TX
Texas Senate Bill SB148

Texas 2009 - 81st Regular

Texas Senate Bill SB148 Compare Versions

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11 81R2184 PB-D
22 By: Ellis S.B. No. 148
33
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55 A BILL TO BE ENTITLED
66 AN ACT
77 relating to required community investment by certain insurers;
88 providing administrative and civil penalties.
99 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1010 SECTION 1. Subtitle B, Title 4, Insurance Code, is amended
1111 by adding Chapter 428 to read as follows:
1212 CHAPTER 428. COMMUNITY INVESTMENT BY INSURERS
1313 SUBCHAPTER A. GENERAL PROVISIONS
1414 Sec. 428.001. LEGISLATIVE FINDINGS; PURPOSE. (a) The
1515 legislature finds that insurers are a major source of investment
1616 capital in this state. Many low-income communities in this state,
1717 both rural and urban, need greater access to investment capital for
1818 purposes such as small business and community economic development
1919 and affordable housing rehabilitation and construction. Financial
2020 institutions, another major source of investment capital in this
2121 state, are required by the Community Reinvestment Act of 1977 (12
2222 U.S.C. Sec. 2901 et seq.) to address the credit needs of low-income
2323 communities in the areas they serve. Investments under that Act
2424 have helped revitalize low-income communities.
2525 (b) The legislature further finds that insurers collect
2626 premiums from individuals and families throughout this state,
2727 including low-income communities. These premiums are part of an
2828 insurer's investable assets. Because insurance companies are
2929 separately regulated by each state, there has been no national
3030 requirement that a portion of insurers' investments be made in
3131 low-income communities. Thus, insurers have not invested
3232 sufficiently in low-income communities in this state. The lack of
3333 investment in low-income communities has inhibited economic growth
3434 and stability in this state and contributed to their overall
3535 economic decline. Insurers that write a significant amount of
3636 coverage in this state should be required to invest a part of their
3737 total investable assets in low-income communities. Those insurers
3838 that generate an average annual written premium of at least $15
3939 million in this state have significant investable assets and have a
4040 continuing and affirmative obligation to invest in low-income
4141 communities of this state in such a way that those communities will
4242 be positively impacted. Investments authorized under this code or
4343 by rules adopted under this code are available to insurers in
4444 low-income communities. Those investments are overlooked business
4545 opportunities that offer competitive rates of return and do not
4646 compromise the financial interests of shareholders and
4747 policyholders.
4848 (c) The purpose of this chapter is to require insurers to
4949 make safe and sound investments in low-income communities as an
5050 appropriate condition of maintaining a certificate of authority to
5151 engage in the business of insurance in this state.
5252 Sec. 428.002. DEFINITIONS. In this chapter:
5353 (1) "Area median income" means the area median income
5454 determined for an area under Section 2306.123, Government Code.
5555 (2) "Community development corporation" means a
5656 private, nonprofit corporation organized to foster economic growth
5757 and revitalization, create small businesses, or develop affordable
5858 housing in a defined neighborhood or for a targeted population.
5959 (3) "Community development credit union" means a
6060 credit union whose basic purpose is the stimulation of economic
6161 development activities and community revitalization efforts aimed
6262 at benefiting the community it serves, a majority of which are
6363 low-income or very low income residents.
6464 (4) "Community development loan" means a line of
6565 credit, commitment, or letter of credit for affordable housing and
6666 economic development needs that are not being met by the private
6767 market.
6868 (5) "Community development financial institution"
6969 means a person, other than an individual or a governmental entity,
7070 that:
7171 (A) has a primary mission of promoting community
7272 development;
7373 (B) serves an investment area or targeted
7474 population;
7575 (C) provides development services in conjunction
7676 with equity investments or loans, directly or through a subsidiary
7777 or affiliate; and
7878 (D) maintains, through representation on its
7979 governing board or otherwise, accountability to residents of its
8080 investment area or targeted populations.
8181 (6) "Direct written premiums" means the gross amount
8282 of premiums paid by policyholders for issuance of policies of
8383 insurance insuring risks located in this state. The term does not
8484 include premiums for reinsurance.
8585 (7) "Economically targeted investment" means an
8686 investment made by an insurer in a low-income or very low income
8787 community that benefits low-income or very low income individuals
8888 and has a positive impact on that community. The term includes:
8989 (A) equity or debt investments:
9090 (i) made through financial intermediaries,
9191 including community development financial institutions, community
9292 development corporations, loan pools or consortia, microenterprise
9393 development organizations, minority- and women-owned financial
9494 institutions, and low-income or community development credit
9595 unions that primarily lend or facilitate lending in low-income and
9696 very low income areas or to low-income and very low income
9797 individuals in order to promote community economic development or
9898 affordable housing development;
9999 (ii) made in businesses or farms with gross
100100 annual revenues less than or equal to $1 million;
101101 (iii) made in organizations promoting small
102102 and microenterprise businesses;
103103 (iv) made in housing affordable to
104104 low-income and very low income households and in community economic
105105 development in low-income and very low income communities; or
106106 (v) made in loan guaranty funds for
107107 low-income or very low income housing;
108108 (B) community development loans;
109109 (C) investments in projects eligible for the
110110 federal low-income housing tax credit;
111111 (D) investments in state and municipal
112112 obligations that specifically support community economic
113113 development or affordable housing to benefit low-income and very
114114 low income individuals or communities;
115115 (E) purchases of loans for multifamily
116116 affordable housing on the secondary market; and
117117 (F) grants or deferred interest loans to
118118 nonprofit organizations engaging in any of the following
119119 activities:
120120 (i) affordable rental housing
121121 rehabilitation and new construction;
122122 (ii) supporting or developing facilities
123123 that promote community economic development in low-income and very
124124 low income areas or for low-income and very low income individuals,
125125 such as day-care facilities;
126126 (iii) activities essential to the capacity
127127 of low-income and very low income individuals or communities to
128128 utilize credit or sustain economic development; or
129129 (iv) small business or microenterprise
130130 development.
131131 (8) "Insurer" means any entity authorized to engage in
132132 the business of insurance in this state as an insurance company or
133133 authorized to provide insurance in this state, including:
134134 (A) a capital stock insurance company;
135135 (B) a mutual insurance company;
136136 (C) a title insurance company;
137137 (D) a fraternal benefit society;
138138 (E) a local mutual aid association;
139139 (F) a statewide mutual assessment company;
140140 (G) a county mutual insurance company;
141141 (H) a Lloyd's plan;
142142 (I) a reciprocal or interinsurance exchange;
143143 (J) a stipulated premium company;
144144 (K) a group hospital service company;
145145 (L) a health maintenance organization;
146146 (M) a farm mutual insurance company;
147147 (N) a risk retention group; and
148148 (O) an eligible surplus lines insurer.
149149 (9) "Low income" means, in the case of an individual,
150150 an individual income, or, in the case of a geographic area, a median
151151 family income that is at least 50 percent and less than 80 percent
152152 of the adjusted area median income, adjusted for family size and
153153 revised annually.
154154 (10) "Microenterprise" means a commercial business
155155 enterprise with 10 or fewer employees, one or more of whom owns the
156156 enterprise.
157157 (11) "Small business" means a commercial business
158158 enterprise with gross annual revenues that do not exceed $1
159159 million.
160160 (12) "Very low income" means, in the case of an
161161 individual, an individual income, or, in the case of a geographic
162162 area, a median family income that is less than 50 percent of the
163163 adjusted area median income, adjusted for family size and revised
164164 annually.
165165 [Sections 428.003-428.050 reserved for expansion]
166166 SUBCHAPTER B. MANDATORY COMMUNITY INVESTMENT
167167 Sec. 428.051. MINIMUM INVESTMENT PERCENTAGE. For purposes
168168 of this subchapter, the minimum investment percentage for each
169169 insurer admitted to engage in the business of insurance in this
170170 state and authorized to write life, health, or accident insurance
171171 in this state is one percent, and for each insurer admitted to
172172 engage in the business of insurance in this state and authorized to
173173 write insurance in this state other than life, health, or accident
174174 policies is one-half of one percent.
175175 Sec. 428.052. METHOD OF INVESTMENT. Economically targeted
176176 investments may be made directly by insurers, through
177177 intermediaries, or through partnerships, consortia, or other
178178 entities organized by insurers or other financial institutions.
179179 Sec. 428.053. ANNUAL REQUIRED INVESTMENT. (a) An admitted
180180 insurer that wrote at least $15 million of direct written premiums
181181 in the 2009 calendar year shall invest in economically targeted
182182 investments during the 2010 calendar year not less than an amount
183183 equal to the applicable investment percentage prescribed by Section
184184 428.051 multiplied by the total of its 2009 calendar year direct
185185 written premiums.
186186 (b) An admitted insurer that wrote an aggregate of at least
187187 $30 million of direct written premiums in the 2009 and 2010 calendar
188188 years shall invest in economically targeted investments during the
189189 2011 calendar year not less than an amount equal to the applicable
190190 investment percentage prescribed by Section 428.051 multiplied by
191191 the total of its aggregate 2009 and 2010 calendar years' direct
192192 written premiums. Economically targeted investments made during
193193 the 2010 calendar year under Subsection (a) may be counted toward
194194 that requirement.
195195 (c) An admitted insurer that has written an aggregate of at
196196 least $45 million of direct written premiums in the three preceding
197197 calendar years shall have economically targeted investments during
198198 the 2012 calendar year and each subsequent calendar year in an
199199 amount equal to not less than the applicable investment percentage
200200 prescribed by Section 428.051 multiplied by the total of its
201201 aggregate direct written premiums for the preceding three calendar
202202 years.
203203 Sec. 428.054. REDUCTION IN REQUIRED INVESTMENT AMOUNT. The
204204 amount that an insurer is required to invest under Section 428.053
205205 shall be reduced by $1 for each $1 that the insurer invests in
206206 economically targeted investments that are:
207207 (1) loans to or equity investments in community
208208 development corporations engaged in promoting small or
209209 microenterprise business opportunities for low-income or very low
210210 income individuals through loans or equity investments; or
211211 (2) loans to or equity investments in small businesses
212212 or farms with gross annual revenues of less than $1 million.
213213 Sec. 428.055. EXEMPTION; VALUATION OF INVESTMENTS. (a) An
214214 insurer is not required to make economically targeted investments
215215 that are:
216216 (1) of medium investment grade; and
217217 (2) rated below 3, P3, or PSF3 by the Securities
218218 Valuation Office of the National Association of Insurance
219219 Commissioners.
220220 (b) For the purpose of this chapter, investments shall be
221221 valued at actual cost.
222222 Sec. 428.056. INSURER ANNUAL COMMUNITY INVESTMENT REPORT.
223223 (a) Each insurer shall submit to the department an annual community
224224 investment report that states:
225225 (1) the type, number, and dollar amount of
226226 economically targeted investments;
227227 (2) the location by address and census tract of where
228228 economically targeted investments are invested; and
229229 (3) a computation of the value of the investments.
230230 (b) The insurer shall provide the information required in
231231 the community investment report both in the aggregate and
232232 separately for low-income and very low income communities.
233233 (c) The insurer may make the community investment report
234234 separately or as part of another annual report required to be
235235 submitted to the department.
236236 (d) The commissioner may require additional information as
237237 is necessary to evaluate the investment performance of insurers and
238238 compliance with this chapter.
239239 Sec. 428.057. COMMUNITY INVESTMENT PLAN. (a) The board of
240240 directors or other governing body of each insurer subject to this
241241 chapter shall:
242242 (1) adopt an annual community investment plan; and
243243 (2) file a copy of the plan with the department in the
244244 manner prescribed by rules adopted by the commissioner.
245245 (b) A community investment plan must contain, at a minimum:
246246 (1) a description of the specific community
247247 development needs to be addressed by the insurer's economically
248248 targeted investments;
249249 (2) a list of the geographic areas in which the
250250 insurer intends to make economically targeted investments;
251251 (3) a list of the specific types of economically
252252 targeted investments the insurer intends to make;
253253 (4) an assessment of the insurer's previous efforts in
254254 making economically targeted investments;
255255 (5) an identification of any obstacles to making
256256 economically targeted investments;
257257 (6) strategies for overcoming any identified
258258 obstacles to making economically targeted investments that the
259259 insurer intends to take; and
260260 (7) a statement of the insurer's community investment
261261 goals for the subsequent calendar year.
262262 [Sections 428.058-428.100 reserved for expansion]
263263 SUBCHAPTER C. POWERS AND DUTIES OF COMMISSIONER AND DEPARTMENT
264264 Sec. 428.101. RULES. The commissioner shall adopt rules as
265265 necessary to implement this chapter.
266266 Sec. 428.102. INFORMATION AVAILABLE ON DEPARTMENT INTERNET
267267 WEBSITE. (a) The commissioner shall biennially provide
268268 information on the department's Internet website regarding the
269269 aggregate insurer community investments made under this chapter.
270270 The information shall identify insurers that make investments that
271271 are innovative, responsive to community needs, not routinely
272272 provided by insurers, or have a high degree of positive impact on
273273 the economic welfare of low-income or very low income individuals,
274274 families, or communities in urban or rural areas of this state.
275275 (b) The department shall also biennially provide
276276 information on the department's Internet website regarding:
277277 (1) the aggregate amount of government obligations,
278278 including all obligations issued by this state or a political
279279 subdivision of this state, that is purchased by insurers as
280280 reported to the department and the National Association of
281281 Insurance Commissioners in the filing described by Section 802.056;
282282 and
283283 (2) the aggregate amount of identified investments
284284 made in this state, as reported to the department and the National
285285 Association of Insurance Commissioners in the filing described by
286286 Section 802.056.
287287 [Sections 428.103-428.150 reserved for expansion]
288288 SUBCHAPTER D. ENFORCEMENT AND PENALTIES
289289 Sec. 428.151. SHOW CAUSE ORDER. (a) If the commissioner
290290 has reason to believe that an insurer has failed to adequately make
291291 economically targeted investments in accordance with this chapter,
292292 the commissioner shall issue an order to show cause that contains:
293293 (1) a statement of the charges against the insurer;
294294 (2) a statement of the insurer's potential liability
295295 under Section 428.153; and
296296 (3) a notice of a hearing, to be held at a time and
297297 place fixed in the notice, to determine whether the commissioner is
298298 to issue an order that the insurer pay any penalty assessed under
299299 Section 428.153 and to cease and desist from further noncompliance
300300 with this chapter.
301301 (b) A hearing under Subsection (a) shall be conducted in
302302 accordance with Chapter 2001, Government Code.
303303 (c) If, after hearing, the commissioner determines that the
304304 charges are justified, the commissioner shall issue an order
305305 specifying:
306306 (1) the penalty that the insurer shall pay under
307307 Section 428.153;
308308 (2) remedial actions as are appropriate to require
309309 compliance; and
310310 (3) that the insurer shall cease and desist from
311311 engaging in investment practices that are found to be
312312 discriminatory or not in compliance with this chapter.
313313 (d) An insurer affected by the commissioner's order may
314314 appeal the decision of the commissioner in the manner provided by
315315 Subchapter D, Chapter 36.
316316 Sec. 428.152. PETITION BY INTERESTED PERSON. Any
317317 interested person may file a petition with the commissioner that
318318 alleges that an insurer has failed to adequately make economically
319319 targeted investments in accordance with this chapter to seek the
320320 issuance under Section 428.151 of an order to show cause directed at
321321 that insurer.
322322 Sec. 428.153. ADMINISTRATIVE AND CIVIL PENALTIES. (a) An
323323 insurer determined to have violated this chapter is subject to
324324 administrative penalties in the manner provided by Chapter 84.
325325 Notwithstanding Section 84.022:
326326 (1) for the first violation, the commissioner may set
327327 the penalty in an amount not to exceed $50,000 for each year in each
328328 three-year period during which the insurer was not in compliance;
329329 and
330330 (2) for the second or a subsequent violation, the
331331 commissioner may set the penalty in an amount not to exceed $100,000
332332 for each year in each three-year period during which the insurer was
333333 not in compliance.
334334 (b) In addition to an administrative penalty assessed under
335335 Subsection (a), an insurer who fails to comply with a final order of
336336 the commissioner under this chapter is liable to the state for a
337337 civil penalty in an amount not to exceed $150,000.
338338 (c) A penalty under this section may be assessed in addition
339339 to any other penalties provided by law.
340340 Sec. 428.154. SUSPENSION OR REVOCATION OF CERTIFICATE OF
341341 AUTHORITY. In addition to other penalties provided by this
342342 chapter, the commissioner may suspend or revoke the certificate of
343343 authority of an insurer who fails to comply with an order issued
344344 under Section 428.151 and may suspend or revoke, wholly or partly,
345345 the certificate of authority of an insurer who receives more than
346346 one order to comply with this chapter.
347347 SECTION 2. Not later than December 31, 2009, the
348348 commissioner of insurance shall issue bulletins adopting
349349 guidelines for the implementation of Chapter 428, Insurance Code,
350350 as added by this Act. The bulletins may specify or define
351351 appropriate economically targeted investments.
352352 SECTION 3. An insurer subject to Chapter 428, Insurance
353353 Code, as added by this Act, is not required to make community
354354 investments as required by that chapter until the calendar year
355355 beginning January 1, 2010.
356356 SECTION 4. This Act takes effect immediately if it receives
357357 a vote of two-thirds of all the members elected to each house, as
358358 provided by Section 39, Article III, Texas Constitution. If this
359359 Act does not receive the vote necessary for immediate effect, this
360360 Act takes effect September 1, 2009.