Texas 2023 - 88th Regular

Texas House Bill HB4498 Compare Versions

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1	1	By: Cook, Oliverson H.B. No. 4498
2	2
3	3
4	4	A BILL TO BE ENTITLED
5	5	AN ACT
6	6	relating to the transfer and statutory novation of insurance
7	7	policies from a transferring insurer to an assuming insurer through
8	8	an insurance business transfer plan; authorizing fees.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle A, Title 6, Insurance Code, is amended
11	11	by adding Chapter 806 to read as follows:
12	12	CHAPTER 806. INSURANCE BUSINESS TRANSFERS
13	13	SUBCHAPTER A. GENERAL PROVISIONS
14	14	Sec. 806.001. DEFINITIONS. In this chapter:
15	15	(1) "Affiliate" means a person that directly or
16	16	indirectly through one or more intermediaries controls, is
17	17	controlled by, or is under common control with a specified person.
18	18	(2) "Applicant" means an assuming insurer, a
19	19	transferring insurer, or a reinsurer applying under Subchapter B.
20	20	(3) "Assuming insurer" means an insurer domiciled in
21	21	this state that assumes or seeks to assume policies from a
22	22	transferring insurer under this chapter. An assuming insurer may
23	23	be a captive insurance company established under Chapter 964.
24	24	(4) "Implementation order" means an order issued by
25	25	the court under Section 806.104.
26	26	(5) "Insurance business transfer" means a transfer and
27	27	novation by a transferring insurer to an assuming insurer made
28	28	under this chapter.
29	29	(6) "Insurance business transfer plan" means the plan
30	30	submitted to the department to accomplish an insurance business
31	31	transfer, including any associated transfer of assets and rights
32	32	from or on behalf of the transferring insurer to the assuming
33	33	insurer.
34	34	(7) "Insurer" means an insurance or surety company,
35	35	including a reinsurance company. The term includes a corporation,
36	36	company, partnership, association, society, order, individual, or
37	37	aggregation of individuals engaging in or proposing or attempting
38	38	to engage in any kind of insurance or surety business, including the
39	39	exchanging of reciprocal or interinsurance contracts between
40	40	individuals, partnerships, and corporations.
41	41	(8) "Policy" means a policy, annuity contract,
42	42	certificate of insurance, or a contract of reinsurance under which
43	43	the insurer agrees to assume an obligation, risk, or both of the
44	44	policyholder or to make payments on behalf of, or to, the
45	45	policyholder or the policyholder's beneficiaries. The term
46	46	includes property, casualty, life, health, and any other line of
47	47	insurance the commissioner finds is suitable for an insurance
48	48	business transfer.
49	49	(9) "Policyholder" means an insured or a reinsured
50	50	under a policy that is part of the subject business.
51	51	(10) "Subject business" means the policy or policies
52	52	that are the subject of the insurance business transfer plan.
53	53	(11) "Transfer and novation" means the transfer of
54	54	insurance obligations, risks, or both of existing or in-force
55	55	policies from a transferring insurer to an assuming insurer that is
56	56	intended to effect a novation of the transferred policies that
57	57	results in the assuming insurer becoming directly liable to the
58	58	policyholders of the transferring insurer on the extinguishment of
59	59	the transferring insurer's insurance obligations, risks, or both
60	60	under the transferred policies.
61	61	(12) "Transferring insurer" means an insurer or
62	62	reinsurer that transfers and novates or seeks to transfer and
63	63	novate obligations, risks, or both under one or more policies to an
64	64	assuming insurer under an insurance business transfer plan.
65	65	Sec. 806.002. CONSENT TO ONGOING COMMISSIONER OVERSIGHT.
66	66	An insurer subject to this chapter is considered to consent to the
67	67	jurisdiction of the commissioner with regard to ongoing oversight
68	68	of operations, management, and solvency relating to the transferred
69	69	business, including the authority of the commissioner to conduct
70	70	financial analysis and examinations.
71	71	Sec. 806.003. AUTHORITY OF COURT. Notwithstanding any
72	72	other law, a court may issue an order, process, or judgment that is
73	73	necessary or appropriate to carry out this chapter. This chapter
74	74	may not be construed to preclude a court from, on the court's own
75	75	motion, taking any action or making any determination necessary or
76	76	appropriate to enforce or implement an order or rule of the court or
77	77	to prevent an abuse of power.
78	78	Sec. 806.004. NOTICE REQUIREMENTS. (a) When notice is
79	79	required to be given by the applicant under this chapter and except
80	80	as otherwise permitted or directed by a court or the commissioner,
81	81	the applicant shall provide the notice not later than the 45th day
82	82	after the date of the event that requires notice:
83	83	(1) to the chief insurance regulator in each
84	84	jurisdiction in which:
85	85	(A) the applicant holds or has ever held a
86	86	certificate of authority; and
87	87	(B) policies that are part of the subject
88	88	business were issued or policyholders currently reside;
89	89	(2) to the National Conference of Insurance Guaranty
90	90	Funds, the National Organization of Life and Health Insurance
91	91	Guaranty Associations, and each state insurance guaranty
92	92	association for a state in which:
93	93	(A) the applicant holds or has ever held a
94	94	certificate of authority; and
95	95	(B) policies that are part of the subject
96	96	business were issued or policyholders currently reside;
97	97	(3) to each reinsurer of the applicant:
98	98	(A) under the notice provisions of each
99	99	reinsurance agreement applicable to the policies that are part of
100	100	the subject business; or
101	101	(B) if a reinsurance agreement does not have a
102	102	notice provision, by an internationally recognized delivery
103	103	service;
104	104	(4) to each policyholder holding a policy that is part
105	105	of the subject business, at the policyholder's last known address
106	106	as indicated by the records of the applicant or to the address to
107	107	which premium notices or other policy documents are sent, and for a
108	108	notice of transfer, to the transferring insurer's agents or brokers
109	109	of record on the subject business; and
110	110	(5) by publication in:
111	111	(A) a newspaper of general circulation in the
112	112	state in which the applicant has the applicant's principal place of
113	113	business; and
114	114	(B) each publication required by the
115	115	commissioner.
116	116	(b) If notice is provided in accordance with this section,
117	117	an intended recipient of the notice is considered to have received
118	118	the notice for purposes of this chapter, regardless of whether the
119	119	recipient received actual notice, and the intended recipient may
120	120	not raise notice to challenge an order issued under this chapter.
121	121	(c) The commissioner shall provide the required notice in
122	122	accordance with this section on behalf of an applicant for which the
123	123	commissioner has been named as receiver.
124	124	(d) Notice under this section may be provided by first-class
125	125	mail, facsimile, or electronic means.
126	126	Sec. 806.005. RULEMAKING AUTHORITY. The commissioner may
127	127	adopt rules consistent with this chapter as necessary to implement
128	128	this chapter.
129	129	Sec. 806.006. CONFIDENTIALITY. The status of any part of an
130	130	application for an insurance business transfer as confidential at
131	131	the time of application, including any documents, materials,
132	132	communications, or other information submitted to the commissioner
133	133	in contemplation of the application, is not affected by the process
134	134	provided by this chapter.
135	135	SUBCHAPTER B. INITIAL APPLICATION; COMMISSIONER REVIEW
136	136	Sec. 806.051. COMMISSIONER AND COURT APPROVAL REQUIRED.
137	137	After obtaining an independent expert report under Section 806.052,
138	138	an applicant shall file an insurance business transfer plan with:
139	139	(1) the commissioner for review and approval under
140	140	this subchapter; and
141	141	(2) a court for approval under Subchapter C on
142	142	receiving the commissioner's approval.
143	143	Sec. 806.052. INDEPENDENT EXPERT; REPORT. (a) The
144	144	commissioner shall appoint an independent expert from a list of at
145	145	least two nominees, submitted jointly by the transferring insurer
146	146	and the assuming insurer, to assist the commissioner and the court
147	147	in connection with the commissioner's and the court's review of a
148	148	proposed insurance business transfer. The commissioner may, in the
149	149	commissioner's sole discretion, reject the nominees and appoint
150	150	another person as the independent expert.
151	151	(b) The independent expert must be an impartial person who:
152	152	(1) has no financial interest in either the assuming
153	153	insurer or transferring insurer;
154	154	(2) has not been employed by or acted as an officer,
155	155	director, consultant, or other independent contractor for either
156	156	the assuming insurer or transferring insurer during the preceding
157	157	12 months;
158	158	(3) is not appointed by the commissioner to assist in
159	159	any capacity in an insurer rehabilitation or delinquency
160	160	proceeding;
161	161	(4) receives no compensation in connection with the
162	162	applicable transaction under this chapter, other than a fee based
163	163	on a fixed or hourly basis that is not contingent on the approval or
164	164	completion of the insurance business transfer; and
165	165	(5) provides proof of insurance coverage that is
166	166	satisfactory to the commissioner.
167	167	(c) The independent expert shall submit a report to the
168	168	commissioner in the form and manner prescribed by the commissioner
169	169	regarding the proposed insurance business transfer. The report
170	170	must include:
171	171	(1) a summary of the terms of the insurance business
172	172	transfer plan to the extent relevant to the independent expert's
173	173	report;
174	174	(2) the scope of the independent expert's report;
175	175	(3) an analysis of the transferring insurer's
176	176	actuarial review of reserves for the subject business to determine
177	177	the reserve adequacy;
178	178	(4) an analysis of the financial conditions of the
179	179	transferring insurer and the assuming insurer and the effect the
180	180	transfer will have on the financial condition of each company;
181	181	(5) a review of the plans or proposals the assuming
182	182	insurer has with respect to the administration of the policies
183	183	subject to the transfer;
184	184	(6) a statement as to whether the transfer has a
185	185	material adverse impact on the policyholders, reinsurers, and
186	186	claimants of the transferring insurer and the assuming insurer;
187	187	(7) an analysis of the assuming insurer's corporate
188	188	governance structure to ensure that there is proper board and
189	189	management oversight and expertise to manage the subject business;
190	190	(8) the independent expert's opinion of the likely
191	191	effects of the transfer on policyholders, reinsurers, and
192	192	claimants, distinguishing between:
193	193	(A) transferring policyholders, reinsurers, and
194	194	claimants;
195	195	(B) policyholders, reinsurers, and claimants of
196	196	the transferring insurer whose policies will not be transferred;
197	197	and
198	198	(C) policyholders, reinsurers, and claimants of
199	199	the assuming insurer;
200	200	(9) consideration of whether the security positions of
201	201	policyholders that are affected by the transfer are materially
202	202	adversely affected by the transfer;
203	203	(10) a statement of the independent expert's
204	204	professional qualifications and a description of the experience
205	205	that qualifies the independent expert as an expert suitable for the
206	206	appointment;
207	207	(11) a statement of whether the independent expert
208	208	has, or has had, a direct or indirect interest in the transferring
209	209	insurer or the assuming insurer or an affiliate of the transferring
210	210	insurer or the assuming insurer;
211	211	(12) a list and summary of each document, report, and
212	212	other material information the independent expert considered in
213	213	preparing the report and whether any information requested was not
214	214	provided;
215	215	(13) the extent to which the independent expert relied
216	216	on information provided by or the judgment of another person;
217	217	(14) each person on whom the independent expert has
218	218	relied and why, in the independent expert's opinion, that reliance
219	219	is reasonable;
220	220	(15) for each opinion that the independent expert
221	221	expresses in the report, the facts and circumstances supporting the
222	222	opinion; and
223	223	(16) any other information the commissioner requests
224	224	be included in the report for purposes of reviewing the transfer.
225	225	Sec. 806.053. APPLICATION REQUIREMENTS. (a) An insurance
226	226	business transfer plan submitted for commissioner approval must
227	227	include the following information or an explanation of why the
228	228	information is not included:
229	229	(1) the name, address, and telephone number and the
230	230	direct and indirect controlling persons, if any, of the
231	231	transferring insurer and the assuming insurer;
232	232	(2) a summary of the plan;
233	233	(3) identification and description of the subject
234	234	business;
235	235	(4) the most recent audited financial statements and
236	236	statutory annual and quarterly reports of the transferring insurer
237	237	and the assuming insurer filed with each insurer's domiciliary
238	238	regulator;
239	239	(5) the most recent actuarial report and opinion that
240	240	quantify the liabilities associated with the subject business;
241	241	(6) pro forma financial statements showing the
242	242	projected statutory balance sheet, results of operations, and cash
243	243	flows of the assuming insurer for the three years following the
244	244	proposed transfer and novation;
245	245	(7) officers' certificates of the transferring insurer
246	246	and the assuming insurer attesting that each has obtained all
247	247	required internal approvals and authorizations regarding the plan
248	248	and completed all necessary and appropriate actions relating to the
249	249	plan;
250	250	(8) a proposal for plan implementation and
251	251	administration, including the form of notice to be provided under
252	252	the plan to a policyholder whose policy is part of the subject
253	253	business;
254	254	(9) a full description of how notice will be provided;
255	255	(10) a description of any reinsurance arrangements
256	256	that would pass to the assuming insurer under the plan;
257	257	(11) a description of any guarantee or additional
258	258	reinsurance that will cover the subject business following the
259	259	transfer and novation;
260	260	(12) a description of the assuming insurer's proposed
261	261	investment policies and any contemplated third-party claims
262	262	management and administration arrangements;
263	263	(13) a description of how the transferring insurer and
264	264	the assuming insurer will be licensed for guaranty association
265	265	coverage purposes;
266	266	(14) evidence of approval of or non-objection to the
267	267	transfer from the chief insurance regulator of the state of the
268	268	transferring insurer's domicile; and
269	269	(15) the report of the independent expert prepared
270	270	under Section 806.052.
271	271	(b) The commissioner may require an insurance business
272	272	transfer plan submitted under Subsection (a) to include additional
273	273	information the commissioner considers necessary for the plan's
274	274	review and approval.
275	275	Sec. 806.054. COMMISSIONER REVIEW. (a) Not later than the
276	276	60th business day after the date of receipt of a complete insurance
277	277	business transfer plan, the commissioner shall review the plan and
278	278	determine whether the applicant is authorized to submit the plan to
279	279	a court. The commissioner may extend the review period for an
280	280	additional 30 business days.
281	281	(b) The commissioner shall authorize the submission of the
282	282	insurance business transfer plan to the court unless the
283	283	commissioner finds that the transfer would have a material adverse
284	284	impact on the interests of policyholders, reinsurers, or claimants
285	285	that are part of the subject business.
286	286	(c) If the commissioner determines that the insurance
287	287	business transfer would have a material adverse impact on the
288	288	interests of policyholders, reinsurers, or claimants that are part
289	289	of the subject business, the commissioner shall notify the
290	290	applicant and specify any modifications, supplements, amendments,
291	291	or additional information or documentation with respect to the
292	292	insurance business transfer plan that the applicant must provide to
293	293	the commissioner before the commissioner will approve the plan's
294	294	submission to a court.
295	295	(d) If the commissioner determines that the insurance
296	296	business transfer plan may be submitted to a court, the
297	297	commissioner shall provide that determination in writing to the
298	298	applicant.
299	299	Sec. 806.055. CONSEQUENCES OF MATERIAL ADVERSE IMPACT
300	300	DETERMINATION. (a) Not later than the 30th day after the date the
301	301	commissioner notifies the applicant of a material adverse impact
302	302	under Section 806.054, the applicant may file an amended insurance
303	303	business transfer plan providing the modifications, supplements,
304	304	amendments, or additional information or documentation requested
305	305	by the commissioner. The applicant may request in writing an
306	306	extension of time of an additional 30 days.
307	307	(b) If the applicant does not make an amended filing within
308	308	the time period provided by Subsection (a), including any extension
309	309	of time granted by the commissioner, the insurance business
310	310	transfer plan filing terminates and a subsequent filing by the
311	311	applicant:
312	312	(1) is considered a new filing; and
313	313	(2) must comply with all provisions of this chapter as
314	314	if the previous filing had never been made.
315	315	(c) The commissioner's time for review as provided under
316	316	Section 806.054 for an amended insurance business transfer plan
317	317	received under Subsection (a) commences on the date the
318	318	commissioner receives all modifications, supplements, amendments,
319	319	or additional information or documentation requested by the
320	320	commissioner under Section 806.054(c).
321	321	SUBCHAPTER C. APPLICATION FOR COURT APPROVAL
322	322	Sec. 806.101. APPLICATION. (a) Not later than the 30th
323	323	day after the date an applicant receives notice from the
324	324	commissioner under Section 806.054(d) that the applicant may submit
325	325	the insurance business transfer plan to a court, the applicant
326	326	shall file a verified petition with a district court in a county
327	327	with a population of more than one million seeking approval of the
328	328	plan. On written request by the applicant, the commissioner may
329	329	extend the period for filing the petition for an additional 30 days.
330	330	(b) The applicant's petition must:
331	331	(1) include the insurance business transfer plan;
332	332	(2) identify any documents and witnesses that the
333	333	applicant intends to present at a hearing regarding the petition;
334	334	and
335	335	(3) state each reason the applicant asks the court to
336	336	find no material adverse impact to policyholders, reinsurers, or
337	337	claimants affected by the proposed insurance business transfer.
338	338	(c) Not later than the 30th day after the date of filing of
339	339	the petition, the applicant shall file a request for the court to
340	340	enter a preliminary scheduling order, which must include a date and
341	341	time for a status conference. The status conference must occur not
342	342	later than the 14th day after the date the comment period required
343	343	by Section 806.102 concludes.
344	344	(d) The commissioner must be a party to the proceedings
345	345	before the court concerning a petition filed under this section and
346	346	shall be served with copies of all filings as required by the Texas
347	347	Rules of Civil Procedure. The commissioner's position in the
348	348	proceedings is not limited by the commissioner's initial review of
349	349	the insurance business transfer plan that is the subject of the
350	350	petition.
351	351	Sec. 806.102. NOTICE AND COMMENT PERIOD. (a) Not later
352	352	than the 45th day after receipt of the preliminary scheduling order
353	353	under Section 806.101(c), the applicant shall provide notice of the
354	354	application for court approval of the insurance business transfer
355	355	plan. The notice commences a comment period that expires on the
356	356	61st day after the date the notice is provided.
357	357	(b) The notice provided to policyholders under this section
358	358	must include:
359	359	(1) the date and time of the status conference;
360	360	(2) the name, address, and telephone number of the
361	361	assuming insurer and the transferring insurer;
362	362	(3) a statement that a policyholder may comment on or
363	363	object to the transfer and novation;
364	364	(4) the procedures and deadline for submitting
365	365	comments or objections on the insurance business transfer plan;
366	366	(5) a summary of any effect that the transfer and
367	367	novation will have on the policyholder's rights;
368	368	(6) a statement that the assuming insurer is
369	369	authorized, as provided by this chapter, to assume the subject
370	370	business and that court approval of the insurance business transfer
371	371	plan will extinguish all rights of policyholders under policies
372	372	that are part of the subject business against the transferring
373	373	insurer;
374	374	(7) a statement that policyholders will not have the
375	375	opportunity to opt out of or otherwise reject the transfer and
376	376	novation;
377	377	(8) contact information for the department from which
378	378	the policyholder may obtain additional information; and
379	379	(9) either:
380	380	(A) information on how an electronic copy of the
381	381	insurance business transfer plan may be accessed; or
382	382	(B) if policyholders are unable to readily access
383	383	electronic copies, hard copies by first-class mail.
384	384	Sec. 806.103. PARTICIPATION IN COURT PROCEEDINGS.
385	385	(a) Only a party to the insurance business transfer plan, or a
386	386	third party or other person who files a request to provide comments
387	387	or objections or to be heard in the matter on the basis that the
388	388	person believes the person will be materially adversely affected by
389	389	approval and implementation of the plan, may present evidence or
390	390	comments to the court at a hearing.
391	391	(b) Participation by a third party does not confer standing
392	392	as a party on that third party.
393	393	(c) Each person participating in the hearing shall:
394	394	(1) follow the process established by the court; and
395	395	(2) pay the person's own costs and attorney fees.
396	396	Sec. 806.104. COURT APPROVAL OF PLAN. (a) The applicant
397	397	shall present the insurance business transfer plan for approval by
398	398	the court following the expiration of the comment period under
399	399	Section 806.102.
400	400	(b) At any time before the court issues an order approving
401	401	the insurance business transfer plan, the applicant may withdraw
402	402	the plan without prejudice.
403	403	(c) If the court finds that the implementation of the
404	404	insurance business transfer plan would not materially adversely
405	405	affect the interests of policyholders, reinsurers, or claimants
406	406	that are part of the subject business, the court shall enter a
407	407	judgment and implementation order. The judgment and implementation
408	408	order must:
409	409	(1) order implementation of the plan;
410	410	(2) order a statutory novation with respect to all
411	411	policyholders or reinsured persons and their respective policies
412	412	and reinsurance agreements under the subject business:
413	413	(A) extinguishing all rights of policyholders
414	414	under policies that are part of the subject business against the
415	415	transferring insurer; and
416	416	(B) providing that:
417	417	(i) the transferring insurer has no further
418	418	rights, obligations, or liabilities with respect to those policies;
419	419	and
420	420	(ii) the assuming insurer has all rights,
421	421	obligations, and liabilities as if the assuming insurer were the
422	422	original insurer of those policies;
423	423	(3) release the transferring insurer from all
424	424	obligations or liabilities under policies that are part of the
425	425	subject business;
426	426	(4) authorize and order the transfer of property or
427	427	liabilities, including the ceded reinsurance of transferred
428	428	policies and contracts on the subject business, notwithstanding any
429	429	nonassignment provisions in any reinsurance contract;
430	430	(5) order the applicant to provide notice of the
431	431	transfer and novation in accordance with Section 806.004; and
432	432	(6) make other provisions with respect to incidental,
433	433	consequential, and supplementary matters as necessary to ensure the
434	434	plan is fully and effectively carried out.
435	435	(d) On filing of the court's order under Subsection (c), the
436	436	subject business vests in and becomes the liabilities of the
437	437	assuming insurer.
438	438	Sec. 806.105. COURT DISAPPROVAL OF PLAN. If the court finds
439	439	that the insurance business transfer plan should not be approved,
440	440	the court by order may:
441	441	(1) deny the petition; or
442	442	(2) provide the applicant leave to file an amended
443	443	insurance business transfer plan and petition.
444	444	Sec. 806.106. RIGHT TO APPEAL. This chapter may not be
445	445	construed to affect a party's right to appeal an order of the court.
446	446	SUBCHAPTER D. FEES AND COSTS
447	447	Sec. 806.151. FILING FEE. At the time of filing an
448	448	application with the commissioner for review and approval of an
449	449	insurance business transfer plan, an applicant shall pay a
450	450	nonrefundable fee to the department of $10,000.
451	451	Sec. 806.152. COMMISSIONER COSTS. (a) The commissioner
452	452	may retain independent attorneys, appraisers, actuaries, certified
453	453	public accountants, authorized consultants, or other professionals
454	454	and specialists to assist the commissioner in connection with the
455	455	review of an insurance business transfer plan under this chapter.
456	456	(b) An applicant shall reimburse the commissioner for any
457	457	cost incurred under Subsection (a).
458	458	Sec. 806.153. INDEPENDENT EXPERT COSTS AND FEES. (a) The
459	459	transferring insurer and the assuming insurer are jointly obligated
460	460	to pay any compensation, costs, and expenses of the independent
461	461	expert, and any consultants retained by the independent expert and
462	462	approved by the commissioner, incurred in fulfilling the
463	463	obligations of the independent expert under this chapter.
464	464	(b) This chapter may not be construed to create a duty of the
465	465	independent expert to any party other than the commissioner or the
466	466	court.
467	467	Sec. 806.154. FAILURE TO PAY COSTS OR FEES. (a) A fee or
468	468	cost provided by this subchapter must be paid not later than the
469	469	30th day after the date of demand for payment.
470	470	(b) If a party fails to pay a required fee or cost within the
471	471	time period described by Subsection (a), the commissioner may:
472	472	(1) if the court has not filed an implementation
473	473	order, request that the court dismiss the petition for approval of
474	474	the insurance business transfer plan; or
475	475	(2) if the court has filed an implementation order,
476	476	suspend or revoke the assuming insurer's certificate of authority
477	477	to transact insurance business in this state.
478	478	Sec. 806.155. DEPOSIT OF AMOUNTS COLLECTED. The department
479	479	shall deposit any amounts collected under this chapter relating to
480	480	the review of an insurance business transfer plan application to
481	481	the credit of the Texas Department of Insurance operating account.
482	482	SECTION 2. The changes in law made by this Act apply only to
483	483	an insurance business transfer under a contract entered into or
484	484	agreement made on or after the effective date of this Act.
485	485	SECTION 3. This Act takes effect September 1, 2023.