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A BILL TO BE ENTITLED
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AN ACT
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relating to own risk and solvency assessment by insurers and |
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insurance groups; providing a penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle B, Title 6, Insurance Code, is amended |
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by adding Chapter 830 to read as follows: |
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CHAPTER 830. OWN RISK AND SOLVENCY ASSESSMENT |
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Sec. 830.001. APPLICABILITY AND PURPOSE. (a) This chapter |
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applies to each domestic insurer unless exempt under Section |
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830.006. |
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(b) The purpose of this chapter is to provide the |
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requirements for maintaining a risk management framework and |
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completing an own risk and solvency assessment and to provide |
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guidance and instructions for filing an own risk and solvency |
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assessment summary report with the commissioner. |
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(c) The own risk and solvency assessment summary report will |
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contain confidential and sensitive information related to an |
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insurer or insurance group's identification of risks material and |
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relevant to the insurer or insurance group filing the report. This |
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information will include proprietary and trade secret information |
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that has the potential for harm and competitive disadvantage to the |
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insurer or insurance group if the information is made public. The |
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summary report is a confidential document filed with the |
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commissioner, and the commissioner may share the summary report |
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only as stated in this chapter in order to assist the commissioner |
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in the performance of the commissioner's duties. An own risk and |
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solvency assessment summary report is not subject to public |
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disclosure in any event. |
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Sec. 830.002. DEFINITIONS. In this chapter: |
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(1) "Guidance manual" means the version of the Own |
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Risk and Solvency Assessment Guidance Manual developed and adopted |
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by the National Association of Insurance Commissioners that is in |
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effect at the time a summary report is provided. A change in the |
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guidance manual becomes effective on the January 1 following the |
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calendar year in which the changes are adopted by the National |
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Association of Insurance Commissioners. |
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(2) "Insurance group" means the insurers and |
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affiliates included within an insurance holding company system as |
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described by Section 823.006. |
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(3) "Insurer" has the meaning assigned by Section |
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823.002(6). |
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(4) "Own risk and solvency assessment" means a |
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confidential internal assessment, appropriate to the nature, |
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scale, and complexity of an insurer or insurance group, conducted |
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by that insurer or insurance group, of the material and relevant |
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risks associated with the insurer or insurance group's current |
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business plan and the sufficiency of capital resources to support |
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those risks. |
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(5) "Summary report" means a confidential, high-level |
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summary of an insurer's or insurance group's own risk and solvency |
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assessment. |
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Sec. 830.003. RISK MANAGEMENT FRAMEWORK. An insurer shall |
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maintain a risk management framework to assist the insurer with |
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identifying, assessing, monitoring, managing, and reporting on the |
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insurer's material and relevant risks. This requirement may be |
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satisfied if the insurance group of which the insurer is a member |
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maintains a risk management framework applicable to the operations |
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of the insurer. |
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Sec. 830.004. OWN RISK AND SOLVENCY ASSESSMENT REQUIREMENT. |
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(a) Subject to Section 830.006, an insurer, or the insurance group |
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of which the insurer is a member, shall regularly conduct, |
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consistent with a process comparable to the guidance manual, an own |
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risk and solvency assessment, appropriate to the nature, scale, and |
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complexity of the insurer or insurance group, of the material and |
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relevant risks associated with the insurer's or insurance group's |
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current business plan and the sufficiency of capital resources to |
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support those risks. |
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(b) The insurer, or the insurance group of which the insurer |
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is a member, shall conduct the own risk and solvency assessment |
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described by Subsection (a): |
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(1) annually; and |
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(2) at any other time there are significant changes to |
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the risk profile of the insurer or the insurance group of which the |
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insurer is a member. |
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Sec. 830.005. SUMMARY REPORT REQUIRED. (a) On the |
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commissioner's request, an insurer shall submit to the commissioner |
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a summary report or a combination of reports that together contain |
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the information described in the guidance manual. The commissioner |
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may not make a request under this subsection more than once each |
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year. |
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(b) Without regard to whether the commissioner has made a |
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request under Subsection (a), if the insurer is a member of an |
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insurance group, the insurer shall submit to the commissioner the |
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reports required by Subsection (a) if the commissioner is the lead |
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state commissioner of the insurance group. |
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(c) In determining the lead state commissioner for purposes |
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of this section, the commissioner shall consider the procedures |
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adopted by the National Association of Insurance Commissioners. |
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(d) The reports must include a signature of the insurer's or |
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insurance group's chief risk officer or other executive responsible |
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for the oversight of the insurer's enterprise risk management |
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process attesting to the best of the officer's or executive's belief |
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and knowledge that: |
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(1) the insurer applies the enterprise risk management |
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process described in the summary report; and |
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(2) a copy of the report has been provided to the |
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insurer's board of directors or the appropriate committee of the |
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board of directors. |
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(e) An insurer may comply with Subsection (a) or (b) by |
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providing the most recent and substantially similar report that the |
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insurer or another member of an insurance group of which the insurer |
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is a member provided to the commissioner of another state or to a |
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supervisor or regulator of a foreign jurisdiction, if that report |
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provides information that is comparable to the information |
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described in the guidance manual. A report in a language other than |
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English must be accompanied by a translation of that report into the |
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English language. |
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Sec. 830.006. EXEMPTION. (a) An insurer is exempt from |
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the requirements of this chapter if: |
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(1) the insurer has annual direct written and |
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unaffiliated assumed premium, including international direct and |
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assumed premium but excluding premiums reinsured with the Federal |
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Crop Insurance Corporation and Federal Flood Program, of less than |
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$500 million; and |
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(2) the insurance group of which the insurer is a |
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member has annual direct written and unaffiliated assumed premium, |
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including international direct and assumed premium but excluding |
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premiums reinsured with the Federal Crop Insurance Corporation and |
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Federal Flood Program, of less than $1 billion. |
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(b) If an insurer qualifies for exemption under Subsection |
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(a)(1), but the insurance group of which the insurer is a member |
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does not qualify for exemption under Subsection (a)(2), then the |
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summary report required under Section 830.005 must include every |
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insurer within the insurance group. |
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(c) An insurer may satisfy the requirement under Subsection |
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(b) by submitting more than one summary report for any combination |
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of insurers if the combination of reports includes each insurer |
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within the insurance group. |
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(d) If an insurer does not qualify for exemption under |
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Subsection (a)(1), but the insurance group of which it is a member |
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qualifies for exemption under Subsection (a)(2), then the insurer |
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must submit a summary report under Section 830.005 that is |
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applicable to that insurer. |
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(e) An insurer that does not qualify for exemption under |
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Subsection (a) may apply to the commissioner for a waiver from the |
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requirements of this chapter based on unique circumstances. In |
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deciding whether to grant the insurer's request for waiver, the |
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commissioner may consider the type and volume of business written, |
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the ownership and organizational structure, and any other factor |
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the commissioner considers relevant to the insurer or insurance |
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group of which the insurer is a member. If the insurer is part of an |
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insurance group with insurers domiciled in more than one state, the |
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commissioner shall coordinate with the lead state commissioner and |
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with the other domiciliary commissioners in considering whether to |
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grant the insurer's request for a waiver. |
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(f) Notwithstanding the exemptions stated in this section, |
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the commissioner may require that an insurer maintain a risk |
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management framework, conduct an own risk and solvency assessment, |
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and file a summary report if: |
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(1) there are unique circumstances, including the type |
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and volume of business written, the ownership and organizational |
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structure, federal agency requests, and international supervisor |
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requests; |
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(2) the insurer has risk-based capital for a company |
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action level event as set forth in department rules; |
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(3) the insurer meets one or more of the standards of |
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an insurer considered to be in hazardous financial condition under |
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Chapter 404 or department rule; or |
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(4) the insurer otherwise exhibits qualities of a |
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troubled insurer as determined by the commissioner. |
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(g) If an insurer that qualifies for an exemption under |
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Subsection (a) subsequently ceases to qualify for that exemption |
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due to changes in premium as reflected in the insurer's most recent |
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annual statement or in the most recent annual statements of the |
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insurers within the insurance group of which the insurer is a |
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member, the insurer must comply with the requirements of this |
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chapter not later than December 31 of the calendar year following |
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the calendar year the threshold is exceeded. |
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Sec. 830.007. CONTENTS OF SUMMARY REPORT. (a) An insurer |
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shall prepare a summary report in accordance with the guidance |
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manual and subject to the requirements of Subsection (b). An |
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insurer shall maintain documentation and supporting information |
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and shall make the documentation and supporting information |
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available on examination or on request of the commissioner. |
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(b) When reviewing the summary report or making requests for |
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additional information, the department shall use procedures |
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similar to the procedures currently used in the analysis and |
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examination of multistate or global insurers and insurance groups. |
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Sec. 830.008. CONFIDENTIALITY. (a) Documents, materials, |
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or other information, including a summary report, in the possession |
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or control of the department that is obtained by, created by, or |
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disclosed to the commissioner or any other person under this |
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chapter, including documents, materials, and other information |
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shared or received under Subsection (e), and documents, materials, |
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or other information in the possession or control of the National |
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Association of Insurance Commissioners or third-party consultant |
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under this chapter, are confidential and privileged and not subject |
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to: |
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(1) Chapter 552, Government Code; |
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(2) a response to subpoena; or |
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(3) discovery or admissibility in evidence in any |
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civil action. |
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(b) Documents, materials, or other information, including a |
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summary report prepared under this chapter and additional |
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information submitted under Section 830.007, in the possession or |
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control of the department that is obtained by, created by, or |
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disclosed to the commissioner or any other person under this |
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chapter is recognized by this state as being proprietary and to |
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contain trade secrets. |
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(c) The commissioner may use the documents, materials, or |
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other information described in this section to further any |
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regulatory or legal action brought as part of the commissioner's |
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official duties. The commissioner shall not otherwise make the |
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documents, materials, or other information public without the prior |
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written consent of the insurer. |
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(d) The commissioner and any other person who receives own |
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risk and solvency assessment-related information under this |
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chapter, in an examination, or otherwise under any other law may not |
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testify or be required to testify in any private civil action |
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concerning any documents, materials, or information subject to |
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Subsection (a) or (b). |
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(e) In order to assist in the performance of the |
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commissioner's regulatory duties, the commissioner may, on |
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request, share documents, materials, or other own risk and solvency |
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assessment-related information, including confidential and |
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privileged documents, materials, or information subject to |
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Subsection (a) or (b) or confidential or privileged documents, |
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materials, or information subject to Chapter 401, 404, or 823, as |
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necessary, with: |
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(1) other state, federal, and international financial |
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regulatory agencies or insurance supervisors; |
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(2) members of a supervisory college described in |
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Section 823.0145; |
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(3) the National Association of Insurance |
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Commissioners; or |
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(4) a third-party consultant designated by the |
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commissioner. |
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(f) Before the commissioner may share information under |
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this section, the recipient of the information shall: |
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(1) agree in writing to maintain the confidential and |
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privileged status of the documents, materials, or other information |
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shared under this section; and |
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(2) verify in writing the recipient's legal authority |
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to maintain the confidential and privileged status of that |
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information. |
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(g) The commissioner may receive documents, materials, or |
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other own risk and solvency assessment-related information or any |
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other relevant information, including otherwise confidential and |
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privileged documents, materials, or information and proprietary |
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and trade-secret information or documents, from: |
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(1) a regulatory official of a foreign or domestic |
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jurisdiction, including a member of a supervisory college described |
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in Section 823.0145; and |
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(2) the National Association of Insurance |
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Commissioners. |
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(h) The commissioner shall maintain as confidential or |
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privileged any documents, materials, or information received under |
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Subsection (g) with notice and understanding that it is |
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confidential or privileged under the laws of the jurisdiction that |
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is the source of the document, material, or information. |
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Sec. 830.009. AGREEMENT CONCERNING CONFIDENTIAL AND |
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PRIVILEGED INFORMATION. (a) The commissioner shall enter into a |
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written agreement with the National Association of Insurance |
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Commissioners or a third-party consultant that governs the sharing |
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and use of information provided under this chapter. The agreement |
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must comply with and contain all the requirements listed in this |
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section. |
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(b) The agreement must specify procedures and protocols |
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regarding the confidentiality and security of information shared |
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with the National Association of Insurance Commissioners or |
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third-party consultant under this chapter, including procedures |
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and protocols for sharing by the National Association of Insurance |
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Commissioners with other state regulators from states in which the |
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insurance group has domiciled insurers. |
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(c) The agreement must provide that the recipient: |
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(1) agrees in writing to maintain the confidential and |
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privileged status of the own risk and solvency assessment-related |
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documents, materials, or other information; and |
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(2) has verified in writing the legal authority to |
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maintain the confidential and privileged status of the information. |
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(d) The agreement must specify that ownership of |
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information shared with the National Association of Insurance |
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Commissioners or third-party consultant under this chapter remains |
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with the commissioner and that the National Association of |
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Insurance Commissioners' or third-party consultant's use of the |
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information is subject to the direction of the commissioner. |
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(e) The agreement must prohibit the National Association of |
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Insurance Commissioners or third-party consultant from storing the |
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information shared under this chapter in a permanent database after |
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the underlying analysis is completed. |
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(f) The agreement must require prompt notice to be given to |
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an insurer whose confidential information in the possession of the |
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National Association of Insurance Commissioners or third-party |
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consultant under this chapter is subject to a request or subpoena to |
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the National Association of Insurance Commissioners or third-party |
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consultant for disclosure or production. |
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(g) The agreement must require the National Association of |
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Insurance Commissioners or third-party consultant to consent to |
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intervention by an insurer in any judicial or administrative action |
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in which the National Association of Insurance Commissioners or |
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third-party consultant may be required to disclose confidential |
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information about the insurer shared with the National Association |
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of Insurance Commissioners or third-party consultant under this |
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chapter. |
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(h) The agreement must provide for the insurer's written |
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consent in the case of an agreement involving a third-party |
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consultant. |
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Sec. 830.010. AUTHORITY OF COMMISSIONER NOT AFFECTED. The |
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commissioner's sharing of information and documents under this |
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chapter does not constitute a delegation of regulatory authority or |
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rulemaking, and the commissioner is solely responsible for the |
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administration, execution, and enforcement of the provisions of |
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this chapter. |
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Sec. 830.011. PRIVILEGE AND CONFIDENTIALITY NOT WAIVED. A |
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waiver of an applicable privilege or claim of confidentiality in a |
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document, proprietary and trade-secret materials, or other own risk |
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and solvency assessment-related information does not occur as a |
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result of disclosure of the document, materials, or other |
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information to the commissioner under this chapter or as a result of |
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sharing as authorized by this chapter. |
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Sec. 830.012. ADMINISTRATIVE PENALTY. (a) An insurer |
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that, without good cause, fails to timely file the summary report as |
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required by this chapter commits a violation subject to an |
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administrative penalty under Chapter 84. |
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(b) Each day the violation continues is a separate violation |
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for purposes of this section. |
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(c) The commissioner may reduce the amount of the penalty |
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assessed under this section if the insurer demonstrates to the |
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commissioner that the imposition of the penalty would constitute a |
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financial hardship to the insurer. |
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SECTION 2. Notwithstanding Chapter 830, Insurance Code, as |
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added by this Act, an insurer is not required to submit a summary |
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report as required by that chapter before January 1, 2016. |
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SECTION 3. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2015. |