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A BILL TO BE ENTITLED
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AN ACT
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relating to unencumbered surplus or guaranty fund requirements for |
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certain insurance companies. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 822.205, Insurance Code, is amended to |
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read as follows: |
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Sec. 822.205. UNENCUMBERED SURPLUS OR GUARANTY FUND |
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REQUIREMENTS FOR CERTAIN INSURANCE COMPANIES. (a) This section |
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applies only to an insurance company that: |
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(1) writes insurance only in this state; [and] |
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(2) is not required by law to have capital stock; and |
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(3) was not, before September 1, 2007, subject to |
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additional capital and surplus requirements under Section 822.210. |
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(b) An [Notwithstanding any other provision of this
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subchapter other than Sections 822.212(b) and (c), an] insurance |
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company described by Subsection (a) must have a minimum amount of |
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unencumbered surplus or a minimum amount of guaranty fund and |
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unencumbered surplus equal to capital and surplus requirements |
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adopted by the commissioner under Section 822.210 [the greater of:
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[(1) the amount of unencumbered surplus or the amount
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of guaranty fund and surplus, as appropriate, the company was
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required to have on August 31, 1991; or
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[(2) one-third of the company's net written premium
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for the preceding 12 months after deducting:
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[(A)lawfully ceded reinsurance; and
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[(B)any policy fees not ceded to reinsurers]. |
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(c) The commissioner by rule shall provide a transition |
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period for insurance companies subject to this section to meet the |
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requirements of Subsection (b) and for the pro rata elimination of |
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any deficiencies in the amounts required. The transition period |
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must be: |
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(1) not less than five years for insurance companies |
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that have a market share of 10 percent or more; and |
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(2) not less than 10 years for all other insurance |
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companies. |
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(d) Notwithstanding Subsection (b), the commissioner shall |
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adopt rules specifically for insurance companies authorized under |
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Chapter 912 to write business through multiple agents licensed |
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under Chapter 4053, using multiple rate filings within each line of |
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business, and that also cede 95 percent or more of direct and |
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assumed written premium. The rules required by this subsection |
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must: |
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(1) require a minimum amount of unencumbered surplus |
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or a minimum amount of guaranty fund and unencumbered surplus equal |
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to the greater of $2 million or five percent of the insurance |
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company's net recoverables for reinsurance, after taking into |
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account: |
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(A) ceded premiums payable and collateral held in |
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compliance with Section 493.104 that secure the collection of the |
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reinsurance; |
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(B) approved cut-through policy endorsements; |
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and |
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(C) reinsurers whose financial strength is rated |
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A+ or better by A. M. Best Company; |
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(2) provide for a 10-year transition period for |
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insurance companies subject to this subsection for the elimination |
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of any deficiencies in the amounts required; and |
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(3) require that insurance companies subject to this |
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subsection file a plan with the department, that may be |
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periodically updated, that reflects how compliance with the |
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requirements shall be progressively achieved over the 10–year |
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transition period. |
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SECTION 2. This Act takes effect September 1, 2007. |