INSURANCE CODE - NOT CODIFIED
TITLE 1. THE INSURANCE CODE OF 1951
CHAPTER 1. THE BOARD, ITS POWERS AND DUTIES
Art. 1.01. Short Title
This Act constitutes and shall be known as the Insurance Code.
Acts 1951, 52nd Leg., ch. 491.
Art. 1.02. Rating
(a) In this article, "insurer" means an insurance company,
reciprocal or interinsurance exchange, mutual insurance company,
farm mutual insurance company, capital stock company, county mutual
insurance company, Lloyd's plan, a surplus lines insurer, or other
legal entity engaged in the business of insurance in this state.
The term includes:
(1) an affiliate as described by Section 2, Article 21.49-1 of this
code, or Section 823.003(a) of this code;
(2) the Texas Windstorm Insurance Association created and operated
under Article 21.49 of this code;
(3) the FAIR Plan Association under Article 21.49A of this code;
and
(4) the Texas Automobile Insurance Plan Association under Article
21.81 of this code.
(b) Rates used under this code must be just, fair, reasonable,
adequate, not confiscatory and not excessive for the risks to which
they apply, and not unfairly discriminatory. An insurer may not use
rates that violate this article.
(c) For purposes of this article, a rate is:
(1) excessive if the rate is likely to produce a long-term profit
that is unreasonably high in relation to the insurance coverage
provided;
(2) inadequate if the rate is insufficient to sustain projected
losses and expenses to which the rate applies, and continued use of
the rate:
(A) endangers the solvency of an insurer using the rate; or
(B) has the effect of substantially lessening competition or
creating a monopoly within any market; or
(3) unfairly discriminatory if the rate:
(A) is not based on sound actuarial principles;
(B) does not bear a reasonable relationship to the expected loss and
expense experience among risks; or
(C) is based in whole or in part on the race, creed, color,
ethnicity, or national origin of the policyholder or an insured.
Added by Acts 2003, 78th Leg., ch. 206, Sec. 13.01, eff. June 11,
2003.
Art. 1.04A. Salaried Examiners
In making examinations of any insurance organization as provided by
law, the department may use its own salaried examiners or may use
the services of persons or firms qualified to perform such
examinations or assist in the performance of such examinations.
Such examination shall cover the period of time that the department
requests. In the event the department does not specify a longer
period of time, such examination shall be from the time of the last
examination theretofore made by the department to December 31st of
the year preceding the examination then being made. All fees paid
to those persons or firms whose services are used shall be paid at
the usual and customary rates charged for the performance of those
services, subject to the right of the Commissioner to disapprove
for payment any fees that are excessive in relation to the services
actually performed. Such payment shall be made by the insurance
organization being examined and all such examination fees so paid
shall be allowed as a credit on the amount of premium or other taxes
to be paid by any such insurance organization for the taxable year
during which examination fees are paid just as examination fees are
credited when the department uses its own salaried examiners.
Acts 1957, 55th Leg., p. 1454, ch. 499, Sec. 2. Amended by Acts
1989, 71st Leg., ch. 1082, Sec. 2.06, eff. Sept. 1, 1989; Acts
1991, 72nd Leg., ch. 242, Sec. 1.02, eff. Sept. 1, 1991. Renumbered
from art. 1.04(g) and amended by Acts 1993, 73rd Leg., ch. 685, Sec.
1.03, eff. Sept. 1, 1993.
Art. 1.04B. Policy Holder Complaints
The department shall establish a program to facilitate resolution
of policy holder complaints.
Added by Acts 1991, 72nd Leg., ch. 242, Sec. 1.02, eff. Sept. 1,
1991. Renumbered from art. 1.04(h) by Acts 1993, 73rd Leg., ch.
685, Sec. 1.03, eff. Sept. 1, 1993.
Art. 1.04D. Duties of Comptroller
Text of subsec. (a) effective until April 1, 2005
(a) Except as otherwise expressly provided for in this code or
another insurance law of this state, the comptroller shall
administer, enforce, and carry out the provisions of this code and
other insurance laws of this state that relate to the collection,
reporting, and administration of taxes and certain fees and
assessments imposed under this code or another insurance law of
this state, as specifically provided in this code.
(b) The duties transferred to the comptroller relative to taxes,
fees, and assessments imposed under this code or another insurance
law of this state relate to the collection, reporting, enforcement,
and administration of all such amounts currently provided for under
this code or another insurance law of this state, and also of any
taxes, fees, or assessments that have been repealed or are
otherwise inactive but for which amounts may still be owing or
refunds may be due on or after the effective date of this article.
Text of subsec. (c) effective until April 1, 2005
(c) The comptroller may adopt rules to carry out the collection,
reporting, enforcement, and administration responsibilities
assigned to the comptroller under this code or another insurance
law of this state. The comptroller may also prescribe appropriate
report forms, establish or alter tax return due dates not otherwise
specifically set forth in this code or another insurance law of this
state, and otherwise adapt the functions transferred to the
comptroller to increase efficiency and cost-effectiveness. With
respect to rules related to the collection, reporting, enforcement,
or otherwise to the administration of taxes imposed under this
code, rules adopted by the comptroller shall prevail in the event of
conflict with rules, policies, or procedures established by the
department, the commissioner, or otherwise.
Text of subsec. (d) effective until April 1, 2005
(d) With respect to the comptroller's performance of the duties
relative to the taxes, fees, and assessments imposed under this
code or another insurance law of this state, the comptroller has the
administrative, enforcement, and collection powers provided by
Subtitles A and B, Title 2, Tax Code, and their subsequent
amendments. Except as otherwise expressly provided by this code,
those powers are granted to the comptroller without limiting and
exclusive of powers granted to the department or the commissioner
with respect to other fees and assessments under this code.
Added by Acts 1993, 73rd Leg., ch. 685, Sec. 3.01, eff. Sept. 1,
1993. Subsec. (a) amended by Acts 1999, 76th Leg., ch. 101, Sec. 3,
eff. Sept. 1, 1999; Subsecs. (a), (c), (d) repealed by Acts 2003,
78th Leg., ch. 1274, Sec. 26(b)(1), eff. April 1, 2005.
Art. 1.09-1. Represented by the Attorney General
(a) The department, the State Board of Insurance, and the
Commissioner shall be represented and advised by the Attorney
General in all legal matters before them or in which they shall be
interested or concerned. The department, the Board, and the
Commissioner may not employ or obtain any other legal services
without the written approval of the Attorney General.
(b) The Commissioner shall have and exercise the power of subpoena
and subpoena duces tecum for witnesses, documents, and other
evidence to the extent of the jurisdiction of this state for such
hearings and proceedings on its own motion.
Added by Acts 1957, 55th Leg., p. 1454, ch. 499, Sec. 3.
Amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 1.03, eff.
Sept. 2, 1987; Acts 1991, 72nd Leg., ch. 242, Sec. 1.02, eff. Sept.
1, 1991. Subsec. (b) amended by Acts 1993, 73rd Leg., ch. 685, Sec.
1.06, eff. Sept. 1, 1993.
Art. 1.10. Certain Duties of the Department
In addition to the other duties required of the department, the
department shall perform duties as follows:
1. Deleted by Acts 1999, 76th Leg., ch. 101, Sec. 4, eff. Sept. 1,
1999.
2. File Articles of Incorporation and Other Papers. File and
preserve in its office all acts or articles of incorporation of
insurance companies and all other papers required by law to be
deposited with the Department and, upon application of any party
interested therein, furnish certified copies thereof upon payment
of the fees prescribed by law.
3. Shall Calculate Reserve. For every company transacting any kind
of insurance business in this State, for which no basis is
prescribed by law, the Department shall calculate the reinsurance
reserve upon the same basis prescribed in Section 862.102 of this
code as to companies transacting fire insurance business.
4. To Calculate Re-insurance Reserve. On the thirty-first day of
December of each and every year, or as soon thereafter as may be
practicable, the Department shall have calculated in the Department
the re-insurance reserve for all unexpired risks of all insurance
companies organized under the laws of this state, or transacting
business in this state, transacting any kind of insurance other
than life, fire, marine, inland, lightning or tornado insurance,
which calculation shall be in accordance with the provisions of
Paragraph 3 hereof.
5. When a Company's Surplus is Impaired. No impairment of the
capital stock of a stock company shall be permitted. No impairment
of the surplus of a stock company, or of the minimum required
aggregate surplus of a mutual, Lloyd's, or reciprocal insurer,
shall be permitted in excess of that provided by this section.
Having charged against a company other than a life insurance
company, the reinsurance reserve, as prescribed by the laws of this
State, and adding thereto all other debts and claims against the
company, the Commissioner shall, (i) if it is determined that the
surplus required by Section 822.054, 822.202, 822.203, 822.205,
822.210, 822.211, or 822.212 of this code of a stock company doing
the kind or kinds of insurance business set out in its Certificate
of Authority is impaired to the extent of more than fifty (50%) per
cent of the required surplus for a capital stock insurance company,
or is less than the minimum level of surplus required by
Commissioner promulgated risk-based capital and surplus
regulations, or (ii) if it is determined that the required
aggregate surplus of a reciprocal or mutual company, or the
required aggregate of guaranty fund and surplus of a Lloyd's
company, other than a life insurance company, doing the kind or
kinds of insurance business set out in its Certificate of Authority
is impaired to the extent of more than twenty-five per cent (25%) of
the required aggregate surplus, or is less than the minimum level of
surplus required by Commissioner promulgated risk-based capital
and surplus regulations, the Commissioner shall order the company
to remedy the impairment of surplus to acceptable levels specified
by the Commissioner or to cease to do business within this State.
The Commissioner shall thereupon immediately institute such
proceedings as may be necessary to determine what further actions
shall be taken in the case.
6. Shall Publish Results of Investigation. The Department shall
publish the result of an examination of the affairs of any company
whenever the Commissioner deems it for the interest of the public.
7 to 14. Deleted by Acts 1999, 76th Leg., ch. 101, Sec. 4, eff. Sept.
1, 1999.
15, 16. Deleted by Acts 2001, 77th Leg., ch. 1419, Sec. 4, eff. June
1, 2003.
17. Voluntary Deposits. (a) In the event any insurance company
organized and doing business under the provisions of this Code
shall be required by any other state, country or province as a
requirement for permission to do an insurance business therein to
make or maintain a deposit with an officer of any state, country, or
province, such company, at its discretion, may voluntarily deposit
with the Comptroller such securities as may be approved by the
Commissioner of Insurance to be of the type and character
authorized by law to be legal investments for such company, or cash,
in any amount sufficient to enable it to meet such requirements.
The Comptroller is hereby authorized and directed to receive such
deposit and hold it exclusively for the protection of all
policyholders or creditors of the company wherever they may be
located, or for the protection of the policyholders or creditors of
a particular state, country or province, as may be designated by
such company at the time of making such deposit. The company may,
at its option, withdraw such deposit or any part thereof, first
having deposited with the Comptroller, in lieu thereof, other
securities of like class and of equal amount and value to those
withdrawn, which withdrawal and substitution must be approved by
the Commissioner of Insurance. The proper officer of each
insurance company making such deposit shall be permitted at all
reasonable times to examine such securities and to detach coupons
therefrom, and to collect interest thereon, under such reasonable
rules and regulations as may be prescribed by the Comptroller and
the Commissioner of Insurance. Any deposit so made for the
protection of policyholders or creditors of a particular state,
country or province shall not be withdrawn, except by substitution
as provided above, by the company, except upon filing with the
Commissioner of Insurance evidence satisfactory to him that the
company has withdrawn from business, and has no unsecured
liabilities outstanding or potential policyholder liabilities or
obligations in such other state, country or province requiring such
deposit, and upon the filing of such evidence the company may
withdraw such deposit at any time upon the approval of the
Commissioner of Insurance. Any deposit so made for the protection
of all policyholders or creditors wherever they may be located
shall not be withdrawn, except by substitution as provided above,
by the company except upon filing with the Commissioner of
Insurance evidence satisfactory to him that the company does not
have any unsecured liabilities outstanding or potential policy
liabilities or obligations anywhere, and upon filing such evidence
the company may withdraw such deposit upon the approval of the
Commissioner of Insurance. For the purpose of state, county and
municipal taxation, the situs of any securities deposited with the
Comptroller hereunder shall be in the city and county where the
principal business office of such company is fixed by its charter.
(b) Any voluntary deposit held by the Comptroller or the Department
heretofore made by any insurance company in this State, and which
deposit was made for the purpose of gaining admission to another
state, may be considered, at the option of such company, to be
hereinafter held under the provisions of this Act.
(c) When two or more companies merge or consolidate or enter a total
reinsurance contract by which the ceding company is dissolved and
its assets acquired and liabilities assumed by the surviving
company, and the companies have on deposit with the Comptroller two
or more deposits made for identical purposes under this section or
Article 4739, Revised Statutes, as amended, and now repealed, all
such deposits, except the deposit of greatest amount and value, may
be withdrawn by the new surviving or reinsuring company, upon
proper showing of duplication of such deposits and that the company
is the owner thereof.
(d) Any company which has made a deposit or deposits under this
section or Article 4739, Revised Statutes, as amended and now
repealed, shall be entitled to a return of such deposits upon proper
application therefor and a showing before the Commissioner that
such deposit or deposits are no longer required under the laws of
any state, country or province in which such company sought or
gained admission to do business upon the strength of a certificate
of such deposit.
(e) Upon being furnished a certified copy of the Commissioner's
order issued under Subsection (c) or (d) above, the Comptroller
shall release, transfer and deliver such deposit or deposits to the
owner as directed in said order.
Text of Sec. 18 effective until April 1, 2005
18. Complaint File. The Department shall keep an information file
about each complaint filed with the Department concerning an
activity that is regulated by the Department or Commissioner.
Text of Sec. 19 effective until April 1, 2005
19. Notice of Complaint Status. If a written complaint is filed
with the Department, the Department, at least quarterly and until
final disposition of the complaint, shall notify the parties to the
complaint of the status of the complaint unless the notice would
jeopardize an undercover investigation.
Text of Sec. 20 effective until April 1, 2005
20. Electronic Transfer of Funds. The Commissioner shall adopt
rules for the electronic transfer of any taxes, fees, guarantee
funds, or other money owed to or held for the benefit of the state
and for which the Department has the responsibility to administer
under this code or another insurance law of this state. The
Commissioner shall require the electronic transfer of any amounts
held or owed in an amount exceeding $500,000.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
413, ch. 117, Sec. 2; Acts 1959, 56th Leg., p. 280, ch. 157, Sec. 1;
Acts 1959, 56th Leg., p. 637, ch. 291, Sec. 3; Acts 1967, 60th Leg.,
p. 1825, ch. 705, Sec. 1 to 3, eff. Aug. 28, 1967; Acts 1979, 66th
Leg., p. 574, ch. 264, Sec. 1, eff. Aug. 27, 1979; Acts 1981, 67th
Leg., p. 412, ch. 170, Sec. 1, eff. May 20, 1981.
Sec. 11 amended and Secs. 18, 19 added by Acts 1983, 68th Leg., p.
3894, ch. 622, Sec. 4, 17, eff. Sept. 1, 1983; Sec. 7 amended by
Acts 1987, 70th Leg., ch. 416, Sec. 1, eff. June 17, 1987; Secs. 7,
13 amended by Acts 1987, 70th Leg., 2nd C.S., ch. 67, Sec. 4, eff.
Aug. 4, 1987. Amended by Acts 1989, 71st Leg., ch. 273, Sec. 6, eff.
Aug. 28, 1989; Sec. 16 amended by Acts 1989, 71st Leg., ch. 1082,
Sec. 1.01, eff. Sept. 1, 1989; Sec. 5 amended by Acts 1991, 72nd
Leg., ch. 242, Sec. 7.07, eff. Sept. 1, 1991; Sec. 7(a) amended by
Acts 1991, 72nd Leg., ch. 242, Sec. 1.06, eff. Sept. 1, 1991; Sec.
20 added by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 1.26, eff.
Jan. 1, 1992. Amended by Acts 1993, 73rd Leg., ch. 685, Sec. 1.07,
eff. Sept. 1, 1993; Sec. 7(a) amended by Acts 1997, 75th Leg., ch.
195, Sec. 1, eff. Sept. 1, 1997; Sec. 17 amended by Acts 1997, 75th
Leg., ch. 1423, Sec. 11.01, eff. Sept. 1, 1997. Amended by Acts
1999, 76th Leg., ch. 101, Sec. 4, eff. Sept. 1, 1999; Acts 2001,
77th Leg., ch. 1419, Sec. 4, eff. June 1, 2003; Acts 2003, 78th
Leg., ch. 1274, Sec. 8, eff. April 1, 2005.
Art. 1.10C. Access to Certain Criminal History Record Information
The department may deny a license to an applicant for any license,
permit, or other authorization issued by the board to engage in an
activity regulated under this code who fails to provide a complete
set of fingerprints on request and may deny a certificate of
authority to an insurance company whose corporate officers fail to
provide complete sets of fingerprints on request.
Added by Acts 1991, 72nd Leg., ch. 242, Sec. 1.02, eff. Sept. 1,
1991. Amended by Acts 1993, 73rd Leg., ch. 790, Sec. 46(17), eff.
Sept. 1, 1993; Acts 2001, 77th Leg., ch. 1419, Sec. 5, eff. June 1,
2003.
Art. 1.10D. Insurance Fraud Unit
Definitions
Sec. 1. (a) In this article:
(1) "Authorized governmental agency" means:
(A) a duly constituted municipal, county, or state law enforcement
agency of this or another state or a federal law enforcement agency;
or
(B) the prosecuting attorney of any municipality, county, or
judicial district of this state, another state, or of the United
States.
(2) "Fraudulent insurance act" means any act that is a violation of
any penal law and that:
(A) is committed or attempted to be committed while engaging in the
business of insurance or as part of or in support of an insurance
transaction; or
(B) is part of an attempt to defraud an insurer.
(3) "Insurer" means a person engaged in the business of insurance as
a principal or agent. The term includes an unauthorized insurer or
any entity that is self-insured and provides health care benefits
to its employees.
(4) "Person" means an individual, corporation, organization,
government or governmental subdivision or agency, business trust,
estate, trust, partnership, joint venture, association, and any
other legal entity.
(b) A person is "engaged in the business of insurance" for purposes
of this article if the person performs any act defined by Section 2,
Article 1.14-1 of this code.
Authority
Sec. 2. (a) The insurance fraud unit is created in the Texas
Department of Insurance to enforce laws relating to fraudulent
insurance acts.
(b) If the commissioner has reason to believe that a person has
engaged in or is engaging in an act or practice that may constitute
either a fraudulent insurance act, as defined by Section 1(a)(2) of
this article, or insurance fraud under Section 35.02(a), Penal
Code, or has committed, or is about to commit, a fraudulent
insurance act or insurance fraud, the commissioner may make any
investigation necessary inside or outside this state to determine
whether or not the act has occurred, or to aid in the enforcement of
the laws relating to fraudulent insurance acts or insurance fraud.
(c) If the commissioner believes that a fraudulent insurance act
has occurred, the commissioner shall take appropriate disciplinary
action as provided by this code. If the commissioner believes that
a person has committed a fraudulent insurance act, the commissioner
shall report the information to an authorized governmental agency.
(d) The commissioner shall furnish all materials, documents,
reports, complaints, or other evidence to any authorized
governmental agency on request and shall assist the authorized
governmental agency as requested.
(d-1) An authorized governmental agency and any state licensing
agency shall furnish any materials, documents, reports,
complaints, or other evidence to the insurance fraud unit on the
request of the unit. Compliance with this subsection by an
authorized governmental agency or state licensing agency does not
constitute waiver of any privilege or requirement of
confidentiality otherwise applicable. Notwithstanding Section
5(a) of this article, the commissioner may not release evidence
obtained under this subsection for public inspection if release of
the evidence would violate a privilege held by or a requirement of
confidentiality imposed on the agency from which the evidence was
obtained.
(e) This section does not prohibit or limit the authority of an
insurer to conduct its own independent investigation into a
suspected case of insurance claim fraud. Before an insurer may
request the commissioner to conduct an investigation of suspected
claim fraud, the insurer must have completed its investigation and
drafted a report of its findings. The insurer shall submit the
report and the related investigation file to the commissioner as
part of the insurer's request for investigation by the
commissioner.
(f) The commissioner may employ investigators as the commissioner
considers necessary to enforce this article and may commission
those investigators as peace officers. An investigator employed by
the department as a peace officer must meet the requirements for
peace officers imposed under Chapter 415, Government Code. If the
commissioner elects to commission peace officers, the commissioner
shall appoint a chief investigator who is commissioned as a peace
officer and who is qualified by training and experience in law
enforcement to supervise, direct, and administer the activities of
the commissioned investigators.
(g) An investigator employed by the department may request the
assistance of local law enforcement officers in conducting an
investigation authorized by this article.
Subpoena Authority; Examination of Material in Other States
Sec. 3. (a) The commissioner and at least one member of the board
may issue a subpoena and compel the attendance and testimony of
witnesses and the production of materials relevant to an inquiry
under this article, except that a witness is not required to produce
any item that can be identified only through the writing and
execution of a special computer program.
(b) A person with materials located outside this state that are
requested by the commissioner and at least one member of the board
may make the materials available to the commissioner and the board
member or a representative of the commissioner and the board member
for examination at the place where the materials are located. The
commissioner and the board member may designate representatives,
including officials of the state in which the materials are
located, to examine the materials and may respond to similar
requests from an official of another state or of the United States.
Insurer Antifraud Investigative Reports
Sec. 3A. (a) The insurance fraud unit may receive, review, and
investigate in a timely manner insurer antifraud reports submitted
under Subchapter K, Chapter 3, of this code.
(b) The insurance fraud unit shall report annually in writing to the
commissioner the number of cases completed and any recommendations
for new regulatory and statutory responses to the types of
fraudulent activities encountered by the insurance fraud unit.
Disclosure of Information
Sec. 4. (a) If a person determines that a fraudulent insurance act
has been committed, or is about to be committed, the person shall
report the information to the commissioner or board or to an
authorized governmental agency in writing not later than the 30th
day after the date of the determination.
(b) A report to one authorized governmental agency or the
department constitutes notice to all authorized governmental
agencies and to the department.
(c) On written request to any insurer by an authorized governmental
agency, the insurer shall furnish to the authorized governmental
agency any relevant information or material relating to the matter
under investigation.
Confidentiality
Sec. 5. (a) Any information or material acquired by the department
that is relevant to an inquiry by the insurance fraud unit is not a
public record for as long as the commissioner considers reasonably
necessary to complete the investigation, protect the person under
investigation from unwarranted injury, or serve the public
interest. The information or material is not subject to a subpoena
by another governmental entity, except a valid grand jury subpoena,
until released for public inspection by the commissioner or, after
notice and a hearing, a district court determines that the public
interest and any investigation by the commissioner would not be
jeopardized by obeying the subpoena. This subsection does not
affect the conduct of contested cases under the Administrative
Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
Civil Statutes).
(b) Any information or material acquired under this article by an
authorized governmental agency is privileged and is not a part of
any public record. Except as otherwise provided by law, an
authorized governmental agency or an insurer that possesses or
receives any information or material under this article may not
release it to the public. The information or material is not
subject to a subpoena, except a valid grand jury subpoena, unless,
after reasonable notice to the insurer and authorized governmental
agency and after a hearing, a district court determines that the
public interest and any investigation by the authorized
governmental agency will not be jeopardized by obeying the
subpoena.
(c) An authorized governmental agency or the department provided
with information or material may release it to any other authorized
governmental agency or the department.
Immunity
Sec. 6. (a) A person acting without malice, fraudulent intent, or
bad faith is not subject to liability based on filing reports or
furnishing, orally or in writing, other information concerning
suspected, anticipated, or completed fraudulent insurance acts if
the reports or information are provided to:
(1) a law enforcement officer or an agent or employee of a law
enforcement officer;
(2) the National Association of Insurance Commissioners, a state or
federal governmental agency established to detect and prevent
fraudulent insurance acts or to regulate the business of insurance,
or an employee of that association or governmental agency;
(3) an authorized governmental agency or the department; or
(4) a special investigative unit of an insurer, including a person
contracting to provide special investigative unit services, or an
employee of an insurer who is responsible for the investigation of
suspected fraudulent insurance acts.
(b) A person to whom Subsection (a) of this section applies or an
employee or agent of such a person when performing an authorized
activity, including the publication or dissemination of any related
bulletin or reports, and while acting without malice, fraudulent
intent, or bad faith, is not subject to civil liability for libel,
slander, or any other relevant tort, and a civil cause of action of
any nature may not exist against that person based on those
activities.
(c) This section does not affect or modify any common law or
statutory privilege or immunity.
(d) A person to whom Subsection (a) of this section applies or an
employee or agent of such a person is entitled to an award of
attorney's fees and costs if the person, employee, or agent is a
prevailing party in a civil cause of action for libel, slander, or
any other relevant tort based on activities performed under
Subsection (a) of this section.
(e) Information provided herein by an insurer to the insurance
fraud unit and/or an authorized governmental agency shall not be
subject to public disclosure. The information may be used by the
insurance fraud unit and/or governmental agency only for the
performance of its duties as described herein. An insurer must
exercise reasonable care concerning the accuracy of the information
conveyed to the insurance fraud unit, an authorized governmental
agency, other insurers, or other persons or entities.
Other Law Enforcement Powers and Duties not Affected
Sec. 7. This article does not:
(1) preempt the authority or relieve the duty of any authorized
governmental agency to investigate and prosecute suspected
criminal acts;
(2) prevent or prohibit a person from voluntarily disclosing any
information to an authorized governmental agency; or
(3) limit any powers or duties granted to the commissioner or the
board by this code or other laws.
Added by Acts 1991, 72nd Leg., ch. 242, Sec. 4.01, eff. Sept. 1,
1991. Sec. 3 amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec.
4.01, eff. Jan. 1, 1992; Sec. 2(d-1) amended by Acts 1993, 73rd
Leg., ch. 685, Sec. 20.02, eff. Sept. 1, 1993; Sec. 2(b), (e)
amended by and Sec. 2(f), (g) added by Acts 1995, 74th Leg., ch.
621, Sec. 4, eff. Sept. 1, 1995; Sec. 3A added by Acts 2001, 77th
Leg., ch. 1033, Sec. 1, eff. Sept. 1, 2001; Sec. 6(a) amended by and
(e) added by Acts 2001, 77th Leg., ch. 1033, Sec. 2, eff. Sept. 1,
2001.
Art. 1.10-1. Renewal Extension for Certain Individuals Performing
Military Service
On written application to the State Board of Insurance, the board
may extend the renewal period for a license, permit, certificate of
authority, certificate of registration, or other authorization
issued by the board to engage in an activity regulated under this
code or other insurance laws of this state for a person unable to
comply with renewal requirements in a timely manner, including any
applicable continuing education requirements, because the person
was on active duty in a combat theater of operations in the United
States Armed Forces on or after August 1, 1990. The board shall
exempt such person from any increased fee or other penalty
otherwise imposed for failure to renew in a timely manner. The
board may adopt rules as necessary to implement this article.
Added by Acts 1991, 72nd Leg., ch. 646, Sec. 1, eff. Aug. 26, 1991.
Art. 1.11. Filing or Deposit of Certain Documents or Payments With
Department
If any report, financial statement, or payment required to be filed
or deposited in the offices of the commissioner, or any report, tax
return, or payment required to be filed or deposited in the offices
of the comptroller, is delivered by the United States Postal
Service to the offices of the commissioner or comptroller, as
required, after the prescribed date on which the report, financial
statement, tax return, or payment is to be filed, the date of the
United States Postal Service postmark stamped on the cover in which
the document is mailed, or any other evidence of mailing authorized
by the United States Postal Service reflected on the cover in which
the document is mailed, shall be deemed to be the date of filing,
unless otherwise specifically made an exception to this general
statute.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1979, 66th Leg., p.
390, ch. 181, Sec. 1, eff. Aug. 27, 1979.
Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 67, Sec. 5, eff. Aug.
4, 1987; Subsec. (b) amended by Acts 1991, 72nd Leg., ch. 242, Sec.
11.48, eff. Sept. 1, 1991; Subsec. (c) added by Acts 1991, 72nd
Leg., ch. 242, Sec. 11.95, eff. Sept. 1, 1991; Subsec. (a) amended
by Acts 1993, 73rd Leg., ch. 685, Sec. 3.02, eff. Sept. 1, 1993;
Subsec. (c) amended and Subsec. (d) added by Acts 1993, 73rd Leg.,
ch. 685, Sec. 7.03, eff. Sept. 1, 1993. Amended by Acts 2001, 77th
Leg., ch. 1419, Sec. 6, eff. June 1, 2003.
Art. 1.12. When Parties Refuse to Testify
If any person refuses to appear and testify or to give information
authorized by this chapter to be demanded by the Board, such Board
may file the sworn application of any member thereof with any
district judge or district court within this State, where said
witness is summoned to appear, and said judge shall summon said
witness and require answers to such questions.
Acts 1951, 52nd Leg., ch. 491.
Art. 1.13. Officers Shall Execute Service
Peace officers shall execute process directed to them by the Board
and make return thereof to it, as in the case of process issued from
any court.
Acts 1951, 52nd Leg., ch. 491.
Art. 1.14-2. Surplus Lines Insurance Premium Tax
Secs. 1 to 3A. Repealed by Acts 2001, 77th Leg., ch. 1419, Sec.
31(b)(1), eff. June 1, 2003.
Sec. 4. (a) to (d). Repealed by Acts 2001, 77th Leg., ch. 1419, Sec.
31(b)(1), eff. June 1, 2003.
(e) Repealed by Acts 1993, 73rd Leg., ch. 685, Sec. 12.51(1), eff.
Sept. 1, 1993.
(f) to (h) Repealed by Acts 2001, 77th Leg., ch. 703, Sec. 8.01(1),
eff. Sept. 1, 2001.
Secs. 5 to 10. Repealed by Acts 2001, 77th Leg., ch. 1419, Sec.
31(b)(1), eff. June 1, 2003.
Sec. 11. Repealed by Acts 1987, 70th Leg., ch. 46, Sec. 12, eff.
Sept. 1, 1987.
Surplus lines insurance premium tax
Sec. 12. (a) The premiums charged for surplus lines insurance are
subject to a premium receipts tax of 4.85 percent of gross premiums
charged for such insurance. The term premium includes all
premiums, membership fees, assessments, dues or any other
consideration for insurance. Such tax shall be in lieu of all other
insurance taxes. The surplus lines agent shall collect from the
insured the amount of the tax at the time of delivery of the cover
note, certificate of insurance, policy or other initial
confirmation of insurance, in addition to the full amount of the
gross premium charged by the insurer for the insurance. No agent
shall absorb such tax nor shall any agent, as an inducement for
insurance or for any other reason, rebate all or any part of such
tax or his commission. The surplus lines agent shall file a report
and pay taxes to the comptroller on or before March 1 of each year on
forms prescribed by the comptroller. The amount of taxes shall be
based on gross premiums written or received for such insurance
placed through an eligible surplus lines insurer during the
calendar year ending on the preceding December 31. A tax prepayment
shall be required any time accrued taxes due equal or exceed
$70,000. The prepayment of the accrued taxes, with a form
prescribed by the comptroller, shall be due by the 15th day of the
month following the month in which accrued taxes total $70,000. If a
surplus lines policy covers risks or exposures only partially in
this state, the tax payable shall be computed on the portions of the
premium which are properly allocated to the risks or exposures
located in this state. In determining the amount of premiums
taxable in this state, all premiums written, procured, or received
in this state and all premiums on policies negotiated in this state
shall be deemed written on property or risks located or resident in
this state, except such premiums as are properly allocated or
apportioned and reported as premiums which may be subject to
taxation by any other state or states. Premiums that are properly
allocated to any other state or states that are specifically exempt
from taxation under the regulations of that state or states are not
taxable in this state. Premiums on risks or exposures which are
properly allocated to federal waters, international waters or under
the jurisdiction of a foreign government shall not be taxable by
this state. In event of cancellation and rewriting of any surplus
lines insurance contract the additional premium for premium
receipts tax purposes shall be the premium in excess of the unearned
premium of the canceled insurance contract.
(b) All surplus lines premium receipt taxes collected by a surplus
lines agent are trust funds in his hands. Any surplus lines agent
who fails or refuses to pay over to the state the surplus lines
premium receipts tax at the time required by this section, or who
fraudulently withholds or appropriates or otherwise uses such money
or any portions thereof belonging to the state is guilty of theft
and shall be punished as provided by law for the crime of theft,
irrespective of whether any such surplus lines agent has or claims
to have any interest in such money so received by him.
(c) If the property of any surplus lines agent is seized upon any
mesne or final process in any court in this state, or when the
business of any surplus lines agent is suspended by the action of
creditors or put into the hands of any assignee, receiver or
trustee, all surplus lines premium receipts tax money and penalties
due the state from such surplus lines agent shall be considered
preferred claims and the state shall be a preferred creditor and
shall be paid in full.
(d) The Attorney General, upon request of the commissioner, shall
proceed in the courts of this or any other state or in any federal
court or agency to recover license fees not paid within the time
prescribed in this Article. Notwithstanding the preceding
sentence, Subtitles A and B, Title 2, Tax Code, and their subsequent
amendments, apply to a tax collected under this Article.
(e) The provisions of Chapter 981 of this code, including
provisions relating to the applicability and enforcement of that
chapter, rulemaking authority under that chapter, and definitions
of terms applicable in that chapter, apply to this section.
Secs. 13 to 18. Repealed by Acts 2001, 77th Leg., ch. 1419, Sec.
31(b)(1), eff. June 1, 2003.
Added by Acts 1967, 60th Leg., p. 408, ch. 185, Sec. 2, eff. May 12,
1967. Amended by Acts 1969, 61st Leg., p. 2121, ch. 725, Sec. 1,
eff. June 12, 1969; Acts 1979, 66th Leg., p. 625, ch. 290, Sec. 1,
eff. Aug. 27, 1979.
Sec. 4(a), (b) amended by Acts 1983, 68th Leg., p. 3932, ch. 622,
Sec. 19, 41, eff. Sept. 1, 1983; Sec. 4(c) to (e) added by Acts
1983, 68th Leg., p. 3947, ch. 622, Sec. 42, eff. Sept. 1, 1983; Sec.
4 amended by Acts 1985, 69th Leg., ch. 831, Sec. 1, eff. Sept. 1,
1985; Sec. 2(a)(1) amended by Acts 1987, 70th Leg., ch. 115, Sec.
2, eff. May 19, 1987; Sec. 3A added by Acts 1987, 70th Leg., 1st
C.S., ch. 1, Sec. 5.02, eff. Sept. 2, 1987; Sec. 4(g) amended by
Acts 1987, 70th Leg., ch. 184, Sec. 1, eff. May 26, 1987; Sec. 4(h)
added by Acts 1987, 70th Leg., ch. 184, Sec. 1, eff. May 26, 1987;
Sec. 6A added by Acts 1987, 70th Leg., ch. 561, Sec. 1, eff. Aug. 31,
1987; Sec. 7 amended by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec.
5.03, eff. Sept. 2, 1987; Sec. 8 amended by Acts 1987, 70th Leg.,
ch. 184, Sec. 2, eff. May 26, 1987; Sec. 8 amended by Acts 1987,
70th Leg., 1st C.S., ch. 1, Sec. 5.04, eff. Sept. 2, 1987; Sec.
12(e) added by Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 7, Sec. 3;
Sec. 14, amended by Acts 1987, 70th Leg., ch. 184, Sec. 3, eff. May
26, 1987; Sec. 17, amended by Acts 1987, 70th Leg., ch. 184, Sec. 4,
eff. May 26, 1987; Sec. 17A added by Acts 1987, 70th Leg., 1st C.S.,
ch. 1, Sec. 5.05, eff. Sept. 2, 1987; Sec. 7(a) amended by Acts
1989, 71st Leg., 1st C.S., ch. 11, Sec. 2, eff. Aug. 2, 1989; Sec.
12(a) amended by Acts 1989, 71st Leg., ch. 242, Sec. 2, eff. June
12, 1989; Sec. 15A added by Acts 1989, 71st Leg., ch. 1114, Sec. 5,
eff. Sept. 1, 1989; Sec. 4(d) amended by Acts 1991, 72nd Leg., ch.
242, Sec. 11.51, eff. Sept. 1, 1991; Sec. 6A(b), (c) amended by
Acts 1991, 72nd Leg., ch. 242, Sec. 9.02, eff. Sept. 1, 1991; Sec.
8(b) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.21, eff.
Sept. 1, 1991; Sec. 1 amended by Acts 1993, 73rd Leg., ch. 999, Sec.
8, eff. Sept. 1, 1993; Sec. 2(b) amended by Acts 1993, 73rd Leg.,
ch. 999, Sec. 9, eff. Sept. 1, 1993; Sec. 3(a) amended by Acts 1993,
73rd Leg., ch. 999, Sec. 10, eff. Sept. 1, 1993; Sec. 4(a) amended
by Acts 1993, 73rd Leg., ch. 999, Sec. 11, eff. Sept. 1, 1993; Sec.
4(c), (d) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 12.04, eff.
Sept. 1, 1993; Sec. 4(e) repealed by Acts 1993, 73rd Leg., ch. 685,
Sec. 12.51(1), eff. Sept. 1, 1993; Sec. 6(c), (d) amended by Acts
1993, 73rd Leg., ch. 999, Sec. 12, eff. Sept. 1, 1993; Sec. 6A(a),
(c) amended by Acts 1993, 73rd Leg., ch. 999, Sec. 13, eff. Sept. 1,
1993; Sec. 7 amended by Acts 1993, 73rd Leg., ch. 999, Sec. 14, eff.
Sept. 1, 1993; Sec. 8 amended by Acts 1993, 73rd Leg., ch. 999, Sec.
15, eff. Sept. 1, 1993; Sec. 8(b), (c) amended by and (d) added by
Acts 1993, 73rd Leg., ch. 685, Sec. 7.08, eff. Sept. 1, 1993; Sec.
8(e) amended by Acts 1993, 73rd Leg., ch. 685, Sec. 7.22, eff. Sept.
1, 1993; Sec. 9 amended by Acts 1993, 73rd Leg., ch. 999, Sec. 16,
eff. Sept. 1, 1993; Sec. 12(a) amended by Acts 1993, 73rd Leg., ch.
999, Sec. 17, eff. Sept. 1, 1993; Sec. 12(a), (d) amended by Acts
1993, 73rd Leg., ch. 685, Sec. 3.07, eff. Sept. 1, 1993; Sec. 16
amended by Acts 1993, 73rd Leg., ch. 999, Sec. 18, eff. Sept. 1,
1993; Sec. 17 amended by Acts 1993, 73rd Leg., ch. 999, Sec. 19,
eff. Sept. 1, 1993; Sec. 17A amended by Acts 1993, 73rd Leg., ch.
685, Sec. 5.02, eff. Sept. 1, 1993; Sec. 17A(a) amended by Acts
1993, 73rd Leg., ch. 999, Sec. 20, eff. Sept. 1, 1993; Sec. 4(b)
amended by Acts 1995, 74th Leg., ch. 508, Sec. 7, eff. June 12,
1995; Sec. 6 amended by Acts 1995, 74th Leg., ch. 983, Sec. 1, eff.
Sept. 1, 1995; Sec. 6A(g), (h) added by Acts 1995, 74th Leg., ch.
983, Sec. 2, eff. Sept. 1, 1995; Sec. 8(b) amended by Acts 1995,
74th Leg., ch. 983, Sec. 3, eff. Sept. 1, 1995; Sec. 8(d) to (l)
relettered as (e) to (m) by Acts 1995, 74th Leg., ch. 898, Sec. 1,
eff. Aug. 28, 1995; Sec. 12(a) amended by Acts 1995, 74th Leg., ch.
279, Sec. 2, eff. Sept. 1, 1995; Sec. 8(d) amended by Acts 1997,
75th Leg., ch. 202, Sec. 1, eff. Sept. 1, 1997; Sec. 12(a), (b)
amended by Acts 1999, 76th Leg., ch. 1467, Sec. 2.05, eff. Jan. 1,
2000; Sec. heading amended by Acts 2001, 77th Leg., ch. 1419, Sec.
7, eff. June 1, 2003; Sec. 2(a)(1) amended by Acts 2001, 77th Leg.,
ch. 703, Sec. 6.01, eff. Sept. 1, 2001; Sec. 2(a)(2) amended by
Acts 2001, 77th Leg., ch. 703, Sec. 6.02, eff. Sept. 1, 2001; Sec.
2(a)(3) amended by Acts 2001, 77th Leg., ch. 703, Sec. 6.03, eff.
Sept. 1, 2001; Sec. 3(a) amended by Acts 2001, 77th Leg., ch. 703,
Sec. 6.04, eff. Sept. 1, 2001; Sec. 3A amended by Acts 2001, 77th
Leg., ch. 703, Sec. 6.05, eff. Sept. 1, 2001; Sec. 4(b) amended by
Acts 2001, 77th Leg., ch. 703, Sec. 6.06, eff. Sept. 1, 2001; Sec.
4(c) amended by Acts 2001, 77th Leg., ch. 703, Sec. 6.07, eff. Sept.
1, 2001; Sec. 4(d) amended by Acts 2001, 77th Leg., ch. 703, Sec.
6.08, eff. Sept. 1, 2001; Secs. 4(f) to (h) repealed by Acts 2001,
77th Leg., ch. 703, Sec. 8.01(1), eff. Sept. 1, 2001; Sec. 12(e)
added by Acts 2001, 77th Leg., ch. 1419, Sec. 8, eff. June 1, 2003;
Sec. 15(a) amended by Acts 2001, 77th Leg., ch. 703, Sec. 6.09, eff.
Sept. 1, 2001.
Art. 1.14-3. Texas Insurance Exchange
Definitions
Sec. 1. In this article:
(1) "Exchange" means the Texas Insurance Exchange.
(2) "Board" means the State Board of Insurance.
(3) "Directors" means the board of directors of the exchange.
(4) "Member" means a person, firm, corporation, or underwriting
syndicate authorized by the directors of the exchange to insure or
reinsure risks through the exchange.
(5) "Subscriber" means a person, firm, corporation, or other
organization designated by the directors of the exchange as a
subscriber on payment of fees or dues required by the constitution
and bylaws.
Creation of Exchange
Sec. 2. The Texas Insurance Exchange is created and shall operate
under a constitution and bylaws and under regulations promulgated
by the board.
Purpose of Exchange
Sec. 3. The purpose of the exchange is to provide a facility for
underwriting the following:
(1) reinsurance of any kind of insurance;
(2) direct insurance of any kind of risk located entirely outside
the United States;
(3) direct insurance of any kind of risk located in a state of the
United States other than this state if the risk qualifies for
placement under the excess and surplus lines requirements of the
jurisdiction in which the risk is located; and
(4) a risk located in this state that is submitted to and certified
as having been rejected by a committee representative of not fewer
than three and not more than seven insurers licensed to do an
insurance business in this state and subject to conditions imposed
by regulations promulgated by the board.
Management of Exchange
Sec. 4. The board shall promulgate regulations under which the
exchange shall be operated and managed, and the directors shall
operate and manage the exchange in accordance with those
regulations.
Operation of Exchange
Sec. 5. (a) The exchange shall function under a constitution and
bylaws adopted by it and approved by the board.
(b) The exchange may amend its constitution and bylaws in
accordance with their terms and with the approval of the board.
(c) The constitution and bylaws and amendments to the constitution
and bylaws are invalid without the approval of the board.
(d) Notwithstanding any authority under this article to adopt or
amend the constitution and bylaws, the constitution and bylaws must
provide for:
(1) the election of nine directors, four of whom represent the
public interest and are not members, subscribers, or agents of the
exchange;
(2) the location of the principal offices of the exchange and its
members within this state for the purpose of the transaction of the
types of business described in Section 3 of this article;
(3) the submission by the exchange, its members, and applicants for
membership in the exchange of financial information required by
regulations promulgated by the board;
(4) the exchange to establish and maintain a security fund in a form
and amount specified by regulations promulgated by the board;
(5) the voting power of members;
(6) the voting power and other rights granted under the Texas
Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
Texas Civil Statutes) to participate in the conduct and management
of the affairs of the exchange by agents transacting business on the
exchange; and
(7) the rights and duties of members, including the manner and form
for conducting business, financial stability, dues, membership
fees, mandatory arbitration, and other matters necessary or
appropriate to conduct business authorized by this article.
(e) For the purposes of this section, a principal office is an
office at which officers and personnel who are engaged in
administration, underwriting, claims adjustment, policyholders'
service, marketing, accounting, record-keeping, and support
services are located.
Directors
Sec. 6. (a) The directors for the exchange shall be elected by the
members of the exchange and by any other persons authorized by the
constitution and bylaws of the exchange to vote for election of
directors.
(b) At least two-thirds of the directors must be citizens of the
United States.
Taxes
Sec. 7. (a) Except as provided by this section and Section 8 of this
article, the exchange is not subject to any state or local taxes
measured by income, premiums, or gross receipts.
(b) Direct premiums written, procured, or received by any member
through the exchange on risks located in this state are deemed
written, procured, or received by the exchange, and those premiums
are subject to the premium taxes imposed under Chapter 4 of this
code. Those taxes shall be reported, paid, and administered as
provided by Chapter 4 of this code.
(c) For purposes of Chapter 4 of this code, the exchange and its
members are considered insurance carriers.
Maintenance Tax
Text of section (8) effective until April 1, 2005
Sec. 8. (a) The commissioner annually shall determine the rate of
assessment of a maintenance tax to be paid on an annual, semiannual,
or other periodic basis, as determined by the comptroller. The rate
of assessment may not exceed one percent of the correctly reported
gross premiums on all classes of insurance covered by this article
and paid through the exchange. The comptroller shall collect the
maintenance tax.
(b) After taking into account the unexpended funds produced by this
tax, if any, the commissioner shall adjust the rate of assessment
each year to produce the amount of funds that the commissioner
estimates will be necessary to pay all the expenses of regulating
all classes of insurance covered by this article during the
succeeding year. In making an estimate under this subsection, the
commissioner shall take into account the requirement that the
general revenue fund be reimbursed under Article 4.19 of this code
and its subsequent amendments.
(c) The collected taxes shall be deposited in the State Treasury to
the credit of the general revenue fund to be reallocated to the
Texas Department of Insurance operating fund and shall be spent as
authorized by legislative appropriation on warrants issued by the
comptroller pursuant to duly certified requisitions of the
commissioner. Amounts reallocated to the Texas Department of
Insurance operating fund under this subsection may be transferred
to the general revenue fund in accordance with Article 4.19 of this
code and its subsequent amendments.
(d) The commissioner shall advise the comptroller of the applicable
rate of assessment no later than the date 45 days prior to the due
date of the tax return for the period for which such taxes are due.
If the commissioner has not advised the comptroller of the
applicable rate by such date, the applicable rate shall be the rate
applied in the previous tax period. If the commissioner advises the
comptroller of the applicable rate of assessment after taxes have
been assessed pursuant to this subsection, the comptroller shall:
(1) advise each taxpayer in writing of the amount of any additional
taxes due; or
(2) refund any excess taxes paid.
Application of This Article and Regulations
Sec. 9. This article and regulations promulgated by the
commissioner or the comptroller, as applicable, apply to the
exchange, its members, and the insurance and reinsurance written
through the exchange, except to the extent exempt by regulations of
the commissioner or the comptroller, as applicable. An exemption
may not be unfairly discriminatory or detrimental to the solvency
of licensed insurers.
Investment in Members and Agents
Sec. 10. (a) The board by regulation may establish limitations on
investments in members of the exchange.
(b) The investment in a member by agents transacting business on the
exchange and the investment in an agent transacting business on the
exchange by a member, either directly or indirectly, in each case is
limited in the aggregate to less than 20 percent of the total
investment in the member or agent or to a lesser amount provided by
board regulation.
Application of Certain Statutes
Sec. 11. For purposes of Article 1.14-1 of this code, insurance and
reinsurance written under Subdivision (4) of Section 3 of this
article written by members of the exchange are deemed to have been
written in accordance with specific authorization of the laws of
this state.
Guaranty Funds
Sec. 12. Performance of the contractual obligations of the exchange
or its members entered into under this article is not covered by any
of the Texas insurance guaranty funds provided by the laws of this
state. This section does not apply to the security fund provided by
Subdivision (4) of Subsection (d) of Section 5 of this article.
Added by Acts 1987, 70th Leg., ch. 415, Sec. 1, eff. Sept. 1, 1987.
Sec. 5(d) amended by Acts 1991, 72nd Leg., ch. 242, Sec. 9.03, eff.
Sept. 1, 1991; Secs. 8 and 9 amended by Acts 1993, 73rd Leg., ch.
685, Sec. 3.08, eff. Sept. 1, 1993; Sec. 8 repealed by Acts 2003,
78th Leg. ch. 1274, Sec. 26(b)(2), eff. April 1, 2005.
Art. 1.15. To Examine Carriers
Sec. 1. The State Board of Insurance shall once each year for the
first three (3) years after organization or incorporation, and
thereafter once in each three (3) years, or oftener, if the Board
deems necessary, in person or by one or more examiners commissioned
by such Board in writing, visit each carrier organized under the
laws of this state and examine its financial condition and its
ability to meet its liabilities, as well as its compliance with the
laws of Texas affecting the conduct of its business; and such Board
shall similarly, in person or by one or more commissioned
examiners, visit and examine, either alone or jointly with
representatives of the insurance supervising departments of other
states, each insurance carrier not organized under the laws of this
state but authorized to transact business in this state. Such Board
or its commissioned examiners shall have free access to all the
books and papers of the carrier or agents thereof relating to the
business and affairs of such carrier, and shall have power to summon
and examine under oath, if necessary, the officers, agents, and
employees of such carrier and any other person relative to the
affairs of such carrier. Such Board may revoke or modify any
certificate of authority issued by such Board or by any predecessor
in office when any condition or requirement prescribed by law for
granting it no longer exists. Such Board shall give such company at
least ten (10) days written notice of its intention to revoke or
modify such certificate of authority stating specifically the
reason for the action it proposes to take.
Sec. 2. The State Board of Insurance in administering any provision
of the Insurance Code, Acts 1951, 51st Legislature, Chapter 491,
shall be authorized and empowered in determining "value" or "market
value" of any investment in or upon real estate or the improvements
thereon by any carrier authorized to do business in the State of
Texas to consider any and all matters and things relating thereto,
including but not restricted to, appraisals by real estate boards
or other qualified persons, affidavits by other persons familiar
with such values, tax valuations, cost of acquisition, with proper
deductions for depreciation and obsolescence, cost of replacement,
sales of other comparable property, enhancement in value from
whatever cause, income received or to be received, improvements
made or any other factor or any other evidence which to said Board
may be deemed proper and material.
Sec. 3. Any insurer whose investment in or upon real estate or the
improvements thereon may have been determined or found by said
Board shall be entitled to make a written request to the Board for a
written finding by the Board; and upon such request being made to
the Board, the Board shall, within ten (10) days after receipt of
such request, enter its written order or finding setting out
separately its finding upon each factor or matter upon which its
said determination or finding of "value" or "market value" was made
and shall in such written order or finding give the names and
addresses of all persons who furnished such evidence as to each such
matter, factor or thing and upon whom the Board relied in making
such determination or finding and shall deliver a copy of such
written finding or order to the carrier so requesting the same.
Sec. 4. Any rule, regulation, order, decision or finding of the
Board under this Act shall be subject to review in accordance with
Article 1.04 of this code. The filing of such suit shall operate as
a stay of any such rule, regulation, order, decision or finding of
the Board until the court directs otherwise.
Sec. 5. If a carrier or an agent of a carrier fails or refuses to
comply with this article or rules adopted under this article or to
comply with a request of the Board or a commissioned examiner to be
examined or to provide information requested as part of an
examination by the Board or commissioned examiner, the carrier is
subject to disciplinary action under Article 1.10, Section 7, of
this code, and the Commissioner of Insurance may institute
disciplinary action pursuant to Article 1.10, Section 7, Insurance
Code.
Sec. 6. The Board, by rule, shall adopt procedures for filing and
adoption of examination reports and for hearings to be held under
this article and guidelines governing orders issued under this
article.
Sec. 7. Nothing contained in this article shall be construed to
limit the Commissioner's authority to use any final or preliminary
examination report, any examiner or company workpapers or other
documents, or any other information discovered or developed during
the course of any examination in the furtherance of any legal or
regulatory action which the Commissioner of Insurance may, in his
or her sole discretion deem appropriate.
Sec. 8. (a) In conducting an examination under this article, the
department shall use audits and work papers prepared by an
accountant or accounting firm that meets the requirements of
Section 12, Article 1.15A, of this code that are made available to
the department by the carrier. If necessary, the department may
conduct a separate audit of the carrier.
(b) The carrier shall provide the department with the work papers of
an accountant or accounting firm or the carrier and a record of any
communications between the accountant or accounting firm and the
carrier that relate to the audit. The accountant or accounting firm
shall deliver that information to the department's examiners, who
shall retain the information during the course of the department's
examination of the carrier. Information obtained under this
section is confidential and may not be disclosed to the public
except when introduced as evidence in a hearing.
(c) For purposes of this section, "work papers" has the meaning
assigned by Section 17(a), Article 1.15A, of this code. Work papers
developed in an audit conducted under this section shall be
maintained in the manner provided by Sections 17(b) and (c),
Article 1.15A, of this code.
Sec. 9. A final or preliminary examination report, and any
information obtained during the course of an examination, is
confidential and is not subject to disclosure under the open
records law, Chapter 424, Acts of the 63rd Legislature, Regular
Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes),
and its subsequent amendments. This section applies if the carrier
examined is under supervision or conservation but does not apply to
an examination conducted in connection with a liquidation or a
receivership under this code or another insurance law of this
state.
Sec. 10. If the Commissioner determines that the financial strength
of a carrier justifies less-frequent examinations than are required
by Section 1 of this article, the Commissioner may conduct the
examination of a carrier at intervals not to exceed five years. The
Commissioner shall adopt rules governing the determination of
whether the financial strength of a carrier justifies examination
under this section. This section applies only to examination of a
carrier that has been incorporated or organized for more than three
years.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
826, ch. 307, Sec. 3; Acts 1965, 59th Leg., p. 309, ch. 141, Sec. 1.
Sec. 1 amended by Acts 1987, 70th Leg., 2nd C.S., ch. 67, Sec. 6,
eff. Aug. 4, 1987; Sec. 1 amended by and Secs. 5 to 7 added by Acts
1991, 72nd Leg., ch. 242, Sec. 11.104, eff. Sept. 1, 1991; Sec. 4
amended by Acts 1993, 73rd Leg., ch. 685, Sec. 4.01, eff. Sept. 1,
1993; Secs. 8 to 10 added by Acts 1993, 73rd Leg., ch. 685, Sec.
7.05, eff. Sept. 1, 1993.
Art. 1.15A. Independent Audit of Financial Statement
Purpose
Sec. 1. The purpose of this article is to require an annual
examination by an independent certified public accountant of the
financial statements reporting the financial condition and the
results of operations of each insurer.
Application
Sec. 2. This article applies to each insurer except an insurer
exempt under Section 4, 6, or 7 of this article.
Definitions
Sec. 3. In this article:
(1) "Accountant" means an independent certified public accountant
or accounting firm that meets the requirements of Section 12 of this
article.
(2) "Affiliate" has the meaning assigned by Subsection (a) of
Section 2 of Article 21.49-1 of this code.
(3) "Board" means the State Board of Insurance.
(4) "Commissioner" means the commissioner of insurance.
(5) "Insurer" means an insurer authorized to do business under the
law of this state and includes life, health, and accident insurance
companies, fire and marine companies, general casualty companies,
title insurance companies, fraternal benefit societies, mutual
life insurance companies, local mutual aid associations, statewide
mutual assessment companies, mutual insurance companies other than
life, farm mutual insurance companies, county mutual insurance
companies, Lloyd's plans, reciprocal and interinsurance exchanges,
group hospital service corporations, health maintenance
organizations, stipulated premium insurance companies, and
nonprofit legal services corporations.
(6) "Subsidiary" has the meaning assigned by Section 2 of Article
21.49-1 of this code.
Exemption
Sec. 4. (a) Except as provided by Subsections (b) and (c) of this
section, an insurer otherwise subject to this article that has less
than $1 million in direct premiums written in this state during a
calendar year, in lieu of the annual examination required by this
article for that calendar year, may submit an affidavit under oath
of an officer of the insurer that specifies the amount of direct
premiums written in this state, and such insurer shall be exempt
from the audit required by this article.
(b) The commissioner may require an insurer that is exempt under
Subsection (a) of this section to comply with this article if the
commissioner finds that the insurer's compliance is necessary for
the commissioner to fulfill the commissioner's statutory
responsibilities; provided that this subsection shall not apply to
any fraternal benefit society qualifying for exemption under
Subsection (a) of this section which has no direct premiums written
in this state for accident and health insurance during a calendar
year.
(c) An insurer that has assumed premiums of $1 million or more under
reinsurance agreements is not exempt under Subsection (a) of this
section.
Sec. 5. Deleted by Acts 1991, 72nd Leg., ch. 242, Sec. 11.02, eff.
Sept. 1, 1991.
Exemption for Insurers Filing Audits in Another State
Sec. 6. (a) A foreign or alien insurer that files an audited
financial report in another state, pursuant to that state's
requirement for audited financial reports, may be exempt from
filing a report under this article if the commissioner finds that
the other state's requirements are substantially similar to the
requirements in this article.
(b) A copy of the audited financial report, the report on
significant deficiencies in internal controls, and the
accountant's letter of qualifications filed with the other state
must be filed with the commissioner in accordance with the filing
dates provided by Sections 9 and 16 of this article.
(c) A copy of a notification of adverse financial conditions report
filed with the other state by a person exempt under this section
must be filed with the commissioner within the time provided by
Section 15 of this article.
Financial Hardship Exemption
Sec. 7. (a) An insurer otherwise subject to this article and not
eligible for an exemption under Section 4 or 6 of this article may
apply to the commissioner for a financial hardship exemption.
(b) Except as provided by Subsection (c) of this section, the
commissioner may grant an exemption under this section if the
commissioner finds, after review of the application, that
compliance with this rule would constitute a severe financial or
organizational hardship on the insurer. An exemption may be
granted at any time and from time to time for a specified period or
periods.
(c) The commissioner may not grant an exemption under this section
if the exemption diminishes the department's ability to monitor the
financial condition of the insurer and may not grant an exemption to
an insurer that:
(1) has been placed under supervision, conservatorship, or
receivership during the five-year period immediately preceding the
date on which application for the exemption is made;
(2) has undergone a change in control, as defined by Section 2,
Article 21.49-1 of this code during the five-year period
immediately preceding the date on which application for the
exemption is made;
(3) has been identified by the department as a troubled insurer;
(4) has been subject to a significant number of complaints, as
determined by the commissioner, during the five-year period
immediately preceding the date on which application for the
exemption is made;
(5) has been or is the subject of a disciplinary action by the
board; or
(6) is not in compliance with any law or any rule adopted by the
board or commissioner.
(d) An insurer that is aggrieved by a determination of the
commissioner under this section may appeal that determination under
Article 1.04 of this code.
Board's Authority
Sec. 8. This article does not prohibit, preclude, or limit the board
from ordering, conducting, or performing an examination of any
insurer under this code or the board's rules.
Filing and Extensions for Filing of Annual Audited Financial
Reports
Sec. 9. (a) Each insurer shall have an annual audit by an accountant
and shall file an audited financial report for the preceding
calendar year with the commissioner on or before June 30 of each
year.
(b) Extension of the filing date for the audited financial report
may be granted by the commissioner for 30-day periods on a showing
by the insurer and its accountant of reasons for requesting the
extension and determination by the commissioner of good cause for
an extension. The request for extension must be submitted in
writing before the 10th day preceding the date the report is due to
be filed and must include sufficient detail to permit the
commissioner to make an informed decision with respect to the
requested extension.
(c) The commissioner may require an insurer to file the audited
financial report on a date before June 30 of a particular year if
the commissioner notifies the insurer of the date not later than the
90th day before the date on which the report is to be filed.
(d) If the insurer fails to comply with this article, the
commissioner shall order the audit performed by an independent
qualified certified public accountant and assess against the
insurer the cost of auditing the insurer's financial statement
under this article, and the insurer shall pay the amount of the
assessment to the commissioner not later than the 30th day after the
date the commissioner issues the notice of assessment to the
insurer. Money collected under this section shall be deposited in
the state treasury to the credit of the State Board of Insurance
operating fund for the use of the board and the department for the
purpose of paying the expenses incurred under the article.
Contents of Audited Financial Report
Sec. 10. (a) The audited financial report shall report the
financial condition of the insurer as of the end of the most recent
calendar year and the results of the insurer's operations, changes
in financial position, and changes in capital and surplus for that
year in conformity with statutory accounting practices prescribed
or otherwise permitted by the insurance regulator in the state of
domicile.
(b) The audited financial report must include the following:
(1) the report of an accountant;
(2) a balance sheet that reports admitted assets, liabilities,
capital, and surplus;
(3) a statement of gain or loss from operations;
(4) a statement of cash flows;
(5) a statement of changes in capital and surplus;
(6) any notes to financial statements; and
(7) supplementary data and information including any additional
data or information required by the commissioner.
(c) The notes to the financial statements required by Subdivision
(6) of Subsection (b) of this section must include:
(1) a reconciliation of differences, if any, between the audited
statutory financial statements and the annual statements filed
pursuant to this code with a written description of the nature of
these differences;
(2) any notes required by the appropriate National Association of
Insurance Commissioners annual statement instructions or by
generally accepted accounting principles; and
(3) a summary of the ownership of the insurer and the relationship
of the insurer to any affiliated company.
(d) The financial statements included in the audited financial
report must be prepared in a form and using language and groupings
substantially the same as the relevant sections of the insurer's
annual statement filed with the commissioner. Except in the first
year in which an insurer is required to file an audited financial
report, the financial statements also must be comparative,
presenting the amounts as of December 31 of the reported year and
the amounts as of December 31 of the preceding year.
(e) Insurers required to be examined under Section 2 of this article
who did not retain an independent certified public accountant to
perform an annual examination for the previous year shall not be
required to include the following reports covered by the
accountant's opinion for the first year, although such statements
shall be presented and labeled unaudited:
(1) Statement of operations.
(2) Statement of cash flows.
(3) Statements of changes in capital and surplus.
All other reports described in Section 9 must be included. For the
succeeding year and each year thereafter, such insurers shall file
with the commissioner all reports required by this article.
(f) The audited financial report must also include information
required by the department to conduct the examination of the
insurer under Article 1.15 of this code. The commissioner shall
adopt rules governing the information to be included in the report
under this subsection.
Canadian or British Insurers
Sec. 10A. (a) In lieu of the audited financial report required under
Section 9 of this article, an insurer domiciled in Canada or the
United Kingdom may file its annual statement of total business on
the form filed by the company with the appropriate regulatory
authority in the country of domicile. The statement must be audited
by an independent accountant chartered in the country of domicile.
(b) The chartered accountant shall register with the commissioner
under Section 11(a) of this article, and the registration must be
accompanied by a statement, signed by the accountant, indicating
that the accountant is aware of the requirements of this article and
affirming that the accountant will express the accountant's opinion
in conformity with those requirements.
Designation of Accountant
Sec. 11. (a) Each insurer must register with the commissioner the
name and address of the accountant retained to prepare an audited
financial report required by this article. The registration must
be made in writing not later than December 31 of the calendar year
to be covered by the audited financial report.
(b) The registration must be accompanied by a statement signed by
the accountant indicating that the accountant is aware of the
requirements of this article, and of the rules and regulations of
the insurance department of the insurer's state of domicile that
relate to accounting and financial matters and affirming that the
accountant will express the accountant's opinion on the financial
statements in terms of their conformity to the statutory accounting
practices prescribed or otherwise permitted by that department,
specifying any exceptions the accountant believes are appropriate.
(c) The commissioner may not accept an audited financial report
from an insurer that is prepared by an accountant that is not
registered under this section.
(d) The commissioner may not accept registration under this section
for a person who does not comply with Section 12 of this article and
with the other requirements of this article.
Qualifications of Accountant
Sec. 12. (a) Except as provided by Subsections (b) and (c) of this
section, the commissioner shall accept an audited financial report
from an accountant who is an independent certified public
accountant in good standing with the American Institute of
Certified Public Accountants and in all states in which the
accountant or firm is licensed to practice and who conforms to the
Code of Professional Ethics of the American Institute of Certified
Public Accountants and to the rules and regulations and Code of
Ethics and Rules of Professional Conduct of the Texas State Board of
Public Accountancy or a similar code. In the case of an insurer
domiciled in Canada, the commissioner shall accept an audited
financial report from an accountant chartered in Canada, and, in
the case of an insurer domiciled in Great Britain, the commissioner
shall accept an audited financial report from an accountant
chartered in Great Britain.
(b) A partner or other person responsible for rendering a report for
an insurer for seven consecutive years may not render a report for
that insurer, or any of the subsidiaries or affiliates of the
insurer that are engaged in the business of insurance, during the
two years following the seventh year. The commissioner may
determine that the limitation in this subsection does not apply to
the accountant for a particular insurer if the insurer
demonstrates, to the satisfaction of the commissioner, that its
application to the insurer would be unfair because of unusual
circumstances. In making the determination, the commissioner may
consider:
(1) the number of partners or individuals employed by the
accountant, the expertise of the partners or individuals employed
by the accountant, or the number of insurance clients of the
accountant;
(2) the premium volume of the insurer; and
(3) the number of jurisdictions in which the insurer transacts
business.
(c) The commissioner may not accept an audited financial report
prepared in whole or in part by an individual who the commissioner
finds:
(1) has been convicted of fraud, bribery, a violation of the
Racketeer Influenced and Corrupt Organizations Act (18 U.S.C.
Sections 1961 through 1968), or any state or federal criminal
offense involving dishonest conduct;
(2) has violated the insurance laws of this state with respect to
any report filed under this article; or
(3) has demonstrated a pattern or practice of failing to detect or
disclose material information in reports filed under this article.
(d) The commissioner may hold a hearing to determine if an
accountant is qualified and independent and, considering the
evidence presented, may rule that the accountant is not qualified
and independent for purposes of expressing an opinion on the
financial statements in the audited financial report filed under
this article.
(e) If the commissioner rules that an accountant is not qualified
and independent, the commissioner shall issue an order directing
the insurer to replace the accountant with a qualified and
independent accountant.
Resignation or Dismissal of Accountant
Sec. 12A. (a) If the accountant who signed an audited financial
report resigns as accountant for the insurer or is dismissed by the
insurer after the report is filed, the insurer shall notify the
department not later than the fifth business day after the date of
resignation or dismissal.
(b) Not later than the 10th business day after the insurer gives the
notification required by Subsection (a) of this section, the
insurer shall file a written statement with the commissioner
advising the commissioner of any disagreements between the
accountant and personnel of the insurer responsible for
presentation of its financial statements relating to accounting
principles or practices, financial statement disclosure, or
auditing scope or procedures that occurred during the 24-month
period immediately preceding the date of resignation or dismissal
and that, if not resolved to the satisfaction of the accountant,
would have caused the accountant to note the disagreement in
connection with the audited financial report. The statement must
include both disagreements that were resolved to the accountant's
satisfaction and those that were not resolved to the accountant's
satisfaction.
(c) The insurer shall file with the statement required under
Subsection (b) of this section a letter signed by the accountant
stating whether the accountant agrees with the insurer's statement
and, if not, stating the reasons why the accountant does not agree.
If the accountant is unwilling or unable to provide the letter, the
insurer shall file with the commissioner a copy of a written request
to the accountant for the letter.
Consolidated or Combined Audits
Sec. 13. (a) An insurer may make written application to the
commissioner for approval to file audited combined or consolidated
financial statements instead of separate annual audited financial
reports if the insurer is part of a group of insurance companies
that uses a pooling or 100 percent reinsurance agreement that
affects the solvency and integrity of the insurer's reserves and
the insurer cedes all of its direct and assumed business to the
pool. The application for approval must be filed on or before
December 31 of the calendar year for which the combined or
consolidated audited financial statements are to be filed.
(b) An insurer that receives approval from the commissioner under
Subsection (a) of this section shall file a columnar consolidating
or combining worksheet for consolidated or combined financial
statements that must include the following:
(1) amounts shown on the consolidated or combined audited financial
statements;
(2) amounts for each insurer stated separately;
(3) noninsurance operations shown on a combined or individual
basis;
(4) explanations of consolidating and eliminating entries; and
(5) reconciliation of any differences between the amounts shown in
the individual insurer columns of the worksheet and comparable
amounts shown on the insurers' annual statements.
(c) An insurer who does not receive approval from the commissioner
to file an audited combined or consolidated financial statements
for the insurer and any of its subsidiaries or affiliates shall file
a separate audited financial report.
Scope of Accountant's Examination and Report
Sec. 14. (a) The financial reports furnished under Section 8 of this
article must be examined by an accountant.
(b) The examination of an insurer's financial reports shall be
conducted in accordance with generally accepted auditing
standards. Consideration should also be given to such other
procedures illustrated in the Examiner's Handbook promulgated by
the National Association of Insurance Commissioners.
Notification of Adverse Financial Condition
Sec. 15. (a) An insurer required to furnish an audited financial
report shall require the accountant to immediately notify in
writing the board of directors of the insurer or its audit committee
of a determination by that accountant that:
(1) the insurer has materially misstated its financial condition as
reported to the commissioner as of the balance sheet date currently
under examination; or
(2) the insurer does not meet the minimum capital and surplus
requirements provided by this code for that insurer as of that date.
(b) The insurer shall furnish to the commissioner a copy of the
accountant's written notice not later than the fifth business day
after the date on which the insurer receives the notice from the
accountant and shall provide the accountant with evidence that the
notice has been furnished to the commissioner. If the accountant
does not receive the evidence on or before the fifth business day
after the date on which the accountant notified the insurer, the
accountant shall, not later than the 10th business day after the
date on which the accountant notified the insurer, file a copy of
the written notice with the commissioner.
(c) If the accountant, subsequent to the date of the audited
financial report filed under this article, becomes aware of facts
that might have affected the report, the accountant must take
action as prescribed in Volume 1, Section AU 561, Professional
Standards of the American Institute of Certified Public
Accountants.
(d) An accountant is not liable to the insurer, its policyholders,
shareholders, officers, employees or directors, creditors or
affiliates, for any statement made under Subsections (a) and (b) of
this section if the statement was made in good faith to comply with
those subsections.
Report on Significant Deficiencies in Internal Control
Sec. 16. (a) In addition to the audited financial report, each
insurer shall furnish to the commissioner the written report of
significant deficiencies required and prepared in accordance with
the Professional Standards of the American Institute of Certified
Public Accountants.
(b) The report required by this section must be filed annually by
the insurer with the commissioner not later than the 60th day after
the date the audited financial report is filed. The insurer is also
required to provide a description of remedial actions taken or
proposed to correct significant deficiencies, if the actions are
not described in the accountant's report.
(c) The report must follow generally the form for communication of
internal control structure matters noted in an audit described in
SAS No. 60, Section AU 325, Professional Standards of the American
Institute of Certified Public Accountants.
Accountant's Letter of Qualifications
Sec. 16A. (a) The audited financial report must be accompanied by a
letter furnished by the accountant stating:
(1) that the accountant is independent with respect to the insurer
and conforms to the standards of the profession contained in the
Code of Professional Ethics, the statements of the American
Institute of Certified Public Accountants, and the Rules of
Professional Conduct of the Texas Board of Public Accountancy, or a
similar code;
(2) the background and experience of the accountant in general, the
experience in audits of insurers of each individual assigned to
prepare the audit, and whether the individual is an independent
certified public accountant;
(3) that the accountant understands that the annual audited
financial report and the accountant's opinion on the report will be
filed in compliance with this article and that the commissioner
will rely on the report and opinion in the monitoring and regulation
of the financial position of insurers;
(4) that the accountant consents to the requirements of Section 17
of this article and that the accountant agrees to make the
accountant's work papers available for review by the commissioner
or the commissioner's designee;
(5) that the accountant is properly licensed by an appropriate
state licensing authority and is a member in good standing in the
American Institute of Certified Public Accountants; and
(6) that the accountant is in compliance with the requirements of
Section 12 of this article.
(b) Subsection (a)(2) of this section does not prohibit an
accountant from using any staff the accountant considers
appropriate if use of that staff is consistent with the generally
accepted auditing standards.
Definition, Availability, and Maintenance of Accountant Work
Papers
Sec. 17. (a) Work papers are the records kept by the accountant of
the procedures followed, the tests performed, the information
obtained, and the conclusions reached pertinent to the accountant's
examination of the financial statements of an insurer and may
include work programs, analyses, memoranda, letters of
confirmation and representation, abstracts of company documents
and schedules, or commentaries prepared or obtained by the
accountant in the course of the accountant's examination of the
financial statements of an insurer that support the accountant's
opinion.
(b) Each insurer required to file an audited financial report shall
require the accountant to make available for review by the
department's examiners the work papers and any record of
communications related to the audit between the accountant and the
insurer prepared in the conduct of the examination. The insurer
shall require that the accountant retain the audit work papers and
records of communications until the department has filed a report
on examination covering the period of the audit, but not longer than
seven years after the period reported.
(c) In the conduct of the periodic review by the department's
examiners, photocopies of pertinent audit work papers may be made
and retained by the board. Reviews by the department's examiners
are considered investigations, and all work papers obtained during
the course of those investigations may be made confidential by the
commissioner, unless admitted as evidence in a hearing before a
governmental agency or in a court of competent jurisdiction.
Sec. 18. Deleted by Acts 1991, 72nd Leg., ch. 242, Sec. 11.02, eff.
Sept. 1, 1991.
Added by Acts 1989, 71st Leg., ch. 1082, Sec. 2.01, eff. Sept. 1,
1989. Amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.02, eff.
Sept. 1, 1991; Sec. 10(f) amended by Acts 1993, 73rd Leg., ch. 685,
Sec. 7.06, eff. Sept. 1, 1993.
Art. 1.15B. Confidentiality of Early Warning System Information
Any information relating to the financial solvency of any
organization regulated by the department under this code or another
insurance law of this state obtained by the department's early
warning system is confidential and is not subject to disclosure
under the open records law, Chapter 424, Acts of the 63rd
Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's
Texas Civil Statutes), and its subsequent amendments.
Added by Acts 1993, 73rd Leg., ch. 685, Sec. 7.07, eff. Sept. 1,
1993.
Art. 1.16. Expenses of Examinations; Disposition of Sums Collected
(a) The expenses of all examinations of domestic insurance
companies made on behalf of the State of Texas by the State Board of
Insurance or under its authority shall be paid by the corporations
examined in such amount as the Commissioner of Insurance shall
certify to be just and reasonable.
(b) Assessments for the expenses of such domestic examination which
shall be sufficient to meet all the expenses and disbursements
necessary to comply with the provisions of the laws of Texas
relating to the examination of insurance companies and to comply
with the provisions of this Article and Articles 1.17 and 1.18 of
this Code, shall be made by the State Board of Insurance upon the
corporations or associations to be examined taking into
consideration annual premium receipts, and/or admitted assets that
are not attributable to 90 percent of pension plan contracts as
defined in Section 818(a) of the Internal Revenue Code of 1986 (26
U.S.C. Section 818(a)), and/or insurance in force; provided such
assessments shall be made and collected as follows: (1) expenses
attributable directly to a specific examination including
employees' salaries and expenses and expenses provided by Article
1.28 of this Code shall be collected at the time of examination;
(2) assessments calculated annually for each corporation or
association which take into consideration annual premium receipts,
and/or admitted assets that are not attributable to 90 percent of
pension plan contracts as defined in Section 818(a) of the Internal
Revenue Code of 1986 (26 U.S.C. Section 818(a)), and/or insurance
in force shall be assessed annually for each such corporation or
association. In computing the assessments, the board may not
consider insurance premiums for insurance contracted for by a state
or federal governmental entity to provide welfare benefits to
designated welfare recipients or contracted for in accordance with
or in furtherance of Title 2, Human Resources Code, or the federal
Social Security Act (42 U.S.C. Section 301 et seq.). The amount of
all examination and evaluation fees paid in each taxable year to the
State of Texas by an insurance carrier shall be allowed as a credit
on the amount of premium taxes due under this article. The
limitations provided by Sections 803.007(1) and (2)(B) of this code
for domestic insurance companies apply to foreign insurance
companies.
(c) Examiners and other personnel employed by the State Board of
Insurance when traveling on official state business related to the
examination of insurance companies outside this state shall be
reimbursed for the actual cost of transportation, lodging, meals,
subsistence expenses, and parking fees or shall be paid a per diem
rate established by the State Board of Insurance based on local
economic conditions. The State Board of Insurance shall establish
guidelines and procedures for the efficient and effective
administration of these travel payment procedures and shall
periodically revise and update these guidelines and procedures
including the maximum actual or per diem allowance.
(d) All sums collected by the State Board of Insurance provided in
this Article shall be deposited in the State Treasury to the credit
of the State Board of Insurance operating fund; and the salaries
and expenses of the actuaries and examiners, and all other expenses
relating to such examinations, shall be paid upon the certificate
of the State Board of Insurance by warrant of the Comptroller of
Public Accounts drawn upon such fund.
(e) If at any time it shall appear that additional pro rata
assessments are necessary to cover all of the expenses and
disbursements required by law and necessary to comply with this
Article and Articles 1.17 and 1.18 of this Code, the same shall be
made, and any surplus arising from any and all such assessments,
over and above such expenses and disbursements, shall be applied in
reduction of subsequent assessments.
(f) In case of an examination of a company not organized under the
laws of Texas, whether such examination is made by the Texas
authorities alone, or jointly with the insurance supervisory
authorities of another state or states, the expenses of such
examination due to Texas' participation therein shall be borne by
the company under examination. Payment of such cost shall be made
by the company upon presentation of itemized written statement by
the Commissioner of Insurance and shall consist of the examiners'
remuneration and expenses, and the other expenses of the State
Board of Insurance properly allocable to the examination. Payment
shall be made directly to the State Board of Insurance, and all
money collected by assessment on foreign companies for the cost of
examination shall be deposited in the State Treasury by the State
Board of Insurance to the credit of the State Board of Insurance
operating fund and shall be spent as provided by the General
Appropriations Act only on warrants issued by the Comptroller of
Public Accounts pursuant to duly certified requisitions of the
State Board of Insurance. The remuneration of examiners
participating in examinations of insurance company books or records
located in states other than Texas shall be fixed by the
Commissioner of Insurance based on the salary rate recommended by
the National Association of Insurance Commissioners or the
examiners' regular salary rate.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
826, ch. 307, Sec. 4; Acts 1979, 66th Leg., p. 568, ch. 262, Sec. 1,
eff. Aug. 27, 1979.
Amended by Acts 1983, 68th Leg., p. 3911, ch. 622, Sec. 16, eff.
Sept. 1, 1983; Acts 1985, 69th Leg., ch. 161, Sec. 2, eff. May 24,
1985; Acts 1987, 70th Leg. 2nd C.S., ch. 67, Sec. 7, eff. Aug. 4,
1987; Acts 1991, 72nd Leg., ch. 242, Sec. 11.50(a), eff. Sept. 1,
1991; Subsec. (b) amended by Acts 1993, 73rd Leg., ch. 685, Sec.
7.09, eff. Sept. 1, 1993; Subsec. (b) amended by Acts 2003, 78th
Leg., ch. 209, Sec. 2, eff. Jan. 1, 2004.
Art. 1.17. Appointment of Examiners and Actuaries by State Board of
Insurance; Salaries
The State Board of Insurance shall appoint a chief examiner and such
number of assistant examiners as it deems necessary for the purpose
of making examinations of insurance companies, corporations, or
associations at the expense of such companies, corporations, or
associations as are provided for by law. The State Board of
Insurance shall also appoint the number of actuaries it considers
necessary to advise it in connection with the performance of its
duties and for aid, advice, and counsel in connection with such
examinations. Such examiners and actuaries shall perform all the
duties relative to examinations. It is the purpose of this Article
and Articles 1.16 and 1.18 of this Code to provide for the
examination by the State Board of Insurance of all corporations,
firms, or persons engaged in the business of writing insurance of
any kind in this State whether now subject to the supervision of the
State Board of Insurance or not.
All such examiners and actuaries shall be employed subject to the
will of the State Board of Insurance and the number of such
examiners and actuaries may be increased or decreased from time to
time to suit the needs of the examining work.
Where the State Board of Insurance shall deem it advisable it may
commission any actuary of the Board, the chief examiner, or any
other examiner or employee of the Board, or any other person, to
conduct or assist in the examination of any company not organized
under the laws of Texas and allow them compensation as herein
provided, except that they may not be otherwise compensated during
the time they are assigned to such foreign company examinations.
Other than as provided herein, neither any actuary nor any examiner
of the State Board of Insurance may continue to serve as such if,
while holding such position, he directly or indirectly accepts from
any insurance company any employment or pay or compensation or
gratuity on account of any service rendered or to be rendered on any
account whatsoever.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
826, ch. 307, Sec. 5.
Amended by Acts 1983, 68th Leg., p. 3911, ch. 622, Sec. 16, eff.
Sept. 1, 1983.
Art. 1.17A. Legislative Intent as to Appointment or Employment of
Examiners and Actuaries
(a) The Legislature recognizes that experienced, highly qualified
examiners and actuaries are necessary for the department to monitor
and regulate effectively the solvency of insurers in this state. It
is the intent of the Legislature that the department, in appointing
or employing examiners or actuaries, select persons who have
substantial experience in financial matters relating to insurance
or other areas of financial activity that are compatible with the
business of insurance and who are recognized for the outstanding
quality of their work in relation to areas of responsibility
typically assigned to examiners and actuaries in the insurance
field.
(b) The Legislature pledges to provide to the department the
necessary funding to implement this article and to support the
department in its efforts to attract the highly qualified persons
necessary to fulfill regulatory responsibilities relating to
insurer solvency assigned to them under the insurance laws of this
state.
Added by Acts 1991, 72nd Leg., ch. 242, Sec. 1.15, eff. Sept. 1,
1991.
Art. 1.18. Oath of Examiners and Assistants
Each examiner and assistant examiner, before entering upon the
duties of his appointment shall take and file in the office of the
Secretary of State an oath to support the Constitution of this
State, to faithfully demean himself in office, to make fair and
impartial examinations, and that he will not accept as presents or
emoluments any pay, directly or indirectly, for the discharge of
his duty, other than the remuneration fixed and accorded to him by
law; and that he will not reveal the condition of, nor any
information secured in the course of any examination of any
corporation, firm or person examined by him, to anyone except the
Members of the State Board of Insurance, or their authorized
representative, or when required as witness in an administrative
hearing before the Board or the Commissioner or in Court.
In case any such examiner or assistant examiner shall knowingly
make any false report or give any information in violation of law
relative to any such examination of any corporation, firm or person
so examined, any such corporation, firm or person shall have a right
of action on a bond authorized under Chapter 653, Government Code,
for his injuries in a suit brought in the name of the State at the
relation of the injured party.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
826, ch. 307, Sec. 6.
Amended by Acts 1989, 71st Leg., ch. 1082, Sec. 2.07, eff. Sept. 1,
1989; Acts 2003, 78th Leg., ch. 285, Sec. 19, eff. Sept. 1, 2003.
Art. 1.19. In Case of Examination
The Board of Insurance Commissioners for the purpose of examination
authorized by law, has power either in person or by one or more
examiners by it commissioned in writing:
1. To require free access to all books and papers within this State
of any insurance companies, or the agents thereof, doing business
within this State.
2. To summon and examine any person within this State, under oath,
which it or any examiner may administer, relative to the affairs and
conditions of any insurance company.
3. To visit at its principal office, wherever situated, any
insurance company doing business in this State, for the purpose of
investigating its affairs and conditions, and shall revoke the
certificate of authority of any such company in this State refusing
to permit such examination. The reasonable expenses of all such
examination shall be paid by the company examined.
The Board may revoke or modify any certificate of authority issued
by it when any conditions prescribed by law for granting it no
longer exist.
The Board shall also have power to institute suits and
prosecutions, either by the Attorney General or such other
attorneys as the Attorney General may designate, for any violation
of the law of this State relating to insurance. No action shall be
brought or maintained by any person other than the Board for closing
up the affairs or to enjoin, restrain or interfere with the
prosecution of the business of any such insurance company organized
under the laws of this State.
Acts 1951, 52nd Leg., ch. 491. Amended by Acts 1955, 54th Leg., p.
826, ch. 307, Sec. 7.
Art. 1.20. Transfer of Securities by Board
No transfer by the Board of securities of any kind, in any way held
by it, shall be valid unless countersigned by the comptroller.
Acts 1951, 52nd Leg., ch. 491.
Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.02, eff. Sept. 1,
1997.
Art. 1.21. Duty of Comptroller
It is the duty of the comptroller:
1. To countersign any such transfer presented to him by the Board.
2. To keep a record of all transfers, stating the name of the
transferee, unless transferred in blank, and a description of the
security.
3. Upon countersigning, to advise by mail the company concerned,
the particulars of the transaction.
4. In his annual report to the Legislature to state the transfers
and the amount thereof, countersigned by him.
Acts 1951, 52nd Leg., ch. 491.
Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.03, eff. Sept. 1,
1997.
Art. 1.22. Free Access to Records
To verify the correctness of records, the Board shall be entitled to
free access to the comptroller's records, required by the preceding
article, and the comptroller shall be entitled to free access to the
books and other documents of the Insurance Department relating to
securities held by the Board.
Acts 1951, 52nd Leg., ch. 491.
Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 11.04, eff. Sept. 1,
1997.
Art. 1.31. Refunds
This article applies to any tax, fee, or other sum of money,
including any interest or penalty, collected or administered by the
State Board of Insurance. When the State Board of Insurance
determines that any person, firm, or corporation has through
mistake of law or fact overpaid or paid erroneously any amount to
the state on any tax, fee, or other sum of money, including any
interest or penalty, collected or administered by the State Board
of Insurance, the State Board of Insurance may refund such payment
by warrant on the state treasury from any funds appropriated for
such purpose.
Added by Acts 1979, 66th Leg., p. 191, ch. 100, Sec. 1, eff. May 2,
1979.
Amended by Acts 1991, 72nd Leg., ch. 641, Sec. 22, eff. Sept. 1,
1991.
Art. 1.31A. State Board of Insurance Operating Fund
Definition
Sec. 1. In this article, "fund" means the Texas Department of
Insurance operating fund.
Creation of Fund
Sec. 2. The Texas Department of Insurance operating fund is a fund
in the State Treasury.
Deposit of Revenues in Fund
Sec. 3. Money received by the commissioner or comptroller from
taxes and fees that are required by this code to be credited to the
fund and money received by the commissioner from sales,
reimbursements, and fees authorized by law other than this code
shall be deposited in the fund.
Certain Money Included
Sec. 4. The money received from sales, reimbursements, and other
fees authorized by law other than this code includes money received
from the following:
(1) fees received by the department for providing copies of public
records under Chapter 552, Government Code;
(2) money or credits received by the department for surplus or
salvage property under Subchapters C and D, Chapter 2175,
Government Code ;
(3) money received by the department from the sale of publications
and other printed material under Sections 2052.301 and 2052.302,
Government Code;
(4) receipts to the department from miscellaneous transactions and
sources under Section 403.011 or 403.012, Government Code, as
amended;
(5) money received by the department from charges for postage spent
to serve legal process under Section 17.025, Civil Practice and
Remedies Code;
