Texas Senate Bill SB1006

Texas 2013 - 83rd Regular

Caption

Relating to requirements regarding certain shareholder and policyholder dividends.

Impact

The implications of SB1006 on state laws are significant, as it instills stricter controls on how insurers manage their surplus and handle dividend distributions. This could enhance the financial stability of insurance companies, ensuring they maintain adequate reserves before declaring dividends, thereby protecting policyholders' interests. Additionally, the bill allows for profit sharing with members of certain nonprofit business associations, opening avenues for collective benefits among policyholders. This modification fosters a more collaborative approach to profit distribution and leverages group programs for insurances.

Summary

SB1006 addresses shareholder and policyholder dividends within the Texas insurance sector, specifically amending several sections of the Insurance Code. The bill lays down new requirements before insurers can distribute profits or dividends to shareholders, mandating that these payments can only come from surplus profits generated by their operations. Moreover, it introduces regulations on policyholder dividends, especially in circumstances where dividends exceed 10% of surplus, requiring insurer notifications and commissioner approvals for these distributions. This legislative effort intends to promote accountability and proper financial management among insurers.

Contention

During the discussions surrounding SB1006, there were notable points of contention regarding the proposed regulatory measures. Supporters emphasized the need for stricter financial governance in the insurance industry to prevent irresponsible profit sharing that could undermine the insurer's ability to meet policyholder claims. In contrast, some critics expressed concerns about potential overreach and the bureaucratic hurdles that may emerge for insurers when complying with heightened approval processes. Balancing financial accountability while promoting an effective insurance market remains a central concern in the discourse around this bill.