Texas 2015 - 84th Regular

Texas House Bill HB1730 Compare Versions

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1	1	84R7861 MEW-F
2	2	By: Smithee H.B. No. 1730
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to own risk and solvency assessment by insurers and
8	8	insurance groups; providing a penalty.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle B, Title 6, Insurance Code, is amended
11	11	by adding Chapter 830 to read as follows:
12	12	CHAPTER 830. OWN RISK AND SOLVENCY ASSESSMENT
13	13	Sec. 830.001. APPLICABILITY AND PURPOSE. (a) This chapter
14	14	applies to each domestic insurer unless exempt under Section
15	15	830.006.
16	16	(b) The purpose of this chapter is to provide the
17	17	requirements for maintaining a risk management framework and
18	18	completing an own risk and solvency assessment and to provide
19	19	guidance and instructions for filing an own risk and solvency
20	20	assessment summary report with the commissioner.
21	21	(c) The own risk and solvency assessment summary report will
22	22	contain confidential and sensitive information related to an
23	23	insurer or insurance group's identification of risks material and
24	24	relevant to the insurer or insurance group filing the report. This
25	25	information will include proprietary and trade secret information
26	26	that has the potential for harm and competitive disadvantage to the
27	27	insurer or insurance group if the information is made public. The
28	28	summary report is a confidential document filed with the
29	29	commissioner, and the commissioner may share the summary report
30	30	only as stated in this chapter in order to assist the commissioner
31	31	in the performance of the commissioner's duties. An own risk and
32	32	solvency assessment summary report is not subject to public
33	33	disclosure in any event.
34	34	Sec. 830.002. DEFINITIONS. In this chapter:
35	35	(1) "Guidance manual" means the version of the Own
36	36	Risk and Solvency Assessment Guidance Manual developed and adopted
37	37	by the National Association of Insurance Commissioners that is in
38	38	effect at the time a summary report is provided. A change in the
39	39	guidance manual becomes effective on the January 1 following the
40	40	calendar year in which the changes are adopted by the National
41	41	Association of Insurance Commissioners.
42	42	(2) "Insurance group" means the insurers and
43	43	affiliates included within an insurance holding company system as
44	44	described by Section 823.006.
45	45	(3) "Insurer" has the meaning assigned by Section
46	46	823.002(6).
47	47	(4) "Own risk and solvency assessment" means a
48	48	confidential internal assessment, appropriate to the nature,
49	49	scale, and complexity of an insurer or insurance group, conducted
50	50	by that insurer or insurance group, of the material and relevant
51	51	risks associated with the insurer or insurance group's current
52	52	business plan and the sufficiency of capital resources to support
53	53	those risks.
54	54	(5) "Summary report" means a confidential, high-level
55	55	summary of an insurer's or insurance group's own risk and solvency
56	56	assessment.
57	57	Sec. 830.003. RISK MANAGEMENT FRAMEWORK. An insurer shall
58	58	maintain a risk management framework to assist the insurer with
59	59	identifying, assessing, monitoring, managing, and reporting on the
60	60	insurer's material and relevant risks. This requirement may be
61	61	satisfied if the insurance group of which the insurer is a member
62	62	maintains a risk management framework applicable to the operations
63	63	of the insurer.
64	64	Sec. 830.004. OWN RISK AND SOLVENCY ASSESSMENT REQUIREMENT.
65	65	(a) Subject to Section 830.006, an insurer, or the insurance group
66	66	of which the insurer is a member, shall regularly conduct,
67	67	consistent with a process comparable to the guidance manual, an own
68	68	risk and solvency assessment, appropriate to the nature, scale, and
69	69	complexity of the insurer or insurance group, of the material and
70	70	relevant risks associated with the insurer's or insurance group's
71	71	current business plan and the sufficiency of capital resources to
72	72	support those risks.
73	73	(b) The insurer, or the insurance group of which the insurer
74	74	is a member, shall conduct the own risk and solvency assessment
75	75	described by Subsection (a):
76	76	(1) annually; and
77	77	(2) at any other time there are significant changes to
78	78	the risk profile of the insurer or the insurance group of which the
79	79	insurer is a member.
80	80	Sec. 830.005. SUMMARY REPORT REQUIRED. (a) On the
81	81	commissioner's request, an insurer shall submit to the commissioner
82	82	a summary report or a combination of reports that together contain
83	83	the information described in the guidance manual. The commissioner
84	84	may not make a request under this subsection more than once each
85	85	year.
86	86	(b) Without regard to whether the commissioner has made a
87	87	request under Subsection (a), if the insurer is a member of an
88	88	insurance group, the insurer shall submit to the commissioner the
89	89	reports required by Subsection (a) if the commissioner is the lead
90	90	state commissioner of the insurance group.
91	91	(c) In determining the lead state commissioner for purposes
92	92	of this section, the commissioner shall consider the procedures
93	93	adopted by the National Association of Insurance Commissioners.
94	94	(d) The reports must include a signature of the insurer's or
95	95	insurance group's chief risk officer or other executive responsible
96	96	for the oversight of the insurer's enterprise risk management
97	97	process attesting to the best of the officer's or executive's belief
98	98	and knowledge that:
99	99	(1) the insurer applies the enterprise risk management
100	100	process described in the summary report; and
101	101	(2) a copy of the report has been provided to the
102	102	insurer's board of directors or the appropriate committee of the
103	103	board of directors.
104	104	(e) An insurer may comply with Subsection (a) or (b) by
105	105	providing the most recent and substantially similar report that the
106	106	insurer or another member of an insurance group of which the insurer
107	107	is a member provided to the commissioner of another state or to a
108	108	supervisor or regulator of a foreign jurisdiction, if that report
109	109	provides information that is comparable to the information
110	110	described in the guidance manual. A report in a language other than
111	111	English must be accompanied by a translation of that report into the
112	112	English language.
113	113	Sec. 830.006. EXEMPTION. (a) An insurer is exempt from the
114	114	requirements of this chapter if:
115	115	(1) the insurer has annual direct written and
116	116	unaffiliated assumed premium, including international direct and
117	117	assumed premium but excluding premiums reinsured with the Federal
118	118	Crop Insurance Corporation and Federal Flood Program, of less than
119	119	$500 million; and
120	120	(2) the insurance group of which the insurer is a
121	121	member has annual direct written and unaffiliated assumed premium,
122	122	including international direct and assumed premium but excluding
123	123	premiums reinsured with the Federal Crop Insurance Corporation and
124	124	Federal Flood Program, of less than $1 billion.
125	125	(b) If an insurer qualifies for exemption under Subsection
126	126	(a)(1), but the insurance group of which the insurer is a member
127	127	does not qualify for exemption under Subsection (a)(2), then the
128	128	summary report required under Section 830.005 must include every
129	129	insurer within the insurance group.
130	130	(c) An insurer may satisfy the requirement under Subsection
131	131	(b) by submitting more than one summary report for any combination
132	132	of insurers if the combination of reports includes each insurer
133	133	within the insurance group.
134	134	(d) If an insurer does not qualify for exemption under
135	135	Subsection (a)(1), but the insurance group of which it is a member
136	136	qualifies for exemption under Subsection (a)(2), then the insurer
137	137	must submit a summary report under Section 830.005 that is
138	138	applicable to that insurer.
139	139	(e) An insurer that does not qualify for exemption under
140	140	Subsection (a) may apply to the commissioner for a waiver from the
141	141	requirements of this chapter based on unique circumstances. In
142	142	deciding whether to grant the insurer's request for waiver, the
143	143	commissioner may consider the type and volume of business written,
144	144	the ownership and organizational structure, and any other factor
145	145	the commissioner considers relevant to the insurer or insurance
146	146	group of which the insurer is a member. If the insurer is part of an
147	147	insurance group with insurers domiciled in more than one state, the
148	148	commissioner shall coordinate with the lead state commissioner and
149	149	with the other domiciliary commissioners in considering whether to
150	150	grant the insurer's request for a waiver.
151	151	(f) Notwithstanding the exemptions stated in this section,
152	152	the commissioner may require that an insurer maintain a risk
153	153	management framework, conduct an own risk and solvency assessment,
154	154	and file a summary report if:
155	155	(1) there are unique circumstances, including the type
156	156	and volume of business written, the ownership and organizational
157	157	structure, federal agency requests, and international supervisor
158	158	requests;
159	159	(2) the insurer has risk-based capital for a company
160	160	action level event as set forth in department rules;
161	161	(3) the insurer meets one or more of the standards of
162	162	an insurer considered to be in hazardous financial condition under
163	163	Chapter 404 or department rule; or
164	164	(4) the insurer otherwise exhibits qualities of a
165	165	troubled insurer as determined by the commissioner.
166	166	(g) If an insurer that qualifies for an exemption under
167	167	Subsection (a) subsequently ceases to qualify for that exemption
168	168	due to changes in premium as reflected in the insurer's most recent
169	169	annual statement or in the most recent annual statements of the
170	170	insurers within the insurance group of which the insurer is a
171	171	member, the insurer must comply with the requirements of this
172	172	chapter not later than December 31 of the calendar year following
173	173	the calendar year the threshold is exceeded.
174	174	Sec. 830.007. CONTENTS OF SUMMARY REPORT. (a) An insurer
175	175	shall prepare a summary report in accordance with the guidance
176	176	manual and subject to the requirements of Subsection (b). An
177	177	insurer shall maintain documentation and supporting information
178	178	and shall make the documentation and supporting information
179	179	available on examination or on request of the commissioner.
180	180	(b) When reviewing the summary report or making requests for
181	181	additional information, the department shall use procedures
182	182	similar to the procedures currently used in the analysis and
183	183	examination of multistate or global insurers and insurance groups.
184	184	Sec. 830.008. CONFIDENTIALITY. (a) Documents, materials,
185	185	or other information obtained by, created by, or disclosed to the
186	186	commissioner or any other person under this chapter, including
187	187	documents, materials, and other information shared or received
188	188	under Subsection (e) and documents, materials, or other information
189	189	in the possession or control of the National Association of
190	190	Insurance Commissioners or third-party consultant under this
191	191	chapter, are confidential and privileged for all purposes,
192	192	including for purposes of:
193	193	(1) Chapter 552, Government Code;
194	194	(2) a response to subpoena; or
195	195	(3) discovery or admissibility in evidence in any
196	196	civil action.
197	197	(b) Documents, materials, or other information, including a
198	198	summary report prepared under this chapter and additional
199	199	information submitted under Section 830.007, that is obtained by,
200	200	created by, or disclosed to the commissioner or any other person
201	201	under this chapter is recognized by this state as being proprietary
202	202	and to contain trade secrets.
203	203	(c) The commissioner may use the documents, materials, or
204	204	other information described in this section to further any
205	205	regulatory or legal action brought as part of the commissioner's
206	206	official duties. The commissioner shall not otherwise make the
207	207	documents, materials, or other information public without the prior
208	208	written consent of the insurer.
209	209	(d) The commissioner and any other person who receives own
210	210	risk and solvency assessment-related information under this
211	211	chapter, in an examination, or otherwise under any other law may not
212	212	testify or be required to testify in any civil action concerning any
213	213	documents, materials, or information subject to Subsection (a) or
214	214	(b).
215	215	(e) In order to assist in the performance of the
216	216	commissioner's regulatory duties, the commissioner may, on
217	217	request, share documents, materials, or other own risk and solvency
218	218	assessment-related information, including confidential and
219	219	privileged documents, materials, or information subject to
220	220	Subsection (a) or (b) or confidential or privileged documents,
221	221	materials, or information subject to Chapter 401, 404, or 823, as
222	222	necessary, with:
223	223	(1) other state, federal, and international financial
224	224	regulatory agencies or insurance supervisors;
225	225	(2) members of a supervisory college described in
226	226	Section 823.0145;
227	227	(3) the National Association of Insurance
228	228	Commissioners; or
229	229	(4) a third-party consultant designated by the
230	230	commissioner.
231	231	(f) Before the commissioner may share information under
232	232	this section, the recipient of the information shall:
233	233	(1) agree in writing to maintain the confidential and
234	234	privileged status of the documents, materials, or other information
235	235	shared under this section; and
236	236	(2) verify in writing the recipient's legal authority
237	237	to maintain the confidential and privileged status of that
238	238	information.
239	239	(g) The commissioner may receive documents, materials, or
240	240	other own risk and solvency assessment-related information or any
241	241	other relevant information, including otherwise confidential and
242	242	privileged documents, materials, or information and proprietary
243	243	and trade-secret information or documents, from:
244	244	(1) a regulatory official of a foreign or domestic
245	245	jurisdiction, including a member of a supervisory college described
246	246	in Section 823.0145; and
247	247	(2) the National Association of Insurance
248	248	Commissioners.
249	249	(h) The commissioner shall maintain as confidential or
250	250	privileged any documents, materials, or information received under
251	251	Subsection (g) with notice and understanding that it is
252	252	confidential or privileged under the laws of the jurisdiction that
253	253	is the source of the document, material, or information.
254	254	Sec. 830.009. AGREEMENT CONCERNING CONFIDENTIAL AND
255	255	PRIVILEGED INFORMATION. (a) The commissioner shall enter into a
256	256	written agreement with the National Association of Insurance
257	257	Commissioners or a third-party consultant that governs the sharing
258	258	and use of information provided under this chapter. The agreement
259	259	must comply with and contain all the requirements listed in this
260	260	section.
261	261	(b) The agreement must specify procedures and protocols
262	262	regarding the confidentiality and security of information shared
263	263	with the National Association of Insurance Commissioners or
264	264	third-party consultant under this chapter, including procedures
265	265	and protocols for sharing by the National Association of Insurance
266	266	Commissioners with other state regulators from states in which the
267	267	insurance group has domiciled insurers.
268	268	(c) The agreement must provide that the recipient:
269	269	(1) agrees in writing to maintain the confidential and
270	270	privileged status of the own risk and solvency assessment-related
271	271	documents, materials, or other information; and
272	272	(2) has verified in writing the legal authority to
273	273	maintain the confidential and privileged status of the information.
274	274	(d) The agreement must specify that ownership of
275	275	information shared with the National Association of Insurance
276	276	Commissioners or third-party consultant under this chapter remains
277	277	with the commissioner and that the National Association of
278	278	Insurance Commissioners' or third-party consultant's use of the
279	279	information is subject to the direction of the commissioner.
280	280	(e) The agreement must prohibit the National Association of
281	281	Insurance Commissioners or third-party consultant from storing the
282	282	information shared under this chapter in a permanent database after
283	283	the underlying analysis is completed.
284	284	(f) The agreement must require prompt notice to be given to
285	285	an insurer whose confidential information in the possession of the
286	286	National Association of Insurance Commissioners or third-party
287	287	consultant under this chapter is subject to a request or subpoena to
288	288	the National Association of Insurance Commissioners or third-party
289	289	consultant for disclosure or production.
290	290	(g) The agreement must require the National Association of
291	291	Insurance Commissioners or third-party consultant to consent to
292	292	intervention by an insurer in any judicial or administrative action
293	293	in which the National Association of Insurance Commissioners or
294	294	third-party consultant may be required to disclose confidential
295	295	information about the insurer shared with the National Association
296	296	of Insurance Commissioners or third-party consultant under this
297	297	chapter.
298	298	(h) The agreement must provide for the insurer's written
299	299	consent in the case of an agreement involving a third-party
300	300	consultant.
301	301	Sec. 830.010. AUTHORITY OF COMMISSIONER NOT AFFECTED. The
302	302	commissioner's sharing of information and documents under this
303	303	chapter does not constitute a delegation of regulatory authority or
304	304	rulemaking, and the commissioner is solely responsible for the
305	305	administration, execution, and enforcement of the provisions of
306	306	this chapter.
307	307	Sec. 830.011. PRIVILEGE AND CONFIDENTIALITY NOT WAIVED. A
308	308	waiver of an applicable privilege or claim of confidentiality in a
309	309	document, proprietary and trade-secret materials, or other own risk
310	310	and solvency assessment-related information does not occur as a
311	311	result of disclosure of the document, materials, or other
312	312	information to the commissioner under this chapter or as a result of
313	313	sharing as authorized by this chapter.
314	314	Sec. 830.012. ADMINISTRATIVE PENALTY. (a) An insurer
315	315	that, without good cause, fails to timely file the summary report as
316	316	required by this chapter commits a violation subject to an
317	317	administrative penalty under Chapter 84.
318	318	(b) Each day the violation continues is a separate violation
319	319	for purposes of this section.
320	320	(c) The commissioner may reduce the amount of the penalty
321	321	assessed under this section if the insurer demonstrates to the
322	322	commissioner that the imposition of the penalty would constitute a
323	323	financial hardship to the insurer.
324	324	SECTION 2. Notwithstanding Chapter 830, Insurance Code, as
325	325	added by this Act, an insurer is not required to submit a summary
326	326	report as required by that chapter before January 1, 2016.
327	327	SECTION 3. This Act takes effect immediately if it receives
328	328	a vote of two-thirds of all the members elected to each house, as
329	329	provided by Section 39, Article III, Texas Constitution. If this
330	330	Act does not receive the vote necessary for immediate effect, this
331	331	Act takes effect September 1, 2015.