82R8362 TJS-F

By: Taylor of Galveston H.B. No. 2604

A BILL TO BE ENTITLED

AN ACT

relating to solvency accounts maintained by title agents for holding unencumbered assets.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2651.012(a)(2), Insurance Code, is amended to read as follows:

(2) "Unencumbered assets" means:

(A) cash or cash equivalents;

(B) liquid assets that have a readily determinable market value and that do not have any lien against them;

(C) real estate, in excess of any encumbrances;

(D) investments, such as mutual funds, certificates of deposit, and stocks and bonds;

(E) a surety bond, the form and content of which shall be prescribed by the commissioner in accordance with this code;

(F) a deposit made in accordance with Section 2651.102; [and]

(G) a letter of credit that meets the requirements of Section 493.104(b)(2)(C); and

(H) a solvency account that meets the requirements of Section 2651.0121.

SECTION 2. Subchapter A, Chapter 2651, Insurance Code, is amended by adding Section 2651.0121 to read as follows:

Sec. 2651.0121. SOLVENCY ACCOUNT. (a) An agent may maintain a solvency account to accrue and hold unencumbered assets as provided by this section.

(b) An account under this section must be:

(1) in a financial institution in this state that is insured by an agency of the United States;

(2) accessible only to the department, on order of the commissioner; and

(3) audited in the same manner provided for trust funds by Section 2651.151.

(c) Subject to Subsection (d), an account under this section may be established by an initial deposit in an amount less than the amount provided by Section 2651.012(c).

(d) An account established by an initial deposit of an amount less than the amount provided by Section 2651.012(c) must be funded with a minimum deposit in the amount that is equal to $5 for each policy of title insurance issued by the agent. Deposits to the account must be made at least quarterly and must be made from and based on retained premiums collected during the calendar quarter during which premiums were collected.

(e) Interest that accrues in an account the principal balance of which is less than the amount provided by Section 2651.012(c) must be retained in the account. Interest that accrues in an account the principal balance of which is greater than the amount provided by Section 2651.012(c) may be paid to the agent maintaining the account.

(f) The commissioner may issue an order to access funds held in an account under this section if:

(1) the agent is an impaired agent, as defined by Section 2602.003; or

(2) the commissioner determines that the agent must be involuntarily liquidated as the result of license surrender or revocation.

(g) If an agent or an agent's principal office voluntarily ceases business, surrenders the agent's license, and liquidates the agent's assets, the agent may apply to the department in a form provided by the commissioner by rule for the release of the agent's solvency account. Not later than the 60th day after the date the department receives an application under this subsection, the commissioner shall enter an order authorizing the financial institution in which the solvency account is held to release all or part of the account balance to the agent or the agent's principal office.

(h) An account established, funded, and maintained as provided by this section complies with the requirement for maintenance of unencumbered assets under Section 2651.012(c), regardless of whether the amount required by that section is fully accrued.

SECTION 3. As soon as practicable after the effective date of this Act, but not later than January 1, 2012, the commissioner of insurance shall promulgate rules and forms governing the operation of a solvency account under Section 2651.0121, Insurance Code, as added by this Act.

SECTION 4. This Act takes effect September 1, 2011.