pool may not exceed the amount
established by the board.
(b) The pool may pay commissions from the fund on approval
of the board.
(c) Money in the fund may not be used to pay:
(1) punitive damages; or
(2) a fine or penalty imposed for a violation of:
(A) a statute;
(B) an administrative rule or regulation; or
(C) an order, rule, or ordinance.
(d) Money for a claim may not be paid from the fund under
excess liability insurance coverage until all benefits payable
under any other underlying liability insurance policy covering the
claim or judgment are exhausted. (V.T.I.C. Art. 21.49-13, Secs.
13(d), (e), (f), 21.)
Sec. 2207.354. DEPOSITORY BANK. (a) The board may select
one or more banks to serve as a depository for money in the fund.
(b) A depository bank must execute a bond or provide other
security before the pool manager may deposit fund money in the bank
in an amount that exceeds the maximum amount secured by the Federal
Deposit Insurance Corporation. The bond or other security must be
in an amount sufficient to secure the excess amount of the deposit.
(V.T.I.C. Art. 21.49-13, Sec. 13(g).)
[Sections 2207.355-2207.400 reserved for expansion]
SUBCHAPTER I. POOL COVERAGE
Sec. 2207.401. ENTITLEMENT TO COVERAGE. A county, school
district, or junior college district is entitled to coverage from
the pool if the county, school district, or junior college
district:
(1) submits a complete application;
(2) provides other information required by the pool;
(3) meets the underwriting standards established by
the pool; and
(4) pays the premiums required for the coverage.
(V.T.I.C. Art. 21.49-13, Sec. 4.)
Sec. 2207.402. SCOPE OF COVERAGE. (a) A pool shall insure
a county, school district, or junior college district and the
entity's officers and employees against liability for acts and
omissions under the laws governing that county, school district, or
junior college district and the entity's officers and employees in
their official or employment capacities.
(b) Except as provided by Subsection (c), under the excess
liability insurance coverage, a pool shall pay any portion of a
claim against a county, school district, or junior college
district, as applicable, and the entity's officers and employees
that:
(1) exceeds $500,000; and
(2) is finally determined or settled or is included in
a final judgment of a court.
(c) The amount paid by a pool under this section may not
exceed the amount the board determines is actuarially sound for the
pool.
(d) A pool may participate in evaluating, settling, or
defending a claim made under the excess liability insurance
coverage. (V.T.I.C. Art. 21.49-13, Sec. 3.)
Sec. 2207.403. BASIS OF COVERAGE. The pool may provide
excess liability insurance coverage on a claims-made basis or an
occurrence basis. (V.T.I.C. Art. 21.49-13, Sec. 18.)
Sec. 2207.404. RATES AND LIMITS OF COVERAGE. (a) To
ensure that the pool is actuarially sound, the board shall:
(1) set the premium rates charged; and
(2) determine the maximum limits of coverage provided.
(b) The pool manager, for the board's consideration, shall:
(1) collect and compile statistical data relating to
the excess liability insurance coverage provided by the pool,
including relevant loss, expense, and premium data, and other
information;
(2) prepare the proposed premium rate schedules for
the approval of the board; and
(3) prepare the maximum limits of coverage.
(c) The board shall periodically reexamine the rate
schedules and the maximum limits of coverage as conditions change.
(d) The pool manager shall make available to the public the
information described by Subsection (b)(1). (V.T.I.C. Art.
21.49-13, Secs. 8(e) (part), 16.)
Sec. 2207.405. USE OF ENTITY MONEY FOR POOL COVERAGE
AUTHORIZED. A county, school district, or junior college district
may use its money to pay any contributions or premiums required by
the applicable pool to purchase excess liability insurance coverage
from the pool. (V.T.I.C. Art. 21.49-13, Sec. 5.)
Sec. 2207.406. COVERAGE PERIOD. A county, school
district, or junior college district that accepts coverage provided
by the applicable pool shall maintain that coverage for at least 36
calendar months following the month in which the pool issued the
coverage. (V.T.I.C. Art. 21.49-13, Sec. 17(a).)
Sec. 2207.407. NONRENEWAL OF COVERAGE. (a) Except as
provided by Subsection (b), the applicable pool may refuse to renew
the coverage of a county, school district, or junior college
district that fails to comply with the pool's underwriting
standards.
(b) The applicable pool may not refuse to renew the coverage
of a county, school district, or junior college district during the
first 36 calendar months following the month in which the entity is
first provided coverage by the pool. (V.T.I.C. Art. 21.49-13,
Secs. 19(a), (b).)
Sec. 2207.408. SUBSEQUENT COVERAGE. (a) A county, school
district, or junior college district that voluntarily discontinues
coverage provided by the applicable pool may not subsequently
obtain coverage from the pool for at least 36 calendar months
following the month in which the entity discontinues the coverage.
(b) A county, school district, or junior college district
whose coverage is not renewed under Section 2207.407 is not
eligible to subsequently apply for coverage during the 12 calendar
months following the month in which the applicable pool gives
written notice of nonrenewal. (V.T.I.C. Art. 21.49-13, Secs.
17(b), 19(c) (part).)
Sec. 2207.409. PAYMENT OF CLAIMS AND JUDGMENTS. (a) If
money in the fund would be exhausted by the payment of all final and
settled claims and final judgments during a fiscal year, the pool
shall prorate the amount paid to each person having the claim or
judgment.
(b) If the amount paid by the pool is prorated under this
section, each person described by Subsection (a) shall receive an
amount equal to the percentage that the amount owed to that person
by the pool bears to the total amount owed, outstanding, and payable
by the pool.
(c) The pool shall pay in the next fiscal year the remaining
amount that is due and unpaid to a person who receives a prorated payment under this section. (V.T.I.C. Art. 21.49-13, Sec. 20.)
CHAPTER 2208. TEXAS PUBLIC ENTITY EXCESS INSURANCE POOL
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2208.001. DEFINITIONS
Sec. 2208.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE
[Sections 2208.003-2208.050 reserved for expansion]
SUBCHAPTER B. CREATION OF POOL
Sec. 2208.051. CREATION OF POOL
Sec. 2208.052. PARTICIPATION IN POOL
[Sections 2208.053-2208.100 reserved for expansion]
SUBCHAPTER C. BOARD OF TRUSTEES
Sec. 2208.101. ADMINISTRATION OF POOL; BOARD
MEMBERSHIP
Sec. 2208.102. COMPENSATION
Sec. 2208.103. OFFICERS; MEETINGS
Sec. 2208.104. GENERAL POWERS AND DUTIES OF BOARD
Sec. 2208.105. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES
[Sections 2208.106-2208.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2208.151. TIME FOR CREATION OF PLAN OF OPERATION
Sec. 2208.152. CONTENTS OF PLAN OF OPERATION
[Sections 2208.153-2208.200 reserved for expansion]
SUBCHAPTER E. OPERATION OF POOL
Sec. 2208.201. GENERAL POWERS AND DUTIES OF POOL
Sec. 2208.202. POOL MANAGER
Sec. 2208.203. GENERAL POWERS AND DUTIES OF POOL
MANAGER
Sec. 2208.204. PERSONNEL
Sec. 2208.205. PERFORMANCE BOND AUTHORIZED
Sec. 2208.206. IMMUNITY OF EMPLOYEES AND CONTRACTORS
FROM CERTAIN LIABILITIES
Sec. 2208.207. OFFICE; RECORDS
[Sections 2208.208-2208.250 reserved for expansion]
SUBCHAPTER F. TEXAS PUBLIC ENTITY EXCESS INSURANCE FUND
Sec. 2208.251. FUND CREATION; MANAGEMENT
Sec. 2208.252. USES OF FUND
Sec. 2208.253. DEPOSITORY
[Sections 2208.254-2208.300 reserved for expansion]
SUBCHAPTER G. POOL COVERAGE
Sec. 2208.301. SCOPE OF COVERAGE
Sec. 2208.302. BASIS OF COVERAGE
Sec. 2208.303. PUNITIVE DAMAGES NOT COVERED
Sec. 2208.304. RATES AND LIMITS OF COVERAGE
Sec. 2208.305. USE OF PUBLIC MONEY FOR POOL COVERAGE
AUTHORIZED
Sec. 2208.306. COVERAGE PERIOD
Sec. 2208.307. NONRENEWAL OF COVERAGE
Sec. 2208.308. SUBSEQUENT COVERAGE
Sec. 2208.309. PAYMENT OF CLAIMS AND JUDGMENTS
CHAPTER 2208. TEXAS PUBLIC ENTITY EXCESS INSURANCE POOL
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2208.001. DEFINITIONS. In this chapter:
(1) "Board" means the board of trustees of the pool.
(2) "Fund" means the Texas public entity excess
insurance fund.
(3) "Insurance" means liability insurance or workers'
compensation insurance.
(4) "Pool" means the Texas public entity excess
insurance pool.
(5) "Public entity" means one or more municipalities
that have formed an insurance pool under Chapter 791, Government
Code. (V.T.I.C. Art. 21.49-11, Secs. 1(1), (2), (3), (4), (6).)
Sec. 2208.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE. (a) Except as provided by Subsection (b), the pool is
not engaged in the business of insurance under this code or other
laws of this state, and the department has no jurisdiction over the
pool.
(b) The pool is subject to Chapter 541 and Subchapter D,
Chapter 38. (V.T.I.C. Art. 21.49-11, Sec. 20.)
[Sections 2208.003-2208.050 reserved for expansion]
SUBCHAPTER B. CREATION OF POOL
Sec. 2208.051. CREATION OF POOL. (a) The Texas Public
Entity Excess Insurance Pool is created on the written agreement of
the presiding officers of 25 or more public entities in this state.
(b) The pool provides excess liability and workers'
compensation insurance coverage to a public entity and the entity's
officers and employees as provided by this chapter. (V.T.I.C. Art.
21.49-11, Sec. 2(a).)
Sec. 2208.052. PARTICIPATION IN POOL. A public entity is
entitled to coverage from the pool if the entity:
(1) submits a complete application;
(2) provides other relevant information required by
the pool;
(3) meets the underwriting guidelines established by
the pool; and
(4) pays the premiums required for the coverage.
(V.T.I.C. Art. 21.49-11, Sec. 3.)
[Sections 2208.053-2208.100 reserved for expansion]
SUBCHAPTER C. BOARD OF TRUSTEES
Sec. 2208.101. ADMINISTRATION OF POOL; BOARD
MEMBERSHIP. (a) A board of trustees shall administer the pool.
(b) The board is composed of the members of the governing
board of an association that:
(1) on September 2, 1987, had been providing pooled
self-insurance in this state for more than five years; and
(2) has as the association's members the public
entities that entered into the written agreement under Section
2208.051.
(c) Board members shall represent members of the pool.
(V.T.I.C. Art. 21.49-11, Secs. 5(a), (c).)
Sec. 2208.102. COMPENSATION. A board member is not
entitled to compensation for the member's service on the board.
(V.T.I.C. Art. 21.49-11, Sec. 5(b).)
Sec. 2208.103. OFFICERS; MEETINGS. (a) Each individual
who serves as an officer of the governing board of the association
described by Section 2208.101(b) serves as an officer of the board.
(b) The board shall hold meetings at the call of the
presiding officer and at times established by the board's rules.
(c) A majority of the board members constitutes a quorum.
(V.T.I.C. Art. 21.49-11, Secs. 5(d), (e), (f).)
Sec. 2208.104. GENERAL POWERS AND DUTIES OF BOARD. (a) In
addition to other duties provided by the plan of operation, the
board shall:
(1) approve contracts other than excess insurance
contracts issued to public entities by the pool;
(2) adopt premium rate schedules and policy forms for
the pool; and
(3) receive service of summons on behalf of the pool.
(b) The board may:
(1) adopt necessary rules, including rules to
implement this chapter;
(2) delegate specific responsibilities to the pool
manager; and
(3) amend the plan of operation to ensure the orderly
management and operation of the pool. (V.T.I.C. Art. 21.49-11,
Secs. 5(g) (part), (h), 10.)
Sec. 2208.105. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES. A board member is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment against a public entity
covered by the pool. (V.T.I.C. Art. 21.49-11, Sec. 5(i).)
[Sections 2208.106-2208.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2208.151. TIME FOR CREATION OF PLAN OF OPERATION. Not
later than the 30th day after the date the pool is created, the
board shall meet to prepare a detailed plan of operation for the
pool. (V.T.I.C. Art. 21.49-11, Sec. 6(a).)
Sec. 2208.152. CONTENTS OF PLAN OF OPERATION. (a) Subject
to the requirements of this chapter, the plan of operation must
include:
(1) the organizational structure of the pool, the
board's method of procedure and operation, and a summary of the
method for managing and operating the pool;
(2) a description of the financial arrangements
necessary to cover the initial expenses of the pool and estimates,
supported by statistical data, of the amounts of those
contributions or other financial arrangements;
(3) underwriting guidelines and procedures for
evaluating risks;
(4) procedures for purchasing reinsurance;
(5) methods, procedures, and guidelines for:
(A) establishing premium rates for and maximum
limits of excess coverage available from the pool; and
(B) managing and investing the fund;
(6) procedures for processing and paying claims;
(7) methods and procedures for defraying losses and
expenses of the pool; and
(8) guidelines for nonrenewal of coverage.
(b) The plan of operation may include any matter relating to
the organization and operation of the pool or to the pool's
finances. (V.T.I.C. Art. 21.49-11, Sec. 6(b).)
[Sections 2208.153-2208.200 reserved for expansion]
SUBCHAPTER E. OPERATION OF POOL
Sec. 2208.201. GENERAL POWERS AND DUTIES OF POOL. (a) The
pool shall:
(1) issue insurance coverage to each public entity
entitled to coverage under this chapter;
(2) collect premiums for coverage issued or renewed by
the pool;
(3) process and pay valid claims; and
(4) maintain detailed data regarding the pool.
(b) The pool may:
(1) enter into contracts;
(2) purchase reinsurance;
(3) cancel or refuse to renew coverage; and
(4) perform any other act necessary to implement this
chapter, the plan of operation, or a rule adopted by the board.
(V.T.I.C. Art. 21.49-11, Sec. 11.)
Sec. 2208.202. POOL MANAGER. (a) The board shall appoint
a pool manager who serves at the pleasure of the board, and the
board shall supervise the pool manager's activities.
(b) The pool manager is entitled to receive compensation as
authorized by the board. (V.T.I.C. Art. 21.49-11, Secs. 5(g)(5),
7(a), (b).)
Sec. 2208.203. GENERAL POWERS AND DUTIES OF POOL MANAGER.
(a) The pool manager shall manage and conduct the affairs of the
pool under the general supervision of the board and shall perform
any other duties as directed by the board.
(b) In addition to any other duties provided by the board,
the pool manager shall:
(1) receive and pass on applications for insurance
coverage from the pool;
(2) negotiate contracts for the pool; and
(3) prepare, and submit to the board for approval,
proposed policy forms for coverage from the pool.
(c) The pool manager may refuse to renew the coverage of a
public entity insured by the pool based on the guidelines included
in the plan of operation. (V.T.I.C. Art. 21.49-11, Secs. 7(c), (d)
(part), (e).)
Sec. 2208.204. PERSONNEL. (a) The pool manager shall
employ or contract with persons necessary to assist the board and
the pool manager in implementing the powers and duties of the pool.
(b) The board must approve:
(1) the compensation paid to a pool employee; and
(2) a contract made with a person under this section.
(V.T.I.C. Art. 21.49-11, Secs. 8(a), (b).)
Sec. 2208.205. PERFORMANCE BOND AUTHORIZED. The board may
require an employee or a person with whom the pool manager contracts
under Section 2208.204 to execute a bond in an amount determined by
the board. The bond must be payable to the board and conditioned on
the faithful performance of the employee's or other person's duties
to the pool. (V.T.I.C. Art. 21.49-11, Sec. 8(c).)
Sec. 2208.206. IMMUNITY OF EMPLOYEES AND CONTRACTORS FROM
CERTAIN LIABILITIES. An employee or a person with whom the pool
manager contracts under Section 2208.204 is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment against a public entity
covered by the pool. (V.T.I.C. Art. 21.49-11, Sec. 8(d).)
Sec. 2208.207. OFFICE; RECORDS. (a) The pool shall
maintain the pool's principal office in Austin, Texas.
(b) Records, files, and other documents and information
relating to the pool must be maintained in the pool's principal
office. (V.T.I.C. Art. 21.49-11, Sec. 9.)
[Sections 2208.208-2208.250 reserved for expansion]
SUBCHAPTER F. TEXAS PUBLIC ENTITY EXCESS INSURANCE FUND
Sec. 2208.251. FUND CREATION; MANAGEMENT. (a) On creation
of the pool, the board shall create the Texas public entity excess
insurance fund.
(b) The fund is composed of:
(1) premiums paid by public entities for coverage
provided by the pool;
(2) proceeds from bonds and other money received by
the pool to cover the expenses of the fund;
(3) investments of the fund and money earned from
those investments; and
(4) any other money received by the pool.
(c) The pool manager shall manage the fund under the general
supervision of the board. The fund manager, under the general
supervision of the board, shall manage and invest the money in the
fund in the manner provided by the plan of operation.
(d) Money earned by the investment of money in the fund must
be deposited in the fund or reinvested for the fund. (V.T.I.C. Art.
21.49-11, Secs. 12(a), (b), (c), 13.)
Sec. 2208.252. USES OF FUND. (a) Administrative expenses
of the pool may be paid from the fund.
(b) Money in the fund may not be used to pay:
(1) punitive damages;
(2) a fine or penalty imposed for a violation of:
(A) a statute;
(B) an administrative rule or regulation; or
(C) an order or ordinance of a public entity; or
(3) a claim under excess insurance coverage until all
benefits payable under any other underlying policy or
self-insurance covering the claim or judgment are exhausted.
(V.T.I.C. Art. 21.49-11, Secs. 12(d), (e), (f).)
Sec. 2208.253. DEPOSITORY. (a) The board may select one
or more banks to serve as depository for money in the fund.
(b) A depository bank must execute a bond or provide other
security before the pool manager may deposit fund money in the bank
in an amount that exceeds the maximum amount secured by the Federal
Deposit Insurance Corporation. The bond or other security must be
in an amount sufficient to secure the excess amount of the deposit.
(V.T.I.C. Art. 21.49-11, Sec. 12(g).)
[Sections 2208.254-2208.300 reserved for expansion]
SUBCHAPTER G. POOL COVERAGE
Sec. 2208.301. SCOPE OF COVERAGE. (a) Except as provided
by Subsection (b), under the excess insurance coverage, the pool
shall pay any portion of a claim against a public entity and the
entity's officers and employees that:
(1) exceeds $1 million; and
(2) is finally determined or settled or is included in
a final judgment of a court.
(b) The amount paid by the pool under this section may not
exceed the amount the board determines is actuarially sound for the
pool.
(c) The pool may participate in evaluating or defending a
claim made under the insurance coverage. (V.T.I.C. Art. 21.49-11,
Secs. 2(b), (c).)
Sec. 2208.302. BASIS OF COVERAGE. The pool may provide
excess insurance coverage on a claims-made basis or an occurrence
basis. (V.T.I.C. Art. 21.49-11, Sec. 16.)
Sec. 2208.303. PUNITIVE DAMAGES NOT COVERED. Excess
insurance coverage provided by the pool may not include coverage
for punitive damages. (V.T.I.C. Art. 21.49-11, Sec. 17.)
Sec. 2208.304. RATES AND LIMITS OF COVERAGE. (a) To
ensure that the pool is actuarially sound, the board shall:
(1) set the premium rates charged; and
(2) determine the maximum limits of insurance coverage
provided.
(b) The pool manager, for the board's consideration, shall:
(1) collect and compile statistical data relating to
the insurance coverage provided by the pool, including relevant
loss, expense, and premium data and other information;
(2) prepare the proposed premium rate schedules for
the approval of the board; and
(3) prepare the maximum limits of insurance coverage.
(c) The board shall periodically reexamine the rate
schedules and the maximum limits of insurance coverage as
conditions change. (V.T.I.C. Art. 21.49-11, Secs. 7(d) (part),
14.)
Sec. 2208.305. USE OF PUBLIC MONEY FOR POOL COVERAGE
AUTHORIZED. A public entity may use the entity's money to pay any
contributions or premiums required by the pool to purchase excess
insurance coverage from the pool. (V.T.I.C. Art. 21.49-11, Sec.
4.)
Sec. 2208.306. COVERAGE PERIOD. A public entity that
accepts coverage provided by the pool shall maintain that coverage
for at least 35 calendar months following the month in which the
pool issued the coverage. (V.T.I.C. Art. 21.49-11, Sec. 15(a).)
Sec. 2208.307. NONRENEWAL OF COVERAGE. The pool may refuse
to renew the insurance coverage of a public entity that fails to
comply with the pool's underwriting or risk management guidelines.
(V.T.I.C. Art. 21.49-11, Sec. 18(a).)
Sec. 2208.308. SUBSEQUENT COVERAGE. (a) A public entity
that voluntarily discontinues insurance coverage provided by the
pool may not subsequently obtain coverage from the pool for at least
36 calendar months following the month in which the entity
discontinues the coverage.
(b) A public entity whose insurance coverage is not renewed
by the pool is not eligible to subsequently apply for coverage
during the 11 calendar months following the month in which the pool
gives written notice of nonrenewal. (V.T.I.C. Art. 21.49-11, Secs.
15(b), 18(b).)
Sec. 2208.309. PAYMENT OF CLAIMS AND JUDGMENTS. (a) If
money in the fund would be exhausted by the payment of all final and
settled claims and final judgments during a fiscal year, the pool
shall prorate the amount paid to each person having the claim or
judgment.
(b) If the amount paid by the pool is prorated under this
section, each person described by Subsection (a) shall receive an
amount equal to the percentage that the amount owed to that person
by the pool bears to the total amount owed, outstanding, and payable
by the pool.
(c) The public entity incurring the original liability
shall pay the remaining amount that is due and unpaid to a person
who receives a prorated payment under this section. (V.T.I.C. Art. 21.49-11, Sec. 19.)
CHAPTER 2209. TEXAS NONPROFIT ORGANIZATIONS LIABILITY POOL
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2209.001. DEFINITIONS
Sec. 2209.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE
Sec. 2209.003. DEPARTMENT AND COMMISSIONER SUPERVISION
[Sections 2209.004-2209.050 reserved for expansion]
SUBCHAPTER B. CREATION OF POOL
Sec. 2209.051. CREATION OF POOL
Sec. 2209.052. PARTICIPATION IN POOL
Sec. 2209.053. SELECTION OF TEMPORARY BOARD
[Sections 2209.054-2209.100 reserved for expansion]
SUBCHAPTER C. PLAN OF OPERATION
Sec. 2209.101. TIME FOR CREATION OF PLAN OF OPERATION
Sec. 2209.102. CONTENTS OF PLAN OF OPERATION
Sec. 2209.103. APPROVAL OF PLAN
[Sections 2209.104-2209.150 reserved for expansion]
SUBCHAPTER D. BOARD OF TRUSTEES
Sec. 2209.151. GOVERNANCE OF POOL; BOARD MEMBERSHIP
Sec. 2209.152. TERMS; VACANCY
Sec. 2209.153. PERFORMANCE BOND REQUIRED
Sec. 2209.154. COMPENSATION
Sec. 2209.155. OFFICERS; MEETINGS
Sec. 2209.156. GENERAL POWERS AND DUTIES OF BOARD
Sec. 2209.157. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES
[Sections 2209.158-2209.200 reserved for expansion]
SUBCHAPTER E. OPERATION OF POOL
Sec. 2209.201. GENERAL POWERS AND DUTIES OF POOL
Sec. 2209.202. POOL MANAGER; PERFORMANCE BOND REQUIRED
Sec. 2209.203. GENERAL POWERS AND DUTIES OF POOL
MANAGER
Sec. 2209.204. PERSONNEL
Sec. 2209.205. PERFORMANCE BOND AUTHORIZED
Sec. 2209.206. IMMUNITY OF EMPLOYEES AND CONTRACTORS
FROM CERTAIN LIABILITIES
Sec. 2209.207. RECORDS
[Sections 2209.208-2209.250 reserved for expansion]
SUBCHAPTER F. TEXAS NONPROFIT ORGANIZATIONS LIABILITY FUND
Sec. 2209.251. FUND CREATION; MANAGEMENT
Sec. 2209.252. CONTRIBUTIONS
Sec. 2209.253. USES OF FUND
Sec. 2209.254. DEPOSITORY BANK
[Sections 2209.255-2209.300 reserved for expansion]
SUBCHAPTER G. POOL COVERAGE
Sec. 2209.301. SCOPE OF COVERAGE
Sec. 2209.302. COVERAGE ON CLAIMS-MADE BASIS
Sec. 2209.303. PUNITIVE DAMAGES NOT COVERED
Sec. 2209.304. RATES AND LIMITS OF COVERAGE
Sec. 2209.305. COVERAGE PERIOD
Sec. 2209.306. NONRENEWAL OF COVERAGE
Sec. 2209.307. SUBSEQUENT COVERAGE
Sec. 2209.308. PAYMENT OF CLAIMS AND JUDGMENTS
CHAPTER 2209. TEXAS NONPROFIT ORGANIZATIONS LIABILITY POOL
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2209.001. DEFINITIONS. In this chapter:
(1) "Board" means the board of trustees of the pool.
(2) "Fund" means the Texas nonprofit organizations
liability fund.
(3) "Nonprofit organization" means an organization
that is exempt from federal income taxation under Section 501(a),
Internal Revenue Code of 1986, by being described as an exempt
organization by Section 501(c)(3) or (4), Internal Revenue Code of
1986.
(4) "Pool" means the Texas Nonprofit Organizations
Liability Pool. (V.T.I.C. Art. 21.49-14, Sec. 1.)
Sec. 2209.002. POOL NOT ENGAGED IN BUSINESS OF
INSURANCE. (a) Except as provided by this section and Section
2209.003(b), the pool is not engaged in the business of insurance
under this code or other laws of this state, and this code,
including Chapter 462, and other insurance laws of this state do not
apply to the pool.
(b) The pool is subject to:
(1) this chapter;
(2) the requirements of this code or the commissioner
relating to reporting liability claims data; and
(3) the requirements of Chapter 2251 and Article
5.13-2 relating to making, filing, and approving rates. (V.T.I.C.
Art. 21.49-14, Secs. 21(a), (b) (part), (d).)
Sec. 2209.003. DEPARTMENT AND COMMISSIONER
SUPERVISION. (a) The pool is subject to the department's
continuing supervision relating to the pool's solvency.
(b) The commissioner may set certain minimum requirements
to ensure the capability of the pool to satisfy the pool's
obligations.
(c) The department shall charge the pool reasonable fees for
services performed by the department under this chapter. (V.T.I.C.
Art. 21.49-14, Secs. 21(b) (part), (c), (e).)
[Sections 2209.004-2209.050 reserved for expansion]
SUBCHAPTER B. CREATION OF POOL
Sec. 2209.051. CREATION OF POOL. (a) The Texas Nonprofit
Organizations Liability Pool is created on the written agreement of
the chief executive officers of 15 or more nonprofit organizations.
(b) The pool provides primary and excess liability
insurance coverage as provided by this chapter. (V.T.I.C. Art.
21.49-14, Sec. 2.)
Sec. 2209.052. PARTICIPATION IN POOL. A nonprofit
organization is entitled to coverage from the pool if the
organization:
(1) submits a complete application;
(2) provides other information required by the pool;
(3) meets the underwriting standards established by
the pool; and
(4) pays the premiums required for the coverage.
(V.T.I.C. Art. 21.49-14, Sec. 4.)
Sec. 2209.053. SELECTION OF TEMPORARY BOARD. At the time
the chief executive officers of the nonprofit organizations enter
into the written agreement under Section 2209.051, the officers
shall select nine individuals to:
(1) serve as the temporary board; and
(2) draft the plan of operation for the pool.
(V.T.I.C. Art. 21.49-14, Sec. 5(a).)
[Sections 2209.054-2209.100 reserved for expansion]
SUBCHAPTER C. PLAN OF OPERATION
Sec. 2209.101. TIME FOR CREATION OF PLAN OF
OPERATION. (a) Not later than the 30th day after the date the
temporary board is selected, the temporary board shall meet to
prepare a detailed plan of operation for the pool.
(b) The temporary board shall complete and adopt the plan of
operation not later than the 90th day after the date the temporary
board is selected. (V.T.I.C. Art. 21.49-14, Secs. 5(b), (d).)
Sec. 2209.102. CONTENTS OF PLAN OF OPERATION. (a) Subject
to the requirements of this chapter, the plan of operation must
include:
(1) the organizational structure of the pool,
including:
(A) the method of selecting the board;
(B) the board's method of procedure and
operation; and
(C) a summary of the method for managing and
operating the pool;
(2) a description of the contributions and other
financial arrangements necessary to cover the initial expenses of
the pool and estimates, supported by statistical data, of the
amounts of those contributions or other financial arrangements;
(3) underwriting standards and procedures for
evaluating risks, including a requirement that all participants in
the pool receive ongoing training in the methods of controlling
liability losses;
(4) procedures for purchasing reinsurance;
(5) methods, procedures, and guidelines for:
(A) establishing premium rates for and maximum
limits of excess coverage available from the pool;
(B) negotiating and paying settlements,
defending claims, and paying judgments; and
(C) managing and investing the fund;
(6) procedures for processing and paying claims;
(7) methods and procedures for defraying losses and
expenses of the pool; and
(8) guidelines for nonrenewal of coverage.
(b) The plan of operation may include any matter relating to
the organization and operation of the pool or to the pool's
finances. (V.T.I.C. Art. 21.49-14, Sec. 5(c).)
Sec. 2209.103. APPROVAL OF PLAN. (a) On completion of the
plan of operation, the temporary board shall submit the plan to the
department for examination, suggested changes, and final approval.
(b) The department shall approve the plan of operation only
if the department is satisfied that the pool is able and will
continue to be able to pay valid claims made against the pool.
(V.T.I.C. Art. 21.49-14, Sec. 5(e).)
[Sections 2209.104-2209.150 reserved for expansion]
SUBCHAPTER D. BOARD OF TRUSTEES
Sec. 2209.151. GOVERNANCE OF POOL; BOARD MEMBERSHIP. (a)
The pool is governed by a board of trustees composed of nine members
selected as provided by the plan of operation.
(b) Not later than the 15th day after the date the
department approves the plan of operation, the initial regular
board must be selected as provided by the plan of operation. The
members of the initial regular board shall take office not later
than the 30th day after the date the plan of operation is adopted.
(c) Four board members must be representatives of the
public. A public representative may not:
(1) be an officer, director, or employee of an
insurer, insurance agency, agent, broker, solicitor, adjuster, or
other business entity regulated by the department;
(2) be a person required to register under Chapter
305, Government Code; or
(3) be related to a person described by Subdivision
(1) or (2) within the second degree by consanguinity or affinity.
(V.T.I.C. Art. 21.49-14, Secs. 5(g), 6(a).)
Sec. 2209.152. TERMS; VACANCY. (a) Board members serve
staggered two-year terms. The terms of four members expire in
odd-numbered years as provided by the plan of operation.
(b) A vacancy on the board shall be filled as provided by the
plan of operation. (V.T.I.C. Art. 21.49-14, Secs. 6(b), (c).)
Sec. 2209.153. PERFORMANCE BOND REQUIRED. (a) Each board
member shall execute a bond in the amount required by the plan of
operation. The bond must be payable to the pool and conditioned on
the faithful performance of the member's duties.
(b) The pool shall pay the cost of the bond executed under
this section. (V.T.I.C. Art. 21.49-14, Sec. 6(d).)
Sec. 2209.154. COMPENSATION. A board member is not
entitled to compensation for the member's service on the board.
(V.T.I.C. Art. 21.49-14, Sec. 6(e).)
Sec. 2209.155. OFFICERS; MEETINGS. (a) The board shall
select from the board members a presiding officer, an assistant
presiding officer, and a secretary, who serve one-year terms that
expire as provided by the plan of operation.
(b) The board shall hold meetings at the call of the
presiding officer and at times established by the board's rules.
(c) A majority of the board members constitutes a quorum.
(V.T.I.C. Art. 21.49-14, Secs. 6(f), (g), (h).)
Sec. 2209.156. GENERAL POWERS AND DUTIES OF BOARD. (a) In
addition to other duties provided by the plan of operation, the
board shall:
(1) approve contracts other than insurance contracts
issued by the pool to nonprofit organizations;
(2) adopt premium rate schedules and policy forms for
the pool; and
(3) receive service of summons on behalf of the pool.
(b) The board may:
(1) adopt necessary rules, including rules to
implement this chapter;
(2) delegate specific responsibilities to the pool
manager; and
(3) with the department's approval, amend the plan of
operation to ensure the orderly management and operation of the
pool. (V.T.I.C. Art. 21.49-14, Secs. 5(f) (part), 6(i) (part),
(j), 10.)
Sec. 2209.157. IMMUNITY OF BOARD MEMBERS FROM CERTAIN
LIABILITIES. A board member is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment against a nonprofit
organization covered by the pool. (V.T.I.C. Art. 21.49-14, Sec.
6(k).)
[Sections 2209.158-2209.200 reserved for expansion]
SUBCHAPTER E. OPERATION OF POOL
Sec. 2209.201. GENERAL POWERS AND DUTIES OF POOL. (a) The
pool shall:
(1) issue primary and excess liability coverage to
each nonprofit organization entitled to coverage under this
chapter;
(2) collect premiums for coverage issued or renewed by
the pool;
(3) process and pay valid claims;
(4) maintain detailed data regarding the pool; and
(5) establish a plan to conduct loss control training
or contract with an outside organization or individual to establish
ongoing training and facilities inspection programs designed to
reduce the potential liability losses of pool participants.
(b) The pool may:
(1) enter into contracts;
(2) purchase reinsurance;
(3) cancel or refuse to renew coverage; and
(4) perform any other act necessary to carry out this
chapter, the plan of operation, or a rule adopted by the board.
(V.T.I.C. Art. 21.49-14, Sec. 11.)
Sec. 2209.202. POOL MANAGER; PERFORMANCE BOND REQUIRED.
(a) The board shall appoint a pool manager who serves at the
pleasure of the board, and the board shall supervise the pool
manager's activities.
(b) The pool manager is entitled to receive compensation as
authorized by the board.
(c) The pool manager shall execute a bond in the amount
determined by the board. The bond must be payable to the pool and
conditioned on the faithful performance of the pool manager's
duties.
(d) The pool shall pay the cost of the bond executed under
this section. (V.T.I.C. Art. 21.49-14, Secs. 6(i) (part), 7(a),
(b), (c).)
Sec. 2209.203. GENERAL POWERS AND DUTIES OF POOL
MANAGER. (a) The pool manager shall manage and conduct the
affairs of the pool under the general supervision of the board and
shall perform any other duties as directed by the board.
(b) In addition to any other duties provided by the board,
the pool manager shall:
(1) receive and pass on applications for liability
coverage from the pool;
(2) negotiate contracts for the pool; and
(3) prepare, and submit to the board for approval,
proposed policy forms for coverage from the pool.
(c) The pool manager may refuse to renew the coverage of a
nonprofit organization insured by the pool based on the guidelines
included in the plan of operation. (V.T.I.C. Art. 21.49-14, Secs.
7(d), (e) (part), (f).)
Sec. 2209.204. PERSONNEL. (a) The pool manager shall
employ or contract with persons necessary to assist the board and
the pool manager in carrying out the powers and duties of the pool.
(b) The board must approve:
(1) the compensation paid to a pool employee; and
(2) a contract made with a person under this section.
(V.T.I.C. Art. 21.49-14, Secs. 8(a), (b).)
Sec. 2209.205. PERFORMANCE BOND AUTHORIZED. The board may
require an employee or a person with whom the pool manager contracts
under Section 2209.204 to execute a bond in an amount determined by
the board. The bond must be payable to the board and conditioned on
the faithful performance of the employee's or other person's duties
to the pool. (V.T.I.C. Art. 21.49-14, Sec. 8(c).)
Sec. 2209.206. IMMUNITY OF EMPLOYEES AND CONTRACTORS FROM
CERTAIN LIABILITIES. An employee or a person with whom the pool
manager contracts under Section 2209.204 is not liable:
(1) with respect to a claim or judgment for which
coverage is provided by the pool; or
(2) for a claim or judgment against a nonprofit
organization covered by the pool. (V.T.I.C. Art. 21.49-14, Sec.
8(d).)
Sec. 2209.207. RECORDS. Records, files, and other
documents and information relating to the pool must be maintained
in the pool's principal office. (V.T.I.C. Art. 21.49-14, Sec. 9.)
[Sections 2209.208-2209.250 reserved for expansion]
SUBCHAPTER F. TEXAS NONPROFIT ORGANIZATIONS LIABILITY FUND
Sec. 2209.251. FUND CREATION; MANAGEMENT. (a) On creation
of the pool, the initial regular board shall create the Texas
nonprofit organizations liability fund.
(b) The fund is composed of:
(1) premiums paid by nonprofit organizations for
coverage provided by the pool;
(2) contributions and other money received by the pool
to cover the initial expenses of the fund;
(3) investments of the fund and money earned from
those investments; and
(4) any other money received by the pool.
(c) The pool manager shall manage the fund under the general
supervision of the board. The fund manager, under the general
supervision of the board, shall manage and invest the money in the
fund in the manner provided by the plan of operation.
(d) Money earned by the investment of money in the fund must
be deposited in the fund or reinvested for the fund. (V.T.I.C. Art.
21.49-14, Secs. 12(a), (b), (c), 13.)
Sec. 2209.252. CONTRIBUTIONS. The board shall determine
the amount of any contributions necessary to meet the initial
expenses of the pool. The board shall make this determination based
on the data provided by the plan of operation. (V.T.I.C. Art.
21.49-14, Sec. 14.)
Sec. 2209.253. USES OF FUND. (a) Administrative expenses
of the pool may be paid from the fund. Payments for administrative
expenses during a fiscal year of the pool may not exceed 10 percent
of the total amount of the money in the fund during that fiscal
year.
(b) Money in the fund may not be used to pay:
(1) punitive damages; or
(2) a fine or penalty imposed for a violation of:
(A) a statute;
(B) an administrative rule of a state agency; or
(C) an ordinance or order of a local government.
(V.T.I.C. Art. 21.49-14, Secs. 12(d), (e).)
Sec. 2209.254. DEPOSITORY BANK. (a) The board may select
one or more banks to serve as a depository for money in the fund.
(b) A depository bank must execute a bond or provide other
security before the pool manager may deposit fund money in the bank
in an amount that exceeds the maximum amount secured by the Federal
Deposit Insurance Corporation. The bond or other security must be
in an amount sufficient to secure the excess amount of the deposit.
(V.T.I.C. Art. 21.49-14, Sec. 12(f).)
[Sections 2209.255-2209.300 reserved for expansion]
SUBCHAPTER G. POOL COVERAGE
Sec. 2209.301. SCOPE OF COVERAGE. (a) The pool shall
insure a nonprofit organization and the organization's officers and
employees against liability for acts and omissions under the laws
of this state.
(b) The pool shall provide to a nonprofit organization that
qualifies under this chapter and the plan of operation:
(1) primary liability insurance coverage in an amount
not to exceed $250,000; and
(2) excess liability insurance coverage in an amount
that the board finds is actuarially sound.
(c) The pool may participate in evaluating, settling, and
defending a claim against a nonprofit organization insured by the
pool if the claim is covered by pool coverage.
(d) The pool is liable in an amount not to exceed the limit
of coverage provided to a nonprofit organization on a claim made
against the organization. (V.T.I.C. Art. 21.49-14, Sec. 3.)
Sec. 2209.302. COVERAGE ON CLAIMS-MADE BASIS. The pool may
provide liability insurance coverage on a claims-made basis on
forms approved by the department. (V.T.I.C. Art. 21.49-14, Sec.
17.)
Sec. 2209.303. PUNITIVE DAMAGES NOT COVERED. Liability
insurance coverage provided by the pool may not include coverage
for punitive damages. (V.T.I.C. Art. 21.49-14, Sec. 18.)
Sec. 2209.304. RATES AND LIMITS OF COVERAGE. (a) To
ensure that the pool is actuarially sound, the board shall:
(1) set the premium rates charged; and
(2) determine the maximum limits of coverage provided.
(b) The pool manager, for the board's consideration, shall:
(1) collect and compile statistical data relating to
the liability insurance coverage provided by the pool, including
relevant loss, expense, and premium data, and other information;
(2) prepare the proposed premium rate schedules for
the approval of the board; and
(3) prepare the maximum limits of coverage.
(c) The board shall periodically reexamine the rate
schedules and the maximum limits of coverage as conditions change.
(d) The pool manager shall make available to the public the
information described by Subsection (b)(1). (V.T.I.C. Art.
21.49-14, Secs. 7(e) (part), 15.)
Sec. 2209.305. COVERAGE PERIOD. A nonprofit organization
that accepts coverage provided by the pool shall maintain that
coverage for at least 24 calendar months following the month in
which the pool issued the coverage. (V.T.I.C. Art. 21.49-14, Sec.
16(a).)
Sec. 2209.306. NONRENEWAL OF COVERAGE. (a) Except as
provided by Subsection (b), the pool may refuse to renew the
coverage of a nonprofit organization that fails to comply with the
pool's underwriting standards.
(b) The pool may not refuse to renew the coverage of a
nonprofit organization during the first 24 calendar months
following the month in which the nonprofit organization is first
provided coverage by the pool if the organization maintains the
underwriting standards established by the plan of operation.
(V.T.I.C. Art. 21.49-14, Secs. 19(a), (b).)
Sec. 2209.307. SUBSEQUENT COVERAGE. (a) A nonprofit
organization that voluntarily discontinues coverage provided by
the pool may not subsequently obtain coverage from the pool for at
least 12 calendar months following the month in which the
organization discontinues the coverage.
(b) A nonprofit organization whose coverage is not renewed
under Section 2209.306 is not eligible to subsequently apply for
coverage during the 12 calendar months following the month in which
the pool gives written notice of nonrenewal. (V.T.I.C. Art.
21.49-14, Secs. 16(b), 19(c) (part).)
Sec. 2209.308. PAYMENT OF CLAIMS AND JUDGMENTS. (a) If
money in the fund would be exhausted by the payment of all final and
settled claims and final judgments during a fiscal year, the pool
shall prorate the amount paid to each person having the claim or
judgment.
(b) If the amount paid by the pool is prorated under this
section, each person described by Subsection (a) shall receive an
amount equal to the percentage that the amount owed to that person
by the pool bears to the total amount owed, outstanding, and payable
by the pool.
(c) The pool shall pay in the next fiscal year the remaining
amount that is due and unpaid to a person who receives a prorated payment under this section. (V.T.I.C. Art. 21.49-14, Sec. 20.)
CHAPTER 2210. TEXAS WINDSTORM INSURANCE ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2210.001. PURPOSE
Sec. 2210.002. SHORT TITLE
Sec. 2210.003. GENERAL DEFINITIONS
Sec. 2210.004. DEFINITION OF INSURABLE PROPERTY
Sec. 2210.005. DESIGNATION AS CATASTROPHE AREA OR
INADEQUATE FIRE INSURANCE AREA;
REVOCATION OF DESIGNATION
Sec. 2210.006. APPLICABILITY OF CHAPTER TO CERTAIN
INSURERS
Sec. 2210.007. IMMUNITY FROM LIABILITY IN GENERAL
Sec. 2210.008. DEPARTMENT ORDERS
[Sections 2210.009-2210.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION OF ASSOCIATION
Sec. 2210.051. COMPOSITION OF ASSOCIATION; REQUIRED
MEMBERSHIP
Sec. 2210.052. MEMBER PARTICIPATION IN ASSOCIATION
Sec. 2210.053. OPERATION OF ASSOCIATION
Sec. 2210.054. ANNUAL STATEMENT
Sec. 2210.055. LEGAL COUNSEL
Sec. 2210.056. USE OF ASSOCIATION ASSETS
Sec. 2210.057. EXAMINATION OF ASSOCIATION
Sec. 2210.058. PAYMENT OF EXCESS LOSSES; PREMIUM TAX
CREDIT
Sec. 2210.059. NOTIFICATION REGARDING TAX CREDITS
Sec. 2210.060. INDEMNIFICATION BY ASSOCIATION
[Sections 2210.061-2210.100 reserved for expansion]
SUBCHAPTER C. ASSOCIATION BOARD OF DIRECTORS
Sec. 2210.101. ACCOUNTABLE TO COMMISSIONER
Sec. 2210.102. COMPOSITION
Sec. 2210.103. TERMS
Sec. 2210.104. OFFICERS
Sec. 2210.105. MEETINGS
Sec. 2210.106. IMMUNITY OF DIRECTOR OR OFFICER FROM
LIABILITY
[Sections 2210.107-2210.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2210.151. ADOPTION OF PLAN OF OPERATION
Sec. 2210.152. CONTENTS OF PLAN OF OPERATION
Sec. 2210.153. AMENDMENTS TO PLAN OF OPERATION
[Sections 2210.154-2210.200 reserved for expansion]
SUBCHAPTER E. INSURANCE COVERAGE
Sec. 2210.201. DEFINITION OF INSURABLE INTEREST
Sec. 2210.202. APPLICATION FOR COVERAGE
Sec. 2210.203. ISSUANCE OF COVERAGE; TERM; RENEWAL
Sec. 2210.204. CANCELLATION OF CERTAIN COVERAGE
Sec. 2210.205. DELETION OF INSURANCE COVERAGE FROM
OTHER POLICIES
Sec. 2210.206. INSURANCE COVERAGE FOR CERTAIN
GOVERNMENTAL ENTITIES
Sec. 2210.207. WINDSTORM AND HAIL INSURANCE:
REPLACEMENT COST COVERAGE
Sec. 2210.208. WINDSTORM AND HAIL INSURANCE: COVERAGE
FOR CERTAIN INDIRECT LOSSES
[Sections 2210.209-2210.250 reserved for expansion]
SUBCHAPTER F. PROPERTY INSPECTIONS FOR WINDSTORM AND HAIL
INSURANCE
Sec. 2210.251. INSPECTION REQUIREMENTS
Sec. 2210.252. INTERNATIONAL RESIDENTIAL CODE BUILDING
SPECIFICATIONS
Sec. 2210.253. INSURER ASSESSMENT: FIRST TIER COASTAL
COUNTY
Sec. 2210.254. QUALIFIED INSPECTORS
Sec. 2210.255. APPOINTMENT OF LICENSED ENGINEER AS
INSPECTOR
Sec. 2210.256. DISCIPLINARY PROCEEDINGS REGARDING
APPOINTED INSPECTORS
Sec. 2210.257. DEPOSIT OF FEES
[Sections 2210.258-2210.300 reserved for expansion]
SUBCHAPTER G. WINDSTORM BUILDING CODE ADVISORY COMMITTEE
Sec. 2210.301. DEFINITION
Sec. 2210.302. ADVISORY COMMITTEE
Sec. 2210.303. TERMS
Sec. 2210.304. COMPENSATION
Sec. 2210.305. PRESIDING OFFICER
Sec. 2210.306. MEETINGS
Sec. 2210.307. RECOMMENDATIONS FOR CHANGES IN PLAN OF
OPERATION PROCEDURES
Sec. 2210.308. RULES
[Sections 2210.309-2210.350 reserved for expansion]
SUBCHAPTER H. RATES
Sec. 2210.351. ASSOCIATION FILINGS
Sec. 2210.352. MANUAL RATE FILINGS: ANNUAL FILING
Sec. 2210.353. MANUAL RATE FILINGS: AMENDED FILING
Sec. 2210.354. MANUAL RATE FILINGS: ADDITIONAL
SUPPORTING INFORMATION
Sec. 2210.355. GENERAL RATE REQUIREMENTS; RATE
STANDARDS
Sec. 2210.356. UNIFORM RATE REQUIREMENTS; INFORMATION
USED IN DEVELOPING RATES
Sec. 2210.357. RATE CLASSIFICATIONS
Sec. 2210.358. EXPERIENCE DATA
Sec. 2210.359. LIMITATION ON CERTAIN RATE CHANGES
Sec. 2210.360. USE OF CERTAIN SURCHARGES IN DEVELOPING
RATES
Sec. 2210.361. ASSOCIATION RECOMMENDATIONS REGARDING
REDUCTIONS IN COVERAGES OR INCREASES
IN DEDUCTIBLES
Sec. 2210.362. IMPLIED CONSENT BY APPLICANT FOR
INSURANCE COVERAGE
Sec. 2210.363. EFFECT ON RATES OF CERTAIN OTHER
INSURANCE COVERAGE
[Sections 2210.364-2210.400 reserved for expansion]
SUBCHAPTER I. RATE ROLLBACK
Sec. 2210.401. RATE ROLLBACK FOR CERTAIN RESIDENTIAL
CONSTRUCTION
[Sections 2210.402-2210.450 reserved for expansion]
SUBCHAPTER J. CATASTROPHE RESERVE TRUST FUND AND REINSURANCE
PROGRAM
Sec. 2210.451. DEFINITION
Sec. 2210.452. ESTABLISHMENT AND USE OF TRUST FUND
Sec. 2210.453. REINSURANCE PROGRAM
Sec. 2210.454. MITIGATION AND PREPAREDNESS PLAN
[Sections 2210.455-2210.500 reserved for expansion]
SUBCHAPTER K. LIABILITY LIMITS
Sec. 2210.501. MAXIMUM LIABILITY LIMITS
Sec. 2210.502. ADJUSTMENTS TO MAXIMUM LIABILITY LIMITS
Sec. 2210.503. FILING OF PROPOSED ADJUSTMENTS WITH
COMMISSIONER
Sec. 2210.504. COMMISSIONER ACTION ON PROPOSED
ADJUSTMENTS
Sec. 2210.505. REINSURED EXCESS LIMITS
Sec. 2210.506. EXCEPTION FROM CERTAIN ADMINISTRATIVE
PROCEDURES
[Sections 2210.507-2210.550 reserved for expansion]
SUBCHAPTER L. APPEALS AND OTHER ACTIONS
Sec. 2210.551. APPEALS
Sec. 2210.552. CLAIM DISPUTES; VENUE
CHAPTER 2210. TEXAS WINDSTORM INSURANCE ASSOCIATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2210.001. PURPOSE. An adequate market for windstorm,
hail, and fire insurance is necessary to the economic welfare of
this state, and without that insurance, the orderly growth and
development of this state would be severely impeded. This chapter
provides a method by which adequate windstorm, hail, and fire
insurance may be obtained in certain designated portions of this
state. (V.T.I.C. Art. 21.49, Sec. 1.)
Sec. 2210.002. SHORT TITLE. This chapter may be cited as
the Texas Windstorm Insurance Association Act. (V.T.I.C.
Art. 21.49, Sec. 2.)
Sec. 2210.003. GENERAL DEFINITIONS. In this chapter,
unless the context clearly indicates otherwise:
(1) "Association" means the Texas Windstorm Insurance
Association.
(2) "Board of directors" means the board of directors
of the association.
(3) "Catastrophe area" means a municipality, a part of
a municipality, a county, or a part of a county designated by the
commissioner under Section 2210.005.
(4) "First tier coastal county" means:
(A) Aransas County;
(B) Brazoria County;
(C) Calhoun County;
(D) Cameron County;
(E) Chambers County;
(F) Galveston County;
(G) Jefferson County;
(H) Kenedy County;
(I) Kleberg County;
(J) Matagorda County;
(K) Nueces County;
(L) Refugio County;
(M) San Patricio County; or
(N) Willacy County.
(5) "Inadequate fire insurance area" means a
municipality or county designated by the commissioner under Section
2210.005 that constitutes, or is located in, a catastrophe area.
(6) "Insurance" means Texas fire and explosion
insurance and Texas windstorm and hail insurance.
(7) "Net direct premium" means gross direct written
premium less return premium on each canceled contract, regardless
of assumed or ceded reinsurance, that is written on property in this
state, as defined by the board of directors.
(8) "New building code" means a building standard,
specification, or guideline adopted by the commissioner after May
1, 1997, that must be satisfied before new residential construction
qualifies for a certificate of compliance that constitutes evidence
of insurability of the structure by the association.
(9) "Plan of operation" means the plan adopted under
this chapter for the operation of the association.
(10) "Seacoast territory" means the territory of this
state composed of the first tier coastal counties and the second
tier coastal counties.
(11) "Second tier coastal county" means:
(A) Bee County;
(B) Brooks County;
(C) Fort Bend County;
(D) Goliad County;
(E) Hardin County;
(F) Harris County;
(G) Hidalgo County;
(H) Jackson County;
(I) Jim Wells County;
(J) Liberty County;
(K) Live Oak County;
(L) Orange County;
(M) Victoria County; or
(N) Wharton County.
(12) "Texas fire and explosion insurance" means
insurance against direct loss to insurable property incurred as a
result of fire or explosion, as those terms are defined and limited
in policies and forms approved by the department.
(13) "Texas windstorm and hail insurance" means
deductible insurance against:
(A) direct loss to insurable property incurred as
a result of windstorm or hail, as those terms are defined and
limited in policies and forms approved by the department; and
(B) indirect losses resulting from the direct
loss. (V.T.I.C. Art. 21.49, Secs. 3(b), (c) (part), (d), (e), (g),
(h) (part), (i) (part), (j), (l), (m), (n), (o); New.)
Sec. 2210.004. DEFINITION OF INSURABLE PROPERTY. (a) For
purposes of this chapter and subject to this section, "insurable
property" means immovable property at a fixed location in a
catastrophe area or corporeal movable property located in that
immovable property, as designated in the plan of operation, that is
determined by the association according to the criteria specified
in the plan of operation to be in an insurable condition against
windstorm and hail or fire and explosion, as appropriate, as
determined by normal underwriting standards.
(b) A structure located in a catastrophe area, construction
of which began on or after the 30th day after the date of
publication of the plan of operation, that is not built in
compliance with building specifications set forth in the plan of
operation or continued in compliance with those specifications,
does not constitute an insurable risk for purposes of windstorm and
hail insurance except as otherwise provided by this chapter.
(c) A structure, or an addition to a structure, that is
constructed in conformity with plans and specifications that comply
with the specifications set forth in the plan of operation at the
time construction begins may not be declared ineligible for
windstorm and hail insurance as a result of subsequent changes in
the building specifications set forth in the plan of operation.
(d) Except as otherwise provided by this section, if repair
of damage to a structure involves replacement of items covered in
the building specifications set forth in the plan of operation, the
repairs must be completed in a manner that complies with those
specifications for the structure to continue to be insurable
property for windstorm and hail insurance.
(e) If repair to a structure, other than a roof repair that
exceeds 100 square feet, is less than five percent of the total
amount of property coverage on the structure, the repairs may be
completed in a manner that returns the structure to the structure's
condition immediately before the loss without affecting the
eligibility of the structure to qualify as insurable property.
(f) This chapter does not preclude special rating of
individual risks as may be provided in the plan of operation.
(g) For purposes of this chapter, a residential structure is
insurable property if:
(1) the residential structure is not:
(A) a condominium, apartment, duplex, or other
multifamily residence; or
(B) a hotel or resort facility;
(2) the residential structure is located within an
area designated as a unit under the Coastal Barrier Resources Act
(Pub. L. No. 97-348); and
(3) a building permit or plat for the residential
structure was filed with the municipality, the county, or the
United States Army Corps of Engineers before January 1, 2004.
(V.T.I.C. Art. 21.49, Sec. 3(f).)
Sec. 2210.005. DESIGNATION AS CATASTROPHE AREA OR
INADEQUATE FIRE INSURANCE AREA; REVOCATION OF
DESIGNATION. (a) After at least 10 days' notice and a hearing,
the commissioner may designate an area of this state as a
catastrophe area if the commissioner determines that windstorm and
hail insurance is not reasonably available to a substantial number
of the owners of insurable property located in that territory
because the territory is subject to unusually frequent and severe
damage resulting from windstorms or hailstorms.
(b) After at least 10 days' notice and a hearing, the
commissioner may designate an area of this state as an inadequate
fire insurance area if the commissioner determines that fire and
explosion insurance is not reasonably available to a substantial
number of owners of insurable property located in that area.
(c) The commissioner shall revoke a designation made under
Subsection (a) or (b) if the commissioner determines, after at
least 10 days' notice and a hearing, that the applicable insurance
coverage is no longer reasonably unavailable to a substantial
number of owners of insurable property within the designated
territory.
(d) If the association determines that windstorm and hail
insurance or fire and explosion insurance is no longer reasonably
unavailable to a substantial number of owners of insurable property
in a territory designated as a catastrophe area or inadequate fire
insurance area, as applicable, the association may request in
writing that the commissioner revoke the designation. After at
least 10 days' notice and a hearing, but not later than the 30th day
after the date of the hearing, the commissioner shall:
(1) approve the request and revoke the designation; or
(2) reject the request. (V.T.I.C. Art. 21.49, Secs.
3(h) (part), (i) (part).)
Sec. 2210.006. APPLICABILITY OF CHAPTER TO CERTAIN
INSURERS. (a) Except as provided by Subsection (b), this chapter
applies to each insurer authorized to engage in the business of
property insurance in this state, including a county mutual
insurance company, a Lloyd's plan, and a reciprocal or
interinsurance exchange.
(b) This chapter does not apply to:
(1) a farm mutual insurance company operating under
Chapter 911;
(2) a county mutual fire insurance company described
by Section 912.310; or
(3) a mutual insurance company or a statewide mutual
assessment company engaged in business under Chapter 12 or 13,
Title 78, Revised Statutes, respectively, before those chapters'
repeal by Section 18, Chapter 40, Acts of the 41st Legislature, 1st
Called Session, 1929, as amended by Section 1, Chapter 60, General
Laws, Acts of the 41st Legislature, 2nd Called Session, 1929, that
retains the rights and privileges under the repealed law to the
extent provided by those sections. (V.T.I.C. Art. 21.49, Secs.
3(k), 18.)
Sec. 2210.007. IMMUNITY FROM LIABILITY IN
GENERAL. (a) This section applies to:
(1) the association and a director, agent, or
association staff;
(2) the commissioner, the department, and department
staff; and
(3) a participating insurer and the insurer's agents
and staff.
(b) A person described by Subsection (a) is not liable, and
a cause of action does not arise against the person, for:
(1) an inspection made under the plan of operation; or
(2) any statement made in good faith by the person:
(A) in a report or communication concerning risks
submitted to the association; or
(B) at any administrative hearing conducted
under this chapter in connection with the inspection or statement.
(V.T.I.C. Art. 21.49, Sec. 10(c).)
Sec. 2210.008. DEPARTMENT ORDERS. (a) After notice and
hearing as provided by Subsection (b), the commissioner may issue
any orders that the commissioner considers necessary to implement
this chapter, including orders regarding maximum rates,
competitive rates, and policy forms.
(b) Before the commissioner adopts an order, the department
shall post notice of the hearing on the order at the secretary of
state's office in Austin and shall hold a hearing to consider the
proposed order. Any person may appear at the hearing and testify
for or against the adoption of the order. (V.T.I.C. Art. 21.49,
Sec. 5A.)
[Sections 2210.009-2210.050 reserved for expansion]
SUBCHAPTER B. ADMINISTRATION OF ASSOCIATION
Sec. 2210.051. COMPOSITION OF ASSOCIATION; REQUIRED
MEMBERSHIP. (a) The association is composed of all property
insurers authorized to engage in the business of property insurance
in this state, other than insurers prevented by law from writing on
a statewide basis coverages available through the association.
(b) As a condition of the insurer's authority to engage in
the business of insurance in this state, each insurer subject to
Subsection (a) must be a member of the association and must remain a
member for the duration of the association's existence. An insurer
that ceases to be a member of the association remains liable on
insurance contracts entered into during the insurer's membership in
the association to the same extent and effect as if the insurer's
membership in the association had not been terminated.
(c) An insurer that becomes authorized to write and is
engaged in writing insurance that requires the insurer to be a
member of the association shall become a member of the association
on the January 1 following the effective date of that
authorization. The determination of the insurer's participation in
the association is made as of the date of the insurer's membership
in the manner used to determine participation for all other members
of the association. (V.T.I.C. Art. 21.49, Secs. 4(a), 5(b)
(part).)
Sec. 2210.052. MEMBER PARTICIPATION IN ASSOCIATION. (a)
Each member of the association shall participate in the writings,
expenses, profits, and losses of the association in the proportion
that the net direct premiums of that member during the preceding
calendar year bears to the aggregate net direct premiums by all
members of the association, as determined using the information
provided under Subsection (b).
(b) The department shall review annual statements, other
reports, and other statistics that the department considers
necessary to obtain the information required under Subsection (a)
and shall provide that information to the association. The
department is entitled to obtain the annual statements, other
reports, and other statistics from any member of the association.
(c) Each member's participation in the association shall be
determined annually in the manner provided by the plan of
operation. For purposes of determining participation in the
association, two or more members that are subject to common
ownership or that operate in this state under common management or
control shall be treated as a single member. The determination
shall also include the net direct premiums of an affiliate that is
under that common management or control, including an affiliate
that is not authorized to engage in the business of property
insurance in this state.
(d) Notwithstanding Subsection (a), a member, in accordance
with the plan of operation, is entitled to receive credit for
similar insurance voluntarily written in an area designated by the
commissioner. The member's participation in the writings of the
association shall be reduced in accordance with the plan of
operation. (V.T.I.C. Art. 21.49, Sec. 5(b) (part).)
Sec. 2210.053. OPERATION OF ASSOCIATION. (a) In
accordance with this chapter and the plan of operation, and with
respect to insurance on insurable property, the association, on
behalf of the association's members, may:
(1) cause issuance of insurance policies to applicants
for insurance coverage;
(2) assume reinsurance from the members;
(3) cede reinsurance to the members; and
(4) purchase reinsurance on behalf of the members.
(b) The department may develop programs to improve the
efficient operation of the association, including a program
designed to create incentives for insurers to write windstorm and
hail insurance voluntarily to cover property located in a
catastrophe area, especially property located on the barrier
islands of this state. (V.T.I.C. Art. 21.49, Secs. 5(a), (e).)
Sec. 2210.054. ANNUAL STATEMENT. (a) The association
shall file annually with the department a statement covering
periods designated by the department that summarizes the
transactions, conditions, operations, and affairs of the
association during the preceding year.
(b) The statement must:
(1) be filed at times designated by the department;
(2) contain the information prescribed by the
department; and
(3) be in the form prescribed by the department.
(V.T.I.C. Art. 21.49, Sec. 12.)
Sec. 2210.055. LEGAL COUNSEL. (a) The association shall
establish a plan in the plan of operation under which the
association's legal representation before the department and the
legislature is without conflict of interest or the appearance of a
conflict of interest as defined by the Texas Disciplinary Rules of
Professional Conduct.
(b) The association shall adopt separate and distinct
procedures for legal counsel in disputes involving policyholder
claims against the association. (V.T.I.C. Art. 21.49, Sec. 12A.)
Sec. 2210.056. USE OF ASSOCIATION ASSETS. (a) The
association's net earnings may not inure, in whole or in part, to
the benefit of a private shareholder or individual.
(b) The association's assets may not be used for or diverted
to any purpose other than to:
(1) satisfy, in whole or in part, the liability of the
association on claims made on policies written by the association;
(2) make investments authorized under applicable law;
(3) pay reasonable and necessary administrative
expenses incurred in connection with the operation of the
association and the processing of claims against the association;
or
(4) make remittance under the laws of this state to be
used by this state to:
(A) pay claims made on policies written by the
association;
(B) purchase reinsurance covering losses under
those policies; or
(C) prepare for or mitigate the effects of
catastrophic natural events.
(c) On dissolution of the association, all assets of the
association revert to this state. (V.T.I.C. Art. 21.49, Secs.
4(c), (d).)
Sec. 2210.057. EXAMINATION OF ASSOCIATION. (a) The
association is subject to Sections 401.051, 401.052,
401.054-401.062, 401.151, 401.152, 401.155, and 401.156 and
Subchapter A, Chapter 86.
(b) A final examination report of the association resulting
from an examination as provided by this section is a public record
and is available to the public at the offices of the department in
accordance with Chapter 552, Government Code. (V.T.I.C.
Art. 21.49, Sec. 5B.)
Sec. 2210.058. PAYMENT OF EXCESS LOSSES; PREMIUM TAX
CREDIT. (a) If, in any calendar year, an occurrence or series of
occurrences in a catastrophe area results in insured losses and
operating expenses of the association in excess of premium and
other revenue of the association, the excess losses shall be paid as
follows:
(1) $100 million shall be assessed against the members
of the association as provided by Subsection (b);
(2) losses in excess of $100 million shall be paid from
the catastrophe reserve trust fund established under Subchapter J
and any reinsurance program established by the association;
(3) for losses in excess of those paid under
Subdivisions (1) and (2), an additional $200 million shall be
assessed against the members of the association, as provided by
Subsection (b); and
(4) losses in excess of those paid under Subdivisions
(1), (2), and (3) shall be assessed against members of the
association, as provided by Subsection (b).
(b) The proportion of the losses allocable to each insurer
under Subsections (a)(1), (3), and (4) shall be determined in the
manner used to determine each insurer's participation in the
association for the year under Section 2210.052.
(c) An insurer may credit an amount paid in accordance with
Subsection (a)(4) in a calendar year against the insurer's premium
tax under Chapter 221. The tax credit authorized under this
subsection shall be allowed at a rate not to exceed 20 percent per
year for five or more successive years following the year of payment
of the claims. The balance of payments made by the insurer and not
claimed as a premium tax credit may be reflected in the books and
records of the insurer as an admitted asset of the insurer for all
purposes, including exhibition in an annual statement under Section
862.001. (V.T.I.C. Art. 21.49, Sec. 19.)
Sec. 2210.059. NOTIFICATION REGARDING TAX CREDITS. (a)
The association shall immediately notify the department if an
occurrence or series of occurrences in a catastrophe area results
in insured losses that result in a tax credit under Section
2210.058(c) in a calendar year.
(b) On receipt of notice under Subsection (a), the
department shall immediately notify the governor and the
appropriate committees of each house of the legislature of the
amount of insured losses eligible for tax credits under Section
2210.058(c). (V.T.I.C. Art. 21.49, Sec. 5(l).)
Sec. 2210.060. INDEMNIFICATION BY ASSOCIATION. (a) Except
as provided by Subsection (b), the association shall indemnify each
director, officer, and employee of the association and each member
of the association against all costs and expenses actually and
necessarily incurred by the person or entity in connection with the
defense of an action or proceeding in which the person or entity is
made a party because of the person's status as a director, officer,
or employee of the association or the member's status as a member of
the association.
(b) Subsection (a) does not apply to a matter in which the
person or entity is determined in the action or proceeding to be
liable because of misconduct in the performance of duties as a
director, officer, or employee of the association or a member of the
association.
(c) Subsection (a) does not authorize the association to
indemnify a member of the association for participating in the
writings, expenses, profits, and losses of the association in the
manner provided by this chapter.
(d) Indemnification under this section is not exclusive of
other rights to which the member or officer may be entitled as a
matter of law. (V.T.I.C. Art. 21.49, Sec. 11.)
[Sections 2210.061-2210.100 reserved for expansion]
SUBCHAPTER C. ASSOCIATION BOARD OF DIRECTORS
Sec. 2210.101. ACCOUNTABLE TO COMMISSIONER. The board of
directors is responsible and accountable to the commissioner.
(V.T.I.C. Art. 21.49, Sec. 5(g) (part).)
Sec. 2210.102. COMPOSITION. (a) The board of directors
is composed of the following nine members:
(1) five representatives of different insurers who are
members of the association, elected by the members as provided by
the plan of operation;
(2) two public representatives who are nominated by
the office of public insurance counsel and who, as of the date of
the appointment:
(A) reside in a catastrophe area; and
(B) are policyholders of the association; and
(3) two general property and casualty agents:
(A) who have demonstrated experience in the
association; and
(B) whose principal offices, as of the date of
the appointment, are located in a catastrophe area.
(b) The persons appointed under Subsections (a)(2) and (3)
must be from different counties. (V.T.I.C. Art. 21.49, Secs. 5(g)
(part), (i).)
Sec. 2210.103. TERMS. (a) Members of the board of
directors serve three-year staggered terms, with the terms of three
members expiring on the third Tuesday of March of each year.
(b) A person may serve on the board of directors for not more
than three consecutive full terms, not to exceed nine years.
(V.T.I.C. Art. 21.49, Sec. 5(h).)
Sec. 2210.104. OFFICERS. The board of directors shall
elect from the board's membership an executive committee consisting
of a presiding officer, assistant presiding officer, and
secretary-treasurer. At least one of the officers must be a member
appointed under Section 2210.102(a)(2) or (3). (V.T.I.C.
Art. 21.49, Sec. 5(j).)
Sec. 2210.105. MEETINGS. (a) Except for an emergency
meeting, the association shall notify the department not later than
the 11th day before the date of a meeting of the board of directors
or of the members of the association.
(b) Except for a closed meeting authorized by Subchapter D,
Chapter 551, Government Code, a meeting of the board of directors or
of the members of the association is open to:
(1) the commissioner or the commissioner's designated
representative; and
(2) the public.
(c) Notice of a meeting of the board of directors or the
association must be given as provided by Chapter 551, Government
Code. (V.T.I.C. Art. 21.49, Sec. 5(k).)
Sec. 2210.106. IMMUNITY OF DIRECTOR OR OFFICER FROM
LIABILITY. (a) A director or officer of the association is not
individually liable for an act or failure to act in the performance
of official duties in connection with the association.
(b) Subsection (a) does not apply to:
(1) an act or failure to act of the association or an
employee of the association;
(2) an act or omission involving a motor vehicle; or
(3) an act or failure to act that constitutes bad
faith, intentional misconduct, or gross negligence. (V.T.I.C.
Art. 21.49, Secs. 10(a), (b).)
[Sections 2210.107-2210.150 reserved for expansion]
SUBCHAPTER D. PLAN OF OPERATION
Sec. 2210.151. ADOPTION OF PLAN OF OPERATION. With the
advice of the board of directors, the commissioner by rule shall
adopt the plan of operation to provide:
(1) Texas windstorm and hail insurance in a
catastrophe area; and
(2) Texas fire and explosion insurance in an
inadequate fire insurance area. (V.T.I.C. Art. 21.49, Secs. 3(c)
(part), 5(c) (part).)
Sec. 2210.152. CONTENTS OF PLAN OF OPERATION. (a) The
plan of operation must:
(1) provide for the efficient, economical, fair, and
nondiscriminatory administration of the association; and
(2) include:
(A) a plan for the equitable assessment of the
members of the association to defray losses and expenses;
(B) underwriting standards;
(C) procedures for accepting and ceding
reinsurance;
(D) procedures for determining the amount of
insurance to be provided to specific risks;
(E) time limits and procedures for processing
applications for insurance; and
(F) other provisions as considered necessary by
the department to implement the purposes of this chapter.
(b) The plan of operation may provide for liability limits
for an insured structure and for the corporeal movable property
located in the structure. (V.T.I.C. Art. 21.49, Secs. 3(c) (part),
5(c) (part), (d).)
Sec. 2210.153. AMENDMENTS TO PLAN OF OPERATION. (a) The
association may present a recommendation for a change in the plan of
operation to the department at:
(1) periodic hearings conducted by the department for
that purpose; or
(2) hearings relating to property and casualty
insurance rates.
(b) The association must present a proposed change to the
department in writing in the manner prescribed by the commissioner.
A proposed change does not take effect unless adopted by the
commissioner by rule.
(c) An interested person may, in accordance with Chapter
2001, Government Code, petition the commissioner to modify the plan
of operation. (V.T.I.C. Art. 21.49, Secs. 5(c) (part), (f).)
[Sections 2210.154-2210.200 reserved for expansion]
SUBCHAPTER E. INSURANCE COVERAGE
Sec. 2210.201. DEFINITION OF INSURABLE INTEREST. In this
subchapter, "insurable interest" includes any lawful and
substantial economic interest in the safety or preservation of
property from loss, destruction, or pecuniary damage. (V.T.I.C.
Art. 21.49, Sec. 6(a) (part).)
Sec. 2210.202. APPLICATION FOR COVERAGE. (a) A person
who has an insurable interest in insurable property may apply to the
association for insurance coverage provided under the plan of
operation and an inspection of the property, subject to any rules,
including any inspection fee, established by the board of directors
and approved by the commissioner.
(b) A general property and casualty agent must submit an
application for the insurance coverage on behalf of the applicant
on forms prescribed by the association. The application must
contain a statement as to whether the applicant has submitted or
will submit the premium in full from personal funds or, if not, to
whom a balance is or will be due. (V.T.I.C. Art. 21.49, Sec. 6(a)
(part).)
Sec. 2210.203. ISSUANCE OF COVERAGE; TERM;
RENEWAL. (a) If the association determines that the property for
which an application for insurance coverage is made is insurable
property, the association, on payment of the premium, shall direct
the issuance of an insurance policy as provided by the plan of
operation.
(b) A policy issued under this section is for a one-year
term.
(c) A policy may be renewed annually on application for
renewal as long as the property continues to be insurable property.
(V.T.I.C. Art. 21.49, Secs. 6(b) (part), (c).)
Sec. 2210.204. CANCELLATION OF CERTAIN COVERAGE. (a)
Subsections (b) and (c) apply if:
(1) an agent or another person, firm, or corporation
finances the payment of all or a portion of the premium for
insurance coverage;
(2) there is an outstanding balance for the financing
of the premium; and
(3) that balance, or an installment of that balance,
is not paid before the expiration of the 10th day after the due
date.
(b) The agent or other person, firm, or corporation to whom
the balance described by Subsection (a) is due may request
cancellation of the insurance coverage by:
(1) returning the policy, with proof that the insured
was notified of the return; or
(2) requesting the association to cancel the insurance
coverage by a notice mailed to the insured and to any others shown
in the policy as having an insurable interest in the property.
(c) On completion of cancellation under Subsection (b), the
association shall refund the unearned premium, less any minimum
retained premium set forth in the plan of operation, to the person,
firm, or corporation to whom the unpaid balance is due.
(d) If an insured requests cancellation of the insurance
coverage, the association shall refund the unearned premium payable
to the insured and the holder of an unpaid balance. The general
property and casualty agent who submitted the application shall
refund the agent's commission on any unearned premium in the same
manner. (V.T.I.C. Art. 21.49, Sec. 6(b) (part).)
Sec. 2210.205. DELETION OF INSURANCE COVERAGE FROM OTHER
POLICIES. The department shall prepare endorsements and forms
applicable to the standard prescribed policies that delete
insurance coverages available through the association, and the
commissioner shall promulgate the applicable reduction of premiums
and rates for the use of the endorsement or form. (V.T.I.C.
Art. 21.49, Sec. 7.)
Sec. 2210.206. INSURANCE COVERAGE FOR CERTAIN GOVERNMENTAL
ENTITIES. (a) In insuring property of this state or property of a
political subdivision of this state, the association may not direct
an insurer to issue the policy if the insurer's organizational plan
precludes the insurer from writing insurance coverage for this
state or a political subdivision of this state.
(b) An insurer described by Subsection (a) may not act as a
reinsurer with respect to an insurance policy described by
Subsection (a). (V.T.I.C. Art. 21.49, Sec. 4(b).)
Sec. 2210.207. WINDSTORM AND HAIL INSURANCE: REPLACEMENT
COST COVERAGE. (a) In this section, "roof covering" means:
(1) the roofing material exposed to the weather;
(2) the underlayments applied for moisture
protection; and
(3) all flashings required in the replacement of a
roof covering.
(b) Subject to any applicable deductibles and the limits for
the coverage purchased by the insured, a windstorm and hail
insurance policy issued by the association may include replacement
cost coverage for one- and two-family dwellings, including
outbuildings, as provided under the dwelling extension coverage in
the policy.
(c) If, at the time of loss, the total amount of insurance
applicable to a dwelling is equal to 80 percent or more of the full
replacement cost of the dwelling or equal to the maximum amount of
insurance otherwise available through the association, coverage
applicable to the dwelling under the policy is extended to include
the full cost of repair or replacement, without a deduction for
depreciation.
(d) If, at the time of loss, the total amount of insurance
applicable to a dwelling is equal to less than 80 percent of the
full replacement cost of the dwelling and less than the maximum
amount of insurance available through the association, liability
for loss under the policy may not exceed the replacement cost of the
part of the dwelling that is damaged or destroyed, less
depreciation.
(e) Notwithstanding this chapter or any other law, the
commissioner, after notice and hearing, may adopt rules to:
(1) authorize the association to provide actual cash
value coverage instead of replacement cost coverage on the roof
covering of a building insured by the association; and
(2) establish:
(A) the conditions under which the association
may provide that actual cash value coverage;
(B) the appropriate premium reductions when
coverage for the roof covering is provided on an actual cash value
basis; and
(C) the disclosure that must be provided to the
policyholder, prominently displayed on the face of the windstorm
and hail insurance policy.
(f) Notwithstanding Chapter 40, a hearing under Subsection
(e) shall be held before the commissioner or the commissioner's
designee.
(g) The commissioner may adopt rules as necessary to
implement this section. (V.T.I.C. Art. 21.49, Sec. 8A.)
Sec. 2210.208. WINDSTORM AND HAIL INSURANCE: COVERAGE FOR
CERTAIN INDIRECT LOSSES. (a) Except as provided by Subsections
(e) and (f), a windstorm and hail insurance policy issued by the
association for a dwelling, as that term is defined by the
department or a successor to the department, must include coverage
for:
(1) wind-driven rain damage, regardless of whether an
opening is made by the wind;
(2) loss of use; and
(3) consequential losses.
(b) A windstorm and hail insurance policy issued by the
association for tenant contents of a dwelling or other residential
building must include coverage for loss of use and consequential
losses.
(c) The coverage required under Subsection (a) or (b) must
be made:
(1) according to forms approved by the commissioner;
and
(2) for a premium paid by the insured based on rates
established by commissioner rule.
(d) The association shall provide coverage under this
section as directed by commissioner rule.
(e) The association is not required to offer coverage for
indirect losses as provided by Subsection (a) or (b) unless that
coverage was excluded from a companion policy in the voluntary
market.
(f) The association is not required to provide coverage for:
(1) loss of use, if the loss is loss of rent or loss of
rental value; or
(2) additional living expenses, if the insured
property is a secondary or a nonprimary residence. (V.T.I.C.
Art. 21.49, Sec. 8B.)
[Sections 2210.209-2210.250 reserved for expansion]
SUBCHAPTER F. PROPERTY INSPECTIONS FOR WINDSTORM AND HAIL
INSURANCE
Sec. 2210.251. INSPECTION REQUIREMENTS. (a) Except as
provided by this section, to be considered insurable property
eligible for windstorm and hail insurance coverage from the
association, a structure that is constructed or repaired or to
which additions are made on or after January 1, 1988, must be
inspected or approved by the department for compliance with the
plan of operation.
(b) After January 1, 2004, for geographic areas specified by
the commissioner, the commissioner by rule shall adopt the 2003
International Residential Code for one- and two-family dwellings
published by the International Code Council. For those geographic
areas, the commissioner by rule may adopt a subsequent edition of
that code and may adopt any supplements published by the
International Code Council and amendments to that code.
(c) After January 1, 2004, a person must submit a notice of a
windstorm inspection to the unit responsible for certification of
windstorm inspections at the department before beginning to
construct, alter, remodel, enlarge, or repair a structure.
(d) A structure constructed or repaired or to which
additions were made before January 1, 1988, that is located in an
area that was governed at the time of the construction, repair, or
addition by a building code recognized by the association is
insurable property eligible for windstorm and hail insurance
coverage from the association without compliance with the
inspection or approval requirements of this section or the plan of
operation.
(e) A structure constructed or repaired or to which
additions were made before January 1, 1988, that is located in an
area not governed by a building code recognized by the association
is insurable property eligible for windstorm and hail insurance
coverage from the association without compliance with the
inspection or approval requirements of this section or the plan of
operation if the structure was previously insured by an insurer
authorized to engage in the business of insurance in this state and
the structure is in essentially the same condition as when
previously insured, except for normal wear and tear, and is without
any structural change other than a change made according to code.
For purposes of this subsection, evidence of previous insurance
coverage includes:
(1) a copy of a previous insurance policy;
(2) copies of canceled checks or agent's records that
show payments for previous policies; and
(3) a copy of the title to the structure or mortgage
company records that show previous policies.
(f) The department shall issue a certificate of compliance
for each structure that qualifies for coverage. The certificate is
evidence of insurability of the structure by the association.
(g) The department may enter into agreements and contracts
as necessary to implement this section.
(h) The department may charge a reasonable fee to cover the
cost of making building requirements and inspection standards
available to the public. (V.T.I.C. Art. 21.49, Secs. 6A(a), (b),
(g), (h).)
Sec. 2210.252. INTERNATIONAL RESIDENTIAL CODE BUILDING
SPECIFICATIONS. (a) After January 1, 2004, for geographic areas
specified by the commissioner, the commissioner by rule may
supplement the plan of operation building specifications with the
structural provisions of the International Residential Code for
one- and two-family dwellings, as published by the International
Code Council or an analogous entity recognized by the department.
(b) For a geographic area specified under Subsection (a),
the commissioner by rule may adopt a subsequent edition of the
International Residential Code for one- and two-family dwellings
and may adopt a supplement published by the International Code
Council or an amendment to that code. (V.T.I.C. Art. 21.49, Sec.
5(m).)
Sec. 2210.253. INSURER ASSESSMENT: FIRST TIER COASTAL
COUNTY. (a) In this section, "property insurance" means a
commercial or residential insurance policy prescribed or approved
by the department that provides coverage for windstorm and hail
damage, including a Texas windstorm and hail insurance policy.
(b) The department shall assess each insurer that provides
property insurance in a first tier coastal county in accordance
with this section.
(c) The total assessment under this section in a state
fiscal year must be in the amount estimated by the department as
necessary to cover the administrative costs of the windstorm
inspection program under Section 2210.251 to be incurred in the
first tier coastal counties in that fiscal year.
(d) The assessment must be based on each insurer's
proportionate share of the total extended coverage and other allied
lines premium received by all insurers for property insurance in
the first tier coastal counties in the calendar year preceding the
year in which the assessment is made.
(e) The commissioner shall adopt rules to implement the
assessment of insurers under this section. (V.T.I.C. Art. 21.49,
Secs. 6B(a), (b) (part), (c), (d).)
Sec. 2210.254. QUALIFIED INSPECTORS. (a) For purposes of
this chapter, a "qualified inspector" includes:
(1) a person determined by the department to be
qualified because of training or experience to perform building
inspections;
(2) a licensed professional engineer who meets the
requirements specified by commissioner rule for appointment to
conduct windstorm inspections; and
(3) an inspector who:
(A) is certified by the International Code
Council, the Building Officials and Code Administrators
International, Inc., the International Conference of Building
Officials, or the Southern Building Code Congress International,
Inc.;
(B) has certifications as a buildings inspector
and coastal construction inspector; and
(C) complies with other requirements specified
by commissioner rule.
(b) A windstorm inspection may be performed only by a
qualified inspector.
(c) Before performing building inspections, a qualified
inspector must be approved and appointed or employed by the
department.
(d) The department may charge a reasonable fee for the
filing of applications by and determining the qualifications of
persons for appointment as qualified inspectors. (V.T.I.C.
Art. 21.49, Sec. 6A(d).)
Sec. 2210.255. APPOINTMENT OF LICENSED ENGINEER AS
INSPECTOR. (a) On request of an engineer licensed by the Texas
Board of Professional Engineers, the commissioner shall appoint the
engineer as an inspector under this subchapter not later than the
10th day after the date the engineer delivers to the commissioner
information demonstrating that the engineer is qualified to perform
windstorm inspections under this subchapter.
(b) The commissioner shall adopt rules establishing the
information to be considered in appointing engineers under this
section. (V.T.I.C. Art. 21.49, Sec. 6D.)
Sec. 2210.256. DISCIPLINARY PROCEEDINGS REGARDING
APPOINTED INSPECTORS. (a) After notice and hearing, the
department may revoke an appointment made under Section 2210.254 if
the appointee is found to be in violation of this subchapter or a
rule of the commissioner adopted under this subchapter.
(b) The commissioner, instead of revocation, may impose one
or more of the following sanctions if the commissioner determines
from the facts that the sanction would be fair, reasonable, or
equitable:
(1) suspension of the appointment for a specific
period, not to exceed one year;
(2) issuance of an order directing the appointee to
cease and desist from the specified activity or failure to act
determined to be in violation of this subchapter or rules of the
commissioner adopted under this subchapter; or
(3) if the commissioner finds that the appointee
knowingly, wilfully, fraudulently, or with gross negligence signed
or caused to be prepared an inspection report that contains a false
or fraudulent statement, issuance of an order directing the
appointee to pay within a specified time, not to exceed 60 days, a
fine not to exceed $5,000 for the violation.
(c) A fine paid as a result of an order issued under
Subsection (b)(3) shall be deposited in the general revenue fund.
(d) If it is found after a hearing that an appointee has
failed to comply with an order issued under Subsection (b), the
department shall, unless the order is stayed, revoke the
appointment of the person.
(e) The department may informally dispose of any matter
under Subsection (a) or (b) by consent order or default.
(f) If an appointee is an engineer licensed by the Texas
Board of Professional Engineers who is found by the department to
have knowingly, wilfully, fraudulently, or with gross negligence
signed or caused to be prepared an inspection report that contains a
false or fraudulent statement, the commissioner may take action
against the appointee in the manner provided by Subsections (a) and
(b) but may not assess a fine against the appointee. The
commissioner shall notify the Texas Board of Professional Engineers
of an order issued by the commissioner against an appointee who is
an engineer licensed by that board, including an order suspending
or revoking the appointment of the person. (V.T.I.C. Art. 21.49,
Secs. 6A(j), (j-1), (k), (k-1).)
Sec. 2210.257. DEPOSIT OF FEES. All fees collected by the
department under this subchapter shall be deposited to the credit
of the Texas Department of Insurance operating account. (V.T.I.C.
Art. 21.49, Sec. 6A(i).)
[Sections 2210.258-2210.300 reserved for expansion]
SUBCHAPTER G. WINDSTORM BUILDING CODE ADVISORY COMMITTEE
Sec. 2210.301. DEFINITION. In this subchapter, "advisory
committee" means the Windstorm Building Code Advisory Committee on
Specifications and Maintenance. (V.T.I.C. Art. 21.49, Sec.
6C(a).)
Sec. 2210.302. ADVISORY COMMITTEE. (a) The advisory
committee shall advise and make recommendations to the commissioner
on building and maintenance requirements under the plan of
operation.
(b) The advisory committee is composed of nine voting
members appointed by the commissioner without regard to the race,
color, disability, sex, religion, age, or national origin of the
appointee.
(c) The commissioner or the commissioner's designee shall
serve as an ex officio, nonvoting member of the advisory committee.
(d) The commissioner shall appoint the voting members of the
advisory committee as follows:
(1) three members who are representatives of the
building industry who reside in catastrophe areas:
(A) two of whom are residential builders; and
(B) one of whom is a representative of the
building supply industry;
(2) three members who are representatives of the
insurance industry:
(A) one of whom is a member of the board of
directors; and
(B) two of whom are full-time employees of an
insurer authorized to engage in the business of property and
casualty insurance in this state that writes insurance in a
catastrophe area; and
(3) three members who are representatives of the
public who reside in a catastrophe area, one of whom is a
professional engineer licensed in this state. (V.T.I.C.
Art. 21.49, Secs. 6C(b), (c).)
Sec. 2210.303. TERMS. A member of the advisory committee
serves a three-year term. (V.T.I.C. Art. 21.49, Sec. 6C(d)
(part).)
Sec. 2210.304. COMPENSATION. A member of the advisory
committee is not entitled to compensation but is entitled to
reimbursement for actual and necessary expenses incurred in
performing duties as an advisory committee member, subject to any
applicable limitation on reimbursement provided by the General
Appropriations Act. (V.T.I.C. Art. 21.49, Sec. 6C(d) (part).)
Sec. 2210.305. PRESIDING OFFICER. The advisory committee
shall elect a presiding officer from the committee members.
(V.T.I.C. Art. 21.49, Sec. 6C(e) (part).)
Sec. 2210.306. MEETINGS. (a) The advisory committee
shall meet at least two times each year at the call of the presiding
officer with the approval of the commissioner. The advisory
committee shall publish the date and location of the meeting not
later than the 45th day before the date on which the meeting is
scheduled to occur.
(b) The commissioner or the commissioner's designee must be
present at each meeting of the advisory committee. (V.T.I.C.
Art. 21.49, Sec. 6C(e) (part).)
Sec. 2210.307. RECOMMENDATIONS FOR CHANGES IN PLAN OF
OPERATION PROCEDURES. (a) The advisory committee shall analyze
and make recommendations for changes regarding procedures
described under Section 2210.152(a)(2) that are adopted by the
commissioner in the plan of operation. In making recommendations,
the advisory committee shall seek to balance the concerns of all
affected parties, including consumers, builders, and the
association.
(b) Each proposal for a change in an applicable procedure
must be submitted to the commissioner. Each proposal must be
submitted separately in writing and must contain:
(1) the name, mailing address, and telephone number of
the proponent, or, if the proponent is a group or organization, the
name of the group or organization and the mailing address and
telephone number of the group or organization;
(2) a citation of any applicable statute or rule;
(3) the text of the proposed change, with deletions
from current language struck through with a single line and new
language underlined; and
(4) a statement of the purpose of the proposed change,
with supporting written or printed information.
(c) The commissioner by rule shall adopt a form to be used by
a person in presenting to the commissioner a proposal for a change
in an applicable procedure.
(d) To be considered at a scheduled advisory committee
meeting, a proposal must be submitted not later than the 30th day
before the date of that meeting and must meet the requirements of
Subsection (b).
(e) The department shall review and organize each proposal
submitted and shall allow the advisory committee and interested
parties to view the proposals to be considered within a reasonable
time before the meeting of the advisory committee. If requested by
a majority of the advisory committee, the department shall make
recommendations regarding each proposal submitted and provide to
the advisory committee any necessary technical information.
(f) At an advisory committee meeting, any interested person
may present the person's views on a proposal for a change in an
applicable procedure that is included on the advisory committee's
published agenda. The advisory committee shall consider each
comment presented in acting on the disposition of each proposal.
(g) After consideration of a proposal for a change in an
applicable procedure, the advisory committee by vote shall:
(1) recommend adoption of the proposal as initially
submitted;
(2) recommend adoption of the proposal with
modifications;
(3) recommend rejection of the proposal; or
(4) suspend consideration of the proposal and request
additional evaluation and study of the proposal.
(h) The advisory committee shall submit to the commissioner
the committee's recommendation on each proposal. The commissioner
shall notify the advisory committee of the acceptance or rejection
of each recommendation not later than the 30th day after the date of
receipt by the commissioner. Acceptance of a recommendation by the
commissioner means that the commissioner will consider adoption of
that recommendation at a rulemaking hearing. Before adopting a
recommendation, the commissioner must determine that the proposal,
if adopted, will not weaken the integrity or diminish the
effectiveness of a procedure. (V.T.I.C. Art. 21.49, Secs. 6C(f),
(g), (h), (i), (j), (k), (l), (m).)
Sec. 2210.308. RULES. In addition to any other rulemaking
authority granted under this chapter, the commissioner may adopt
rules as necessary to implement this subchapter. (V.T.I.C. Art.
21.49, Sec. 6C(n).)
[Sections 2210.309-2210.350 reserved for expansion]
SUBCHAPTER H. RATES
Sec. 2210.351. ASSOCIATION FILINGS. (a) The association
must file with the department each manual of classifications,
rules, rates, including condition charges, and each rating plan,
and each modification of those items that the association proposes
to use.
(b) A filing under this section must indicate the character
and the extent of the coverage contemplated and must be accompanied
by the policy and endorsement forms proposed to be used. The forms
may be designed specifically for use by the association without
regard to other forms filed with, approved by, or prescribed by the
department for use in this state.
(c) As soon as reasonably possible after the filing has been
made, the commissioner in writing shall approve, modify, or
disapprove the filing. A filing is considered approved unless
modified or disapproved on or before the 30th day after the date of
the filing.
(d) If at any time the commissioner determines that a filing
approved under Subsection (c) no longer meets the requirements of
this chapter, the commissioner may, after a hearing held on at least
20 days' notice to the association that specifies the matters to be
considered at the hearing, issue an order withdrawing approval of
the filing. The order must specify in what respects the
commissioner determines that the filing no longer meets the
requirements of this chapter. An order issued under this subsection
may not take effect before the 30th day after the date of issuance
of the order.
(e) The department shall value the loss and loss adjustment
expense data to be used for a filing not earlier than March 31 of the
year before the year in which the filing is to be made. (V.T.I.C.
Art. 21.49, Secs. 8(a) (part), (c), (d), (h)(15).)
Sec. 2210.352. MANUAL RATE FILINGS: ANNUAL FILING. (a)
Not later than August 15 of each year, the association shall file
with the department for approval by the commissioner a proposed
manual rate for all types and classes of risks written by the
association. Chapter 40 does not apply to:
(1) a filing made under this subsection; or
(2) a department action with respect to the filing.
(b) Before approving, disapproving, or modifying a filing,
the commissioner shall provide all interested persons a reasonable
opportunity to:
(1) review the filing;
(2) obtain copies of the filing on payment of any
legally required copying cost; and
(3) submit to the commissioner written comments or
information related to the filing.
(c) The commissioner shall schedule an open meeting not
later than the 45th day after the date the department receives a
filing at which interested persons may present written or oral
comments relating to the filing.
(d) An open meeting under Subsection (c) is subject to
Chapter 551, Government Code, but is not a contested case hearing
under Chapter 2001, Government Code.
(e) The department shall file with the secretary of state
for publication in the Texas Register notice that a filing has been
made under Subsection (a) not later than the seventh day after the
date the department receives the filing. The notice must include
information relating to:
(1) the availability of the filing for public
inspection at the department during regular business hours and the
procedures for obtaining copies of the filing;
(2) procedures for making written comments related to
the filing; and
(3) the time, place, and date of the open meeting
scheduled under Subsection (c) at which interested persons may
present written or oral comments relating to the filing.
(f) After the conclusion of the open meeting, the
commissioner shall approve, disapprove, or modify the filing in
writing not later than November 15 of the year in which the filing
was made. If the filing is not approved, disapproved, or modified
on or before that date, the filing is considered approved.
(g) If the commissioner disapproves a filing, the
commissioner shall state in writing the reasons for the disapproval
and the criteria the association is required to meet to obtain
approval. (V.T.I.C. Art. 21.49, Secs. 8(h)(2), (3), (4), (5), (6)
(part).)
Sec. 2210.353. MANUAL RATE FILINGS: AMENDED FILING. (a)
Not later than the 30th day after the date the association receives
the commissioner's written disapproval under Section 2210.352(f),
the association may file with the commissioner an amended filing
that conforms to all criteria stated in that written disapproval.
(b) Not later than the 30th day after the date an amended
filing made under Subsection (a) is received, the commissioner
shall approve the amended filing with or without modifications or
disapprove the amended filing. If the filing is not modified or
disapproved on or before the 30th day after the date of receipt, the
filing is considered approved without modification.
(c) Before approving or disapproving an amended filing, the
commissioner shall, in the manner provided by Section 2210.352(b),
provide all interested persons a reasonable opportunity to:
(1) review the amended filing;
(2) obtain copies of the amended filing on payment of
any legally required copying cost; and
(3) submit to the commissioner written comments or
information related to the amended filing.
(d) The commissioner may, in the manner provided by Sections
2210.352(c) and (d), hold a hearing regarding an amended filing not
later than the 20th day after the date the department receives the
amended filing.
(e) Not later than the 10th day after the date the hearing is
concluded, the commissioner shall approve or disapprove the amended
filing.
(f) The requirements imposed under Subsection (a) and under
Sections 2210.352(e), (f), and (g) apply to a hearing conducted
under this section and the commissioner's decision resulting from
that hearing. (V.T.I.C. Art. 21.49, Secs. 8(h)(6) (part), (7).)
Sec. 2210.354. MANUAL RATE FILINGS: ADDITIONAL SUPPORTING
INFORMATION. (a) In conjunction with the review of a filing under
Section 2210.352 or 2210.353:
(1) the commissioner may request the association to
provide additional supporting information relating to the filing;
and
(2) any interested person may file a written request
with the commissioner for additional supporting information
relating to the filing.
(b) A request under this section must be reasonable and must
be directly related to the filing.
(c) The commissioner shall submit to the association all
requests for additional supporting information made under this
section for the commissioner's use and the use of any interested
person.
(d) Unless a different period is requested by the
association and approved by the commissioner, the association shall
provide the information to the commissioner not later than the
fifth day after the date the written request for additional
supporting information is delivered to the association. The
department shall notify an interested person who has requested
additional information of the availability of the information not
later than one business day after the date the commissioner
receives the information from the association. (V.T.I.C.
Art. 21.49, Sec. 8(h)(8).)
Sec. 2210.355. GENERAL RATE REQUIREMENTS; RATE
STANDARDS. (a) Rates for coverage under this chapter must be made
in accordance with this section.
(b) In adopting rates under this chapter, the following must
be considered:
(1) the past and prospective loss experience within
and outside this state of hazards for which insurance is made
available through the plan of operation, if any;
(2) expenses of operation, including acquisition
costs;
(3) a reasonable margin for profit and contingencies;
and
(4) all other relevant factors, within and outside
this state.
(c) Rates must be reasonable, adequate, not unfairly
discriminatory, and nonconfiscatory as to any class of insurer.
(d) For the establishment of rates and minimum premiums, the
risks may be grouped by classification.
(e) Classification rates may be modified to produce rates
for individual risks in accordance with rating plans that establish
standards for measuring variations in those risks on the basis of
any or all of the factors described by Subsection (b). The
classification rates may include rules for classification of risks
insured under this chapter and rate modifications to those
classifications.
(f) Each provision regarding a rate, classification,
standard, or premium must be made without prejudice to, or
prohibition of, provision by the association for consent rates on
individual risks if the rate and risk are acceptable to the
association, and are analogous to the rate provided for under
Article 5.26(a). This subsection applies regardless of whether
such a risk would otherwise be subject to or the subject of a rate
classification provision or eligibility provision.
(g) A commission paid to an agent must be reasonable,
adequate, not unfairly discriminatory, and nonconfiscatory.
(V.T.I.C. Art. 21.49, Sec. 8(e).)
Sec. 2210.356. UNIFORM RATE REQUIREMENTS; INFORMATION USED
IN DEVELOPING RATES. (a) Each rate approved by the commissioner in
accordance with this subchapter must be uniform throughout the
first tier coastal counties.
(b) The catastrophe element used to develop rates under this
subchapter applicable to risks written by the association must be
uniform throughout the seacoast territory. The catastrophe element
of the rates must be developed using:
(1) 90 percent of both the monoline extended coverage
loss experience and related premium income for all insurers, other
than the association, for covered property located in the seacoast
territory, using not less than the most recent 30 years of
experience available; and
(2) 100 percent of both the loss experience and
related premium income for the association for covered property,
using not less than the most recent 30 years of experience
available.
(c) The noncatastrophe element of the noncommercial rates
must be developed using:
(1) 90 percent of both the monoline extended coverage
loss experience and related premium income for all insurers, other
than the association, for covered property located in the
catastrophe area of the seacoast territory, using the most recent
10 years of experience available; and
(2) 100 percent of both the loss experience and
related premium income for the association for covered property,
using the most recent 10 years of experience available.
(d) The noncatastrophe element of the commercial rates must
be developed using 100 percent of both the loss experience and
related premium income for the association for covered property,
using the most recent 10 years of experience available. (V.T.I.C.
Art. 21.49, Secs. 8(h)(1), (11), (12), (13).)
Sec. 2210.357. RATE CLASSIFICATIONS. All premiums written
and losses paid under this chapter, as appropriate, must be
included in applicable classifications for general ratemaking
purposes. (V.T.I.C. Art. 21.49, Sec. 8(g).)
Sec. 2210.358. EXPERIENCE DATA. (a) Not later than June 1
of each year, the department shall provide to the association and
other interested persons the experience data to be used in
establishing the rates under this subchapter in that year.
(b) On request from the department, an insurer shall provide
the data to the department or the department may obtain the data
from a designated statistical agent, as defined by Section 38.201.
(V.T.I.C. Art. 21.49, Sec. 8(h)(16).)
Sec. 2210.359. LIMITATION ON CERTAIN RATE CHANGES. (a) A
rate approved by the commissioner under this subchapter may not
reflect an average rate change that is more than 10 percent higher
or lower than the rate for commercial windstorm and hail insurance
or 10 percent higher or lower than the rate for noncommercial
windstorm and hail insurance in effect on the date the filing is
made. The rate may not reflect a rate change for an individual
rating class that is 15 percent higher or lower than the rate for
that individual rating class in effect on the date the filing is
made.
(b) The commissioner may, after notice and hearing, suspend
this section on a finding that a catastrophe loss or series of
occurrences resulting in losses in the catastrophe area justify a
need to ensure:
(1) rate adequacy in the catastrophe area; and
(2) availability of insurance outside the catastrophe
area. (V.T.I.C. Art. 21.49, Sec. 8(h)(9).)
Sec. 2210.360. USE OF CERTAIN SURCHARGES IN DEVELOPING
RATES. Surcharges previously collected and used in the
development of current rates may not be excluded from future rate
development if those surcharges were collected during the
experience period considered by the commissioner. (V.T.I.C.
Art. 21.49, Sec. 8(h)(14).)
Sec. 2210.361. ASSOCIATION RECOMMENDATIONS REGARDING
REDUCTIONS IN COVERAGES OR INCREASES IN DEDUCTIBLES. (a) The
association may make recommendations to the commissioner that would
result in a reduction of coverages or an increase in an applicable
deductible if the resultant reduction in coverages or increase in
deductibles is accompanied by proposed rate credits.
(b) After notice and hearing, the commissioner may accept,
modify, or reject a recommendation made by the association under
this section. Chapter 40 does not apply to an action taken under
this section. (V.T.I.C. Art. 21.49, Sec. 8(a) (part).)
Sec. 2210.362. IMPLIED CONSENT BY APPLICANT FOR INSURANCE
COVERAGE. For purposes of this chapter, an applicant for insurance
coverage is considered to have consented to the appropriate rates
and classifications authorized by this chapter regardless of any
other rates or classifications. (V.T.I.C. Art. 21.49, Sec. 8(f).)
Sec. 2210.363. EFFECT ON RATES OF CERTAIN OTHER INSURANCE
COVERAGE. The commissioner may provide for an appropriate premium
rate or reduction in premium rate if flood or rising water insurance
coverage exists and is maintained on a risk insured by the
association. (V.T.I.C. Art. 21.49, Sec. 8(h)(10).)
[Sections 2210.364-2210.400 reserved for expansion]
SUBCHAPTER I. RATE ROLLBACK
Sec. 2210.401. RATE ROLLBACK FOR CERTAIN RESIDENTIAL
CONSTRUCTION. (a) This section applies only to insurance
coverage issued by the association to cover new residential
construction, excluding an addition or repair to an existing
structure, built to the standards of a new building code.
(b) The commissioner shall hold a rulemaking hearing under
Chapter 2001, Government Code, to determine the percentage of
equitable across-the-board reductions in insurance rates required
for Texas windstorm and hail insurance coverage written by the
association.
(c) Not later than the 180th day after the date a building
code is implemented, the commissioner shall issue an order
mandating the appropriate rate reductions.
(d) The commissioner shall require a six percent
across-the-board reduction if, before the 181st day after the date
a new building code is implemented:
(1) the commissioner has not issued an order
establishing rate reductions for Texas windstorm and hail insurance
on new residential construction built to the standards of a new
building code; or
(2) the order has not become final because of judicial
intervention or any other reason.
(e) Notwithstanding Chapter 40, a hearing under this
section shall be held before the commissioner or the commissioner's
designee. (V.T.I.C. Art. 21.49, Sec. 8E, as added Acts 75th Leg.,
R.S., Ch. 1000.)
[Sections 2210.402-2210.450 reserved for expansion]
SUBCHAPTER J. CATASTROPHE RESERVE TRUST FUND AND REINSURANCE
PROGRAM
Sec. 2210.451. DEFINITION. In this subchapter, "trust
fund" means the catastrophe reserve trust fund. (V.T.I.C. Art.
21.49, Sec. 8(i)(1) (part).)
Sec. 2210.452. ESTABLISHMENT AND USE OF TRUST
FUND. (a) The commissioner shall adopt rules under which
association members relinquish their net equity on an annual basis
as provided by those rules by making payments to the catastrophe
reserve trust fund. The trust fund may be used only to fund:
(1) the obligations of the trust fund under Section
2210.058(a); and
(2) the mitigation and preparedness plan established
under Section 2210.454 to reduce the potential for payments by
association members that give rise to tax credits in the event of
loss.
(b) All money, including investment income, deposited in
the trust fund constitutes state funds until disbursed as provided
by this chapter and commissioner rules. The comptroller shall hold
the money outside the state treasury on behalf of, and with legal
title in, the department. The department shall keep and maintain
the trust fund in accordance with this chapter and commissioner
rules. The comptroller, as custodian of the trust fund, shall
administer the trust fund strictly and solely as provided by this
chapter and commissioner rules.
(c) At the end of each calendar year or policy year, the
association shall pay the net equity of a member, including all
premium and other revenue of the association in excess of incurred
losses and operating expenses, to the trust fund or a reinsurance
program approved by the commissioner.
(d) The commissioner by rule shall establish the procedure
relating to the disbursement of money from the trust fund to
policyholders in the event of an occurrence or series of
occurrences within a catastrophe area that results in a
disbursement under Section 2210.058(a).
(e) The trust fund may be terminated only by law. On
termination of the trust fund, all assets of the trust fund revert
to the state to provide funding for the mitigation and preparedness
plan established under Section 2210.454. (V.T.I.C. Art. 21.49,
Secs. 8(i)(1) (part), (2), (3), (4).)
Sec. 2210.453. REINSURANCE PROGRAM. (a) The association
shall:
(1) make payments into the trust fund; or
(2) establish a reinsurance program approved by the
department.
(b) With the approval of the department, the association may
establish a reinsurance program that operates in addition to or in
concert with the trust fund. (V.T.I.C. Art. 21.49, Sec. 8(h)(17).)
Sec. 2210.454. MITIGATION AND PREPAREDNESS PLAN. (a) The
commissioner shall annually develop and implement a mitigation and
preparedness plan.
(b) Each state fiscal year, the department may fund the
mitigation and preparedness plan using the investment income of the
trust fund in an amount not less than $1 million and not more than 10
percent of the investment income of the prior fiscal year. From
that amount and as part of that plan, the department may use in each
fiscal year $1 million for the windstorm inspection program
established under Section 2210.251.
(c) The mitigation and preparedness plan must provide for
actions to be taken in the seacoast territory by the commissioner,
or by a local government, state agency, educational institution, or
nonprofit organization designated by the commissioner in the plan,
to implement programs to:
(1) improve preparedness for windstorm and hail
catastrophes;
(2) reduce potential losses in the event of such a
catastrophe; and
(3) provide research into the means to:
(A) reduce those losses;
(B) educate or inform the public in determining
the appropriateness of particular upgrades to structures; or
(C) protect infrastructure from potential damage
from those catastrophes.
(d) Money in excess of $1 million may not be used under this
section if the commissioner determines that an expenditure of
investment income from the trust fund would jeopardize the
actuarial soundness of the fund or materially impair the ability of
the fund to serve the state purposes for which the fund was
established. (V.T.I.C. Art. 21.49, Sec. 8(i)(5).)
[Sections 2210.455-2210.500 reserved for expansion]
SUBCHAPTER K. LIABILITY LIMITS
Sec. 2210.501. MAXIMUM LIABILITY LIMITS. (a) The board
of directors shall propose the maximum liability limits under a
windstorm and hail insurance policy issued by the association under
this chapter. The maximum liability limits must be approved by the
commissioner.
(b) Subject to Section 2210.502, the maximum liability
limits for coverage on a single insurable property may not be less
than:
(1) $350,000 for:
(A) a dwelling, including an individually owned
townhouse unit; and
(B) the corporeal movable property located in or
about the dwelling and, as an extension of coverage, away from those
premises, as provided under the policy;
(2) $2,192,000 for a building, and the corporeal
movable property located in the building, if the building is:
(A) owned by, and at least 75 percent of which is
occupied by, a governmental entity; or
(B) not owned by, but is wholly and exclusively
occupied by, a governmental entity;
(3) $125,000 for individually owned corporeal movable
property located in an apartment unit, residential condominium
unit, or townhouse unit that is occupied by the owner of that
property and, as an extension of coverage, away from those
premises, as provided under the policy; and
(4) $1,500,000 for:
(A) a structure other than a dwelling or a public
building; and
(B) the corporeal movable property located in
that structure and, as an extension of coverage, away from those
premises, as provided under the policy.
(c) Maximum liability limits for insurable property not
described by Subsection (b) are established by the plan of
operation. (V.T.I.C. Art. 21.49, Secs. 8D(a), (c).)
Sec. 2210.502. ADJUSTMENTS TO MAXIMUM LIABILITY LIMITS.
(a) Not later than September 30 of each year, the board of
directors shall propose inflation adjustments to the maximum
liability limits imposed under Section 2210.501 in increments of
$1,000, rounded to the nearest $1,000, considering the limits
imposed by Section 2210.501(b), at a rate that reflects any change
in the BOECKH Index. If the BOECKH Index ceases to exist, the board
of directors shall propose the adjustments in the same manner based
on another index that the board of directors determines accurately
reflects changes in the cost of construction or residential values
in the catastrophe area.
(b) An adjustment to the maximum liability limits that is
approved by the commissioner applies to each windstorm and hail
insurance policy delivered, issued for delivery, or renewed on or
after January 1 of the year following the date of the approval. The
indexing of the limits shall adjust for changes occurring on and
after January 1, 1997.
(c) The board of directors may propose additional increases
in the maximum liability limits as the board determines necessary
to implement the purposes of this chapter.
(d) Notwithstanding Section 2210.501(b), the maximum
liability limit imposed under Section 2210.501(b)(2) is frozen, and
the indexing and adjustments provided by this section do not apply
to that limit, until the limit imposed on a structure subject to
Section 2210.501(b)(4) and the corporeal property located in that
structure reaches or exceeds $2,192,000, at which time the limit
imposed under Section 2210.501(b)(2) shall be indexed and adjusted
as provided for a risk under Section 2210.501(b)(4). (V.T.I.C.
Art. 21.49, Secs. 8D(b), (d), (e).)
Sec. 2210.503. FILING OF PROPOSED ADJUSTMENTS WITH
COMMISSIONER. Not later than the 10th day after the date a proposed
adjustment to the maximum liability limits is determined under
Section 2210.501(a) or (b) or Section 2210.502, the association
shall file the proposed adjustments with the commissioner in
writing. The filing must include:
(1) a statement of the proposed adjusted limits;
(2) a statement of the limits in effect immediately
preceding the effective date of the proposed adjustment;
(3) a brief summary of the changes to the BOECKH Index
or other index on which the proposed adjustments are based; and
(4) a brief summary of the computations used in
determining the proposed adjustments. (V.T.I.C. Art. 21.49, Sec.
8D(f).)
Sec. 2210.504. COMMISSIONER ACTION ON PROPOSED
ADJUSTMENTS. (a) Not later than the 60th day after the date of
receipt of a filing under Section 2210.503, and after notice and
hearing, the commissioner by order shall approve, disapprove, or
modify the proposed adjustment to the maximum liability limits.
(b) Notwithstanding Subsection (a) and Sections
2210.501(c), 2210.502(a)-(c), and 2210.503, the commissioner may
not approve adjustments of maximum liability limits to amounts
lower than the amounts prescribed under Section 2210.501(b).
(V.T.I.C. Art. 21.49, Secs. 8D(g), (h).)
Sec. 2210.505. REINSURED EXCESS LIMITS. (a)
Notwithstanding any other law, the association may issue a
windstorm and hail insurance policy that includes coverage for an
amount in excess of a maximum liability limit established under
Sections 2210.501-2210.504 if the association first obtains from a
reinsurer approved by the commissioner reinsurance for the full
amount of policy exposure above that limit.
(b) The premium charged by the association for the excess
coverage must equal the amount of the reinsurance premium charged
to the association by the reinsurer, plus any payment to the
association that is approved by the commissioner.
(c) The commissioner shall adopt rules as necessary to
implement this section. (V.T.I.C. Art. 21.49, Secs. 8E(a), (b),
(c), as added Acts 75th Leg., R.S., Ch. 642.)
Sec. 2210.506. EXCEPTION FROM CERTAIN ADMINISTRATIVE
PROCEDURES. Chapter 40 does not apply to an action taken under this
subchapter. (V.T.I.C. Art. 21.49, Secs. 8D(i), 8E(d), as added
Acts 75th Leg., R.S., Ch. 642.)
[Sections 2210.507-2210.550 reserved for expansion]
SUBCHAPTER L. APPEALS AND OTHER ACTIONS
Sec. 2210.551. APPEALS. (a) This section applies to:
(1) a person insured under this chapter or an
authorized representative of the person; or
(2) an affected insurer.
(b) A person or entity described by Subsection (a) who is
aggrieved by an act, ruling, or decision of the association may
appeal to the commissioner not later than the 30th day after the
date of that act, ruling, or decision.
(c) If the association is aggrieved by the action of the
commissioner with respect to a ruling, order, or determination of
the commissioner, the association may, not later than the 30th day
after the date of the action, make a written request to the
commissioner for a hearing on the action.
(d) On 10 days' written notice of the time and place of the
hearing, the commissioner shall conduct a hearing on the
association's request or the appeal from an act, ruling, or
decision of the association, not later than the 30th day after the
date of receipt of the request or appeal.
(e) A hearing on an act, ruling, or decision of the
association relating to the payment of, the amount of, or the denial
of a particular claim shall be held, at the request of the claimant,
in the county in which the insured property is located or in Travis
County.
(f) Not later than the 30th day after the date of the
hearing, the commissioner shall affirm, reverse, or modify the
commissioner's previous action or the act, ruling, or decision
appealed to the commissioner. Pending the hearing and decision,
the commissioner may suspend or postpone the effective date of the
previous action or of the act, ruling, or decision appealed to the
commissioner.
(g) The association, or the person or entity aggrieved by
the order or decision of the commissioner, may appeal to a district
court in the county in which the covered property is located or a
district court in Travis County.
(h) An action brought under this section is subject to the
procedures established under Subchapter D, Chapter 36. (V.T.I.C.
Art. 21.49, Sec. 9.)
Sec. 2210.552. CLAIM DISPUTES; VENUE. (a) Except as
provided by Sections 2210.007 and 2210.106, a person insured under
this chapter who is aggrieved by an act, ruling, or decision of the
association relating to the payment of, the amount of, or the denial
of a claim may:
(1) bring an action against the association, including
an action under Chapter 541; or
(2) appeal the act, ruling, or decision under Section
2210.551.
(b) A person may not proceed under both Section 2210.551 and
this section for the same act, ruling, or decision.
(c) Except as provided by Subsection (d), venue in an action
brought under this section, including an action under Chapter 541,
against the association is in the county in which the insured
property is located or in a district court in Travis County.
(d) Venue in an action, including an action under Chapter
541, brought under this section in which the claimant joins the
department as a party to the action is only in a district court in Travis County. (V.T.I.C. Art. 21.49, Sec. 9A.)
CHAPTER 2211. FAIR PLAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2211.001. DEFINITIONS
Sec. 2211.002. IMMUNITY
Sec. 2211.003. APPEALS; JUDICIAL REVIEW
[Sections 2211.004-2211.050 reserved for expansion]
SUBCHAPTER B. ESTABLISHMENT AND ADMINISTRATION OF FAIR PLAN
Sec. 2211.051. ESTABLISHMENT OF FAIR PLAN
Sec. 2211.052. ADMINISTRATION OF FAIR PLAN;
COMPOSITION OF GOVERNING COMMITTEE
Sec. 2211.053. AMENDMENTS TO PLAN OF OPERATION
Sec. 2211.054. CONTENTS OF PLAN OF OPERATION
Sec. 2211.055. ASSOCIATION DUTIES WITH RESPECT TO
POLICIES
Sec. 2211.056. FILING AND APPROVAL OF RATES
Sec. 2211.057. POWERS OF COMMISSIONER
Sec. 2211.058. ANNUAL OPERATING REPORT
[Sections 2211.059-2211.100 reserved for expansion]
SUBCHAPTER C. INSURER PARTICIPATION IN FAIR PLAN
Sec. 2211.101. COVERAGE PROVIDED TO INSUREDS IN
UNDERSERVED AREA
Sec. 2211.102. LIABILITY OF INSURERS TO ASSOCIATION;
ASSESSMENTS
Sec. 2211.103. RECOMPUTATION OF REIMBURSEMENT RATIOS
Sec. 2211.104. ADDITIONAL ASSESSMENT IN EVENT OF
DEFICIT; PREMIUM SURCHARGE AUTHORIZED
Sec. 2211.105. RETENTION AND USE OF PROFITS BY
ASSOCIATION
[Sections 2211.106-2211.150 reserved for expansion]
SUBCHAPTER D. COVERAGE PROVIDED TO INSUREDS
Sec. 2211.151. MANDATORY COVERAGE PROVIDED TO CERTAIN
INSUREDS
Sec. 2211.152. DESIGNATION OF AREA AS UNDERSERVED
Sec. 2211.153. INSPECTION BUREAU
Sec. 2211.154. PROPERTY INSPECTION
Sec. 2211.155. INSPECTION RESULTS; REINSPECTION
Sec. 2211.156. CERTAIN COVERAGE EXCLUDED
[Sections 2211.157-2211.200 reserved for expansion]
SUBCHAPTER E. REVENUE BOND PROGRAM
Sec. 2211.201. PURPOSE
Sec. 2211.202. DEFINITIONS
Sec. 2211.203. APPLICABILITY OF OTHER LAWS
Sec. 2211.204. ISSUANCE OF PUBLIC SECURITIES
AUTHORIZED
Sec. 2211.205. LIMITATION ON AMOUNT OF PUBLIC
SECURITIES
Sec. 2211.206. TERMS OF ISSUANCE
Sec. 2211.207. CONTENTS OF PUBLIC SECURITY RESOLUTION;
ADMINISTRATION OF ACCOUNTS
Sec. 2211.208. SOURCE OF PAYMENT
Sec. 2211.209. SERVICE FEE
Sec. 2211.210. EXEMPTION FROM TAXATION
Sec. 2211.211. AUTHORIZED INVESTMENTS
Sec. 2211.212. STATE PLEDGE REGARDING PUBLIC SECURITY
OWNER RIGHTS AND REMEDIES
Sec. 2211.213. PAYMENT ENFORCEABLE BY MANDAMUS
[Sections 2211.214-2211.250 reserved for expansion]
SUBCHAPTER F. PENALTIES
Sec. 2211.251. SANCTIONS AND ADMINISTRATIVE PENALTIES
Sec. 2211.252. ADDITIONAL DISCIPLINARY PROCEDURES
CHAPTER 2211. FAIR PLAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2211.001. DEFINITIONS. In this chapter:
(1) "Association" means the FAIR Plan Association
established under this chapter.
(2) "FAIR Plan" means a Fair Access to Insurance
Requirements Plan established under Section 2211.051.
(3) "Governing committee" means the governing
committee of the association.
(4) "Inspection bureau" means the organization or
organizations designated by the association under Section
2211.153.
(5) "Insurer" means an authorized insurer writing
property insurance in this state, including:
(A) a Lloyd's plan; and
(B) a reciprocal or interinsurance exchange.
(6) "Net direct premiums" means gross direct written
premiums less return premiums on canceled contracts, regardless of
reinsurance assumed or ceded, written on residential property under
this chapter.
(7) "Residential property insurance" means the
coverage provided by a homeowners insurance policy, residential
fire and allied lines insurance policy, or farm and ranch owners
insurance policy against loss incurred to real or tangible personal
property at a fixed location.
(8) "Underserved area" or "underserved areas" means an
area or areas designated as underserved by the commissioner by
rule. (V.T.I.C. Art. 21.49A, Secs. 2(1) (part), (2), (3), (4)
(part), (5), (6) (part); Art. 21.49A-1, Sec. 2(1); New.)
Sec. 2211.002. IMMUNITY. Liability does not exist on the
part of, and a cause of action does not arise against, an insurer,
the inspection bureau, the association, the governing committee,
the commissioner, an authorized representative of the
commissioner, or an agent or employee of an insurer, the inspection
bureau, the association, or the governing committee for:
(1) an inspection required by this chapter;
(2) an act or omission in connection with an
inspection; or
(3) a statement made:
(A) in a report and communication concerning the
insurability of property;
(B) in the determinations required by this
subchapter or Subchapter B, C, D, or F; or
(C) at a hearing conducted in connection with an
inspection. (V.T.I.C. Art. 21.49A, Sec. 9.)
Sec. 2211.003. APPEALS; JUDICIAL REVIEW. (a) An applicant
or affected insurer is entitled to appeal to the association. The
association's decision may be appealed to the commissioner not
later than the 30th day after the date of the decision.
(b) An order or decision made by the commissioner under this
chapter is subject to judicial review in accordance with Subchapter
D, Chapter 36. (V.T.I.C. Art. 21.49A, Sec. 8.)
[Sections 2211.004-2211.050 reserved for expansion]
SUBCHAPTER B. ESTABLISHMENT AND ADMINISTRATION OF FAIR PLAN
Sec. 2211.051. ESTABLISHMENT OF FAIR PLAN. The
commissioner may establish a Fair Access to Insurance Requirements
Plan to deliver residential property insurance to residents of this
state in underserved areas if the commissioner determines, after a
public hearing, that:
(1) in all or any part of the state, residential
property insurance is not reasonably available in the voluntary
market to a substantial number of insurable risks; and
(2) at least 25 percent of the applicants to the
residential property market assistance program who are qualified
under that program's plan of operation have not been placed with an
insurer in the preceding six months. (V.T.I.C. Art. 21.49A, Secs.
1(a) (part), 2(1) (part).)
Sec. 2211.052. ADMINISTRATION OF FAIR PLAN; COMPOSITION OF
GOVERNING COMMITTEE. (a) The governing committee shall
administer the FAIR Plan under a plan of operation.
(b) The governing committee is composed of 11 members
appointed by the commissioner as follows:
(1) five members who represent the interests of
insurers;
(2) four public members; and
(3) two members who are general property and casualty
agents.
(c) The commissioner or an employee of the department
designated by the commissioner serves as an ex officio member.
(d) Each member of the governing committee who represents
the interests of insurers must be a full-time employee of an
insurer. (V.T.I.C. Art. 21.49A, Secs. 3(a) (part), (b), (c), (d).)
Sec. 2211.053. AMENDMENTS TO PLAN OF OPERATION. (a) The
governing committee may, on the committee's own initiative or at
the commissioner's request, propose amendments to the plan of
operation.
(b) Amendments to the plan must be adopted by the
commissioner by rule. (V.T.I.C. Art. 21.49A, Sec. 3(a) (part).)
Sec. 2211.054. CONTENTS OF PLAN OF OPERATION. The plan of
operation must:
(1) provide for a nonprofit association to issue
residential property insurance under this chapter and distribute
the losses and expenses in writing that insurance in this state;
(2) provide that all insurers that write residential
property insurance shall participate in the association in
accordance with Sections 2211.101(b) and (c);
(3) provide that a participating insurer is entitled
to receive credit in accordance with Section 2211.101(d);
(4) provide for the immediate binding of eligible
risks;
(5) provide for the use of premium installment payment
plans, adequate marketing, and service facilities;
(6) provide for the establishment of reasonable
service standards;
(7) provide procedures for efficient, economical,
fair, and nondiscriminatory administration of the association;
(8) provide procedures for determining the net level
of participation required for each insurer in the association;
(9) provide for the use of deductibles and other
underwriting devices;
(10) provide for assessment of all members in amounts
sufficient to operate the association;
(11) establish maximum limits of liability to be
placed through the program;
(12) establish commissions to be paid to the insurance
agents submitting applications;
(13) provide that the association issue policies in
the association's own name;
(14) provide reasonable underwriting standards for
determining insurability of a risk;
(15) provide procedures for the association to assume
and cede reinsurance; and
(16) provide any other procedure or operational matter
the governing committee or the commissioner considers necessary.
(V.T.I.C. Art. 21.49A, Secs. 2(1) (part), 3(e) (part).)
Sec. 2211.055. ASSOCIATION DUTIES WITH RESPECT TO
POLICIES. (a) The association may, for FAIR Plan purposes only:
(1) issue insurance policies and endorsements to those
policies in the association's own name or a trade name adopted for
that purpose; and
(2) act on behalf of all participating insurers in
connection with those policies and act in any other manner
necessary to accomplish the purposes of this chapter, including:
(A) issuing insurance policies;
(B) collecting premiums;
(C) issuing cancellations; and
(D) paying commissions, losses, judgments, and
expenses.
(b) In connection with an insurance policy issued by the
association:
(1) service of a notice, proof of loss, legal process,
or other communication with regard to the policy must be made on the
association; and
(2) an action by the insured constituting a claim
under the policy may be brought only against the association, and
the association is the proper party for all purposes in an action
brought under or in connection with the policy.
(c) The requirements of Subsection (b) must be stated in an
insurance policy issued by the association.
(d) The form and content of an insurance policy issued by
the association are subject to the commissioner's approval.
(e) The association may assume and cede reinsurance as
provided by the plan of operation. (V.T.I.C. Art. 21.49A, Secs.
5(a), (b) (part), (c).)
Sec. 2211.056. FILING AND APPROVAL OF RATES. (a) The
association shall file with the commissioner for approval the
proposed rates and supplemental rate information to be used in
connection with the issuance of insurance policies or endorsements.
(b) The association shall set rates in an amount sufficient
to:
(1) carry all claims to maturity; and
(2) meet the expenses incurred in the writing and
servicing of the business.
(c) Not later than the 60th day after the date the
association files the proposed rates, the commissioner shall enter
an order approving or disapproving, wholly or partly, the proposed
rates. The commissioner may, on notice to the association, extend
the period for entering an order under this section an additional 30
days.
(d) An order disapproving a rate must state:
(1) the grounds for the disapproval; and
(2) the findings in support of the disapproval.
(e) The association may not issue an insurance policy or
endorsement until the commissioner approves the rates to be applied
to the policy or endorsement. (V.T.I.C. Art. 21.49A, Sec. 7.)
Sec. 2211.057. POWERS OF COMMISSIONER. The commissioner
is charged with the authority to supervise the association and the
inspection bureau. The commissioner also has the power to:
(1) examine the operation of the association and the
inspection bureau through free access to all the books, records,
files, papers, and documents relating to the operation of the
association and the inspection bureau;
(2) summon, qualify, and examine as a witness any
person who has knowledge of the operation of the association or the
inspection bureau, including a member of the governing committee or
an officer or employee of the association or the inspection bureau;
(3) take any action necessary to enable this state and
the association to fully participate in any federal reinsurance
program that is enacted for purposes similar to the purposes of this
chapter;
(4) require reports from the association concerning
risks the association insures under this chapter as the
commissioner considers necessary; and
(5) adopt policy forms and endorsements, promulgate
rates, and adopt rating and rule manuals for use by the association.
(V.T.I.C. Art. 21.49A, Sec. 14.)
Sec. 2211.058. ANNUAL OPERATING REPORT. (a) Not later
than March 31 of each year, the association shall compile and submit
to the commissioner an operating report covering the preceding
calendar year.
(b) The report is a public record. (V.T.I.C. Art. 21.49A,
Sec. 13.)
[Sections 2211.059-2211.100 reserved for expansion]
SUBCHAPTER C. INSURER PARTICIPATION IN FAIR PLAN
Sec. 2211.101. COVERAGE PROVIDED TO INSUREDS IN UNDERSERVED
AREA. (a) In accordance with the plan of operation, the
association shall develop and administer a program for
participation by each insurer that writes residential property
insurance in this state.
(b) Each insurer, as a condition of the insurer's authority
to engage in the business of residential property insurance in this
state, shall participate in the association in accordance with this
chapter, including participating in the association's writings,
expenses, and losses in the proportion that the insurer's net
direct premiums written in this state during the preceding calendar
year bear to the aggregate net direct premiums written in this state
by all participating insurers.
(c) An insurer's participation under Subsection (b) in the
association's writings, expenses, and losses must be determined in
accordance with the residential property statistical plan adopted
by the commissioner.
(d) A participating insurer is entitled to receive credit
for similar insurance voluntarily written in an underserved area.
The participation of an insurer entitled to receive credit under
this subsection must be reduced in accordance with the plan of
operation. (V.T.I.C. Art. 21.49A, Secs. 1(b), 3(e) (part), 4
(part), 5(d).)
Sec. 2211.102. LIABILITY OF INSURERS TO ASSOCIATION;
ASSESSMENTS. The participating insurers are liable to the
association as provided by this chapter and the plan of operation
for the expenses and liabilities incurred by the association as
provided by this chapter and the plan. The association shall make
assessments against the participating insurers as required to meet
those expenses and liabilities. (V.T.I.C. Art. 21.49A, Sec. 5(b)
(part).)
Sec. 2211.103. RECOMPUTATION OF REIMBURSEMENT RATIOS. If
a participating insurer fails to pay an assessment because of the
insurer's insolvency, the association shall immediately recompute
the reimbursement ratios to exclude from the ratios the amount of
that assessment the commissioner determines is uncollectible, so
that the uncollectible amount is assumed by and redistributed among
the remaining participating insurers. (V.T.I.C. Art. 21.49A, Sec.
10.)
Sec. 2211.104. ADDITIONAL ASSESSMENT IN EVENT OF DEFICIT;
PREMIUM SURCHARGE AUTHORIZED. (a) If the association incurs a
deficit, the association, at the commissioner's direction, shall:
(1) request the issuance of public securities as
authorized by Subchapter E; or
(2) assess participating insurers in accordance with
this section.
(b) If the association assesses participating insurers
under this section, each insurer may charge a premium surcharge on
every property insurance policy insuring property in this state
that the insurer issues, the effective date of which is within the
three-year period beginning on the 90th day after the date of the
assessment.
(c) The insurer shall compute the amount of the surcharge
under Subsection (b) as a uniform percentage of the premium on each
policy described by Subsection (b). The percentage must be equal to
one-third of the ratio of the amount of the participating insurer's
assessment to the amount of the insurer's direct earned premiums,
as reported to the department in the insurer's financial statement
for the calendar year preceding the year in which the assessment is
made so that, over the three-year period, the aggregate of all
surcharges by the insurer under this section equals the amount of
the assessment.
(d) The minimum surcharge on a policy may be $1. A surcharge
may be rounded to the nearest dollar. (V.T.I.C. Art. 21.49A, Sec.
11.)
Sec. 2211.105. RETENTION AND USE OF PROFITS BY
ASSOCIATION. (a) The association shall retain any profits of the
association to be used for the purposes of the association.
(b) The association:
(1) shall use the profits to mitigate losses,
including purchasing reinsurance and offsetting future
assessments; and
(2) may not distribute the profits to insurers.
(V.T.I.C. Art. 21.49A, Sec. 15.)
[Sections 2211.106-2211.150 reserved for expansion]
SUBCHAPTER D. COVERAGE PROVIDED TO INSUREDS
Sec. 2211.151. MANDATORY COVERAGE PROVIDED TO CERTAIN
INSUREDS. The association shall make residential property
insurance available to each applicant in an underserved area whose
property is insurable in accordance with reasonable underwriting
standards but who, after diligent efforts, is unable to obtain
residential property insurance through the voluntary market, as
evidenced by two declinations from insurers authorized to engage in
the business of, and writing, residential property insurance in
this state. (V.T.I.C. Art. 21.49A, Sec. 4 (part).)
Sec. 2211.152. DESIGNATION OF AREA AS UNDERSERVED. The
commissioner by rule shall designate the areas determined to be
underserved. In determining which areas to designate as
underserved, the commissioner shall consider the factors specified
in Section 2004.002. (V.T.I.C. Art. 21.49A, Secs. 1(a) (part),
2(6) (part).)
Sec. 2211.153. INSPECTION BUREAU. The association, with
the approval of the commissioner, shall designate one or more
organizations as the inspection bureau. The inspection bureau
shall:
(1) make inspections to determine the condition of a
property for which residential property insurance is sought; and
(2) perform other duties authorized by the association
or the commissioner. (V.T.I.C. Art. 21.49A, Sec. 2(4) (part).)
Sec. 2211.154. PROPERTY INSPECTION. (a) A person who has
an insurable interest in real or tangible personal property at a
fixed location in an underserved area and who, after diligent
effort, is unable to obtain residential property insurance, as
evidenced by two current declinations from insurers authorized to
engage in the business of residential property insurance in this
state and actually writing residential property insurance in this
state, is entitled on application to the association to an
inspection and evaluation of the property by representatives of the
inspection bureau.
(b) A general property and casualty agent may make an
application on behalf of the applicant. The applicant or agent must
submit the application on a form prescribed by the association.
(c) Promptly after the application is received, the
inspection bureau shall make an inspection and file an inspection
report with the association. The inspection report must be made
available to the applicant on request. The association shall
prescribe the manner and scope of the inspection and inspection
report for residential property in accordance with the plan of
operation. (V.T.I.C. Art. 21.49A, Secs. 2(4) (part), 6(a), (b),
(c).)
Sec. 2211.155. INSPECTION RESULTS; REINSPECTION. (a) If,
after an inspection, the inspection bureau determines that
residential property meets the underwriting standards established
in the plan of operation, the applicant must be informed in writing
of that determination and the association shall issue a policy or
binder. If the residential property does not meet the underwriting
standards, the applicant must be informed in writing of the reason
for the failure of the residential property to meet the standards.
(b) If, at any time, an applicant whose residential property
did not meet the underwriting standards makes improvements to the
property or the property's condition that the applicant believes
are sufficient to make the property meet the standards, an
inspection bureau representative shall reinspect the property on
request. In any case, the applicant is eligible for one
reinspection on or before the 60th day after the date of the initial
inspection.
(c) If, on reinspection, the residential property meets the
underwriting standards, the applicant must be informed in writing
of that fact and the association shall issue a policy or binder.
(V.T.I.C. Art. 21.49A, Secs. 6(d), (e).)
Sec. 2211.156. CERTAIN COVERAGE EXCLUDED. The FAIR Plan
may not provide windstorm and hail insurance coverage for a risk
eligible for that coverage under Chapter 2210. (V.T.I.C. Art.
21.49A, Sec. 1(c).)
[Sections 2211.157-2211.200 reserved for expansion]
SUBCHAPTER E. REVENUE BOND PROGRAM
Sec. 2211.201. PURPOSE. The legislature finds that
issuing public securities to provide a method to raise funds to
provide residential property insurance in this state through the
association is to benefit the public and to further a public
purpose. (V.T.I.C. Art. 21.49A-1, Sec. 1.)
Sec. 2211.202. DEFINITIONS. In this subchapter:
(1) "Board" means the board of directors of the Texas
Public Finance Authority.
(2) "Bond" means a debt instrument or other public
security issued by the Texas Public Finance Authority.
(3) "Public security resolution" means the resolution
or order authorizing public securities to be issued under this
subchapter. (V.T.I.C. Art. 21.49A-1, Secs. 2(2), (3), (4).)
Sec. 2211.203. APPLICABILITY OF OTHER LAWS. The following
laws apply to public securities issued under this subchapter to the
extent consistent with this subchapter:
(1) Chapters 1201, 1202, 1204, 1205, 1231, 1232, and
1371, Government Code; and
(2) Subchapter A, Chapter 1206, Government Code.
(V.T.I.C. Art. 21.49A-1, Secs. 3(b), 4.)
Sec. 2211.204. ISSUANCE OF PUBLIC SECURITIES
AUTHORIZED. At the request of the association and subject to
Section 2211.205, the Texas Public Finance Authority shall issue
public securities to:
(1) fund the association, including to:
(A) establish and maintain reserves to pay
claims;
(B) pay operating expenses; and
(C) purchase reinsurance;
(2) pay costs related to issuing the public
securities; and
(3) pay other costs related to the public securities
as determined by the board. (V.T.I.C. Art. 21.49A-1, Sec. 3(a).)
Sec. 2211.205. LIMITATION ON AMOUNT OF PUBLIC
SECURITIES. The Texas Public Finance Authority may issue on behalf
of the association public securities in a total amount not to exceed
$75 million. (V.T.I.C. Art. 21.49A-1, Sec. 5.)
Sec. 2211.206. TERMS OF ISSUANCE. (a) Public securities
issued under this subchapter may be issued at a public or private
sale.
(b) Public securities must:
(1) be issued in the name of the association; and
(2) mature not more than 10 years after the date
issued. (V.T.I.C. Art. 21.49A-1, Sec. 6.)
Sec. 2211.207. CONTENTS OF PUBLIC SECURITY RESOLUTION;
ADMINISTRATION OF ACCOUNTS. (a) In a public security resolution,
the board may:
(1) provide for the flow of funds and the
establishment, maintenance, and investment of funds and special
accounts with regard to the public securities, including an
interest and sinking fund account, a reserve account, and other
accounts; and
(2) make additional covenants with regard to the
public securities and the designated income and receipts of the
association pledged to the payment of the public securities.
(b) The association shall administer the accounts in
accordance with this chapter. (V.T.I.C. Art. 21.49A-1, Secs. 7,
8.)
Sec. 2211.208. SOURCE OF PAYMENT. (a) Public securities
issued under this subchapter are payable only from:
(1) the service fee established under Section
2211.209; or
(2) other amounts the association is authorized to
levy, charge, and collect.
(b) The public securities are obligations solely of the
association and do not create a pledge, gift, or loan of the faith,
credit, or taxing authority of this state.
(c) Each public security must:
(1) include a statement that the state is not
obligated to pay any amount on the security and that the faith,
credit, and taxing authority of this state are not pledged, given,
or loaned to those payments; and
(2) state on the security's face that the security:
(A) is payable solely from the revenue pledged
for that purpose; and
(B) is not a legal or moral obligation of the
state. (V.T.I.C. Art. 21.49A-1, Sec. 9.)
Sec. 2211.209. SERVICE FEE. (a) A service fee may be
assessed against:
(1) each participating insurer; and
(2) the association.
(b) The commissioner shall set the service fee in an amount
sufficient to pay all debt service on the public securities issued
under this subchapter. Each participating insurer and the
association shall pay the service fee as required by the
commissioner by rule.
(c) The comptroller shall collect the service fee and the
department shall reimburse the comptroller in the manner described
by Section 201.052.
(d) The commissioner, in consultation with the comptroller,
may coordinate payment and collection of the service fee with other
payments made by participating insurers and collected by the
comptroller.
(e) As a condition of engaging in the business of insurance
in this state, a participating insurer agrees that, if the insurer
leaves the property insurance market in this state, the insurer
remains obligated to pay the insurer's share of the service fee
assessed under this section until the public securities are
retired. The amount assessed against an insurer under this
subsection must be:
(1) proportionate to the insurer's share of the
property insurance market, including residential property
insurance, in this state as of the last complete reporting period
before the date the insurer ceases to engage in the property
insurance business in this state; and
(2) based on the insurer's gross premiums for property
insurance, including residential property insurance, for the
insurer's last reporting period. (V.T.I.C. Art. 21.49A-1, Sec.
10.)
Sec. 2211.210. EXEMPTION FROM TAXATION. Public securities
issued under this subchapter, any interest from the public
securities, and all assets pledged to secure the payment of the
public securities are exempt from taxation by the state or a
political subdivision of this state. (V.T.I.C. Art. 21.49A-1, Sec.
11.)
Sec. 2211.211. AUTHORIZED INVESTMENTS. Public securities
issued under this subchapter are authorized investments under
Subchapter B, Chapter 424, and Subchapters C and D, Chapter 425.
(V.T.I.C. Art. 21.49A-1, Sec. 12.)
Sec. 2211.212. STATE PLEDGE REGARDING PUBLIC SECURITY OWNER
RIGHTS AND REMEDIES. (a) The state pledges to and agrees with the
owners of public securities issued in accordance with this
subchapter that the state will not limit or alter the rights vested
in the association to fulfill the terms of agreements made with the
owners or impair the rights and remedies of the owners until the
following obligations are fully discharged:
(1) the public securities;
(2) any bond premium;
(3) interest; and
(4) all costs and expenses related to an action or
proceeding by or on behalf of the owners.
(b) The association may include the state's pledge and
agreement under Subsection (a) in an agreement with the owners of
the public securities. (V.T.I.C. Art. 21.49A-1, Sec. 13.)
Sec. 2211.213. PAYMENT ENFORCEABLE BY MANDAMUS. A writ of
mandamus and any other legal or equitable remedy are available to a
party in interest to require the association or another party to
fulfill an agreement or perform a function or duty under:
(1) this subchapter;
(2) the Texas Constitution; or
(3) a public security resolution. (V.T.I.C.
Art. 21.49A-1, Sec. 14.)
[Sections 2211.214-2211.250 reserved for expansion]
SUBCHAPTER F. PENALTIES
Sec. 2211.251. SANCTIONS AND ADMINISTRATIVE PENALTIES. If
the association, the inspection bureau, or a participating insurer
is found to be in violation of or to have failed to comply with this
chapter, that entity is subject to:
(1) the sanctions authorized by Chapter 82; and
(2) administrative penalties authorized by Chapter
84. (V.T.I.C. Art. 21.49A, Sec. 12 (part).)
Sec. 2211.252. ADDITIONAL DISCIPLINARY PROCEDURES. In
addition to the remedies provided by Section 2211.251, the
commissioner may use any other disciplinary procedures authorized
by this code, including the cease and desist procedures authorized by Chapter 83. (V.T.I.C. Art. 21.49A, Sec. 12 (part).)
CHAPTER 2212. SELF-INSURANCE TRUSTS FOR HEALTH CARE
LIABILITY CLAIMS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2212.001. DEFINITIONS
Sec. 2212.002. TRUST NOT ENGAGED IN BUSINESS OF
INSURANCE
[Sections 2212.003-2212.050 reserved for expansion]
SUBCHAPTER B. CREATION AND OPERATION OF TRUST
Sec. 2212.051. CREATION OF TRUST
Sec. 2212.052. MINIMUM REQUIREMENTS
Sec. 2212.053. FILING REQUIREMENTS
Sec. 2212.054. POWERS OF TRUST
Sec. 2212.055. GUARANTEE OF CERTAIN LIABILITIES
Sec. 2212.056. ADMINISTRATIVE SANCTIONS
[Sections 2212.057-2212.100 reserved for expansion]
SUBCHAPTER C. INSURANCE CONTRACTS ISSUED BY TRUST
Sec. 2212.101. COVERAGE UNDER CONTRACT
CHAPTER 2212. SELF-INSURANCE TRUSTS FOR HEALTH CARE
LIABILITY CLAIMS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2212.001. DEFINITIONS. In this chapter:
(1) "Dentist" means a person licensed to practice
dentistry in this state.
(2) "Health care liability claim" means a cause of
action against a physician or dentist for treatment, lack of
treatment, or other claimed departure from accepted standards of
health care or safety that proximately results in injury to or death
of the patient, whether the patient's claim or cause of action
sounds in tort or contract.
(3) "Physician" means a person licensed to practice
medicine in this state.
(4) "Trust" means a self-insurance trust organized and
operated under this chapter. (V.T.I.C. Art. 21.49-4, Sec. (a);
New.)
Sec. 2212.002. TRUST NOT ENGAGED IN BUSINESS OF INSURANCE.
A trust is not engaged in the business of insurance under this code
and other laws of this state, and this code, other than this
chapter, does not apply to the trust, except as provided by Section
2212.052. (V.T.I.C. Art. 21.49-4, Sec. (e) (part).)
[Sections 2212.003-2212.050 reserved for expansion]
SUBCHAPTER B. CREATION AND OPERATION OF TRUST
Sec. 2212.051. CREATION OF TRUST. (a) Subject to
Subsection (b), an incorporated association, a purpose of which is
to unite in one compact organization the entire profession licensed
to practice medicine or dentistry in this state, or a portion of the
members of the profession licensed to practice medicine who are
practicing a particular specialty within the practice of medicine
in the state or are practicing within a particular region of the
state, may create a trust to self-insure physicians or dentists and
agree, by contract or otherwise, to insure other members of the
organization or association against health care liability claims
and related risks.
(b) The organization or association must:
(1) have been in continuing existence for at least two
years;
(2) have established a health care liability claim
trust or other agreement to provide coverage against health care
liability claims and related risks; and
(3) employ appropriate professional staff and
consultants for program management. (V.T.I.C. Art. 21.49-4, Sec.
(b).)
Sec. 2212.052. MINIMUM REQUIREMENTS. (a) The department
may require a trust to satisfy reasonable minimum requirements that
ensure the trust is able to satisfy the trust's contractual
obligations.
(b) On request, a trust shall provide books, records, and
documents required by the department to fulfill the requirements of
this section relating to the trust's solvency. (V.T.I.C.
Art. 21.49-4, Secs. (e) (part), (f).)
Sec. 2212.053. FILING REQUIREMENTS. (a) A trust shall file
with the department:
(1) all rates and forms, for informational purposes
only;
(2) all liability claims reports required under
Subchapter D, Chapter 38; and
(3) the trust's independently audited annual financial
statement.
(b) An audited annual financial statement filed under this
section may not be considered an examination document. (V.T.I.C.
Art. 21.49-4, Secs. (g), (h), (j).)
Sec. 2212.054. POWERS OF TRUST. (a) A trust may:
(1) purchase, on behalf of the members of the
association that created the trust, medical professional liability
insurance, specific excess insurance, aggregate excess insurance,
and reinsurance, as necessary in the opinion of the trustees;
(2) purchase required risk management services; and
(3) pay claims that arise under any deductible
provisions.
(b) A trust's investment powers and limitations are the same
as the investment powers and limitations of a state bank with trust
powers. (V.T.I.C. Art. 21.49-4, Secs. (c), (d) (part).)
Sec. 2212.055. GUARANTEE OF CERTAIN LIABILITIES. The
trust shall adopt rules to guarantee all contingent liabilities in
the event of dissolution. (V.T.I.C. Art. 21.49-4, Sec. (d)
(part).)
Sec. 2212.056. ADMINISTRATIVE SANCTIONS. If a trust is
found to have violated this code or a rule adopted by the
commissioner that is declared applicable to the trust, the
commissioner may order sanctions under Chapter 82 for the
violation. (V.T.I.C. Art. 21.49-4, Sec. (i).)
[Sections 2212.057-2212.100 reserved for expansion]
SUBCHAPTER C. INSURANCE CONTRACTS ISSUED BY TRUST
Sec. 2212.101. COVERAGE UNDER CONTRACT. A contract of
professional liability insurance issued by a trust may include
coverage of:
(1) a professional association or partnership of
physicians, with respect to health care liability claims and
related risks if a majority of the persons having a proprietary
interest in the association or partnership are members of the
association that created the trust;
(2) proprietary members, associates, stockholders,
and executive officers and directors of an association or
partnership described by Subdivision (1), with respect to potential
vicarious liability for acts or omissions of others giving rise to
health care liability claims and related risks;
(3) an insured physician and, as applicable, an
insured professional association or partnership, including
proprietary members, associates, stockholders, and executive
officers and directors of the association or partnership, with
respect to liability of an insured arising out of:
(A) injury to a patient related to ownership,
maintenance, or use of premises for the practice of medicine,
including necessary or incidental operations;
(B) service by an insured physician as a member
of a committee, board, or similar group of a hospital medical staff
or of a professional association or society with respect to medical
staff privileges, accreditation, or disciplinary matters relating
to competency or patient safety and risk reduction programs; or
(C) a health care liability claim or related risk
based in whole or part on an act or omission occurring before the
date a contract of professional insurance is issued by the trust; or
(4) an applicant for membership in the association
that created the trust, pending final action on the application,
with respect to health care liability claims and related risks,
including coverage described by Subdivision (1), (2), or (3), as applicable. (V.T.I.C. Art. 21.49-4a.)
CHAPTER 2213. SELF-INSURANCE TRUSTS FOR BANKS AND SAVINGS AND LOAN
ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2213.001. DEFINITIONS
Sec. 2213.002. SELF-INSURANCE TRUST NOT ENGAGED IN
BUSINESS OF INSURANCE
Sec. 2213.003. RULES
[Sections 2213.004-2213.050 reserved for expansion]
SUBCHAPTER B. CREATION AND OPERATION OF SELF-INSURANCE TRUST
Sec. 2213.051. CREATION OF BANK SELF-INSURANCE TRUST;
COVERAGE
Sec. 2213.052. CREATION OF SAVINGS AND LOAN
SELF-INSURANCE TRUST; COVERAGE
Sec. 2213.053. PLAN OF ORGANIZATION AND OPERATION;
TRUSTEES
Sec. 2213.054. MINIMUM REQUIREMENTS; COMMISSIONER
SUPERVISION
Sec. 2213.055. CREATION OF TRUST FUND
Sec. 2213.056. PERSONNEL; PAYMENT OF EXPENSES
[Sections 2213.057-2213.100 reserved for expansion]
SUBCHAPTER C. PARTICIPATION IN SELF-INSURANCE TRUST
Sec. 2213.101. PARTICIPATION
CHAPTER 2213. SELF-INSURANCE TRUSTS FOR BANKS AND SAVINGS AND LOAN
ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2213.001. DEFINITIONS. In this chapter:
(1) "Bank" means a bank chartered under federal or
state law.
(2) "Plan" means a self-insurance trust's plan of
organization and operation.
(3) "Savings and loan association" means a savings and
loan association chartered under federal or state law.
(4) "Self-insurance trust" means a self-insurance
trust organized and operated under this chapter.
(5) "Trustees" means the trustees of a self-insurance
trust. (V.T.I.C. Art. 21.49-6, Secs. 1(1), (3); Art. 21.49-7,
Secs. 1(1) (part), (3); New.)
Sec. 2213.002. SELF-INSURANCE TRUST NOT ENGAGED IN BUSINESS
OF INSURANCE. (a) A self-insurance trust is not engaged in the
business of insurance under this code or other laws of this state.
(b) Other than this chapter, the provisions of this code,
including the Texas Property and Casualty Insurance Guaranty Act,
Chapter 462, do not apply to a self-insurance trust. (V.T.I.C.
Art. 21.49-6, Sec. 11; Art. 21.49-7, Sec. 11.)
Sec. 2213.003. RULES. The commissioner may adopt:
(1) necessary rules to carry out the provisions of
this chapter relating to bank self-insurance trusts; and
(2) reasonable rules necessary to carry out the
provisions of this chapter relating to savings and loan
self-insurance trusts. (V.T.I.C. Art. 21.49-6, Sec. 10; Art.
21.49-7, Sec. 10.)
[Sections 2213.004-2213.050 reserved for expansion]
SUBCHAPTER B. CREATION AND OPERATION OF SELF-INSURANCE TRUST
Sec. 2213.051. CREATION OF BANK SELF-INSURANCE TRUST;
COVERAGE. (a) A group or association of banks or bankers, composed
of any number of members, may create a bank self-insurance trust to
self-insure banks that are members of the group or association, or
that have any officers who are members of the group or association,
against losses described by this section.
(b) The bank self-insurance trust may self-insure a bank
described by Subsection (a) against losses resulting from:
(1) dishonest acts and criminal acts of employees;
(2) a robbery or other act commonly included within a
bank's bond coverage; and
(3) indemnification for a wrongful act committed by a
director, officer, or employee of a member of the group or
association, subject to the limitations under Chapter 8, Business
Organizations Code.
(c) The trustees shall determine, according to the plan, the
amount of coverage to be provided to a bank participating in the
bank self-insurance trust.
(d) Notwithstanding Subsection (b), on or before December
31, 2009, the bank self-insurance trust may self-insure a bank
described by Subsection (a) against losses resulting from:
(1) dishonest acts and criminal acts of employees;
(2) a robbery or other act commonly included within a
bank's bond coverage; and
(3) indemnification for a wrongful act committed by a
director, officer, or employee of a member of the group or
association, subject to the limitations under Article 2.02-1, Texas
Business Corporation Act, or Chapter 8, Business Organizations
Code, as applicable.
(e) This subsection and Subsection (d) expire January 1,
2010. (V.T.I.C. Art. 21.49-6, Secs. 2, 7 (part).)
Sec. 2213.052. CREATION OF SAVINGS AND LOAN SELF-INSURANCE
TRUST; COVERAGE. (a) Two or more savings and loan associations
that have their principal offices located in this state may create a
savings and loan self-insurance trust to provide insurance and
indemnity coverage for the savings and loan self-insurance trust's
members and the officers and directors of the savings and loan
self-insurance trust's members.
(b) Insurance and indemnity coverage provided by the
savings and loan self-insurance trust is limited to savings and
loan blanket bonds covering losses resulting from:
(1) dishonest acts and criminal acts of employees; or
(2) robbery.
(c) The trustees shall determine, according to the plan, the
amount of coverage to be provided to a savings and loan association
participating in the savings and loan self-insurance trust.
(V.T.I.C. Art. 21.49-7, Secs. 1(1) (part), 2, 7 (part).)
Sec. 2213.053. PLAN OF ORGANIZATION AND OPERATION;
TRUSTEES. (a) Before organizing and operating a self-insurance
trust, the group or association of banks or bankers or the savings
and loan associations, as applicable, proposing to organize the
self-insurance trust shall:
(1) select trustees to administer the self-insurance
trust; and
(2) prepare a detailed plan of organization and
operation in the form and manner prescribed by the commissioner.
(b) The group or association of banks or bankers or the
savings and loan associations shall submit the proposed plan to the
commissioner for examination, suggested changes, and final
approval.
(c) The commissioner shall approve the proposed plan only if
the commissioner is satisfied that the self-insurance trust is able
and will continue to be able to pay valid claims made to the
self-insurance trust.
(d) After final approval, the plan may be amended with the
commissioner's approval. (V.T.I.C. Art. 21.49-6, Secs. 3, 4;
Art. 21.49-7, Secs. 3, 4.)
Sec. 2213.054. MINIMUM REQUIREMENTS; COMMISSIONER
SUPERVISION. (a) After approval of a self-insurance trust's
plan, the self-insurance trust is subject to continuing supervision
by the commissioner relating to:
(1) the solvency of the self-insurance trust; and
(2) the approval of the self-insurance trust's policy
forms.
(b) The commissioner may set minimum requirements to ensure
that a self-insurance trust is able to satisfy the self-insurance
trust's contractual obligations. (V.T.I.C. Art. 21.49-6, Sec. 9;
Art. 21.49-7, Sec. 9.)
Sec. 2213.055. CREATION OF TRUST FUND. (a) The trustees
shall create a trust fund to pay claims made under the coverage
provided by the self-insurance trust under Section 2213.051 or
2213.052, as applicable.
(b) The trustees shall administer and control the trust fund
and shall pay claims from and invest the money of the trust fund as
provided by the plan. (V.T.I.C. Art. 21.49-6, Sec. 5;
Art. 21.49-7, Sec. 5.)
Sec. 2213.056. PERSONNEL; PAYMENT OF EXPENSES. (a) The
trustees shall employ appropriate professional employees and
consultants for management of the self-insurance trust program.
(b) The trustees shall pay the salaries of professional
employees and consultants and other costs of administering the
self-insurance trust program from the trust fund.
(c) The total amount paid for salaries and administration
may not exceed an amount set by the commissioner. The amount set by
the commissioner may not exceed 35 percent of the total amount of
money in the trust fund in any year. (V.T.I.C. Art. 21.49-6, Sec.
8; Art. 21.49-7, Sec. 8.)
[Sections 2213.057-2213.100 reserved for expansion]
SUBCHAPTER C. PARTICIPATION IN SELF-INSURANCE TRUST
Sec. 2213.101. PARTICIPATION. A bank that is a member, or
that has an officer who is a member, of a group or association of
banks or bankers organizing a bank self-insurance trust or of
savings and loan associations organizing a savings and loan
self-insurance trust may participate in the applicable
self-insurance trust by:
(1) entering into a contract or agreement with the
trustees for coverage that the self-insurance trust may provide
under Section 2213.051 or 2213.052, as applicable; and
(2) paying the required contribution to the trust fund
in the amount determined by the trustees in accordance with the
plan. (V.T.I.C. Art. 21.49-6, Secs. 6, 7 (part); Art. 21.49-7,
Secs. 6, 7 (part).)
[Chapters 2214-2250 reserved for expansion]
SUBTITLE H. RATEMAKING IN GENERAL
CHAPTER 2251. RATES
SUBCHAPTER A. GENERAL PROVISIONS FOR RATES
Sec. 2251.001. PURPOSE
Sec. 2251.002. DEFINITIONS
Sec. 2251.003. APPLICABILITY OF CERTAIN SUBCHAPTERS
Sec. 2251.004. REGULATION OF INLAND MARINE RATES
Sec. 2251.005. NOTICE OF RATE INCREASE FOR RESIDENTIAL
PROPERTY INSURANCE POLICIES
Sec. 2251.006. CONSIDERATION OF CERTAIN OTHER LAW
Sec. 2251.007. ADMINISTRATIVE PROCEDURE ACT APPLICABLE
Sec. 2251.008. QUARTERLY REPORT OF INSURER;
LEGISLATIVE REPORT
[Sections 2251.009-2251.050 reserved for expansion]
SUBCHAPTER B. RATE STANDARDS
Sec. 2251.051. EXCESSIVE, INADEQUATE, AND UNFAIRLY
DISCRIMINATORY RATES
Sec. 2251.052. RATE STANDARDS
[Sections 2251.053-2251.100 reserved for expansion]
SUBCHAPTER C. RATE FILINGS
Sec. 2251.101. RATE FILINGS AND SUPPORTING INFORMATION
Sec. 2251.102. FILING REQUIREMENTS FOR INSURERS WITH
LESS THAN FIVE PERCENT OF MARKET
Sec. 2251.103. DISAPPROVAL OF RATE IN RATE FILING;
HEARING
Sec. 2251.104. DISAPPROVAL OF RATE IN EFFECT; HEARING
Sec. 2251.105. GRIEVANCE
Sec. 2251.106. ROLE OF PUBLIC INSURANCE COUNSEL
Sec. 2251.107. PUBLIC INSPECTION OF INFORMATION
[Sections 2251.108-2251.150 reserved for expansion]
SUBCHAPTER D. PRIOR APPROVAL OF RATES UNDER
CERTAIN CIRCUMSTANCES
Sec. 2251.151. REQUIREMENT TO FILE RATES FOR PRIOR
APPROVAL UNDER CERTAIN CIRCUMSTANCES
Sec. 2251.152. RATE APPROVAL REQUIRED; EXCEPTION
Sec. 2251.153. COMMISSIONER ACTION
Sec. 2251.154. ADDITIONAL INFORMATION
Sec. 2251.155. RATE FILING APPROVAL BY COMMISSIONER;
USE OF RATE
Sec. 2251.156. RATE FILING DISAPPROVAL BY
COMMISSIONER; HEARING
[Sections 2251.157-2251.200 reserved for expansion]
SUBCHAPTER E. STANDARD RATE INDEX FOR PERSONAL AUTOMOBILE
INSURANCE
Sec. 2251.201. APPLICABILITY OF SUBCHAPTER
Sec. 2251.202. STATEWIDE STANDARD RATE INDEX FOR
PERSONAL AUTOMOBILE INSURANCE
Sec. 2251.203. ESTABLISHMENT OF OTHER STANDARD RATE
INDEXES
Sec. 2251.204. APPLICATION TO CERTAIN COUNTY MUTUAL
INSURANCE COMPANIES
[Sections 2251.205-2251.250 reserved for expansion]
SUBCHAPTER F. EXEMPTIONS FOR CERTAIN INSURERS FROM RATE FILING AND
APPROVAL REQUIREMENTS
Sec. 2251.251. APPLICABILITY OF SUBCHAPTER
Sec. 2251.252. EXEMPTION FROM CERTAIN OTHER LAW
CHAPTER 2251. RATES
SUBCHAPTER A. GENERAL PROVISIONS FOR RATES
Sec. 2251.001. PURPOSE. The purposes of this subchapter
and Subchapters B, C, D, and E are to:
(1) promote the public welfare by regulating insurance
rates to prohibit excessive, inadequate, or unfairly
discriminatory rates;
(2) promote the availability of insurance;
(3) promote price competition among insurers to
provide rates and premiums that are responsive to competitive
market conditions;
(4) prohibit price-fixing agreements and other
anticompetitive behavior by insurers; and
(5) provide regulatory procedures for the maintenance
of appropriate information reporting systems. (V.T.I.C. Art.
5.13-2, Sec. 1 (part).)
Sec. 2251.002. DEFINITIONS. In this chapter:
(1) "Disallowed expenses" includes:
(A) administrative expenses, other than
acquisition, loss control, and safety engineering expenses, that
exceed 110 percent of the industry median for those expenses;
(B) lobbying expenses;
(C) advertising expenses, other than for
advertising:
(i) directly related to the services or
products provided by the insurer; or
(ii) designed and directed at loss
prevention;
(D) amounts paid by an insurer:
(i) as damages in an action brought against
the insurer for bad faith, fraud, or any matters other than payment
under the insurance contract; or
(ii) as fees, fines, penalties, or
exemplary damages for a civil or criminal violation of law;
(E) contributions to:
(i) social, religious, political, or
fraternal organizations; or
(ii) organizations engaged in legislative
advocacy;
(F) except as authorized by commissioner rule,
fees and assessments paid to advisory organizations;
(G) any amount determined by the commissioner to
be excess premiums charged by the insurer; and
(H) any unreasonably incurred expenses, as
determined by the commissioner after notice and hearing.
(2) "Filer" means an insurer that files rates,
prospective loss costs, or supplementary rating information under
this chapter.
(3) "Prospective loss cost" means that portion of a
rate that:
(A) does not include a provision for expenses or
profit, other than loss adjustment expenses; and
(B) is based on historical aggregate losses and
loss adjustment expenses projected by development to the ultimate
value of those losses and expenses and projected through trending
to a future point in time.
(4) "Rate" means the cost of insurance per exposure
unit, whether expressed as a single number or as a prospective loss
cost, adjusted to account for the treatment of expenses, profit,
and individual insurer variation in loss experience, before
applying individual risk variations based on loss or expense
considerations.
(5) "Rating manual" means a publication or schedule
that lists rules, classifications, territory codes and
descriptions, rates, premiums, and other similar information used
by an insurer to determine the applicable premium charged an
insured.
(6) "Residential property insurance" means insurance
coverage against loss to real or tangible personal property at a
fixed location that is provided through a homeowners insurance
policy, including a tenants insurance policy, a condominium owners
insurance policy, or a residential fire and allied lines insurance
policy.
(7) "Supplementary rating information" means any
manual, rating schedule, plan of rules, rating rules,
classification systems, territory codes and descriptions, rating
plans, and other similar information used by the insurer to
determine the applicable premium for an insured. The term includes
factors and relativities, including increased limits factors,
classification relativities, deductible relativities, premium
discount, and other similar factors and rating plans such as
experience, schedule, and retrospective rating.
(8) "Supporting information" means:
(A) the experience and judgment of the filer and
the experience or information of other insurers or advisory
organizations on which the filer relied;
(B) the interpretation of any other information
on which the filer relied;
(C) a description of methods used in making a
rate; and
(D) any other information the department
requires to be filed. (V.T.I.C. Art. 5.13-2, Secs. 3(a)(1), (2),
(4), (5), (6), (7), (8), (9); Art. 5.13-2C, Sec. 1(2).)
Sec. 2251.003. APPLICABILITY OF CERTAIN SUBCHAPTERS. (a)
This subchapter and Subchapters B, C, D, and E apply to:
(1) an insurer to which Article 5.13 applies, other
than the Texas Windstorm Insurance Association, the FAIR Plan
Association, and the Texas Automobile Insurance Plan Association;
and
(2) except as provided by Subsection (c), a Lloyd's
plan, reciprocal or interinsurance exchange, and county mutual
insurance company with respect to the lines of insurance described
by Subsection (b).
(b) This subchapter and Subchapters B, C, D, and E apply to
all lines of the following kinds of insurance written under an
insurance policy or contract issued by an insurer authorized to
engage in the business of insurance in this state:
(1) general liability insurance;
(2) residential and commercial property insurance,
including farm and ranch insurance and farm and ranch owners
insurance;
(3) personal and commercial casualty insurance,
except as provided by Section 2251.004;
(4) medical professional liability insurance;
(5) fidelity and surety bonds other than criminal
court appearance bonds;
(6) personal umbrella insurance;
(7) personal liability insurance;
(8) guaranteed auto protection (GAP) insurance;
(9) involuntary unemployment insurance;
(10) financial guaranty insurance;
(11) inland marine insurance;
(12) rain insurance;
(13) hail insurance on farm crops; and
(14) personal and commercial automobile insurance.
(c) Sections 2251.008, 2251.052, 2251.101, 2251.102,
2251.103, 2251.104, 2251.105, and 2251.107 do not apply to a
Lloyd's plan or a reciprocal or interinsurance exchange with
respect to commercial property insurance, inland marine insurance,
rain insurance, or hail insurance on farm crops. (V.T.I.C. Art.
5.13-2, Secs. 1 (part), 2(a), 3(a)(3).)
Sec. 2251.004. REGULATION OF INLAND MARINE RATES. The
commissioner shall adopt rules governing the manner in which rates
for the various classifications of risks insured under inland
marine insurance, as determined by the commissioner, are regulated.
(V.T.I.C. Art. 5.13-2, Sec. 2(b) (part).)
Sec. 2251.005. NOTICE OF RATE INCREASE FOR RESIDENTIAL
PROPERTY INSURANCE POLICIES. (a) An insurer shall notify a
policyholder of a residential property insurance policy issued by
the insurer of a rate increase scheduled to take effect on the
policy's renewal that will result in a premium amount to be paid by
the policyholder that is at least 10 percent greater than the lesser
of:
(1) the premium amount paid by the policyholder for
coverage under the policy during the 12-month period preceding the
policy's renewal date; or
(2) the premium amount paid by the policyholder for
coverage under the policy during the policy period preceding the
policy's renewal date.
(b) An insurer shall send the notice required by Subsection
(a) before the renewal date and not later than the 30th day before
the date the rate increase is scheduled to take effect.
(c) An insurer may send the notice described by Subsection
(a) to any policyholder of a residential property insurance policy
issued by the insurer, regardless of whether the policyholder's
premium amount will increase as a result of the scheduled rate
change.
(d) The commissioner by rule may exempt an insurer from the
notice requirements of this section for a short-term policy, as
defined by the commissioner, that is written by the insurer.
(V.T.I.C. Art. 5.13-2, Sec. 15.)
Sec. 2251.006. CONSIDERATION OF CERTAIN OTHER LAW. In
reviewing rates under this chapter, the commissioner shall consider
any state or federal law that may affect rates for liability
coverage included in an insurance policy subject to this chapter.
(V.T.I.C. Art. 5.13-2, Sec. 14.)
Sec. 2251.007. ADMINISTRATIVE PROCEDURE ACT APPLICABLE.
Chapter 2001, Government Code, applies to all rate hearings
conducted under this chapter. (V.T.I.C. Art. 5.13-2, Sec. 10.)
Sec. 2251.008. QUARTERLY REPORT OF INSURER; LEGISLATIVE
REPORT. (a) The commissioner shall require each insurer subject to
this subchapter to quarterly file with the commissioner information
relating to changes in losses, premiums, and market share since
January 1, 1993.
(b) Quarterly, the commissioner shall report to the
governor, the lieutenant governor, and the speaker of the house of
representatives regarding:
(1) the information provided to the commissioner in
the insurers' reports under Subsection (a); and
(2) market conduct, especially consumer complaints.
(V.T.I.C. Art. 5.13-2, Sec. 5(e).)
[Sections 2251.009-2251.050 reserved for expansion]
SUBCHAPTER B. RATE STANDARDS
Sec. 2251.051. EXCESSIVE, INADEQUATE, AND UNFAIRLY
DISCRIMINATORY RATES. (a) A rate is excessive, inadequate, or
unfairly discriminatory for purposes of this chapter as provided by
this section.
(b) A rate is excessive if the rate is likely to produce a
long-term profit that is unreasonably high in relation to the
insurance coverage provided.
(c) A rate is inadequate if:
(1) the rate is insufficient to sustain projected
losses and expenses to which the rate applies; and
(2) continued use of the rate:
(A) endangers the solvency of an insurer using
the rate; or
(B) has the effect of substantially lessening
competition or creating a monopoly in a market.
(d) A rate is unfairly discriminatory if the rate:
(1) is not based on sound actuarial principles;
(2) does not bear a reasonable relationship to the
expected loss and expense experience among risks; or
(3) is based wholly or partly on the race, creed,
color, ethnicity, or national origin of the policyholder or an
insured. (V.T.I.C. Art. 5.13-2, Sec. 3(b).)
Sec. 2251.052. RATE STANDARDS. (a) In setting rates, an
insurer shall consider:
(1) past and prospective loss experience:
(A) inside this state; and
(B) outside this state if the data from this
state are not credible;
(2) the peculiar hazards and experiences of individual
risks, past and prospective, inside and outside this state;
(3) the insurer's actuarially credible historical
premium, exposure, loss, and expense experience;
(4) catastrophe hazards in this state;
(5) operating expenses, excluding disallowed
expenses;
(6) investment income;
(7) a reasonable margin for profit; and
(8) any other factors inside and outside this state:
(A) determined to be relevant by the insurer; and
(B) not disallowed by the commissioner.
(b) A rate may not be excessive, inadequate, unreasonable,
or unfairly discriminatory for the risks to which the rate applies.
(c) The insurer may:
(1) group risks by classification to establish rates
and minimum premiums; and
(2) modify classification rates to produce rates for
individual risks in accordance with rating plans that establish
standards for measuring variations in those risks on the basis of
any factor listed in Subsection (a).
(d) In setting rates that apply only to policyholders in
this state, an insurer shall use available premium, loss, claim,
and exposure information from this state to the full extent of the
actuarial credibility of that information. The insurer may use
experience from outside this state as necessary to supplement
information from this state that is not actuarially credible.
(e) In determining rating territories and territorial
rates, an insurer shall use methods based on sound actuarial
principles. (V.T.I.C. Art. 5.13-2, Secs. 4(b), (c), (d), (e),
(f).)
[Sections 2251.053-2251.100 reserved for expansion]
SUBCHAPTER C. RATE FILINGS
Sec. 2251.101. RATE FILINGS AND SUPPORTING INFORMATION.
(a) Except as provided by Subchapter D, for risks written in this
state, each insurer shall file with the commissioner all rates,
applicable rating manuals, supplementary rating information, and
additional information as required by the commissioner.
(b) The commissioner by rule shall determine the
information required to be included in the filing, including:
(1) categories of supporting information and
supplementary rating information;
(2) statistics or other information to support the
rates to be used by the insurer, including information necessary to
evidence that the computation of the rate does not include
disallowed expenses; and
(3) information concerning policy fees, service fees,
and other fees that are charged or collected by the insurer under
Section 550.001 or 4005.003. (V.T.I.C. Art. 5.13-2, Secs. 5(a),
(a-1).)
Sec. 2251.102. FILING REQUIREMENTS FOR INSURERS WITH LESS
THAN FIVE PERCENT OF MARKET. In determining filing requirements
under Section 2251.101 for an insurer with less than five percent of
the market, the commissioner shall consider insurer and
market-specific attributes, as applicable. The commissioner shall
determine filing requirements for those insurers accordingly to
accommodate premium volume and loss experience, targeted markets,
limitations on coverage, and any potential barriers to market entry
or growth. (V.T.I.C. Art. 5.13-2, Sec. 5(a-2).)
Sec. 2251.103. DISAPPROVAL OF RATE IN RATE FILING; HEARING.
(a) The commissioner shall disapprove a rate if the commissioner
determines that the rate filing made under this chapter does not
meet the standards established under Subchapter B.
(b) If the commissioner disapproves a filing, the
commissioner shall issue an order specifying in what respects the
filing fails to meet the requirements of this chapter.
(c) The filer is entitled to a hearing on written request
made to the commissioner not later than the 30th day after the date
the order disapproving the rate filing takes effect. (V.T.I.C.
Art. 5.13-2, Secs. 7(a), (b).)
Sec. 2251.104. DISAPPROVAL OF RATE IN EFFECT; HEARING.
(a) The commissioner may disapprove a rate that is in effect only
after a hearing. The commissioner shall provide the filer at least
20 days' written notice.
(b) The commissioner must issue an order disapproving a rate
under Subsection (a) not later than the 15th day after the close of
the hearing. The order must:
(1) specify in what respects the rate fails to meet the
requirements of this chapter; and
(2) state the date on which further use of the rate is
prohibited, which may not be earlier than the 45th day after the
close of the hearing under this section. (V.T.I.C. Art. 5.13-2,
Sec. 7(c).)
Sec. 2251.105. GRIEVANCE. (a) An insured who is aggrieved
with respect to any filing under this chapter that is in effect, or
the public insurance counsel, may apply to the commissioner in
writing for a hearing on the filing. The application must specify
the grounds for the applicant's grievance.
(b) The commissioner shall hold a hearing on an application
filed under Subsection (a) not later than the 30th day after the
date the commissioner receives the application if the commissioner
determines that:
(1) the application is made in good faith;
(2) the applicant would be aggrieved as alleged if the
grounds specified in the application were established; and
(3) the grounds specified in the application otherwise
justify holding the hearing.
(c) The commissioner shall provide written notice of a
hearing under Subsection (b) to the applicant and each insurer that
made the filing not later than the 10th day before the date of the
hearing.
(d) If, after the hearing, the commissioner determines that
the filing does not meet the requirements of this chapter, the
commissioner shall issue an order:
(1) specifying in what respects the filing fails to
meet those requirements; and
(2) stating the date on which the filing is no longer
in effect, which must be within a reasonable period after the order
date.
(e) The commissioner shall send copies of the order issued
under Subsection (d) to the applicant and each affected insurer.
(V.T.I.C. Art. 5.13-2, Secs. 5(c), (d).)
Sec. 2251.106. ROLE OF PUBLIC INSURANCE COUNSEL. (a) On
request to the commissioner, the public insurance counsel may
review all rate filings and additional information provided by an
insurer under this chapter. Confidential information reviewed
under this subsection remains confidential.
(b) The public insurance counsel, not later than the 30th
day after the date of a rate filing under this chapter, may file
with the commissioner a written objection to:
(1) an insurer's rate filing; or
(2) the criteria on which the insurer relied to
determine the rate.
(c) A written objection filed under Subsection (b) must
contain the reasons for the objection. (V.T.I.C. Art. 5.13-2, Sec.
16.)
Sec. 2251.107. PUBLIC INSPECTION OF INFORMATION. Each
filing made, and any supporting information filed, under this
chapter is open to public inspection as of the date of the filing.
(V.T.I.C. Art. 5.13-2, Sec. 6.)
[Sections 2251.108-2251.150 reserved for expansion]
SUBCHAPTER D. PRIOR APPROVAL OF RATES UNDER
CERTAIN CIRCUMSTANCES
Sec. 2251.151. REQUIREMENT TO FILE RATES FOR PRIOR APPROVAL
UNDER CERTAIN CIRCUMSTANCES. (a) The commissioner by order may
require an insurer to file with the department for the
commissioner's approval all rates, supplementary rating
information, and any supporting information in accordance with this
subchapter if the commissioner determines that:
(1) the insurer's rates require supervision because of
the insurer's financial condition or rating practices; or
(2) a statewide insurance emergency exists.
(b) From the date of the filing of the rate with the
department to the effective date of the new rate, the insurer's
previously filed rate that is in effect on the date of the filing
remains in effect.
(c) The commissioner may require an insurer to file the
insurer's rates under this section until the commissioner
determines that the conditions described by Subsection (a) no
longer exist.
(d) For purposes of this section, a rate is filed with the
department on the date the department receives the rate filing.
(V.T.I.C. Art. 5.13-2, Secs. 5A(a), (b) (part), (j), (m).)
Sec. 2251.152. RATE APPROVAL REQUIRED; EXCEPTION. (a) An
insurer subject to this subchapter may not use a rate until the rate
has been filed with the department and approved by the commissioner
in accordance with this subchapter.
(b) Notwithstanding Subsection (a), after a rate filing is
approved under this subchapter, an insurer, without prior approval
of the commissioner, may use any rate subsequently filed by the
insurer if the subsequently filed rate does not exceed the lesser
of:
(1) 107.5 percent of the rate approved by the
commissioner; or
(2) 110 percent of any rate used by the insurer in the
previous 12-month period.
(c) Filed rates under Subsection (b) take effect on the date
specified by the insurer. (V.T.I.C. Art. 5.13-2, Secs. 5A(b)
(part), (k).)
Sec. 2251.153. COMMISSIONER ACTION. (a) Not later than the
30th day after the date a rate is filed with the department under
this subchapter, the commissioner shall:
(1) approve the rate if the commissioner determines
that the rate complies with the requirements of this chapter; or
(2) disapprove the rate if the commissioner determines
that the rate does not comply with the requirements of this chapter.
(b) Except as provided by Subsection (c), if a rate has not
been approved or disapproved by the commissioner before the
expiration of the 30-day period described by Subsection (a), the
rate is considered approved and the insurer may use the rate unless
the rate proposed in the filing represents an increase of 12.5
percent or more from the insurer's previously filed rate.
(c) For good cause, the commissioner may, on the expiration
of the 30-day period described by Subsection (a), extend the period
for approval or disapproval of a rate for one additional 30-day
period. The commissioner and the insurer may not by agreement
extend the 30-day period described by Subsection (a). (V.T.I.C.
Art. 5.13-2, Secs. 5A(c), (d), (e), (f).)
Sec. 2251.154. ADDITIONAL INFORMATION. (a) If the
department determines that the information filed by an insurer
under this chapter is incomplete or otherwise deficient, the
department may request additional information from the insurer. If
the department requests additional information from the insurer
during the 30-day period provided by Section 2251.153(a) or under a
second 30-day period provided under Section 2251.153(c), the time
between the date the department submits the request to the insurer
and the date the department receives the information requested is
not included in the computation of the first 30-day period or the
second 30-day period, as applicable.
(b) For purposes of this section, the date of the
department's submission of a request for additional information is:
(1) the date of the department's electronic mailing or
telephone call relating to the request for additional information;
or
(2) the postmarked date on the department's letter
relating to the request for additional information. (V.T.I.C. Art.
5.13-2, Sec. 5A(g).)
Sec. 2251.155. RATE FILING APPROVAL BY COMMISSIONER; USE OF
RATE. (a) The commissioner shall approve a rate filing under this
subchapter if the proposed rate is adequate, not excessive, and not
unfairly discriminatory.
(b) If the commissioner approves a rate filing under this
section, the commissioner shall provide the insurer with a written
or electronic notification of the approval. The insurer may use the
rate on receipt of the approval notice. (V.T.I.C. Art. 5.13-2,
Secs. 5A(h), (i).)
Sec. 2251.156. RATE FILING DISAPPROVAL BY COMMISSIONER;
HEARING. (a) If the commissioner disapproves a rate filing under
Section 2251.153(a)(2), the commissioner shall issue an order
disapproving the filing in accordance with Section 2251.103(b).
(b) An insurer whose rate filing is disapproved is entitled
to a hearing in accordance with Section 2251.103(c). (V.T.I.C.
Art. 5.13-2, Sec. 5A(l).)
[Sections 2251.157-2251.200 reserved for expansion]
SUBCHAPTER E. STANDARD RATE INDEX FOR PERSONAL AUTOMOBILE
INSURANCE
Sec. 2251.201. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter governs rate regulation of personal automobile
insurance issued by a county mutual insurance company as prescribed
by this subchapter.
(b) The commissioner by rule may designate other types of
insurers that, historically and as of June 11, 2003, have served
exclusively or are serving exclusively the high-risk, nonstandard
market and meet capitalization and solvency requirements set by the
commissioner. An insurer designated by the commissioner under this
subsection is governed by this subchapter. (V.T.I.C. Art. 5.13-2,
Secs. 13(a), (g).)
Sec. 2251.202. STATEWIDE STANDARD RATE INDEX FOR PERSONAL
AUTOMOBILE INSURANCE. (a) Using standard and generally accepted
actuarial techniques, the commissioner shall annually compute and
publish a statewide standard rate index that accurately reflects
the average statewide rates for classifications for each of the
following coverages under a personal automobile insurance policy:
(1) bodily injury liability;
(2) property damage liability;
(3) personal injury protection;
(4) medical payments;
(5) uninsured and underinsured motorist;
(6) physical damage--collision; and
(7) physical damage--other than collision.
(b) The commissioner shall compute the rate index using the
benchmark rate in effect for personal automobile insurance under
former Article 5.101 on June 11, 2003. The commissioner shall
adjust the rate index annually to reflect average changes in claims
costs in the personal automobile insurance market in this state.
(V.T.I.C. Art. 5.13-2, Secs. 13(b), (c) (part).)
Sec. 2251.203. ESTABLISHMENT OF OTHER STANDARD RATE
INDEXES. The commissioner may compute and establish standard rate
indexes other than the rate index required under Section
2251.202(a) for any of the personal automobile insurance coverages
listed under that subsection as necessary to implement this
subchapter. (V.T.I.C. Art. 5.13-2, Sec. 13(d).)
Sec. 2251.204. APPLICATION TO CERTAIN COUNTY MUTUAL
INSURANCE COMPANIES. (a) For purposes of this subsection, a
"nonstandard rate" is a rate that is 30 percent or more above the
standard rate index as determined by the commissioner under this
subchapter. A county mutual insurance company that issues personal
automobile insurance policies only at nonstandard rates is subject
to filing requirements, as determined by the commissioner by rule,
if the insurance company and the company's affiliated companies or
group has a market share of less than 3.5 percent.
(b) In setting rates, a county mutual insurance company
subject to this section must comply with the rating standards
established under Subchapter B. The commissioner may inspect the
books and records of the company at any time to ensure compliance
with the rating standards.
(c) Not later than the first day any change in the rates of a
county mutual insurance company subject to this section takes
effect, the company shall file for informational purposes those
rates and any additional information required by the department.
The commissioner by rule shall determine the information required
to be provided in the filing under this subsection.
(d) A county mutual insurance company described by
Subsection (a) is subject to Chapter 2254. A county mutual
insurance company not described by Subsection (a) is:
(1) subject to Chapter 2151; and
(2) required to comply with the other filing
requirements of this chapter and any other provision of this code
applicable to a county mutual insurance company. (V.T.I.C. Art.
5.13-2, Secs. 13(e), (f).)
[Sections 2251.205-2251.250 reserved for expansion]
SUBCHAPTER F. EXEMPTIONS FOR CERTAIN INSURERS FROM RATE FILING AND
APPROVAL REQUIREMENTS
Sec. 2251.251. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to:
(1) an insurer, including an insurance company, a
reciprocal or interinsurance exchange, a mutual insurance company,
a capital stock insurance company, a county mutual insurance
company, a Lloyd's plan, or any other legal entity authorized to
write residential property insurance in this state; and
(2) an insurer's affiliate, as described by this code,
if the affiliate is authorized to write residential property
insurance. (V.T.I.C. Art. 5.13-2C, Sec. 1(1).)
Sec. 2251.252. EXEMPTION FROM CERTAIN OTHER LAW. (a)
Except as provided by Subsections (b) and (c), an insurer is exempt
from the rate filing and approval requirements of this chapter if
the insurer, during the calendar year preceding the date filing is
otherwise required under this chapter, issued residential property
insurance policies in this state that accounted for less than two
percent of the total amount of premiums collected by insurers for
residential property insurance policies issued in this state, more
than 50 percent of which cover property:
(1) valued at less than $100,000; and
(2) located in an area designated by the commissioner
as underserved for residential property insurance under Chapter
2004.
(b) If an insurer described by Subsection (a) is a member of
an affiliated insurance group, this subchapter applies to the
insurer only if the total aggregate premium collected by the group
accounts for less than two percent of the total amount of premiums
collected by insurers for residential property insurance policies
issued in this state.
(c) An insurer described by Subsection (a) that proposes to
increase the premium rates charged policyholders for a residential
property insurance product by an amount that is 10 percent or more
over the amount the insurer charged policyholders for the same or an
equivalent residential property insurance product during the
preceding calendar year must file the insurer's proposed rates in
accordance with this chapter and, if applicable, obtain approval of
the proposed rates as provided by this chapter. (V.T.I.C. Art. 5.13-2C, Secs. 2, 3(a), (b).)
CHAPTER 2252. RATE ADMINISTRATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2252.001. APPLICABILITY OF CHAPTER
Sec. 2252.002. CONSTRUCTION OF CHAPTER
[Sections 2252.003-2252.050 reserved for expansion]
SUBCHAPTER B. RATING SYSTEMS
Sec. 2252.051. INSURER TO PROVIDE RATE INFORMATION
Sec. 2252.052. RIGHT TO HEARING ON RATING SYSTEM
Sec. 2252.053. APPEAL OF DECISION ON RATING SYSTEM
[Sections 2252.054-2252.100 reserved for expansion]
SUBCHAPTER C. LOSS AND EXPENSE EXPERIENCE
Sec. 2252.101. RECORDING AND REPORTING OF LOSS AND
EXPENSE EXPERIENCE AND OTHER DATA
Sec. 2252.102. RULES AND PLANS REQUIRING INTERCHANGE
OF LOSS EXPERIENCE
Sec. 2252.103. EXCHANGE OF RATE INFORMATION WITH OTHER
STATES
[Sections 2252.104-2252.150 reserved for expansion]
SUBCHAPTER D. PROHIBITED ACTS
Sec. 2252.151. PROHIBITED CONDUCT RELATED TO RATES AND
PREMIUMS
CHAPTER 2252. RATE ADMINISTRATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2252.001. APPLICABILITY OF CHAPTER. (a) Except as
provided by Subsections (b) and (c), this chapter applies to an
insurer, including a corporation, reciprocal or interinsurance
exchange, mutual insurance company, association, Lloyd's plan, or
other organization, writing casualty insurance or writing
fidelity, surety, or guaranty bonds, on risks or operations in this
state.
(b) This chapter does not apply to:
(1) a farm mutual insurance company or association
regulated under Chapter 911; or
(2) a county mutual insurance company regulated under
Chapter 912.
(c) This chapter does not apply to the writing of:
(1) automobile insurance;
(2) life, health, or accident insurance;
(3) professional liability insurance;
(4) reinsurance;
(5) aircraft insurance;
(6) fraternal benefit insurance;
(7) fire insurance;
(8) workers' compensation insurance;
(9) marine insurance, including noncommercial inland
marine insurance and ocean marine insurance;
(10) title insurance;
(11) explosion insurance, except insurance against
loss from personal injury or property damage resulting accidentally
from:
(A) a steam boiler;
(B) a heater or pressure vessel;
(C) an electrical device;
(D) an engine; or
(E) all machinery and appliances used in
connection with or in the operation of a boiler, heater, vessel,
electrical device, or engine described by Paragraphs (A)-(D); or
(12) insurance coverage for any of the following
conditions or risks:
(A) weather or climatic conditions, including
lightning, tornado, windstorm, hail, cyclone, rain, or frost and
freeze;
(B) earthquake or volcanic eruption;
(C) smoke or smudge;
(D) excess or deficiency of moisture;
(E) flood;
(F) the rising water of an ocean or an ocean's
tributary;
(G) bombardment, invasion, insurrection, riot,
civil war or commotion, military or usurped power, or any order of a
civil authority made to prevent the spread of a conflagration,
epidemic or catastrophe;
(H) vandalism or malicious mischief;
(I) strike or lockout;
(J) water or other fluid or substance resulting
from:
(i) the breakage or leakage of a sprinkler,
pump, or other apparatus erected for extinguishing fire, or a water
pipe or other conduit or container; or
(ii) casual water entering a building
through a leak or opening in the building or by seepage through
building walls; or
(K) accidental damage to a sprinkler, pump, fire
apparatus, pipe, or other conduit or container described by
Paragraph (J)(i). (V.T.I.C. Art. 5.13, Secs. (a) (part), (b),
(c).)
Sec. 2252.002. CONSTRUCTION OF CHAPTER. This chapter does
not limit in any manner the kinds or classes of insurance that an
insurer may write under an appropriate statute or the insurer's
charter or certificate of authority. (V.T.I.C. Art. 5.13, Sec.
(d).)
[Sections 2252.003-2252.050 reserved for expansion]
SUBCHAPTER B. RATING SYSTEMS
Sec. 2252.051. INSURER TO PROVIDE RATE INFORMATION. (a) An
insurer shall provide all information relevant to a rate used by the
insurer to:
(1) any person who is or will be affected by the rate
or by a modification of the rate; or
(2) the authorized representative of a person
described by Subdivision (1).
(b) The insurer shall provide the information within a
reasonable time after receipt of a written request for the
information and on payment of any reasonable charge set by the
insurer. (V.T.I.C. Art. 5.18, Sec. (a).)
Sec. 2252.052. RIGHT TO HEARING ON RATING SYSTEM. (a) An
insurer shall provide within this state reasonable means by which a
person aggrieved by the application of the insurer's rating system
may be heard on written request to review the manner in which the
rating system has been applied in connection with the insurance
afforded the person.
(b) The person may be heard under this section in person or
through the person's authorized representative. (V.T.I.C.
Art. 5.18, Sec. (b) (part).)
Sec. 2252.053. APPEAL OF DECISION ON RATING SYSTEM. Any
party affected by an action taken by an insurer or rating
organization in response to a request for a hearing under Section
2252.052 may appeal that action to the commissioner not later than
the 10th day after the date the party receives written notice of the
action. (V.T.I.C. Art. 5.18, Sec. (b) (part).)
[Sections 2252.054-2252.100 reserved for expansion]
SUBCHAPTER C. LOSS AND EXPENSE EXPERIENCE
Sec. 2252.101. RECORDING AND REPORTING OF LOSS AND EXPENSE
EXPERIENCE AND OTHER DATA. (a) The commissioner shall adopt
reasonable rules and statistical plans for the recording and
reporting of loss experience and other required data by insurers.
The rules and plans must ensure that each insurer's total loss and
expense experience is made available at least as frequently as
biennially in the form and with the detail necessary to aid in
determining whether rating plans comply with the standards provided
by this chapter, Chapter 1901, Chapter 2251, or Subchapter B,
Chapter 5.
(b) In adopting the rules and statistical plans, the
commissioner shall have due regard for:
(1) the rating plans used under this chapter, Chapter
1901, Chapter 2251, or Subchapter B, Chapter 5; and
(2) the rules and forms of plans used in other states
to ensure that the rules and plans are as uniform as is practicable.
(c) Each insurer shall use the statistical plans adopted
under this section to record and report loss experience and other
required data in accordance with the rules adopted by the
commissioner.
(d) The commissioner may designate other agencies to gather
and compile the loss experience and other data.
(e) The commissioner may adopt modifications to statistical
plans adopted under this section. (V.T.I.C. Art. 5.19, Sec. (a).)
Sec. 2252.102. RULES AND PLANS REQUIRING INTERCHANGE OF
LOSS EXPERIENCE. The commissioner may adopt reasonable rules and
plans requiring the interchange of loss experience necessary for
the application of rating plans. (V.T.I.C. Art. 5.19, Sec. (b).)
Sec. 2252.103. EXCHANGE OF RATE INFORMATION WITH OTHER
STATES. To further the uniform administration of rating laws, the
department or an insurer may:
(1) exchange information and experience data with
insurance supervisory officials, insurers, and rating
organizations in other states; and
(2) consult and cooperate with the individuals or
entities described by Subdivision (1) with respect to ratemaking
and the application of rating systems. (V.T.I.C. Art. 5.19, Sec.
(c).)
[Sections 2252.104-2252.150 reserved for expansion]
SUBCHAPTER D. PROHIBITED ACTS
Sec. 2252.151. PROHIBITED CONDUCT RELATED TO RATES AND
PREMIUMS. (a) A person or organization may not knowingly give
false or misleading information to the department or commissioner,
an insurer, or any other entity that will in any manner affect the
proper determination of rates or premiums.
(b) An insurer or agent who knowingly misrepresents the
actual or replacement value of real or personal property to achieve
an unfair competitive rate advantage commits an offense. (V.T.I.C. Art. 5.21.)
CHAPTER 2253. RATING TERRITORIES
Sec. 2253.001. RATING TERRITORIES
CHAPTER 2253. RATING TERRITORIES
Sec. 2253.001. RATING TERRITORIES. (a) Notwithstanding
any other provision of this code, an insurer may use rating
territories that subdivide a county only if:
(1) the county is subdivided; and
(2) the rate for any subdivision in the county is not
greater than 15 percent higher than the rate used in any other
subdivision in the county by that insurer.
(b) For residential property insurance or personal
automobile insurance, the commissioner by rule may allow a greater
rate difference than the rate difference specified by Subsection (a). (V.T.I.C. Art. 5.171.)
CHAPTER 2254. PREMIUM REFUND FOR CERTAIN PERSONAL LINES
Sec. 2254.001. DEFINITIONS
Sec. 2254.002. INAPPLICABILITY OF CHAPTER
Sec. 2254.003. REFUND OR DISCOUNT BASED ON EXCESSIVE
OR UNFAIRLY DISCRIMINATORY PREMIUM
RATES
Sec. 2254.004. RATE HEARING BY STATE OFFICE OF
ADMINISTRATIVE HEARINGS
CHAPTER 2254. PREMIUM REFUND FOR CERTAIN PERSONAL LINES
Sec. 2254.001. DEFINITIONS. In this chapter:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other legal entity authorized to write residential property
insurance or personal automobile insurance in this state. The term
includes an affiliate, as described by this code, that is
authorized to write residential property insurance. The term does
not include:
(A) the Texas Windstorm Insurance Association
under Chapter 2210; or
(B) the FAIR Plan Association under Chapter 2211.
(2) "Personal automobile insurance" means motor
vehicle insurance coverage for the ownership, maintenance, or use
of a private passenger, utility, or miscellaneous type motor
vehicle, including a motor home, trailer, or recreational vehicle,
that is:
(A) owned or leased by one or more individuals;
and
(B) not used primarily for the delivery of goods,
materials, or services, other than for use in farm or ranch
operations.
(3) "Residential property insurance" means insurance
coverage against loss to real or tangible personal property at a
fixed location that is provided through:
(A) a homeowners policy, including a tenants
policy;
(B) a condominium owners policy; or
(C) a residential fire and allied lines policy.
(V.T.I.C. Art. 5.144, Sec. (a).)
Sec. 2254.002. INAPPLICABILITY OF CHAPTER. This chapter
does not apply to rates for personal automobile insurance or
residential property insurance for which an insurer obtains prior
rate approval under Subchapter D, Chapter 2251. (V.T.I.C.
Art. 5.144, Sec. (f).)
Sec. 2254.003. REFUND OR DISCOUNT BASED ON EXCESSIVE OR
UNFAIRLY DISCRIMINATORY PREMIUM RATES. (a) This section applies
to a rate filed on or after the effective date of Chapter 206, Acts
of the 78th Legislature, Regular Session, 2003.
(b) Except as provided by Section 2254.004(c), if the
commissioner determines that an insurer has charged a rate for
personal automobile insurance or residential property insurance
that is excessive or unfairly discriminatory, as described by
Section 2251.051, the commissioner may:
(1) order the insurer to refund directly to each
affected policyholder the portion of the premium that is excessive
or unfairly discriminatory, if that portion of the premium is at
least 7.5 percent of the total premium charged for the coverage; or
(2) if that portion of the premium is less than 7.5
percent of the total premium, order the insurer to provide, to each
affected policyholder:
(A) who renews the policy, a future premium
discount equal to the amount of the excessive or unfairly
discriminatory portion of the premium; and
(B) who does not renew or whose coverage is
otherwise terminated, a refund in the amount described by
Subdivision (1). (V.T.I.C. Art. 5.144, Secs. (b), (g).)
Sec. 2254.004. RATE HEARING BY STATE OFFICE OF
ADMINISTRATIVE HEARINGS. (a) Not later than the 20th day after
the date of an order under Section 2254.003, the insurer may request
that the State Office of Administrative Hearings conduct a rate
hearing to determine whether the rate that is subject to the order
is excessive or unfairly discriminatory.
(b) The office of public insurance counsel may participate
in and present evidence at the hearing.
(c) After completion of the hearing, the administrative law
judge shall:
(1) prepare a proposal for decision under Section
40.058; and
(2) remand the matter to the commissioner recommending
that the commissioner affirm the order or that:
(A) the commissioner complete an additional
review of the order not later than the 10th day after the date the
commissioner receives the proposal;
(B) the parties enter into negotiations; or
(C) the commissioner take within a period
specified by the administrative law judge other appropriate action
with respect to the order.
(d) The commissioner's action or failure to act on a
proposal or recommendation under Subsection (c) is subject to
judicial review under Subchapter D, Chapter 36. (V.T.I.C.
Art. 5.144, Secs. (c), (d), (e).)
[Chapters 2255-2300 reserved for expansion]
SUBTITLE I. POLICY FORMS IN GENERAL
CHAPTER 2301. POLICY FORMS
SUBCHAPTER A. POLICY FORMS GENERALLY
Sec. 2301.001. PURPOSE
Sec. 2301.002. DEFINITIONS
Sec. 2301.003. APPLICABILITY OF SUBCHAPTER
Sec. 2301.004. EXEMPTION FOR LARGE RISKS
Sec. 2301.005. REGULATION OF INLAND MARINE FORMS
Sec. 2301.006. FILING AND APPROVAL OF FORMS
Sec. 2301.007. DISAPPROVAL OF FORMS; WITHDRAWAL OF
APPROVAL
Sec. 2301.008. ADOPTION AND USE OF STANDARD FORMS
Sec. 2301.009. PUBLIC INSPECTION OF INFORMATION
[Sections 2301.010-2301.050 reserved for expansion]
SUBCHAPTER B. POLICY FORMS FOR PERSONAL AUTOMOBILE
INSURANCE COVERAGE AND RESIDENTIAL PROPERTY INSURANCE COVERAGE
Sec. 2301.051. DEFINITIONS
Sec. 2301.052. REGULATION OF POLICY FORMS AND
ENDORSEMENTS
Sec. 2301.053. REQUIREMENTS FOR FORMS; PLAIN-LANGUAGE
REQUIREMENT
Sec. 2301.054. CERTAIN CONTRACTS OR AGREEMENTS
PROHIBITED; REVOCATION OF CERTIFICATE
OF AUTHORITY
Sec. 2301.055. RULES
CHAPTER 2301. POLICY FORMS
SUBCHAPTER A. POLICY FORMS GENERALLY
Sec. 2301.001. PURPOSE. The purposes of this subchapter
are to:
(1) promote the availability of insurance;
(2) regulate the insurance forms used for lines of
insurance to which this subchapter applies to ensure that the forms
are not unjust, unfair, inequitable, misleading, or deceptive; and
(3) provide regulatory procedures for the maintenance
of appropriate information reporting systems. (V.T.I.C. Art.
5.13-2, Sec. 1 (part).)
Sec. 2301.002. DEFINITIONS. In this subchapter:
(1) "Form" means an insurance policy form or a printed
endorsement form.
(2) "Residential property insurance" means insurance
coverage against loss to real or tangible personal property at a
fixed location that is provided through a homeowners insurance
policy, including a tenants insurance policy, a condominium owners
insurance policy, or a residential fire and allied lines insurance
policy.
(3) "Supporting information" means any information
required by the department to be filed. (V.T.I.C. Art. 5.13-2,
Secs. 3(a)(7), (9) (part); New.)
Sec. 2301.003. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter applies to:
(1) an insurer to which Article 5.13 applies, other
than the Texas Windstorm Insurance Association, the FAIR Plan
Association, and the Texas Automobile Insurance Plan Association;
and
(2) except as provided by Subsections (c) and (d), a
Lloyd's plan, reciprocal or interinsurance exchange, and county
mutual insurance company with respect to the lines of insurance
described by Subsection (b).
(b) This subchapter applies to all lines of the following
kinds of insurance written under an insurance policy or contract
issued by an insurer authorized to engage in the business of
insurance in this state:
(1) general liability insurance;
(2) residential and commercial property insurance,
including farm and ranch insurance and farm and ranch owners
insurance;
(3) personal and commercial casualty insurance,
except as provided by Section 2301.005;
(4) medical professional liability insurance;
(5) fidelity and surety bonds other than criminal
court appearance bonds;
(6) personal umbrella insurance;
(7) personal liability insurance;
(8) guaranteed auto protection (GAP) insurance;
(9) involuntary unemployment insurance;
(10) financial guaranty insurance;
(11) inland marine insurance;
(12) rain insurance;
(13) hail insurance on farm crops; and
(14) personal and commercial automobile insurance.
(c) Section 2301.009 does not apply to a Lloyd's plan or a
reciprocal or interinsurance exchange with respect to commercial
property insurance.
(d) This subchapter does not apply to a Lloyd's plan or
reciprocal or interinsurance exchange with respect to inland marine
insurance, rain insurance, or hail insurance on farm crops.
(V.T.I.C. Art. 5.13-2, Secs. 1 (part), 2(a), 3(a)(3).)
Sec. 2301.004. EXEMPTION FOR LARGE RISKS. Sections
2301.006, 2301.007(a) and (b), and 2301.008 do not apply to forms
for use with an insured that has:
(1) total insured property values of $5 million or
more;
(2) total annual gross revenues of $10 million or
more; or
(3) a total premium of $25,000 or more for property
insurance, $25,000 or more for general liability insurance, or
$50,000 or more for multiperil insurance. (V.T.I.C. Art. 5.13-2,
Sec. 8(f).)
Sec. 2301.005. REGULATION OF INLAND MARINE FORMS. The
commissioner shall adopt rules governing the manner in which forms
for the various classifications of risks insured under inland
marine insurance, as determined by the commissioner, are regulated.
(V.T.I.C. Art. 5.13-2, Sec. 2(b) (part).)
Sec. 2301.006. FILING AND APPROVAL OF FORMS. (a) Except as
provided by Section 2301.008, an insurer may not deliver or issue
for delivery in this state a form for use in writing insurance
described by Section 2301.003 unless the form has been filed with
and approved by the commissioner.
(b) An insurer must file the form not later than the 60th day
before the date an insurer uses the form or delivers the form for
use.
(c) A filed form is approved at the expiration of 60 days
after the date the form is filed unless the commissioner by order
approves or disapproves the form during the 60-day period. The
commissioner's approval of a filed form constitutes a waiver of any
unexpired portion of the 60-day period.
(d) The commissioner may extend by not more than 10 days the
60-day period described by Subsection (c) during which the
commissioner may approve or disapprove a form filed by an insurer.
The commissioner shall notify the insurer of the extension before
the expiration of the 60-day period.
(e) A filed form for which an extension has been granted
under Subsection (d) is considered approved at the expiration of
the extension period described by that subsection absent an earlier
approval or disapproval of the form. (V.T.I.C. Art. 5.13-2, Secs.
8(a), (b) (part).)
Sec. 2301.007. DISAPPROVAL OF FORMS; WITHDRAWAL OF
APPROVAL. (a) The commissioner may disapprove a form filed under
Section 2301.006 or withdraw approval of a form if the form:
(1) violates any law, including a rule adopted under
this code; or
(2) contains a provision or has a title or heading that
is unjust or deceptive, encourages misrepresentation, or violates
public policy.
(b) For good cause shown, the commissioner may withdraw
approval of a form after notice and hearing.
(c) An order issued by the commissioner disapproving a form,
or a notice of the commissioner's intention to withdraw approval of
a form, must state the grounds for the disapproval or withdrawal of
approval in sufficient detail to reasonably inform the insurer of
those grounds.
(d) An order of withdrawal of approval of a form takes
effect on the date prescribed by the commissioner in the order. The
commissioner may not prescribe a date earlier than the 30th day
after the effective date of the order, as prescribed by the
commissioner.
(e) An insurer may not use a form in this state after the
commissioner disapproves the form or withdraws approval of the
form. (V.T.I.C. Art. 5.13-2, Secs. 8(b) (part), (c), (d), (e)
(part).)
Sec. 2301.008. ADOPTION AND USE OF STANDARD FORMS. The
commissioner may adopt standard insurance policy forms, printed
endorsement forms, and related forms other than insurance policy
forms and printed endorsement forms, that an insurer may use
instead of the insurer's own forms in writing insurance subject to
this subchapter. (V.T.I.C. Art. 5.13-2, Sec. 8(e) (part).)
Sec. 2301.009. PUBLIC INSPECTION OF INFORMATION. Each
filing made, and any supporting information filed, under this
subchapter is open to public inspection as of the date of the
filing. (V.T.I.C. Art. 5.13-2, Sec. 6.)
[Sections 2301.010-2301.050 reserved for expansion]
SUBCHAPTER B. POLICY FORMS FOR PERSONAL AUTOMOBILE
INSURANCE COVERAGE AND RESIDENTIAL PROPERTY INSURANCE COVERAGE
Sec. 2301.051. DEFINITIONS. In this subchapter:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock insurance company, county mutual insurance company, Lloyd's
plan, or other legal entity authorized to write personal automobile
insurance or residential property insurance in this state. The
term includes an affiliate, as described by this code, that is
authorized to write and is writing personal automobile insurance or
residential property insurance in this state. The term does not
include:
(A) the Texas Windstorm Insurance Association;
(B) the FAIR Plan Association; or
(C) the Texas Automobile Insurance Plan
Association.
(2) "Personal automobile insurance" means automobile
insurance coverage for the ownership, maintenance, or use of a
private passenger, utility, or miscellaneous type motor vehicle,
including a motor home, trailer, or recreational vehicle, that is:
(A) owned or leased by one or more individuals;
and
(B) not primarily used for the delivery of goods,
materials, or services, other than for use in farm or ranch
operations.
(3) "Residential property insurance" means insurance
coverage against loss to tangible personal property or to
residential real property at a fixed location that is provided
through a homeowners insurance policy, including a tenants
insurance policy, a condominium owners insurance policy, or a
residential fire and allied lines insurance policy. (V.T.I.C. Art.
5.145, Sec. 1.)
Sec. 2301.052. REGULATION OF POLICY FORMS AND ENDORSEMENTS.
(a) Notwithstanding any other provision of this code and except as
provided by this section, Subchapter A applies to an insurer with
respect to insurance policy forms and endorsements for personal
automobile insurance and residential property insurance.
(b) An insurer may continue to use an insurance policy form
or endorsement promulgated, approved, or adopted under Article 5.06
or 5.35 before June 11, 2003, on written notification to the
commissioner that the insurer will continue to use the form or
endorsement. (V.T.I.C. Art. 5.145, Sec. 2.)
Sec. 2301.053. REQUIREMENTS FOR FORMS; PLAIN-LANGUAGE
REQUIREMENT. (a) Each form filed in accordance with this
subchapter must comply with applicable state and federal law.
(b) Each form for a personal automobile insurance policy
must provide the coverages mandated under Subchapters C and D,
Chapter 1952, unless the coverages are rejected by the named
insured in the manner provided by those subchapters.
(c) A form may not be used unless the form is written in
plain language. For purposes of this section, a form is written in
plain language if:
(1) the form achieves the minimum score established by
the commissioner on the Flesch reading ease test or an equivalent
test selected by the commissioner; or
(2) at the commissioner's option, the form conforms to
the language requirements in a National Association of Insurance
Commissioners model act relating to plain language.
(d) Subsection (c) does not apply to policy language that is
mandated by state or federal law. (V.T.I.C. Art. 5.145, Sec. 3.)
Sec. 2301.054. CERTAIN CONTRACTS OR AGREEMENTS PROHIBITED;
REVOCATION OF CERTIFICATE OF AUTHORITY. (a) A contract or
agreement that is not written into an application for personal
automobile insurance coverage and the personal automobile
insurance policy is void and violates this code.
(b) A contract or agreement described by Subsection (a)
constitutes grounds for the revocation of an insurer's certificate
of authority to write personal automobile insurance in this state.
(V.T.I.C. Art. 5.145, Sec. 4.)
Sec. 2301.055. RULES. The commissioner may adopt
reasonable and necessary rules to implement this subchapter.
(V.T.I.C. Art. 5.145, Sec. 6.)
SECTION 3. TITLE 12, INSURANCE CODE. The Insurance Code is
amended by adding Title 12 to read as follows:
TITLE 12. OTHER COVERAGE
CHAPTER 3501. CREDIT INVOLUNTARY UNEMPLOYMENT INSURANCE
CHAPTER 3502. MORTGAGE GUARANTY INSURANCE
CHAPTER 3503. SURETY BONDS AND RELATED INSTRUMENTS
TITLE 12. OTHER COVERAGE
CHAPTER 3501. CREDIT INVOLUNTARY UNEMPLOYMENT INSURANCE
Sec. 3501.001. DEFINITION
Sec. 3501.002. AUTHORIZATION
Sec. 3501.003. RATES AND FORMS
CHAPTER 3501. CREDIT INVOLUNTARY UNEMPLOYMENT INSURANCE
Sec. 3501.001. DEFINITION. In this chapter, "credit
involuntary unemployment insurance" means insurance that
indemnifies a debtor for installment or other periodic payments on
an indebtedness while the debtor is involuntarily unemployed. The
term includes policy forms and endorsements that define involuntary
unemployment to provide coverage and a premium charge for
interruption or reduction of a debtor's income during periods of
leave, whether paid or unpaid, authorized by the federal Family and
Medical Leave Act of 1993 (29 U.S.C. Section 2601 et seq.), as
amended, or other state or federal law. (V.T.I.C. Art. 21.79E
(part).)
Sec. 3501.002. AUTHORIZATION. (a) Any insurer authorized
to write any form of casualty insurance in this state may also write
group or individual credit involuntary unemployment insurance.
(b) Credit involuntary unemployment insurance may be
written alone or in conjunction with credit life insurance, credit
accident and health insurance, or both, in a policy issued by an
authorized insurer.
(c) Credit involuntary unemployment insurance may not be
written in contravention of Chapter 15, Business & Commerce Code.
(V.T.I.C. Art. 21.79E (part).)
Sec. 3501.003. RATES AND FORMS. Rates and forms for credit
involuntary unemployment insurance must be set and filed in
accordance with Chapters 2251 and 2301 and Article 5.13-2. (V.T.I.C. Art. 21.79E (part).)
CHAPTER 3502. MORTGAGE GUARANTY INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 3502.001. APPLICABILITY OF CHAPTER
Sec. 3502.002. APPLICABILITY OF OTHER LAW
Sec. 3502.003. MORTGAGE GUARANTY INSURANCE DEFINED
Sec. 3502.004. AUTHORIZED REAL ESTATE SECURITY DEFINED
[Sections 3502.005-3502.050 reserved for expansion]
SUBCHAPTER B. MORTGAGE GUARANTY INSURERS
Sec. 3502.051. GENERAL ELIGIBILITY TO WRITE MORTGAGE
GUARANTY INSURANCE
Sec. 3502.052. ELIGIBILITY OF FOREIGN OR ALIEN INSURER
TO WRITE MORTGAGE GUARANTY INSURANCE
Sec. 3502.053. DISCRIMINATION PROHIBITED
[Sections 3502.054-3502.100 reserved for expansion]
SUBCHAPTER C. FORMS AND RATES
Sec. 3502.101. RATE FILINGS
Sec. 3502.102. RATE STANDARDS
Sec. 3502.103. RECORDING AND REPORTING OF LOSS AND
EXPENSE EXPERIENCE AND OTHER DATA
Sec. 3502.104. POLICY FORM FILINGS
Sec. 3502.105. POLICY FORM STANDARDS
Sec. 3502.106. CLAIM AGAINST RESIDENTIAL BORROWER
Sec. 3502.107. EXEMPTION; WITHDRAWAL OF APPROVAL
Sec. 3502.108. RULES
[Sections 3502.109-3502.150 reserved for expansion]
SUBCHAPTER D. FINANCIAL REQUIREMENTS
Sec. 3502.151. DEFINITION
Sec. 3502.152. CAPITAL AND SURPLUS REQUIREMENTS
Sec. 3502.153. UNEARNED PREMIUM RESERVE
Sec. 3502.154. LOSS RESERVE
Sec. 3502.155. CONTINGENCY RESERVE
Sec. 3502.156. OUTSTANDING TOTAL LIABILITY
Sec. 3502.157. LIMIT ON INSURANCE OF CERTAIN LOANS
Sec. 3502.158. LIMIT ON COVERAGE FOR CERTAIN INSUREDS
[Sections 3502.159-3502.200 reserved for expansion]
SUBCHAPTER E. LENDER POWERS AND DUTIES
Sec. 3502.201. DEFINITION
Sec. 3502.202. NOTICE OF BORROWER'S RIGHT TO CANCEL
Sec. 3502.203. REFUND OF PREMIUM
Sec. 3502.204. ADVERTISING OF "INSURED LOANS"
CHAPTER 3502. MORTGAGE GUARANTY INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 3502.001. APPLICABILITY OF CHAPTER. This chapter
applies only to mortgage guaranty insurance and does not affect any
other provision of this code. (V.T.I.C. Art. 21.50, Sec. 1A(a).)
Sec. 3502.002. APPLICABILITY OF OTHER LAW. (a) This code
and other state laws apply to the business of mortgage guaranty
insurance.
(b) This chapter controls to the extent of any conflict with
another provision of this code or other state law. (V.T.I.C.
Art. 21.50, Sec. 10.)
Sec. 3502.003. MORTGAGE GUARANTY INSURANCE DEFINED. In
this chapter, "mortgage guaranty insurance" means insurance
against:
(1) financial loss because of nonpayment of principal,
interest, and other amounts agreed to be paid under the terms of a
note, bond, or other evidence of indebtedness that is secured by an
authorized real estate security, provided the improvement on the
real estate is:
(A) one or more residential buildings designed to
be occupied by not more than four families;
(B) a condominium unit; or
(C) one or more buildings designed to be occupied
by five or more families or for industrial or commercial purposes;
or
(2) financial loss because of nonpayment of rent and
other amounts agreed to be paid under the terms of a written lease
for the possession, use, or occupancy of real estate, provided the
improvement on the real estate is one or more buildings designed to
be occupied for industrial or commercial purposes. (V.T.I.C.
Art. 21.50, Sec. 1 (part).)
Sec. 3502.004. AUTHORIZED REAL ESTATE SECURITY
DEFINED. (a) In this chapter, "authorized real estate security"
means:
(1) a proprietary lease and a stock membership
certificate issued to a tenant stockholder or resident member of a
fee simple cooperative housing corporation as defined in Section
216, Internal Revenue Code of 1986; or
(2) a mortgage, deed of trust, wraparound mortgage, or
other instrument that constitutes a first lien or charge on real
estate or is considered to be the equivalent of a first lien or
charge on real estate by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, the Federal Housing
Finance Board, a successor of one of those entities, an agency of
this state, or a federal agency, provided:
(A) the improvement on the real estate is a
building or buildings designed to be occupied as specified by
Section 3502.003(1); and
(B) the real estate loan is a type of loan that
is:
(i) authorized to be made by a bank, savings
and loan association, credit union, or insurer that is supervised
and regulated by a department of this state or a federal agency;
(ii) authorized to be made by a mortgage
banker that is an approved seller-servicer of the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation,
or a successor of one of those entities; or
(iii) approved by the federal secretary of
housing and urban development for participation in a mortgage
insurance program.
(b) The lien on real estate described by Subsection (a)(2)
may be subject and subordinate to:
(1) the lien of a public bond, assessment, or tax if
there is not a delinquent installment, call, or payment of or under
the bond, assessment, or tax;
(2) an outstanding mineral, oil, or timber right,
right-of-way, easement or right-of-way support, sewer right,
building restriction, other restriction or covenant, or other
condition or regulation of use; or
(3) an outstanding lease on the real estate under
which rents or profits are reserved to the owner. (V.T.I.C.
Art. 21.50, Sec. 1 (part).)
[Sections 3502.005-3502.050 reserved for expansion]
SUBCHAPTER B. MORTGAGE GUARANTY INSURERS
Sec. 3502.051. GENERAL ELIGIBILITY TO WRITE MORTGAGE
GUARANTY INSURANCE. (a) An insurer that writes anywhere any class
of insurance other than mortgage guaranty insurance may not be
issued or continue to hold a certificate of authority to write
mortgage guaranty insurance in this state.
(b) A mortgage guaranty insurer that writes anywhere the
class of mortgage guaranty insurance described by Section
3502.003(1)(C) or (2) may not be issued or continue to hold a
certificate of authority to write in this state the class of
mortgage guaranty insurance described by Section 3502.003(1)(A) or
(B). (V.T.I.C. Art. 21.50, Sec. 2 (part).)
Sec. 3502.052. ELIGIBILITY OF FOREIGN OR ALIEN INSURER TO
WRITE MORTGAGE GUARANTY INSURANCE. The department may not issue a
certificate of authority to a foreign or alien insurer writing
mortgage guaranty insurance unless the insurer demonstrates a
satisfactory operating experience in the insurer's state of
domicile. (V.T.I.C. Art. 21.50, Sec. 2 (part).)
Sec. 3502.053. DISCRIMINATION PROHIBITED. In extending or
issuing mortgage guaranty insurance, a mortgage guaranty insurer
may not discriminate on the basis of the applicant's sex, marital
status, race, color, creed, national origin, disability, or age or
solely on the basis of the geographic location of the property to be
insured unless:
(1) the discrimination related to geographic location
is for a business purpose that is not a mere pretext for unfair
discrimination; or
(2) the refusal, cancellation, or limitation of the
insurance is required by law or regulatory mandate. (V.T.I.C.
Art. 21.50, Sec. 1A(l) (part).)
[Sections 3502.054-3502.100 reserved for expansion]
SUBCHAPTER C. FORMS AND RATES
Sec. 3502.101. RATE FILINGS. (a) Not later than the 15th
day before the date a mortgage guaranty insurer uses a rate or
supplementary rate information in this state, the insurer must file
the rate and supplementary rate information, and any changes to the
rate or supplementary rate information, with the department.
(b) The rate filing must include adequate supporting data,
including:
(1) information on:
(A) past and prospective loss experience in this
state and outside the state;
(B) catastrophe hazards;
(C) expenses of operation; and
(D) a reasonable margin for profit and
contingencies;
(2) an explanation of the insurer's interpretation of
any statistical data on which the insurer relied;
(3) an explanation and description of the methods used
in making the rates; and
(4) certification by an appropriate official of the
insurer relating to the appropriateness of the charges, rates, or
rating plans based on reasonable assumptions and accompanied by
adequate supporting information. (V.T.I.C. Art. 21.50, Secs.
1A(f) (part), (g).)
Sec. 3502.102. RATE STANDARDS. (a) A mortgage guaranty
insurance rate, rating plan, or charge may not be excessive,
inadequate, or unfairly discriminatory and must be reasonable with
respect to the benefits provided.
(b) This chapter does not require the department to:
(1) establish standard and absolute rates or a single
and uniform rate for each risk or risks; or
(2) compel all insurers to adhere to rates previously
filed by other insurers.
(c) The department may accept different rates for different
insurers for the same risk or risks on mortgage guaranty insurance.
The department may accept different rates for different insurers as
filed by any authorized insurer unless the department finds that
the filing does not meet the requirements of this chapter.
(V.T.I.C. Art. 21.50, Secs. 1A(f) (part), (j).)
Sec. 3502.103. RECORDING AND REPORTING OF LOSS AND EXPENSE
EXPERIENCE AND OTHER DATA. (a) The commissioner shall adopt
reasonable rules and statistical plans for the recording and
reporting of loss experience and other required data by a mortgage
guaranty insurer. The rules and plans must ensure that each
insurer's total loss and expense experience is made available in
the form and with the detail the commissioner considers necessary.
(b) Each mortgage guaranty insurer shall use the
statistical plans adopted under this section to record and report
loss experience and other required data in accordance with the
rules adopted by the commissioner.
(c) The commissioner may modify statistical plans adopted
under this section. (V.T.I.C. Art. 21.50, Sec. 1A(i).)
Sec. 3502.104. POLICY FORM FILINGS. (a) Except as
provided by Subsection (b), not later than the 15th day before the
date a mortgage guaranty insurer uses a policy form, related form,
classification, or rule in this state, the insurer must file the
form, classification, or rule with the department.
(b) This subsection applies only to a policy form, related
form, classification, or rule a mortgage guaranty insurer uses in
this state for a policy that provides coverage for a pool or group
of loans in connection with the issuance of mortgage-backed
securities or bonds. Not later than the 15th day after the date the
insurer uses the form, classification, or rule, the insurer shall
file the form, classification, or rule with the department.
(V.T.I.C. Art. 21.50, Secs. 1A(b) (part), (l) (part).)
Sec. 3502.105. POLICY FORM STANDARDS. The commissioner
shall disapprove a mortgage guaranty insurance policy form if the
form:
(1) violates this code or rules adopted by the
commissioner; or
(2) contains a provision that encourages
misrepresentation or is unjust, unfair, inequitable, misleading,
deceptive, or contrary to law or to the public policy of this state.
(V.T.I.C. Art. 21.50, Sec. 1A(c) (part).)
Sec. 3502.106. CLAIM AGAINST RESIDENTIAL BORROWER. A
mortgage guaranty insurance policy may not contain a provision that
allows subrogation rights or any other claim by the insurer against
the borrower for a deficiency arising from a foreclosure sale of a
single-family dwelling that is occupied by the borrower as the
borrower's principal residence. (V.T.I.C. Art. 21.50, Sec. 1A(c)
(part).)
Sec. 3502.107. EXEMPTION; WITHDRAWAL OF APPROVAL. (a) A
policy form, related form, classification, or rule a mortgage
guaranty insurer uses in this state, including for a policy
described by Section 3502.104(b), is exempt from department
approval.
(b) If the commissioner finds, after notice and hearing,
that the filing of a policy form, related form, classification, or
rule is no longer in the best interest of the public, the
commissioner may issue an order:
(1) suspending the exemption under Subsection (a) with
respect to one or more insurers that filed the form,
classification, or rule; and
(2) requiring each affected insurer to cease and
desist using the form, classification, or rule, as the commissioner
specifies.
(c) If the commissioner finds, after notice and hearing,
that a filed policy form or rate no longer meets the requirements of
this code, the commissioner may issue an order withdrawing approval
of the form or rate. The order must specify the reasons the form or
rate no longer meets the requirements. An order under this
subsection may not take effect until the 30th day after the date the
commissioner issues the order.
(d) The commissioner must provide to each insurer that filed
a form, classification, rule, or rate that is the subject of a
hearing under this section notice of the hearing not later than the
20th day before the date of the hearing. The notice must specify
the matters to be considered at the hearing. (V.T.I.C. Art. 21.50,
Secs. 1A(b) (part), (k), (l) (part).)
Sec. 3502.108. RULES. (a) The commissioner may, after
notice and hearing, adopt reasonable rules:
(1) relating to the minimum standards for coverage
under policy forms consistent with the purpose of this chapter and
the public policy of this state; and
(2) necessary to establish guidelines, procedures,
methods, standards, and criteria by which the types of forms and
documents submitted to the department are to be reviewed and acted
on by the department.
(b) The department may establish requirements for data and
information filed under this chapter. (V.T.I.C. Art. 21.50, Secs.
1A(d), (e), (h).)
[Sections 3502.109-3502.150 reserved for expansion]
SUBCHAPTER D. FINANCIAL REQUIREMENTS
Sec. 3502.151. DEFINITION. In this subchapter,
"contingency reserve" means an additional premium reserve
established to protect policyholders against the effect of adverse
economic cycles or losses. (V.T.I.C. Art. 21.50, Sec. 1(c).)
Sec. 3502.152. CAPITAL AND SURPLUS REQUIREMENTS. An
insurer may not write mortgage guaranty insurance unless the
insurer has the minimum capital and surplus required by Chapter 861
for a general casualty company. (V.T.I.C. Art 21.50, Sec. 2.
(part).)
Sec. 3502.153. UNEARNED PREMIUM RESERVE. (a) Except as
provided by Subsection (b), the unearned premium reserve on
mortgage guaranty insurance must be computed in accordance with
this code.
(b) For a policy covering a risk period of more than one
year, the unearned premium reserve must be computed in accordance
with standards adopted by the commissioner after appropriate
hearings. (V.T.I.C. Art. 21.50, Sec. 3.)
Sec. 3502.154. LOSS RESERVE. A mortgage guaranty insurer
shall determine the loss reserve using the case basis method. The
loss reserve must include a reserve for claims incurred but not
reported. (V.T.I.C. Art. 21.50, Sec. 4.)
Sec. 3502.155. CONTINGENCY RESERVE. (a) In addition to
the capital, surplus, and reserves required by Sections 3502.152,
3502.153, and 3502.154, a mortgage guaranty insurer shall establish
a contingency reserve and report the contingency reserve as a
liability in the insurer's financial statements.
(b) To establish and maintain the contingency reserve, the
mortgage guaranty insurer shall annually contribute to the
contingency reserve 50 percent of the earned premiums on the
insurer's mortgage guaranty insurance business. The reserved
earned premiums may be released to the insurer's surplus annually
after the premiums have been maintained for 120 months.
(c) In addition, the mortgage guaranty insurer may withdraw
premiums from the contingency reserve in any year for which the
insurer can demonstrate to the department that the incurred losses
for that year exceed 35 percent of the corresponding earned
premiums for that year. The insurer shall reduce any subsequent
annual release to surplus from the established contingency reserve
by an amount equal to the amount withdrawn and released for the
losses. The insurer shall deduct from subsequent annual releases
any balance that exceeds the normal annual release from the
contingency reserve. (V.T.I.C. Art. 21.50, Sec. 5.)
Sec. 3502.156. OUTSTANDING TOTAL LIABILITY. (a) A
mortgage guaranty insurer may not at any time have outstanding
under the insurer's aggregate mortgage guaranty insurance policies
a total liability, net of reinsurance, that exceeds the sum of the
insurer's capital, surplus, and contingency reserve, multiplied by
25.
(b) A mortgage guaranty insurer shall compute the insurer's
liability for the purposes of this section on the basis of the
insurer's liability under the election as provided by Section
3502.158. An insurer shall compute the insurer's liability for
leases on the basis of the insurer's liability as determined by the
department.
(c) A mortgage guaranty insurer that has outstanding total
liability that exceeds the amount computed under Subsection (a) may
not write new mortgage guaranty insurance business until the
insurer's total liability no longer exceeds that amount. (V.T.I.C.
Art. 21.50, Sec. 6.)
Sec. 3502.157. LIMIT ON INSURANCE OF CERTAIN
LOANS. (a) In this section, "contiguous" means not separated by
more than one-half mile.
(b) A mortgage guaranty insurer may not insure loans secured
by properties in a single housing tract or a contiguous tract in an
amount that exceeds 10 percent of the insurer's capital, surplus,
and contingency reserve.
(c) In determining the amount of risk under this section, a
mortgage guaranty insurer shall deduct from the total direct risk
insured any applicable reinsurance in an assuming insurer
authorized to engage in the business of mortgage guaranty insurance
in this state. (V.T.I.C. Art. 21.50, Sec. 8.)
Sec. 3502.158. LIMIT ON COVERAGE FOR CERTAIN INSUREDS. For
the classes of insurance described by Section 3502.003(1), a
mortgage guaranty insurer shall elect to:
(1) limit the insurer's coverage, net of reinsurance,
to a maximum of 25 percent of the entire indebtedness to the
insured; or
(2) pay the entire indebtedness to the insured and
acquire title to the authorized real estate security. (V.T.I.C.
Art. 21.50, Sec. 7.)
[Sections 3502.159-3502.200 reserved for expansion]
SUBCHAPTER E. LENDER POWERS AND DUTIES
Sec. 3502.201. DEFINITION. In this subchapter, "lender"
has the meaning assigned by Section 549.001. (V.T.I.C. Art. 21.50,
Sec. 1B(d).)
Sec. 3502.202. NOTICE OF BORROWER'S RIGHT TO
CANCEL. (a) A lender that requires a borrower to purchase
mortgage guaranty insurance shall provide annually to the borrower
a copy of the following written notice printed in at least 10-point
boldfaced type:
"NOTICE OF RIGHT TO CANCEL PRIVATE MORTGAGE INSURANCE: If
you currently pay private mortgage insurance premiums, you may have
the right to cancel the insurance and cease paying premiums. This
would permit you to make a lower total monthly mortgage payment and
to possibly receive a refund of any unearned premiums on the policy.
In most cases, you have the right to cancel private mortgage
insurance if the principal balance of your loan is 80 percent or
less of the current fair market appraised value of your home. If
you want to learn whether you are eligible to cancel this insurance,
please contact us at (address and telephone number of lender) or the
Texas Department of Insurance consumer help line at (the
appropriate toll-free telephone number)."
(b) If federal law requires a lender to provide a borrower
with a written notice containing substantially the same information
required by Subsection (a), a lender that provides the notice
required by federal law within the period prescribed by federal law
satisfies the notice requirement of Subsection (a). (V.T.I.C.
Art. 21.50, Secs. 1B(a), (c).)
Sec. 3502.203. REFUND OF PREMIUM. A lender that receives a
refund of an unearned mortgage guaranty insurance premium paid by a
borrower shall remit the refund to the borrower not later than the
10th business day after the date the lender receives the refund.
(V.T.I.C. Art. 21.50, Sec. 1B(b).)
Sec. 3502.204. ADVERTISING OF "INSURED LOANS." A bank,
savings and loan association, insurer, or approved seller-servicer
of the Federal National Mortgage Association, any of whose
authorized real estate securities are insured by a mortgage
guaranty insurer, may not state in a brochure, pamphlet, or report
or any form of advertising that the real estate loans of the bank,
savings and loan association, insurer, or seller-servicer are
"insured loans" unless:
(1) the brochure, pamphlet, report, or advertising
also:
(A) clearly states that the loans are insured by
private insurers; and
(B) lists the names of the private insurers; and
(2) the insurance on the real estate loans is written
by an insurer authorized to write that insurance in this state. (V.T.I.C. Art. 21.50, Sec. 9.)
CHAPTER 3503. SURETY BONDS AND RELATED INSTRUMENTS
SUBCHAPTER A. CERTAIN REQUIRED OR PERMITTED OBLIGATIONS
Sec. 3503.001. DEFINITION
Sec. 3503.002. EXECUTION OF OBLIGATION BY SURETY
COMPANY
Sec. 3503.003. DESIGNATION OF AGENT BY CORPORATE
SURETY REQUIRED
Sec. 3503.004. WRITTEN CERTIFICATION OF REINSURANCE AS
CONDITION OF ACCEPTANCE OF OBLIGATION
Sec. 3503.005. ADDITIONAL REQUIREMENTS FOR CERTAIN
BONDS
[Sections 3503.006-3503.050 reserved for expansion]
SUBCHAPTER B. PROMPT PAYMENT OF CONSTRUCTION PAYMENT BONDS
Sec. 3503.051. DEFINITIONS
Sec. 3503.052. CONSTRUCTION OF SUBCHAPTER
Sec. 3503.053. CERTAIN TERMS VOID
Sec. 3503.054. NOTICE OF CLAIM; ACKNOWLEDGMENT AND
INVESTIGATION
Sec. 3503.055. NOTICE OF ACCEPTANCE OR REJECTION OF
CLAIM
Sec. 3503.056. PAYMENT OF CLAIM
Sec. 3503.057. RULES
[Sections 3503.058-3503.100 reserved for expansion]
SUBCHAPTER C. OTHER BONDS
Sec. 3503.101. BAIL BOND CERTIFICATES
[Sections 3503.102-3503.150 reserved for expansion]
SUBCHAPTER D. SUIT ON CERTAIN BONDS OR OTHER OBLIGATIONS
Sec. 3503.151. VENUE OF SUIT ON CERTAIN BONDS OR OTHER
OBLIGATIONS
Sec. 3503.152. RESIDENCE OF INSURANCE COMPANY
Sec. 3503.153. SERVICE OF PROCESS
Sec. 3503.154. ACCEPTANCE OF SUBCHAPTER
[Sections 3503.155-3503.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF SURETY COMPANY
Sec. 3503.201. MERGER OR CONSOLIDATION OF CERTAIN
COMPANIES
CHAPTER 3503. SURETY BONDS AND RELATED INSTRUMENTS
SUBCHAPTER A. CERTAIN REQUIRED OR PERMITTED OBLIGATIONS
Sec. 3503.001. DEFINITION. In this subchapter,
"obligation" means a bond, undertaking, recognizance, guaranty, or
other obligation that is by law or by a charter, ordinance, or rule
of a municipality, board, body, organization, court, or public
officer required or permitted to be made, given, tendered, or filed
to guarantee the performance of an act, duty, or obligation or the
refraining from an act. (V.T.I.C. Art. 7.19-1, Sec. (a) (part).)
Sec. 3503.002. EXECUTION OF OBLIGATION BY SURETY
COMPANY. (a) A surety company authorized to engage in business in
this state may execute an obligation.
(b) Except as provided by Section 3503.004 or 3503.005, the
execution of an obligation by a surety company under Subsection (a)
is in full compliance with each law, charter, ordinance, or rule
that requires:
(1) the obligation to be executed by one or more
sureties; or
(2) the executing sureties to possess any
qualification, including the requirement that a surety be a
resident, householder, or freeholder.
(c) Each municipality, board, body, organization, court,
public officer, and head of department shall accept and treat an
obligation executed by a surety company under Subsection (a) as
fully complying with each law, charter, ordinance, or rule
described by Subsection (b). (V.T.I.C. Art. 7.19-1, Sec. (a)
(part).)
Sec. 3503.003. DESIGNATION OF AGENT BY CORPORATE SURETY
REQUIRED. Notwithstanding Section 3503.002, in specifications by
a municipality for work or supplies for which sealed bids are
required, the municipality may require that a corporate surety
tender designate, in a manner satisfactory to the municipality, an
agent:
(1) who is a resident of the county in which the
municipality is located; and
(2) to whom any required notices may be delivered and
on whom process may be served in matters arising out of the
suretyship. (V.T.I.C. Art. 7.19-1, Sec. (a) (part).)
Sec. 3503.004. WRITTEN CERTIFICATION OF REINSURANCE AS
CONDITION OF ACCEPTANCE OF OBLIGATION. (a) If an obligation is in
an amount that exceeds 10 percent of the surety company's capital
and surplus, the municipality, board, body, organization, court, or
public officer may require, as a condition of accepting the
obligation, written certification that the surety company has
reinsured the portion of the risk that exceeds 10 percent of the
surety company's capital and surplus with one or more reinsurers
who are authorized, accredited, or trusteed to engage in business
in this state.
(b) The amount reinsured by a reinsurer under this section
may not exceed 10 percent of the reinsurer's capital and surplus.
(c) On request, the department shall provide the amount of
the allowed capital and surplus, as of the date of the last annual
statutory financial statement, for a surety company or reinsurer
authorized to engage in business in this state. (V.T.I.C. Art.
7.19-1, Sec. (b).)
Sec. 3503.005. ADDITIONAL REQUIREMENTS FOR CERTAIN
BONDS. (a) A bond that is made, given, tendered, or filed under
Chapter 53, Property Code, or Chapter 2253, Government Code, may be
executed only by a surety company that is authorized to write surety
bonds in this state. If the amount of the bond exceeds $100,000,
the surety company must also:
(1) hold a certificate of authority from the United
States secretary of the treasury to qualify as a surety on
obligations permitted or required under federal law; or
(2) have obtained reinsurance for any liability in
excess of $100,000 from a reinsurer that:
(A) is an authorized reinsurer in this state; and
(B) holds a certificate of authority from the
United States secretary of the treasury to qualify as a surety or
reinsurer on obligations permitted or required under federal law.
(b) To determine whether the surety on the bond or the
reinsurer holds a certificate of authority from the United States
secretary of the treasury, a party may conclusively rely on the list
published in the Federal Register by the United States Department
of the Treasury, covering the date on which the bond was executed,
of the companies holding certificates of authority as acceptable
sureties on federal bonds and as acceptable reinsuring companies.
A purchaser, insurer of title, or lender acquiring or insuring an
interest in or title to real property may also conclusively rely on,
and is protected by, a statement on a recorded bond or a sworn,
recorded statement by the surety that refers to the specific
recorded bond and states that, at the time the bond was executed,
the surety complied with Subsection (a)(1) or (2). (V.T.I.C. Art.
7.19-1, Secs. (c), (d).)
[Sections 3503.006-3503.050 reserved for expansion]
SUBCHAPTER B. PROMPT PAYMENT OF CONSTRUCTION PAYMENT BONDS
Sec. 3503.051. DEFINITIONS. In this subchapter:
(1) "Claimant" means a person directly entitled to
payment under a construction payment bond.
(2) "Construction payment bond" means a surety
agreement or obligation issued to guarantee or assure payment by a
principal obligor for work performed or materials supplied or
specially fabricated for a public or private construction project.
(3) "Notice of claim" means a written notification by
a claimant who makes a claim for payment from the surety company.
The term does not include a routine statutory notice required by
Section 53.056(b), 53.057, 53.058, 53.252(b), or 53.253, Property
Code, or Section 2253.047, Government Code.
(4) "Surety company" means an authorized surety or
guaranty company that executes and delivers a construction payment
bond as a surety for a principal obligor. (V.T.I.C. Art. 7.20, Sec.
1.)
Sec. 3503.052. CONSTRUCTION OF SUBCHAPTER. (a) This
subchapter shall be construed to encourage prompt payment of just
claims made under construction payment bonds of surety companies.
This subchapter does not foreclose any other remedy available to a
claimant by law or contract.
(b) This subchapter may not be construed to:
(1) create a private cause of action;
(2) be a precondition to judicially enforcing an
obligation under a construction payment bond;
(3) diminish any other obligation of a surety company
that exists by law; or
(4) prohibit a surety company from asserting a defense
against a construction payment bond claim in a proceeding to
enforce a claim. (V.T.I.C. Art. 7.20, Sec. 6.)
Sec. 3503.053. CERTAIN TERMS VOID. A term contained in a
construction payment bond that is inconsistent with this subchapter
is void. (V.T.I.C. Art. 7.20, Sec. 7.)
Sec. 3503.054. NOTICE OF CLAIM; ACKNOWLEDGMENT AND
INVESTIGATION. (a) A surety company that issues a construction
payment bond shall, not later than the 15th day after the date of
receipt of notice of claim under the bond:
(1) acknowledge receipt of the claim;
(2) begin any review or investigation necessary to
determine whether the surety company is obligated to satisfy the
claim under the bond; and
(3) request from the claimant each document, item of
information, accounting, statement, or form that the surety company
reasonably believes, at that time, will be required from the
claimant.
(b) If a construction payment bond provides an address to
which a notice of claim under the bond should be submitted, the
notice is effective on the date the notice is received at that
address.
(c) This subchapter does not exempt a claimant from
complying with any applicable statutory or contractual notice
requirement. (V.T.I.C. Art. 7.20, Sec. 2.)
Sec. 3503.055. NOTICE OF ACCEPTANCE OR REJECTION OF
CLAIM. (a) Except as provided by Subsection (c), a surety company
shall notify a claimant in writing of the acceptance or rejection of
a claim not later than the 30th day after the date the company
receives all documents, items of information, accountings,
statements, and forms requested by the company under Section
3503.054.
(b) If the surety company rejects all or part of the claim,
the notice required by Subsection (a) must state in specific terms
the reasons for the rejection that are known by the company at the
time of the rejection.
(c) If the surety company is unable to accept or reject the
claim within the period specified by Subsection (a), the company,
in that same period, shall notify the claimant in writing that the
company is unable to accept or reject the claim. The notice
provided under this subsection must:
(1) state the reasons for which the company needs
additional time to accept or reject the claim; and
(2) include a request for any additional information
the company reasonably needs to process the claim.
(d) Not later than the 30th day after the date a surety
company notifies a claimant under Subsection (c), the company shall
notify the claimant in writing of the acceptance or rejection of the
claim. If the company rejects all or part of the claim, the company
shall state in specific terms the reasons for the rejection that are
known by the company at the time of the rejection.
(e) In addition to any other contractual or statutory basis
for denying a claim, the surety company may reject all or part of a
claim:
(1) that is the subject of a legitimate dispute
between the principal obligor and the claimant; or
(2) for which the claimant has failed to provide
supporting documents or information the company reasonably
requested.
(f) The time limits provided by this section and Section
3503.054 may be varied by any statute requiring a construction
payment bond.
(g) This section does not preclude a surety company from
asserting any defense in an action brought by a claimant on a
construction payment bond if the company makes a good faith effort
to inform the claimant in accordance with this section of the
reasons for rejecting all or part of the claim. (V.T.I.C. Art.
7.20, Sec. 3.)
Sec. 3503.056. PAYMENT OF CLAIM. (a) If a surety company
notifies a claimant under Section 3503.055 that the company accepts
a claim or part of a claim, the company shall pay the claim not later
than the 15th day after the date of the notice.
(b) If payment of the claim or part of the claim is
conditioned on the execution of a document or performance of an act
by the claimant, the surety company shall pay the claim not later
than the seventh day after the date the company receives the
executed document or evidence that the act has been performed.
(c) For purposes of this section, payment of a claim occurs
when the surety company places the company's check or draft in the
United States mail properly addressed to the claimant or the
claimant's representative. (V.T.I.C. Art. 7.20, Sec. 4.)
Sec. 3503.057. RULES. The commissioner may adopt rules
enforcing this subchapter in cases in which a surety company
violates this subchapter as a general business practice. (V.T.I.C.
Art. 7.20, Sec. 5.)
[Sections 3503.058-3503.100 reserved for expansion]
SUBCHAPTER C. OTHER BONDS
Sec. 3503.101. BAIL BOND CERTIFICATES. (a) In any year,
an insurance company authorized to engage in fidelity and surety
insurance business in this state may become surety in an amount not
to exceed $200 with respect to each bail bond certificate issued in
that year by:
(1) an automobile club authorized to transact business
in this state; or
(2) a truck and bus association incorporated in this
state.
(b) The bail bond certificate must be a printed card or
other certificate that:
(1) is issued by:
(A) an automobile club authorized to transact
business within this state; or
(B) a truck and bus association incorporated in
this state;
(2) is issued to a member of the club or association
and signed by the member of the club or association; and
(3) contains a printed statement that:
(A) a fidelity and surety company authorized to
engage in business in this state guarantees the appearance of the
member whose signature appears on the card or certificate; and
(B) if the member fails to appear in court at the
time of trial, the fidelity and surety company will pay any fine or
forfeiture imposed on the member in an amount not to exceed $200.
(V.T.I.C. Art. 7.20-1.)
[Sections 3503.102-3503.150 reserved for expansion]
SUBCHAPTER D. SUIT ON CERTAIN BONDS OR OTHER OBLIGATIONS
Sec. 3503.151. VENUE OF SUIT ON CERTAIN BONDS OR OTHER
OBLIGATIONS. (a) This section applies to:
(1) a bond or other obligation of an insurance company
authorized to engage in business in this state and to act as surety
and guarantor of the fidelity of employees, trustees, executors,
administrators, guardians, or others appointed to, or assuming the
performance of, any public or private trust under appointment of a
court or tribunal, or under contract between private individuals or
corporations; or
(2) a bond that may be required:
(A) to be filed in a judicial proceeding;
(B) to guarantee a contract or undertaking
between:
(i) individuals;
(ii) private corporations;
(iii) individuals and corporations; or
(iv) individuals or private corporations
and the state, a municipal corporation, or a county; or
(C) of a state, county, municipal, or district
official, including a school district official.
(b) A proper court in the county in which a bond or other
obligation described by Subsection (a) is filed has jurisdiction of
a suit instituted on the bond or obligation. (V.T.I.C. Art. 7.01
(part).)
Sec. 3503.152. RESIDENCE OF INSURANCE COMPANY. An
insurance company described by Section 3503.151 is a resident of a
county in which the company engages in business. (V.T.I.C. Art.
7.01 (part).)
Sec. 3503.153. SERVICE OF PROCESS. In a suit described by
Section 3503.151, process shall be served in accordance with
Sections 804.003, 804.101, 804.102, 804.103, 804.201, 804.202,
804.203(a), (c), and (d), and 804.204, as applicable. (V.T.I.C.
Art. 7.01 (part).)
Sec. 3503.154. ACCEPTANCE OF SUBCHAPTER. The doing or
performance of any business in any county is considered an
acceptance of the provisions of this subchapter. (V.T.I.C. Art.
7.01 (part).)
[Sections 3503.155-3503.200 reserved for expansion]
SUBCHAPTER E. REGULATION OF SURETY COMPANY
Sec. 3503.201. MERGER OR CONSOLIDATION OF CERTAIN
COMPANIES. When two or more companies authorized to write
fidelity, guaranty, and surety insurance in this state merge or
consolidate and, incident to the merger or consolidation, enter
into a total reinsurance contract under which the merged or ceding
company is dissolved and that company's assets are acquired and
liabilities are assumed by the new or surviving company, the
commissioner, on finding that the contracting companies have on
deposit with the comptroller two or more deposits made for the same
or similar purposes under former Article 7.03, repealed by Chapter
388, Acts of the 55th Legislature, Regular Session, 1957, or under
Section 861.252, shall authorize the comptroller to:
(1) retain for a single purpose only the deposit of the
greatest amount and value; and
(2) permit the new or surviving company, on proper
showing that there is duplication of deposits and that the new or
surviving company is the owner of those deposits, to withdraw a
duplicate or excessive deposit. (V.T.I.C. Art. 7.02.)
SECTION 4. TITLE 14, INSURANCE CODE. The Insurance Code is
amended by adding Title 14 to read as follows:
TITLE 14. UTILIZATION REVIEW AND INDEPENDENT REVIEW
CHAPTER 4201. UTILIZATION REVIEW AGENTS
CHAPTER 4202. INDEPENDENT REVIEW ORGANIZATIONS
CHAPTER 4203. PROHIBITED CONSULTANT ACTIVITIES
TITLE 14. UTILIZATION REVIEW AND INDEPENDENT REVIEW
CHAPTER 4201. UTILIZATION REVIEW AGENTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4201.001. PURPOSE
Sec. 4201.002. DEFINITIONS
Sec. 4201.003. RULES
Sec. 4201.004. TELEPHONE ACCESS
[Sections 4201.005-4201.050 reserved for expansion]
SUBCHAPTER B. APPLICABILITY OF CHAPTER
Sec. 4201.051. PERSONS PROVIDING INFORMATION ABOUT
SCOPE OF COVERAGE OR BENEFITS
Sec. 4201.052. CERTAIN CONTRACTS WITH FEDERAL
GOVERNMENT
Sec. 4201.053. MEDICAID AND CERTAIN OTHER STATE HEALTH
OR MENTAL HEALTH PROGRAMS
Sec. 4201.054. WORKERS' COMPENSATION BENEFITS
Sec. 4201.055. HEALTH CARE SERVICE PROVIDED UNDER
AUTOMOBILE INSURANCE POLICY
Sec. 4201.056. EMPLOYEE WELFARE BENEFIT PLANS
Sec. 4201.057. HEALTH MAINTENANCE ORGANIZATIONS
Sec. 4201.058. INSURERS
[Sections 4201.059-4201.100 reserved for expansion]
SUBCHAPTER C. CERTIFICATION
Sec. 4201.101. CERTIFICATE OF REGISTRATION REQUIRED
Sec. 4201.102. REQUIREMENTS FOR CERTIFICATION
Sec. 4201.103. CERTIFICATE RENEWAL
Sec. 4201.104. CERTIFICATION AND RENEWAL FORMS
Sec. 4201.105. FEES
Sec. 4201.106. CERTIFICATE NOT TRANSFERABLE
Sec. 4201.107. REPORTING MATERIAL CHANGES
Sec. 4201.108. LIST OF UTILIZATION REVIEW AGENTS
[Sections 4201.109-4201.150 reserved for expansion]
SUBCHAPTER D. UTILIZATION REVIEW: GENERAL STANDARDS
Sec. 4201.151. UTILIZATION REVIEW PLAN
Sec. 4201.152. UTILIZATION REVIEW UNDER DIRECTION OF
PHYSICIAN
Sec. 4201.153. SCREENING CRITERIA AND REVIEW
PROCEDURES
Sec. 4201.154. REVIEW AND INSPECTION OF SCREENING
CRITERIA AND REVIEW PROCEDURES
Sec. 4201.155. LIMITATION ON NOTICE REQUIREMENTS AND
REVIEW PROCEDURES
[Sections 4201.156-4201.200 reserved for expansion]
SUBCHAPTER E. UTILIZATION REVIEW: RELATIONS WITH PATIENTS AND
HEALTH CARE PROVIDERS
Sec. 4201.201. REPETITIVE CONTACTS WITH HEALTH CARE
PROVIDER OR PATIENT; FREQUENCY OF
REVIEWS
Sec. 4201.202. OBSERVING OR PARTICIPATING IN PATIENT'S
CARE
Sec. 4201.203. MENTAL HEALTH THERAPY
Sec. 4201.204. COMPLAINT SYSTEM
Sec. 4201.205. DESIGNATED INITIAL CONTACT
Sec. 4201.206. OPPORTUNITY TO DISCUSS TREATMENT BEFORE
ADVERSE DETERMINATION
Sec. 4201.207. CHARGES BY HEALTH CARE PROVIDER FOR
PROVIDING MEDICAL INFORMATION
[Sections 4201.208-4201.250 reserved for expansion]
SUBCHAPTER F. UTILIZATION REVIEW: PERSONNEL
Sec. 4201.251. DELEGATION OF UTILIZATION REVIEW
Sec. 4201.252. PERSONNEL
Sec. 4201.253. PROHIBITED BASES FOR EMPLOYMENT,
COMPENSATION, EVALUATIONS, OR
PERFORMANCE STANDARDS
[Sections 4201.254-4201.300 reserved for expansion]
SUBCHAPTER G. NOTICE OF DETERMINATIONS
Sec. 4201.301. GENERAL DUTY TO NOTIFY
Sec. 4201.302. GENERAL TIME FOR NOTICE
Sec. 4201.303. ADVERSE DETERMINATION: CONTENTS OF
NOTICE
Sec. 4201.304. TIME FOR NOTICE OF ADVERSE
DETERMINATION
[Sections 4201.305-4201.350 reserved for expansion]
SUBCHAPTER H. APPEAL OF ADVERSE DETERMINATION
Sec. 4201.351. COMPLAINT AS APPEAL
Sec. 4201.352. WRITTEN DESCRIPTION OF APPEAL
PROCEDURES
Sec. 4201.353. APPEAL PROCEDURES MUST BE REASONABLE
Sec. 4201.354. PERSONS OR ENTITIES WHO MAY APPEAL
Sec. 4201.355. ACKNOWLEDGMENT OF APPEAL
Sec. 4201.356. DECISION BY PHYSICIAN REQUIRED;
SPECIALTY REVIEW
Sec. 4201.357. EXPEDITED APPEAL FOR DENIAL OF
EMERGENCY CARE OR CONTINUED
HOSPITALIZATION
Sec. 4201.358. RESPONSE LETTER TO INTERESTED PERSONS
Sec. 4201.359. NOTICE OF APPEAL
Sec. 4201.360. IMMEDIATE APPEAL TO INDEPENDENT REVIEW
ORGANIZATION IN LIFE-THREATENING
CIRCUMSTANCES
[Sections 4201.361-4201.400 reserved for expansion]
SUBCHAPTER I. INDEPENDENT REVIEW OF ADVERSE DETERMINATION
Sec. 4201.401. REVIEW BY INDEPENDENT REVIEW
ORGANIZATION; COMPLIANCE WITH
INDEPENDENT DETERMINATION
Sec. 4201.402. INFORMATION PROVIDED TO INDEPENDENT
REVIEW ORGANIZATION
Sec. 4201.403. PAYMENT FOR INDEPENDENT REVIEW
[Sections 4201.404-4201.450 reserved for expansion]
SUBCHAPTER J. SPECIALTY UTILIZATION REVIEW AGENTS
Sec. 4201.451. DEFINITION
Sec. 4201.452. INAPPLICABILITY OF CERTAIN OTHER LAW
Sec. 4201.453. UTILIZATION REVIEW PLAN
Sec. 4201.454. UTILIZATION REVIEW UNDER DIRECTION OF
PROVIDER OF SAME SPECIALTY
Sec. 4201.455. PERSONNEL
Sec. 4201.456. OPPORTUNITY TO DISCUSS TREATMENT BEFORE
ADVERSE DETERMINATION
Sec. 4201.457. APPEAL DECISIONS
[Sections 4201.458-4201.500 reserved for expansion]
SUBCHAPTER K. CLAIMS REVIEW OF MEDICAL NECESSITY
AND APPROPRIATENESS
Sec. 4201.501. RETROSPECTIVE REVIEW OF MEDICAL
NECESSITY AND APPROPRIATENESS
Sec. 4201.502. APPEALS OF RETROSPECTIVE ADVERSE
DETERMINATIONS
[Sections 4201.503-4201.550 reserved for expansion]
SUBCHAPTER L. CONFIDENTIALITY OF INFORMATION; ACCESS TO OTHER
INFORMATION
Sec. 4201.551. GENERAL CONFIDENTIALITY REQUIREMENT
Sec. 4201.552. CONSENT REQUIREMENTS
Sec. 4201.553. PROVIDING INFORMATION TO AFFILIATED
ENTITIES
Sec. 4201.554. PROVIDING INFORMATION TO COMMISSIONER
Sec. 4201.555. ACCESS TO RECORDED PERSONAL INFORMATION
Sec. 4201.556. PUBLISHING INFORMATION IDENTIFIABLE TO
HEALTH CARE PROVIDER
Sec. 4201.557. REQUIREMENT TO MAINTAIN DATA IN
CONFIDENTIAL MANNER
Sec. 4201.558. DESTRUCTION OF CERTAIN CONFIDENTIAL
DOCUMENTS
[Sections 4201.559-4201.600 reserved for expansion]
SUBCHAPTER M. ENFORCEMENT
Sec. 4201.601. NOTICE OF SUSPECTED VIOLATION;
COMPELLING PRODUCTION OF INFORMATION
Sec. 4201.602. ENFORCEMENT PROCEEDING
Sec. 4201.603. REMEDIES AND PENALTIES FOR VIOLATION
CHAPTER 4201. UTILIZATION REVIEW AGENTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4201.001. PURPOSE. The purpose of this chapter is to:
(1) promote the delivery of quality health care in a
cost-effective manner;
(2) ensure that a utilization review agent adheres to
reasonable standards for conducting utilization review;
(3) foster greater coordination and cooperation
between a health care provider and utilization review agent;
(4) improve communications and knowledge of benefits
among all parties concerned before an expense is incurred; and
(5) ensure that a utilization review agent maintains
the confidentiality of medical records in accordance with
applicable law. (V.T.I.C. Art. 21.58A, Sec. 1.)
Sec. 4201.002. DEFINITIONS. In this chapter:
(1) "Adverse determination" means a determination by a
utilization review agent that health care services provided or
proposed to be provided to a patient are not medically necessary.
(2) "Emergency care" means health care services
provided in a hospital emergency facility or comparable facility to
evaluate and stabilize medical conditions of a recent onset and
severity, including severe pain, that would lead a prudent
layperson possessing an average knowledge of medicine and health to
believe that the individual's condition, sickness, or injury is of
such a nature that failure to get immediate medical care could:
(A) place the individual's health in serious
jeopardy;
(B) result in serious impairment to bodily
functions;
(C) result in serious dysfunction of a bodily
organ or part;
(D) result in serious disfigurement; or
(E) for a pregnant woman, result in serious
jeopardy to the health of the fetus.
(3) "Enrollee" means an individual covered by a
health insurance policy or health benefit plan. The term includes
an individual who is covered as an eligible dependent of another
individual.
(4) "Health benefit plan" means a plan of benefits,
other than a health insurance policy, that:
(A) defines the coverage provisions for health
care for enrollees; and
(B) is offered or provided by a public or private
organization.
(5) "Health care provider" means a person,
corporation, facility, or institution that is:
(A) licensed by a state to provide or is
otherwise lawfully providing health care services; and
(B) eligible for independent reimbursement for
those health care services.
(6) "Health insurance policy" means an insurance
policy, including a policy written by a corporation subject to
Chapter 842, that provides coverage for medical or surgical
expenses incurred as a result of accident or sickness.
(7) "Life-threatening" means a disease or condition
from which the likelihood of death is probable unless the course of
the disease or condition is interrupted.
(8) "Nurse" means a professional or registered nurse,
a licensed vocational nurse, or a licensed practical nurse.
(9) "Patient" means the enrollee or an eligible
dependent of the enrollee under a health benefit plan or health
insurance policy.
(10) "Payor" means:
(A) an insurer that writes health insurance
policies;
(B) a preferred provider organization, health
maintenance organization, or self-insurance plan; or
(C) any other person or entity that provides,
offers to provide, or administers hospital, outpatient, medical, or
other health benefits to a person treated by a health care provider
in this state under a policy, plan, or contract.
(11) "Physician" means a licensed doctor of medicine
or a doctor of osteopathy.
(12) "Provider of record" means the physician or other
health care provider with primary responsibility for the care,
treatment, and services provided to an enrollee. The term includes
a health care facility if treatment is provided on an inpatient or
outpatient basis.
(13) "Utilization review" means a system for
prospective or concurrent review of the medical necessity and
appropriateness of health care services being provided or proposed
to be provided to an individual in this state. The term does not
include a review in response to an elective request for
clarification of coverage.
(14) "Utilization review agent" means an entity that
conducts utilization review for:
(A) an employer with employees in this state who
are covered under a health benefit plan or health insurance policy;
(B) a payor; or
(C) an administrator holding a certificate of
authority under Chapter 4151.
(15) "Utilization review plan" means the screening
criteria and utilization review procedures of a utilization review
agent.
(16) "Working day" means a weekday that is not a legal
holiday. (V.T.I.C. Art. 21.58A, Sec. 2 (part).)
Sec. 4201.003. RULES. (a) The commissioner may adopt rules
to implement this chapter.
(b) A rule adopted under this chapter relates only to a
person or entity subject to this chapter.
(c) The commissioner shall appoint an advisory committee to
advise the commissioner on development of rules regarding the
administration of this chapter, as authorized by Section 2001.031,
Government Code. The committee includes:
(1) the public counsel appointed under Chapter 501;
and
(2) one representative for each of the following:
(A) insurers;
(B) health maintenance organizations;
(C) group hospital service corporations;
(D) utilization review agents;
(E) employers;
(F) consumer organizations;
(G) physicians;
(H) dentists;
(I) hospitals;
(J) registered nurses; and
(K) other health care providers.
(d) The advisory committee's deliberations are subject to
Chapter 551, Government Code. (V.T.I.C. Art. 21.58A, Secs. 13,
14(f).)
Sec. 4201.004. TELEPHONE ACCESS. (a) A utilization review
agent shall:
(1) have appropriate personnel reasonably available,
by toll-free telephone at least 40 hours per week during normal
business hours in this state, to discuss patients' care and allow
response to telephone review requests;
(2) have a telephone system capable, during hours
other than normal business hours, of accepting or recording
incoming telephone calls or of providing instructions to a caller;
and
(3) respond to a call made during hours other than
normal business hours not later than the second working day after
the later of:
(A) the date the call was received; or
(B) the date the details necessary to respond
have been received from the caller.
(b) A utilization review agent must provide to the
commissioner a written description of the procedures to be used
when responding with respect to poststabilization care subsequent
to emergency treatment as requested by a treating physician or
other health care provider. (V.T.I.C. Art. 21.58A, Sec. 7.)
[Sections 4201.005-4201.050 reserved for expansion]
SUBCHAPTER B. APPLICABILITY OF CHAPTER
Sec. 4201.051. PERSONS PROVIDING INFORMATION ABOUT SCOPE OF
COVERAGE OR BENEFITS. This chapter does not apply to a person who:
(1) provides information to an enrollee about scope of
coverage or benefits provided under a health insurance policy or
health benefit plan; and
(2) does not determine whether a particular health
care service provided or to be provided to an enrollee is medically
necessary or appropriate. (V.T.I.C. Art. 21.58A, Sec. 14(a).)
Sec. 4201.052. CERTAIN CONTRACTS WITH FEDERAL GOVERNMENT.
This chapter does not apply to a contract with the federal
government to provide utilization review with respect to a patient
who is eligible for services under Title XVIII or XIX of the Social
Security Act (42 U.S.C. Section 1395 et seq. or Section 1396 et
seq.). (V.T.I.C. Art. 21.58A, Sec. 14(b)(1).)
Sec. 4201.053. MEDICAID AND CERTAIN OTHER STATE HEALTH OR
MENTAL HEALTH PROGRAMS. Except as provided by Section 4201.057,
this chapter does not apply to:
(1) the state Medicaid program;
(2) the services program for children with special
health care needs under Chapter 35, Health and Safety Code;
(3) a program administered under Title 2, Human
Resources Code;
(4) a program of the Department of State Health
Services relating to mental health services;
(5) a program of the Department of Aging and
Disability Services relating to mental retardation services; or
(6) a program of the Texas Department of Criminal
Justice. (V.T.I.C. Art. 21.58A, Sec. 14(b)(2).)
Sec. 4201.054. WORKERS' COMPENSATION BENEFITS. (a) Except
as provided by this section, this chapter applies to utilization
review of a health care service provided to a person eligible for
workers' compensation medical benefits under Title 5, Labor Code.
The commissioner shall regulate as provided by this chapter a
person who performs utilization review of a medical benefit
provided under Chapter 408, Labor Code.
(b) This section does not affect the authority of the Texas
Workers' Compensation Commission to exercise the powers granted to
that commission under Title 5, Labor Code.
(c) Title 5, Labor Code, prevails in the event of a conflict
between this chapter and Title 5, Labor Code.
(d) The commissioner and the Texas Workers' Compensation
Commission may adopt rules and enter into memoranda of
understanding as necessary to implement this section. (V.T.I.C.
Art. 21.58A, Sec. 14(c).)
Sec. 4201.055. HEALTH CARE SERVICE PROVIDED UNDER
AUTOMOBILE INSURANCE POLICY. This chapter does not apply to
utilization review of a health care service provided under an
automobile insurance policy or contract that is authorized under
Chapter 2301 or Article 5.13-2 or that is issued under Chapter 981.
(V.T.I.C. Art. 21.58A, Sec. 14(d).)
Sec. 4201.056. EMPLOYEE WELFARE BENEFIT PLANS. This
chapter does not apply to the terms or benefits of an employee
welfare benefit plan defined by Section 3(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. Section 1002(1)).
(V.T.I.C. Art. 21.58A, Sec. 14(e).)
Sec. 4201.057. HEALTH MAINTENANCE ORGANIZATIONS. (a) In
this section, "health maintenance organization" includes a health
maintenance organization that contracts with the Health and Human
Services Commission or with an agency operating part of the state
Medicaid managed care program to provide health care services to
recipients of medical assistance under Chapter 32, Human Resources
Code.
(b) This chapter applies to a health maintenance
organization except as expressly provided by this section.
(c) As a condition of holding a certificate of authority to
engage in the business of a health maintenance organization, a
health maintenance organization that performs utilization review
must:
(1) comply with this chapter, except Subchapter C; and
(2) submit to assessment of a maintenance tax under
Chapter 258 to cover the costs of administering compliance with
this subsection.
(d) The commissioner shall adopt rules for appropriate
verification and enforcement of compliance with Subsection (c).
(e) Notwithstanding Subsection (c)(1), a health maintenance
organization that performs utilization review for a person or
entity subject to this chapter, other than a person or entity for
which the health maintenance organization is the payor, must obtain
a certificate of registration under Subchapter C and shall comply
with all of the provisions of this chapter.
(f) This chapter does not prohibit or limit the distribution
of a portion of the savings from the reduction or elimination of
unnecessary medical services, treatment, supplies, confinements,
or days of confinement in a health care facility through profit
sharing, bonus, or withholding arrangements to a participating
physician or participating health care provider for providing
health care services to an enrollee. (V.T.I.C. Art. 21.58A, Secs.
14(g), (i) (part).)
Sec. 4201.058. INSURERS. (a) This chapter applies to an
insurer subject to this code that delivers or issues for delivery a
health insurance policy in this state except as expressly provided
by this section. As a condition of holding a certificate of
authority to engage in the business of insurance, an insurer that
performs utilization review shall comply with this chapter, except
Subchapter C. The insurer is subject to assessment of a maintenance
tax under Chapter 257 to cover the costs of administering
compliance with this subsection.
(b) The commissioner shall adopt rules for appropriate
verification and enforcement of compliance with Subsection (a).
(c) Notwithstanding Subsection (a), an insurer subject to
this code that performs utilization review for a person or entity
subject to this chapter, other than a person or entity for which the
insurer is the payor, must obtain a certificate of registration
under Subchapter C and shall comply with all of the provisions of
this chapter. (V.T.I.C. Art. 21.58A, Secs. 14(h), (i) (part).)
[Sections 4201.059-4201.100 reserved for expansion]
SUBCHAPTER C. CERTIFICATION
Sec. 4201.101. CERTIFICATE OF REGISTRATION REQUIRED. A
utilization review agent may not conduct utilization review unless
the commissioner issues a certificate of registration to the agent
under this subchapter. (V.T.I.C. Art. 21.58A, Secs. 2 (part),
3(a).)
Sec. 4201.102. REQUIREMENTS FOR CERTIFICATION. (a) The
commissioner may issue a certificate of registration only to an
applicant who has met all the requirements of this chapter and all
applicable rules adopted by the commissioner.
(b) As a condition of holding a certificate of registration
or renewal of a certificate, a utilization review agent must
maintain compliance with Subchapters D, E, and F. (V.T.I.C. Art.
21.58A, Secs. 3(b), 4(a).)
Sec. 4201.103. CERTIFICATE RENEWAL. Certification may be
renewed biennially by filing, not later than March 1, a renewal form
with the commissioner accompanied by a fee in an amount set by the
commissioner. (V.T.I.C. Art. 21.58A, Sec. 3(d).)
Sec. 4201.104. CERTIFICATION AND RENEWAL FORMS. (a) The
commissioner shall promulgate forms to be filed under this
subchapter for initial certification and for a renewal certificate
of registration. The form for initial certification must require:
(1) the utilization review agent's name, address,
telephone number, and normal business hours;
(2) the name and address of an agent for service of
process in this state;
(3) a summary of the utilization review plan;
(4) information concerning the categories of
personnel who will perform utilization review for the agent;
(5) a copy of the procedures established under
Subchapter H for the appeal of an adverse determination;
(6) a certification that the agent will comply with
this chapter; and
(7) a copy of the procedures for resolving oral or
written complaints initiated by enrollees, patients, or health care
providers as required by Section 4201.204.
(b) The commissioner may not require that the summary of the
utilization review plan include proprietary details. (V.T.I.C.
Art. 21.58A, Sec. 3(e).)
Sec. 4201.105. FEES. The commissioner shall establish,
administer, and enforce the fees for initial certification and
certification renewal in amounts that do not exceed the amounts
necessary to cover the cost of administering this chapter.
(V.T.I.C. Art. 21.58A, Sec. 3(f).)
Sec. 4201.106. CERTIFICATE NOT TRANSFERABLE. A certificate
of registration is not transferable. (V.T.I.C. Art. 21.58A, Sec.
3(c).)
Sec. 4201.107. REPORTING MATERIAL CHANGES. A utilization
review agent shall report any material change to the information
disclosed in a form filed under this subchapter not later than the
30th day after the date the change takes effect. (V.T.I.C. Art.
21.58A, Sec. 3(g).)
Sec. 4201.108. LIST OF UTILIZATION REVIEW AGENTS. (a) The
commissioner shall maintain and update monthly a list of each
utilization review agent to whom a certificate of registration has
been issued and the renewal date of the certificate.
(b) The commissioner shall provide the list at cost to each
individual or organization requesting the list. (V.T.I.C. Art.
21.58A, Sec. 12.)
[Sections 4201.109-4201.150 reserved for expansion]
SUBCHAPTER D. UTILIZATION REVIEW: GENERAL STANDARDS
Sec. 4201.151. UTILIZATION REVIEW PLAN. A utilization
review agent's utilization review plan, including reconsideration
and appeal requirements, must be reviewed by a physician and
conducted in accordance with standards developed with input from
appropriate health care providers and approved by a physician.
(V.T.I.C. Art. 21.58A, Sec. 4(b).)
Sec. 4201.152. UTILIZATION REVIEW UNDER DIRECTION OF
PHYSICIAN. A utilization review agent shall conduct utilization
review under the direction of a physician licensed to practice
medicine by a state licensing agency in the United States.
(V.T.I.C. Art. 21.58A, Sec. 4(h).)
Sec. 4201.153. SCREENING CRITERIA AND REVIEW PROCEDURES.
(a) A utilization review agent shall use written medically
acceptable screening criteria and review procedures that are
established and periodically evaluated and updated with
appropriate involvement from physicians, including practicing
physicians, dentists, and other health care providers.
(b) A utilization review determination shall be made in
accordance with currently accepted medical or health care
practices, taking into account special circumstances of the case
that may require deviation from the norm stated in the screening
criteria.
(c) Screening criteria must be:
(1) objective;
(2) clinically valid;
(3) compatible with established principles of health
care; and
(4) flexible enough to allow a deviation from the norm
when justified on a case-by-case basis.
(d) Screening criteria must be used to determine only
whether to approve the requested treatment. A denial of requested
treatment must be referred to an appropriate physician, dentist, or
other health care provider to determine medical necessity.
(V.T.I.C. Art. 21.58A, Sec. 4(i) (part).)
Sec. 4201.154. REVIEW AND INSPECTION OF SCREENING CRITERIA
AND REVIEW PROCEDURES. (a) A utilization review agent's written
screening criteria and review procedures shall be made available
for:
(1) review and inspection to determine
appropriateness and compliance as considered necessary by the
commissioner; and
(2) copying as necessary for the commissioner to
accomplish the commissioner's duties under this code.
(b) Any information obtained or acquired under the
authority of this section, Section 4201.153, and this chapter is
confidential and privileged and is not subject to Chapter 552,
Government Code, or to subpoena except to the extent necessary for
the commissioner to enforce this chapter. (V.T.I.C. Art. 21.58A,
Sec. 4(i) (part).)
Sec. 4201.155. LIMITATION ON NOTICE REQUIREMENTS AND REVIEW
PROCEDURES. A utilization review agent may not establish or impose
a notice requirement or other review procedure that is contrary to
the requirements of the health insurance policy or health benefit
plan. (V.T.I.C. Art. 21.58A, Sec. 4(d).)
[Sections 4201.156-4201.200 reserved for expansion]
SUBCHAPTER E. UTILIZATION REVIEW: RELATIONS WITH PATIENTS AND
HEALTH CARE PROVIDERS
Sec. 4201.201. REPETITIVE CONTACTS WITH HEALTH CARE
PROVIDER OR PATIENT; FREQUENCY OF REVIEWS. A utilization review
agent:
(1) may not engage in unnecessary or unreasonable
repetitive contacts with a health care provider or patient; and
(2) shall base the frequency of contacts or reviews on
the severity or complexity of the patient's condition or on
necessary treatment and discharge planning activity. (V.T.I.C.
Art. 21.58A, Sec. 4(j).)
Sec. 4201.202. OBSERVING OR PARTICIPATING IN PATIENT'S
CARE. (a) Unless approved for an individual patient by the
provider of record or modified by contract, a utilization review
agent shall be prohibited from observing, participating in, or
otherwise being present during a patient's examination, treatment,
procedure, or therapy.
(b) This subchapter, Subchapters D and F, and Section
4201.102(b) may not be construed to otherwise limit or deny contact
with a patient for purposes of conducting utilization review unless
otherwise specifically prohibited by law. (V.T.I.C. Art. 21.58A,
Sec. 4(e).)
Sec. 4201.203. MENTAL HEALTH THERAPY. (a) A utilization
review agent may not require, as a condition of treatment approval
or for any other reason, the observation of a psychotherapy session
or the submission or review of a mental health therapist's process
or progress notes.
(b) Notwithstanding this section, a utilization review
agent may require submission of a patient's medical record summary.
(V.T.I.C. Art. 21.58A, Sec. 4(o).)
Sec. 4201.204. COMPLAINT SYSTEM. (a) A utilization review
agent shall establish and maintain a complaint system that provides
reasonable procedures for the resolution of oral or written
complaints initiated by enrollees, patients, or health care
providers concerning the utilization review.
(b) The complaint procedure must include a requirement that
the utilization review agent provide a written response to the
complainant within 30 days.
(c) A utilization review agent shall submit to the
commissioner a summary report of all complaints at the times and in
the form specified by the commissioner. The agent shall allow the
commissioner to examine the complaints and relevant documents at
any time.
(d) A utilization review agent shall maintain a record of
each complaint until the third anniversary of the date the
complainant filed the complaint. (V.T.I.C. Art. 21.58A, Sec.
4(m).)
Sec. 4201.205. DESIGNATED INITIAL CONTACT. (a) A health
care provider may designate one or more individuals as the initial
contact or contacts for a utilization review agent seeking routine
information or data.
(b) A designation made under this section may not preclude a
utilization review agent or medical advisor from contacting a
health care provider or the provider's employees who are not
designated under this section under circumstances in which:
(1) a review might otherwise be unreasonably delayed;
or
(2) the designated individual is unable to provide the
necessary data or information that the agent requests. (V.T.I.C.
Art. 21.58A, Sec. 4(g).)
Sec. 4201.206. OPPORTUNITY TO DISCUSS TREATMENT BEFORE
ADVERSE DETERMINATION. Subject to the notice requirements of
Subchapter G, before a utilization review agent who questions the
medical necessity or appropriateness of a health care service
issues an adverse determination, the agent shall provide the health
care provider who ordered the service a reasonable opportunity to
discuss with a physician the patient's treatment plan and the
clinical basis for the agent's determination. (V.T.I.C. Art.
21.58A, Sec. 4(k).)
Sec. 4201.207. CHARGES BY HEALTH CARE PROVIDER FOR
PROVIDING MEDICAL INFORMATION. (a) Unless precluded or modified
by contract, a utilization review agent shall reimburse a health
care provider for the reasonable costs of providing medical
information in writing, including the costs of copying and
transmitting requested patient records or other documents.
(b) A health care provider's charges for providing medical
information to a utilization review agent may not:
(1) exceed the cost of copying records as set by rules
adopted by the Texas Workers' Compensation Commission; or
(2) include any costs otherwise recouped as part of
the charges for health care. (V.T.I.C. Art. 21.58A, Sec. 4(l).)
[Sections 4201.208-4201.250 reserved for expansion]
SUBCHAPTER F. UTILIZATION REVIEW: PERSONNEL
Sec. 4201.251. DELEGATION OF UTILIZATION REVIEW. A
utilization review agent may delegate utilization review to
qualified personnel in the hospital or other health care facility
in which the health care services to be reviewed were or are to be
provided. The delegation does not release the agent from the full
responsibility for compliance with this chapter, including the
conduct of those to whom utilization review has been delegated.
(V.T.I.C. Art. 21.58A, Sec. 4(n).)
Sec. 4201.252. PERSONNEL. (a) Personnel employed by or
under contract with a utilization review agent to perform
utilization review must be appropriately trained and qualified.
(b) Personnel, other than a physician, who obtain oral or
written information directly from a patient's physician or other
health care provider regarding the patient's specific medical
condition, diagnosis, or treatment options or protocols must be a
nurse, physician assistant, or other health care provider qualified
to provide the requested service.
(c) This section may not be interpreted to require personnel
who perform clerical or administrative tasks to have the
qualifications prescribed by this section. (V.T.I.C. Art. 21.58A,
Sec. 4(c).)
Sec. 4201.253. PROHIBITED BASES FOR EMPLOYMENT,
COMPENSATION, EVALUATIONS, OR PERFORMANCE STANDARDS. A
utilization review agent may not permit or provide compensation or
another thing of value to an employee or agent of the utilization
review agent, condition employment of the agent's employees or
agent evaluations, or set employee or agent performance standards,
based on the amount of volume of adverse determinations, reductions
of or limitations on lengths of stay, benefits, services, or
charges, or the number or frequency of telephone calls or other
contacts with health care providers or patients, that are
inconsistent with this chapter. (V.T.I.C. Art. 21.58A, Sec. 4(f).)
[Sections 4201.254-4201.300 reserved for expansion]
SUBCHAPTER G. NOTICE OF DETERMINATIONS
Sec. 4201.301. GENERAL DUTY TO NOTIFY. A utilization
review agent shall provide notice of a determination made in a
utilization review to:
(1) the enrollee's provider of record; and
(2) the enrollee or a person acting on the enrollee's
behalf. (V.T.I.C. Art. 21.58A, Sec. 5(a).)
Sec. 4201.302. GENERAL TIME FOR NOTICE. A utilization
review agent must mail or otherwise transmit the notice required by
this subchapter not later than the second working day after the date
of the request for utilization review and the agent receives all
information necessary to complete the review. (V.T.I.C. Art.
21.58A, Sec. 5(b).)
Sec. 4201.303. ADVERSE DETERMINATION: CONTENTS OF NOTICE.
(a) Notice of an adverse determination must include:
(1) the principal reasons for the adverse
determination;
(2) the clinical basis for the adverse determination;
(3) a description of or the source of the screening
criteria used as guidelines in making the adverse determination;
and
(4) a description of the procedure for the complaint
and appeal process, including notice to the enrollee of the
enrollee's right to appeal an adverse determination to an
independent review organization and of the procedures to obtain
that review.
(b) For an enrollee who has a life-threatening condition,
the notice required by Subsection (a)(4) must include a description
of the enrollee's right to an immediate review by an independent
review organization and of the procedures to obtain that review.
(V.T.I.C. Art. 21.58A, Sec. 5(c).)
Sec. 4201.304. TIME FOR NOTICE OF ADVERSE DETERMINATION. A
utilization review agent shall provide notice of an adverse
determination required by this subchapter as follows:
(1) with respect to a patient who is hospitalized at
the time of the adverse determination, within one working day by
either telephone or electronic transmission to the provider of
record, followed by a letter within three working days notifying
the patient and the provider of record of the adverse
determination;
(2) with respect to a patient who is not hospitalized
at the time of the adverse determination, within three working days
in writing to the provider of record and the patient; or
(3) within the time appropriate to the circumstances
relating to the delivery of the services to the patient and to the
patient's condition, provided that when denying poststabilization
care subsequent to emergency treatment as requested by a treating
physician or other health care provider, the agent shall provide
the notice to the treating physician or other health care provider
not later than one hour after the time of the request. (V.T.I.C.
Art. 21.58A, Sec. 5(d).)
[Sections 4201.305-4201.350 reserved for expansion]
SUBCHAPTER H. APPEAL OF ADVERSE DETERMINATION
Sec. 4201.351. COMPLAINT AS APPEAL. For purposes of this
subchapter, a complaint filed concerning dissatisfaction or
disagreement with an adverse determination constitutes an appeal of
that adverse determination. (V.T.I.C. Art. 21.58A, Sec. 6(a)
(part).)
Sec. 4201.352. WRITTEN DESCRIPTION OF APPEAL PROCEDURES. A
utilization review agent shall maintain and make available a
written description of the procedures for appealing an adverse
determination. (V.T.I.C. Art. 21.58A, Sec. 6(a) (part).)
Sec. 4201.353. APPEAL PROCEDURES MUST BE REASONABLE. The
procedures for appealing an adverse determination must be
reasonable. (V.T.I.C. Art. 21.58A, Sec. 6(b) (part).)
Sec. 4201.354. PERSONS OR ENTITIES WHO MAY APPEAL. The
procedures for appealing an adverse determination must provide that
the adverse determination may be appealed orally or in writing by:
(1) an enrollee;
(2) a person acting on the enrollee's behalf; or
(3) the enrollee's physician or other health care
provider. (V.T.I.C. Art. 21.58A, Sec. 6(b) (part).)
Sec. 4201.355. ACKNOWLEDGMENT OF APPEAL. (a) The
procedures for appealing an adverse determination must provide
that, within five working days from the date the utilization review
agent receives the appeal, the agent shall send to the appealing
party a letter acknowledging the date of receipt.
(b) The letter must also include a list of:
(1) the procedures required by this subchapter; and
(2) the documents that the appealing party must submit
for review.
(c) When a utilization review agent receives an oral appeal
of an adverse determination, the agent shall send a one-page appeal
form to the appealing party. (V.T.I.C. Art. 21.58A, Sec. 6(b)
(part).)
Sec. 4201.356. DECISION BY PHYSICIAN REQUIRED; SPECIALTY
REVIEW. (a) The procedures for appealing an adverse determination
must provide that a physician makes the decision on the appeal,
except as provided by Subsection (b).
(b) If not later than the 10th working day after the date an
appeal is denied the enrollee's health care provider states in
writing good cause for having a particular type of specialty
provider review the case, a health care provider who is of the same
or a similar specialty as the health care provider who would
typically manage the medical or dental condition, procedure, or
treatment under consideration for review shall review the decision
denying the appeal. The specialty review must be completed within
15 working days of the date the health care provider's request for
specialty review is received. (V.T.I.C. Art. 21.58A, Sec. 6(b)
(part).)
Sec. 4201.357. EXPEDITED APPEAL FOR DENIAL OF EMERGENCY
CARE OR CONTINUED HOSPITALIZATION. (a) The procedures for
appealing an adverse determination must include, in addition to the
written appeal, a procedure for an expedited appeal of a denial of
emergency care or a denial of continued hospitalization. That
procedure must include a review by a health care provider who:
(1) has not previously reviewed the case; and
(2) is of the same or a similar specialty as the health
care provider who would typically manage the medical or dental
condition, procedure, or treatment under review in the appeal.
(b) The time for resolution of an expedited appeal under
this section shall be based on the medical or dental immediacy of
the condition, procedure, or treatment under review, provided that
the resolution of the appeal may not exceed one working day from the
date all information necessary to complete the appeal is received.
(V.T.I.C. Art. 21.58A, Sec. 6(b) (part).)
Sec. 4201.358. RESPONSE LETTER TO INTERESTED PERSONS. The
procedures for appealing an adverse determination must provide
that, after the utilization review agent has sought review of the
appeal, the agent shall issue a response letter explaining the
resolution of the appeal to:
(1) the patient or a person acting on the patient's
behalf; and
(2) the patient's physician or other health care
provider. (V.T.I.C. Art. 21.58A, Sec. 6(b) (part).)
Sec. 4201.359. NOTICE OF APPEAL. (a) The procedures for
appealing an adverse determination must require written notice to
the appealing party of the determination of the appeal as soon as
practicable, but not later than the 30th calendar day, after the
date the utilization review agent receives the appeal.
(b) If the appeal is denied, the notice must include a clear
and concise statement of:
(1) the clinical basis for the denial;
(2) the specialty of the physician or other health
care provider making the denial; and
(3) the appealing party's right to seek review of the
denial by an independent review organization under Subchapter I and
the procedures for obtaining that review. (V.T.I.C. Art. 21.58A,
Sec. 6(b) (part).)
Sec. 4201.360. IMMEDIATE APPEAL TO INDEPENDENT REVIEW
ORGANIZATION IN LIFE-THREATENING CIRCUMSTANCES. Notwithstanding
any other law, in a circumstance involving an enrollee's
life-threatening condition, the enrollee is:
(1) entitled to an immediate appeal to an independent
review organization as provided by Subchapter I; and
(2) not required to comply with procedures for an
internal review of the utilization review agent's adverse
determination. (V.T.I.C. Art. 21.58A, Sec. 6(c).)
[Sections 4201.361-4201.400 reserved for expansion]
SUBCHAPTER I. INDEPENDENT REVIEW OF ADVERSE DETERMINATION
Sec. 4201.401. REVIEW BY INDEPENDENT REVIEW ORGANIZATION;
COMPLIANCE WITH INDEPENDENT DETERMINATION. (a) A utilization
review agent shall allow any party whose appeal of an adverse
determination is denied by the agent to seek review of that
determination by an independent review organization assigned to the
appeal in accordance with Chapter 4202.
(b) The utilization review agent shall comply with the
independent review organization's determination regarding the
medical necessity or appropriateness of health care items and
services for an enrollee. (V.T.I.C. Art. 21.58A, Sec. 6A (part).)
Sec. 4201.402. INFORMATION PROVIDED TO INDEPENDENT REVIEW
ORGANIZATION. (a) Not later than the third business day after the
date a utilization review agent receives a request for independent
review, the agent shall provide to the appropriate independent
review organization:
(1) a copy of:
(A) any medical records of the enrollee that are
relevant to the review;
(B) any documents used by the plan in making the
determination to be reviewed;
(C) the written notification described by
Section 4201.359; and
(D) any documents and other written information
submitted to the agent in support of the appeal; and
(2) a list of each physician or other health care
provider who:
(A) has provided care to the enrollee; and
(B) may have medical records relevant to the
appeal.
(b) A utilization review agent may provide confidential
information in the custody of the agent to an independent review
organization, subject to rules and standards adopted by the
commissioner under Chapter 4202. (V.T.I.C. Art. 21.58A, Secs. 6A
(part); 8(f), as added Acts 75th Leg., R.S., Ch. 163.)
Sec. 4201.403. PAYMENT FOR INDEPENDENT REVIEW. A
utilization review agent shall pay for an independent review
conducted under this subchapter. (V.T.I.C. Art. 21.58A, Sec. 6A
(part).)
[Sections 4201.404-4201.450 reserved for expansion]
SUBCHAPTER J. SPECIALTY UTILIZATION REVIEW AGENTS
Sec. 4201.451. DEFINITION. For purposes of this
subchapter, "specialty utilization review agent" means a
utilization review agent who conducts utilization review for a
specialty health care service, including dentistry, chiropractic
services, or physical therapy. (V.T.I.C. Art. 21.58A, Sec. 14(j)
(part).)
Sec. 4201.452. INAPPLICABILITY OF CERTAIN OTHER LAW. A
specialty utilization review agent is not subject to Section
4201.151, 4201.152, 4201.206, 4201.252, or 4201.356. (V.T.I.C.
Art. 21.58A, Sec. 14(j) (part).)
Sec. 4201.453. UTILIZATION REVIEW PLAN. A specialty
utilization review agent's utilization review plan, including
reconsideration and appeal requirements, must be reviewed by a
health care provider of the appropriate specialty and conducted in
accordance with standards developed with input from a health care
provider of the appropriate specialty. (V.T.I.C. Art. 21.58A, Sec.
14(j) (part).)
Sec. 4201.454. UTILIZATION REVIEW UNDER DIRECTION OF
PROVIDER OF SAME SPECIALTY. A specialty utilization review agent
shall conduct utilization review under the direction of a health
care provider who is of the same specialty as the agent and who is
licensed or otherwise authorized to provide the specialty health
care service by a state licensing agency in the United States.
(V.T.I.C. Art. 21.58A, Sec. 14(j) (part).)
Sec. 4201.455. PERSONNEL. (a) Personnel who are employed
by or under contract with a specialty utilization review agent to
perform utilization review must be appropriately trained and
qualified.
(b) Personnel who obtain oral or written information
directly from a physician or other health care provider must be a
nurse, physician assistant, or other health care provider of the
same specialty as the agent and who are licensed or otherwise
authorized to provide the specialty health care service by a state
licensing agency in the United States.
(c) This section does not require personnel who perform only
clerical or administrative tasks to have the qualifications
prescribed by this section. (V.T.I.C. Art. 21.58A, Sec. 14(j)
(part).)
Sec. 4201.456. OPPORTUNITY TO DISCUSS TREATMENT BEFORE
ADVERSE DETERMINATION. Subject to the notice requirements of
Subchapter G, before a specialty utilization review agent who
questions the medical necessity or appropriateness of a health care
service issues an adverse determination, the agent shall provide
the health care provider who ordered the service a reasonable
opportunity to discuss the patient's treatment plan and the
clinical basis for the agent's determination with a health care
provider who is of the same specialty as the agent. (V.T.I.C. Art.
21.58A, Sec. 14(j) (part).)
Sec. 4201.457. APPEAL DECISIONS. A specialty utilization
review agent shall comply with the requirement that a physician or
other health care provider who makes the decision in an appeal of an
adverse determination must be of the same or a similar specialty as
the health care provider who would typically manage the specialty
condition, procedure, or treatment under review in the appeal.
(V.T.I.C. Art. 21.58A, Sec. 14(j) (part).)
[Sections 4201.458-4201.500 reserved for expansion]
SUBCHAPTER K. CLAIMS REVIEW OF MEDICAL NECESSITY
AND APPROPRIATENESS
Sec. 4201.501. RETROSPECTIVE REVIEW OF MEDICAL NECESSITY
AND APPROPRIATENESS. (a) A retrospective review of the medical
necessity and appropriateness of a health care service made under a
health insurance policy or health benefit plan shall be based on
written screening criteria established and periodically updated
with appropriate involvement from physicians, including practicing
physicians, and other health care providers.
(b) A payor's system for retrospective review of medical
necessity and appropriateness under this section must be under the
direction of a physician. (V.T.I.C. Art. 21.58A, Sec. 11(a).)
Sec. 4201.502. APPEALS OF RETROSPECTIVE ADVERSE
DETERMINATIONS. (a) When an adverse determination is made under a
health insurance policy or health benefit plan based on a
retrospective review of the medical necessity and appropriateness
of the allocation of health care resources and services, the payor
shall provide the health care provider with the opportunity to
appeal the determination in the same manner as provided to the
enrollee, with the enrollee's consent to act on the enrollee's
behalf. In no event shall a health care provider be precluded from
appeal if the enrollee is not reasonably available or competent to
consent.
(b) The appeal does not imply or confer on a health care
provider any contractual right with respect to the enrollee's
health insurance policy or health benefit plan that the health care
provider does not otherwise have. (V.T.I.C. Art. 21.58A, Sec.
11(b).)
[Sections 4201.503-4201.550 reserved for expansion]
SUBCHAPTER L. CONFIDENTIALITY OF INFORMATION; ACCESS TO OTHER
INFORMATION
Sec. 4201.551. GENERAL CONFIDENTIALITY REQUIREMENT. (a) A
utilization review agent shall preserve the confidentiality of
individual medical records to the extent required by law.
(b) This chapter does not authorize a utilization review
agent to take any action that violates a state or federal law or
regulation concerning confidentiality of patient records.
(V.T.I.C. Art. 21.58A, Secs. 8(a), (h) (part).)
Sec. 4201.552. CONSENT REQUIREMENTS. (a) A utilization
review agent may not disclose individual medical records, personal
information, or other confidential information about a patient
obtained in the performance of utilization review without the
patient's prior written consent or except as otherwise required by
law.
(b) If the prior written consent is submitted by anyone
other than the patient who is the subject of the personal or
confidential information requested, the consent must:
(1) be dated; and
(2) contain the patient's signature.
(c) The patient's signature for purposes of Subsection
(b)(2) must have been obtained one year or less before the date the
disclosure is sought or the consent is invalid. (V.T.I.C. Art.
21.58A, Sec. 8(b).)
Sec. 4201.553. PROVIDING INFORMATION TO AFFILIATED
ENTITIES. A utilization review agent may provide confidential
information to a third party under contract with or affiliated with
the agent solely to perform or assist with utilization review.
Information provided to a third party under this section remains
confidential. (V.T.I.C. Art. 21.58A, Sec. 8(c).)
Sec. 4201.554. PROVIDING INFORMATION TO COMMISSIONER.
Notwithstanding this subchapter, a utilization review agent shall
provide to the commissioner on request individual medical records
or other confidential information to enable the commissioner to
determine compliance with this chapter. The information is
confidential and privileged and is not subject to Chapter 552,
Government Code, or to subpoena, except to the extent necessary to
enable the commissioner to enforce this chapter. (V.T.I.C. Art.
21.58A, Sec. 8(i).)
Sec. 4201.555. ACCESS TO RECORDED PERSONAL INFORMATION.
(a) If an individual submits a written request to a utilization
review agent for access to recorded personal information concerning
the individual, the agent shall, within 10 business days from the
date the agent receives the request:
(1) inform the requesting individual in writing of the
nature and substance of the recorded personal information; and
(2) allow the individual, at the individual's
discretion, to:
(A) view and copy, in person, the recorded
personal information concerning the individual; or
(B) obtain a copy of the information by mail.
(b) If the information requested under this section is in
coded form, the utilization review agent shall provide in writing
an accurate translation of the information in plain language.
(c) A utilization review agent's charges for providing a
copy of information requested under this section shall be
reasonable, as determined by rule adopted by the commissioner. The
charges may not include any costs otherwise recouped as part of the
charges for utilization review. (V.T.I.C. Art. 21.58A, Secs. 8(d),
(e).)
Sec. 4201.556. PUBLISHING INFORMATION IDENTIFIABLE TO
HEALTH CARE PROVIDER. (a) A utilization review agent may not
publish data that identifies a particular physician or other health
care provider, including data in a quality review study or
performance tracking data, without providing prior written notice
to the physician or other provider.
(b) The prohibition under this section does not apply to
internal systems or reports used by the utilization review agent.
(V.T.I.C. Art. 21.58A, Sec. 8(f), as added Acts 75th Leg., R.S., Ch.
1025.)
Sec. 4201.557. REQUIREMENT TO MAINTAIN DATA IN CONFIDENTIAL
MANNER. A utilization review agent shall maintain all data
concerning a patient or physician or other health care provider in a
confidential manner that prevents unauthorized disclosure to a
third party. (V.T.I.C. Art. 21.58A, Sec. 8(h) (part).)
Sec. 4201.558. DESTRUCTION OF CERTAIN CONFIDENTIAL
DOCUMENTS. When a utilization review agent determines a document
in the custody of the agent that contains confidential patient
information or confidential physician or other health care provider
financial data is no longer needed, the document shall be destroyed
by a method that ensures the complete destruction of the
information. (V.T.I.C. Art. 21.58A, Sec. 8(g).)
[Sections 4201.559-4201.600 reserved for expansion]
SUBCHAPTER M. ENFORCEMENT
Sec. 4201.601. NOTICE OF SUSPECTED VIOLATION; COMPELLING
PRODUCTION OF INFORMATION. If the commissioner believes that a
person or entity conducting utilization review is in violation of
this chapter or applicable rules, the commissioner:
(1) shall notify the utilization review agent, health
maintenance organization, or insurer of the alleged violation; and
(2) may compel the production of documents or other
information as necessary to determine whether a violation has
occurred. (V.T.I.C. Art. 21.58A, Sec. 9(a).)
Sec. 4201.602. ENFORCEMENT PROCEEDING. (a) The
commissioner may initiate a proceeding under this subchapter.
(b) A proceeding under this chapter is a contested case for
purposes of Chapter 2001, Government Code. (V.T.I.C. Art. 21.58A,
Secs. 9(b), (c).)
Sec. 4201.603. REMEDIES AND PENALTIES FOR VIOLATION. If
the commissioner determines that a utilization review agent, health
maintenance organization, insurer, or other person or entity
conducting utilization review has violated or is violating this
chapter, the commissioner may:
(1) impose a sanction under Chapter 82;
(2) issue a cease and desist order under Chapter 83;
or
(3) assess an administrative penalty under Chapter 84. (V.T.I.C. Art. 21.58A, Sec. 9(d).)
CHAPTER 4202. INDEPENDENT REVIEW ORGANIZATIONS
Sec. 4202.001. DEFINITION
Sec. 4202.002. ADOPTION OF STANDARDS FOR INDEPENDENT
REVIEW ORGANIZATIONS
Sec. 4202.003. REQUIREMENTS REGARDING TIMELINESS OF
DETERMINATION
Sec. 4202.004. CERTIFICATION
Sec. 4202.005. PERIODIC REPORTING OF INFORMATION;
ANNUAL DESIGNATION
Sec. 4202.006. PAYORS FEES
Sec. 4202.007. OVERSIGHT
Sec. 4202.008. PROHIBITED OWNERSHIP OR CONTROL OF
INDEPENDENT REVIEW ORGANIZATION
Sec. 4202.009. CONFIDENTIAL INFORMATION
Sec. 4202.010. IMMUNITY FROM LIABILITY
CHAPTER 4202. INDEPENDENT REVIEW ORGANIZATIONS
Sec. 4202.001. DEFINITION. In this chapter, "payor" has
the meaning assigned by Section 4201.002. (V.T.I.C. Art. 21.58C,
Sec. 1(2).)
Sec. 4202.002. ADOPTION OF STANDARDS FOR INDEPENDENT REVIEW
ORGANIZATIONS. (a) The commissioner shall adopt standards and
rules for:
(1) the certification, selection, and operation of
independent review organizations to perform independent review
described by Subchapter I, Chapter 4201; and
(2) the suspension and revocation of the
certification.
(b) The standards adopted under this section must ensure:
(1) the timely response of an independent review
organization selected under this chapter;
(2) the confidentiality of medical records
transmitted to an independent review organization for use in
conducting an independent review;
(3) the qualifications and independence of each
physician or other health care provider making a review
determination for an independent review organization;
(4) the fairness of the procedures used by an
independent review organization in making review determinations;
and
(5) the timely notice to an enrollee of the results of
an independent review, including the clinical basis for the review
determination. (V.T.I.C. Art. 21.58C, Secs. 2(a) (part), (b).)
Sec. 4202.003. REQUIREMENTS REGARDING TIMELINESS OF
DETERMINATION. The standards adopted under Section 4202.002 must
require each independent review organization to make the
organization's determination:
(1) for a life-threatening condition as defined by
Section 4201.002, not later than the earlier of:
(A) the fifth day after the date the organization
receives the information necessary to make the determination; or
(B) the eighth day after the date the
organization receives the request that the determination be made;
and
(2) for a condition other than a life-threatening
condition, not later than the earlier of:
(A) the 15th day after the date the organization
receives the information necessary to make the determination; or
(B) the 20th day after the date the organization
receives the request that the determination be made. (V.T.I.C.
Art. 21.58C, Secs. 1(1), 2(c).)
Sec. 4202.004. CERTIFICATION. To be certified as an
independent review organization under this chapter, an
organization must submit to the commissioner an application in the
form required by the commissioner. The application must include:
(1) for an applicant that is publicly held, the name of
each shareholder or owner of more than five percent of any of the
applicant's stock or options;
(2) the name of any holder of the applicant's bonds or
notes that exceed $100,000;
(3) the name and type of business of each corporation
or other organization that the applicant controls or is affiliated
with and the nature and extent of the control or affiliation;
(4) the name and a biographical sketch of each
director, officer, and executive of the applicant and of any entity
listed under Subdivision (3) and a description of any relationship
the named individual has with:
(A) a health benefit plan;
(B) a health maintenance organization;
(C) an insurer;
(D) a utilization review agent;
(E) a nonprofit health corporation;
(F) a payor;
(G) a health care provider; or
(H) a group representing any of the entities
described by Paragraphs (A) through (G);
(5) the percentage of the applicant's revenues that
are anticipated to be derived from independent reviews conducted
under Subchapter I, Chapter 4201;
(6) a description of the areas of expertise of the
physicians or other health care providers making review
determinations for the applicant; and
(7) the procedures to be used by the applicant in
making independent review determinations under Subchapter I,
Chapter 4201. (V.T.I.C. Art. 21.58C, Sec. 2(d).)
Sec. 4202.005. PERIODIC REPORTING OF INFORMATION; ANNUAL
DESIGNATION. (a) An independent review organization shall
annually submit the information required in an application for
certification under Section 4202.004. Anytime there is a material
change in the information the organization included in the
application, the organization shall submit updated information to
the commissioner.
(b) The commissioner shall designate annually each
organization that meets the standards for an independent review
organization adopted under Section 4202.002. (V.T.I.C. Art.
21.58C, Secs. 2(a) (part), (e).)
Sec. 4202.006. PAYORS FEES. The commissioner shall charge
payors fees in accordance with this chapter as necessary to fund the
operations of independent review organizations. (V.T.I.C.
Art. 21.58C, Sec. 2(a) (part).)
Sec. 4202.007. OVERSIGHT. The commissioner shall provide
ongoing oversight of the independent review organizations to ensure
continued compliance with this chapter and the standards and rules
adopted under this chapter. (V.T.I.C. Art. 21.58C, Sec. 2(a)
(part).)
Sec. 4202.008. PROHIBITED OWNERSHIP OR CONTROL OF
INDEPENDENT REVIEW ORGANIZATION. An independent review
organization may not be a subsidiary of, or in any way owned or
controlled by, a payor or a trade or professional association of
payors. (V.T.I.C. Art. 21.58C, Sec. 2(f).)
Sec. 4202.009. CONFIDENTIAL INFORMATION. Information that
reveals the identity of a physician or other individual health care
provider who makes a review determination for an independent review
organization is confidential. (V.T.I.C. Art. 21.58C, Sec. 2(h).)
Sec. 4202.010. IMMUNITY FROM LIABILITY. (a) An
independent review organization conducting an independent review
under Subchapter I, Chapter 4201, is not liable for damages arising
from the review determination made by the organization.
(b) This section does not apply to an act or omission of the
independent review organization that is made in bad faith or that involves gross negligence. (V.T.I.C. Art. 21.58C, Sec. 2(g).)
CHAPTER 4203. PROHIBITED CONSULTANT ACTIVITIES
Sec. 4203.001. DEFINITION
Sec. 4203.002. PROHIBITED CONSULTANT ACTIVITIES
CHAPTER 4203. PROHIBITED CONSULTANT ACTIVITIES
Sec. 4203.001. DEFINITION. In this chapter, "consultant"
means a person who, for compensation and at the request of an
insurer, business, individual, or utilization review agent:
(1) reviews, assesses, or evaluates a claim, charge,
or service of another chiropractor to determine whether the claim,
charge, or service is:
(A) medically necessary, reasonable, or
appropriate; or
(B) recommended for payment or nonpayment; or
(2) advises an insurer or utilization review agent
regarding a chiropractic charge or service or recommends to that
insurer or agent guidelines for a chiropractic charge or service.
(V.T.I.C. Art. 21.58B (part).)
Sec. 4203.002. PROHIBITED CONSULTANT ACTIVITIES. A member
or employee of the Texas Board of Chiropractic Examiners may not act
as a consultant or perform any consultant activities for an insurer
or business, individual, or utilization review agent that audits
chiropractic claims, charges, or services. (V.T.I.C. Art. 21.58B
(part).)
SECTION 5. CONFORMING AMENDMENT. Article 5.25, Insurance
Code, is amended to read as follows:
Art. 5.25. BOARD SHALL FIX RATES. (a) The State Board of
Insurance shall have the sole and exclusive power and authority and
it shall be its duty to prescribe, fix, determine and promulgate the
rates of premiums to be charged and collected by fire insurance
companies transacting business in this State. Said Board shall
also have authority to alter or amend any and all such rates of
premiums so fixed and determined and adopted by it, and to raise or
lower the same, or any part thereof, as herein provided. [Said
Board shall have authority to employ clerical help, inspectors,
experts and other assistants, and to incur such other expenses as
may be necessary in carrying out the provisions of this law. Said
Board shall ascertain as soon as practicable the annual fire loss in
this State; obtain, make and maintain a record thereof and collect
such data with respect thereto as will enable said Board to classify
the fire losses of this State, the causes thereof, and the amount of
premiums collected therefor for each class of risks and the amount
paid thereon, in such manner as will aid in determining equitable
insurance rates, methods of reducing such fire losses and reducing
the insurance rates of the State, or subdivisions of the State. The
Board may designate one or more advisory organizations or other
agencies to gather, audit, and compile such experience of insurers,
and the cost thereof shall be borne by such insurers.]
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of S.B. No. 14, Acts of the 78th
Legislature, Regular Session, 2003, rates for homeowners and
residential fire and residential allied lines insurance coverage
under this subchapter are determined as provided by Subchapter Q of
this chapter, and rates for other lines of insurance subject to this
subchapter are determined as provided by Article 5.13-2 of this
code, except that on and after December 1, 2004, rates for all lines
of insurance subject to this subchapter are determined as provided
by Article 5.13-2 of this code. [This subsection does not affect
the requirement for the commissioner to conduct inspections of
commercial property and prescribe a manual of rules and rating
schedules for commercial property under this subchapter.]
SECTION 6. CONFORMING AMENDMENT. Article 5.25-3, Insurance
Code, is amended to read as follows:
Art. 5.25-3. FIRE INSURANCE RATES AND FIRE SUPPRESSION
RATINGS FOR BORDER MUNICIPALITY. The commissioner, in adopting
fire insurance rates [or in assigning or evaluating a fire
suppression rating] for a municipality at or near the border
between this state and another state or the United Mexican States,
shall take into account the existence and capabilities of a fire
department or volunteer fire department that serves an adjoining or
nearby municipality in the other state or the United Mexican States
and that by agreement or by long-standing practice provides fire
suppression services to the Texas municipality.
SECTION 7. CONFORMING AMENDMENT. Article 5.28(a),
Insurance Code, is amended to read as follows:
(a) Said Board is authorized and empowered to require sworn
statements for any period of time from any insurance company
affected by this law and from any of its directors, officers,
representatives, general agents, state agents, special agents, and
local agents of the rates and premiums collected for fire insurance
on each class of risks, on all property in this State and of the
causes of fire, if such be known, if they are in possession of such
data, and information, or can obtain it at a reasonable expense;
and said Board is empowered to require such statements showing all
necessary facts and information to enable said Board to make, amend
and maintain the general basis schedules provided for in this law
and the rules and regulations for applying same and to determine
reasonable and proper maximum specific rates [and to determine and
assist in the enforcement of the provisions of this law].
SECTION 8. CONFORMING AMENDMENT. Article 5.30(a),
Insurance Code, is amended to read as follows:
(a) [When a policy of fire insurance shall be issued by any
company transacting the business of fire insurance in this State,
such company shall furnish the policyholder with a written or
printed analysis of the rate or premium charged for such policy,
showing the items of charge and credit which determine the rate,
unless such policyholder has theretofore been furnished with such
analysis of such rate.] All schedules of rates promulgated by said
Board shall be open to the public, and every local agent of any
company engaging in the business of fire insurance in this state
[such fire insurance company] shall have and exhibit to the public
copies of such schedules covering all risks upon which he is
authorized to write insurance.
SECTION 9. CONFORMING AMENDMENT. Article 5.41(a),
Insurance Code, is amended to read as follows:
(a) A [No] company engaging or participating [shall engage
or participate] in the insuring or reinsuring of any property in
this state [State] against loss or damage by fire may not [except in
compliance with the terms and provisions of this law; nor shall any
such company] knowingly write insurance at any lesser rate than the
rates herein provided for, and it shall be unlawful for any company
so to do, unless it shall thereafter file an analysis of same with
the Board[, and it shall be unlawful for any company, or its
officers, directors, general agents, state agents, special agents,
local agents, or its representatives, to grant or contract for any
special favor or advantages in the dividends or other profits to
come thereon, or in commissions in the dividends or other profits to
accrue thereon, or in commissions or division of commission, or any
position or any valuable consideration or any inducement not
specified in the policy contract of insurance; nor shall such
company give, sell or purchase, offer to give, sell or purchase,
directly or indirectly, as an inducement to insure or in connection
therewith, any stocks, bonds or other securities of any insurance
company or other corporation, partnership or individual, or any
dividends or profits accrued or to accrue thereon, or anything of
value whatsoever, not specified in the policy. Nothing in this law
shall be construed to prohibit a company from sharing its profits
with its policyholders, if such agreement as to profit sharing
shall be placed on or in the face of the policy, and such profit
sharing shall be uniform and shall not discriminate between
individuals or between classes. No part of the profit shall be paid
until the expiration of the policy. Any company, or any of its
officers, directors, general agents, state agents, special agents,
local agents or its representatives, doing any of the acts in this
article prohibited, shall be deemed guilty of unjust
discrimination. If any agent or company shall issue a policy
without authority, and any policyholder holding such policy shall
sustain a loss or damage thereunder, said company or companies
shall be liable to the policyholder thereunder, in the same manner
and to the same extent as if said company had been authorized to
issue said policies, although the company issued said policy in
violation of the provisions of this subchapter. But this shall not
be construed to give any company the right to issue any contract or
policy of insurance other than as provided in this subchapter].
SECTION 10. CONFORMING AMENDMENT. Chapter 30, Insurance
Code, is amended to read as follows:
CHAPTER 30. GENERAL PROVISIONS
Sec. 30.001. PURPOSE OF TITLES 2, 3, 4, 5, 6, 7, 8, 9, 10,
11, 12, [AND] 13, AND 14. (a) This title and Titles 3, 4, 5, 6, 7, 8,
9, 10, 11, 12, [and] 13, and 14 are enacted as a part of the state's
continuing statutory revision program, begun by the Texas
Legislative Council in 1963 as directed by the legislature in the
law codified as Section 323.007, Government Code. The program
contemplates a topic-by-topic revision of the state's general and
permanent statute law without substantive change.
(b) Consistent with the objectives of the statutory
revision program, the purpose of this title and Titles 3, 4, 5, 6,
7, 8, 9, 10, 11, 12, [and] 13, and 14 is to make the law encompassed
by the titles more accessible and understandable by:
(1) rearranging the statutes into a more logical
order;
(2) employing a format and numbering system designed
to facilitate citation of the law and to accommodate future
expansion of the law;
(3) eliminating repealed, duplicative,
unconstitutional, expired, executed, and other ineffective
provisions; and
(4) restating the law in modern American English to
the greatest extent possible.
Sec. 30.002. CONSTRUCTION. Except as provided by Section
30.003 and as otherwise expressly provided in this code, Chapter
311, Government Code (Code Construction Act), applies to the
construction of each provision in this title and in Titles 3, 4, 5,
6, 7, 8, 9, 10, 11, 12, [and] 13, and 14.
Sec. 30.003. DEFINITION OF PERSON. The definition of
"person" assigned by Section 311.005, Government Code, does not
apply to any provision in this title or in Title 3, 4, 5, 6, 7, 8, 9,
10, 11, 12, [or] 13, or 14.
Sec. 30.004. REFERENCE IN LAW TO STATUTE REVISED BY TITLE 2,
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, [OR] 13, OR 14. A reference in a law
to a statute or a part of a statute revised by this title or by Title
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, [or] 13, or 14 is considered to be a
reference to the part of this code that revises that statute or part
of that statute.
SECTION 11. CONFORMING AMENDMENT. Subchapter A, Chapter
36, Insurance Code, is amended by adding Section 36.002 to read as
follows:
Sec. 36.002. ADDITIONAL RULEMAKING AUTHORITY. The
commissioner may adopt reasonable rules that are:
(1) necessary to effect the purposes of a provision
of:
(A) Subchapter B, Chapter 5;
(B) Subchapter C, Chapter 1806;
(C) Subchapter A, Chapter 2301;
(D) Chapter 251, as that chapter relates to
casualty insurance and fidelity, guaranty, and surety bond
insurance;
(E) Chapter 253;
(F) Chapter 2251 or 2252; or
(G) Subtitle B, Title 10; or
(2) appropriate to accomplish the purposes of a
provision of:
(A) Section 37.051(a), 403.002, 492.051(b) or
(c), 501.159, 941.003(b)(3) or (c), or 942.003(b)(3) or (c);
(B) Subchapter H, Chapter 544;
(C) Chapter 251, as that chapter relates to:
(i) automobile insurance;
(ii) casualty insurance and fidelity,
guaranty, and surety bond insurance;
(iii) fire insurance and allied lines;
(iv) workers' compensation insurance; or
(v) aircraft insurance;
(D) Chapter 5, 252, 253, 254, 255, 256, 426, 493,
494, 1804, 1805, 1806, or 2171;
(E) Subtitle B, C, D, E, F, H, or I, Title 10;
(F) Section 417.008, Government Code;
(G) Chapter 406A, Labor Code; or
(H) Chapter 2154, Occupations Code. (V.T.I.C.
Art. 5.19, Sec. (d); Art. 5.98.)
SECTION 12. CONFORMING AMENDMENT. Subtitle B, Title 2,
Insurance Code, is amended by adding Chapter 86 to read as follows:
CHAPTER 86. REVOCATION OR MODIFICATION OF CERTIFICATE OF
AUTHORITY; AUTHORITY TO BRING CERTAIN ACTIONS
SUBCHAPTER A. REVOCATION OR MODIFICATION OF CERTIFICATE
OF AUTHORITY
Sec. 86.001. AUTHORITY TO REVOKE OR MODIFY CERTIFICATE OF
AUTHORITY. The commissioner may revoke or modify a certificate of
authority if a condition or requirement prescribed by law for
granting the certificate is no longer satisfied. (V.T.I.C. Art.
1.15, Sec. 1 (part); Art. 1.19 (part).)
Sec. 86.002. NOTICE OF INTENT TO REVOKE OR MODIFY
CERTIFICATE OF AUTHORITY. (a) The commissioner must notify an
insurance carrier in writing of the commissioner's intent to revoke
or modify the carrier's certificate of authority.
(b) The commissioner must provide the notice not later than
the 10th day before the date the revocation or modification is to
occur.
(c) The commissioner must specifically state in the notice
the reason for the action. (V.T.I.C. Art. 1.15, Sec. 1 (part).)
[Sections 86.003-86.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO BRING CERTAIN ACTIONS
Sec. 86.051. AUTHORITY TO BRING ACTION FOR OR PROSECUTE
VIOLATION OF LAW. The department, through the attorney general or
an attorney designated by the attorney general, may institute an
action relating to or initiate a prosecution for a violation of a
law of this state relating to insurance. (V.T.I.C. Art. 1.19
(part).)
Sec. 86.052. AUTHORITY TO BRING ACTION TO CLOSE AFFAIRS OR
RESTRAIN BUSINESS OF DOMESTIC INSURANCE COMPANY. Only the
department may bring an action to:
(1) close the affairs of an insurance company
organized under the laws of this state; or
(2) enjoin, restrain, or interfere with the
prosecution of the business of an insurance company organized under
the laws of this state. (V.T.I.C. Art. 1.19 (part).)
SECTION 13. CONFORMING AMENDMENT. Chapter 252, Insurance
Code, is amended by adding Section 252.005 to read as follows:
Sec. 252.005. EXCEPTION. This chapter does not apply to:
(1) a farm mutual insurance company operating under
Chapter 911; or
(2) a mutual insurance company engaged in business
under Chapter 12, Title 78, Revised Statutes, before that chapter's
repeal by Section 18, Chapter 40, Acts of the 41st Legislature, 1st
Called Session, 1929, as amended by Section 1, Chapter 60, General
Laws, Acts of the 41st Legislature, 2nd Called Session, 1929, that
retains the rights and privileges under the repealed law to the
extent provided by those sections. (V.T.I.C. Art. 5.54 (part).)
SECTION 14. CONFORMING AMENDMENT. Subchapter D, Chapter
501, Insurance Code, is amended by adding Section 501.159 to read as
follows:
Sec. 501.159. COMMENTS ON CERTAIN INSURER FILINGS. (a)
Notwithstanding this chapter, the office may submit written
comments to the commissioner and otherwise participate regarding
individual insurer filings made under Chapters 2251 and 2301
relating to insurance described by Subchapter B, Chapter 2301.
(b) The commissioner may adopt reasonable and necessary
rules to implement this section. (V.T.I.C. Art. 5.145, Secs. 5, 6.)
SECTION 15. CONFORMING AMENDMENT. Subchapter O, Chapter
841, Insurance Code, is amended by adding Section 841.705 to read as
follows:
Sec. 841.705. PENALTY FOR FAILURE TO INVEST OR REPORT. (a)
In addition to the penalty provided by this subchapter, an
insurance company is subject to a penalty as prescribed by
Subsection (b) if, while holding a certificate of authority to
engage in the business of insurance in this state, or after the
company ceases to write new business or ceases to hold a certificate
of authority, the company intentionally fails or refuses to:
(1) make the investments required by Chapter 425;
(2) make a report required by a law described by
Section 841.002;
(3) make any special report requested by the
commissioner under a law described by Section 841.002; or
(4) comply with another provision of a law described
by Section 841.002.
(b) A penalty under this section is in the amount of $25 per
day for each day the company remains in default after the
commissioner notifies the company of the default in the manner
provided by this subchapter.
(c) A penalty under this section may be recovered in a suit
brought by the attorney general on behalf of the state in a district
court of Travis County.
(d) In a suit brought to recover a penalty under this
section:
(1) there are rebuttable presumptions that:
(A) any default that may have occurred was
intentional; and
(B) the notice required by Subsection (b) was
given; and
(2) if the question of whether the investments
required by Chapter 425 were made is at issue, the defendant
insurance company has the burden of proving that the investments
were made as required by that chapter. (V.T.I.C. Art. 3.56.)
SECTION 16. CONFORMING AMENDMENT. Subtitle H, Title 6,
Insurance Code, is amended by adding Chapter 962 to read as follows:
CHAPTER 962. JOB PROTECTION INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 962.001. GENERAL DEFINITIONS. In this chapter:
(1) "Insured" means an individual whose
indemnification against income loss is provided because of the
individual's membership in a company or association that offers a
job protection insurance plan.
(2) "Insurer" has the meaning assigned by Section
801.001.
(3) "Person" means an individual, corporation,
association, or other legal entity. (V.T.I.C. Art. 25.01, Secs.
(3), (4), (5).)
Sec. 962.002. JOB PROTECTION INSURANCE DEFINED. (a) In
this chapter, "job protection insurance" means insurance providing
indemnity that is:
(1) paid for loss of position arising from discharge
or suspension;
(2) payable in installments that do not exceed the
average monthly wage of the insured; and
(3) provided to:
(A) conductors, engineers, motormen, brakemen,
switchmen, firemen, dispatchers, clerks, operators, trackmen,
signalmen, and maintenance-of-way personnel of steam and electric
railways; and
(B) bus drivers and truck drivers employed by
common carriers.
(b) The term "job protection insurance" does not include a
job benefit fund administered by and through a labor union only for
the union's members. (V.T.I.C. Art. 25.01, Sec. (1).)
Sec. 962.003. COMPLIANCE WITH CHAPTER REQUIRED. An insurer
must comply with this chapter to write the insurance coverages
authorized by Section 962.101. (V.T.I.C. Art. 25.02, Sec. (c).)
Sec. 962.004. APPLICABILITY OF OTHER LAW. An insurer
operating under this chapter is subject to the following
provisions, if not in conflict with this chapter:
(1) the other chapters of this code, including:
(A) Chapter 221;
(B) Chapter 281, other than any minimum capital
and surplus requirements specified in that chapter;
(C) Chapter 822, including Sections 822.203,
822.205, 822.210, and 822.212;
(D) Chapter 861; and
(E) Chapter 402; and
(2) Section 171.0525, Tax Code. (V.T.I.C. Arts.
25.05, 25.07.)
Sec. 962.005. AGENTS. Title 13 applies to the licensing and
regulation of an agent authorized to solicit job protection
insurance for an insurer operating under this chapter. (V.T.I.C.
Art. 25.06.)
[Sections 962.006-962.050 reserved for expansion]
SUBCHAPTER B. AUTHORITY TO ENGAGE IN BUSINESS
Sec. 962.051. QUALIFICATIONS FOR CERTIFICATE OF AUTHORITY.
An insurer may not be issued a certificate of authority to operate
under this chapter unless:
(1) it or a predecessor was writing the insurance
coverages authorized by Section 962.101 on or before January 1,
1920, in at least one state; and
(2) it had policyholders in this state on August 29,
1983, and provides proof of that fact to the department. (V.T.I.C.
Art. 25.04, Sec. (a).)
Sec. 962.052. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a)
The commissioner shall issue a certificate of authority to a
domestic or foreign insurer that applies for a certificate if:
(1) the applicant has:
(A) complied with the requirements of this
chapter and all other requirements imposed on the applicant by law;
and
(B) paid any deposit imposed by law; and
(2) the operational history of the applicant indicates
a condition such that the expanded operation of the applicant in
this state or the applicant's operations outside this state will
not create a condition that might be hazardous to the applicant's
policyholders or creditors or to the public, when that operational
history is reviewed in conjunction with:
(A) the applicant's loss experience;
(B) the kinds and nature of risks insured;
(C) the financial condition of the applicant and
the applicant's ownership;
(D) the applicant's proposed method of
operation;
(E) the applicant's affiliations;
(F) the applicant's investments;
(G) any contracts leading to contingent
liability or agreements relating to guaranty and surety, other than
insurance; and
(H) the ratio of the applicant's total annual
premium and net investment income to commission expenses, general
insurance expenses, policy benefits paid, and required policy
reserve increases.
(b) The commissioner shall file in the department's offices
any documents delivered to the commissioner under this section.
(c) The certificate of authority authorizes the insurer to
engage in the kind or kinds of business in this state specified in
the certificate. (V.T.I.C. Art. 25.04, Sec. (b) (part).)
Sec. 962.053. COMPLIANCE WITH STATE LAW REQUIRED. A
certificate of authority issued under this chapter continues in
effect on the condition that the insurer continue to comply with the
laws of this state. (V.T.I.C. Art. 25.04, Sec. (b) (part).)
Sec. 962.054. INSURERS NOT MEETING CERTAIN REQUIREMENTS.
To write the insurance coverages authorized by Section 962.101, a
domestic or foreign insurer that does not meet the requirements of
Sections 962.051 and 962.052 must comply with Chapters 822 and 861.
(V.T.I.C. Art. 25.04, Sec. (c).)
Sec. 962.055. CAPITAL AND SURPLUS REQUIREMENTS. A domestic
or foreign insurer operating under this chapter shall maintain the
minimum capital and surplus required by Sections 822.054, 822.210,
and 822.211. (V.T.I.C. Art. 25.03.)
[Sections 962.056-962.100 reserved for expansion]
SUBCHAPTER C. COVERAGE
Sec. 962.101. AUTHORIZED COVERAGES. A domestic or foreign
insurer operating under this chapter may write:
(1) job protection insurance; and
(2) insurance that:
(A) insures an individual described by Section
962.002(a) against bodily injury or death by accident or against
disability on account of sickness or accident;
(B) grants specific hospital benefits and
medical, surgical, and sick-care benefits to an individual and the
individual's family; and
(C) provides reimbursement of funeral expenses
in an amount not to exceed $200 to any person in connection with the
coverage. (V.T.I.C. Art. 25.02, Sec. (a).)
Sec. 962.102. OTHER COVERAGES PROHIBITED. A domestic or
foreign insurer operating under this chapter may not write coverage
that is not authorized by Section 962.101. (V.T.I.C. Art. 25.02,
Sec. (b).)
Sec. 962.103. APPLICABILITY OF GUARANTY FUND LAW. A
guaranty fund established under this code does not provide coverage
for insurance written under this chapter except as specifically
provided by a law governing the fund. (V.T.I.C. Art. 25.08.)
[Sections 962.104-962.700 reserved for expansion]
SUBCHAPTER O. ENFORCEMENT PROVISIONS
Sec. 962.701. PROHIBITED ACTS; OFFENSE. (a) A person may
not:
(1) provide coverage described by Section 962.101
unless the person holds a certificate of authority to provide that
coverage; or
(2) solicit insurance for an insurer authorized to
provide insurance coverage under this chapter unless the person
holds an insurance agent's license.
(b) A person commits an offense if the person knowingly
violates Subsection (a). An offense under this subsection is a
Class B misdemeanor.
(c) Venue for prosecution of an offense under this section
is in Travis County. (V.T.I.C. Art. 25.09; Art. 25.10, Secs. (b),
(c).)
Sec. 962.702. REFUSAL TO ISSUE OR RENEW CERTIFICATE OF
AUTHORITY OR LICENSE; SUSPENSION OR REVOCATION. If, after notice
and hearing, the commissioner finds that the applicant, certificate
holder, or license holder has violated this chapter or another
provision of this code, the commissioner may refuse to issue or
renew a certificate of authority or a license, or may suspend or
revoke a certificate of authority or a license. (V.T.I.C. Art.
25.10, Sec. (a).)
SECTION 17. CONFORMING AMENDMENT. Subtitle A, Title 5,
Labor Code, is amended by adding Chapter 406A to read as follows:
CHAPTER 406A. GROUP PURCHASE OF WORKERS' COMPENSATION
INSURANCE COVERAGE
Sec. 406A.001. DEFINITIONS. In this chapter:
(1) "Business entity" means a business enterprise
owned by a single person or a corporation, organization, business
trust, trust, partnership, joint venture, association, or other
business entity.
(2) "Commissioner" means the commissioner of
insurance.
(3) "Department" means the Texas Department of
Insurance. (V.T.I.C. Art. 5.57A, Sec. (a).)
Sec. 406A.002. CERTIFICATION PROGRAM. (a) The department
shall:
(1) maintain a certification program for groups
organized under this chapter; and
(2) issue certificates of approval to eligible
business entities authorizing formation and maintenance of a group.
(b) The commissioner by rule shall adopt forms, criteria,
and procedures for issuing certificates of approval to groups under
this chapter. (V.T.I.C. Art. 5.57A, Secs. (d), (e).)
Sec. 406A.003. FORMATION OF GROUP. (a) On receipt of a
certificate of approval issued by the department under this
chapter, two or more business entities or two or more members of a
trade association may join together to form a group to purchase
individual workers' compensation insurance policies covering each
member of the group.
(b) To be eligible to join a group, a business entity must:
(1) be engaged in a business pursuit that is the same
as or similar to the other business entities participating in the
group as determined by the department; or
(2) be a member of the same trade association as the
other business entities participating in the group. (V.T.I.C.
Art. 5.57A, Secs. (a)(3), (b), (c), as amended Acts 78th Leg.,
R.S., Chs. 275, 607.)
Sec. 406A.004. PLAN OF OPERATION. (a) A group shall:
(1) adopt a plan of operation; and
(2) file a copy of the plan of operation with the
department.
(b) The plan of operation must include:
(1) provisions governing the composition and
selection of a governing board;
(2) the methods for administering the group; and
(3) guidelines governing the workers' compensation
insurance coverage obtained by the group that include provisions
governing:
(A) the payment of premiums;
(B) the distribution of discounts; and
(C) the methods for providing risk management.
(V.T.I.C. Art. 5.57A, Sec. (i).)
Sec. 406A.005. GROUP PURCHASE AUTHORIZED. A group
certified under this chapter may purchase individual workers'
compensation insurance policies covering each member of the group
from any insurer authorized to write workers' compensation
insurance in this state. (V.T.I.C. Art. 5.57A, Sec. (f) (part).)
Sec. 406A.006. POLICY RATES. Rates for policies purchased
under this chapter must be computed using manual rules and rates.
The department shall determine any experience rating factor that
must be applied to those policies as provided by the commissioner by
rule. (V.T.I.C. Art. 5.57A, Sec. (h).)
Sec. 406A.007. GROUP DISCOUNT. (a) A group that purchases
a policy under this chapter is entitled to any premium or volume
discount that would be applicable to a policy of the combined
premium amount.
(b) A group shall apportion any discount or policyholder
dividend received on workers' compensation insurance coverage
among the members of the group according to a formula adopted in the
plan of operation for the group. (V.T.I.C. Art. 5.57A, Secs. (f)
(part), (g).)
Sec. 406A.008. APPLICABILITY OF OTHER LAW. (a) A group
established under this chapter is entitled to any deviation
applicable under Section 2052.004, 2053.051, or 2053.052(a) or (b),
Insurance Code.
(b) A member of a group is not subject to the discounts and
surcharges established under Subchapter F, Chapter 2053, Insurance
Code. (V.T.I.C. Art. 5.57A, Sec. (j).)
SECTION 18. REPEALER. (a) The following Acts and articles
as compiled in Vernon's Texas Insurance Code are repealed:
(1) 1.04A, 1.14-3, 1.15, 1.15A, 1.15B, 1.16, 1.17,
1.17A, 1.18, 1.19, 1.32, and 1.39;
(2) 2.10, 2.10-1, 2.10-2, 2.10-3A, 2.10-4, and 2.10-5;
(3) 3.10, 3.16, 3.17, 3.18, 3.28, 3.29, 3.31, 3.32,
3.33, 3.39, 3.39a, 3.40, 3.40-1, 3.41, 3.41a, and 3.56;
(4) 5.01C, 5.01-3, 5.06-1, 5.06-2, 5.06-3, 5.06-4,
5.06-5, 5.06-6, 5.07, 5.07-1, 5.08, 5.09, 5.12-1, 5.13-2C, 5.15-2,
5.15-3, 5.15-4, 5.18, 5.19, 5.20, 5.21, 5.25-1, 5.25-2, 5.33,
5.33B, 5.33E, 5.35-1, 5.35-2, 5.35-3, 5.36, 5.37, 5.38, 5.41-1,
5.41-2, 5.41-3, 5.42, 5.43, 5.45, 5.46, 5.47, 5.48, 5.48-1, 5.48-2,
5.51, 5.52, 5.53, 5.53-A, 5.54, 5.55, 5.55B, 5.55C, 5.56, 5.57,
5.57A, 5.58, 5.59, 5.60, 5.60A, 5.61, 5.62, 5.63, 5.64, 5.65A,
5.65B, 5.65C, 5.67, 5.68-1, 5.69, 5.70, 5.71, 5.72, 5.73, 5.74,
5.75, 5.75-1, 5.75-3, 5.76-3, 5.76-4, 5.76-5, 5.90, 5.92, 5.98,
5.102, 5.131, 5.144, 5.145, 5.171, and 5.172;
(5) 7.01, 7.02, 7.19-1, 7.20, and 7.20-1;
(6) 21.11-2, 21.28, 21.28-A, 21.28-C, 21.28-D,
21.28-E, 21.31, 21.32, 21.32A, 21.39, 21.39-A, 21.39-B, 21.40,
21.49, 21.49-3b, 21.49-3d, 21.49-4, 21.49-4a, 21.49-6, 21.49-7,
21.49-8, 21.49-11, 21.49-13, 21.49-14, 21.49-15A, 21.49-17,
21.49-18, 21.49-20, 21.49A, 21.49A-1, 21.49B, 21.50, 21.54,
21.58A, 21.58B, 21.58C, 21.61, 21.72, 21.77, 21.79, 21.79E, and
21.81; and
(7) 25.01, 25.02, 25.03, 25.04, 25.05, 25.06, 25.07,
25.08, 25.09, and 25.10.
(b) Sections 3, 4, 5, and 17, Article 1.10, Insurance Code,
are repealed.
(c) Subsections (5), (6), (9), (10), (11), and (12)(b),
Article 5.06, Insurance Code, are repealed.
(d) Sections 2-8 and 10-16, Article 5.13-2, Insurance Code,
are repealed.
(e) Sections 1-9 and 11, Article 5.15-1, Insurance Code, are
repealed.
(f) Subsections (b) and (c), Article 5.28, Insurance Code,
are repealed.
(g) Subsection (k), Article 5.35, Insurance Code, as added
by Chapter 206, Acts of the 78th Legislature, Regular Session,
2003, is repealed.
(h) Sections 1, 3-4B, and 5-10, Article 21.49-3, Insurance
Code, are repealed.
SECTION 19. LEGISLATIVE INTENT. This Act is enacted under
Section 43, Article III, Texas Constitution. This Act is intended
as a recodification only, and no substantive change in law is
intended by this Act.
SECTION 20. EFFECTIVE DATE. This Act takes effect April 1,
2007.