|
|
A BILL TO BE ENTITLED
|
|
AN ACT
|
|
|
relating to the licensing of captive insurance companies; |
|
authorizing fees and authorizing and imposing taxes. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle B, Title 3, Insurance Code, is amended |
|
by adding Chapter 223A to read as follows: |
|
CHAPTER 223A. CAPTIVE INSURANCE PREMIUM TAX |
|
Sec. 223A.001. DEFINITION. In this chapter, "captive |
|
insurance company" means a captive insurance company or segregated |
|
account holding a certificate of authority under Chapter 964. |
|
Sec. 223A.002. APPLICABILITY OF CHAPTER. This chapter |
|
applies to a captive insurance company or segregated account |
|
holding a certificate of authority under Chapter 964. |
|
Sec. 223A.003. TAX IMPOSED; RATE. (a) An annual tax is |
|
imposed on each captive insurance company that receives gross |
|
premiums subject to taxation under this chapter. The rate of the |
|
tax is one-half percent of the company's taxable premium receipts |
|
for a calendar year. |
|
(b) Except as provided by Subsection (c), in determining a |
|
captive insurance company's taxable premium receipts, the captive |
|
insurance company shall include the total gross amounts of |
|
premiums, membership fees, assessments, dues, revenues, and other |
|
considerations for insurance written by the captive insurance |
|
company in a calendar year from any kind of insurance written by the |
|
company on each kind of property or risk located in this state. |
|
(c) The following premium receipts are not included in |
|
determining a captive insurance company's taxable premium |
|
receipts: |
|
(1) premium receipts received from another authorized |
|
insurer for reinsurance; |
|
(2) returned premiums and dividends paid to |
|
policyholders; and |
|
(3) premiums excluded by another law of this state. |
|
(d) In determining a captive insurance company's taxable |
|
premium receipts, a company is not entitled to a deduction for |
|
premiums paid for reinsurance. |
|
(e) The annual minimum aggregate tax to be paid by a captive |
|
insurance company under this chapter is $7,500 and the annual |
|
maximum aggregate tax to be paid by a company under this chapter is |
|
$200,000. Gross premiums subject to taxation under this chapter |
|
are not subject to taxes, surcharges, or other regulatory |
|
assessments or fees under this code other than insurance |
|
maintenance taxes as provided by Section 964.068. |
|
Sec. 223A.004. TAX DUE DATES. (a) The total tax imposed by |
|
this chapter is due and payable not later than March 1 after the end |
|
of the calendar year for which the tax is due. |
|
(b) A captive insurance company that had a net tax liability |
|
for the previous calendar year of more than $1,000 shall make |
|
semiannual prepayments of tax on March 1 and August 1. The tax paid |
|
on each date must be equal to 50 percent of the total amount of tax |
|
the company paid under this chapter for the previous calendar year. |
|
If the company did not pay a tax under this chapter during the |
|
previous calendar year, the tax paid on each date must be equal to |
|
the tax that would be owed on the aggregate of the gross premiums |
|
for the two previous calendar quarters. |
|
(c) The comptroller may refund any overpayment of taxes that |
|
results from the semiannual prepayment system prescribed by this |
|
section. |
|
Sec. 223A.005. TAX REPORT. (a) A captive insurance |
|
company liable for the tax imposed by this chapter must file |
|
annually with the comptroller a tax report on a form prescribed by |
|
the comptroller. |
|
(b) The tax report is due on the date the tax is due under |
|
Section 223A.004(a). |
|
Sec. 223A.006. CHANGE IN DUE DATES. (a) The comptroller |
|
by rule may change the dates for reporting and paying taxes under |
|
this chapter to improve operating efficiencies within the agency. |
|
(b) A change by the comptroller in a reporting or payment |
|
date must retain the system of semiannual prepayments prescribed by |
|
Section 223A.004. |
|
Sec. 223A.007. CREDIT FOR FEES PAID. (a) A captive |
|
insurance company is entitled to a credit on the amount of tax due |
|
under this chapter for all examination and evaluation fees paid to |
|
this state during the calendar year for which the tax is due. The |
|
limitations provided by Sections 803.007(1) and (2)(B) for a |
|
domestic insurance company apply to a captive insurance company. |
|
(b) The credit provided by this section is in addition to |
|
any other credit authorized by statute. |
|
Sec. 223A.008. FAILURE TO PAY TAXES. A captive insurance |
|
company that fails to pay all taxes imposed by this chapter is |
|
subject to Section 203.002 of this code and Subtitles A and B, Title |
|
2, Tax Code. |
|
SECTION 2. Subtitle H, Title 6, Insurance Code, is amended |
|
by adding Chapter 964 to read as follows: |
|
CHAPTER 964. CAPTIVE INSURANCE COMPANIES |
|
SUBCHAPTER A. GENERAL PROVISIONS |
|
Sec. 964.001. DEFINITIONS. (a) In this chapter: |
|
(1) "Affiliated company" or "affiliate" has the |
|
meaning assigned by Section 823.003 and includes a parent entity |
|
that controls a captive insurance company. |
|
(2) "Captive insurance company" means a company that |
|
holds a certificate of authority under this chapter to insure the |
|
operational risks of the company's affiliates or risks of a |
|
controlled unaffiliated business. |
|
(3) "Captive management company" means an entity |
|
providing administrative services to a captive insurance company. |
|
(4) "Control" means the power to direct, or cause the |
|
direction of, the management and policies of an entity, other than |
|
the power that results from an official position with or corporate |
|
office held in the entity. The power may be possessed directly or |
|
indirectly by any means, including through the ownership of voting |
|
securities or by contract, other than a commercial contract for |
|
goods or nonmanagement services. |
|
(5) "Controlled unaffiliated business" means a |
|
person: |
|
(A) that is not an affiliate; |
|
(B) that has an existing contractual |
|
relationship with an affiliate under which the affiliate bears a |
|
potential financial loss; and |
|
(C) the risks of which are managed by a captive |
|
insurance company under Section 964.066. |
|
(6) "Managing captive insurance company" means a |
|
captive insurance company that meets the requirements of Subchapter |
|
B and organizes and operates a segregated account. |
|
(7) "Operational risk" means any potential financial |
|
loss of an affiliate, except for a loss arising from an insurance |
|
policy issued by a captive or insurance affiliate. |
|
(8) "Participant" means a person and affiliate of that |
|
person who is insured by a managing captive insurance company |
|
through a participant contract. |
|
(9) "Participant contract" means a contract by which a |
|
managing captive insurance company insures the risks of a |
|
participant and limits the losses of the participant to the |
|
participant's pro rata share of the assets of the segregated |
|
account identified by the contract. |
|
(10) "Redomestication" means the transfer to or from |
|
this state of the insurance domicile of an authorized captive |
|
insurer. |
|
(11) "Segregated account" means a separate account |
|
that is separately formed, holds a separate certificate of |
|
authority, and is established and maintained by a managing captive |
|
insurance company and in which: |
|
(A) the assets are maintained for a participant |
|
under a participant contract to fund the liabilities of the |
|
managing captive insurance company assumed by the participant under |
|
the participant contract; and |
|
(B) the minimum capital and surplus required by |
|
applicable law may be provided by a person. |
|
(b) Notwithstanding Section 30.003, in this chapter, |
|
"person" has the meaning assigned by Section 311.005, Government |
|
Code. |
|
Sec. 964.002. APPLICABILITY OF OTHER LAWS. (a) Except as |
|
otherwise provided by this chapter, this code does not apply to a |
|
captive insurance company except: |
|
(1) Title 2; |
|
(2) Chapter 223A and Subtitles A and C, Title 3; |
|
(3) Chapter 401; |
|
(4) Chapter 441; |
|
(5) Chapter 443; and |
|
(6) Chapter 803. |
|
(b) A captive insurance company operating under this |
|
chapter is subject to the Business Organizations Code, including |
|
the requirement to be authorized by the secretary of state, to the |
|
extent those laws do not conflict with this chapter. |
|
(c) Chapter 823 applies to a captive insurance company only |
|
if the company is affiliated with another insurer that is subject to |
|
Chapter 823. |
|
SUBCHAPTER B. CAPTIVE INSURANCE COMPANIES |
|
Sec. 964.051. AUTHORITY TO WRITE DIRECT BUSINESS. |
|
(a) Except as provided by this section, a captive insurance |
|
company may write any type of insurance, but may only insure the |
|
operational risks of the company's affiliates and risks of a |
|
controlled unaffiliated business. |
|
(b) A captive insurance company may not issue: |
|
(1) life insurance; |
|
(2) annuities; |
|
(3) accident and health insurance for the company's |
|
parent and affiliates, except to insure employee benefits that are |
|
subject to the Employee Retirement Income Security Act of 1974 (29 |
|
U.S.C. Section 1001 et seq.); |
|
(4) title insurance; |
|
(5) mortgage guaranty insurance; |
|
(6) financial guaranty insurance; |
|
(7) residential property insurance; |
|
(8) personal automobile insurance; or |
|
(9) workers' compensation insurance. |
|
(c) A captive insurance company may not issue a type of |
|
insurance, including automobile liability insurance, that is |
|
required, under the laws of this state or a political subdivision of |
|
this state, as a prerequisite for obtaining a license or permit if |
|
the law requires that the liability insurance be issued by an |
|
insurer authorized to engage in the business of insurance in this |
|
state. |
|
(d) A captive insurance company is authorized to issue a |
|
contractual reimbursement policy to: |
|
(1) an affiliated certified self-insurer authorized |
|
under Chapter 407, Labor Code, or a similar affiliated entity |
|
expressly authorized by analogous laws of another state; or |
|
(2) an affiliate that is insured by a workers' |
|
compensation insurance policy with a negotiated deductible |
|
endorsement. |
|
Sec. 964.052. AUTHORITY TO PROVIDE REINSURANCE. (a) A |
|
captive insurance company may provide reinsurance to an insurer |
|
covering the operational risks of the captive insurance company's |
|
affiliates or risks of a controlled unaffiliated business that the |
|
captive insurance company may insure directly under Section 964.051 |
|
and: |
|
(1) employee benefit plans offered by affiliates; |
|
(2) liability insurance an affiliate must maintain as |
|
a prerequisite for obtaining a license or permit if the law requires |
|
maintenance of the liability insurance; and |
|
(3) workers' compensation insurance and employer |
|
liability policies issued to affiliates if the insurer that |
|
directly issues workers' compensation insurance and employer's |
|
liability policies or its licensed, if required by law, |
|
administrator or adjuster: |
|
(A) services all claims incurred during the |
|
policy period; and |
|
(B) complies with all requirements for an insurer |
|
under this code, including Chapter 462, and under Title 5, Labor |
|
Code. |
|
(b) A captive insurance company shall provide notice to the |
|
commissioner of a reinsurance agreement that the company becomes a |
|
party to not later than the 30th day after the date of the execution |
|
of the agreement. |
|
(c) A captive insurance company shall provide notice of a |
|
termination of a previously filed reinsurance agreement to the |
|
commissioner not later than the 30th day after the date of |
|
termination. |
|
(d) A captive insurance company may take credit for reserves |
|
on risks or portions of risks ceded to reinsurers under Subchapter |
|
C, Chapter 492, and Subchapter C, Chapter 493. |
|
Sec. 964.053. FORMATION. (a) A captive insurance company |
|
must be formed for the purpose of engaging in the business of |
|
insurance under this chapter. |
|
(b) A captive insurance company may be formed and operated |
|
in any form of business organization authorized under the Business |
|
Organizations Code except a risk retention group or general |
|
partnership. A captive insurance company may only be formed as a |
|
nonprofit corporation if it is controlled by a nonprofit |
|
corporation. |
|
(c) The certificate of formation of a captive insurance |
|
company must include: |
|
(1) the name of the company, which may not be the same |
|
as, deceptively similar to, or likely to be confused with or |
|
mistaken for any other existing business name registered in this |
|
state; |
|
(2) the location of the company's principal business |
|
office; |
|
(3) the type of insurance business in which the |
|
company proposes to engage; |
|
(4) the number of directors or members of the |
|
governing body of the company; |
|
(5) the number of authorized shares and the par value |
|
of the company's capital stock for a captive insurance company |
|
formed as a corporation; |
|
(6) the amount of the company's initial capital and |
|
surplus; and |
|
(7) any other information required by the commissioner |
|
as necessary to explain the company's objectives, management, and |
|
control. |
|
(d) The board of directors or governing body of a captive |
|
insurance company formed in this state must have at least three |
|
members, and at least one of the members must be a resident of this |
|
state. |
|
(e) The certificate of formation or bylaws of a captive |
|
insurance company must authorize a quorum of the board of directors |
|
or governing body to consist of not fewer than one-third of the |
|
fixed number of directors or members of the governing body. |
|
Sec. 964.054. RESERVES AND ACCOUNTING BASIS. (a) A |
|
captive insurance company shall maintain reserves in an amount |
|
stated in the aggregate to provide for the payment of all losses or |
|
claims for which the captive insurance company may be liable and |
|
that are: |
|
(1) incurred on or before the date of the annual report |
|
under Section 964.060, whether reported or unreported; and |
|
(2) unpaid as of the date of the annual report under |
|
Section 964.060. |
|
(b) In addition to the reserves required by Subsection (a), |
|
a captive insurance company shall maintain reserves in an amount |
|
estimated to provide for the expenses of adjustment or settlement |
|
of the losses or claims described by Subsection (a). |
|
(c) The captive insurance company shall use generally |
|
accepted accounting principles as an accounting basis except that a |
|
captive insurance company that is required to hold a certificate of |
|
authority under another jurisdiction's insurance laws shall use |
|
statutory accounting principles. |
|
Sec. 964.055. CERTIFICATE OF AUTHORITY REQUIRED. (a) An |
|
entity may not engage in business as a captive insurance company |
|
domiciled in this state unless it holds a certificate of authority |
|
to act as a captive insurance company issued by the department. A |
|
captive insurance company, when permitted by its certificate of |
|
formation, may apply for a certificate of authority under this |
|
chapter. |
|
(b) An entity does not qualify for a certificate of |
|
authority under this chapter unless: |
|
(1) its affiliates have significant operations in this |
|
state, as determined by the commissioner; |
|
(2) its board of directors or governing body holds at |
|
least one meeting each year in this state; |
|
(3) it maintains its principal office and books and |
|
records in this state, unless the commissioner grants an |
|
application to relocate the entity's books and records under |
|
Chapter 803; and |
|
(4) it complies with Section 804.101 or 804.102. |
|
Sec. 964.056. CAPITAL AND SURPLUS REQUIREMENTS. (a) The |
|
department may not issue a certificate of authority to a captive |
|
insurance company unless the company possesses and maintains |
|
unencumbered capital and surplus in an amount determined by the |
|
commissioner after considering: |
|
(1) the amount of premium written by the captive |
|
insurance company; |
|
(2) the characteristics of the assets held by the |
|
captive insurance company; |
|
(3) the terms of reinsurance arrangements entered into |
|
by the captive insurance company; |
|
(4) the type of business covered in policies issued by |
|
the captive insurance company; |
|
(5) the underwriting practices and procedures of the |
|
captive insurance company; and |
|
(6) any other criteria that has an impact on the |
|
operations of the captive insurance company determined to be |
|
significant by the commissioner. |
|
(b) The amount of capital and surplus determined by the |
|
commissioner under Subsection (a) may not be less than $250,000. |
|
(c) The capital and surplus required by Subsection (a) must |
|
be in the form of: |
|
(1) United States currency; |
|
(2) an irrevocable letter of credit, in a form |
|
approved by the commissioner and not secured by a guarantee from an |
|
affiliate, naming the commissioner as beneficiary for the security |
|
of the captive insurance company's policyholders and issued by a |
|
bank approved by the commissioner; |
|
(3) bonds of this state; or |
|
(4) bonds or other evidences of indebtedness of the |
|
United States, the principal and interest of which are guaranteed |
|
by the United States. |
|
Sec. 964.057. APPLICATION FOR CERTIFICATE OF AUTHORITY. |
|
(a) To obtain a certificate of authority for a captive insurance |
|
company, the incorporators or organizers must pay to the |
|
commissioner an application fee and file with the commissioner an |
|
application for the certificate of authority, which must include: |
|
(1) a financial statement certified by two principal |
|
officers; |
|
(2) a plan of operation and projections, which must |
|
include an actuarial report prepared by a qualified independent |
|
actuary; |
|
(3) the captive insurance company's certificate of |
|
formation; |
|
(4) an affidavit by the incorporators, organizers, or |
|
officers of the captive insurance company stating that: |
|
(A) the capital and surplus are the bona fide |
|
property of the company; and |
|
(B) the certificate of formation is true and |
|
correct; and |
|
(5) if the application provides for the issuance of |
|
shares of stock or other type of equity instrument without par |
|
value, a certificate authenticated by the incorporators or officers |
|
stating: |
|
(A) the number of shares or other type of equity |
|
instrument without par value that are subscribed; and |
|
(B) the actual consideration received by the |
|
captive insurance company for those shares or other type of equity |
|
instrument. |
|
(b) If the commissioner is not satisfied with the affidavit |
|
filed under Subsection (a)(4), the commissioner may require that |
|
the incorporators, organizers, or officers provide at their expense |
|
additional evidence as described by Subsection (a) before the |
|
commissioner takes action on the application. |
|
(c) The application fee required under this section is |
|
$1,500 or a greater amount set by the commissioner by rule as |
|
necessary to recover the cost of administering this section. |
|
(d) Notwithstanding Subsection (c), for a complete |
|
application filed on or before December 30, 2018, the application |
|
fee may not exceed $1,500. This subsection expires January 1, 2019. |
|
(e) Fees collected under this section shall be deposited to |
|
the credit of the Texas Department of Insurance operating account. |
|
Sec. 964.058. EXAMINATION BY COMMISSIONER. (a) After the |
|
application and application fee for a certificate of authority |
|
under Section 964.057 are filed with the department and the |
|
applicant has complied with all legal requirements, the |
|
commissioner shall conduct an examination of the applicant to |
|
determine whether: |
|
(1) the minimum capital and surplus requirements of |
|
Section 964.056 are satisfied; |
|
(2) the capital and surplus are the bona fide property |
|
of the applicant; and |
|
(3) the applicant has fully complied with applicable |
|
insurance laws. |
|
(b) The commissioner may appoint a competent and |
|
disinterested person to conduct the examination required by this |
|
section. The examiner shall file an affidavit of the examiner's |
|
findings with the commissioner. The commissioner shall record the |
|
affidavit. |
|
Sec. 964.059. ACTION ON APPLICATION. (a) The commissioner |
|
shall determine whether: |
|
(1) the capital structure of the applicant meets the |
|
requirements of this chapter; |
|
(2) the officers or directors of the applicant have |
|
sufficient insurance experience, ability, standing, and good |
|
record to make success of the captive insurance company probable; |
|
(3) the applicant is acting in good faith; and |
|
(4) the applicant otherwise satisfies the |
|
requirements of this chapter. |
|
(b) In evaluating the application, the commissioner shall |
|
consider: |
|
(1) the amount and liquidity of the applicant's assets |
|
relative to the risks to be assumed; |
|
(2) the adequacy of the expertise, experience, and |
|
character of each individual who will manage the applicant; |
|
(3) the overall soundness of the applicant's plan of |
|
operations and the projections contained in that plan; |
|
(4) whether the applicant's affiliates have |
|
significant operations located in this state; and |
|
(5) any other factors the commissioner considers |
|
relevant to determine whether the applicant will be able to meet its |
|
policy obligations. |
|
(c) If the commissioner determines that the applicant has |
|
not met the standards set out by Subsection (a), the commissioner |
|
shall deny the application in writing, giving the reason for the |
|
denial. On the applicant's request, the commissioner shall hold a |
|
hearing on a denial. Not later than the 30th day after the date the |
|
commissioner receives the applicant's request for a hearing, the |
|
commissioner shall set a hearing date. |
|
(d) If the commissioner does not deny the application under |
|
Subsection (c), the commissioner shall approve the application and: |
|
(1) issue to the applicant a certificate of authority |
|
to engage in business as provided for in the applicant's |
|
certificate of formation; |
|
(2) certify and file the approved document with the |
|
department; and |
|
(3) issue a certified copy of the certificate of |
|
authority to the applicant's incorporators or officers. |
|
(e) A certificate of authority issued to a captive insurance |
|
company under this section may not be sold. |
|
Sec. 964.060. ANNUAL REPORT. (a) A captive insurance |
|
company holding a certificate of authority under this chapter is |
|
not required to file a report, except as provided by this section, |
|
Chapter 223A, and Subtitle C, Title 3. |
|
(b) A captive insurance company that holds a certificate of |
|
authority to engage in captive insurance business in this state |
|
shall file with the commissioner: |
|
(1) on or before March 1 of each year, a statement of |
|
the company's financial condition, verified by two of its executive |
|
officers and filed in a format prescribed by the commissioner; and |
|
(2) on or before June 1 of each year, a report of its |
|
financial condition at last year-end with an independent certified |
|
public accountant's opinion of the company's financial condition. |
|
(c) A captive insurance company may make a written |
|
application to the commissioner for filing its annual report |
|
required under this section on a fiscal year-end. If an alternative |
|
filing date is granted, the company shall file: |
|
(1) the annual report not later than the 60th day after |
|
the date of the company's fiscal year-end; |
|
(2) the report of its financial condition at last |
|
year-end with an independent certified public accountant's opinion |
|
of the company's financial condition not later than the 150th day |
|
after the date the annual report is due; and |
|
(3) its balance sheet, income statement, and statement |
|
of cash flows, verified by two of its executive officers, before |
|
March 1 of each year to provide sufficient detail to support a |
|
premium tax return. |
|
Sec. 964.061. INVESTMENTS. (a) A captive insurance |
|
company without segregated accounts is not subject to a restriction |
|
on allowable investments, except as provided by this section. |
|
(b) A captive insurance company without segregated accounts |
|
may make loans to its affiliates with the prior approval of the |
|
commissioner. Each loan must be evidenced by a note approved by the |
|
commissioner. A captive insurance company may not make a loan of |
|
the minimum capital and surplus funds required by this chapter. |
|
(c) The commissioner may prohibit or limit an investment |
|
that threatens the solvency or liquidity of a captive insurance |
|
company. |
|
Sec. 964.062. AMENDMENTS TO CERTIFICATE OF FORMATION. A |
|
captive insurance company may not amend its certificate of |
|
formation unless the amendment has been filed with and approved by |
|
the commissioner. |
|
Sec. 964.063. NOTICE OF DIVIDENDS. A captive insurance |
|
company shall notify the commissioner in writing when issuing |
|
policyholder dividends. |
|
Sec. 964.064. PROHIBITION ON JOINING OR CONTRIBUTING TO |
|
CERTAIN ENTITIES AND FUNDS. A captive insurance company may not |
|
join or contribute financially to any plan, pool, association, or |
|
guaranty or insolvency fund in this state, and a captive insurance |
|
company, its insured, or any affiliate is not entitled to receive |
|
any benefit from a plan, pool, association, or guaranty or |
|
insolvency fund for claims arising out of the operations of the |
|
company. |
|
Sec. 964.065. SUSPENSION OR REVOCATION OF CERTIFICATE OF |
|
AUTHORITY. The commissioner, after notice and an opportunity for |
|
hearing, may revoke or suspend the certificate of authority of a |
|
captive insurance company for: |
|
(1) insolvency or impairment of required capital or |
|
surplus to policyholders; |
|
(2) failure to submit an annual report, as required by |
|
Section 964.060; |
|
(3) failure to comply with the provisions of its own |
|
charter or bylaws; |
|
(4) failure to submit to examination, as required by |
|
Chapter 401; |
|
(5) failure to pay the cost of examination, as |
|
required by Chapter 401; |
|
(6) failure to pay any tax or fee required by this |
|
code; |
|
(7) removal of its principal office or books and |
|
records from this state without prior approval of the commissioner; |
|
(8) use of practices that render its operation |
|
detrimental to the public or its condition unsound; or |
|
(9) failure to otherwise comply with the laws of this |
|
state. |
|
Sec. 964.066. STANDARDS FOR RISK MANAGEMENT OF CONTROLLED |
|
UNAFFILIATED BUSINESS. The commissioner may adopt rules |
|
establishing standards to ensure that an affiliated company is able |
|
to exercise control of the risk management function of any |
|
controlled unaffiliated business to be insured by the captive |
|
insurance company. Until rules under this section are adopted, the |
|
commissioner may approve the coverage of these risks by a captive |
|
insurance company. |
|
Sec. 964.067. CAPTIVE MANAGERS. Before providing captive |
|
management services to a licensed captive insurance company, a |
|
captive management company shall register with the commissioner by |
|
providing the information required on a form adopted by the |
|
commissioner. |
|
Sec. 964.068. MAINTENANCE TAX. A captive insurance company |
|
is subject to maintenance tax under Subtitle C, Title 3, on direct |
|
premiums for risks located in this state as applicable to the |
|
individual lines of business written by the captive insurance |
|
company. |
|
Sec. 964.069. RULEMAKING AUTHORITY. The commissioner may |
|
adopt reasonable rules as necessary to implement the purposes and |
|
provisions of this chapter. |
|
Sec. 964.070. CONFIDENTIALITY. (a) Any information filed |
|
by an applicant or captive insurance company under this chapter is |
|
confidential and privileged for all purposes, including for |
|
purposes of Chapter 552, Government Code, a response to a subpoena, |
|
or evidence in a civil action. Except as provided by Subsections |
|
(b) and (c), the information may not be disclosed without the prior |
|
written consent of the applicant or captive insurance company to |
|
which the information pertains. |
|
(b) If the recipient of the information described by |
|
Subsection (a) has the legal authority to maintain the confidential |
|
or privileged status of the information and verifies that authority |
|
in writing, the commissioner or another person may disclose the |
|
information to any of the following entities functioning in an |
|
official capacity: |
|
(1) a commissioner of insurance or an insurance |
|
department of another state; |
|
(2) an authorized law enforcement official; |
|
(3) a district attorney of this state; |
|
(4) the attorney general; |
|
(5) a grand jury; |
|
(6) the National Association of Insurance |
|
Commissioners if the captive insurance company is affiliated with |
|
an insurance company that is part of an insurance holding company |
|
system as described in Chapter 823; |
|
(7) another state or federal regulator if the state or |
|
federal regulator is operating in its official capacity and the |
|
applicant or captive insurance company to which the information |
|
relates operates in the entity's jurisdiction; |
|
(8) an international insurance regulator or analogous |
|
financial agency operating in an official capacity, if the captive |
|
insurance company is affiliated with an insurance company that is |
|
part of an insurance holding company system as described in Chapter |
|
823 and the holding company system operates in the entity's |
|
jurisdiction; or |
|
(9) members of a supervisory college described by |
|
Section 823.0145, if the captive insurance company is affiliated |
|
with an insurance company that is part of an insurance holding |
|
company system as described in Chapter 823. |
|
(c) The commissioner may use information described by |
|
Subsection (a) in the furtherance of a legal or regulatory action |
|
relating to the administration of this code. |
|
Sec. 964.071. REDOMESTICATION. (a) An authorized foreign |
|
or alien captive insurance company licensed under laws of any |
|
jurisdiction may become a domestic captive insurance company in |
|
this state on a determination by the commissioner that the |
|
authorized foreign or alien captive insurance company has complied |
|
with all of the requirements of this chapter for the issuance of a |
|
certificate of authority to, and the Business Organizations Code |
|
for converting to an entity of this state for, a domestic captive |
|
insurance company of the same type. |
|
(b) A domestic captive insurance company, on the approval of |
|
the commissioner, may transfer its domicile. On the transfer, the |
|
captive insurance company ceases to be a domestic captive insurance |
|
company. The commissioner shall approve any proposed transfer |
|
unless the commissioner determines the transfer is not in the best |
|
interest of the policyholders. |
|
(c) The commissioner may postpone or waive the imposition of |
|
any fees or taxes under this code for a period not to exceed two |
|
years for any foreign or alien captive insurance company |
|
redomesticating to this state. |
|
SUBCHAPTER C. MANAGING CAPTIVE INSURANCE COMPANIES |
|
Sec. 964.101. SEGREGATED ACCOUNT. (a) A managing captive |
|
insurance company may form a segregated account to insure risks of a |
|
participant. |
|
(b) The assets and liabilities of a managing captive |
|
insurance company and each segregated account shall be held |
|
separately. The assets and liabilities of each segregated account |
|
shall be held separately from the assets and liabilities of all |
|
other segregated accounts and the managing captive insurance |
|
company. |
|
(c) A managing captive insurance company is a single legal |
|
entity and must establish each segregated account as a separate |
|
legal entity. Each segregated account shall be separately |
|
identified or designated as being a part of the managing captive |
|
insurance company. |
|
Sec. 964.102. ORGANIZATION AND STRUCTURE OF SEGREGATED |
|
ACCOUNT. (a) A managing captive insurance company may issue |
|
segregated account shares of stock or other type of equity |
|
instrument in one or more classes or series for one or more |
|
segregated accounts, or for the managing captive insurance company |
|
as a whole. The proceeds of each issue shall be included in the |
|
assets of the segregated account for which the segregated account |
|
shares of stock or other type of equity instrument was issued. The |
|
proceeds of the issue of shares of stock or other type of equity |
|
instrument, other than segregated account shares of stock or other |
|
type of equity instrument, is included in the managing captive |
|
insurance company's general assets. |
|
(b) A managing captive insurance company may pay a dividend |
|
on segregated account shares of stock or other type of equity |
|
instrument of any class or series regardless of whether a dividend |
|
is declared on another class or series of segregated account shares |
|
of stock or other type of equity instrument, or any other shares of |
|
stock or other type of equity instrument. |
|
(c) Segregated account dividends or distributions must be |
|
paid on the segregated account shares of stock or other type of |
|
equity instrument from the segregated account assets. The |
|
dividends or distributions shall only be paid to the holders of the |
|
segregated account shares of stock or other type of equity |
|
instrument and in accordance with the rights of the shares of stock |
|
or other type of equity instrument. |
|
Sec. 964.103. ASSETS OF MANAGING CAPTIVE INSURANCE COMPANY. |
|
(a) The assets of a managing captive insurance company are general |
|
assets or assets of an individual segregated account. The |
|
segregated account assets are the assets of the managing captive |
|
insurance company held within or on behalf of the segregated |
|
account of the managing captive insurance company. The general |
|
assets of a managing captive insurance company are the assets of the |
|
managing captive insurance company that are not segregated account |
|
assets. |
|
(b) The assets of a segregated account are assets |
|
representing the capital, reserves held to support the liabilities |
|
of the segregated account, or all other assets attributable to or |
|
held within the segregated account. For purposes of this |
|
subsection, "reserves" includes retained earnings, capital, and |
|
paid-in capital. |
|
Sec. 964.104. REQUIRED PROCEDURES. (a) The directors or |
|
members of the governing body of a managing captive insurance |
|
company shall establish and maintain, or cause to be established |
|
and maintained, procedures: |
|
(1) to segregate, and keep segregated, segregated |
|
account assets from general assets; |
|
(2) to segregate, and keep segregated, segregated |
|
account assets of each segregated account captive insurance company |
|
from segregated account assets of another segregated account; and |
|
(3) if applicable, to apportion or transfer assets and |
|
liabilities between segregated accounts, or between segregated |
|
account assets and general assets, of the managing captive |
|
insurance company. |
|
(b) A managing captive insurance company must obtain prior |
|
approval from the commissioner before the company apportions or |
|
transfers assets and liabilities between segregated accounts of the |
|
managing captive insurance company. |
|
(c) A managing captive insurance company may not transfer |
|
assets and liabilities between segregated accounts and general |
|
assets of the managing captive insurance company. |
|
Sec. 964.105. USE OF SEGREGATED ACCOUNT ASSETS. |
|
(a) Segregated account assets: |
|
(1) must only be available and used to meet |
|
liabilities of the creditors with respect to that segregated |
|
account, and those creditors shall be entitled to have recourse |
|
only to the segregated account assets attributable to that |
|
segregated account; and |
|
(2) may not be available or used to meet liabilities |
|
of, and shall be absolutely protected from, the creditors of the |
|
managing captive insurance company and any other segregated account |
|
who are not creditors with respect to a particular segregated |
|
account, and those creditors are not entitled to have recourse to |
|
the protected segregated account assets. |
|
(b) If a liability of a managing captive insurance company |
|
to a creditor arises with respect to a particular segregated |
|
account, the liability extends only to that segregated account. |
|
The creditor shall, with respect to that liability, be entitled to |
|
have recourse only to the segregated account assets attributable to |
|
the segregated account. |
|
(c) If a liability, other than a liability described by |
|
Subsection (b), of a managing captive insurance company to a |
|
creditor arises, the liability extends only to the managing captive |
|
insurance company's general assets. The creditor shall, with |
|
respect to that liability, be entitled to have recourse only to the |
|
managing captive insurance company's general assets. |
|
(d) Liabilities of a managing captive insurance company not |
|
attributable to any of the company's segregated accounts are |
|
discharged from the managing captive insurance company's general |
|
assets. Income, receipts, and other property or rights of or |
|
acquired by a managing captive insurance company not otherwise |
|
attributable to any segregated account are allocated to the |
|
managing captive insurance company's general assets to the extent |
|
that the managing captive insurance company's general assets exceed |
|
any minimum capital amounts required by this chapter. |
|
Sec. 964.106. SEPARATE RECORDS. The managing captive |
|
insurance company shall account for each segregated account |
|
separately on the books and records of the managing captive |
|
insurance company to reflect the financial condition and results of |
|
operations of the segregated account, including net income or loss, |
|
dividends or other distributions to participants, and other factors |
|
provided by the participant contract or required by the |
|
commissioner. |
|
Sec. 964.107. TRANSACTIONS REQUIRING COMMISSIONER |
|
APPROVAL. (a) The managing captive insurance company may not make |
|
a sale, exchange, or other transfer of assets between or among any |
|
of its segregated accounts without the written consent of the |
|
participants and the commissioner. |
|
(b) A dividend or distribution shall not be made from the |
|
company's segregated assets to any person without the |
|
commissioner's prior written approval. |
|
(c) The commissioner may not approve a transaction |
|
described by Subsection (a) or (b) if the transaction would result |
|
in the insolvency or impairment of the segregated account. |
|
(d) A participant contract is not effective without the |
|
commissioner's prior written approval. The withdrawal of a |
|
participant from an existing segregated account is a change in the |
|
strategic business plan of that segregated account requiring the |
|
commissioner's prior written approval. |
|
Sec. 964.108. NOTIFICATION REQUIRED. Each managing captive |
|
insurance company shall notify the commissioner not later than the |
|
10th business day after the date a segregated account becomes |
|
insolvent, impaired, or otherwise unable to meet its claims or |
|
expense obligations. |
|
Sec. 964.109. QUALIFICATIONS OF PARTICIPANT. (a) Any |
|
person may be a participant in a segregated account organized or |
|
holding a certificate of authority under this chapter. |
|
(b) A participant in a segregated account is not required to |
|
be a holder of a segregated account shares of stock or other type of |
|
equity instrument issued within the segregated account or by the |
|
managing captive insurance company or any affiliate of the managing |
|
captive insurance company. |
|
Sec. 964.110. APPLICABILITY OF CHAPTER TO SEGREGATED |
|
ACCOUNTS. Subchapters A and B apply to each segregated account, |
|
except: |
|
(1) Sections 964.056(a) and (b); |
|
(2) Sections 964.059(a)(2) and (b)(2); |
|
(3) Section 964.061; |
|
(4) Section 964.063; and |
|
(5) Section 964.071. |
|
Sec. 964.111. CAPITAL AND SURPLUS REQUIREMENTS OF |
|
SEGREGATED ACCOUNT. (a) The minimum amount of capital and surplus |
|
in each segregated account is $100,000. |
|
(b) The commissioner may require each segregated account to |
|
maintain additional capital and surplus based on the type, volume, |
|
and nature of the insurance business that is transacted by the |
|
segregated account and may determine the amount of capital and |
|
surplus, if any, that may be in the form of an irrevocable letter of |
|
credit. |
|
(c) The minimum capital and surplus required under |
|
Subsection (a) must be in the form required by Section 964.056(c). |
|
Sec. 964.112. ADDITIONAL ANNUAL REPORT REQUIREMENT. In |
|
addition to the requirements of Section 964.060, a managing captive |
|
insurance company must include in its annual report a financial |
|
statement detailing the financial experience of each segregated |
|
account. |
|
Sec. 964.113. SEGREGATED ACCOUNT INVESTMENTS. (a) Each |
|
segregated account shall file with the commissioner a proposed |
|
investment strategy, and any changes to the strategy, which the |
|
commissioner shall approve if the strategy does not threaten the |
|
solvency, liquidity, or overall operating soundness of the |
|
segregated account. |
|
(b) A managing captive insurance company may file with the |
|
commissioner a proposed investment strategy, and any changes to the |
|
strategy, that will be applicable to each segregated account of the |
|
managing captive insurance company. |
|
Sec. 964.114. SUPPLEMENTAL APPLICATION MATERIALS. In |
|
addition to the information required to obtain a certificate of |
|
authority under Subchapter B, each managing captive insurance |
|
company shall file with the commissioner the following: |
|
(1) materials demonstrating how the company will |
|
account for the loss and expense experience of each segregated |
|
account and how expenses will be allocated; and |
|
(2) all contracts or sample contracts between the |
|
managing captive insurance company and a participant. |
|
SECTION 3. Subsection (b), Section 203.001, Insurance Code, |
|
is amended to read as follows: |
|
(b) Except as otherwise provided by this code or the Labor |
|
Code, an insurer or health maintenance organization subject to a |
|
tax imposed by Chapter 4, 221, 222, 223A, 224, or 257 may not be |
|
required to pay any additional tax imposed by this state or a county |
|
or municipality in proportion to the insurer's or health |
|
maintenance organization's gross premium receipts. |
|
SECTION 4. Subsection (b), Section 203.002, Insurance Code, |
|
is amended to read as follows: |
|
(b) If the commissioner determines by examining a company or |
|
segregated account or by other means that the company's or account's |
|
gross premium receipts in a year exceed the amount reported by the |
|
company or account for that year, the commissioner shall report |
|
that determination to the comptroller. The comptroller shall |
|
institute a collection action as the comptroller considers |
|
appropriate to collect taxes due on unreported gross premium |
|
receipts. |
|
SECTION 5. Subdivision (11), Section 228.001, Insurance |
|
Code, is amended to read as follows: |
|
(11) "State premium tax liability" means: |
|
(A) any liability incurred by any person under |
|
Chapter 221, 222, 223, 223A, or 224; or |
|
(B) if the tax liability imposed under Chapter |
|
221, 222, 223, or 224 is eliminated or reduced, any tax liability |
|
imposed on an insurer or other person that had premium tax liability |
|
under Subchapter A, Chapter 4, or Article 9.59 as those laws existed |
|
on January 1, 2003. |
|
SECTION 6. Subsection (a), Section 171.052, Tax Code, is |
|
amended to read as follows: |
|
(a) Except as provided by Subsection (c), an insurance |
|
organization, title insurance company, or title insurance agent |
|
authorized to engage in insurance business in this state now |
|
required to pay an annual tax under Chapters 221, 222, 223, 223A, |
|
and 224 [Chapter 4 or 9], Insurance Code, measured by its gross |
|
premium receipts is exempted from the franchise tax. A nonadmitted |
|
insurance organization that is required to pay a gross premium |
|
receipts tax during a tax year is exempted from the franchise tax |
|
for that same tax year. |
|
SECTION 7. As soon as practicable after the effective date |
|
of this Act, but not later than January 1, 2014, the commissioner of |
|
insurance shall adopt rules and procedures necessary to implement |
|
Chapter 964, Insurance Code, as added by this Act. |
|
SECTION 8. 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, 2013. |
|
|
|
* * * * * |