H.B. No. 2604
AN ACT
relating to unencumbered assets held by title agents.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2651.012(a)(2), Insurance Code, is
amended to read as follows:
(2) "Unencumbered assets" means:
(A) cash or cash equivalents;
(B) liquid assets that have a readily
determinable market value and that do not have any lien against
them;
(C) real estate, in excess of any encumbrances;
(D) investments, such as mutual funds,
certificates of deposit, and stocks and bonds;
(E) a surety bond, the form and content of which
shall be prescribed by the commissioner in accordance with this
code;
(F) a deposit made in accordance with Section
2651.102; [and]
(G) a letter of credit that meets the
requirements of Section 493.104(b)(2)(C); and
(H) a solvency account that meets the
requirements of Section 2651.0121.
SECTION 2. Section 2651.012(b), Insurance Code, is amended
to read as follows as follows:
(b) The unencumbered assets required under this section are
reserves for contingencies. The reserves must be deducted from
premiums for purposes of proceedings conducted under Subchapter D,
Chapter 2703. The reserves may only be spent or released:
(1) as permitted by the commissioner if the agent is
declared impaired;
(2) if the agent merges or consolidates with another
agent who maintains the amount of unencumbered assets that would be
required for the survivor of the merger or consolidation;
(3) if the agent surrenders the agent's license under
Section 2651.201 [and the rules adopted under that section]; [or]
(4) if the agent is liquidated; or
(5) if the agent's license is revoked.
SECTION 3. Subchapter A, Chapter 2651, Insurance Code, is
amended by adding Section 2651.0121 to read as follows:
Sec. 2651.0121. SOLVENCY ACCOUNT. (a) An agent may
maintain a solvency account to accrue and hold unencumbered assets
as provided by this section.
(b) An account under this section must be:
(1) in a financial institution in this state that is
insured by an agency of the United States;
(2) accessible only to the department, on order of the
commissioner; and
(3) audited in the same manner provided for trust
funds by Section 2651.151.
(c) Subject to Subsection (d), an account under this section
may be established by an initial deposit in an amount less than the
amount provided by Section 2651.012(c).
(d) An account established by an initial deposit of an
amount less than the amount provided by Section 2651.012(c) must be
funded with a minimum deposit in the amount for each policy of title
insurance issued by the agent that is equal to the greater of $5 or
one percent of the agent's portion of the retained premium received
by the agent rounded to the nearest whole dollar.
(e) Deposits to the account must be made at least quarterly
and must be made from and based on the agent's portion of retained
premiums collected during the calendar quarter during which
premiums were collected.
(f) Interest that accrues in an account the principal
balance of which is less than the amount provided by Section
2651.012(c) must be retained in the account. Interest that accrues
in an account the principal balance of which is greater than the
amount provided by Section 2651.012(c) shall be paid to the agent
maintaining the account.
(g) The commissioner may issue an order to access or release
funds held in an account under this section if any of the events
described by Section 2651.012(b) occur.
(h) The commissioner by rule shall adopt procedures and
requirements for the release, transfer, or expenditure of the funds
held in an account. The rules must establish the procedures and
requirements by which the department shall account for any
expenditures that the department makes from an account or funds
transferred by the department to a third party.
(i) If an agent or an agent's principal office voluntarily
ceases to engage in business, surrenders the agent's license, and
liquidates the agent's assets, the agent may apply to the
department in a form prescribed by the commissioner by rule for the
release of the agent's solvency account.
(j) Not later than the 60th day after the date the
department receives an application under Subsection (i), provided
that the title agent complied with all applicable rules adopted
under Subsection (h), the commissioner shall enter an order
authorizing the financial institution in which the solvency account
is held to release all or part of the account balance to the agent or
the agent's principal office. If the commissioner does not enter
the order within that 60-day period, the application is denied.
(k) An agent may appeal an order of the commissioner or
denial of an application without an order by filing a petition in a
district court of Travis County to seek injunctive or other relief
against the commissioner.
(l) An account established, funded, and maintained as
provided by this section complies with the requirement for
maintenance of unencumbered assets under Section 2651.012(c),
regardless of whether the amount required by that section is fully
accrued. The amount required by Section 2651.012(c) may be accrued
in an account as provided by this section according to the schedule
established by Section 2651.012(g) or as provided by the
commissioner by rule under Section 2651.012(j).
(m) In a home office issue transaction in which a title
insurance company issues a policy of title insurance, an agent who
closes the transaction and remits premium to the title insurance
company shall make the deposit required by this section. An agent
who otherwise participates in a home office issue transaction but
does not close the transaction is not required to make a deposit
under this section.
SECTION 4. Section 2651.158, Insurance Code, is amended to
read as follows:
Sec. 2651.158. CERTIFICATION OF UNENCUMBERED ASSETS. (a)
Unless the agent has elected to make a deposit with the department
under Section 2651.012(f), the annual audit of escrow accounts must
be accompanied by a certification by the title insurance agent or
direct operation [a certified public accountant] that the title
insurance agent has the appropriate unencumbered assets in excess
of liabilities, exclusive of the value of its abstract plants, as
required by Section 2651.012.
(b) The commissioner by rule shall establish[:
[(1) a procedure to be used to determine the value of
categories of assets; and
[(2)] the method by which the certification required
by this section must be made, which shall not include an audit of
operating accounts or a certification by a certified public
accountant.
SECTION 5. As soon as practicable after the effective date
of this Act, but not later than January 1, 2012, the commissioner of
insurance shall promulgate rules and forms governing the operation
of a solvency account under Section 2651.0121, Insurance Code, as
added by this Act.
SECTION 6. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2011.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2604 was passed by the House on May 5,
2011, by the following vote: Yeas 144, Nays 2, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 2604 on May 24, 2011, by the following vote: Yeas 142, Nays 0,
2 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2604 was passed by the Senate, with
amendments, on May 21, 2011, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor