Texas 2019 - 86th Regular

Texas Senate Bill SB2122 Compare Versions

Only one version of the bill is available at this time.

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1	1	86R9174 MEW-F
2	2	By: Zaffirini S.B. No. 2122
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the disclosure of information concerning the corporate
8	8	governance structure of certain insurers and related entities;
9	9	providing an administrative penalty.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subtitle B, Title 6, Insurance Code, is amended
12	12	by adding Chapter 831 to read as follows:
13	13	CHAPTER 831. CORPORATE GOVERNANCE ANNUAL DISCLOSURE
14	14	Sec. 831.0001. APPLICABILITY AND PURPOSE. (a) The purpose
15	15	of this chapter is to promote the public interest by:
16	16	(1) requiring annual disclosure of an insurer or
17	17	insurance group's corporate governance structure, policies, and
18	18	practices to permit the commissioner to gain and maintain an
19	19	understanding of the insurer's corporate governance framework; and
20	20	(2) providing for the confidential treatment of the
21	21	corporate governance annual disclosure and related information as
22	22	the disclosure and related information will contain confidential
23	23	and sensitive information related to an insurer or insurance
24	24	group's internal operations and proprietary and trade-secret
25	25	information which, if made public, could potentially cause the
26	26	insurer or insurance group competitive harm or disadvantage.
27	27	(b) This chapter may not be construed to prescribe or impose
28	28	corporate governance standards and internal procedures beyond that
29	29	which is required under applicable state corporate law.
30	30	(c) Notwithstanding Subsection (b), this chapter may not be
31	31	construed to limit the commissioner's authority, or the rights or
32	32	obligations of third parties, under Chapter 401.
33	33	(d) This chapter applies to each insurer domiciled in this
34	34	state, except that this chapter does not apply to a domestic insurer
35	35	that is authorized, admitted, or eligible to engage in the business
36	36	of insurance only in this state. For the purposes of this chapter,
37	37	an insurer is not considered to be authorized, admitted, or
38	38	eligible to engage in the business of insurance only in this state
39	39	if the insurer is a member of an insurance group that writes or
40	40	assumes insurance in any manner in another state.
41	41	Sec. 831.0002. DEFINITIONS. In this chapter:
42	42	(1) "Disclosure" means the confidential corporate
43	43	governance annual disclosure filed by the insurer or insurance
44	44	group in accordance with the requirements of this chapter.
45	45	(2) "Insurance group" means the insurers and
46	46	affiliates included within an insurance holding company system as
47	47	described by Section 823.006.
48	48	(3) "Insurer" has the meaning assigned by Section
49	49	823.002. The term includes a health maintenance organization
50	50	authorized to engage in business under Chapter 843.
51	51	Sec. 831.0003. DISCLOSURE REQUIRED. (a) Except as
52	52	provided by Subsection (b), an insurer, or the insurance group of
53	53	which the insurer is a member, shall, not later than June 1 of each
54	54	calendar year, submit to the commissioner a corporate governance
55	55	annual disclosure that contains the information described by
56	56	Section 831.0008(c).
57	57	(b) Notwithstanding any request from the commissioner under
58	58	Subsection (d), an insurer that is a member of an insurance group
59	59	shall submit the report required by Subsection (a) to the
60	60	commissioner of the lead state for the insurance group, in
61	61	accordance with the laws of the lead state, as determined by the
62	62	procedures adopted by the National Association of Insurance
63	63	Commissioners.
64	64	(c) The disclosure must include a signature of the insurer
65	65	or insurance group's chief executive officer or corporate secretary
66	66	attesting to the best of that individual's belief and knowledge
67	67	that the insurer has implemented the corporate governance practices
68	68	described in the disclosure and that a copy of the disclosure has
69	69	been provided to the insurer's board of directors or the
70	70	appropriate committee of the insurer's board of directors.
71	71	(d) An insurer not otherwise required to submit a disclosure
72	72	under this chapter shall submit a disclosure on the commissioner's
73	73	request.
74	74	Sec. 831.0004. LEVEL OF REPORTING. (a) For purposes of
75	75	completing the disclosure under Section 831.0003, an insurer or
76	76	insurance group may provide information regarding corporate
77	77	governance at the ultimate controlling parent level, an
78	78	intermediate holding company level, or the individual legal entity
79	79	level, depending on how the insurer or insurance group has
80	80	structured the insurer's or insurance group's system of corporate
81	81	governance.
82	82	(b) An insurer or insurance group is encouraged to make the
83	83	disclosure:
84	84	(1) at the level at which the insurer's or insurance
85	85	group's risk appetite is determined;
86	86	(2) at the level at which the earnings, capital,
87	87	liquidity, operations, and reputation of the insurer are overseen
88	88	collectively and at which the supervision of those factors are
89	89	coordinated and exercised; or
90	90	(3) at the level at which legal liability for failure
91	91	of general corporate governance duties would be placed.
92	92	(c) If an insurer or insurance group determines the level of
93	93	reporting based on the criteria described by Subsection (b), the
94	94	insurer or insurance group shall indicate which of the three
95	95	criteria was used to determine the level of reporting and explain
96	96	any subsequent changes in level of reporting.
97	97	Sec. 831.0005. REVIEW OF DISCLOSURE; REQUEST FOR ADDITIONAL
98	98	INFORMATION. The review of the disclosure and any additional
99	99	requests for information shall be made through the lead state as
100	100	determined by the procedures adopted by the National Association of
101	101	Insurance Commissioners described by Section 831.0003(b).
102	102	Sec. 831.0006. SUBSTANTIALLY SIMILAR INFORMATION. An
103	103	insurer that provides information substantially similar to the
104	104	information required by this chapter in other documents provided to
105	105	the commissioner, including proxy statements filed in conjunction
106	106	with Form B requirements or other state or federal filings provided
107	107	to the department, is not required to duplicate that information in
108	108	the disclosure but is required only to cross-reference the document
109	109	in which the information is included.
110	110	Sec. 831.0007. PART OF EXAMINATION PROCESS. The disclosure
111	111	and any additional information requested by the commissioner and
112	112	provided to the department as described by this chapter is
113	113	considered part of the process of examination of insurers under
114	114	this code, including Chapter 401.
115	115	Sec. 831.0008. CONTENTS OF DISCLOSURE. (a) An insurer or
116	116	insurance group has discretion over the responses to the disclosure
117	117	inquiries, provided the disclosure must contain the material
118	118	information necessary to permit the commissioner to gain an
119	119	understanding of the insurer's or insurance group's corporate
120	120	governance structure, policies, and practices.
121	121	(b) The commissioner may request additional information
122	122	that the commissioner considers material and necessary to provide
123	123	the commissioner with a clear understanding of:
124	124	(1) the corporate governance policies; and
125	125	(2) the reporting, information system, or controls
126	126	implementing those policies.
127	127	(c) Notwithstanding Subsections (a) and (b), the disclosure
128	128	shall be prepared consistent with rules adopted by the
129	129	commissioner. Documentation and supporting information must be
130	130	maintained and made available on examination or on request of the
131	131	commissioner.
132	132	Sec. 831.0009. CONFIDENTIALITY. (a) Documents, materials,
133	133	or other information, including a disclosure, in the possession or
134	134	control of the department that is obtained by, created by, or
135	135	disclosed to the commissioner or any other person under this
136	136	chapter is confidential and privileged and is:
137	137	(1) not subject to disclosure under Chapter 552,
138	138	Government Code;
139	139	(2) not subject to subpoena; and
140	140	(3) not subject to discovery or admissible in evidence
141	141	in any private civil action.
142	142	(b) Documents, materials, or other information, including a
143	143	disclosure, in the possession or control of the department that is
144	144	obtained by, created by, or disclosed to the commissioner or any
145	145	other person under this chapter is recognized by this state as being
146	146	proprietary and to contain trade secrets.
147	147	(c) The commissioner may use the documents, materials, or
148	148	other information described in this section to further any
149	149	regulatory or legal action brought as part of the commissioner's
150	150	official duties. The commissioner may not otherwise make the
151	151	documents, materials, or other information public without the prior
152	152	written consent of the insurer. Nothing in this section may be
153	153	construed to require written consent of the insurer before the
154	154	commissioner may share or receive documents, materials, or other
155	155	information under Subsection (e).
156	156	(d) The commissioner and any other person who receives
157	157	documents, materials, or other information under this chapter,
158	158	through examination, or otherwise under any other law, while acting
159	159	under the authority of the commissioner, or with whom the
160	160	documents, materials, or other information is shared under this
161	161	chapter may not testify or be required to testify in any private
162	162	civil action concerning any documents, materials, or other
163	163	information subject to Subsection (a) or (b).
164	164	(e) In order to assist in the performance of the
165	165	commissioner's regulatory duties, the commissioner may, on
166	166	request, share documents, materials, or other information,
167	167	including confidential and privileged documents, materials, or
168	168	information subject to Subsection (a) or (b) and proprietary and
169	169	trade-secret documents, materials, or information, with:
170	170	(1) other state, federal, and international financial
171	171	regulatory agencies, including members of a supervisory college
172	172	described by Section 823.0145;
173	173	(2) the National Association of Insurance
174	174	Commissioners; and
175	175	(3) a third-party consultant under Section 831.0012.
176	176	(f) Before the commissioner may share information under
177	177	this section, the recipient shall:
178	178	(1) agree in writing to maintain the confidential and
179	179	privileged status of the documents, materials, or other information
180	180	shared under this section; and
181	181	(2) verify in writing the recipient's legal authority
182	182	to maintain the confidential and privileged status of that
183	183	information.
184	184	(g) In order to assist in the performance of the
185	185	commissioner's regulatory duties, the commissioner may receive
186	186	documents, materials, or other governance-related information,
187	187	including confidential and privileged documents, materials, or
188	188	information and proprietary and trade-secret documents, materials,
189	189	or information from:
190	190	(1) regulatory officials of other state, federal, and
191	191	international financial regulatory agencies, including members of
192	192	a supervisory college described by Section 823.0145; and
193	193	(2) the National Association of Insurance
194	194	Commissioners.
195	195	(h) The commissioner shall maintain as confidential or
196	196	privileged any documents, materials, or information received under
197	197	Subsection (g) with notice or the understanding that it is
198	198	confidential or privileged under the laws of the jurisdiction that
199	199	is the source of the document, material, or information.
200	200	Sec. 831.0010. AUTHORITY OF COMMISSIONER NOT AFFECTED. The
201	201	sharing of documents, materials, or other information by the
202	202	commissioner under this chapter does not constitute a delegation of
203	203	regulatory authority or rulemaking, and the commissioner is solely
204	204	responsible for the administration, execution, and enforcement of
205	205	the provisions of this chapter.
206	206	Sec. 831.0011. PRIVILEGE AND CONFIDENTIALITY NOT WAIVED. A
207	207	waiver of an applicable privilege or claim of confidentiality in
208	208	documents, materials, or other information, including proprietary
209	209	and trade-secret materials, does not occur as a result of
210	210	disclosure of the document, materials, or information to the
211	211	commissioner under this chapter or as a result of sharing as
212	212	authorized by this chapter.
213	213	Sec. 831.0012. NATIONAL ASSOCIATION OF INSURANCE
214	214	COMMISSIONERS AND THIRD-PARTY CONSULTANTS. (a) The commissioner
215	215	may retain, at the insurer's expense, third-party consultants,
216	216	including attorneys, actuaries, accountants, and other experts not
217	217	otherwise part of the commissioner's staff as may be reasonably
218	218	necessary to assist the commissioner in reviewing the disclosure
219	219	and related information or the insurer's compliance with this
220	220	chapter.
221	221	(b) A person retained under Subsection (a) is under the
222	222	direction and control of the commissioner and acts in a purely
223	223	advisory capacity.
224	224	(c) The National Association of Insurance Commissioners and
225	225	a third-party consultant are subject to the same confidentiality
226	226	standards and requirements as the commissioner.
227	227	(d) As part of the retention process, a third-party
228	228	consultant shall verify to the commissioner, with notice to the
229	229	insurer, that the consultant:
230	230	(1) is free of a conflict of interest; and
231	231	(2) has internal procedures in place to:
232	232	(A) monitor compliance with a conflict; and
233	233	(B) comply with the confidentiality standards
234	234	and requirements of this chapter.
235	235	(e) A written agreement with the National Association of
236	236	Insurance Commissioners or a third-party consultant governing
237	237	sharing and use of information provided under this chapter must
238	238	expressly require the written consent of the insurer before
239	239	information provided under this chapter is made public and contain:
240	240	(1) specific procedures and protocols for maintaining
241	241	the confidentiality and security of disclosure-related information
242	242	shared with the National Association of Insurance Commissioners or
243	243	the third-party consultant under this chapter;
244	244	(2) procedures and protocols for the sharing by the
245	245	National Association of Insurance Commissioners of
246	246	disclosure-related documents, materials, or other information only
247	247	with other state regulators from states in which an affected
248	248	insurance group has domiciled insurers, including a requirement
249	249	that the recipient agrees in writing to maintain the confidential
250	250	and privileged status of the shared documents, materials, or other
251	251	information and has verified in writing the recipient's legal
252	252	authority to maintain the confidential and privileged status of
253	253	that information;
254	254	(3) a provision specifying that ownership of
255	255	disclosure-related documents, materials, or other information
256	256	shared with the National Association of Insurance Commissioners or
257	257	a third-party consultant remains with the department and the use of
258	258	the information by the National Association of Insurance
259	259	Commissioners or third-party consultant is subject to the direction
260	260	of the commissioner;
261	261	(4) a provision that prohibits the National
262	262	Association of Insurance Commissioners or third-party consultant
263	263	from storing disclosure-related documents, materials, or other
264	264	information shared under this chapter in a permanent database after
265	265	the underlying analysis is completed;
266	266	(5) a provision requiring the National Association of
267	267	Insurance Commissioners or third-party consultant to provide
268	268	prompt notice to the commissioner and to the insurer or insurance
269	269	group regarding any subpoena, request for disclosure, or request
270	270	for production of the insurer's disclosure-related documents,
271	271	materials, or other information; and
272	272	(6) a requirement that the National Association of
273	273	Insurance Commissioners or third-party consultant consents to
274	274	intervention by an insurer in any judicial or administrative action
275	275	in which the National Association of Insurance Commissioners or
276	276	third-party consultant may be required to disclose confidential
277	277	information about the insurer shared with the National Association
278	278	of Insurance Commissioners or third-party consultant under this
279	279	chapter.
280	280	Sec. 831.0013. ADMINISTRATIVE PENALTY. (a) An insurer
281	281	that, without good cause, fails to timely file the disclosure as
282	282	required by this chapter commits a violation subject to an
283	283	administrative penalty under Chapter 84.
284	284	(b) Each day the violation continues is a separate violation
285	285	for purposes of this section.
286	286	(c) The commissioner may reduce the amount of the penalty
287	287	assessed under this section if the insurer demonstrates to the
288	288	commissioner that the imposition of the penalty would constitute a
289	289	financial hardship to the insurer.
290	290	Sec. 831.0014. RULES. (a) The commissioner shall adopt
291	291	rules as necessary to enforce this chapter.
292	292	(b) A rule adopted under Subsection (a) is not subject to
293	293	Section 2001.0045, Government Code.
294	294	SECTION 2. An insurer is not required to file a corporate
295	295	governance annual disclosure under Chapter 831, Insurance Code, as
296	296	added by this Act, before June 1, 2020.
297	297	SECTION 3. This Act takes effect September 1, 2019.