By: Deuell S.B. No. 416
(Smithee)
A BILL TO BE ENTITLED
AN ACT
relating to the amount of outstanding total liability of a mortgage
guaranty insurer.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 3502.156, Insurance Code, is amended by
amending Subsections (a) and (c) and adding Subsections (d) through
(j) to read as follows:
(a) Except as provided by Subsection (d), a [A] mortgage
guaranty insurer may not at any time have outstanding under the
insurer's aggregate mortgage guaranty insurance policies a total
liability, net of reinsurance, that exceeds the sum of the
insurer's capital, surplus, and contingency reserve, multiplied by
25.
(c) Except as provided by Subsection (d), a [A] mortgage
guaranty insurer that has outstanding total liability that exceeds
the amount computed under Subsection (a) may not write new mortgage
guaranty insurance business until the insurer's total liability no
longer exceeds that amount.
(d) The commissioner may waive the limit imposed by
Subsection (a) at the written request of a mortgage guaranty
insurer on a finding by the commissioner that the sum of the
insurer's capital, surplus, and contingency reserve is reasonable
in relationship to the insurer's aggregate insured risk and
adequate to the insurer's financial needs. The request must be made
in writing on or before the 90th day before the date the insurer
expects to exceed the limit imposed by Subsection (a) and shall, at
a minimum, address the factors listed in Subsection (e).
(e) In determining whether a mortgage guaranty insurer's
capital, surplus, and contingency reserve is reasonable in relation
to the insurer's aggregate insured risk and adequate to the
insurer's financial needs, the commissioner, in the commissioner's
sole discretion, may consider relevant factors including:
(1) the insurer's size as measured by the insurer's
assets, capital and surplus, reserves, premium writings, insurance
in force, and other appropriate criteria;
(2) the extent to which the insurer's business is
diversified across time, geography, credit quality, origination,
and distribution channels;
(3) the nature and extent of the insurer's reinsurance
program;
(4) the quality, diversification, and liquidity of the
insurer's investment portfolio;
(5) the historical and forecasted trend in the size of
the insurer's capital, surplus, and contingency reserve;
(6) the capital, surplus, and contingency reserve
maintained by other comparable mortgage guaranty insurers in
relation to the nature of the insurers' respective insured risks;
(7) the reasonableness of the insurer's reserves;
(8) the quality and liquidity of the insurer's
investments in affiliates; and
(9) the quality of the insurer's earnings and the
extent to which the insurer's reported earnings include
extraordinary items.
(f) With respect to the factors listed in Subsection (e)(8),
the commissioner may treat an investment in an affiliate as a
nonadmitted asset for purposes of determining the adequacy of
surplus as regards policyholders.
(g) The commissioner may retain accountants, actuaries, or
other experts to assist the commissioner in the review of a request
made by a mortgage guaranty insurer under Subsection (d). The
insurer shall pay the commissioner's cost of retaining those
persons.
(h) A waiver granted under Subsection (d) must be for a
specified period that does not exceed two years and is subject to
any terms and conditions the commissioner considers best suited to
restoring the mortgage guaranty insurer's capital, surplus, and
contingency reserve to the level required by Subsection (a). The
mortgage guaranty insurer may apply to extend the waiver on or
before the 90th day before the date the waiver period expires.
(i) The commissioner may not under any circumstances allow
the mortgage guaranty insurer to have outstanding under the
insurer's aggregate mortgage guaranty insurance policies a total
liability, net of reinsurance, that exceeds the sum of the
insurer's capital, surplus, and contingency reserve, multiplied by
50.
(j) An insurer may not be allowed a waiver under Subsections
(d) and (h) for a continuous period of more than six years.
SECTION 2. 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.