Bill Text: TX SB1007 | 2013-2014 | 83rd Legislature | Engrossed

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Bill Title: Relating to own risk and solvency assessment by insurers and insurance groups; providing a penalty.

Sponsorship: Partisan Bill (Republican 2)

Status: (Engrossed - Dead) 2013-04-24 - Committee report sent to Calendars [SB1007 Detail]

Download: Texas-2013-SB1007-Engrossed.html

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By: Carona S.B. No. 1007

A BILL TO BE ENTITLED
AN ACT
relating to own risk and solvency assessment by insurers and
insurance groups; providing a 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 830 to read as follows:
CHAPTER 830. OWN RISK AND SOLVENCY ASSESSMENT
Sec. 830.001. APPLICABILITY AND PURPOSE. (a) This chapter
applies to each domestic insurer unless exempt under Section
830.006.
(b) The purpose of this chapter is to provide the
requirements for maintaining a risk management framework and
completing an own risk and solvency assessment and to provide
guidance and instructions for filing an own risk and solvency
assessment summary report with the commissioner.
(c) The own risk and solvency assessment summary report will
contain confidential and sensitive information related to an
insurer or insurance group's identification of risks material and
relevant to the insurer or insurance group filing the report. This
information will include proprietary and trade secret information
that has the potential for harm and competitive disadvantage to the
insurer or insurance group if the information is made public. The
summary report is a confidential document filed with the
commissioner, and the commissioner may share the summary report
only as stated in this chapter in order to assist the commissioner
in the performance of the commissioner's duties. An own risk and
solvency assessment summary report is not subject to public
disclosure in any event.
Sec. 830.002. DEFINITIONS. In this chapter:
(1) "Guidance manual" means the version of the Own
Risk and Solvency Assessment Guidance Manual developed and adopted
by the National Association of Insurance Commissioners that is in
effect at the time a summary report is provided. A change in the
guidance manual becomes effective on the January 1 following the
calendar year in which the changes are adopted by the National
Association of Insurance Commissioners.
(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(6).
(4) "Own risk and solvency assessment" means a
confidential internal assessment, appropriate to the nature,
scale, and complexity of an insurer or insurance group, conducted
by that insurer or insurance group, of the material and relevant
risks associated with the insurer or insurance group's current
business plan and the sufficiency of capital resources to support
those risks.
(5) "Summary report" means a confidential, high-level
summary of an insurer's or insurance group's own risk and solvency
assessment.
Sec. 830.003. RISK MANAGEMENT FRAMEWORK. An insurer shall
maintain a risk management framework to assist the insurer with
identifying, assessing, monitoring, managing, and reporting on the
insurer's material and relevant risks. This requirement may be
satisfied if the insurance group of which the insurer is a member
maintains a risk management framework applicable to the operations
of the insurer.
Sec. 830.004. OWN RISK AND SOLVENCY ASSESSMENT REQUIREMENT.
(a) Subject to Section 830.006, an insurer, or the insurance group
of which the insurer is a member, shall regularly conduct,
consistent with a process comparable to the guidance manual, an own
risk and solvency assessment, appropriate to the nature, scale, and
complexity of the insurer or insurance group, of the material and
relevant risks associated with the insurer's or insurance group's
current business plan and the sufficiency of capital resources to
support those risks.
(b) The insurer, or the insurance group of which the insurer
is a member, shall conduct the own risk and solvency assessment
described by Subsection (a):
(1) annually; and
(2) at any other time there are significant changes to
the risk profile of the insurer or the insurance group of which the
insurer is a member.
Sec. 830.005. SUMMARY REPORT REQUIRED. (a) On the
commissioner's request, an insurer shall submit to the commissioner
a summary report or a combination of reports that together contain
the information described in the guidance manual. The commissioner
may not make a request under this subsection more than once each
year.
(b) Without regard to whether the commissioner has made a
request under Subsection (a), if the insurer is a member of an
insurance group, the insurer shall submit to the commissioner the
reports required by Subsection (a) if the commissioner is the lead
state commissioner of the insurance group.
(c) In determining the lead state commissioner for purposes
of this section, the commissioner shall consider the procedures
adopted by the National Association of Insurance Commissioners.
(d) The reports must include a signature of the insurer's or
insurance group's chief risk officer or other executive responsible
for the oversight of the insurer's enterprise risk management
process attesting to the best of the officer's or executive's belief
and knowledge that:
(1) the insurer applies the enterprise risk management
process described in the summary report; and
(2) a copy of the report has been provided to the
insurer's board of directors or the appropriate committee of the
board of directors.
(e) An insurer may comply with Subsection (a) or (b) by
providing the most recent and substantially similar report that the
insurer or another member of an insurance group of which the insurer
is a member provided to the commissioner of another state or to a
supervisor or regulator of a foreign jurisdiction, if that report
provides information that is comparable to the information
described in the guidance manual. A report in a language other than
English must be accompanied by a translation of that report into the
English language.
Sec. 830.006. EXEMPTION. (a) An insurer is exempt from
the requirements of this chapter if:
(1) the insurer has annual direct written and
unaffiliated assumed premium, including international direct and
assumed premium but excluding premiums reinsured with the Federal
Crop Insurance Corporation and Federal Flood Program, of less than
$500 million; and
(2) the insurance group of which the insurer is a
member has annual direct written and unaffiliated assumed premium,
including international direct and assumed premium but excluding
premiums reinsured with the Federal Crop Insurance Corporation and
Federal Flood Program, of less than $1 billion.
(b) If an insurer qualifies for exemption under Subsection
(a)(1), but the insurance group of which the insurer is a member
does not qualify for exemption under Subsection (a)(2), then the
summary report required under Section 830.005 must include every
insurer within the insurance group.
(c) An insurer may satisfy the requirement under Subsection
(b) by submitting more than one summary report for any combination
of insurers if the combination of reports includes each insurer
within the insurance group.
(d) If an insurer does not qualify for exemption under
Subsection (a)(1), but the insurance group of which it is a member
qualifies for exemption under Subsection (a)(2), then the insurer
must submit a summary report under Section 830.005 that is
applicable to that insurer.
(e) An insurer that does not qualify for exemption under
Subsection (a) may apply to the commissioner for a waiver from the
requirements of this chapter based on unique circumstances. In
deciding whether to grant the insurer's request for waiver, the
commissioner may consider the type and volume of business written,
the ownership and organizational structure, and any other factor
the commissioner considers relevant to the insurer or insurance
group of which the insurer is a member. If the insurer is part of an
insurance group with insurers domiciled in more than one state, the
commissioner shall coordinate with the lead state commissioner and
with the other domiciliary commissioners in considering whether to
grant the insurer's request for a waiver.
(f) Notwithstanding the exemptions stated in this section,
the commissioner may require that an insurer maintain a risk
management framework, conduct an own risk and solvency assessment,
and file a summary report if:
(1) there are unique circumstances, including the type
and volume of business written, the ownership and organizational
structure, federal agency requests, and international supervisor
requests;
(2) the insurer has risk-based capital for a company
action level event as set forth in department rules;
(3) the insurer meets one or more of the standards of
an insurer considered to be in hazardous financial condition under
Chapter 404 or department rule; or
(4) the insurer otherwise exhibits qualities of a
troubled insurer as determined by the commissioner.
(g) If an insurer that qualifies for an exemption under
Subsection (a) subsequently ceases to qualify for that exemption
due to changes in premium as reflected in the insurer's most recent
annual statement or in the most recent annual statements of the
insurers within the insurance group of which the insurer is a
member, the insurer must comply with the requirements of this
chapter not later than December 31 of the calendar year following
the calendar year the threshold is exceeded.
Sec. 830.007. CONTENTS OF SUMMARY REPORT. (a) An insurer
shall prepare a summary report in accordance with the guidance
manual and subject to the requirements of Subsection (b). An
insurer shall maintain documentation and supporting information
and shall make the documentation and supporting information
available on examination or on request of the commissioner.
(b) When reviewing the summary report or making requests for
additional information, the department shall use procedures
similar to the procedures currently used in the analysis and
examination of multistate or global insurers and insurance groups.
Sec. 830.008. CONFIDENTIALITY. (a) Documents, materials,
or other information obtained by, created by, or disclosed to the
commissioner or any other person under this chapter, including
documents, materials, and other information shared or received
under Subsection (e) and documents, materials, or other information
in the possession or control of the National Association of
Insurance Commissioners or third-party consultant under this
chapter, are confidential and privileged for all purposes including
for purposes of:
(1) Chapter 552, Government Code;
(2) a response to subpoena; or
(3) discovery or admissibility in evidence in any
civil action.
(b) Documents, materials, or other information, including a
summary report prepared under this chapter and additional
information submitted under Section 830.007, 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 shall not otherwise make the
documents, materials, or other information public without the prior
written consent of the insurer.
(d) The commissioner and any other person who receives own
risk and solvency assessment-related information under this
chapter, in an examination, or otherwise under any other law may not
testify or be required to testify in any civil action concerning any
documents, materials, or 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 own risk and solvency
assessment-related information, including confidential and
privileged documents, materials, or information subject to
Subsection (a) or (b) or confidential or privileged documents,
materials, or information subject to Chapter 401, 404, or 823, as
necessary, with:
(1) other state, federal, and international financial
regulatory agencies or insurance supervisors;
(2) members of a supervisory college described in
Section 823.0145;
(3) the National Association of Insurance
Commissioners; or
(4) a third-party consultant designated by the
commissioner.
(f) Before the commissioner may share information under
this section, the recipient of the information 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) The commissioner may receive documents, materials, or
other own risk and solvency assessment-related information or any
other relevant information, including otherwise confidential and
privileged documents, materials, or information and proprietary
and trade-secret information or documents, from:
(1) a regulatory official of a foreign or domestic
jurisdiction, including a member of a supervisory college described
in 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 and understanding that it is
confidential or privileged under the laws of the jurisdiction that
is the source of the document, material, or information.
Sec. 830.009. AGREEMENT CONCERNING CONFIDENTIAL AND
PRIVILEGED INFORMATION. (a) The commissioner shall enter into a
written agreement with the National Association of Insurance
Commissioners or a third-party consultant that governs the sharing
and use of information provided under this chapter. The agreement
must comply with and contain all the requirements listed in this
section.
(b) The agreement must specify procedures and protocols
regarding the confidentiality and security of information shared
with the National Association of Insurance Commissioners or
third-party consultant under this chapter, including procedures
and protocols for sharing by the National Association of Insurance
Commissioners with other state regulators from states in which the
insurance group has domiciled insurers.
(c) The agreement must provide that the recipient:
(1) agrees in writing to maintain the confidential and
privileged status of the own risk and solvency assessment-related
documents, materials, or other information; and
(2) has verified in writing the legal authority to
maintain the confidential and privileged status of the information.
(d) The agreement must specify that ownership of
information shared with the National Association of Insurance
Commissioners or third-party consultant under this chapter remains
with the commissioner and that the National Association of
Insurance Commissioners' or third-party consultant's use of the
information is subject to the direction of the commissioner.
(e) The agreement must prohibit the National Association of
Insurance Commissioners or third-party consultant from storing the
information shared under this chapter in a permanent database after
the underlying analysis is completed.
(f) The agreement must require prompt notice to be given to
an insurer whose confidential information in the possession of the
National Association of Insurance Commissioners or third-party
consultant under this chapter is subject to a request or subpoena to
the National Association of Insurance Commissioners or third-party
consultant for disclosure or production.
(g) The agreement must require the National Association of
Insurance Commissioners or third-party consultant to consent 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.
(h) The agreement must provide for the insurer's written
consent in the case of an agreement involving a third-party
consultant.
Sec. 830.010. AUTHORITY OF COMMISSIONER NOT AFFECTED. The
commissioner's sharing of information and documents 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. 830.011. PRIVILEGE AND CONFIDENTIALITY NOT WAIVED. A
waiver of an applicable privilege or claim of confidentiality in a
document, proprietary and trade-secret materials, or other own risk
and solvency assessment-related information does not occur as a
result of disclosure of the document, materials, or other
information to the commissioner under this chapter or as a result of
sharing as authorized by this chapter.
Sec. 830.012. ADMINISTRATIVE PENALTY. (a) An insurer
that, without good cause, fails to timely file the summary report 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.
SECTION 2. Notwithstanding Chapter 830, Insurance Code, as
added by this Act, an insurer is not required to submit a summary
report as required by that chapter before January 1, 2015.
SECTION 3. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2013.