AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Current law requires that the Texas Department of Insurance (TDI) approve certain aspects of the purchase of title reinsurance when the reinsurer is eligible, but has not been admitted to sell insurance in Texas. This process is infrequently used in practice because there are few desirable reinsurers not admitted in Texas. TDI's review does not focus on critical aspects of the reinsurance policy such as rates or policy language. However, the process costs both the insurer and the agency in time and resources and those costs are passed on to consumers and taxpayers.
Title reinsurance is a process where a title insurer is required or chooses to contract with other title insurers to cover the risk associated with a policy that it sells. The lead insurer generally assumes the responsibility of obtaining reinsurance in accordance with policy guidelines negotiated between the insurer and the insured, and reinsurers may agree to accept varying levels of risk.
There are a number of reasons for requiring reinsurance. For example, an
insurer may not have the funds available to cover a given risk, and therefore
may have to purchase reinsurance; a party to be insured may mandate
reinsurance; and when an insurer provides coverage for a single risk that
accounts for more than 50 percent of that insurer's capital and surplus, Texas
law requires the purchase of reinsurance.
This bill would remove the TDI approval requirement for title reinsurance and place the duty of compliance on the title insurers, eliminating time consuming and expensive regulatory action by TDI. The bill would also require that a reasonable effort be made by an insurer to obtain reinsurance from admitted carriers before going to a non-admitted carrier. Also, the bill would increase the minimum capital requirements associated with reinsurance to mirror current requirements for standard title insurers found in Section 2551.053 (Stock and Surplus Requirements), Insurance Code. This bill would not abrogate TDI's enforcement ability outside of the scope of the title reinsurance review process.
As proposed, S.B. 322 amends current law relating to the requirements for reinsurance contracts covering title insurance policies issued in this state.
RULEMAKING AUTHORITY
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 2551.302, Insurance Code, to delete existing text authorizing a title insurance company to reinsure any of its policies and contracts issued on real property located in this state or on policies and contracts issued in this state under Chapter 2751 (Title Insurance for Personal Property Interests) if the Texas Department of Insurance first approves the form of the reinsurance contract. Makes nonsubstantive changes.
SECTION 2. Repealer: Section 2551.303 (Form of Reinsurance Contract), Insurance Code.
SECTION 3. Makes application of this Act prospective.
SECTION 4. Effective date: September 1, 2011.