Bill Text: TX SB322 | 2011-2012 | 82nd Legislature | Enrolled
Bill Title: Relating to certain requirements for reinsurance contracts covering, and to certain restrictions regarding, title insurance policies issued in this state.
Spectrum: Bipartisan Bill
Status: (Passed) 2011-06-17 - Effective on 9/1/11 [SB322 Detail]
Download: Texas-2011-SB322-Enrolled.html
S.B. No. 322 |
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relating to certain requirements for reinsurance contracts | ||
covering, and to certain restrictions regarding, title insurance | ||
policies issued in this state. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subchapter A, Chapter 2502, Insurance Code, is | ||
amended by adding Section 2502.006 to read as follows: | ||
Sec. 2502.006. CERTAIN EXTRA HAZARDOUS COVERAGES | ||
PROHIBITED. (a) A title insurance company may not insure against | ||
loss or damage sustained by reason of any claim that under federal | ||
bankruptcy, state insolvency, or similar creditor's rights laws the | ||
transaction vesting title in the insured as shown in the policy or | ||
creating the lien of the insured mortgage is: | ||
(1) a preference or preferential transfer under 11 | ||
U.S.C. Section 547; | ||
(2) a fraudulent transfer under 11 U.S.C. Section 548; | ||
(3) a transfer that is fraudulent as to present and | ||
future creditors under Section 24.005, Business & Commerce Code, or | ||
a similar law of another state; or | ||
(4) a transfer that is fraudulent as to present | ||
creditors under Section 24.006, Business & Commerce Code, or a | ||
similar law of another state. | ||
(b) The commissioner may by rule designate coverages that | ||
violate this section. It is not a defense against a claim that a | ||
title insurance company has violated this section that the | ||
commissioner has not adopted a rule under this subsection. | ||
(c) Title insurance issued in or on a form prescribed by the | ||
commissioner shall be considered to comply with this section. | ||
(d) Nothing in this section prohibits title insurance with | ||
respect to liens, encumbrances, or other defects to title to land | ||
that: | ||
(1) appear in the public records before the date on | ||
which the contract of title insurance is made; | ||
(2) occur or result from transactions before the | ||
transaction vesting title in the insured or creating the lien of the | ||
insured mortgage; or | ||
(3) result from failure to timely perfect or record | ||
any instrument before the date on which the contract of title | ||
insurance is made. | ||
(e) A title insurance company may not engage in the business | ||
of title insurance in this state if the title insurance company | ||
provides insurance of the type prohibited by Subsection (a) | ||
anywhere in the United States, except to the extent that the laws of | ||
another state require the title insurance company to provide that | ||
type of insurance. | ||
SECTION 2. Section 2551.302, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2551.302. REQUIREMENTS FOR REINSURING POLICIES. A | ||
title insurance company may reinsure any of its policies and | ||
contracts issued on real property located in this state or on | ||
policies and contracts issued in this state under Chapter 2751, if: | ||
(1) the reinsuring title insurance company is | ||
authorized to engage in business in this state under this title; or | ||
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(2) the title insurance company acquires reinsurance | ||
in accordance with Section 2551.305 [ |
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SECTION 3. Section 2551.305, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2551.305. CERTAIN REINSURANCE ALLOWED. | ||
(a) Notwithstanding any other provision of this subchapter, a | ||
title insurance company may acquire reinsurance on an individual | ||
policy or facultative basis from a title insurance company not | ||
authorized to engage in the business of title insurance in this | ||
state if: | ||
(1) the title insurance company from which the | ||
reinsurance is acquired: | ||
(A) has a combined capital and surplus of at | ||
least $20 million as stated in the company's most recent annual | ||
statement preceding the acceptance of reinsurance; and | ||
(B) is domiciled in another state and is | ||
authorized to engage in the business of title insurance in one or | ||
more states; and | ||
(2) the title insurance company acquiring reinsurance | ||
gives written notice to the department at least 30 days before | ||
acquiring the reinsurance, and the commissioner does not, before | ||
the expiration of the 30-day period and on the ground that the | ||
transaction may result in a hazardous financial condition, prohibit | ||
the title insurance company from obtaining reinsurance under this | ||
section. | ||
(b) The notice required under Subsection (a)(2) must | ||
provide sufficient information to enable the commissioner to | ||
evaluate the proposed transaction, including a summary of the | ||
significant terms of the reinsurance, the financial impact of the | ||
transaction on the title insurance company acquiring reinsurance, | ||
and the specific identity and state of domicile of each title | ||
insurance company from which reinsurance is acquired. | ||
(c) Notwithstanding any other provision of this subchapter, | ||
the department may, on application and hearing, permit a title | ||
insurance company to acquire reinsurance that does not comply with | ||
Subsection (a) on an individual policy or facultative basis from a | ||
title insurance company domiciled in another state and not | ||
authorized to engage in the business of title insurance in this | ||
state, if: | ||
(1) the company has exhausted the opportunity to | ||
acquire reinsurance from all other authorized title insurance | ||
companies; and | ||
(2) the title insurance company from which the | ||
reinsurance is acquired has a combined capital and surplus of at | ||
least $2 [ |
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the acceptance of reinsurance. | ||
(d) [ |
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subchapter, the department may, on application and hearing, permit | ||
a title insurance company, including an authorized reinsuring title | ||
insurance company, to retain an additional potential liability of | ||
not more than 40 percent of the company's capital stock and surplus | ||
as stated in the most recent annual statement of the company, if: | ||
(1) the company has exhausted the opportunity to | ||
acquire reinsurance under Subsection (c) [ |
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(2) the additional potential liability of the company | ||
is incurred only if the loss suffered by the insured under the | ||
policy exceeds the amount of insurance and reinsurance accepted by | ||
the company and its reinsuring title insurance companies under the | ||
other provisions of this subchapter. | ||
SECTION 4. Section 2551.303, Insurance Code, is repealed. | ||
SECTION 5. Section 2502.006, Insurance Code, as added by | ||
this Act, applies only to an insurance policy that is delivered, | ||
issued for delivery, or renewed on or after January 1, 2012. A | ||
policy delivered, issued for delivery, or renewed before January 1, | ||
2012, is governed by the law as it existed immediately before the | ||
effective date of this Act, and that law is continued in effect for | ||
that purpose. | ||
SECTION 6. The change in law made by this Act applies only | ||
to a reinsurance contract entered into by a title insurance company | ||
on or after the effective date of this Act. A reinsurance contract | ||
entered into by a title insurance company before the effective date | ||
of this Act is governed by the law in effect immediately before the | ||
effective date of this Act, and the former law is continued in | ||
effect for that purpose. | ||
SECTION 7. This Act takes effect September 1, 2011. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I hereby certify that S.B. No. 322 passed the Senate on | ||
May 17, 2011, by the following vote: Yeas 31, Nays 0; and that the | ||
Senate concurred in House amendment on May 27, 2011, by the | ||
following vote: Yeas 31, Nays 0. | ||
______________________________ | ||
Secretary of the Senate | ||
I hereby certify that S.B. No. 322 passed the House, with | ||
amendment, on May 17, 2011, by the following vote: Yeas 144, | ||
Nays 0, one present not voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
Approved: | ||
______________________________ | ||
Date | ||
______________________________ | ||
Governor |