Texas 2019 - 86th Regular

Texas House Bill HB3306 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	H.B. No. 3306
	1	+	By: Smithee (Senate Sponsor - Zaffirini) H.B. No. 3306
	2	+	(In the Senate - Received from the House May 6, 2019;
	3	+	May 6, 2019, read first time and referred to Committee on Business &
	4	+	Commerce; May 15, 2019, reported favorably by the following vote:
	5	+	Yeas 7, Nays 0; May 15, 2019, sent to printer.)
	6	+	Click here to see the committee vote
2	7
3	8
	9	+	A BILL TO BE ENTITLED
4	10		AN ACT
5	11		relating to the disclosure of information concerning the corporate
6	12		governance structure of certain insurers and related entities;
7	13		providing an administrative penalty.
8	14		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	15		SECTION 1. Subtitle B, Title 6, Insurance Code, is amended
10	16		by adding Chapter 831 to read as follows:
11	17		CHAPTER 831. CORPORATE GOVERNANCE ANNUAL DISCLOSURE
12	18		Sec. 831.0001. APPLICABILITY AND PURPOSE. (a) The purpose
13	19		of this chapter is to promote the public interest by:
14	20		(1) requiring annual disclosure of an insurer or
15	21		insurance group's corporate governance structure, policies, and
16	22		practices to permit the commissioner to gain and maintain an
17	23		understanding of the insurer's corporate governance framework; and
18	24		(2) providing for the confidential treatment of the
19	25		corporate governance annual disclosure and related information as
20	26		the disclosure and related information will contain confidential
21	27		and sensitive information related to an insurer or insurance
22	28		group's internal operations and proprietary and trade-secret
23	29		information which, if made public, could potentially cause the
24	30		insurer or insurance group competitive harm or disadvantage.
25	31		(b) This chapter may not be construed to prescribe or impose
26	32		corporate governance standards and internal procedures beyond that
27	33		which is required under applicable state corporate law.
28	34		(c) Notwithstanding Subsection (b), this chapter may not be
29	35		construed to limit the commissioner's authority, or the rights or
30	36		obligations of third parties, under Chapter 401.
31	37		(d) This chapter applies to each insurer domiciled in this
32	38		state, except that this chapter does not apply to a domestic insurer
33	39		that is authorized, admitted, or eligible to engage in the business
34	40		of insurance only in this state. For the purposes of this chapter,
35	41		an insurer is not considered to be authorized, admitted, or
36	42		eligible to engage in the business of insurance only in this state
37	43		if the insurer is a member of an insurance group that writes or
38	44		assumes insurance in any manner in another state.
39	45		Sec. 831.0002. DEFINITIONS. In this chapter:
40	46		(1) "Disclosure" means the confidential corporate
41	47		governance annual disclosure filed by the insurer or insurance
42	48		group in accordance with the requirements of this chapter.
43	49		(2) "Insurance group" means the insurers and
44	50		affiliates included within an insurance holding company system as
45	51		described by Section 823.006.
46	52		(3) "Insurer" has the meaning assigned by Section
47	53		823.002. The term includes a health maintenance organization
48	54		authorized to engage in business under Chapter 843.
49	55		Sec. 831.0003. DISCLOSURE REQUIRED. (a) Except as
50	56		provided by Subsection (b), an insurer, or the insurance group of
51	57		which the insurer is a member, shall, not later than June 1 of each
52	58		calendar year, submit to the commissioner a corporate governance
53	59		annual disclosure that contains the information described by
54	60		Section 831.0008(c).
55	61		(b) Notwithstanding any request from the commissioner under
56	62		Subsection (d), an insurer that is a member of an insurance group
57	63		shall submit the report required by Subsection (a) to the
58	64		commissioner of the lead state for the insurance group, in
59	65		accordance with the laws of the lead state, as determined by the
60	66		procedures adopted by the National Association of Insurance
61	67		Commissioners.
62	68		(c) The disclosure must include a signature of the insurer
63	69		or insurance group's chief executive officer or corporate secretary
64	70		attesting to the best of that individual's belief and knowledge
65	71		that the insurer has implemented the corporate governance practices
66	72		described in the disclosure and that a copy of the disclosure has
67	73		been provided to the insurer's board of directors or the
68	74		appropriate committee of the insurer's board of directors.
69	75		(d) An insurer not otherwise required to submit a disclosure
70	76		under this chapter shall submit a disclosure on the commissioner's
71	77		request.
72	78		Sec. 831.0004. LEVEL OF REPORTING. (a) For purposes of
73	79		completing the disclosure under Section 831.0003, an insurer or
74	80		insurance group may provide information regarding corporate
75	81		governance at the ultimate controlling parent level, an
76	82		intermediate holding company level, or the individual legal entity
77	83		level, depending on how the insurer or insurance group has
78	84		structured the insurer's or insurance group's system of corporate
79	85		governance.
80	86		(b) An insurer or insurance group is encouraged to make the
81	87		disclosure:
82	88		(1) at the level at which the insurer's or insurance
83	89		group's risk appetite is determined;
84	90		(2) at the level at which the earnings, capital,
85	91		liquidity, operations, and reputation of the insurer are overseen
86	92		collectively and at which the supervision of those factors are
87	93		coordinated and exercised; or
88	94		(3) at the level at which legal liability for failure
89	95		of general corporate governance duties would be placed.
90	96		(c) If an insurer or insurance group determines the level of
91	97		reporting based on the criteria described by Subsection (b), the
92	98		insurer or insurance group shall indicate which of the three
93	99		criteria was used to determine the level of reporting and explain
94	100		any subsequent changes in level of reporting.
95	101		Sec. 831.0005. REVIEW OF DISCLOSURE; REQUEST FOR ADDITIONAL
96	102		INFORMATION. The review of the disclosure and any additional
97	103		requests for information shall be made through the lead state as
98	104		determined by the procedures adopted by the National Association of
99	105		Insurance Commissioners described by Section 831.0003(b).
100	106		Sec. 831.0006. SUBSTANTIALLY SIMILAR INFORMATION. An
101	107		insurer that provides information substantially similar to the
102	108		information required by this chapter in other documents provided to
103	109		the commissioner, including proxy statements filed in conjunction
104	110		with Form B requirements or other state or federal filings provided
105	111		to the department, is not required to duplicate that information in
106	112		the disclosure but is required only to cross-reference the document
107	113		in which the information is included.
108	114		Sec. 831.0007. PART OF EXAMINATION PROCESS. The disclosure
109	115		and any additional information requested by the commissioner and
110	116		provided to the department as described by this chapter is
111	117		considered part of the process of examination of insurers under
112	118		this code, including Chapter 401.
113	119		Sec. 831.0008. CONTENTS OF DISCLOSURE. (a) An insurer or
114	120		insurance group has discretion over the responses to the disclosure
115	121		inquiries, provided the disclosure must contain the material
116	122		information necessary to permit the commissioner to gain an
117	123		understanding of the insurer's or insurance group's corporate
118	124		governance structure, policies, and practices.
119	125		(b) The commissioner may request additional information
120	126		that the commissioner considers material and necessary to provide
121	127		the commissioner with a clear understanding of:
122	128		(1) the corporate governance policies; and
123	129		(2) the reporting, information system, or controls
124	130		implementing those policies.
125	131		(c) Notwithstanding Subsections (a) and (b), the disclosure
126	132		shall be prepared consistent with rules adopted by the
127	133		commissioner. Documentation and supporting information must be
128	134		maintained and made available on examination or on request of the
129	135		commissioner.
130	136		Sec. 831.0009. CONFIDENTIALITY. (a) Documents, materials,
131	137		or other information, including a disclosure, in the possession or
132	138		control of the department that is obtained by, created by, or
133	139		disclosed to the commissioner or any other person under this
134	140		chapter is confidential and privileged and is:
135	141		(1) not subject to disclosure under Chapter 552,
136	142		Government Code;
137	143		(2) not subject to subpoena; and
138	144		(3) not subject to discovery or admissible in evidence
139	145		in any private civil action.
140	146		(b) Documents, materials, or other information, including a
141	147		disclosure, in the possession or control of the department that is
142	148		obtained by, created by, or disclosed to the commissioner or any
143	149		other person under this chapter is recognized by this state as being
144	150		proprietary and to contain trade secrets.
145	151		(c) The commissioner may use the documents, materials, or
146	152		other information described in this section to further any
147	153		regulatory or legal action brought as part of the commissioner's
148	154		official duties. The commissioner may not otherwise make the
149	155		documents, materials, or other information public without the prior
150	156		written consent of the insurer. Nothing in this section may be
151	157		construed to require written consent of the insurer before the
152	158		commissioner may share or receive documents, materials, or other
153	159		information under Subsection (e).
154	160		(d) The commissioner and any other person who receives
155	161		documents, materials, or other information under this chapter,
156	162		through examination, or otherwise under any other law, while acting
157	163		under the authority of the commissioner, or with whom the
158	164		documents, materials, or other information is shared under this
159	165		chapter may not testify or be required to testify in any private
160	166		civil action concerning any documents, materials, or other
161	167		information subject to Subsection (a) or (b).
162	168		(e) In order to assist in the performance of the
163	169		commissioner's regulatory duties, the commissioner may, on
164	170		request, share documents, materials, or other information,
165	171		including confidential and privileged documents, materials, or
166	172		information subject to Subsection (a) or (b) and proprietary and
167	173		trade-secret documents, materials, or information, with:
168	174		(1) other state, federal, and international financial
169	175		regulatory agencies, including members of a supervisory college
170	176		described by Section 823.0145;
171	177		(2) the National Association of Insurance
172	178		Commissioners; and
173	179		(3) a third-party consultant under Section 831.0012.
174	180		(f) Before the commissioner may share information under
175	181		this section, the recipient shall:
176	182		(1) agree in writing to maintain the confidential and
177	183		privileged status of the documents, materials, or other information
178	184		shared under this section; and
179	185		(2) verify in writing the recipient's legal authority
180	186		to maintain the confidential and privileged status of that
181	187		information.
182	188		(g) In order to assist in the performance of the
183	189		commissioner's regulatory duties, the commissioner may receive
184	190		documents, materials, or other governance-related information,
185	191		including confidential and privileged documents, materials, or
186	192		information and proprietary and trade-secret documents, materials,
187	193		or information from:
188	194		(1) regulatory officials of other state, federal, and
189	195		international financial regulatory agencies, including members of
190	196		a supervisory college described by Section 823.0145; and
191	197		(2) the National Association of Insurance
192	198		Commissioners.
193	199		(h) The commissioner shall maintain as confidential or
194	200		privileged any documents, materials, or information received under
195	201		Subsection (g) with notice or the understanding that it is
196	202		confidential or privileged under the laws of the jurisdiction that
197	203		is the source of the document, material, or information.
198	204		Sec. 831.0010. AUTHORITY OF COMMISSIONER NOT AFFECTED. The
199	205		sharing of documents, materials, or other information by the
200	206		commissioner under this chapter does not constitute a delegation of
201	207		regulatory authority or rulemaking, and the commissioner is solely
202	208		responsible for the administration, execution, and enforcement of
203	209		the provisions of this chapter.
204	210		Sec. 831.0011. PRIVILEGE AND CONFIDENTIALITY NOT WAIVED. A
205	211		waiver of an applicable privilege or claim of confidentiality in
206	212		documents, materials, or other information, including proprietary
207	213		and trade-secret materials, does not occur as a result of
208	214		disclosure of the document, materials, or information to the
209	215		commissioner under this chapter or as a result of sharing as
210	216		authorized by this chapter.
211	217		Sec. 831.0012. NATIONAL ASSOCIATION OF INSURANCE
212	218		COMMISSIONERS AND THIRD-PARTY CONSULTANTS. (a) The commissioner
213	219		may retain, at the insurer's expense, third-party consultants,
214	220		including attorneys, actuaries, accountants, and other experts not
215	221		otherwise part of the commissioner's staff as may be reasonably
216	222		necessary to assist the commissioner in reviewing the disclosure
217	223		and related information or the insurer's compliance with this
218	224		chapter.
219	225		(b) A person retained under Subsection (a) is under the
220	226		direction and control of the commissioner and acts in a purely
221	227		advisory capacity.
222	228		(c) The National Association of Insurance Commissioners and
223	229		a third-party consultant are subject to the same confidentiality
224	230		standards and requirements as the commissioner.
225	231		(d) As part of the retention process, a third-party
226	232		consultant shall verify to the commissioner, with notice to the
227	233		insurer, that the consultant:
228	234		(1) is free of a conflict of interest; and
229	235		(2) has internal procedures in place to:
230	236		(A) monitor compliance with a conflict; and
231	237		(B) comply with the confidentiality standards
232	238		and requirements of this chapter.
233	239		(e) A written agreement with the National Association of
234	240		Insurance Commissioners or a third-party consultant governing
235	241		sharing and use of information provided under this chapter must
236	242		expressly require the written consent of the insurer before
237	243		information provided under this chapter is made public and contain:
238	244		(1) specific procedures and protocols for maintaining
239	245		the confidentiality and security of disclosure-related information
240	246		shared with the National Association of Insurance Commissioners or
241	247		the third-party consultant under this chapter;
242	248		(2) procedures and protocols for the sharing by the
243	249		National Association of Insurance Commissioners of
244	250		disclosure-related documents, materials, or other information only
245	251		with other state regulators from states in which an affected
246	252		insurance group has domiciled insurers, including a requirement
247	253		that the recipient agrees in writing to maintain the confidential
248	254		and privileged status of the shared documents, materials, or other
249	255		information and has verified in writing the recipient's legal
250	256		authority to maintain the confidential and privileged status of
251	257		that information;
252	258		(3) a provision specifying that ownership of
253	259		disclosure-related documents, materials, or other information
254	260		shared with the National Association of Insurance Commissioners or
255	261		a third-party consultant remains with the department and the use of
256	262		the information by the National Association of Insurance
257	263		Commissioners or third-party consultant is subject to the direction
258	264		of the commissioner;
259	265		(4) a provision that prohibits the National
260	266		Association of Insurance Commissioners or third-party consultant
261	267		from storing disclosure-related documents, materials, or other
262	268		information shared under this chapter in a permanent database after
263	269		the underlying analysis is completed;
264	270		(5) a provision requiring the National Association of
265	271		Insurance Commissioners or third-party consultant to provide
266	272		prompt notice to the commissioner and to the insurer or insurance
267	273		group regarding any subpoena, request for disclosure, or request
268	274		for production of the insurer's disclosure-related documents,
269	275		materials, or other information; and
270	276		(6) a requirement that the National Association of
271	277		Insurance Commissioners or third-party consultant consents to
272	278		intervention by an insurer in any judicial or administrative action
273	279		in which the National Association of Insurance Commissioners or
274	280		third-party consultant may be required to disclose confidential
275	281		information about the insurer shared with the National Association
276	282		of Insurance Commissioners or third-party consultant under this
277	283		chapter.
278	284		Sec. 831.0013. ADMINISTRATIVE PENALTY. (a) An insurer
279	285		that, without good cause, fails to timely file the disclosure as
280	286		required by this chapter commits a violation subject to an
281	287		administrative penalty under Chapter 84.
282	288		(b) Each day the violation continues is a separate violation
283	289		for purposes of this section.
284	290		(c) The commissioner may reduce the amount of the penalty
285	291		assessed under this section if the insurer demonstrates to the
286	292		commissioner that the imposition of the penalty would constitute a
287	293		financial hardship to the insurer.
288	294		Sec. 831.0014. RULES. (a) The commissioner shall adopt
289	295		rules as necessary to enforce this chapter.
290	296		(b) A rule adopted under Subsection (a) is not subject to
291	297		Section 2001.0045, Government Code.
292	298		SECTION 2. An insurer is not required to file a corporate
293	299		governance annual disclosure under Chapter 831, Insurance Code, as
294	300		added by this Act, before June 1, 2020.
295	301		SECTION 3. This Act takes effect September 1, 2019.
296		-	______________________________ ______________________________
297		-	President of the Senate Speaker of the House
298		-	I certify that H.B. No. 3306 was passed by the House on May 3,
299		-	2019, by the following vote: Yeas 140, Nays 0, 2 present, not
300		-	voting.
301		-	______________________________
302		-	Chief Clerk of the House
303		-	I certify that H.B. No. 3306 was passed by the Senate on May
304		-	22, 2019, by the following vote: Yeas 31, Nays 0.
305		-	______________________________
306		-	Secretary of the Senate
307		-	APPROVED: _____________________
308		-	Date
309		-	_____________________
310		-	Governor
	302	+	* * * * *