Bill Text: TX HB4498 | 2023-2024 | 88th Legislature | Engrossed


Bill Title: Relating to the transfer and statutory novation of insurance policies from a transferring insurer to an assuming insurer through an insurance business transfer plan; authorizing fees.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Engrossed - Dead) 2023-05-16 - Referred to Business & Commerce [HB4498 Detail]

Download: Texas-2023-HB4498-Engrossed.html
 
 
  By: Cook, Oliverson H.B. No. 4498
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the transfer and statutory novation of insurance
  policies from a transferring insurer to an assuming insurer through
  an insurance business transfer plan; authorizing fees.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle A, Title 6, Insurance Code, is amended
  by adding Chapter 806 to read as follows:
  CHAPTER 806.  INSURANCE BUSINESS TRANSFERS
  SUBCHAPTER A.  GENERAL PROVISIONS
         Sec. 806.001.  DEFINITIONS. In this chapter:
               (1)  "Affiliate" means a person that directly or
  indirectly through one or more intermediaries controls, is
  controlled by, or is under common control with a specified person.
               (2)  "Applicant" means an assuming insurer, a
  transferring insurer, or a reinsurer applying under Subchapter B.
               (3)  "Assuming insurer" means an insurer domiciled in
  this state that assumes or seeks to assume policies from a
  transferring insurer under this chapter. An assuming insurer may
  be a captive insurance company established under Chapter 964.
               (4)  "Implementation order" means an order issued by
  the court under Section 806.104.
               (5)  "Insurance business transfer" means a transfer and
  novation by a transferring insurer to an assuming insurer made
  under this chapter.
               (6)  "Insurance business transfer plan" means the plan
  submitted to the department to accomplish an insurance business
  transfer, including any associated transfer of assets and rights
  from or on behalf of the transferring insurer to the assuming
  insurer.
               (7)  "Insurer" means an insurance or surety company,
  including a reinsurance company. The term includes a corporation,
  company, partnership, association, society, order, individual, or
  aggregation of individuals engaging in or proposing or attempting
  to engage in any kind of insurance or surety business, including the
  exchanging of reciprocal or interinsurance contracts between
  individuals, partnerships, and corporations.
               (8)  "Policy" means a policy, annuity contract,
  certificate of insurance, or a contract of reinsurance under which
  the insurer agrees to assume an obligation, risk, or both of the
  policyholder or to make payments on behalf of, or to, the
  policyholder or the policyholder's beneficiaries. The term
  includes property, casualty, life, health, and any other line of
  insurance the commissioner finds is suitable for an insurance
  business transfer.
               (9)  "Policyholder" means an insured or a reinsured
  under a policy that is part of the subject business.
               (10)  "Subject business" means the policy or policies
  that are the subject of the insurance business transfer plan.
               (11)  "Transfer and novation" means the transfer of
  insurance obligations, risks, or both of existing or in-force
  policies from a transferring insurer to an assuming insurer that is
  intended to effect a novation of the transferred policies that
  results in the assuming insurer becoming directly liable to the
  policyholders of the transferring insurer on the extinguishment of
  the transferring insurer's insurance obligations, risks, or both
  under the transferred policies.
               (12)  "Transferring insurer" means an insurer or
  reinsurer that transfers and novates or seeks to transfer and
  novate obligations, risks, or both under one or more policies to an
  assuming insurer under an insurance business transfer plan.
         Sec. 806.002.  CONSENT TO ONGOING COMMISSIONER OVERSIGHT.
  An insurer subject to this chapter is considered to consent to the
  jurisdiction of the commissioner with regard to ongoing oversight
  of operations, management, and solvency relating to the transferred
  business, including the authority of the commissioner to conduct
  financial analysis and examinations.
         Sec. 806.003.  AUTHORITY OF COURT. Notwithstanding any
  other law, a court may issue an order, process, or judgment that is
  necessary or appropriate to carry out this chapter. This chapter
  may not be construed to preclude a court from, on the court's own
  motion, taking any action or making any determination necessary or
  appropriate to enforce or implement an order or rule of the court or
  to prevent an abuse of power.
         Sec. 806.004.  NOTICE REQUIREMENTS. (a)  When notice is
  required to be given by the applicant under this chapter and except
  as otherwise permitted or directed by a court or the commissioner,
  the applicant shall provide the notice not later than the 45th day
  after the date of the event that requires notice:
               (1)  to the chief insurance regulator in each
  jurisdiction in which:
                     (A)  the applicant holds or has ever held a
  certificate of authority; and
                     (B)  policies that are part of the subject
  business were issued or policyholders currently reside;
               (2)  to the National Conference of Insurance Guaranty
  Funds, the National Organization of Life and Health Insurance
  Guaranty Associations, and each state insurance guaranty
  association for a state in which:
                     (A)  the applicant holds or has ever held a
  certificate of authority; and
                     (B)  policies that are part of the subject
  business were issued or policyholders currently reside;
               (3)  to each reinsurer of the applicant:
                     (A)  under the notice provisions of each
  reinsurance agreement applicable to the policies that are part of
  the subject business; or
                     (B)  if a reinsurance agreement does not have a
  notice provision, by an internationally recognized delivery
  service;
               (4)  to each policyholder holding a policy that is part
  of the subject business, at the policyholder's last known address
  as indicated by the records of the applicant or to the address to
  which premium notices or other policy documents are sent, and for a
  notice of transfer, to the transferring insurer's agents or brokers
  of record on the subject business; and
               (5)  by publication in:
                     (A)  a newspaper of general circulation in the
  state in which the applicant has the applicant's principal place of
  business; and
                     (B)  each publication required by the
  commissioner.
         (b)  If notice is provided in accordance with this section,
  an intended recipient of the notice is considered to have received
  the notice for purposes of this chapter, regardless of whether the
  recipient received actual notice, and the intended recipient may
  not raise notice to challenge an order issued under this chapter.
         (c)  The commissioner shall provide the required notice in
  accordance with this section on behalf of an applicant for which the
  commissioner has been named as receiver.
         (d)  Notice under this section may be provided by first-class
  mail, facsimile, or electronic means.
         Sec. 806.005.  RULEMAKING AUTHORITY. The commissioner may
  adopt rules consistent with this chapter as necessary to implement
  this chapter.
         Sec. 806.006.  CONFIDENTIALITY. The status of any part of an
  application for an insurance business transfer as confidential at
  the time of application, including any documents, materials,
  communications, or other information submitted to the commissioner
  in contemplation of the application, is not affected by the process
  provided by this chapter.
  SUBCHAPTER B.  INITIAL APPLICATION; COMMISSIONER REVIEW
         Sec. 806.051.  COMMISSIONER AND COURT APPROVAL REQUIRED.
  After obtaining an independent expert report under Section 806.052,
  an applicant shall file an insurance business transfer plan with:
               (1)  the commissioner for review and approval under
  this subchapter; and
               (2)  a court for approval under Subchapter C on
  receiving the commissioner's approval.
         Sec. 806.052.  INDEPENDENT EXPERT; REPORT. (a)  The
  commissioner shall appoint an independent expert from a list of at
  least two nominees, submitted jointly by the transferring insurer
  and the assuming insurer, to assist the commissioner and the court
  in connection with the commissioner's and the court's review of a
  proposed insurance business transfer. The commissioner may, in the
  commissioner's sole discretion, reject the nominees and appoint
  another person as the independent expert.
         (b)  The independent expert must be an impartial person who:
               (1)  has no financial interest in either the assuming
  insurer or transferring insurer;
               (2)  has not been employed by or acted as an officer,
  director, consultant, or other independent contractor for either
  the assuming insurer or transferring insurer during the preceding
  12 months;
               (3)  is not appointed by the commissioner to assist in
  any capacity in an insurer rehabilitation or delinquency
  proceeding;
               (4)  receives no compensation in connection with the
  applicable transaction under this chapter, other than a fee based
  on a fixed or hourly basis that is not contingent on the approval or
  completion of the insurance business transfer; and
               (5)  provides proof of insurance coverage that is
  satisfactory to the commissioner.
         (c)  The independent expert shall submit a report to the
  commissioner in the form and manner prescribed by the commissioner
  regarding the proposed insurance business transfer. The report
  must include:
               (1)  a summary of the terms of the insurance business
  transfer plan to the extent relevant to the independent expert's
  report;
               (2)  the scope of the independent expert's report;
               (3)  an analysis of the transferring insurer's
  actuarial review of reserves for the subject business to determine
  the reserve adequacy;
               (4)  an analysis of the financial conditions of the
  transferring insurer and the assuming insurer and the effect the
  transfer will have on the financial condition of each company;
               (5)  a review of the plans or proposals the assuming
  insurer has with respect to the administration of the policies
  subject to the transfer;
               (6)  a statement as to whether the transfer has a
  material adverse impact on the policyholders, reinsurers, and
  claimants of the transferring insurer and the assuming insurer;
               (7)  an analysis of the assuming insurer's corporate
  governance structure to ensure that there is proper board and
  management oversight and expertise to manage the subject business;
               (8)  the independent expert's opinion of the likely
  effects of the transfer on policyholders, reinsurers, and
  claimants, distinguishing between:
                     (A)  transferring policyholders, reinsurers, and
  claimants;
                     (B)  policyholders, reinsurers, and claimants of
  the transferring insurer whose policies will not be transferred;
  and
                     (C)  policyholders, reinsurers, and claimants of
  the assuming insurer;
               (9)  consideration of whether the security positions of
  policyholders that are affected by the transfer are materially
  adversely affected by the transfer;
               (10)  a statement of the independent expert's
  professional qualifications and a description of the experience
  that qualifies the independent expert as an expert suitable for the
  appointment;
               (11)  a statement of whether the independent expert
  has, or has had, a direct or indirect interest in the transferring
  insurer or the assuming insurer or an affiliate of the transferring
  insurer or the assuming insurer;
               (12)  a list and summary of each document, report, and
  other material information the independent expert considered in
  preparing the report and whether any information requested was not
  provided;
               (13)  the extent to which the independent expert relied
  on information provided by or the judgment of another person;
               (14)  each person on whom the independent expert has
  relied and why, in the independent expert's opinion, that reliance
  is reasonable;
               (15)  for each opinion that the independent expert
  expresses in the report, the facts and circumstances supporting the
  opinion; and
               (16)  any other information the commissioner requests
  be included in the report for purposes of reviewing the transfer.
         Sec. 806.053.  APPLICATION REQUIREMENTS. (a) An insurance
  business transfer plan submitted for commissioner approval must
  include the following information or an explanation of why the
  information is not included:
               (1)  the name, address, and telephone number and the
  direct and indirect controlling persons, if any, of the
  transferring insurer and the assuming insurer;
               (2)  a summary of the plan;
               (3)  identification and description of the subject
  business;
               (4)  the most recent audited financial statements and
  statutory annual and quarterly reports of the transferring insurer
  and the assuming insurer filed with each insurer's domiciliary
  regulator;
               (5)  the most recent actuarial report and opinion that
  quantify the liabilities associated with the subject business;
               (6)  pro forma financial statements showing the
  projected statutory balance sheet, results of operations, and cash
  flows of the assuming insurer for the three years following the
  proposed transfer and novation;
               (7)  officers' certificates of the transferring insurer
  and the assuming insurer attesting that each has obtained all
  required internal approvals and authorizations regarding the plan
  and completed all necessary and appropriate actions relating to the
  plan;
               (8)  a proposal for plan implementation and
  administration, including the form of notice to be provided under
  the plan to a policyholder whose policy is part of the subject
  business;
               (9)  a full description of how notice will be provided;
               (10)  a description of any reinsurance arrangements
  that would pass to the assuming insurer under the plan;
               (11)  a description of any guarantee or additional
  reinsurance that will cover the subject business following the
  transfer and novation;
               (12)  a description of the assuming insurer's proposed
  investment policies and any contemplated third-party claims
  management and administration arrangements;
               (13)  a description of how the transferring insurer and
  the assuming insurer will be licensed for guaranty association
  coverage purposes; 
               (14)  evidence of approval of or non-objection to the
  transfer from the chief insurance regulator of the state of the
  transferring insurer's domicile; and
               (15)  the report of the independent expert prepared
  under Section 806.052.
         (b)  The commissioner may require an insurance business
  transfer plan submitted under Subsection (a) to include additional
  information the commissioner considers necessary for the plan's
  review and approval.
         Sec. 806.054.  COMMISSIONER REVIEW. (a)  Not later than the
  60th business day after the date of receipt of a complete insurance
  business transfer plan, the commissioner shall review the plan and
  determine whether the applicant is authorized to submit the plan to
  a court. The commissioner may extend the review period for an
  additional 30 business days.
         (b)  The commissioner shall authorize the submission of the
  insurance business transfer plan to the court unless the
  commissioner finds that the transfer would have a material adverse
  impact on the interests of policyholders, reinsurers, or claimants
  that are part of the subject business.
         (c)  If the commissioner determines that the insurance
  business transfer would have a material adverse impact on the
  interests of policyholders, reinsurers, or claimants that are part
  of the subject business, the commissioner shall notify the
  applicant and specify any modifications, supplements, amendments,
  or additional information or documentation with respect to the
  insurance business transfer plan that the applicant must provide to
  the commissioner before the commissioner will approve the plan's
  submission to a court.
         (d)  If the commissioner determines that the insurance
  business transfer plan may be submitted to a court, the
  commissioner shall provide that determination in writing to the
  applicant.
         Sec. 806.055.  CONSEQUENCES OF MATERIAL ADVERSE IMPACT
  DETERMINATION. (a)  Not later than the 30th day after the date the
  commissioner notifies the applicant of a material adverse impact
  under Section 806.054, the applicant may file an amended insurance
  business transfer plan providing the modifications, supplements,
  amendments, or additional information or documentation requested
  by the commissioner. The applicant may request in writing an
  extension of time of an additional 30 days.
         (b)  If the applicant does not make an amended filing within
  the time period provided by Subsection (a), including any extension
  of time granted by the commissioner, the insurance business
  transfer plan filing terminates and a subsequent filing by the
  applicant:
               (1)  is considered a new filing; and
               (2)  must comply with all provisions of this chapter as
  if the previous filing had never been made.
         (c)  The commissioner's time for review as provided under
  Section 806.054 for an amended insurance business transfer plan
  received under Subsection (a) commences on the date the
  commissioner receives all modifications, supplements, amendments,
  or additional information or documentation requested by the
  commissioner under Section 806.054(c).
  SUBCHAPTER C. APPLICATION FOR COURT APPROVAL
         Sec. 806.101.  APPLICATION. (a)  Not later than the 30th
  day after the date an applicant receives notice from the
  commissioner under Section 806.054(d) that the applicant may submit
  the insurance business transfer plan to a court, the applicant
  shall file a verified petition with a district court in a county
  with a population of more than one million seeking approval of the
  plan. On written request by the applicant, the commissioner may
  extend the period for filing the petition for an additional 30 days. 
         (b)  The applicant's petition must:
               (1)  include the insurance business transfer plan;
               (2)  identify any documents and witnesses that the
  applicant intends to present at a hearing regarding the petition;
  and
               (3)  state each reason the applicant asks the court to
  find no material adverse impact to policyholders, reinsurers, or
  claimants affected by the proposed insurance business transfer.
         (c)  Not later than the 30th day after the date of filing of
  the petition, the applicant shall file a request for the court to
  enter a preliminary scheduling order, which must include a date and
  time for a status conference. The status conference must occur not
  later than the 14th day after the date the comment period required
  by Section 806.102 concludes.
         (d)  The commissioner must be a party to the proceedings
  before the court concerning a petition filed under this section and
  shall be served with copies of all filings as required by the Texas
  Rules of Civil Procedure. The commissioner's position in the
  proceedings is not limited by the commissioner's initial review of
  the insurance business transfer plan that is the subject of the
  petition.
         Sec. 806.102.  NOTICE AND COMMENT PERIOD. (a)  Not later
  than the 45th day after receipt of the preliminary scheduling order
  under Section 806.101(c), the applicant shall provide notice of the
  application for court approval of the insurance business transfer
  plan. The notice commences a comment period that expires on the
  61st day after the date the notice is provided.
         (b)  The notice provided to policyholders under this section
  must include:
               (1)  the date and time of the status conference;
               (2)  the name, address, and telephone number of the
  assuming insurer and the transferring insurer;
               (3)  a statement that a policyholder may comment on or
  object to the transfer and novation;
               (4)  the procedures and deadline for submitting
  comments or objections on the insurance business transfer plan;
               (5)  a summary of any effect that the transfer and
  novation will have on the policyholder's rights;
               (6)  a statement that the assuming insurer is
  authorized, as provided by this chapter, to assume the subject
  business and that court approval of the insurance business transfer
  plan will extinguish all rights of policyholders under policies
  that are part of the subject business against the transferring
  insurer;
               (7)  a statement that policyholders will not have the
  opportunity to opt out of or otherwise reject the transfer and
  novation;
               (8)  contact information for the department from which
  the policyholder may obtain additional information; and
               (9)  either:
                     (A)  information on how an electronic copy of the
  insurance business transfer plan may be accessed; or
                     (B)  if policyholders are unable to readily access
  electronic copies, hard copies by first-class mail.
         Sec. 806.103.  PARTICIPATION IN COURT PROCEEDINGS.
  (a)  Only a party to the insurance business transfer plan, or a
  third party or other person who files a request to provide comments
  or objections or to be heard in the matter on the basis that the
  person believes the person will be materially adversely affected by
  approval and implementation of the plan, may present evidence or
  comments to the court at a hearing.
         (b)  Participation by a third party does not confer standing
  as a party on that third party.
         (c)  Each person participating in the hearing shall:
               (1)  follow the process established by the court; and
               (2)  pay the person's own costs and attorney fees. 
         Sec. 806.104.  COURT APPROVAL OF PLAN. (a)  The applicant
  shall present the insurance business transfer plan for approval by
  the court following the expiration of the comment period under
  Section 806.102.
         (b)  At any time before the court issues an order approving
  the insurance business transfer plan, the applicant may withdraw
  the plan without prejudice.
         (c)  If the court finds that the implementation of the
  insurance business transfer plan would not materially adversely
  affect the interests of policyholders, reinsurers, or claimants
  that are part of the subject business, the court shall enter a
  judgment and implementation order. The judgment and implementation
  order must:
               (1)  order implementation of the plan;
               (2)  order a statutory novation with respect to all
  policyholders or reinsured persons and their respective policies
  and reinsurance agreements under the subject business:
                     (A)  extinguishing all rights of policyholders
  under policies that are part of the subject business against the
  transferring insurer; and
                     (B)  providing that:
                           (i)  the transferring insurer has no further
  rights, obligations, or liabilities with respect to those policies;
  and
                           (ii)  the assuming insurer has all rights,
  obligations, and liabilities as if the assuming insurer were the
  original insurer of those policies;
               (3)  release the transferring insurer from all
  obligations or liabilities under policies that are part of the
  subject business;
               (4)  authorize and order the transfer of property or
  liabilities, including the ceded reinsurance of transferred
  policies and contracts on the subject business, notwithstanding any
  nonassignment provisions in any reinsurance contract;
               (5)  order the applicant to provide notice of the
  transfer and novation in accordance with Section 806.004; and
               (6)  make other provisions with respect to incidental,
  consequential, and supplementary matters as necessary to ensure the
  plan is fully and effectively carried out.
         (d)  On filing of the court's order under Subsection (c), the
  subject business vests in and becomes the liabilities of the
  assuming insurer.
         Sec. 806.105.  COURT DISAPPROVAL OF PLAN. If the court finds
  that the insurance business transfer plan should not be approved,
  the court by order may:
               (1)  deny the petition; or
               (2)  provide the applicant leave to file an amended
  insurance business transfer plan and petition.
         Sec. 806.106.  RIGHT TO APPEAL. This chapter may not be
  construed to affect a party's right to appeal an order of the court.
  SUBCHAPTER D.  FEES AND COSTS
         Sec. 806.151.  FILING FEE. At the time of filing an
  application with the commissioner for review and approval of an
  insurance business transfer plan, an applicant shall pay a
  nonrefundable fee to the department of $10,000.
         Sec. 806.152.  COMMISSIONER COSTS. (a)  The commissioner
  may retain independent attorneys, appraisers, actuaries, certified
  public accountants, authorized consultants, or other professionals
  and specialists to assist the commissioner in connection with the
  review of an insurance business transfer plan under this chapter.
         (b)  An applicant shall reimburse the commissioner for any
  cost incurred under Subsection (a).
         Sec. 806.153.  INDEPENDENT EXPERT COSTS AND FEES. (a)  The
  transferring insurer and the assuming insurer are jointly obligated
  to pay any compensation, costs, and expenses of the independent
  expert, and any consultants retained by the independent expert and
  approved by the commissioner, incurred in fulfilling the
  obligations of the independent expert under this chapter.
         (b)  This chapter may not be construed to create a duty of the
  independent expert to any party other than the commissioner or the
  court.
         Sec. 806.154.  FAILURE TO PAY COSTS OR FEES. (a)  A fee or
  cost provided by this subchapter must be paid not later than the
  30th day after the date of demand for payment.
         (b)  If a party fails to pay a required fee or cost within the
  time period described by Subsection (a), the commissioner may:
               (1)  if the court has not filed an implementation
  order, request that the court dismiss the petition for approval of
  the insurance business transfer plan; or
               (2)  if the court has filed an implementation order,
  suspend or revoke the assuming insurer's certificate of authority
  to transact insurance business in this state.
         Sec. 806.155.  DEPOSIT OF AMOUNTS COLLECTED. The department
  shall deposit any amounts collected under this chapter relating to
  the review of an insurance business transfer plan application to
  the credit of the Texas Department of Insurance operating account.
         SECTION 2.  The changes in law made by this Act apply only to
  an insurance business transfer under a contract entered into or
  agreement made on or after the effective date of this Act.
         SECTION 3.  This Act takes effect September 1, 2023.
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