| 1 | 1 | | 2009S0040-2 01/27/09 |
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| 2 | 2 | | By: McCall H.B. No. 2006 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to authorizing the commissioner of insurance to further |
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| 8 | 8 | | regulate the financial security and operations of certain insurance |
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| 9 | 9 | | companies through local districts or chapters. |
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| 10 | 10 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 11 | 11 | | SECTION 1. Section 912.056, Insurance Code, is amended by |
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| 12 | 12 | | adding Subsections (d), (e), and (f) to read as follows: |
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| 13 | 13 | | (d) A company organized and operating under this chapter |
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| 14 | 14 | | that historically appointed managing general agencies, created |
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| 15 | 15 | | districts, or organized local chapters and that cedes 90 percent or |
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| 16 | 16 | | more of its direct and assumed risks to one or more reinsurers may |
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| 17 | 17 | | appoint and contract with a managing general agent in accordance |
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| 18 | 18 | | with the provisions of this code to manage a portion of its business |
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| 19 | 19 | | independent of all other business of the company. The company shall |
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| 20 | 20 | | file, for each managing general agent, district, or local chapter |
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| 21 | 21 | | program, the rating information required by the commissioner by |
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| 22 | 22 | | rule. Each managing general agent, district, or local chapter |
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| 23 | 23 | | program shall be treated as a separate insurer for the purposes of |
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| 24 | 24 | | Chapters 544, 2251, 2253, and 2254. |
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| 25 | 25 | | (e) Notwithstanding any other provision of this code, a |
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| 26 | 26 | | company operating under Subsection (d) that utilizes more than one |
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| 27 | 27 | | rate filing per line of business shall maintain a minimum amount of |
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| 28 | 28 | | unencumbered surplus or a minimum amount of guaranty fund and |
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| 29 | 29 | | unencumbered surplus equal to the greater of $2 million or five |
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| 30 | 30 | | percent of the company's net recoverable for reinsurance after |
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| 31 | 31 | | taking full credit against the recoverable as otherwise permitted |
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| 32 | 32 | | for: |
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| 33 | 33 | | (1) premiums payable to cedents net of ceding |
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| 34 | 34 | | commission due the company; |
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| 35 | 35 | | (2) collateral held as required by Section 493.104, |
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| 36 | 36 | | letters of credit, and security trusts that secure the collection |
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| 37 | 37 | | of the reinsurance; |
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| 38 | 38 | | (3) cut-through policy endorsements approved by the |
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| 39 | 39 | | commissioner; and |
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| 40 | 40 | | (4) reinsurance through reinsurance companies whose |
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| 41 | 41 | | financial strength is rated A or better by the A. M. Best Company, |
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| 42 | 42 | | Incorporated. |
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| 43 | 43 | | (f) The commissioner by rule shall provide a transition |
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| 44 | 44 | | period for insurance companies subject to Subsection (e) to meet |
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| 45 | 45 | | the requirements of that subsection and for the pro rata |
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| 46 | 46 | | elimination of any deficiencies in the amounts required under that |
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| 47 | 47 | | subsection. The transition period must be: |
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| 48 | 48 | | (1) not less than five years for companies that have a |
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| 49 | 49 | | market share of 10 percent or more; and |
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| 50 | 50 | | (2) not less than 10 years for companies that have a |
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| 51 | 51 | | market share of less than 10 percent. |
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| 52 | 52 | | SECTION 2. This Act takes effect September 1, 2009. |
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