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
 
 
 
 
AN ACT
  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       
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