By: Hancock S.B. No. 1071
(In the Senate - Filed February 23, 2017; March 7, 2017,
read first time and referred to Committee on Business & Commerce;
April 24, 2017, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 9, Nays 0; April 24, 2017,
sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 1071 By: Hancock
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of insurance holding company systems,
including internationally active insurance groups; authorizing a
fee.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 823.002, Insurance Code, is amended by
adding Subdivisions (4-b) and (6-a) to read as follows:
(4-b) "Group-wide supervisor" means the regulatory
official authorized to engage in conducting and coordinating
group-wide supervision activities who is determined or
acknowledged by the commissioner under Section 823.0147 to have
sufficient significant contacts with the internationally active
insurance group.
(6-a) "Internationally active insurance group" means
an insurance holding company system that:
(A) includes an insurer registered under
Subchapter B; and
(B) meets the following criteria:
(i) has premiums written in at least three
countries;
(ii) has a percentage of gross premiums
written outside the United States of at least 10 percent of the
insurance holding company system's total gross written premiums;
and
(iii) based on a three-year rolling
average, has total assets of at least $50 billion or total gross
written premiums of at least $10 billion.
SECTION 2. Sections 823.011(a), (d), and (d-1), Insurance
Code, are amended to read as follows:
(a) This section applies only to information, including
documents and copies of documents, that is:
(1) reported or otherwise provided under Subchapter B
or C or Section 823.201(d) or (e) or Section 823.0147;
(2) disclosed to the commissioner under Section
823.010; or
(3) obtained by or disclosed to the commissioner or
another person in the course of an examination or investigation
under Subchapter H or Chapter 401.
(d) Except as provided by Subsection (e), if the recipient
of documents or other information described by Subsection (a)
agrees in writing to maintain the confidential and privileged
status of the documents or other information, and verifies in
writing the legal authority to maintain the confidential and
privileged status of the documents or information, the commissioner
or another person may disclose the information to any of the
following entities functioning in an official capacity:
(1) a commissioner of insurance or an insurance
department of another state;
(2) an authorized law enforcement official;
(3) a district attorney of this state;
(4) the attorney general;
(5) a grand jury;
(6) members of a supervisory college described by
Section 823.0145;
(7) the National Association of Insurance
Commissioners and its affiliates and subsidiaries; or
(8) another state, federal, or international
regulatory agency.
(d-1) The commissioner may receive documents or
information, including otherwise confidential and privileged
documents or information, from the entities listed in Subsection
(d)[,] and shall maintain as confidential or privileged any
document or information received by the commissioner with notice or
an understanding that the document or information is confidential
or privileged under the laws of the jurisdiction of the entity that
provides the document or information.
SECTION 3. Subchapter A, Chapter 823, Insurance Code, is
amended by adding Section 823.0147 to read as follows:
Sec. 823.0147. GROUP-WIDE SUPERVISION OF INTERNATIONALLY
ACTIVE INSURANCE GROUPS. (a) The commissioner is authorized to
act as the group-wide supervisor for any internationally active
insurance group under the provisions of this section.
(b) The commissioner may otherwise acknowledge another
regulatory official as the group-wide supervisor where the
internationally active insurance group:
(1) does not have substantial insurance operations in
the United States;
(2) has substantial insurance operations in the United
States, but not in this state; or
(3) has substantial insurance operations in the United
States and this state, but the commissioner has determined under
the factors in Subsections (e) and (k) that the other regulatory
official is the appropriate group-wide supervisor.
(c) An insurance holding company system that does not
otherwise qualify as an internationally active insurance group may
request that the commissioner make a determination or
acknowledgment as to a group-wide supervisor under this section.
(d) In cooperation with other state, federal, and
international regulatory agencies, the commissioner will identify
a single group-wide supervisor for an internationally active
insurance group. The commissioner may determine that the
commissioner is the appropriate group-wide supervisor for an
internationally active insurance group that conducts substantial
insurance operations concentrated in this state. The commissioner
may acknowledge that a regulatory official from another
jurisdiction is the appropriate group-wide supervisor for the
internationally active insurance group.
(e) The commissioner shall consider the following factors
when making a determination or acknowledgment under Subsection (d):
(1) the place of domicile of the insurers within the
internationally active insurance group that hold the largest share
of the group's written premiums, assets, or liabilities;
(2) the place of domicile of the top-tiered insurers
in the insurance holding company system of the internationally
active insurance group;
(3) the location of the executive offices or largest
operational offices of the internationally active insurance group;
(4) whether another regulatory official is acting or
is seeking to act as the group-wide supervisor under a regulatory
system that the commissioner determines to be:
(A) substantially similar to the system of
regulation provided under the laws of this state; or
(B) otherwise sufficient in terms of providing
for group-wide supervision, enterprise risk analysis, and
cooperation with other regulatory officials; and
(5) whether another regulatory official acting or
seeking to act as the group-wide supervisor provides the
commissioner with reasonably reciprocal recognition and
cooperation.
(f) A commissioner identified under this section as the
group-wide supervisor may determine that it is appropriate to
acknowledge another supervisor to serve as the group-wide
supervisor. The acknowledgment of the group-wide supervisor shall
be made after consideration of the factors listed in Subsection
(e), and shall be made in cooperation with and subject to the
acknowledgment of other regulatory officials involved with
supervision of members of the internationally active insurance
group, and in consultation with the internationally active
insurance group.
(g) Notwithstanding any other provision of law, when
another regulatory official is acting as the group-wide supervisor
of an internationally active insurance group, the commissioner
shall acknowledge that regulatory official as the group-wide
supervisor.
(h) The commissioner shall make a determination or
acknowledgment as to the appropriate group-wide supervisor for an
internationally active insurance group under Subsection (d) or (f)
in the event of a material change in the internationally active
insurance group that results in:
(1) the internationally active insurance group's
insurers domiciled in this state holding the largest share of the
group's premiums, assets, or liabilities; or
(2) this state being the place of domicile of the
top-tiered insurers in the insurance holding company system of the
internationally active insurance group.
(i) Under Subchapter H, the commissioner is authorized to
collect from any insurer registered under Subchapter B all
information necessary to determine whether the commissioner may act
as the group-wide supervisor of an internationally active insurance
group or if the commissioner may acknowledge another regulatory
official to act as the group-wide supervisor. Prior to issuing a
determination that an internationally active insurance group is
subject to group-wide supervision by the commissioner, the
commissioner shall notify the insurer registered under Subchapter B
and the ultimate controlling person within the internationally
active insurance group. The internationally active insurance group
shall have not less than 30 days to provide the commissioner with
additional information pertinent to the pending determination. The
commissioner may publish on the department's website the identity
of internationally active insurance groups that the commissioner
has determined are subject to group-wide supervision by the
commissioner.
(j) If the commissioner is the group-wide supervisor for an
internationally active insurance group, the commissioner is
authorized to engage in any of the following group-wide supervision
activities:
(1) assess the enterprise risks within the
internationally active insurance group to ensure that:
(A) the material financial condition and
liquidity risks to the members of the internationally active
insurance group that are engaged in the business of insurance are
identified by management; and
(B) reasonable and effective mitigation measures
are in place;
(2) request, from any member of an internationally
active insurance group subject to the commissioner's supervision,
information necessary and appropriate to assess enterprise risk,
including information about the members of the internationally
active insurance group regarding:
(A) governance, risk assessment, and management;
(B) capital adequacy; and
(C) material intercompany transactions;
(3) coordinate and, through the authority of the
regulatory officials of the jurisdictions where members of the
internationally active insurance group are domiciled, compel
development and implementation of reasonable measures designed to
ensure that the internationally active insurance group is able to
timely recognize and mitigate enterprise risks to members of the
internationally active insurance group that are engaged in the
business of insurance;
(4) communicate with other state, federal, and
international regulatory agencies for members within the
internationally active insurance group and share relevant
information, subject to the confidentiality provisions of Section
823.011, through supervisory colleges in Section 823.0145 or
otherwise;
(5) enter into agreements with or obtain documentation
from any insurer registered under Subchapter B, any member of the
internationally active insurance group, and any other state,
federal, and international regulatory agencies for members of the
internationally active insurance group, providing the basis for or
otherwise clarifying the commissioner's role as group-wide
supervisor, including provisions for resolving disputes with other
regulatory officials, provided that such agreements or
documentation may not serve as evidence in any proceeding to show
that any insurer or person within an insurance holding company
system not domiciled or incorporated in this state is doing
business in this state or is otherwise subject to jurisdiction in
this state; and
(6) other group-wide supervision activities,
consistent with the authorities and purposes enumerated above, as
considered necessary by the commissioner.
(k) If the commissioner acknowledges that another
regulatory official from a jurisdiction that is not accredited by
the National Association of Insurance Commissioners is the
group-wide supervisor, the commissioner is authorized to
reasonably cooperate, through supervisory colleges or otherwise,
with group-wide supervision undertaken by the group-wide
supervisor, provided that:
(1) the commissioner's cooperation is in compliance
with the laws of this state; and
(2) the regulatory official acknowledged as the
group-wide supervisor also recognizes and cooperates with the
commissioner's activities as a group-wide supervisor for other
internationally active insurance groups where applicable.
(l) Where recognition and cooperation are not reasonably
reciprocal under Subsection (k)(2), the commissioner is authorized
to refuse recognition and cooperation.
(m) The commissioner is authorized to enter into agreements
with or obtain documentation from any insurer registered under
Subchapter B, any affiliate of the insurer, and other state,
federal, and international regulatory agencies for members of the
internationally active insurance group that provides the basis for
or otherwise clarifies a regulatory official's role as group-wide
supervisor.
(n) The commissioner may adopt rules necessary for the
administration of this section.
(o) A registered insurer subject to this section shall be
liable for and shall pay the reasonable expenses of the
commissioner's participation in the administration of this
section, including the engagement of attorneys, actuaries, and any
other professionals and all reasonable travel expenses.
SECTION 4. Section 823.054(b), Insurance Code, is amended
to read as follows:
(b) If the amount of a single transaction or the total
amount of all transactions involving sales, purchases, exchanges,
loans or other extensions of credit, or investments is more than
[the lesser of] one-half of one percent of an insurer's admitted
assets [or five percent of an insurer's surplus,] as of December 31
of the year preceding the date of the transaction or transactions,
the transaction or transactions, respectively, are considered to be
material for purposes of this section.
SECTION 5. (a) Section 823.011, Insurance Code, as amended
by this Act, applies only to information, including documents and
copies of documents, obtained by or reported, disclosed, or
otherwise provided to the commissioner of insurance on or after the
effective date of this Act. Information, including documents and
copies of documents, obtained by or reported, disclosed, or
otherwise provided to the commissioner of insurance before the
effective date of this Act is governed by the law in effect on the
date the transaction occurred, and the former law is continued in
effect for that purpose.
(b) Section 823.054, Insurance Code, as amended by this Act,
applies only to a transaction that occurs on or after the effective
date of this Act. A transaction that occurs before the effective
date of this Act is governed by the law in effect on the date the
transaction occurred, and the former law is continued in effect for
that purpose.
SECTION 6. 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, 2017.
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