Texas 2017 - 85th Regular

Texas Senate Bill SB1071 Compare Versions

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1	1	By: Hancock S.B. No. 1071
2	2	(In the Senate - Filed February 23, 2017; March 7, 2017,
3	3	read first time and referred to Committee on Business & Commerce;
4	4	April 24, 2017, reported adversely, with favorable Committee
5	5	Substitute by the following vote: Yeas 9, Nays 0; April 24, 2017,
6	6	sent to printer.)
7	7	Click here to see the committee vote
8	8	COMMITTEE SUBSTITUTE FOR S.B. No. 1071 By: Hancock
9	9
10	10
11	11	A BILL TO BE ENTITLED
12	12	AN ACT
13	13	relating to the regulation of insurance holding company systems,
14	14	including internationally active insurance groups; authorizing a
15	15	fee.
16	16	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
17	17	SECTION 1. Section 823.002, Insurance Code, is amended by
18	18	adding Subdivisions (4-b) and (6-a) to read as follows:
19	19	(4-b) "Group-wide supervisor" means the regulatory
20	20	official authorized to engage in conducting and coordinating
21	21	group-wide supervision activities who is determined or
22	22	acknowledged by the commissioner under Section 823.0147 to have
23	23	sufficient significant contacts with the internationally active
24	24	insurance group.
25	25	(6-a) "Internationally active insurance group" means
26	26	an insurance holding company system that:
27	27	(A) includes an insurer registered under
28	28	Subchapter B; and
29	29	(B) meets the following criteria:
30	30	(i) has premiums written in at least three
31	31	countries;
32	32	(ii) has a percentage of gross premiums
33	33	written outside the United States of at least 10 percent of the
34	34	insurance holding company system's total gross written premiums;
35	35	and
36	36	(iii) based on a three-year rolling
37	37	average, has total assets of at least $50 billion or total gross
38	38	written premiums of at least $10 billion.
39	39	SECTION 2. Sections 823.011(a), (d), and (d-1), Insurance
40	40	Code, are amended to read as follows:
41	41	(a) This section applies only to information, including
42	42	documents and copies of documents, that is:
43	43	(1) reported or otherwise provided under Subchapter B
44	44	or C or Section 823.201(d) or (e) or Section 823.0147;
45	45	(2) disclosed to the commissioner under Section
46	46	823.010; or
47	47	(3) obtained by or disclosed to the commissioner or
48	48	another person in the course of an examination or investigation
49	49	under Subchapter H or Chapter 401.
50	50	(d) Except as provided by Subsection (e), if the recipient
51	51	of documents or other information described by Subsection (a)
52	52	agrees in writing to maintain the confidential and privileged
53	53	status of the documents or other information, and verifies in
54	54	writing the legal authority to maintain the confidential and
55	55	privileged status of the documents or information, the commissioner
56	56	or another person may disclose the information to any of the
57	57	following entities functioning in an official capacity:
58	58	(1) a commissioner of insurance or an insurance
59	59	department of another state;
60	60	(2) an authorized law enforcement official;
61	61	(3) a district attorney of this state;
62	62	(4) the attorney general;
63	63	(5) a grand jury;
64	64	(6) members of a supervisory college described by
65	65	Section 823.0145;
66	66	(7) the National Association of Insurance
67	67	Commissioners and its affiliates and subsidiaries; or
68	68	(8) another state, federal, or international
69	69	regulatory agency.
70	70	(d-1) The commissioner may receive documents or
71	71	information, including otherwise confidential and privileged
72	72	documents or information, from the entities listed in Subsection
73	73	(d)[,] and shall maintain as confidential or privileged any
74	74	document or information received by the commissioner with notice or
75	75	an understanding that the document or information is confidential
76	76	or privileged under the laws of the jurisdiction of the entity that
77	77	provides the document or information.
78	78	SECTION 3. Subchapter A, Chapter 823, Insurance Code, is
79	79	amended by adding Section 823.0147 to read as follows:
80	80	Sec. 823.0147. GROUP-WIDE SUPERVISION OF INTERNATIONALLY
81	81	ACTIVE INSURANCE GROUPS. (a) The commissioner is authorized to
82	82	act as the group-wide supervisor for any internationally active
83	83	insurance group under the provisions of this section.
84	84	(b) The commissioner may otherwise acknowledge another
85	85	regulatory official as the group-wide supervisor where the
86	86	internationally active insurance group:
87	87	(1) does not have substantial insurance operations in
88	88	the United States;
89	89	(2) has substantial insurance operations in the United
90	90	States, but not in this state; or
91	91	(3) has substantial insurance operations in the United
92	92	States and this state, but the commissioner has determined under
93	93	the factors in Subsections (e) and (k) that the other regulatory
94	94	official is the appropriate group-wide supervisor.
95	95	(c) An insurance holding company system that does not
96	96	otherwise qualify as an internationally active insurance group may
97	97	request that the commissioner make a determination or
98	98	acknowledgment as to a group-wide supervisor under this section.
99	99	(d) In cooperation with other state, federal, and
100	100	international regulatory agencies, the commissioner will identify
101	101	a single group-wide supervisor for an internationally active
102	102	insurance group. The commissioner may determine that the
103	103	commissioner is the appropriate group-wide supervisor for an
104	104	internationally active insurance group that conducts substantial
105	105	insurance operations concentrated in this state. The commissioner
106	106	may acknowledge that a regulatory official from another
107	107	jurisdiction is the appropriate group-wide supervisor for the
108	108	internationally active insurance group.
109	109	(e) The commissioner shall consider the following factors
110	110	when making a determination or acknowledgment under Subsection (d):
111	111	(1) the place of domicile of the insurers within the
112	112	internationally active insurance group that hold the largest share
113	113	of the group's written premiums, assets, or liabilities;
114	114	(2) the place of domicile of the top-tiered insurers
115	115	in the insurance holding company system of the internationally
116	116	active insurance group;
117	117	(3) the location of the executive offices or largest
118	118	operational offices of the internationally active insurance group;
119	119	(4) whether another regulatory official is acting or
120	120	is seeking to act as the group-wide supervisor under a regulatory
121	121	system that the commissioner determines to be:
122	122	(A) substantially similar to the system of
123	123	regulation provided under the laws of this state; or
124	124	(B) otherwise sufficient in terms of providing
125	125	for group-wide supervision, enterprise risk analysis, and
126	126	cooperation with other regulatory officials; and
127	127	(5) whether another regulatory official acting or
128	128	seeking to act as the group-wide supervisor provides the
129	129	commissioner with reasonably reciprocal recognition and
130	130	cooperation.
131	131	(f) A commissioner identified under this section as the
132	132	group-wide supervisor may determine that it is appropriate to
133	133	acknowledge another supervisor to serve as the group-wide
134	134	supervisor. The acknowledgment of the group-wide supervisor shall
135	135	be made after consideration of the factors listed in Subsection
136	136	(e), and shall be made in cooperation with and subject to the
137	137	acknowledgment of other regulatory officials involved with
138	138	supervision of members of the internationally active insurance
139	139	group, and in consultation with the internationally active
140	140	insurance group.
141	141	(g) Notwithstanding any other provision of law, when
142	142	another regulatory official is acting as the group-wide supervisor
143	143	of an internationally active insurance group, the commissioner
144	144	shall acknowledge that regulatory official as the group-wide
145	145	supervisor.
146	146	(h) The commissioner shall make a determination or
147	147	acknowledgment as to the appropriate group-wide supervisor for an
148	148	internationally active insurance group under Subsection (d) or (f)
149	149	in the event of a material change in the internationally active
150	150	insurance group that results in:
151	151	(1) the internationally active insurance group's
152	152	insurers domiciled in this state holding the largest share of the
153	153	group's premiums, assets, or liabilities; or
154	154	(2) this state being the place of domicile of the
155	155	top-tiered insurers in the insurance holding company system of the
156	156	internationally active insurance group.
157	157	(i) Under Subchapter H, the commissioner is authorized to
158	158	collect from any insurer registered under Subchapter B all
159	159	information necessary to determine whether the commissioner may act
160	160	as the group-wide supervisor of an internationally active insurance
161	161	group or if the commissioner may acknowledge another regulatory
162	162	official to act as the group-wide supervisor. Prior to issuing a
163	163	determination that an internationally active insurance group is
164	164	subject to group-wide supervision by the commissioner, the
165	165	commissioner shall notify the insurer registered under Subchapter B
166	166	and the ultimate controlling person within the internationally
167	167	active insurance group. The internationally active insurance group
168	168	shall have not less than 30 days to provide the commissioner with
169	169	additional information pertinent to the pending determination. The
170	170	commissioner may publish on the department's website the identity
171	171	of internationally active insurance groups that the commissioner
172	172	has determined are subject to group-wide supervision by the
173	173	commissioner.
174	174	(j) If the commissioner is the group-wide supervisor for an
175	175	internationally active insurance group, the commissioner is
176	176	authorized to engage in any of the following group-wide supervision
177	177	activities:
178	178	(1) assess the enterprise risks within the
179	179	internationally active insurance group to ensure that:
180	180	(A) the material financial condition and
181	181	liquidity risks to the members of the internationally active
182	182	insurance group that are engaged in the business of insurance are
183	183	identified by management; and
184	184	(B) reasonable and effective mitigation measures
185	185	are in place;
186	186	(2) request, from any member of an internationally
187	187	active insurance group subject to the commissioner's supervision,
188	188	information necessary and appropriate to assess enterprise risk,
189	189	including information about the members of the internationally
190	190	active insurance group regarding:
191	191	(A) governance, risk assessment, and management;
192	192	(B) capital adequacy; and
193	193	(C) material intercompany transactions;
194	194	(3) coordinate and, through the authority of the
195	195	regulatory officials of the jurisdictions where members of the
196	196	internationally active insurance group are domiciled, compel
197	197	development and implementation of reasonable measures designed to
198	198	ensure that the internationally active insurance group is able to
199	199	timely recognize and mitigate enterprise risks to members of the
200	200	internationally active insurance group that are engaged in the
201	201	business of insurance;
202	202	(4) communicate with other state, federal, and
203	203	international regulatory agencies for members within the
204	204	internationally active insurance group and share relevant
205	205	information, subject to the confidentiality provisions of Section
206	206	823.011, through supervisory colleges in Section 823.0145 or
207	207	otherwise;
208	208	(5) enter into agreements with or obtain documentation
209	209	from any insurer registered under Subchapter B, any member of the
210	210	internationally active insurance group, and any other state,
211	211	federal, and international regulatory agencies for members of the
212	212	internationally active insurance group, providing the basis for or
213	213	otherwise clarifying the commissioner's role as group-wide
214	214	supervisor, including provisions for resolving disputes with other
215	215	regulatory officials, provided that such agreements or
216	216	documentation may not serve as evidence in any proceeding to show
217	217	that any insurer or person within an insurance holding company
218	218	system not domiciled or incorporated in this state is doing
219	219	business in this state or is otherwise subject to jurisdiction in
220	220	this state; and
221	221	(6) other group-wide supervision activities,
222	222	consistent with the authorities and purposes enumerated above, as
223	223	considered necessary by the commissioner.
224	224	(k) If the commissioner acknowledges that another
225	225	regulatory official from a jurisdiction that is not accredited by
226	226	the National Association of Insurance Commissioners is the
227	227	group-wide supervisor, the commissioner is authorized to
228	228	reasonably cooperate, through supervisory colleges or otherwise,
229	229	with group-wide supervision undertaken by the group-wide
230	230	supervisor, provided that:
231	231	(1) the commissioner's cooperation is in compliance
232	232	with the laws of this state; and
233	233	(2) the regulatory official acknowledged as the
234	234	group-wide supervisor also recognizes and cooperates with the
235	235	commissioner's activities as a group-wide supervisor for other
236	236	internationally active insurance groups where applicable.
237	237	(l) Where recognition and cooperation are not reasonably
238	238	reciprocal under Subsection (k)(2), the commissioner is authorized
239	239	to refuse recognition and cooperation.
240	240	(m) The commissioner is authorized to enter into agreements
241	241	with or obtain documentation from any insurer registered under
242	242	Subchapter B, any affiliate of the insurer, and other state,
243	243	federal, and international regulatory agencies for members of the
244	244	internationally active insurance group that provides the basis for
245	245	or otherwise clarifies a regulatory official's role as group-wide
246	246	supervisor.
247	247	(n) The commissioner may adopt rules necessary for the
248	248	administration of this section.
249	249	(o) A registered insurer subject to this section shall be
250	250	liable for and shall pay the reasonable expenses of the
251	251	commissioner's participation in the administration of this
252	252	section, including the engagement of attorneys, actuaries, and any
253	253	other professionals and all reasonable travel expenses.
254	254	SECTION 4. Section 823.054(b), Insurance Code, is amended
255	255	to read as follows:
256	256	(b) If the amount of a single transaction or the total
257	257	amount of all transactions involving sales, purchases, exchanges,
258	258	loans or other extensions of credit, or investments is more than
259	259	[the lesser of] one-half of one percent of an insurer's admitted
260	260	assets [or five percent of an insurer's surplus,] as of December 31
261	261	of the year preceding the date of the transaction or transactions,
262	262	the transaction or transactions, respectively, are considered to be
263	263	material for purposes of this section.
264	264	SECTION 5. (a) Section 823.011, Insurance Code, as amended
265	265	by this Act, applies only to information, including documents and
266	266	copies of documents, obtained by or reported, disclosed, or
267	267	otherwise provided to the commissioner of insurance on or after the
268	268	effective date of this Act. Information, including documents and
269	269	copies of documents, obtained by or reported, disclosed, or
270	270	otherwise provided to the commissioner of insurance before the
271	271	effective date of this Act is governed by the law in effect on the
272	272	date the transaction occurred, and the former law is continued in
273	273	effect for that purpose.
274	274	(b) Section 823.054, Insurance Code, as amended by this Act,
275	275	applies only to a transaction that occurs on or after the effective
276	276	date of this Act. A transaction that occurs before the effective
277	277	date of this Act is governed by the law in effect on the date the
278	278	transaction occurred, and the former law is continued in effect for
279	279	that purpose.
280	280	SECTION 6. This Act takes effect immediately if it receives
281	281	a vote of two-thirds of all the members elected to each house, as
282	282	provided by Section 39, Article III, Texas Constitution. If this
283	283	Act does not receive the vote necessary for immediate effect, this
284	284	Act takes effect September 1, 2017.
285	285	* * * * *