By: Eltife S.B. No. 572
(In the Senate - Filed February 13, 2015; February 23, 2015,
read first time and referred to Committee on Business and Commerce;
March 31, 2015, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 7, Nays 0; March 31, 2015,
sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 572 By: Eltife
A BILL TO BE ENTITLED
AN ACT
relating to certain title insurance policy liability and
reinsurance requirements.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2551.301, Insurance Code, is amended to
read as follows:
Sec. 2551.301. MAXIMUM POLICY LIABILITY. (a) Except as
provided by Subsection (b), a title insurance company may [not]
issue a title insurance policy on any real property located in this
state involving a potential policy liability of not more than 50
percent of the sum of the company's [capital stock and] surplus as
regards policyholders and the company's statutory premium reserves
as stated in the most recent annual statement of the company.
(b) A title insurance company may exceed the limit described
by Subsection (a) if the excess liability is reinsured in due course
in accordance with Section 2551.302, 2551.305, or 2551.3055 [an
authorized title insurance company].
SECTION 2. 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
(2) the title insurance company acquires reinsurance
in accordance with Section 2551.305 or 2551.3055.
SECTION 3. Subchapter G, Chapter 2551, Insurance Code, is
amended by amending Section 2551.305 and adding Section 2551.3055
to read as follows:
Sec. 2551.305. [CERTAIN] REINSURANCE FROM NON-ADMITTED
TITLE INSURER [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:
(1) [(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
(2) [(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 million as stated in its annual statement preceding the
acceptance of reinsurance.
[(d) 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); 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].
Sec. 2551.3055. REINSURANCE FROM INSURER OTHER THAN TITLE
INSURER. [(e)] Notwithstanding any other provision of this
subchapter, a title insurance company may obtain reinsurance by a
reinsurance treaty or other reinsurance agreement from an assuming
insurer with a financial strength rating of B+ or better from the A.
M. Best Company, which reinsurance [that] meets the requirements of
Subchapter C, Chapter 493, if the title insurance company has
provided the department with notice [an affidavit] that:
(1) contains representations [facts] that
[demonstrate] the title insurance company was unable after diligent
effort to procure sufficient reinsurance from another title
insurance company; and
(2) summarizes [states] the terms of the reinsurance
treaty or other reinsurance agreement that the title insurance
company will obtain.
SECTION 4. Section 2703.001(c), Insurance Code, is amended
to read as follows:
(c) With respect to real property located in this state, a
corporation may not issue any kind of title insurance coverage, any
kind of guarantee, or reinsurance of a risk assumed under a title
insurance policy, except as provided by Section 2551.305 or
2551.3055 [2551.305(a)], unless the corporation is authorized to
engage in the business of title insurance under this title and
otherwise complies with this title. In engaging in the business of
title insurance with respect to real property located in this
state, the corporation shall comply with this title and rules
described by Subsection (b), including when:
(1) issuing any kind of title insurance policy or an
underwriting contract;
(2) reinsuring any portion of a risk assumed under a
title insurance policy; and
(3) deleting a title insurance policy exclusion.
SECTION 5. (a) Section 2551.301, Insurance Code, as
amended by this Act, applies only to a title insurance policy issued
on or after the effective date of this Act. A title insurance
policy issued before the effective date of this Act is governed by
the law as it existed immediately before the effective date of this
Act, and the former law is continued in effect for that purpose.
(b) Sections 2551.302 and 2551.305, Insurance Code, as
amended by this Act, and Section 2551.3055, Insurance Code, as
added by this Act, apply 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
as it existed immediately before the effective date of this Act, and
the former law is continued in effect for that purpose.
SECTION 6. This Act takes effect September 1, 2015.
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