Texas Insurance Code - Not Codified - Article 1.32. Hazardous Financial Condition
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Art. 1.32. HAZARDOUS FINANCIAL CONDITION.
Article repealed effective April 1, 2007
Definitions
Sec. 1. (a) "Insurer" shall include but not be limited to
capital stock companies, reciprocal or interinsurance exchanges,
Lloyds associations, fraternal benefit societies, mutual and
mutual assessment companies of all kinds and types, state-wide
assessment associations, local mutual aids, burial associations,
county and farm mutual associations, fidelity, guaranty, and surety
companies, trust companies organized under the provisions of
Chapter 7 of the Texas Insurance Code of 1951, as amended, title
insurance companies, stipulated premium insurance companies, group
hospital service companies, health maintenance organizations, risk
retention groups, and all other organizations, corporations, or
persons transacting an insurance business, whether or not named
above, unless such insurers are by statute specifically, by naming
this article, exempted from the operation of this article.
(b) "Board" means the State Board of Insurance of Texas.
(c) "Commissioner" means the Commissioner of Insurance of
Texas.
Order to rectify financial condition
Sec. 2. Whenever the financial condition of an insurer when
reviewed in conjunction with the kinds and nature of risks insured,
the loss experience and ownership of the insurer, the ratio of total
annual premium and net investment income to commission expenses,
general insurance expenses, policy benefits paid, and required
policy reserve increases, its method of operation, its
affiliations, its investments, any contracts which lead or may lead
to contingent liability, or agreements in respect to guaranty and
surety, indicate a condition such that the continued operation of
the insurer might be hazardous to its policyholders, creditors, or
the general public, then the commissioner may, after notice and
hearing, order the insurer to take such action as may be reasonably
necessary to rectify the existing condition, including but not
necessarily limited to one or more of the following steps:
(a) reduce the total amount of present and potential
liability for policy benefits by reinsurance;
(b) reduce the volume of new business being accepted;
(c) reduce general insurance and commission expenses by
specified methods;
(d) suspend or limit the writing of new business for a
period of time;
(e) increase the insurer's capital and surplus by
contribution; or
(f) suspend or cancel the certificate of authority. The
commissioner may use the remedies available under this section in
conjunction with the provisions of Article 1.10A of this code when
the commissioner determines that the financial condition of the
insurer is hazardous and can be reasonably expected to cause
significant and imminent harm to it policyholders or the general
public.
Effect of other laws
Sec. 2A. The commissioner's authority under Section 2 of this
article to require an increase in an insurer's capital and surplus
by contribution prevails over the capital and surplus requirements
of Articles 2.01, 2.02, 2.20, 3.02, and 22.13 of this code, over any
other article of this code or other law establishing capital and
surplus requirements for insurers, or any rules adopted under those
articles or laws, and in the event of any conflict between capital
and surplus requirements imposed by the commissioner under Section
2 of this article and capital and surplus requirements imposed
under Articles 2.01, 2.02, 2.20, 3.02, or 22.13 of this code, any
other article of this code or other law establishing capital and
surplus requirements for insurers, or any rules adopted under those
articles or laws, the capital and surplus requirements imposed by
the commissioner under Section 2 of this article prevail.
Standards and Criteria for Early Warning
Sec. 3. The board is authorized, by rule and regulations, to
fix uniform standards and criteria for early warning that the
continued operation of an insurer might be hazardous to its
policyholders, creditors, or the general public, and to fix
standards for evaluating the financial condition of an insurer,
which standards shall be consistent with the purposes expressed in
Section 2 of this article.
Arrangements with Other Jurisdictions
Sec. 4. The commissioner is authorized to enter into
arrangements or agreements with the insurance regulatory
authorities of other jurisdictions concerning the management,
volume of business, type of risks to be insured, expenses of
operation, plans for reinsurance, rehabilitation, or
reorganization, and method of operations of an insurer that is
licensed in such other jurisdictions and that is deemed to be in a
hazardous financial condition or needful of specific remedies which
may be imposed by the commissioner and insurance regulatory
authorities of such other jurisdictions.
Additional Authority of Article
Sec. 5. Authority granted by the provisions of this article
is in addition to other provisions of law and not in substitution,
restriction, or diminution thereof.
Added as art. 1.30 by Acts 1975, 64th Leg., p. 1019, ch. 388, Sec. 1,
eff. June 19, 1975. Renumbered as art. 1.32 by Acts 1981, 67th
Leg., p. 201, ch. 94, Sec. 1, eff. Aug. 31, 1981.
Secs. 1, 2 amended by Acts 1991, 72nd Leg., ch. 242, Sec. 11.96,
eff. Sept. 1, 1991; Sec. 2A added by Acts 1991, 72nd Leg., ch. 242,
Sec. 7.09, eff. Sept. 1, 1991.
Article: 1.15A 1.15B 1.16 1.17 1.17A 1.18 1.19 1.32 1.33 1.39 1.61 2.10 2.10-1 2.10-2 2.10-3A
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Last modified: August 10, 2007
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