By: Deuell S.B. No. 416
 
  (Smithee)
 
   
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the amount of outstanding total liability of a mortgage
  guaranty insurer.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 3502.156, Insurance Code, is amended by
  amending Subsections (a) and (c) and adding Subsections (d) through
  (j) to read as follows:
         (a)  Except as provided by Subsection (d), 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.
         (c)  Except as provided by Subsection (d), a [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.
         (d)  The commissioner may waive the limit imposed by
  Subsection (a) at the written request of a mortgage guaranty
  insurer on a finding by the commissioner that the sum of the
  insurer's capital, surplus, and contingency reserve is reasonable
  in relationship to the insurer's aggregate insured risk and
  adequate to the insurer's financial needs.  The request must be made
  in writing on or before the 90th day before the date the insurer
  expects to exceed the limit imposed by Subsection (a) and shall, at
  a minimum, address the factors listed in Subsection (e).
         (e)  In determining whether a mortgage guaranty insurer's
  capital, surplus, and contingency reserve is reasonable in relation
  to the insurer's aggregate insured risk and adequate to the
  insurer's financial needs, the commissioner, in the commissioner's
  sole discretion, may consider relevant factors including:
               (1)  the insurer's size as measured by the insurer's
  assets, capital and surplus, reserves, premium writings, insurance
  in force, and other appropriate criteria;
               (2)  the extent to which the insurer's business is
  diversified across time, geography, credit quality, origination,
  and distribution channels;
               (3)  the nature and extent of the insurer's reinsurance
  program;
               (4)  the quality, diversification, and liquidity of the
  insurer's investment portfolio;
               (5)  the historical and forecasted trend in the size of
  the insurer's capital, surplus, and contingency reserve;
               (6)  the capital, surplus, and contingency reserve
  maintained by other comparable mortgage guaranty insurers in
  relation to the nature of the insurers' respective insured risks;
               (7)  the reasonableness of the insurer's reserves;
               (8)  the quality and liquidity of the insurer's
  investments in affiliates; and
               (9)  the quality of the insurer's earnings and the
  extent to which the insurer's reported earnings include
  extraordinary items.
         (f)  With respect to the factors listed in Subsection (e)(8),
  the commissioner may treat an investment in an affiliate as a
  nonadmitted asset for purposes of determining the adequacy of
  surplus as regards policyholders.
         (g)  The commissioner may retain accountants, actuaries, or
  other experts to assist the commissioner in the review of a request
  made by a mortgage guaranty insurer under Subsection (d).  The
  insurer shall pay the commissioner's cost of retaining those
  persons.
         (h)  A waiver granted under Subsection (d) must be for a
  specified period that does not exceed two years and is subject to
  any terms and conditions the commissioner considers best suited to
  restoring the mortgage guaranty insurer's capital, surplus, and
  contingency reserve to the level required by Subsection (a).  The
  mortgage guaranty insurer may apply to extend the waiver on or
  before the 90th day before the date the waiver period expires.
         (i)  The commissioner may not under any circumstances allow
  the mortgage guaranty insurer to 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
  50.
         (j)  An insurer may not be allowed a waiver under Subsections
  (d) and (h) for a continuous period of more than six years.
         SECTION 2.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2011.