Texas 2015 - 84th Regular

Texas House Bill HB2317 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New	Differences
1	1	84R19907 PMO-F
2	2	By: Frullo H.B. No. 2317
3	3	Substitute the following for H.B. No. 2317:
4	4	By: Paul C.S.H.B. No. 2317
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to reinsurance financial statement credit and accounting.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Section 492.102, Insurance Code, is amended by
12	12	amending Subsection (a) and adding Subsection (a-1) to read as
13	13	follows:
14	14	(a) A ceding insurer may be allowed credit for reinsurance
15	15	ceded, as an asset or as a deduction from liability, only if the
16	16	reinsurance is ceded to an assuming insurer that:
17	17	(1) is authorized to engage in the business of
18	18	insurance or reinsurance in this state;
19	19	(2) is accredited as a reinsurer in this state, as
20	20	provided by Section 492.103; [or]
21	21	(3) subject to Subchapter D, maintains, in a qualified
22	22	United States financial institution that has been granted the
23	23	authority to operate with fiduciary powers, a trust fund to pay
24	24	valid claims of:
25	25	(A) the assuming insurer's United States
26	26	policyholders and ceding insurers; and
27	27	(B) the policyholders' and ceding insurers'
28	28	assigns and successors in interest; or
29	29	(4) is certified as a reinsurer in this state under
30	30	Section 492.1033 and maintains adequate collateral as determined by
31	31	the commissioner.
32	32	(a-1) Notwithstanding Subsection (a), a ceding insurer that
33	33	cedes 75 percent or more of its direct and assumed risks in a
34	34	calendar year to one or more nonaffiliated reinsurers may not be
35	35	allowed credit under Subsection (a)(4) during that calendar year.
36	36	SECTION 2. Subchapter C, Chapter 492, Insurance Code, is
37	37	amended by adding Sections 492.1033, 492.1034, 492.1035, 492.1036,
38	38	492.1037, 492.1038, and 492.1039 to read as follows:
39	39	Sec. 492.1033. CREDIT ALLOWED FOR CERTAIN CERTIFIED
40	40	REINSURERS. (a) Credit shall be allowed when the reinsurance is
41	41	ceded to an assuming insurer that:
42	42	(1) is certified by the commissioner as a reinsurer in
43	43	this state; and
44	44	(2) secures its obligations in accordance with the
45	45	requirements of this section and Sections 492.1034-492.1038.
46	46	(b) To be eligible for certification, the assuming insurer
47	47	must:
48	48	(1) be domiciled and licensed to transact insurance or
49	49	reinsurance in a jurisdiction listed as qualified on the list
50	50	published by the commissioner under Section 492.1035;
51	51	(2) maintain minimum capital and surplus in an amount
52	52	required by the commissioner by rule;
53	53	(3) maintain a financial strength rating from not
54	54	fewer than two rating agencies determined to be acceptable in
55	55	accordance with rules adopted by the commissioner;
56	56	(4) agree to submit to the jurisdiction of any court of
57	57	competent jurisdiction in any state of the United States;
58	58	(5) appoint the commissioner as its agent for service
59	59	of process in this state;
60	60	(6) provide security for 100 percent of the assuming
61	61	insurer's liabilities for reinsurance ceded by United States ceding
62	62	insurers if the assuming insurer resists enforcement of a final
63	63	judgment of a court of the United States;
64	64	(7) meet application information filing requirements
65	65	as established by the commissioner by rule, for the initial
66	66	application for certification and on an ongoing basis; and
67	67	(8) satisfy any other requirements for certification
68	68	required by rule adopted by the commissioner.
69	69	Sec. 492.1034. CERTAIN ASSOCIATIONS MAY BE CERTIFIED
70	70	REINSURERS. (a) An association that includes incorporated and
71	71	individual unincorporated underwriters may be a certified
72	72	reinsurer under Section 492.1033. To be eligible for certification
73	73	the association must satisfy the requirements of Section 492.1033
74	74	and this section.
75	75	(b) The association must satisfy minimum capital and
76	76	surplus requirements through the capital and surplus equivalents,
77	77	net of liabilities, of the association and its members, that must
78	78	include a joint central fund, in an amount determined by the
79	79	commissioner to provide adequate protection, that may be applied to
80	80	any unsatisfied obligation of the association or any of its
81	81	members.
82	82	(c) The incorporated members of the association may not be
83	83	engaged in any business other than underwriting and are subject to
84	84	the same level of regulation and solvency control by the
85	85	association's domiciliary regulator as are the unincorporated
86	86	members.
87	87	(d) Not later than the 90th day after the date the
88	88	association's financial statements are due to be filed with the
89	89	association's domiciliary regulator, the association shall provide
90	90	to the commissioner:
91	91	(1) an annual certification by the association's
92	92	domiciliary regulator of the solvency of each underwriter member;
93	93	or
94	94	(2) if a certification described by Subdivision (1) is
95	95	unavailable, financial statements, prepared by independent public
96	96	accountants, of each underwriter member of the association.
97	97	Sec. 492.1035. QUALIFIED JURISDICTIONS. (a) The
98	98	commissioner shall develop and publish a list of qualified
99	99	jurisdictions in one of which an assuming insurer must be licensed
100	100	and domiciled in order to be considered for certification by the
101	101	commissioner under Section 492.1033 as a certified reinsurer. In
102	102	developing the list, the commissioner shall consider the list of
103	103	qualified jurisdictions published through the National Association
104	104	of Insurance Commissioners committee process.
105	105	(b) In order to determine whether a jurisdiction of an
106	106	assuming insurer located outside of the United States is eligible
107	107	to be recognized as a qualified jurisdiction under Subsection (a),
108	108	the commissioner shall evaluate the appropriateness and
109	109	effectiveness of the reinsurance supervisory system of the
110	110	jurisdiction, both initially and on an ongoing basis, and consider
111	111	the rights, benefits, and extent of reciprocal recognition afforded
112	112	by the jurisdiction to reinsurers licensed and domiciled in the
113	113	United States.
114	114	(c) In order to be qualified a jurisdiction must agree to
115	115	share information and cooperate with the commissioner with respect
116	116	to all certified reinsurers doing business in the jurisdiction.
117	117	(d) A jurisdiction may not be recognized as a qualified
118	118	jurisdiction if the commissioner has determined that the
119	119	jurisdiction does not adequately and promptly enforce final United
120	120	States judgments and arbitration awards. Additional factors may be
121	121	considered in the discretion of the commissioner.
122	122	(e) If the commissioner approves under this section a
123	123	jurisdiction as qualified that does not appear on the list of
124	124	qualified jurisdictions published through the National Association
125	125	of Insurance Commissioners committee process, the commissioner
126	126	shall provide documentation in accordance with rules adopted by the
127	127	commissioner. The rules must include a requirement for a
128	128	thoroughly documented justification of the approval.
129	129	(f) The commissioner shall include as a qualified
130	130	jurisdiction under this section a United States jurisdiction that
131	131	meets the requirement for accreditation under the National
132	132	Association of Insurance Commissioners financial standards and
133	133	accreditation program.
134	134	(g) If a certified reinsurer's domiciliary jurisdiction
135	135	ceases to be a qualified jurisdiction, the commissioner may suspend
136	136	the reinsurer's certification indefinitely, instead of revoking
137	137	the certification.
138	138	Sec. 492.1036. REQUIREMENTS FOR CERTIFIED REINSURER. (a)
139	139	The commissioner shall assign a rating to each certified reinsurer
140	140	after giving due consideration to the financial strength ratings
141	141	that have been assigned by rating agencies recognized by the
142	142	commissioner by rule.
143	143	(b) The commissioner shall publish a list of the ratings
144	144	assigned under this section for all certified reinsurers.
145	145	(c) A certified reinsurer shall secure obligations assumed
146	146	from ceding insurers domiciled in the United States in accordance
147	147	with the rating assigned by the commissioner under Subsection (a)
148	148	and with the amount of security required by the commissioner by
149	149	rule.
150	150	(d) For a domestic ceding insurer to qualify for full
151	151	financial statement credit for reinsurance ceded to a certified
152	152	reinsurer, the certified reinsurer must maintain security:
153	153	(1) in a form acceptable to the commissioner and
154	154	consistent with the insurance laws of this state; or
155	155	(2) in a multibeneficiary trust in accordance with
156	156	Subchapter D, except as otherwise provided.
157	157	(e) If a certified reinsurer maintains a trust under
158	158	Subchapter D to secure its obligations, and chooses to secure its
159	159	obligations incurred as a certified reinsurer with a
160	160	multibeneficiary trust, the certified reinsurer shall maintain
161	161	separate trust accounts for the obligations incurred under
162	162	reinsurance agreements the certified reinsurer issued or renewed
163	163	with reduced security as permitted by this section or comparable
164	164	laws of other United States jurisdictions and for its obligations
165	165	subject to Subchapter D. It is a condition to the grant of
166	166	certification under Section 492.1033 that the certified reinsurer
167	167	has bound itself, by the language of the trust agreement and
168	168	agreement with the insurance commissioner or other chief insurance
169	169	regulatory official with principal regulatory oversight over each
170	170	trust account, to fund, on termination of the trust account, out of
171	171	the remaining surplus of the trust any deficiency of any other trust
172	172	account described by this subsection.
173	173	(f) The minimum trusteed surplus requirements provided in
174	174	Subchapter D do not apply to a multibeneficiary trust described by
175	175	this section, except that the trust shall maintain a minimum
176	176	trusteed surplus of $10,000,000.
177	177	(g) With respect to obligations incurred by a certified
178	178	reinsurer under this section, if the security is insufficient, the
179	179	commissioner:
180	180	(1) shall reduce the allowable credit by an amount
181	181	proportionate to the deficiency; and
182	182	(2) may impose further reductions in allowable credit
183	183	on finding that there is a material risk that the certified
184	184	reinsurer's obligations will not be paid in full when due.
185	185	(h) For purposes of this section, a reinsurer whose
186	186	certification has been revoked, suspended, or voluntarily
187	187	surrendered or whose certification status has become inactive for
188	188	any reason shall be treated as a reinsurer required to secure 100
189	189	percent of its obligations, except that if the commissioner
190	190	continues to assign to the reinsurer a higher financial strength
191	191	rating as permitted by this section, the security requirement does
192	192	not apply to a reinsurer whose certification has been suspended or
193	193	whose certification status has become inactive.
194	194	Sec. 492.1037. CERTIFICATION BY NATIONAL ASSOCIATION OF
195	195	INSURANCE COMMISSIONERS. If an applicant for certification has
196	196	been certified as a reinsurer in a National Association of
197	197	Insurance Commissioners accredited jurisdiction:
198	198	(1) the commissioner may make a determination to defer
199	199	to the accredited jurisdiction's certification and the financial
200	200	strength rating assigned by that jurisdiction; and
201	201	(2) if the commissioner makes the determination
202	202	authorized by Subdivision (1), the applicant shall be considered to
203	203	be a certified reinsurer in this state.
204	204	Sec. 492.1038. SUSPENSION OR REVOCATION OF ACCREDITATION OR
205	205	CERTIFICATION; INACTIVE STATUS. (a) A certified reinsurer that
206	206	ceases to assume new business in this state may request to maintain
207	207	its certification in inactive status to continue to qualify for a
208	208	reduction in security for in-force business. An inactive certified
209	209	reinsurer shall continue to comply with all applicable requirements
210	210	of this section, and the commissioner shall assign a financial
211	211	strength rating that takes into account, if relevant, the reasons
212	212	the reinsurer is not assuming new business.
213	213	(b) If an accredited or certified reinsurer ceases to meet
214	214	the requirements for accreditation or certification, the
215	215	commissioner may, after notice and opportunity for hearing, suspend
216	216	or revoke the reinsurer's accreditation or certification. A
217	217	suspension or revocation may not take effect until after the date of
218	218	the commissioner's order on the hearing, unless:
219	219	(1) the reinsurer waives its right to hearing;
220	220	(2) the commissioner's order is based on regulatory
221	221	action by the reinsurer's domiciliary jurisdiction or the voluntary
222	222	surrender or termination of the reinsurer's eligibility to transact
223	223	insurance or reinsurance business in its domiciliary jurisdiction
224	224	or in the primary certifying state of the reinsurer under this
225	225	section; or
226	226	(3) the commissioner finds that an emergency requires
227	227	immediate action and a court of competent jurisdiction has not
228	228	stayed the commissioner's action.
229	229	(c) While a reinsurer's accreditation or certification is
230	230	suspended, a reinsurance contract issued or renewed after the
231	231	effective date of the suspension does not qualify for credit except
232	232	to the extent that the reinsurer's obligations under the contract
233	233	are secured in accordance with Subchapter D.
234	234	(d) If a reinsurer's accreditation or certification is
235	235	revoked, credit for reinsurance may not be granted after the
236	236	effective date of the revocation except to the extent that the
237	237	reinsurer's obligations under the contract are secured in
238	238	accordance with Section 492.1036 or Subchapter D.
239	239	Sec. 492.1039. CONCENTRATION RISK. (a) A ceding insurer
240	240	shall manage its reinsurance recoverable proportionate to its book
241	241	of business. A domestic ceding insurer shall notify the
242	242	commissioner not later than the 30th day after the date reinsurance
243	243	recoverable from any single assuming insurer, or group of
244	244	affiliated assuming insurers, exceeds or is likely to exceed 50
245	245	percent of the domestic ceding insurer's last reported surplus to
246	246	policyholders. The notification shall demonstrate that the
247	247	exposure is safely managed by the domestic ceding insurer.
248	248	(b) A ceding insurer shall diversify its reinsurance
249	249	program. A domestic ceding insurer shall notify the commissioner
250	250	not later than the 30th day after the date the insurer cedes to any
251	251	single assuming insurer, or group of affiliated assuming insurers,
252	252	an amount that exceeds or is likely to exceed 20 percent of the
253	253	ceding insurer's gross written premium in the prior calendar year.
254	254	The notification shall demonstrate that the exposure is safely
255	255	managed by the domestic ceding insurer.
256	256	SECTION 3. Section 492.151, Insurance Code, is amended to
257	257	read as follows:
258	258	Sec. 492.151. APPLICABILITY OF SUBCHAPTER. This subchapter
259	259	applies to:
260	260	(1) a trust that is used to qualify for a reinsurance
261	261	credit under Section 492.102(a)(3) and as described by Sections
262	262	492.1036(e) and (f); and
263	263	(2) [to] the assuming insurer that maintains the trust
264	264	fund.
265	265	SECTION 4. Section 492.152, Insurance Code, is amended by
266	266	amending Subsection (a) and adding Subsection (a-1) to read as
267	267	follows:
268	268	(a) If the assuming insurer is a single insurer, the trust
269	269	must:
270	270	(1) consist of a trusteed account representing the
271	271	assuming insurer's liabilities attributable to business written in
272	272	the United States; and
273	273	(2) include a trusteed surplus of at least $20
274	274	million, except after the assuming insurer has permanently
275	275	discontinued underwriting new business secured by the trust for not
276	276	less than three calendar years, the insurance commissioner or other
277	277	chief insurance regulatory official with principal regulatory
278	278	oversight over the trust may authorize a reduction in the required
279	279	trusteed surplus, but only after a finding, based on an assessment
280	280	of the risk, that the new required surplus level is adequate for the
281	281	protection of United States ceding insurers, policyholders, and
282	282	claimants in light of reasonably foreseeable adverse loss
283	283	development.
284	284	(a-1) The risk assessment described by Subsection (a)(2)
285	285	may involve an actuarial review, including an independent analysis
286	286	of reserves and cash flows, and must consider all material risk
287	287	factors, including when applicable, the lines of business involved,
288	288	the stability of the incurred loss estimates, and the effect of the
289	289	surplus requirements on the assuming insurer's liquidity or
290	290	solvency. The minimum required trusteed surplus may not be reduced
291	291	to an amount less than 30 percent of the assuming insurer's
292	292	liabilities attributable to reinsurance ceded by United States
293	293	ceding insurers.
294	294	SECTION 5. Section 492.155(b), Insurance Code, is amended
295	295	to read as follows:
296	296	(b) To enable the commissioner to determine the sufficiency
297	297	of the trust fund under Section 492.102(a)(3) and for purposes of
298	298	Sections 492.1036(e) and (f), the assuming insurer shall report to
299	299	the department not later than March 1 of each year information
300	300	substantially the same as the information required to be reported
301	301	by an authorized insurer on the National Association of Insurance
302	302	Commissioners' Annual Statement form.
303	303	SECTION 6. Section 492.156(a), Insurance Code, is amended
304	304	to read as follows:
305	305	(a) A ceding insurer may not be allowed credit under Section
306	306	492.102(a)(3) for reinsurance ceded to an assuming insurer that is
307	307	not authorized, [or] accredited, or certified to engage in the
308	308	business of insurance or reinsurance in this state unless the
309	309	assuming insurer agrees in the reinsurance contract:
310	310	(1) that, if the assuming insurer fails to perform the
311	311	assuming insurer's obligations under the reinsurance contract, the
312	312	assuming insurer, at the request of the ceding insurer, will:
313	313	(A) submit to the jurisdiction of a court in any
314	314	state of the United States;
315	315	(B) comply with all requirements necessary to
316	316	give the court jurisdiction; and
317	317	(C) abide by the final decision of that court or,
318	318	if the court's decision is appealed, of the appellate court; and
319	319	(2) to designate the commissioner or an attorney as an
320	320	agent for service of process in any action, suit, or proceeding
321	321	instituted by or on behalf of the ceding insurer.
322	322	SECTION 7. Subchapter D, Chapter 492, Insurance Code, is
323	323	amended by adding Section 492.1561 to read as follows:
324	324	Sec. 492.1561. CERTAIN TRUSTEED ASSUMING REINSURERS;
325	325	REQUIREMENTS FOR TRUST AGREEMENTS. (a) In this section,
326	326	"commissioner" means the insurance commissioner or other chief
327	327	insurance regulatory official with principal regulatory oversight
328	328	over the trust.
329	329	(b) If the assuming insurer does not meet the requirements
330	330	of Section 492.102(a)(1) or (2), the credit permitted by Section
331	331	492.102(a)(3) or (4) may not be allowed unless the assuming insurer
332	332	agrees in the trust agreements that:
333	333	(1) notwithstanding any other provisions in the trust
334	334	agreement, the trustee shall comply with an order of the
335	335	commissioner or a court ordering the trustee to transfer to the
336	336	commissioner all assets of the trust fund if:
337	337	(A) the trust fund is inadequate because the
338	338	trust fund contains an amount that is less than the amount required
339	339	by this subchapter; or
340	340	(B) the grantor of the trust has been declared
341	341	insolvent or placed into receivership, rehabilitation, or
342	342	liquidation or a similar proceeding under the laws of the grantor's
343	343	domiciliary state or country;
344	344	(2) claims in a proceeding described by Subdivision
345	345	(1)(B) must be filed with the commissioner;
346	346	(3) the commissioner shall value the claims described
347	347	by Subdivision (2) and distribute the assets of the trust under the
348	348	laws of the trust's domiciliary state applicable to the liquidation
349	349	of a domestic insurance company;
350	350	(4) if the commissioner determines that all or part of
351	351	the trust assets are unnecessary to satisfy the claims of the
352	352	grantor's ceding insurers domiciled in the United States, the
353	353	commissioner shall return those unnecessary assets to the trustee
354	354	for distribution in accordance with the trust agreement; and
355	355	(5) the grantor waives any right available under
356	356	federal or state law that is inconsistent with this section.
357	357	SECTION 8. Section 493.102, Insurance Code, is amended by
358	358	amending Subsection (a) and adding Subsection (a-1) to read as
359	359	follows:
360	360	(a) A ceding insurer may be allowed credit for reinsurance
361	361	ceded, as an asset or as a deduction from liability, only if the
362	362	reinsurance is ceded to an assuming insurer that:
363	363	(1) is authorized to engage in the business of
364	364	insurance or reinsurance in this state;
365	365	(2) is accredited as a reinsurer in this state, as
366	366	provided by Section 493.103; [or]
367	367	(3) subject to Subchapter D, maintains, in a qualified
368	368	United States financial institution that has been granted the
369	369	authority to operate with fiduciary powers, a trust fund to pay
370	370	valid claims of:
371	371	(A) the assuming insurer's United States
372	372	policyholders and ceding insurers; and
373	373	(B) the policyholders' and ceding insurers'
374	374	assigns and successors in interest; or
375	375	(4) is certified as a reinsurer in this state under
376	376	Section 493.1033 and maintains adequate collateral as determined by
377	377	the commissioner.
378	378	(a-1) Notwithstanding Subsection (a), a ceding insurer that
379	379	cedes 75 percent or more of its direct and assumed risks in a
380	380	calendar year to one or more nonaffiliated reinsurers may not be
381	381	allowed credit under Subsection (a)(4) during that calendar year.
382	382	SECTION 9. Subchapter C, Chapter 493, Insurance Code, is
383	383	amended by adding Sections 493.1033, 493.1034, 493.1035, 493.1036,
384	384	493.1037, 493.1038, and 493.1039 to read as follows:
385	385	Sec. 493.1033. CREDIT ALLOWED FOR CERTAIN CERTIFIED
386	386	REINSURERS. (a) Credit shall be allowed when the reinsurance is
387	387	ceded to an assuming insurer that:
388	388	(1) is certified by the commissioner as a reinsurer in
389	389	this state; and
390	390	(2) secures its obligations in accordance with the
391	391	requirements of this section and Sections 493.1034-493.1038.
392	392	(b) To be eligible for certification, the assuming insurer
393	393	must:
394	394	(1) be domiciled and licensed to transact insurance or
395	395	reinsurance in a jurisdiction listed as qualified on the list
396	396	published by the commissioner under Section 493.1035;
397	397	(2) maintain minimum capital and surplus in an amount
398	398	required by the commissioner by rule;
399	399	(3) maintain a financial strength rating from not
400	400	fewer than two rating agencies determined to be acceptable in
401	401	accordance with rules adopted by the commissioner;
402	402	(4) agree to submit to the jurisdiction of any court of
403	403	competent jurisdiction in any state of the United States;
404	404	(5) appoint the commissioner as its agent for service
405	405	of process in this state;
406	406	(6) provide security for 100 percent of the assuming
407	407	insurer's liabilities for reinsurance ceded by United States ceding
408	408	insurers if the assuming insurer resists enforcement of a final
409	409	judgment of a court of the United States;
410	410	(7) meet application information filing requirements
411	411	as established by the commissioner by rule, for the initial
412	412	application for certification and on an ongoing basis; and
413	413	(8) satisfy any other requirements for certification
414	414	required by rule adopted by the commissioner.
415	415	Sec. 493.1034. CERTAIN ASSOCIATIONS MAY BE CERTIFIED
416	416	REINSURERS. (a) An association that includes incorporated and
417	417	individual unincorporated underwriters may be a certified
418	418	reinsurer under Section 493.1033. To be eligible for certification
419	419	the association must satisfy the requirements of Section 493.1033
420	420	and this section.
421	421	(b) The association must satisfy minimum capital and
422	422	surplus requirements through the capital and surplus equivalents,
423	423	net of liabilities, of the association and its members, that must
424	424	include a joint central fund, in an amount determined by the
425	425	commissioner to provide adequate protection, that may be applied to
426	426	any unsatisfied obligation of the association or any of its
427	427	members.
428	428	(c) The incorporated members of the association may not be
429	429	engaged in any business other than underwriting and are subject to
430	430	the same level of regulation and solvency control by the
431	431	association's domiciliary regulator as are the unincorporated
432	432	members.
433	433	(d) Not later than the 90th day after the date the
434	434	association's financial statements are due to be filed with the
435	435	association's domiciliary regulator, the association shall provide
436	436	to the commissioner:
437	437	(1) an annual certification by the association's
438	438	domiciliary regulator of the solvency of each underwriter member;
439	439	or
440	440	(2) if a certification described by Subdivision (1) is
441	441	unavailable, financial statements, prepared by independent public
442	442	accountants, of each underwriter member of the association.
443	443	Sec. 493.1035. QUALIFIED JURISDICTIONS. (a) The
444	444	commissioner shall develop and publish a list of qualified
445	445	jurisdictions in one of which an assuming insurer must be licensed
446	446	and domiciled in order to be considered for certification by the
447	447	commissioner under Section 493.1033 as a certified reinsurer. In
448	448	developing the list, the commissioner shall consider the list of
449	449	qualified jurisdictions published through the National Association
450	450	of Insurance Commissioners committee process.
451	451	(b) In order to determine whether a jurisdiction of an
452	452	assuming insurer located outside of the United States is eligible
453	453	to be recognized as a qualified jurisdiction under Subsection (a),
454	454	the commissioner shall evaluate the appropriateness and
455	455	effectiveness of the reinsurance supervisory system of the
456	456	jurisdiction, both initially and on an ongoing basis, and consider
457	457	the rights, benefits, and extent of reciprocal recognition afforded
458	458	by the jurisdiction to reinsurers licensed and domiciled in the
459	459	United States.
460	460	(c) In order to be qualified a jurisdiction must agree to
461	461	share information and cooperate with the commissioner with respect
462	462	to all certified reinsurers doing business in the jurisdiction.
463	463	(d) A jurisdiction may not be recognized as a qualified
464	464	jurisdiction if the commissioner has determined that the
465	465	jurisdiction does not adequately and promptly enforce final United
466	466	States judgments and arbitration awards. Additional factors may be
467	467	considered in the discretion of the commissioner.
468	468	(e) If the commissioner approves under this section a
469	469	jurisdiction as qualified that does not appear on the list of
470	470	qualified jurisdictions published through the National Association
471	471	of Insurance Commissioners committee process, the commissioner
472	472	shall provide documentation in accordance with rules adopted by the
473	473	commissioner. The rules must include a requirement for a
474	474	thoroughly documented justification of the approval.
475	475	(f) The commissioner shall include as a qualified
476	476	jurisdiction under this section a United States jurisdiction that
477	477	meets the requirement for accreditation under the National
478	478	Association of Insurance Commissioners financial standards and
479	479	accreditation program.
480	480	(g) If a certified reinsurer's domiciliary jurisdiction
481	481	ceases to be a qualified jurisdiction, the commissioner may suspend
482	482	the reinsurer's certification indefinitely, instead of revoking
483	483	the certification.
484	484	Sec. 493.1036. REQUIREMENTS FOR CERTIFIED REINSURER. (a)
485	485	The commissioner shall assign a rating to each certified reinsurer
486	486	after giving due consideration to the financial strength ratings
487	487	that have been assigned by rating agencies recognized by the
488	488	commissioner by rule.
489	489	(b) The commissioner shall publish a list of the ratings
490	490	assigned under this section for all certified reinsurers.
491	491	(c) A certified reinsurer shall secure obligations assumed
492	492	from ceding insurers domiciled in the United States in accordance
493	493	with the rating assigned by the commissioner under Subsection (a)
494	494	and with the amount of security required by the commissioner by
495	495	rule.
496	496	(d) For a domestic ceding insurer to qualify for full
497	497	financial statement credit for reinsurance ceded to a certified
498	498	reinsurer, the certified reinsurer must maintain security:
499	499	(1) in a form acceptable to the commissioner and
500	500	consistent with the insurance laws of this state; or
501	501	(2) in a multibeneficiary trust in accordance with
502	502	Subchapter D, except as otherwise provided.
503	503	(e) If a certified reinsurer maintains a trust under
504	504	Subchapter D to secure its obligations, and chooses to secure its
505	505	obligations incurred as a certified reinsurer with a
506	506	multibeneficiary trust, the certified reinsurer shall maintain
507	507	separate trust accounts for the obligations incurred under
508	508	reinsurance agreements the certified reinsurer issued or renewed
509	509	with reduced security as permitted by this section or comparable
510	510	laws of other United States jurisdictions and for its obligations
511	511	subject to Subchapter D. It is a condition to the grant of
512	512	certification under Section 493.1033 that the certified reinsurer
513	513	has bound itself, by the language of the trust agreement and
514	514	agreement with the insurance commissioner or other chief insurance
515	515	regulatory official with principal regulatory oversight over each
516	516	trust account, to fund, on termination of the trust account, out of
517	517	the remaining surplus of the trust any deficiency of any other trust
518	518	account described by this subsection.
519	519	(f) The minimum trusteed surplus requirements provided in
520	520	Subchapter D do not apply to a multibeneficiary trust described by
521	521	this section, except that the trust shall maintain a minimum
522	522	trusteed surplus of $10,000,000.
523	523	(g) With respect to obligations incurred by a certified
524	524	reinsurer under this section, if the security is insufficient, the
525	525	commissioner:
526	526	(1) shall reduce the allowable credit by an amount
527	527	proportionate to the deficiency; and
528	528	(2) may impose further reductions in allowable credit
529	529	on finding that there is a material risk that the certified
530	530	reinsurer's obligations will not be paid in full when due.
531	531	(h) For purposes of this section, a reinsurer whose
532	532	certification has been revoked, suspended, or voluntarily
533	533	surrendered or whose certification status has become inactive for
534	534	any reason shall be treated as a reinsurer required to secure 100
535	535	percent of its obligations, except that if the commissioner
536	536	continues to assign to the reinsurer a higher financial strength
537	537	rating as permitted by this section, the security requirement does
538	538	not apply to a reinsurer whose certification has been suspended or
539	539	whose certification status has become inactive.
540	540	Sec. 493.1037. CERTIFICATION BY NATIONAL ASSOCIATION OF
541	541	INSURANCE COMMISSIONERS. If an applicant for certification has
542	542	been certified as a reinsurer in a National Association of
543	543	Insurance Commissioners accredited jurisdiction:
544	544	(1) the commissioner may make a determination to defer
545	545	to the accredited jurisdiction's certification and the financial
546	546	strength rating assigned by that jurisdiction; and
547	547	(2) if the commissioner makes the determination
548	548	authorized by Subdivision (1), the applicant shall be considered to
549	549	be a certified reinsurer in this state.
550	550	Sec. 493.1038. SUSPENSION OR REVOCATION OF ACCREDITATION OR
551	551	CERTIFICATION; INACTIVE STATUS. (a) A certified reinsurer that
552	552	ceases to assume new business in this state may request to maintain
553	553	its certification in inactive status to continue to qualify for a
554	554	reduction in security for in-force business. An inactive certified
555	555	reinsurer shall continue to comply with all applicable requirements
556	556	of this section, and the commissioner shall assign a financial
557	557	strength rating that takes into account, if relevant, the reasons
558	558	the reinsurer is not assuming new business.
559	559	(b) If an accredited or certified reinsurer ceases to meet
560	560	the requirements for accreditation or certification, the
561	561	commissioner may, after notice and opportunity for hearing, suspend
562	562	or revoke the reinsurer's accreditation or certification. A
563	563	suspension or revocation may not take effect until after the date of
564	564	the commissioner's order on the hearing, unless:
565	565	(1) the reinsurer waives its right to hearing;
566	566	(2) the commissioner's order is based on regulatory
567	567	action by the reinsurer's domiciliary jurisdiction or the voluntary
568	568	surrender or termination of the reinsurer's eligibility to transact
569	569	insurance or reinsurance business in its domiciliary jurisdiction
570	570	or in the primary certifying state of the reinsurer under this
571	571	section; or
572	572	(3) the commissioner finds that an emergency requires
573	573	immediate action and a court of competent jurisdiction has not
574	574	stayed the commissioner's action.
575	575	(c) While a reinsurer's accreditation or certification is
576	576	suspended, a reinsurance contract issued or renewed after the
577	577	effective date of the suspension does not qualify for credit except
578	578	to the extent that the reinsurer's obligations under the contract
579	579	are secured in accordance with Subchapter D.
580	580	(d) If a reinsurer's accreditation or certification is
581	581	revoked, credit for reinsurance may not be granted after the
582	582	effective date of the revocation except to the extent that the
583	583	reinsurer's obligations under the contract are secured in
584	584	accordance with Section 493.1036 or Subchapter D.
585	585	Sec. 493.1039. CONCENTRATION RISK. (a) A ceding insurer
586	586	shall manage its reinsurance recoverable proportionate to its book
587	587	of business. A domestic ceding insurer shall notify the
588	588	commissioner not later than the 30th day after the date reinsurance
589	589	recoverable from any single assuming insurer, or group of
590	590	affiliated assuming insurers, exceeds or is likely to exceed 50
591	591	percent of the domestic ceding insurer's last reported surplus to
592	592	policyholders. The notification shall demonstrate that the
593	593	exposure is safely managed by the domestic ceding insurer.
594	594	(b) A ceding insurer shall diversify its reinsurance
595	595	program. A domestic ceding insurer shall notify the commissioner
596	596	not later than the 30th day after the date the insurer cedes to any
597	597	single assuming insurer, or group of affiliated assuming insurers,
598	598	an amount that exceeds or is likely to exceed 20 percent of the
599	599	ceding insurer's gross written premium in the prior calendar year.
600	600	The notification shall demonstrate that the exposure is safely
601	601	managed by the domestic ceding insurer.
602	602	SECTION 10. Section 493.151, Insurance Code, is amended to
603	603	read as follows:
604	604	Sec. 493.151. APPLICABILITY OF SUBCHAPTER. This subchapter
605	605	applies to:
606	606	(1) a trust that is used to qualify for a reinsurance
607	607	credit under Section 493.102(a)(3) and as described by Sections
608	608	493.1036(e) and (f); and
609	609	(2) [to] the assuming insurer that maintains the trust
610	610	fund.
611	611	SECTION 11. Section 493.152, Insurance Code, is amended by
612	612	amending Subsection (a) and adding Subsection (a-1) to read as
613	613	follows:
614	614	(a) If the assuming insurer is a single insurer, the trust
615	615	must:
616	616	(1) consist of a trusteed account representing the
617	617	assuming insurer's liabilities attributable to business written in
618	618	the United States; and
619	619	(2) include a trusteed surplus of at least $20
620	620	million, except after the assuming insurer has permanently
621	621	discontinued underwriting new business secured by the trust for not
622	622	less than three calendar years, the insurance commissioner or other
623	623	chief insurance regulatory official with principal regulatory
624	624	oversight over the trust may authorize a reduction in the required
625	625	trusteed surplus, but only after a finding, based on an assessment
626	626	of the risk, that the new required surplus level is adequate for the
627	627	protection of United States ceding insurers, policyholders, and
628	628	claimants in light of reasonably foreseeable adverse loss
629	629	development.
630	630	(a-1) The risk assessment described by Subsection (a)(2)
631	631	may involve an actuarial review, including an independent analysis
632	632	of reserves and cash flows, and must consider all material risk
633	633	factors, including when applicable, the lines of business involved,
634	634	the stability of the incurred loss estimates, and the effect of the
635	635	surplus requirements on the assuming insurer's liquidity or
636	636	solvency. The minimum required trusteed surplus may not be reduced
637	637	to an amount less than 30 percent of the assuming insurer's
638	638	liabilities attributable to reinsurance ceded by United States
639	639	ceding insurers.
640	640	SECTION 12. Section 493.155(b), Insurance Code, is amended
641	641	to read as follows:
642	642	(b) To enable the commissioner to determine the sufficiency
643	643	of the trust fund under Section 493.102(a)(3) and for purposes of
644	644	Sections 493.1036(e) and (f), the assuming insurer shall report to
645	645	the department not later than March 1 of each year information
646	646	substantially the same as the information required to be reported
647	647	by an authorized insurer on the National Association of Insurance
648	648	Commissioners' Annual Statement form.
649	649	SECTION 13. Section 493.156(a), Insurance Code, is amended
650	650	to read as follows:
651	651	(a) A ceding insurer may not be allowed credit under Section
652	652	493.102(a)(3) for reinsurance ceded to an assuming insurer that is
653	653	not authorized, [or] accredited, or certified to engage in the
654	654	business of insurance or reinsurance in this state unless the
655	655	assuming insurer agrees in the reinsurance contract:
656	656	(1) that, if the assuming insurer fails to perform the
657	657	assuming insurer's obligations under the reinsurance contract, the
658	658	assuming insurer, at the request of the ceding insurer, will:
659	659	(A) submit to the jurisdiction of a court in any
660	660	state of the United States;
661	661	(B) comply with all requirements necessary to
662	662	give the court jurisdiction; and
663	663	(C) abide by the final decision of that court or,
664	664	if the court's decision is appealed, of the appellate court; and
665	665	(2) to designate the commissioner or an attorney as an
666	666	agent for service of process in any action, suit, or proceeding
667	667	instituted by or on behalf of the ceding insurer.
668	668	SECTION 14. Subchapter D, Chapter 493, Insurance Code, is
669	669	amended by adding Section 493.1561 to read as follows:
670	670	Sec. 493.1561. CERTAIN TRUSTEED ASSUMING REINSURERS;
671	671	REQUIREMENTS FOR TRUST AGREEMENTS. (a) In this section,
672	672	"commissioner" means the insurance commissioner or other chief
673	673	insurance regulatory official with principal regulatory oversight
674	674	over the trust.
675	675	(b) If the assuming insurer does not meet the requirements
676	676	of Section 493.102(a)(1) or (2), the credit permitted by Section
677	677	493.102(a)(3) or (4) may not be allowed unless the assuming insurer
678	678	agrees in the trust agreements that:
679	679	(1) notwithstanding any other provisions in the trust
680	680	agreement, the trustee shall comply with an order of the
681	681	commissioner or a court ordering the trustee to transfer to the
682	682	commissioner all assets of the trust fund if:
683	683	(A) the trust fund is inadequate because the
684	684	trust fund contains an amount that is less than the amount required
685	685	by this subchapter; or
686	686	(B) the grantor of the trust has been declared
687	687	insolvent or placed into receivership, rehabilitation, or
688	688	liquidation or a similar proceeding under the laws of the grantor's
689	689	domiciliary state or country;
690	690	(2) claims in a proceeding described by Subdivision
691	691	(1)(B) must be filed with the commissioner;
692	692	(3) the commissioner shall value the claims described
693	693	by Subdivision (2) and distribute the assets of the trust under the
694	694	laws of the trust's domiciliary state applicable to the liquidation
695	695	of a domestic insurance company;
696	696	(4) if the commissioner determines that all or part of
697	697	the trust assets are unnecessary to satisfy the claims of the
698	698	grantor's ceding insurers domiciled in the United States, the
699	699	commissioner shall return those unnecessary assets to the trustee
700	700	for distribution in accordance with the trust agreement; and
701	701	(5) the grantor waives any right available under
702	702	federal or state law that is inconsistent with this section.
703	703	SECTION 15. This Act applies only to a reinsurance contract
704	704	that is entered into or renewed on or after January 1, 2016. A
705	705	reinsurance contract that is entered into or renewed before January
706	706	1, 2016, is governed by the law as it existed immediately before the
707	707	effective date of this Act, and that law is continued in effect for
708	708	that purpose.
709	709	SECTION 16. This Act takes effect September 1, 2015.