Bill Text: TX SB1431 | 2011-2012 | 82nd Legislature | Comm Sub
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to the functions of insurance holding company systems.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2011-06-17 - Effective on 9/1/11 [SB1431 Detail]
Download: Texas-2011-SB1431-Comm_Sub.html
Bill Title: Relating to the functions of insurance holding company systems.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2011-06-17 - Effective on 9/1/11 [SB1431 Detail]
Download: Texas-2011-SB1431-Comm_Sub.html
By: Carona | S.B. No. 1431 | |
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relating to the functions of insurance holding company systems. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 823.002, Insurance Code, is amended by | ||
adding Subdivisions (3-a), (3-b), and (4-a) and amending | ||
Subdivision (6) to read as follows: | ||
(3-a) "Divesting person" means a person who has | ||
control of a domestic insurer and who intends to divest control of | ||
the domestic insurer. | ||
(3-b) "Divestiture" means an abandonment of control of | ||
a domestic insurer by a divesting person that does not result in the | ||
transfer of control to another person. | ||
(4-a) "Enterprise risk" means any activity, | ||
circumstance, event, or series of events involving one or more | ||
affiliates of an insurer that, if not remedied promptly, is likely | ||
to have a material adverse effect on the financial condition or | ||
liquidity of the insurer or its insurance holding company system as | ||
a whole, including anything: | ||
(A) that would cause the insurer's risk-based | ||
capital to fall into company action level; or | ||
(B) that would cause the insurer to be in | ||
hazardous financial condition. | ||
(6) "Insurer" means any insurance company organized | ||
under the laws of this state, a commercially domiciled insurer, or | ||
an insurer authorized to engage in the business of insurance in this | ||
state. The term includes a capital stock company, mutual company, | ||
farm mutual insurance company, title insurance company, fraternal | ||
benefit society, local mutual aid association, statewide mutual | ||
assessment company, county mutual insurance company, Lloyd's plan, | ||
reciprocal or interinsurance exchange, stipulated premium | ||
insurance company, and group hospital service corporation. The | ||
term does not include an agency, authority, or instrumentality of | ||
the United States, its possessions and territories, the | ||
Commonwealth of Puerto Rico, the District of Columbia, or a state[ |
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subdivision of a state. | ||
SECTION 2. Section 823.010, Insurance Code, is amended by | ||
amending Subsections (c) and (d) and adding Subsections (e) and (f) | ||
to read as follows: | ||
(c) Except as provided by Subsection (d), [ |
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disclaimer shall be deemed to have been allowed unless, not later | ||
than 60 days after the receipt of a complete disclaimer, [ |
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notifies the filing party that [ |
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disallowed[ |
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(d) Notwithstanding Subsection (c), if the commissioner at | ||
any time determines that the information disclosed in the | ||
disclaimer is incomplete or inaccurate or is no longer accurate, | ||
the [ |
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(e) If the commissioner disallows a disclaimer, the party | ||
who filed the disclaimer may request an administrative hearing. | ||
The commissioner shall grant the request for the hearing. | ||
(f) If the commissioner allows a disclaimer, the party who | ||
filed the disclaimer is not required to register under Subchapter B | ||
or comply with Section 823.154, 823.155, 823.159, or 823.160 unless | ||
the commissioner determines that the disclaimer should be | ||
disallowed under Subsection (d). | ||
SECTION 3. Section 823.011, Insurance Code, is amended by | ||
amending Subsections (b) and (d) and adding Subsections (e) through | ||
(i) to read as follows: | ||
(b) The information shall be confidential and privileged | ||
for all purposes [ |
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information may not be disclosed without the prior written consent | ||
of the insurer to which it pertains. | ||
(d) Except as provided by Subsection (e), if the recipient | ||
of documents or other information agrees in writing to maintain the | ||
confidential and privileged status of the documents or other | ||
information, and verifies in writing the legal authority to | ||
maintain the confidential and privileged status of the documents or | ||
information, the [ |
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the information to any of the following entities functioning in an | ||
official capacity: | ||
(1) a commissioner of insurance or an insurance | ||
department of another state; | ||
(2) an authorized law enforcement official; | ||
(3) a district attorney of this state; | ||
(4) the attorney general; [ |
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(5) a grand jury; or | ||
(6) members of a supervisory college described by | ||
Section 823.0145. | ||
(e) Notwithstanding Subsection (d), the commissioner may | ||
share confidential and privileged information reported under | ||
Section 823.0595 only with the commissioner of insurance of a state | ||
that has a statute or rule substantially similar to Subsection (d) | ||
who agrees in writing not to disclose the information. | ||
(f) Information described by Subsection (a), including | ||
information in the possession of the National Association of | ||
Insurance Commissioners under this section, is confidential and | ||
privileged for all purposes, including for purposes of: | ||
(1) Chapter 552, Government Code; | ||
(2) a response to a subpoena; or | ||
(3) discovery or admissibility in evidence in a civil | ||
action. | ||
(g) The commissioner shall enter into written agreements | ||
with the National Association of Insurance Commissioners regarding | ||
the sharing and use of information provided under this chapter. An | ||
agreement entered into under this subsection must: | ||
(1) specify procedures and protocols regarding the | ||
confidentiality and security of information shared with the | ||
National Association of Insurance Commissioners and its affiliates | ||
and subsidiaries under this chapter, including procedures and | ||
protocols for sharing by the National Association of Insurance | ||
Commissioners with other state, federal, or international | ||
regulators; | ||
(2) specify that ownership of information shared with | ||
the National Association of Insurance Commissioners and its | ||
affiliates and subsidiaries under this chapter remains with the | ||
commissioner, and that use of the information by the National | ||
Association of Insurance Commissioners is subject to the direction | ||
of the commissioner; | ||
(3) require prompt notice to an insurer whose | ||
confidential information is in the possession of the National | ||
Association of Insurance Commissioners under this chapter that the | ||
information is subject to a request or subpoena to the National | ||
Association of Insurance Commissioners for disclosure or | ||
production; and | ||
(4) require the National Association of Insurance | ||
Commissioners and its affiliates and subsidiaries to give consent | ||
to intervention by an insurer in any judicial or administrative | ||
action in which the National Association of Insurance Commissioners | ||
and its affiliates and subsidiaries may be required to disclose | ||
confidential information about the insurer shared with the National | ||
Association of Insurance Commissioners and its affiliates and | ||
subsidiaries under this chapter. | ||
(h) This section may not be construed to prevent the | ||
commissioner or the attorney general from using information | ||
described by Subsection (a) for any purpose with respect to which | ||
the commissioner or the attorney general is otherwise authorized to | ||
act, including a regulatory or other legal action. | ||
(i) The commissioner remains solely responsible for the | ||
administration, execution, and enforcement of this chapter, and the | ||
commissioner's sharing of information does not constitute a | ||
delegation of regulatory or rulemaking authority. | ||
SECTION 4. Subchapter A, Chapter 823, Insurance Code, is | ||
amended by adding Section 823.0145 to read as follows: | ||
Sec. 823.0145. SUPERVISORY COLLEGES. (a) With respect to | ||
any insurer registered under Subchapter B, and in accordance with | ||
Subsection (c), the commissioner may participate in a supervisory | ||
college for a domestic insurer that is part of an insurance holding | ||
company system with international operations in order to determine | ||
the insurer's compliance with this chapter. The commissioner may: | ||
(1) initiate the establishment of a supervisory | ||
college; | ||
(2) clarify the membership and participation of other | ||
entities in the supervisory college; | ||
(3) clarify the functions of the supervisory college | ||
and the role of other entities in the supervisory college; | ||
(4) establish a group-wide supervisor; | ||
(5) coordinate the ongoing activities of the | ||
supervisory college, including meetings, regulatory activities, | ||
and processes for information sharing; and | ||
(6) establish a crisis management plan. | ||
(b) In order to assess the business strategy, financial | ||
position, legal and regulatory position, risk exposure, and risk | ||
management and governance processes, and as part of the examination | ||
of individual insurers under Subchapter H, the commissioner may | ||
participate in a supervisory college with other entities that | ||
regulate the insurer or its affiliates, including other state, | ||
federal, and international regulatory entities. The commissioner | ||
may enter into agreements under Section 823.011 to cooperate with | ||
other regulatory entities. Nothing in this section shall be | ||
construed as delegating to the supervisory college the | ||
commissioner's authority to regulate the insurer or its affiliates. | ||
(c) A registered insurer subject to this section shall pay | ||
the reasonable expenses, including reasonable travel expenses, of | ||
the commissioner's participation in a supervisory college under | ||
Subsection (b). For purposes of this section, a supervisory | ||
college may be convened as either a temporary or permanent forum for | ||
communication and cooperation between the entities that regulate | ||
the insurer or its affiliates, and the commissioner may establish a | ||
regular assessment to the insurer for the payment of expenses | ||
related to the regulation of the insurer. | ||
SECTION 5. Section 823.052, Insurance Code, is amended by | ||
amending Subsections (b) and (c) and adding Subsections (c-1) and | ||
(c-2) to read as follows: | ||
(b) The registration statement must be in a format | ||
prescribed by the National Association of Insurance Commissioners | ||
or adopted by rule of the commissioner and contain current | ||
information about: | ||
(1) the identity and relationship of each affiliate in | ||
the insurance holding company system of which the insurer is a part; | ||
(2) the capital structure, general financial | ||
condition, and ownership and management of the insurer, the | ||
insurer's holding company, the insurer's subsidiaries, and, if the | ||
commissioner considers the information necessary, any of the | ||
insurer's other affiliates; and | ||
(3) any pledge of stock of the insurer or a subsidiary | ||
or controlling affiliate of the insurer for a loan made to a member | ||
of the insurer's insurance holding company system. | ||
(c) The registration statement must also contain | ||
information about: | ||
(1) each outstanding loan the insurer makes to an | ||
affiliate of the insurer or an affiliate makes to the insurer; | ||
(2) each purchase, sale, or exchange of securities or | ||
other investment between the insurer and an affiliate of the | ||
insurer; | ||
(3) each purchase, sale, or exchange of assets between | ||
the insurer and an affiliate of the insurer; | ||
(4) each management and service contract or | ||
cost-sharing arrangement between the insurer and an affiliate of | ||
the insurer; | ||
(5) each reinsurance agreement between the insurer and | ||
an affiliate of the insurer that covers one or more lines of | ||
insurance of the ceding company; | ||
(6) each agreement between the insurer and an | ||
affiliate of the insurer to consolidate federal income tax returns; | ||
(7) each transaction between the insurer and an | ||
affiliated financial institution; | ||
(8) each transaction between the insurer and an | ||
affiliate of the insurer that is not in the ordinary course of | ||
business; | ||
(9) each guarantee or undertaking, other than an | ||
insurance contract entered into in the ordinary course of the | ||
insurer's business, for the benefit of an affiliate of the insurer | ||
that results in a contingent exposure of the insurer's assets to | ||
liability; | ||
(10) each dividend or distribution to the insurer's | ||
shareholders; [ |
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(11) each transaction between the insurer and an | ||
affiliate of the insurer not specified by this subsection that is | ||
subject to Section 823.102, 823.103, or 823.104; | ||
(12) the corporate governance and internal control | ||
responsibilities of the insurer's board of directors, including a | ||
statement that: | ||
(A) the insurer's senior management or officers | ||
have approved and implemented, and continue to maintain and | ||
monitor, corporate governance and internal control procedures; and | ||
(B) the insurer's board of directors oversees | ||
corporate governance and internal controls; and | ||
(13) any other information that the commissioner | ||
requires by rule. | ||
(c-1) On request of the commissioner, an insurer shall | ||
include with the statement a copy of all financial statements for | ||
the insurance holding company system and all affiliates of the | ||
holding company system, including annual audited financial | ||
statements filed with the United States Securities and Exchange | ||
Commission pursuant to the Securities Act of 1933 (15 U.S.C. | ||
Section 77a et seq.) or the Securities Exchange Act of 1934 (15 | ||
U.S.C. Section 78a et seq.). | ||
(c-2) An insurer required by the commissioner to submit | ||
financial statements under Subsection (c-1) may satisfy the | ||
requirement by submitting to the commissioner: | ||
(1) the financial statements that the insurer's parent | ||
corporation most recently filed with the Securities and Exchange | ||
Commission; and | ||
(2) if the insurer is required to submit financial | ||
statements for an affiliate, the financial statements that the | ||
affiliate most recently filed with an agency that regulates the | ||
affiliate. | ||
SECTION 6. Subchapter B, Chapter 823, Insurance Code, is | ||
amended by adding Section 823.0595 to read as follows: | ||
Sec. 823.0595. ENTERPRISE RISK REPORT. (a) Except as | ||
provided by Subsections (d) and (f), the ultimate controlling | ||
person, as defined by Section 823.055, of each insurer required to | ||
file an annual registration shall file with the registration an | ||
annual enterprise risk report. The report must, to the best of the | ||
ultimate controlling person's knowledge, identify the material | ||
risks within the insurance holding company system that may pose | ||
enterprise risk to the insurer. The report must be filed with the | ||
lead state commissioner of the insurance holding company system, as | ||
determined by the commissioner. In determining the lead state | ||
commissioner, the commissioner shall consider the procedures | ||
adopted by the National Association of Insurance Commissioners. | ||
(b) The ultimate controlling person of an insurer shall file | ||
the first enterprise risk report required by this section with the | ||
first annual registration statement due after: | ||
(1) January 1, 2013, if the total direct or assumed | ||
annual premiums of the insurer were $5 billion or more during the | ||
preceding 12-month period; | ||
(2) January 1, 2014, if the total direct or assumed | ||
annual premiums of the insurer were more than $1 billion but less | ||
than $5 billion during the preceding 12-month period; | ||
(3) January 1, 2015, if the total direct or assumed | ||
annual premiums of the insurer were more than $500 million but less | ||
than $1 billion during the preceding 12-month period; or | ||
(4) January 1, 2016, if the total direct or assumed | ||
annual premiums of the insurer were $300 million or more but less | ||
than $500 million during the preceding 12-month period. | ||
(c) Subsection (b) and this subsection expire January 2, | ||
2015. | ||
(d) Except as provided by Subsection (e), the ultimate | ||
controlling person of an insurer with total direct or assumed | ||
annual premiums of less than $300 million is not required to submit | ||
an enterprise risk report under Subsection (a). | ||
(e) Regardless of total direct or assumed annual premium, | ||
the ultimate controlling person of an insurer that is not in | ||
compliance with applicable risk-based capital standards or that is | ||
otherwise in hazardous condition, as determined by the | ||
commissioner, shall file an enterprise risk report required by | ||
Subsection (a) as directed by the commissioner. | ||
(f) An insurer or health maintenance organization that in | ||
the preceding calendar year had direct written and assumed premiums | ||
of more than $300 million but less than $500 million may request an | ||
exemption from the reporting requirements of Subsection (a) by | ||
filing with the commissioner a written statement describing the | ||
undue financial or organizational hardship the insurer or health | ||
maintenance organization would suffer as a result of complying with | ||
Subsection (a). The commissioner may grant the exemption if the | ||
commissioner finds that compliance with Subsection (a) would impose | ||
an undue financial or organizational hardship on the insurer or | ||
health maintenance organization. | ||
SECTION 7. Section 823.060, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 823.060. VIOLATION OF SUBCHAPTER. The failure to file | ||
a registration statement or an amendment to a registration | ||
statement, or an enterprise risk report, within the time specified | ||
for filing the statement, [ |
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this subchapter, is a violation of this subchapter. | ||
SECTION 8. The heading to Section 823.101, Insurance Code, | ||
is amended to read as follows: | ||
Sec. 823.101. STANDARDS FOR TRANSACTION WITHIN AN INSURANCE | ||
HOLDING COMPANY SYSTEM [ |
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SECTION 9. Section 823.101, Insurance Code, is amended by | ||
amending Subsection (a) and adding Subsection (b-1) to read as | ||
follows: | ||
(a) This section applies only to a material transaction | ||
within an insurance holding company system to which an [ |
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registration under Section 823.052 is a party. | ||
(b-1) An agreement, including an agreement for | ||
cost-sharing, services, or management, must include all provisions | ||
required by rule of the commissioner. | ||
SECTION 10. Section 823.102, Insurance Code, is amended by | ||
amending Subsection (a) and adding Subsections (d) and (e) to read | ||
as follows: | ||
(a) This section applies only to a sale, purchase, exchange, | ||
loan or other extension of credit, or investment between a domestic | ||
insurer and any person in the insurer's insurance holding company | ||
system, including an amendment or modification of an affiliate | ||
agreement previously filed under this section, that involves more | ||
than the lesser of 5 percent of the insurer's admitted assets or 25 | ||
percent of the insurer's surplus, as of December 31 of the year | ||
preceding the year in which the transaction occurs. | ||
(d) The notice described by Subsection (c) must include: | ||
(1) the reasons for entering into or changing the | ||
transaction; and | ||
(2) the financial impact of the transaction on the | ||
domestic insurer. | ||
(e) Not later than the 30th day after the termination of a | ||
previously filed agreement, the domestic insurer shall give notice | ||
of the termination to the commissioner. | ||
SECTION 11. Section 823.103, Insurance Code, is amended by | ||
amending Subsection (a) and adding Subsections (e) and (f) to read | ||
as follows: | ||
(a) This section applies only to: | ||
(1) a sale, purchase, exchange, loan or other | ||
extension of credit, or investment between a domestic insurer and | ||
any person in the insurer's insurance holding company system, | ||
including an amendment or modification of an affiliate agreement | ||
previously filed under this section: | ||
(A) that involves more than the lesser of | ||
one-half of one percent of the insurer's admitted assets or five | ||
percent of the insurer's surplus, as of December 31 of the year | ||
preceding the year in which the transaction occurs; and | ||
(B) the approval of which is not required under | ||
Section 823.102; | ||
(2) a reinsurance agreement, including a reinsurance | ||
treaty or pooling agreement, or an amendment or modification of an | ||
agreement previously filed under this section, between a domestic | ||
insurer and any person in the insurer's holding company system [ |
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(3) a rendering of services between a domestic insurer | ||
and any person in the insurer's holding company system on a regular | ||
or systematic basis, including a tax-allocation agreement, or an | ||
amendment or modification of an agreement previously filed under | ||
this section; or | ||
(4) any material transaction between a domestic | ||
insurer and any person in the insurer's holding company system that | ||
is specified by rule and that the commissioner determines may | ||
adversely affect the interests of the insurer's policyholders or of | ||
the public, including an amendment or modification of an agreement | ||
previously filed under this section. | ||
(e) The notice described by Subsection (c) must include: | ||
(1) the reasons for entering into or changing the | ||
transaction; and | ||
(2) the financial impact of the transaction on the | ||
domestic insurer. | ||
(f) Not later than the 30th day after the termination of a | ||
previously filed agreement, the domestic insurer shall give notice | ||
of the termination to the commissioner. | ||
SECTION 12. Section 823.154, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 823.154. REQUIREMENTS FOR ACQUISITION OR EXERCISE OF | ||
CONTROL OR DIVESTITURE OF DOMESTIC INSURER. (a) Before a person | ||
who directly or indirectly controls, or after the acquisition would | ||
directly or indirectly control, a domestic insurer may in any | ||
manner acquire a voting security of a domestic insurer or before a | ||
person may otherwise acquire control of a domestic insurer or | ||
exercise any control over a domestic insurer, or before a person may | ||
initiate a divestiture of control of a domestic insurer: | ||
(1) the acquiring person shall file with the | ||
commissioner a statement that satisfies the requirements of | ||
Subchapter E; [ |
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(2) the acquisition or divestiture of control must be | ||
approved by the commissioner in accordance with this subchapter; | ||
and | ||
(3) if the person is initiating a divestiture of | ||
control, the divesting person shall file with the commissioner a | ||
notice of divestiture on a form adopted by the National Association | ||
of Insurance Commissioners or adopted by the commissioner by rule. | ||
(b) The acquiring person or divesting person shall send a | ||
copy of the statement filed under this section to the domestic | ||
insurer. | ||
(c) A statement or notice filed under this section must be | ||
filed not later than the 60th day before the proposed effective date | ||
of the acquisition or change of control or divestiture and is | ||
subject to public inspection at the office of the commissioner. | ||
(d) Notwithstanding Subsection (a), a divesting person is | ||
not required to provide the commissioner with notice of divestiture | ||
required by Subsection (a)(3) if an acquiring person submits the | ||
statement required by Subsection (a)(1) and that acquisition is | ||
approved by the commissioner. | ||
SECTION 13. Section 823.157, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 823.157. APPROVAL OF ACQUISITION, CHANGE, OR | ||
DIVESTITURE OF CONTROL. (a) The commissioner shall approve or | ||
deny an acquisition, [ |
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which a statement or notice is filed under Section 823.154 not later | ||
than the 60th day after the date the statement required by that | ||
section is filed. The 60-day period may be waived by the person | ||
filing the statement or notice required by Section 823.154 and the | ||
domestic insurer. On the request of either the person filing the | ||
statement or notice required by Section 823.154, or the domestic | ||
insurer, the commissioner shall hold a hearing on a denial. | ||
(b) In considering whether to approve or deny, the | ||
commissioner shall consider whether: | ||
(1) immediately on the acquisition, [ |
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divestiture of control the domestic insurer would not be able to | ||
satisfy the requirements for the issuance of a new certificate of | ||
authority to write the line or lines of insurance for which the | ||
insurer holds a certificate of authority; | ||
(2) the effect of the acquisition, [ |
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divestiture of control would be substantially to lessen competition | ||
in a line or subclassification lines of insurance in this state or | ||
tend to create a monopoly in a line or subclassification lines of | ||
insurance in this state; | ||
(3) the financial condition of the acquiring person | ||
may jeopardize the financial stability of the domestic insurer or | ||
prejudice the interest of the domestic insurer's policyholders; | ||
(4) the acquiring person has a plan or proposal to | ||
liquidate the domestic insurer or cause the insurer to declare | ||
dividends or make distributions, sell any of its assets, | ||
consolidate or merge with any person, make a material change in its | ||
business or corporate structure or management, or enter into a | ||
material agreement, arrangement, or transaction of any kind with | ||
any person, and that the plan or proposal is unfair, prejudicial, | ||
hazardous, or unreasonable to the insurer's policyholders and not | ||
in the public interest; | ||
(5) due to a lack of competence, trustworthiness, | ||
experience, and integrity of the persons who would control the | ||
operation of the domestic insurer, the acquisition or change of | ||
control would not be in the interest of the insurer's policyholders | ||
and the public; | ||
(5-a) the divestiture of control may jeopardize the | ||
financial stability of the domestic insurer or prejudice the | ||
interest of the domestic insurer's policyholders and other | ||
claimants; or | ||
(6) the acquisition, [ |
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control would violate the law of this or another state or the United | ||
States. | ||
(c) If a proposed acquisition, change, or divestiture of | ||
control will require the approval of more than one commissioner, | ||
the commissioner may participate in a public hearing referred to in | ||
this chapter held on a consolidated basis on request of the person | ||
filing the statement required by Section 823.154. The person | ||
filing the statement under Section 823.154 shall file the statement | ||
with the National Association of Insurance Commissioners within | ||
five days of making the request for a public hearing. A hearing | ||
conducted on a consolidated basis shall be public and shall be held | ||
within the United States before the commissioners of the states in | ||
which the insurers are domiciled. The commissioners shall hear and | ||
receive evidence at the hearing. The commissioner may attend the | ||
hearing in person or by telecommunication. | ||
(d) This section does not require the commissioner to hold a | ||
hearing before approving or denying an acquisition, change, or | ||
divestiture of control. | ||
SECTION 14. Section 823.201, Insurance Code, is amended by | ||
adding Subsections (d) and (e) to read as follows: | ||
(d) The acquiring person shall agree to provide the annual | ||
enterprise risk report required by Section 823.0595 for as long as | ||
the acquiring person maintains control of the insurer. | ||
(e) The acquiring person and all subsidiaries within the | ||
acquiring person's control in the insurance holding company system | ||
shall provide information to the commissioner on request of the | ||
commissioner as the commissioner deems necessary to evaluate | ||
enterprise risk to the insurer. | ||
SECTION 15. Section 823.205, Insurance Code, is amended by | ||
adding Subsection (c) to read as follows: | ||
(c) An insurer required to file information under Section | ||
823.154 may satisfy the requirement of Section 823.052(c-1) by | ||
providing the commissioner with the most recently filed parent | ||
corporation reports that have been filed with the United States | ||
Securities and Exchange Commission, if required by the | ||
commissioner. | ||
SECTION 16. Section 823.351, Insurance Code, is amended by | ||
amending Subsections (a) and (b) and adding Subsections (a-1) and | ||
(b-1) to read as follows: | ||
(a) Subject to Section 823.352, the commissioner may order | ||
an insurer registered under Subchapter B to produce records, books, | ||
or other information papers in the possession of the insurer or an | ||
affiliate of the insurer that are necessary to ascertain the | ||
financial condition or legality of conduct of the insurer, | ||
including the enterprise risk to the insurer by the ultimate | ||
controlling party, or by any entity or combination of entities | ||
within the insurance holding company system, or by the insurance | ||
holding company system on a consolidated basis. | ||
(a-1) To determine compliance with this chapter, the | ||
commissioner may order any insurer registered under Subchapter B to | ||
produce information not in the possession of the insurer if the | ||
insurer can obtain access to the information pursuant to | ||
contractual relationships, statutory obligations, or other | ||
methods. In the event that the insurer is unable to obtain the | ||
information requested by the commissioner, the insurer shall | ||
provide the commissioner with a detailed explanation of the reason | ||
why the insurer is unable to obtain the information and the identity | ||
of the holder of information. If it appears to the commissioner | ||
that the insurer's explanation is without merit, the commissioner | ||
may after notice and hearing: | ||
(1) require the insurer to pay a penalty of not less | ||
than $100 for each day the insurer delays producing the | ||
information; or | ||
(2) suspend or revoke the insurer's license. | ||
(b) If an insurer fails to comply with an order under this | ||
section [ |
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examination of each holding company of the insurer and each | ||
controlled person or affiliate in the insurer's insurance holding | ||
company system if the commissioner has cause to believe that: | ||
(1) the operations of that person may materially | ||
affect the operations, management, or financial condition of any | ||
controlled insurer in that system; and | ||
(2) the commissioner is unable to obtain relevant | ||
information from the controlled insurer. | ||
(b-1) The commissioner may issue subpoenas, administer | ||
oaths, and examine under oath any person for purposes of | ||
determining compliance with this section. On the failure or | ||
refusal of a person to obey a subpoena, the commissioner may | ||
petition a court of competent jurisdiction, and on proper showing | ||
the court may enter an order compelling the witness to appear and | ||
testify or produce documentary evidence. Failure to obey the court | ||
order is punishable as contempt of court. A person shall attend as | ||
a witness at the place specified in the subpoena, when subpoenaed, | ||
at any location in this state. The person is entitled to the same | ||
fees and mileage, if claimed, as a witness in district court. Fees, | ||
mileage, and actual expenses necessarily incurred in securing the | ||
attendance of a witness shall be itemized and charged against, and | ||
be paid by, the insurer being examined. | ||
SECTION 17. Section 823.452, Insurance Code, is amended by | ||
adding Subsection (a-1) to read as follows: | ||
(a-1) If it appears to the commissioner that a person has | ||
committed a violation of Subchapter D that prevents the full | ||
understanding of the enterprise risk to the insurer by affiliates | ||
or by the insurance holding company system, the violation may serve | ||
as an independent basis for disapproving dividends or distributions | ||
and for issuing an order under Chapter 404 or Chapter 441. | ||
SECTION 18. The Texas Department of Insurance may not | ||
implement Section 823.0595, Insurance Code, as added by this Act, | ||
until the date that the commissioner determines that the National | ||
Association of Insurance Commissioners has promulgated an | ||
enterprise risk form and has proposed a master confidentiality | ||
agreement and places notice of that determination in the Texas | ||
Register. | ||
SECTION 19. This Act takes effect September 1, 2011. |