Texas 2025 - 89th Regular

Texas House Bill HB3320 Compare Versions

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1	1	89R6007 DNC-D
2	2	By: Oliverson, Lalani H.B. No. 3320
3	3
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5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to a property and casualty self-insurance pool for certain
10	10	religious institutions; authorizing fees; providing administrative
11	11	penalties.
12	12	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	13	SECTION 1. Subtitle G, Title 10, Insurance Code, is amended
14	14	by adding Chapter 2214 to read as follows:
15	15	CHAPTER 2214. RELIGIOUS INSTITUTIONS SELF-INSURANCE POOL
16	16	SUBCHAPTER A. GENERAL PROVISIONS
17	17	Sec. 2214.001. DEFINITIONS. In this chapter:
18	18	(1) "Board" means the board of trustees of the pool.
19	19	(2) "Church" means a nonprofit religious organization
20	20	consisting of a group of religious believers.
21	21	(3) "Fund" means a trust fund established under
22	22	Section 2214.052.
23	23	(4) "Member" means a church, nonprofit religious
24	24	organization, or religious denomination entitled to pool coverage
25	25	and obligated for pool liabilities under a pool coverage agreement.
26	26	(5) "Nonprofit religious organization" means an
27	27	active corporation or other entity organized under Section
28	28	501(c)(3), Internal Revenue Code of 1986, as a nonprofit
29	29	organization defined as any one of the following:
30	30	(A) a church or religious house of worship;
31	31	(B) an organization formed for religious
32	32	purposes;
33	33	(C) a nonprofit institution affiliated with a
34	34	faith-based organization; or
35	35	(D) an integrated auxiliary organization of a
36	36	church.
37	37	(6) "Organizing party" means a church, nonprofit
38	38	religious organization, or religious denomination that has entered
39	39	into a pool creation agreement.
40	40	(7) "Person" means an individual, corporation, trust,
41	41	partnership, association, or any other legal entity.
42	42	(8) "Pool" means the Religious Institutions
43	43	Self-Insurance Pool authorized under this chapter.
44	44	(9) "Pool coverage" means the self-insured coverage
45	45	provided by the pool in accordance with this chapter.
46	46	(10) "Pool coverage agreement" means an indemnity
47	47	agreement under which a church, nonprofit religious organization,
48	48	or religious denomination is entitled to pool coverage in exchange
49	49	for the payment of premiums to the pool and is obligated for pool
50	50	liabilities.
51	51	(11) "Pool creation agreement" means an agreement
52	52	entered into under Section 2214.051.
53	53	(12) "Religious denomination" means a group of
54	54	individual churches or houses of worship that are identified using
55	55	the same terms and have a particular set of beliefs or spiritual or
56	56	religious values.
57	57	Sec. 2214.002. POOL NOT INSURANCE; APPLICABILITY OF
58	58	INSURANCE LAWS. The pool is not an insurer and pool coverage is not
59	59	insurance for purposes of this code. Except as provided by this
60	60	chapter, the pool is not subject to a provision of this code other
61	61	than this chapter.
62	62	Sec. 2214.003. PARTNERSHIP NOT CREATED. Notwithstanding
63	63	any other law, the pool is not a partnership under the laws of this
64	64	state.
65	65	Sec. 2214.004. POOL NOT COVERED BY GUARANTY ASSOCIATION.
66	66	The pool is not a member insurer of the Texas Property and Casualty
67	67	Insurance Guaranty Association.
68	68	Sec. 2214.005. RULES. The commissioner may adopt rules
69	69	necessary to implement this chapter.
70	70	SUBCHAPTER B. CREATION OF POOL
71	71	Sec. 2214.051. POOL CREATION AGREEMENT. (a) The pool may
72	72	be created by two or more churches or nonprofit religious
73	73	organizations or one or more religious denominations that enter
74	74	into an agreement described by Subsection (b).
75	75	(b) An agreement under Subsection (a) must be in the form of
76	76	an indemnity agreement signed by each organizing party
77	77	acknowledging and agreeing to the assumption of the obligations of
78	78	the pool under this chapter.
79	79	(c) Each organizing party that enters into the agreement
80	80	must have a positive net worth, be financially solvent, and be
81	81	capable of assuming the obligations of the pool.
82	82	Sec. 2214.052. TRUST FUND. The organizing parties shall
83	83	establish a trust fund to serve as the group self-insurance account
84	84	for the members.
85	85	Sec. 2214.053. SELECTION OF TEMPORARY BOARD. At the time
86	86	the organizing parties enter into the pool creation agreement, the
87	87	organizing parties shall select nine individuals to:
88	88	(1) serve as the temporary board; and
89	89	(2) draft a plan of operation for the pool.
90	90	Sec. 2214.054. POWERS OF TEMPORARY BOARD. The temporary
91	91	board may:
92	92	(1) solicit applications from prospective members to
93	93	participate in the pool on the date the pool begins providing pool
94	94	coverage;
95	95	(2) accept payment of premiums for the prospective
96	96	pool coverage; and
97	97	(3) take any other action necessary to complete and
98	98	submit an application for a certificate of authority under
99	99	Subchapter C.
100	100	Sec. 2214.055. DOMICILE. The pool must be domiciled in this
101	101	state.
102	102	SUBCHAPTER C. CERTIFICATE OF AUTHORITY
103	103	Sec. 2214.101. CERTIFICATE OF AUTHORITY. (a) The pool may
104	104	not provide pool coverage before the department issues a
105	105	certificate of authority to the pool.
106	106	(b) A certificate of authority issued under this subchapter
107	107	is continuous until:
108	108	(1) revoked or suspended by the commissioner; or
109	109	(2) the board voluntarily surrenders the certificate
110	110	in connection with the pool's dissolution under Section 2214.451.
111	111	(c) The temporary board appointed by the organizing parties
112	112	under Section 2214.053 shall submit to the department a written
113	113	application, in the form and manner prescribed by the commissioner,
114	114	for a certificate of authority.
115	115	Sec. 2214.102. APPLICATION CONTENTS. (a) An application
116	116	for a certificate of authority under this chapter must include:
117	117	(1) the pool creation agreement;
118	118	(2) the plan of operation; and
119	119	(3) evidence of the financial strength and liquidity
120	120	of the organizing parties to pay claims promptly and support the
121	121	pool's financial ability to satisfy the pool's obligations.
122	122	(b) The evidence described by Subsection (a)(3) must be in
123	123	the form of:
124	124	(1) either:
125	125	(A) financial statements, dated not later than
126	126	one year before the date the temporary board submits the
127	127	application and audited by an independent certified public
128	128	accountant, showing a combined net worth of the organizing parties
129	129	of at least $1 million; or
130	130	(B) financial documents, in the form and manner
131	131	prescribed by the commissioner, sufficient to verify the combined
132	132	net worth of the organizing parties is at least $1 million;
133	133	(2) current financial documents of each prospective
134	134	member that has applied to participate in the pool dated not later
135	135	than one year before the date the board submits the application;
136	136	(3) schedules of all prospective members showing:
137	137	(A) the ratio of current assets to current
138	138	liabilities of all prospective members combined to be greater than
139	139	one-to-one;
140	140	(B) the working capital of all prospective
141	141	members combined to be an amount establishing the financial
142	142	strength and liquidity of the pool to pay claims promptly; and
143	143	(C) the net worth of all prospective members
144	144	combined to be at least $1 million; and
145	145	(4) other financial information and documents as
146	146	required by the commissioner.
147	147	(c) The following items must be included with the
148	148	application:
149	149	(1) security as required by Section 2214.351(d);
150	150	(2) copies of excess insurance or reinsurance that
151	151	meets the requirements of Section 2214.355 and the commissioner;
152	152	(3) a bond covering each third-party administrator as
153	153	required by Section 2214.152;
154	154	(4) a certification from a designated depository
155	155	attesting to the amount of money on hand in the trust fund
156	156	established under Section 2214.052;
157	157	(5) copies of pool bylaws and any trust agreement or
158	158	other governance documents;
159	159	(6) an individual application, in the form and manner
160	160	prescribed by the commissioner, of each prospective member applying
161	161	to participate in the pool that includes a copy of the prospective
162	162	member's executed indemnity agreement;
163	163	(7) evidence of financial strength and liquidity of
164	164	the prospective members on the date the application is submitted to
165	165	satisfy the financial strength and liquidity requirements of this
166	166	chapter;
167	167	(8) proof that the pool will have the minimum annual
168	168	earned premium required by Section 2214.351 when the pool begins
169	169	operation;
170	170	(9) the current annual report or financial statement
171	171	of any casualty insurance company providing excess or reinsurance
172	172	coverage for the pool, if the statement is not already on file with
173	173	the department;
174	174	(10) the name, address, and telephone number of each
175	175	attorney representing the pool, each qualified actuary for the
176	176	pool, and each certified public accountant who will be auditing the
177	177	annual financial statements of the pool, as well as evidence of the
178	178	appointment of each by the board;
179	179	(11) the domicile address in this state where the
180	180	pool's books and records are maintained and the state from which the
181	181	pool's fund will be administered;
182	182	(12) proof of advance payment into the fund by each
183	183	prospective member of not less than 25 percent of the prospective
184	184	member's first year estimated annually earned premiums;
185	185	(13) a feasibility study or other analysis prepared by
186	186	a qualified actuary using actual loss history of the prospective
187	187	members;
188	188	(14) pro forma financial statements projecting the
189	189	first three years of operations of the pool based on a feasibility
190	190	study or other analysis prepared by a qualified actuary that
191	191	include a pro forma balance sheet, income statement, and statement
192	192	of cash flow, each of which are prepared in accordance with
193	193	generally accepted accounting principles; and
194	194	(15) a copy of the pool's premium billing policy
195	195	indicating whether the premium payments to the pool are to be paid
196	196	by members annually, monthly, quarterly, or any combination of
197	197	those periods.
198	198	(d) The application must be sworn to and subscribed before a
199	199	notary public.
200	200	Sec. 2214.103. APPLICATION APPROVAL. (a) The commissioner
201	201	shall approve an application for a certificate of authority if the
202	202	application and the proposed pool satisfy the requirements of this
203	203	subchapter and rules adopted under this chapter.
204	204	(b) The commissioner may deny without review an application
205	205	for a certificate of authority under this chapter that does not meet
206	206	the requirements of this subchapter.
207	207	Sec. 2214.104. FEES. (a) The commissioner may impose a fee
208	208	for an application for a certificate of authority under this
209	209	chapter in an amount necessary to cover the department's expenses
210	210	in reviewing the application.
211	211	(b) The commissioner may impose other fees in amounts
212	212	reasonable and necessary to defray the costs of administering this
213	213	chapter.
214	214	SUBCHAPTER D. OPERATION OF POOL
215	215	Sec. 2214.151. GOVERNANCE OF POOL; BOARD OF TRUSTEES. (a)
216	216	The pool is governed by a board of trustees composed of nine members
217	217	selected as provided by the plan of operation.
218	218	(b) Not later than the 15th day after the date the
219	219	commissioner approves the temporary board's application for a
220	220	certificate of authority, the initial regular board must be
221	221	selected as provided by the plan of operation. The members of the
222	222	initial regular board shall take office not later than the 30th day
223	223	after the date the application for the certificate of authority is
224	224	approved.
225	225	Sec. 2214.152. POOL ADMINISTRATION. (a) The board may
226	226	administer the pool by employing an administrator or contracting
227	227	with a third-party administrator.
228	228	(b) If the board employs an administrator to administer the
229	229	pool, the pool must purchase a bond, errors and omissions
230	230	insurance, directors' and officers' liability insurance, or another
231	231	security approved by the commissioner for the administration of the
232	232	pool.
233	233	(c) A third-party administrator contracted by the board and
234	234	whose acts are not covered by the pool's bond, errors and omissions
235	235	insurance, directors' and officers' liability insurance, or other
236	236	security approved by the commissioner and any person contracting
237	237	either directly or indirectly with the pool to provide claims
238	238	adjusting, underwriting, safety engineering, loss control,
239	239	marketing, investment advisory, or administrative services to the
240	240	pool or the members, other than bookkeeping, auditing, or claims
241	241	investigation services, shall:
242	242	(1) submit to the department:
243	243	(A) a safekeeping receipt or trust receipt from a
244	244	bank or savings and loan association doing business in this state
245	245	indicating the deposit and pledge to secure the performance of the
246	246	administrator's or person's obligations under the contract and this
247	247	chapter of:
248	248	(i) $50,000; or
249	249	(ii) bonds of the United States, this
250	250	state, or any political subdivision of this state having a par value
251	251	of $50,000; or
252	252	(B) a surety bond issued by a corporate surety
253	253	authorized to engage in business in this state of not less than
254	254	$50,000; and
255	255	(2) place all contractual terms, including fee
256	256	arrangements, in a written agreement that constitutes the entire
257	257	agreement between the parties and is signed by the administrator or
258	258	person and the pool.
259	259	SUBCHAPTER E. POOL COVERAGE
260	260	Sec. 2214.201. COVERAGE AUTHORIZED. (a) The pool's
261	261	certificate of authority authorizes the pool to provide coverage to
262	262	churches, nonprofit religious organizations, and religious
263	263	denominations on a self-insured basis for damage to or loss of a
264	264	structure or building.
265	265	(b) In addition to coverage authorized by Subsection (a),
266	266	pool coverage may include:
267	267	(1) premises liability coverage;
268	268	(2) contents coverage for furniture or equipment;
269	269	(3) wind and hail coverage;
270	270	(3) loss of use coverage; or
271	271	(4) medical payments coverage.
272	272	(c) Pool coverage is provided in the form of an indemnity
273	273	agreement entered into by the member under which the member is
274	274	entitled to pool coverage in exchange for the payment of premiums to
275	275	the pool and is obligated for pool liabilities as provided by
276	276	Section 2214.202.
277	277	Sec. 2214.202. MEMBER LIABILITY. To the extent required by
278	278	this chapter, each member is jointly and severally liable for
279	279	liabilities incurred by the pool for each fiscal year in which the
280	280	member is entitled to pool coverage.
281	281	Sec. 2214.203. RATES; APPEAL. (a) The board shall set
282	282	rates for pool coverage. The rates must be actuarially justified.
283	283	(b) The board shall file proposed rates with the department
284	284	and may use the rates beginning on the 90th day after the date of the
285	285	filing, unless the commissioner disapproves the use of the rates
286	286	within the 90-day period.
287	287	(c) The board shall prescribe a reasonable procedure for any
288	288	member aggrieved by the rates to request in writing a review of the
289	289	rating system for pool coverage. The board shall grant or deny the
290	290	request in writing not later than the 30th day after the date the
291	291	board receives the request.
292	292	(d) If the board rejects a request for review under
293	293	Subsection (c) or fails to grant or reject the request within the
294	294	30-day period described by that subsection, the party requesting
295	295	the review may appeal to the commissioner for a hearing not later
296	296	than the 30th day after the expiration of the 30-day period. After
297	297	the hearing, the commissioner may affirm, modify, or reverse an
298	298	action taken by the board with respect to rates.
299	299	Sec. 2214.204. RATE REVIEW. On the request of the
300	300	commissioner, the pool shall obtain a rate review conducted by a
301	301	national independent actuarial firm, provided that the
302	302	commissioner may not make more than two requests in any calendar
303	303	year for a rate review under this section. The firm shall report
304	304	its findings to the commissioner.
305	305	Sec. 2214.205. UNDERWRITING GUIDELINES; MEMBERSHIP
306	306	APPLICATION. (a) The board in the plan of operation shall
307	307	prescribe:
308	308	(1) underwriting guidelines and procedures for
309	309	evaluating risks; and
310	310	(2) procedures for eligible persons to apply to become
311	311	members.
312	312	(b) The board shall provide written notice to an applicant
313	313	for pool membership that the pool is not a member insurer covered by
314	314	the Texas Property and Casualty Insurance Guaranty Association.
315	315	SUBCHAPTER F. SOLICITATION OF POOL MEMBERSHIP
316	316	Sec. 2214.251. USE OF INSURANCE AGENT REQUIRED. Any person
317	317	soliciting applications for pool membership must hold a general
318	318	property and casualty agent license under Chapter 4051. A pool
319	319	employee or employee of a religious denomination or association of
320	320	nonprofit religious organizations is not required to hold an
321	321	agent's license if the solicitation of applications for pool
322	322	membership is not the employee's primary duty.
323	323	Sec. 2214.252. LIABILITY OF AGENT. An insurance agent or
324	324	other person involved in the soliciting or processing of
325	325	applications for pool membership is not liable for claims arising
326	326	out of the insolvency of the pool or the inability of the pool to pay
327	327	claims as they become due unless the claimant first exhausts all
328	328	remedies available to the claimant against the members as provided
329	329	by this chapter.
330	330	Sec. 2214.253. USE OF APPLICATION INFORMATION. (a) Except
331	331	as otherwise provided by this section, for purposes of soliciting,
332	332	selling, or negotiating the renewal or sale of group self-insurance
333	333	coverage, insurance products, or insurance services, an insurance
334	334	agent has the exclusive use of expirations, records, or other
335	335	written or electronic information directly related to an
336	336	application for pool coverage submitted to the agent or to a pool
337	337	coverage agreement arranged through the agent.
338	338	(b) The pool may not use expirations, records, or other
339	339	written or electronic information related to applications for pool
340	340	coverage to solicit, sell, or negotiate the renewal or sale of
341	341	insurance coverage, insurance products, or insurance services to
342	342	members, either directly or by providing the information to others,
343	343	without the express written consent of an insurance agent.
344	344	(c) The pool may use the expirations, records, or other
345	345	written or electronic information related to an application for
346	346	pool coverage to review the application, to issue a pool coverage
347	347	agreement, or for any other purpose necessary for arranging pool
348	348	coverage through an insurance agent. The pool may also use the
349	349	agent's expirations, records, or other written or electronic
350	350	information for any other purpose that does not involve the
351	351	soliciting, selling, or negotiating the renewal or sale of group
352	352	self-insurance coverage, insurance products, or insurance
353	353	services.
354	354	Sec. 2214.254. AGENT LOST COMMISSION CLAIMS. (a) An
355	355	insurance agent's claim for lost commissions shall be resolved in
356	356	accordance with dispute resolution terms in the applicable agent
357	357	contract. In the absence of any dispute resolution terms, the
358	358	parties shall attempt to resolve the dispute through mediation.
359	359	(b) If the claim is not resolved through mediation, the
360	360	parties may agree to submit the claim to binding arbitration. In
361	361	the absence of an agreement to resolve the claim through binding
362	362	arbitration, an insurance agent may bring an action against the
363	363	pool for the claim.
364	364	Sec. 2214.255. OTHER AGREEMENTS AUTHORIZED. The board or
365	365	pool administrator and an insurance agent may, in a written
366	366	agreement separate from the agency contract, mutually agree to
367	367	terms different from the provisions provided by this subchapter.
368	368	Sec. 2214.256. EXEMPTIONS FROM SUBCHAPTER. This subchapter
369	369	does not apply to:
370	370	(1) a pool coverage agreement provided by the pool on
371	371	request, individually or through a pool administrator;
372	372	(2) an insurance agent contract for the insurance
373	373	agent's exclusive representation of one pool member or prospective
374	374	pool member or a group of affiliated members or prospective
375	375	members, in which case the rights of the agent are determined by the
376	376	terms of the contract;
377	377	(3) a default by an insurance agent for nonpayment of
378	378	premiums under the insurance agent's contract with the pool; or
379	379	(4) a terminated insurance agent contract if the pool
380	380	is required by law to continue coverage for the member, in which
381	381	case the pool shall continue to pay the insurance agent commission
382	382	on the pool coverage agreements issued under that contract that the
383	383	pool is required to renew during the 36-month period following the
384	384	effective date of the termination, provided that the commission is
385	385	paid at the pool's prevailing commission rates in effect on the date
386	386	of renewal for that class or line of coverage in effect on the date
387	387	of renewal for agents whose contracts are not terminated.
388	388	SUBCHAPTER G. RECORDS
389	389	Sec. 2214.301. DEFINITIONS. In this subchapter:
390	390	(1) "Copy" includes a photograph or reproduction.
391	391	(2) "Record" means a book, record, document, account,
392	392	or voucher.
393	393	Sec. 2214.302. MAINTENANCE AND AVAILABILITY OF POOL
394	394	RECORDS. (a) The pool shall maintain and make available to the
395	395	department all pool records to allow the commissioner to determine
396	396	that the pool's financial condition, affairs, and operations are in
397	397	compliance with this chapter.
398	398	(b) Except as provided by Subsection (c), the pool shall
399	399	maintain in this state the original or a copy of a record for the
400	400	purpose of commissioner examination until the earlier of:
401	401	(1) the date the commissioner approves disposal of the
402	402	record; or
403	403	(2) the later of:
404	404	(A) the first day of the examination period
405	405	following the examination period in which the record is examined by
406	406	the commissioner; or
407	407	(B) the fifth anniversary of the creation of the
408	408	record.
409	409	(c) The pool shall permanently maintain an original or
410	410	certified copy of a record in which a member agrees to or
411	411	acknowledges the members' joint and several liability for
412	412	liabilities incurred by the pool.
413	413	Sec. 2214.303. CONFIDENTIALITY OF RECORDS. Except as
414	414	otherwise provided by this chapter, the pool's records and any
415	415	records of the department associated with the pool are confidential
416	416	and not subject to disclosure under Chapter 552, Government Code.
417	417	SUBCHAPTER H. FINANCIAL PROVISIONS
418	418	Sec. 2214.351. INITIAL FINANCIAL REQUIREMENTS. (a) To
419	419	maintain the pool's financial stability, the commissioner shall, at
420	420	times determined necessary by the commissioner, require two or more
421	421	members to maintain:
422	422	(1) a minimum combined net worth of $1 million; and
423	423	(2) a current assets to current liabilities ratio of
424	424	at least one-to-one.
425	425	(b) After the pool has been operating for three years and
426	426	has a total surplus of $3 million, the commissioner may waive any
427	427	requirements imposed under Subsection (a).
428	428	(c) The pool must maintain at least $750,000 in earned
429	429	premiums in the pool's first year of operation as documented in the
430	430	pool's audited financial statement prepared in accordance with
431	431	generally accepted accounting principles.
432	432	(d) During the pool's first year of operation, the board
433	433	shall submit to the department:
434	434	(1) a safekeeping receipt or trust receipt from a bank
435	435	or savings and loan association doing business in this state
436	436	indicating that the board has deposited and pledged:
437	437	(A) $100,000; or
438	438	(B) bonds of the United States, this state, or a
439	439	political subdivision of this state having a par value of $100,000;
440	440	or
441	441	(2) a surety bond issued by a corporate surety
442	442	authorized to engage in business in this state in an amount of
443	443	$100,000 to secure the pool's obligations.
444	444	Sec. 2214.352. EARNED PREMIUM REQUIREMENTS. Each year
445	445	after the pool's first year of operation, the pool shall maintain at
446	446	least $2 million in earned premiums as documented on the pool's
447	447	audited financial statement prepared in accordance with generally
448	448	accepted accounting principles.
449	449	Sec. 2214.353. SECURITY. Each year after the pool's first
450	450	year of operation, the pool's board shall submit to the department:
451	451	(1) a safekeeping receipt or trust receipt from a bank
452	452	or savings and loan association doing business in this state
453	453	indicating that the board has deposited and pledged:
454	454	(A) $250,000; or
455	455	(B) bonds of the United States, this state, or
456	456	any political subdivision of this state having a par value of
457	457	$250,000; or
458	458	(2) a surety bond issued by a corporate surety
459	459	authorized to engage in business in this state, in the amount of
460	460	$250,000 to secure the pool's obligations.
461	461	Sec. 2214.354. RESERVE ACCOUNT. (a) To maintain the
462	462	financial stability of the pool, the board shall annually assess
463	463	each member a reserve payment in an amount that is a percentage of
464	464	the premium owed by the member for that year.
465	465	(b) Before assessing a reserve payment under Subsection
466	466	(a), the board must obtain approval from the commissioner of the
467	467	percentage amount to be paid by all members.
468	468	(c) The board shall deposit all reserve payments into a
469	469	separate reserve account and shall maintain the account at all
470	470	times while the pool is in operation. The board may not withdraw
471	471	money from the reserve account without commissioner approval.
472	472	Sec. 2214.355. EXCESS INSURANCE AND REINSURANCE. (a) The
473	473	pool shall maintain, on a fiscal year basis, a contract of specific
474	474	excess insurance or reinsurance of not less than an amount that is
475	475	actuarially sound and approved by the commissioner. The maximum
476	476	retention under the contract may not exceed amounts provided by the
477	477	commissioner. The commissioner must approve an excess insurance or
478	478	reinsurance contract before use by the pool.
479	479	(b) Solely for purposes of authorizing the purchase of
480	480	reinsurance under this section, the pool is considered an insurer.
481	481	(c) The board may purchase excess insurance or reinsurance
482	482	from a domestic or foreign company, subject to Chapter 493 and
483	483	Financial Accounting Standards Board Statement No. 113, Accounting
484	484	and Reporting for Reinsurance of Short-Duration and Long-Duration
485	485	Contracts.
486	486	(d) To be eligible to write excess coverage for the pool, a
487	487	casualty insurer must have on file with the department the
488	488	insurer's current financial statement showing assets, including
489	489	any surplus to policyholders, at least equal to the current
490	490	commissioner requirements for admission of a new company to engage
491	491	in business in this state. The board may enter into a contract for
492	492	excess insurance coverage with an active underwriter of Lloyd's of
493	493	London with prior commissioner approval.
494	494	(e) In addition to the requirements described by Subsection
495	495	(c) or (d), as applicable, the board must purchase excess insurance
496	496	or reinsurance only from a company having an eligible rating of at
497	497	least:
498	498	(1) "A-" by A.M. Best Company, Inc.;
499	499	(2) "A-" by Fitch Ratings Ltd.;
500	500	(3) "A" by Weiss Ratings;
501	501	(4) "A-" by Standard & Poor's Financial Services LLC;
502	502	or
503	503	(5) "A3" by Moody's Investors Service, Inc.
504	504	Sec. 2214.356. FINANCIAL STATEMENTS AND REPORTS. The board
505	505	shall file with the department financial statements and financial
506	506	reports, including financial statements audited by an independent
507	507	certified public accountant and actuarial reports, as may be
508	508	required by the commissioner under rules adopted under this
509	509	chapter.
510	510	Sec. 2214.357. MEMBER REFUNDS. The board may declare as
511	511	refundable to members any money exceeding the amount necessary to
512	512	fulfill the pool's obligations. The board may distribute the
513	513	refund at board's discretion, in accordance with the plan of
514	514	operation, provided that:
515	515	(1) the amount of the refund does not exceed the
516	516	members' distributions payable and is recorded on the pool's
517	517	balance sheet as indicated by the most recently completed audited
518	518	financial statements of the pool; and
519	519	(2) the board provides written notice of the refund to
520	520	the department not later than the 10th day before the date the board
521	521	provides the refund.
522	522	Sec. 2214.358. INVESTMENTS. (a) The board may invest pool
523	523	money only in a security or other investment authorized by this
524	524	section that is interest-bearing, interest-accruing,
525	525	dividend-paying, or income-paying and that is not in default. A
526	526	pool investment is exclusively for the benefit of the pool and the
527	527	board shall deposit the investment's interest or income in the
528	528	fund.
529	529	(b) The board may invest pool money not needed for current
530	530	obligations in:
531	531	(1) a deposit in a federally insured bank or savings
532	532	and loan association that is:
533	533	(A) insured by the Federal Deposit Insurance
534	534	Corporation; or
535	535	(B) collateralized by direct obligations of the
536	536	United States;
537	537	(2) bonds or securities not in default as to principal
538	538	or interest that are obligations of the United States;
539	539	(3) pass-through mortgage-backed securities and
540	540	collateralized mortgage obligations issued by the Federal National
541	541	Mortgage Association, the Government National Mortgage
542	542	Association, the Federal Home Loan Mortgage Corporation, or the
543	543	Federal Housing Administration, provided that the collateralized
544	544	mortgage obligations have a minimum financial strength of "A" by
545	545	Moody's Investors Service, Inc., Standard & Poor's Financial
546	546	Services LLC, or Fitch Ratings Ltd.;
547	547	(4) obligations of this state or a political
548	548	subdivision of this state having a minimum financial strength of
549	549	"A" by Moody's Investors Service, Inc., Standard & Poor's Financial
550	550	Services LLC, or Fitch Ratings Ltd., provided that not more than 5
551	551	percent of the pool's assets are invested in any particular issue
552	552	and the type of investment does not exceed 15 percent of the pool's
553	553	assets in the aggregate;
554	554	(5) obligations of any state or a political
555	555	subdivision of that state having a minimum financial strength of
556	556	"A" by Moody's Investors Service, Inc., Standard & Poor's Financial
557	557	Services LLC, or Fitch Ratings Ltd., provided that not more than 5
558	558	percent of the pool's assets are invested in any particular issue
559	559	and the type of investment does not exceed 15 percent of the pool's
560	560	assets in the aggregate;
561	561	(6) commercial mortgage-backed securities with
562	562	purchases having a minimum final strength of "Aaa" by Moody's
563	563	Investors Service, Inc., "AAA" By Standard & Poor's Financial
564	564	Services LLC, or "AAA" by Fitch Ratings Ltd., provided that not more
565	565	than 2 percent of the pool's assets are invested in one issue and
566	566	this type of investment does not exceed 10 percent of the pool's
567	567	assets in the aggregate;
568	568	(7) asset-backed securities with purchases having a
569	569	minimum financial strength of "Aa" by Moody's Investors Service,
570	570	Inc., "AA" by Standard & Poor's Financial Services LLC, or "AA" by
571	571	Fitch Ratings Ltd., provided that no more than 5 percent of the
572	572	pool's assets are invested in one issue and this type of investment
573	573	does not exceed 10 percent of the pool's assets in the aggregate;
574	574	(8) repurchase agreements when the collateral for the
575	575	agreement is a direct obligation of the United States, provided
576	576	that the repurchase agreement:
577	577	(A) is in writing;
578	578	(B) has a specific maturity date;
579	579	(C) adequately identifies each security to which
580	580	the agreement applies; and
581	581	(D) states that in the event of default by the
582	582	party agreeing to repurchase the securities described in the
583	583	agreement at the term contained in the agreement, title to the
584	584	described securities passes immediately to the pool without
585	585	recourse;
586	586	(9) corporate bonds having a minimum financial
587	587	strength of "Baa" by Moody's Investors Service, Inc., "BBB" by
588	588	Standard & Poor's Financial Services LLC, or "BBB" by Fitch Ratings
589	589	Ltd., provided that:
590	590	(A) except as provided by Subsection (c),
591	591	corporate bonds of any particular issue or issuer constitute not
592	592	more than 5 percent of the pool's assets; and
593	593	(B) except as provided by Subsection (c), not
594	594	more than 50 percent of the pool's assets are invested in corporate
595	595	bonds of all types;
596	596	(10) mutual or trust fund institutions registered with
597	597	the Securities and Exchange Commission that have underlying
598	598	investments consisting solely of securities approved for
599	599	investment as provided by this section, provided that this
600	600	investment does not exceed 50 percent of the pool's assets in the
601	601	aggregate;
602	602	(11) individual equities, provided that:
603	603	(A) individual equities and any mutual funds or
604	604	exchange-traded funds do not exceed 15 percent of the pool's
605	605	assets;
606	606	(B) the pool holds a minimum of 5 different
607	607	issues in the equity sector to provide for diversification;
608	608	(C) no single issue constitutes more than 5
609	609	percent, at cost, of the pool's overall investment fund;
610	610	(D) market capitalization for each issue is of at
611	611	least $1 billion;
612	612	(E) each eligible issue pays a cash dividend; and
613	613	(F) the equity holdings are restricted to:
614	614	(i) high-quality, readily marketable
615	615	securities corporations that are domiciled in the United States and
616	616	that are actively traded on the major United States exchanges,
617	617	including the New York Stock Exchange and the National Association
618	618	of Securities Dealers Automated Quotation System; or
619	619	(ii) equities of foreign-domiciled
620	620	corporations that trade American depositary receipts on the major
621	621	United States exchanges; and
622	622	(12) a mutual fund or exchange-traded fund, provided
623	623	that:
624	624	(A) the mutual fund or exchanged-traded fund pays
625	625	a dividend and consists of securities that have an average market
626	626	capitalization of at least $1 billion;
627	627	(B) the same general quality requirements
628	628	described by Subdivision (11) are met; and
629	629	(C) the aggregate total of the investment, plus
630	630	any individual securities, does not exceed 15 percent of the pool's
631	631	assets.
632	632	(c) The board may invest in corporate bonds in excess of the
633	633	5 percent and 50 percent limitations specified under Subsections
634	634	(b)(9)(A) and (B) up to an additional 10 percent of the pool's
635	635	assets if the financial circumstances are acceptable to the
636	636	commissioner, such as an increase in market value after initial
637	637	purchase of a corporate bond, provided that:
638	638	(1) the initial purchase of corporate bonds was within
639	639	the limitations specified under Subsections (b)(9)(B) and (C); and
640	640	(2) in determining the financial condition of the
641	641	pool, the commissioner does not include as assets of the pool those
642	642	corporate bonds that exceed 50 percent of the pool's total assets.
643	643	(d) Except as provided by Subsection (e), the board may not
644	644	invest in rental assets, including:
645	645	(1) any item that is not actually owned by the pool;
646	646	(2) any item of which the ownership is subject to
647	647	resolution, rescission, or revocation on the pool's insolvency,
648	648	receivership, bankruptcy, statutory supervision, rehabilitation,
649	649	or liquidation or on the occurrence of any other contingency;
650	650	(3) any item for which the pool pays a regular or
651	651	periodic fee for the right to carry the item as an asset, whether
652	652	the fee is characterized as a rental fee, a management fee, or a
653	653	dividend not previously approved by the commissioner, or makes
654	654	another periodic payment for that right;
655	655	(4) any asset purchased for investment by the pool on
656	656	credit in which the interest rate paid by the pool on its credit
657	657	instrument is greater than the interest rate or yield generated by
658	658	the purchased asset;
659	659	(5) any asset on the pool's balance sheet subject to a
660	660	mortgage, lien, privilege, preference, pledge, charge, or other
661	661	encumbrance that is not accurately reflected in the liability
662	662	section of the pool's balance sheet; and
663	663	(6) any asset received by the pool as a contribution to
664	664	capital or surplus from any person that meets any of the criteria
665	665	described by Subdivisions (1) through (5) while in the hands of that
666	666	contributing person or on or after the moment of the contribution to
667	667	capital.
668	668	(e) Subsection (d)(3) does not apply to leases capitalized
669	669	under generally accepted accounting principles.
670	670	Sec. 2214.359. CONSECUTIVE NET LOSSES. (a) This section
671	671	applies if the pool has:
672	672	(1) three years of consecutive net losses on the pool's
673	673	audited financial statements; or
674	674	(2) two years of consecutive net losses on the pool's
675	675	audited financial statements of more than the greater of:
676	676	(A) $500,000; or
677	677	(B) five percent of the premium of the latest
678	678	audited financial statement.
679	679	(b) If a condition described by Subsection (a) exists, an
680	680	authorized representative of the board shall:
681	681	(1) attend a meeting with the department, the pool
682	682	administrator, and any third-party administrator to discuss the
683	683	financial condition of the pool and to advise the department of the
684	684	course of action the pool will take to obtain net incomes on
685	685	subsequently audited financial statements;
686	686	(2) file with the department a written plan signed by
687	687	the board describing the actions the pool will take to generate net
688	688	incomes on subsequently audited financial statements; and
689	689	(3) obtain an actuarial rate analysis, if an actuarial
690	690	rate analysis was not performed for the previous fiscal year.
691	691	Sec. 2214.360. INSOLVENCY PLAN. (a) In this section,
692	692	"insolvent" means the condition in which the pool has liabilities
693	693	greater than the pool's assets as determined in accordance with
694	694	generally accepted accounting principles.
695	695	(b) If the pool becomes insolvent, the board shall file with
696	696	the department, not later than the 60th day after the date the board
697	697	becomes aware of the insolvency, a written plan to resolve the
698	698	insolvency signed by the board. In determining whether the pool is
699	699	insolvent, intangible property such as patents, trade names, or
700	700	goodwill may not be considered to be assets of the pool.
701	701	(c) The insolvency plan must provide in detail the means by
702	702	which the board intends to eliminate the insolvency, including any
703	703	assessment of the members the board determines is necessary, the
704	704	timetable for implementing the plan, and the reporting that will be
705	705	made to the department regarding the progress of the plan, and
706	706	include any other information required by the commissioner.
707	707	(d) The commissioner shall review the insolvency plan and
708	708	notify the board of the plan's approval or disapproval not later
709	709	than the 30th day after the date the department receives the plan.
710	710	(e) The commissioner shall provide written notice to the
711	711	board of a determination that:
712	712	(1) the insolvency plan submitted by the board is
713	713	disapproved; or
714	714	(2) the pool is not implementing a plan approved by the
715	715	commissioner in accordance with the plan's terms.
716	716	Sec. 2214.361. SUPERVISION, CONSERVATORSHIP, OR
717	717	RECEIVERSHIP. (a) In this section:
718	718	(1) "Hazardous financial condition" means a condition
719	719	in which, based on the pool's present or reasonably anticipated
720	720	financial condition, the pool, although not yet financially
721	721	impaired or insolvent, is unlikely to be able to:
722	722	(A) meet the pool's obligations to members with
723	723	respect to known claims and reasonably anticipated claims; or
724	724	(B) pay other obligations in the normal course of
725	725	business.
726	726	(2) "Insolvent" has the meaning assigned by Section
727	727	2214.360.
728	728	(b) In addition to any other powers of the commissioner, if
729	729	the commissioner determines that the pool is insolvent, is
730	730	operating in a hazardous financial condition, or is otherwise
731	731	operating in violation of this chapter, the commissioner may take
732	732	any action against the pool that the commissioner could take
733	733	against an insurer under Chapter 441 or Chapter 443.
734	734	SUBCHAPTER I. COMMISSIONER EXAMINATION
735	735	Sec. 2214.401. EXAMINATION REQUIRED. (a) The commissioner
736	736	shall conduct an examination of the pool at least once every five
737	737	years and at other times as the commissioner considers necessary.
738	738	(b) The examination shall be conducted in the same manner as
739	739	an examination of an insurer under Chapter 401.
740	740	(c) In conducting an examination of the pool, the
741	741	commissioner has the same powers and duties with respect to the
742	742	pool, and with respect to other persons in relation to the pool's
743	743	affairs and condition, that the commissioner has with respect to an
744	744	insurer or other persons with respect to an insurer's affairs and
745	745	condition.
746	746	SUBCHAPTER J. DISSOLUTION OF POOL
747	747	Sec. 2214.451. APPLICATION FOR VOLUNTARY DISSOLUTION. (a)
748	748	If the members of the pool elect to dissolve the pool, the board
749	749	must apply to the commissioner in the form and manner prescribed by
750	750	the commissioner for the authority to dissolve.
751	751	(b) The commissioner shall approve or disapprove an
752	752	application to dissolve the pool not later than the 60th day after
753	753	the date the commissioner receives the application.
754	754	(c) The commissioner shall approve an application to
755	755	dissolve the pool if the pool:
756	756	(1) has no outstanding liabilities including incurred
757	757	but not reported liabilities; or
758	758	(2) is covered by an irrevocable commitment from an
759	759	authorized insurer that provides for payment of all outstanding
760	760	liabilities and related services, including payment of claims,
761	761	preparation of reports, and administration of transactions
762	762	associated with the period during which the pool provided pool
763	763	coverage.
764	764	Sec. 2214.452. DISTRIBUTION OF POOL ASSETS. On the pool's
765	765	dissolution and after payment of all outstanding liabilities and
766	766	indebtedness, the pool assets shall be distributed to the members
767	767	under a distribution plan submitted by the board to the department
768	768	and approved by the commissioner.
769	769	Sec. 2214.453. DISSOLUTION WITHOUT APPROVAL. (a)
770	770	Dissolution of the pool without authorization is prohibited.
771	771	(b) The dissolution of the pool violation of this section
772	772	does not absolve or release the pool, a member, or any individual or
773	773	entity that has executed an indemnity agreement in connection with
774	774	the pool from obligations incurred or entered into before the
775	775	dissolution.
776	776	SUBCHAPTER K. ENFORCEMENT
777	777	Sec. 2214.501. CONSUMER COMPLAINTS; ADMINISTRATIVE
778	778	PENALTY. (a) A consumer may file a complaint with the department
779	779	to report a suspected violation of this chapter or the failure of
780	780	the pool to meet its obligations under a pool coverage agreement or
781	781	the plan of operation.
782	782	(b) After investigating a complaint regarding the pool, the
783	783	commissioner may order the board to take a corrective action the
784	784	commissioner considers necessary instead of taking an enforcement
785	785	action under another provision of this subchapter.
786	786	Sec. 2214.502. CORRECTIVE ACTION PLAN. (a) The
787	787	commissioner may order the board to submit a corrective action plan
788	788	to remediate any noncompliance or financial issues affecting the
789	789	pool.
790	790	(b) The board shall submit the completed corrective action
791	791	plan to the commissioner for approval and include standards, time
792	792	frames, and other parameters acceptable to the commissioner.
793	793	(c) The corrective action plan may include:
794	794	(1) mandatory training;
795	795	(2) on-site or off-site monitoring and supervision of
796	796	the activities of the pool for a specific period of time to
797	797	determine progress regarding correction of deficiencies;
798	798	(3) the submission of written progress reports;
799	799	(4) the institution of measures to conserve or
800	800	generate additional funding for the pool; or
801	801	(5) the imposition of an administrative penalty under
802	802	Section 2214.504 for any future misconduct of the kind that
803	803	contributed to the need for the imposition of the corrective action
804	804	plan.
805	805	(d) Failure by the pool to comply with the corrective action
806	806	plan may result in:
807	807	(1) the imposition of an administrative penalty under
808	808	Section 2214.504;
809	809	(2) suspension or revocation of the pool's certificate
810	810	of authority; or
811	811	(3) placement of the pool into supervision.
812	812	Sec. 2214.503. CEASE AND DESIST ORDER; SUSPENSION OR
813	813	REVOCATION OF CERTIFICATE OF AUTHORITY. (a) If the commissioner
814	814	determines the pool has violated this chapter, a commissioner rule,
815	815	or any order or directive issued by the commissioner, the
816	816	commissioner may:
817	817	(1) order the pool to cease and desist from the conduct
818	818	constituting the violation; or
819	819	(2) suspend or revoke the pool's certificate of
820	820	authority.
821	821	(b) A cease and desist order issued under this section may
822	822	include a prohibition on issuing or renewing pool coverage.
823	823	Sec. 2214.504. ADMINISTRATIVE PENALTY. If the commissioner
824	824	determines that the pool or any trustee, member, officer,
825	825	administrator, or employee of the pool has violated this chapter,
826	826	any other applicable law relating to the pool, a commissioner rule,
827	827	or any order or directive issued by the commissioner, the
828	828	commissioner may impose an administrative penalty not to exceed
829	829	$2,000 for each violation. For a subsequent violation, the
830	830	commissioner may impose an administrative penalty not to exceed
831	831	$4,000.
832	832	SECTION 2. A board of trustees may not apply for a
833	833	certificate of authority under Section 2214.101, Insurance Code, as
834	834	added by this Act, before January 1, 2026.
835	835	SECTION 3. This Act takes effect September 1, 2025.