Bill Text: TX HB3306 | 2019-2020 | 86th Legislature | Enrolled
Bill Title: Relating to the disclosure of information concerning the corporate governance structure of certain insurers and related entities; providing an administrative penalty.
Spectrum: Bipartisan Bill
Status: (Passed) 2019-06-14 - Effective on 9/1/19 [HB3306 Detail]
Download: Texas-2019-HB3306-Enrolled.html
H.B. No. 3306 |
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relating to the disclosure of information concerning the corporate | ||
governance structure of certain insurers and related entities; | ||
providing an administrative penalty. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subtitle B, Title 6, Insurance Code, is amended | ||
by adding Chapter 831 to read as follows: | ||
CHAPTER 831. CORPORATE GOVERNANCE ANNUAL DISCLOSURE | ||
Sec. 831.0001. APPLICABILITY AND PURPOSE. (a) The purpose | ||
of this chapter is to promote the public interest by: | ||
(1) requiring annual disclosure of an insurer or | ||
insurance group's corporate governance structure, policies, and | ||
practices to permit the commissioner to gain and maintain an | ||
understanding of the insurer's corporate governance framework; and | ||
(2) providing for the confidential treatment of the | ||
corporate governance annual disclosure and related information as | ||
the disclosure and related information will contain confidential | ||
and sensitive information related to an insurer or insurance | ||
group's internal operations and proprietary and trade-secret | ||
information which, if made public, could potentially cause the | ||
insurer or insurance group competitive harm or disadvantage. | ||
(b) This chapter may not be construed to prescribe or impose | ||
corporate governance standards and internal procedures beyond that | ||
which is required under applicable state corporate law. | ||
(c) Notwithstanding Subsection (b), this chapter may not be | ||
construed to limit the commissioner's authority, or the rights or | ||
obligations of third parties, under Chapter 401. | ||
(d) This chapter applies to each insurer domiciled in this | ||
state, except that this chapter does not apply to a domestic insurer | ||
that is authorized, admitted, or eligible to engage in the business | ||
of insurance only in this state. For the purposes of this chapter, | ||
an insurer is not considered to be authorized, admitted, or | ||
eligible to engage in the business of insurance only in this state | ||
if the insurer is a member of an insurance group that writes or | ||
assumes insurance in any manner in another state. | ||
Sec. 831.0002. DEFINITIONS. In this chapter: | ||
(1) "Disclosure" means the confidential corporate | ||
governance annual disclosure filed by the insurer or insurance | ||
group in accordance with the requirements of this chapter. | ||
(2) "Insurance group" means the insurers and | ||
affiliates included within an insurance holding company system as | ||
described by Section 823.006. | ||
(3) "Insurer" has the meaning assigned by Section | ||
823.002. The term includes a health maintenance organization | ||
authorized to engage in business under Chapter 843. | ||
Sec. 831.0003. DISCLOSURE REQUIRED. (a) Except as | ||
provided by Subsection (b), an insurer, or the insurance group of | ||
which the insurer is a member, shall, not later than June 1 of each | ||
calendar year, submit to the commissioner a corporate governance | ||
annual disclosure that contains the information described by | ||
Section 831.0008(c). | ||
(b) Notwithstanding any request from the commissioner under | ||
Subsection (d), an insurer that is a member of an insurance group | ||
shall submit the report required by Subsection (a) to the | ||
commissioner of the lead state for the insurance group, in | ||
accordance with the laws of the lead state, as determined by the | ||
procedures adopted by the National Association of Insurance | ||
Commissioners. | ||
(c) The disclosure must include a signature of the insurer | ||
or insurance group's chief executive officer or corporate secretary | ||
attesting to the best of that individual's belief and knowledge | ||
that the insurer has implemented the corporate governance practices | ||
described in the disclosure and that a copy of the disclosure has | ||
been provided to the insurer's board of directors or the | ||
appropriate committee of the insurer's board of directors. | ||
(d) An insurer not otherwise required to submit a disclosure | ||
under this chapter shall submit a disclosure on the commissioner's | ||
request. | ||
Sec. 831.0004. LEVEL OF REPORTING. (a) For purposes of | ||
completing the disclosure under Section 831.0003, an insurer or | ||
insurance group may provide information regarding corporate | ||
governance at the ultimate controlling parent level, an | ||
intermediate holding company level, or the individual legal entity | ||
level, depending on how the insurer or insurance group has | ||
structured the insurer's or insurance group's system of corporate | ||
governance. | ||
(b) An insurer or insurance group is encouraged to make the | ||
disclosure: | ||
(1) at the level at which the insurer's or insurance | ||
group's risk appetite is determined; | ||
(2) at the level at which the earnings, capital, | ||
liquidity, operations, and reputation of the insurer are overseen | ||
collectively and at which the supervision of those factors are | ||
coordinated and exercised; or | ||
(3) at the level at which legal liability for failure | ||
of general corporate governance duties would be placed. | ||
(c) If an insurer or insurance group determines the level of | ||
reporting based on the criteria described by Subsection (b), the | ||
insurer or insurance group shall indicate which of the three | ||
criteria was used to determine the level of reporting and explain | ||
any subsequent changes in level of reporting. | ||
Sec. 831.0005. REVIEW OF DISCLOSURE; REQUEST FOR ADDITIONAL | ||
INFORMATION. The review of the disclosure and any additional | ||
requests for information shall be made through the lead state as | ||
determined by the procedures adopted by the National Association of | ||
Insurance Commissioners described by Section 831.0003(b). | ||
Sec. 831.0006. SUBSTANTIALLY SIMILAR INFORMATION. An | ||
insurer that provides information substantially similar to the | ||
information required by this chapter in other documents provided to | ||
the commissioner, including proxy statements filed in conjunction | ||
with Form B requirements or other state or federal filings provided | ||
to the department, is not required to duplicate that information in | ||
the disclosure but is required only to cross-reference the document | ||
in which the information is included. | ||
Sec. 831.0007. PART OF EXAMINATION PROCESS. The disclosure | ||
and any additional information requested by the commissioner and | ||
provided to the department as described by this chapter is | ||
considered part of the process of examination of insurers under | ||
this code, including Chapter 401. | ||
Sec. 831.0008. CONTENTS OF DISCLOSURE. (a) An insurer or | ||
insurance group has discretion over the responses to the disclosure | ||
inquiries, provided the disclosure must contain the material | ||
information necessary to permit the commissioner to gain an | ||
understanding of the insurer's or insurance group's corporate | ||
governance structure, policies, and practices. | ||
(b) The commissioner may request additional information | ||
that the commissioner considers material and necessary to provide | ||
the commissioner with a clear understanding of: | ||
(1) the corporate governance policies; and | ||
(2) the reporting, information system, or controls | ||
implementing those policies. | ||
(c) Notwithstanding Subsections (a) and (b), the disclosure | ||
shall be prepared consistent with rules adopted by the | ||
commissioner. Documentation and supporting information must be | ||
maintained and made available on examination or on request of the | ||
commissioner. | ||
Sec. 831.0009. CONFIDENTIALITY. (a) Documents, materials, | ||
or other information, including a disclosure, in the possession or | ||
control of the department that is obtained by, created by, or | ||
disclosed to the commissioner or any other person under this | ||
chapter is confidential and privileged and is: | ||
(1) not subject to disclosure under Chapter 552, | ||
Government Code; | ||
(2) not subject to subpoena; and | ||
(3) not subject to discovery or admissible in evidence | ||
in any private civil action. | ||
(b) Documents, materials, or other information, including a | ||
disclosure, in the possession or control of the department that is | ||
obtained by, created by, or disclosed to the commissioner or any | ||
other person under this chapter is recognized by this state as being | ||
proprietary and to contain trade secrets. | ||
(c) The commissioner may use the documents, materials, or | ||
other information described in this section to further any | ||
regulatory or legal action brought as part of the commissioner's | ||
official duties. The commissioner may not otherwise make the | ||
documents, materials, or other information public without the prior | ||
written consent of the insurer. Nothing in this section may be | ||
construed to require written consent of the insurer before the | ||
commissioner may share or receive documents, materials, or other | ||
information under Subsection (e). | ||
(d) The commissioner and any other person who receives | ||
documents, materials, or other information under this chapter, | ||
through examination, or otherwise under any other law, while acting | ||
under the authority of the commissioner, or with whom the | ||
documents, materials, or other information is shared under this | ||
chapter may not testify or be required to testify in any private | ||
civil action concerning any documents, materials, or other | ||
information subject to Subsection (a) or (b). | ||
(e) In order to assist in the performance of the | ||
commissioner's regulatory duties, the commissioner may, on | ||
request, share documents, materials, or other information, | ||
including confidential and privileged documents, materials, or | ||
information subject to Subsection (a) or (b) and proprietary and | ||
trade-secret documents, materials, or information, with: | ||
(1) other state, federal, and international financial | ||
regulatory agencies, including members of a supervisory college | ||
described by Section 823.0145; | ||
(2) the National Association of Insurance | ||
Commissioners; and | ||
(3) a third-party consultant under Section 831.0012. | ||
(f) Before the commissioner may share information under | ||
this section, the recipient shall: | ||
(1) agree in writing to maintain the confidential and | ||
privileged status of the documents, materials, or other information | ||
shared under this section; and | ||
(2) verify in writing the recipient's legal authority | ||
to maintain the confidential and privileged status of that | ||
information. | ||
(g) In order to assist in the performance of the | ||
commissioner's regulatory duties, the commissioner may receive | ||
documents, materials, or other governance-related information, | ||
including confidential and privileged documents, materials, or | ||
information and proprietary and trade-secret documents, materials, | ||
or information from: | ||
(1) regulatory officials of other state, federal, and | ||
international financial regulatory agencies, including members of | ||
a supervisory college described by Section 823.0145; and | ||
(2) the National Association of Insurance | ||
Commissioners. | ||
(h) The commissioner shall maintain as confidential or | ||
privileged any documents, materials, or information received under | ||
Subsection (g) with notice or the understanding that it is | ||
confidential or privileged under the laws of the jurisdiction that | ||
is the source of the document, material, or information. | ||
Sec. 831.0010. AUTHORITY OF COMMISSIONER NOT AFFECTED. The | ||
sharing of documents, materials, or other information by the | ||
commissioner under this chapter does not constitute a delegation of | ||
regulatory authority or rulemaking, and the commissioner is solely | ||
responsible for the administration, execution, and enforcement of | ||
the provisions of this chapter. | ||
Sec. 831.0011. PRIVILEGE AND CONFIDENTIALITY NOT WAIVED. A | ||
waiver of an applicable privilege or claim of confidentiality in | ||
documents, materials, or other information, including proprietary | ||
and trade-secret materials, does not occur as a result of | ||
disclosure of the document, materials, or information to the | ||
commissioner under this chapter or as a result of sharing as | ||
authorized by this chapter. | ||
Sec. 831.0012. NATIONAL ASSOCIATION OF INSURANCE | ||
COMMISSIONERS AND THIRD-PARTY CONSULTANTS. (a) The commissioner | ||
may retain, at the insurer's expense, third-party consultants, | ||
including attorneys, actuaries, accountants, and other experts not | ||
otherwise part of the commissioner's staff as may be reasonably | ||
necessary to assist the commissioner in reviewing the disclosure | ||
and related information or the insurer's compliance with this | ||
chapter. | ||
(b) A person retained under Subsection (a) is under the | ||
direction and control of the commissioner and acts in a purely | ||
advisory capacity. | ||
(c) The National Association of Insurance Commissioners and | ||
a third-party consultant are subject to the same confidentiality | ||
standards and requirements as the commissioner. | ||
(d) As part of the retention process, a third-party | ||
consultant shall verify to the commissioner, with notice to the | ||
insurer, that the consultant: | ||
(1) is free of a conflict of interest; and | ||
(2) has internal procedures in place to: | ||
(A) monitor compliance with a conflict; and | ||
(B) comply with the confidentiality standards | ||
and requirements of this chapter. | ||
(e) A written agreement with the National Association of | ||
Insurance Commissioners or a third-party consultant governing | ||
sharing and use of information provided under this chapter must | ||
expressly require the written consent of the insurer before | ||
information provided under this chapter is made public and contain: | ||
(1) specific procedures and protocols for maintaining | ||
the confidentiality and security of disclosure-related information | ||
shared with the National Association of Insurance Commissioners or | ||
the third-party consultant under this chapter; | ||
(2) procedures and protocols for the sharing by the | ||
National Association of Insurance Commissioners of | ||
disclosure-related documents, materials, or other information only | ||
with other state regulators from states in which an affected | ||
insurance group has domiciled insurers, including a requirement | ||
that the recipient agrees in writing to maintain the confidential | ||
and privileged status of the shared documents, materials, or other | ||
information and has verified in writing the recipient's legal | ||
authority to maintain the confidential and privileged status of | ||
that information; | ||
(3) a provision specifying that ownership of | ||
disclosure-related documents, materials, or other information | ||
shared with the National Association of Insurance Commissioners or | ||
a third-party consultant remains with the department and the use of | ||
the information by the National Association of Insurance | ||
Commissioners or third-party consultant is subject to the direction | ||
of the commissioner; | ||
(4) a provision that prohibits the National | ||
Association of Insurance Commissioners or third-party consultant | ||
from storing disclosure-related documents, materials, or other | ||
information shared under this chapter in a permanent database after | ||
the underlying analysis is completed; | ||
(5) a provision requiring the National Association of | ||
Insurance Commissioners or third-party consultant to provide | ||
prompt notice to the commissioner and to the insurer or insurance | ||
group regarding any subpoena, request for disclosure, or request | ||
for production of the insurer's disclosure-related documents, | ||
materials, or other information; and | ||
(6) a requirement that the National Association of | ||
Insurance Commissioners or third-party consultant consents to | ||
intervention by an insurer in any judicial or administrative action | ||
in which the National Association of Insurance Commissioners or | ||
third-party consultant may be required to disclose confidential | ||
information about the insurer shared with the National Association | ||
of Insurance Commissioners or third-party consultant under this | ||
chapter. | ||
Sec. 831.0013. ADMINISTRATIVE PENALTY. (a) An insurer | ||
that, without good cause, fails to timely file the disclosure as | ||
required by this chapter commits a violation subject to an | ||
administrative penalty under Chapter 84. | ||
(b) Each day the violation continues is a separate violation | ||
for purposes of this section. | ||
(c) The commissioner may reduce the amount of the penalty | ||
assessed under this section if the insurer demonstrates to the | ||
commissioner that the imposition of the penalty would constitute a | ||
financial hardship to the insurer. | ||
Sec. 831.0014. RULES. (a) The commissioner shall adopt | ||
rules as necessary to enforce this chapter. | ||
(b) A rule adopted under Subsection (a) is not subject to | ||
Section 2001.0045, Government Code. | ||
SECTION 2. An insurer is not required to file a corporate | ||
governance annual disclosure under Chapter 831, Insurance Code, as | ||
added by this Act, before June 1, 2020. | ||
SECTION 3. This Act takes effect September 1, 2019. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I certify that H.B. No. 3306 was passed by the House on May 3, | ||
2019, by the following vote: Yeas 140, Nays 0, 2 present, not | ||
voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
I certify that H.B. No. 3306 was passed by the Senate on May | ||
22, 2019, by the following vote: Yeas 31, Nays 0. | ||
______________________________ | ||
Secretary of the Senate | ||
APPROVED: _____________________ | ||
Date | ||
_____________________ | ||
Governor |