By: Carona  S.B. No. 322
         (In the Senate - Filed January 7, 2011; February 2, 2011,
  read first time and referred to Committee on Business and Commerce;
  March 7, 2011, reported adversely, with favorable Committee
  Substitute by the following vote:  Yeas 7, Nays 0; March 7, 2011,
  sent to printer.)
 
  COMMITTEE SUBSTITUTE FOR S.B. No. 322 By:  Carona
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to the requirements for reinsurance contracts covering
  title insurance policies issued in this state.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2551.302, Insurance Code, is amended to
  read as follows:
         Sec. 2551.302.  REQUIREMENTS FOR REINSURING POLICIES.  A
  title insurance company may 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, if:
               (1)  the reinsuring title insurance company is
  authorized to engage in business in this state under this title; or 
  [and]
               (2)  the title insurance company acquires reinsurance
  in accordance with Section 2551.305 [the department first approves
  the form of the reinsurance contract].
         SECTION 2.  Section 2551.305, Insurance Code, is amended to
  read as follows:
         Sec. 2551.305.  CERTAIN REINSURANCE ALLOWED.
  (a)  Notwithstanding any other provision of this subchapter, a
  title insurance company may acquire reinsurance on an individual
  policy or facultative basis from a title insurance company not
  authorized to engage in the business of title insurance in this
  state if:
               (1)  the title insurance company from which the
  reinsurance is acquired:
                     (A)  has a combined capital and surplus of at
  least $20 million as stated in the company's most recent annual
  statement preceding the acceptance of reinsurance; and
                     (B)  is domiciled in another state and is
  authorized to engage in the business of title insurance in one or
  more states; and
               (2)  the title insurance company acquiring reinsurance
  gives written notice to the department at least 30 days before
  acquiring the reinsurance, and the commissioner does not, before
  the expiration of the 30-day period and on the ground that the
  transaction may result in a hazardous financial condition, prohibit
  the title insurance company from obtaining reinsurance under this
  section.
         (b)  The notice required under Subsection (a)(2) must
  provide sufficient information to enable the commissioner to
  evaluate the proposed transaction, including a summary of the
  significant terms of the reinsurance, the financial impact of the
  transaction on the title insurance company acquiring reinsurance,
  and the specific identity and state of domicile of each title
  insurance company from which reinsurance is acquired.
         (c)  Notwithstanding any other provision of this subchapter,
  the department may, on application and hearing, permit a title
  insurance company to acquire reinsurance that does not comply with
  Subsection (a) on an individual policy or facultative basis from a
  title insurance company domiciled in another state and not
  authorized to engage in the business of title insurance in this
  state, if:
               (1)  the company has exhausted the opportunity to
  acquire reinsurance from all other authorized title insurance
  companies; and
               (2)  the title insurance company from which the
  reinsurance is acquired has a combined capital and surplus of at
  least $2 [$1.4] million as stated in its annual statement preceding
  the acceptance of reinsurance.
         (d) [(b)]  Notwithstanding any other provision of this
  subchapter, the department may, on application and hearing, permit
  a title insurance company, including an authorized reinsuring title
  insurance company, to retain an additional potential liability of
  not more than 40 percent of the company's capital stock and surplus
  as stated in the most recent annual statement of the company, if:
               (1)  the company has exhausted the opportunity to
  acquire reinsurance under Subsection (c) [(a)]; and
               (2)  the additional potential liability of the company
  is incurred only if the loss suffered by the insured under the
  policy exceeds the amount of insurance and reinsurance accepted by
  the company and its reinsuring title insurance companies under the
  other provisions of this subchapter.
         SECTION 3.  Section 2551.303, Insurance Code, is repealed.
         SECTION 4.  The change in law made by this Act applies only
  to a reinsurance contract entered into by a title insurance company
  on or after the effective date of this Act. A reinsurance contract
  entered into by a title insurance company before the effective date
  of this Act is governed by the law in effect immediately before the
  effective date of this Act, and the former law is continued in
  effect for that purpose.
         SECTION 5.  This Act takes effect September 1, 2011.
 
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