By: Carona S.B. No. 322
(Deshotel)
A BILL TO BE ENTITLED
AN ACT
relating to the requirements for reinsurance contracts covering
title insurance policies issued in this state.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. 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 2. 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 3. Section 2551.303, Insurance Code, is repealed.
SECTION 4. 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 5. This Act takes effect September 1, 2011.