S.B. No. 322
AN ACT
relating to certain requirements for reinsurance contracts
covering, and to certain restrictions regarding, title insurance
policies issued in this state.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter A, Chapter 2502, Insurance Code, is
amended by adding Section 2502.006 to read as follows:
Sec. 2502.006. CERTAIN EXTRA HAZARDOUS COVERAGES
PROHIBITED. (a) A title insurance company may not insure against
loss or damage sustained by reason of any claim that under federal
bankruptcy, state insolvency, or similar creditor's rights laws the
transaction vesting title in the insured as shown in the policy or
creating the lien of the insured mortgage is:
(1) a preference or preferential transfer under 11
U.S.C. Section 547;
(2) a fraudulent transfer under 11 U.S.C. Section 548;
(3) a transfer that is fraudulent as to present and
future creditors under Section 24.005, Business & Commerce Code, or
a similar law of another state; or
(4) a transfer that is fraudulent as to present
creditors under Section 24.006, Business & Commerce Code, or a
similar law of another state.
(b) The commissioner may by rule designate coverages that
violate this section. It is not a defense against a claim that a
title insurance company has violated this section that the
commissioner has not adopted a rule under this subsection.
(c) Title insurance issued in or on a form prescribed by the
commissioner shall be considered to comply with this section.
(d) Nothing in this section prohibits title insurance with
respect to liens, encumbrances, or other defects to title to land
that:
(1) appear in the public records before the date on
which the contract of title insurance is made;
(2) occur or result from transactions before the
transaction vesting title in the insured or creating the lien of the
insured mortgage; or
(3) result from failure to timely perfect or record
any instrument before the date on which the contract of title
insurance is made.
(e) A title insurance company may not engage in the business
of title insurance in this state if the title insurance company
provides insurance of the type prohibited by Subsection (a)
anywhere in the United States, except to the extent that the laws of
another state require the title insurance company to provide that
type of insurance.
SECTION 2. Section 2551.302, Insurance Code, is amended to
read as follows:
Sec. 2551.302. REQUIREMENTS FOR REINSURING POLICIES. A
title insurance company may reinsure any of its policies and
contracts issued on real property located in this state or on
policies and contracts issued in this state under Chapter 2751, if:
(1) the reinsuring title insurance company is
authorized to engage in business in this state under this title; or
[and]
(2) the title insurance company acquires reinsurance
in accordance with Section 2551.305 [the department first approves
the form of the reinsurance contract].
SECTION 3. Section 2551.305, Insurance Code, is amended to
read as follows:
Sec. 2551.305. CERTAIN REINSURANCE ALLOWED.
(a) Notwithstanding any other provision of this subchapter, a
title insurance company may acquire reinsurance on an individual
policy or facultative basis from a title insurance company not
authorized to engage in the business of title insurance in this
state if:
(1) the title insurance company from which the
reinsurance is acquired:
(A) has a combined capital and surplus of at
least $20 million as stated in the company's most recent annual
statement preceding the acceptance of reinsurance; and
(B) is domiciled in another state and is
authorized to engage in the business of title insurance in one or
more states; and
(2) the title insurance company acquiring reinsurance
gives written notice to the department at least 30 days before
acquiring the reinsurance, and the commissioner does not, before
the expiration of the 30-day period and on the ground that the
transaction may result in a hazardous financial condition, prohibit
the title insurance company from obtaining reinsurance under this
section.
(b) The notice required under Subsection (a)(2) must
provide sufficient information to enable the commissioner to
evaluate the proposed transaction, including a summary of the
significant terms of the reinsurance, the financial impact of the
transaction on the title insurance company acquiring reinsurance,
and the specific identity and state of domicile of each title
insurance company from which reinsurance is acquired.
(c) Notwithstanding any other provision of this subchapter,
the department may, on application and hearing, permit a title
insurance company to acquire reinsurance that does not comply with
Subsection (a) on an individual policy or facultative basis from a
title insurance company domiciled in another state and not
authorized to engage in the business of title insurance in this
state, if:
(1) the company has exhausted the opportunity to
acquire reinsurance from all other authorized title insurance
companies; and
(2) the title insurance company from which the
reinsurance is acquired has a combined capital and surplus of at
least $2 [$1.4] million as stated in its annual statement preceding
the acceptance of reinsurance.
(d) [(b)] Notwithstanding any other provision of this
subchapter, the department may, on application and hearing, permit
a title insurance company, including an authorized reinsuring title
insurance company, to retain an additional potential liability of
not more than 40 percent of the company's capital stock and surplus
as stated in the most recent annual statement of the company, if:
(1) the company has exhausted the opportunity to
acquire reinsurance under Subsection (c) [(a)]; and
(2) the additional potential liability of the company
is incurred only if the loss suffered by the insured under the
policy exceeds the amount of insurance and reinsurance accepted by
the company and its reinsuring title insurance companies under the
other provisions of this subchapter.
SECTION 4. Section 2551.303, Insurance Code, is repealed.
SECTION 5. Section 2502.006, Insurance Code, as added by
this Act, applies only to an insurance policy that is delivered,
issued for delivery, or renewed on or after January 1, 2012. A
policy delivered, issued for delivery, or renewed before January 1,
2012, is governed by the law as it existed immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 6. The change in law made by this Act applies only
to a reinsurance contract entered into by a title insurance company
on or after the effective date of this Act. A reinsurance contract
entered into by a title insurance company before the effective date
of this Act is governed by the law in effect immediately before the
effective date of this Act, and the former law is continued in
effect for that purpose.
SECTION 7. This Act takes effect September 1, 2011.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 322 passed the Senate on
May 17, 2011, by the following vote: Yeas 31, Nays 0; and that the
Senate concurred in House amendment on May 27, 2011, by the
following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 322 passed the House, with
amendment, on May 17, 2011, by the following vote: Yeas 144,
Nays 0, one present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor