| 1 | 1 | | H.B. No. 2449 |
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| 2 | 2 | | |
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| 3 | 3 | | |
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| 4 | 4 | | AN ACT |
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| 5 | 5 | | relating to requirements for county mutual insurance companies. |
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| 6 | 6 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 7 | 7 | | SECTION 1. Section 822.205(a), Insurance Code, is amended |
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| 8 | 8 | | to read as follows: |
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| 9 | 9 | | (a) Except as provided by Section 912.308, this [This] |
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| 10 | 10 | | section applies only to an insurance company that: |
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| 11 | 11 | | (1) writes insurance only in this state; and |
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| 12 | 12 | | (2) is not required by law to have capital stock. |
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| 13 | 13 | | SECTION 2. Section 912.308(b), Insurance Code, is amended |
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| 14 | 14 | | to read as follows: |
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| 15 | 15 | | (b) Except as provided by Section 912.056, a [A] county |
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| 16 | 16 | | mutual insurance company is subject to Subchapter B, Chapter 404, |
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| 17 | 17 | | and Sections 822.203, [822.205,] 822.210, and 822.212. |
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| 18 | 18 | | SECTION 3. Section 912.056, Insurance Code, is amended by |
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| 19 | 19 | | adding Subsections (d), (e), (f), and (g) to read as follows: |
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| 20 | 20 | | (d) A company organized and operating under this chapter |
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| 21 | 21 | | that, as of September 1, 2001, and continuously thereafter, |
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| 22 | 22 | | appointed managing general agents, created districts, or organized |
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| 23 | 23 | | local chapters to manage a portion of the company's business |
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| 24 | 24 | | independent of all other business of the company may continue to |
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| 25 | 25 | | operate in that manner and may appoint and contract with one or more |
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| 26 | 26 | | managing general agents in accordance with this code only if the |
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| 27 | 27 | | company: |
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| 28 | 28 | | (1) cedes 85 percent or more of the company's direct |
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| 29 | 29 | | and assumed risks to one or more reinsurers; and |
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| 30 | 30 | | (2) has a private passenger automobile insurance |
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| 31 | 31 | | business: |
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| 32 | 32 | | (A) with a market share of not greater than five |
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| 33 | 33 | | percent; or |
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| 34 | 34 | | (B) that is predominantly nonstandard. |
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| 35 | 35 | | (e) A company described by Subsection (d) shall file, for |
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| 36 | 36 | | each managing general agent, district, or local chapter program, |
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| 37 | 37 | | the rating information required by the commissioner by rule. Each |
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| 38 | 38 | | managing general agent, district, or local chapter program shall be |
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| 39 | 39 | | treated as a separate insurer for the purposes of Chapters 544, |
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| 40 | 40 | | 2251, 2253, and 2254. |
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| 41 | 41 | | (f) Notwithstanding any other provision of this code, a |
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| 42 | 42 | | company operating under Subsection (d) that cedes 85 percent or |
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| 43 | 43 | | more of the company's direct and assumed risks to one or more |
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| 44 | 44 | | nonaffiliated reinsurers shall maintain unencumbered surplus, or |
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| 45 | 45 | | guaranty fund and unencumbered surplus, equal to the greater of $2 |
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| 46 | 46 | | million or five percent of the company's recoverable for |
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| 47 | 47 | | reinsurance after taking full credit against the recoverable as |
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| 48 | 48 | | otherwise permitted for: |
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| 49 | 49 | | (1) premium payable to ceding insurers, net of any |
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| 50 | 50 | | ceding commission due the company; |
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| 51 | 51 | | (2) collateral held as required by Section 493.104, |
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| 52 | 52 | | letters of credit, and security trusts that secure the collection |
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| 53 | 53 | | of the reinsurance; and |
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| 54 | 54 | | (3) reinsurance through reinsurers whose financial |
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| 55 | 55 | | strength is rated "A" or better by the A. M. Best Company, |
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| 56 | 56 | | Incorporated, or another nationally recognized statistical rating |
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| 57 | 57 | | organization acceptable to the commissioner. |
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| 58 | 58 | | (g) The commissioner by rule shall adopt a transition period |
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| 59 | 59 | | for insurance companies subject to Subsection (f) to meet the |
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| 60 | 60 | | requirements of that subsection and for the pro rata elimination of |
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| 61 | 61 | | any deficiencies in the amounts required under that subsection. |
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| 62 | 62 | | The transition period adopted under this subsection must be for a |
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| 63 | 63 | | period of not less than five years. |
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| 64 | 64 | | SECTION 4. This Act takes effect September 1, 2009. |
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| 65 | 65 | | ______________________________ ______________________________ |
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| 66 | 66 | | President of the Senate Speaker of the House |
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| 67 | 67 | | I certify that H.B. No. 2449 was passed by the House on April |
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| 68 | 68 | | 9, 2009, by the following vote: Yeas 148, Nays 0, 1 present, not |
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| 69 | 69 | | voting. |
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| 70 | 70 | | ______________________________ |
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| 71 | 71 | | Chief Clerk of the House |
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| 72 | 72 | | I certify that H.B. No. 2449 was passed by the Senate on May |
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| 73 | 73 | | 26, 2009, by the following vote: Yeas 31, Nays 0. |
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| 74 | 74 | | ______________________________ |
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| 75 | 75 | | Secretary of the Senate |
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| 76 | 76 | | APPROVED: _____________________ |
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| 77 | 77 | | Date |
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| 78 | 78 | | _____________________ |
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| 79 | 79 | | Governor |
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