Court Opinions
State Laws
|
Texas Insurance Code - Not Codified - Article 21.54. Risk Retention Groups And Purchasing Groups
Legal Research Home >
Texas Lawyer > Insurance Code - Not Codified > Texas Insurance Code - Not Codified - Article 21.54. Risk Retention Groups And Purchasing Groups
Art. 21.54. RISK RETENTION GROUPS AND PURCHASING GROUPS.
Article repealed effective April 1, 2007
Purpose
Sec. 1. The purpose of this article is to regulate the
formation and operation of risk retention groups and purchasing
groups in this state formed pursuant to the provisions of the
federal Product Liability Risk Retention Act of 1981 (Public Law
97-45) and the federal Liability Risk Retention Act of 1986 and to
protect the public by the appropriate regulation of these groups to
the extent permitted by law.
Definitions
Sec. 2. In this article:
(1) "Board" means the State Board of Insurance.
(2) "Commissioner" means the commissioner of insurance of
the State of Texas or the commissioner, director, or superintendent
of insurance in any other state.
(3) "Completed operations liability" means liability,
including liability for activities that are completed or abandoned
before the date of the occurrence giving rise to the liability,
arising out of the installation, maintenance, or repair of any
product at a site that is not owned or controlled by:
(A) a person who performs that work; or
(B) a person who hires an independent contractor to perform
that work.
(4) "Insurance" means primary insurance, excess insurance,
reinsurance, surplus lines insurance, and any other arrangement for
transferring and distributing risk that is determined to be
insurance under the law of this state.
(5) "Product liability" means liability for damages because
of any personal injury, death, emotional harm, consequential
economic damage, or property damage, including damage resulting
from the loss of use of property, arising out of the manufacture,
design, importation, distribution, packaging, labeling, lease, or
sale of a product, but does not include the liability of any person
for those damages if the product involved was in the possession of
such person when the incident giving rise to the claim occurred.
(6) "Liability":
(A) means legal liability for damages, including costs of
defense, legal costs, fees, and other claims expenses, because of
injuries to other persons, damage to their property, or other
damage or loss to other persons resulting from or arising out of:
(i) a business, whether profit or nonprofit, a trade, a
product, services, including professional services, premises, or
operations; or
(ii) any activity of any state or local government or any
agency or political subdivision thereof; but
(B) does not include personal risk liability or an
employer's liability with respect to its employees other than legal
liability under the Federal Employers' Liability Act (45 U.S.C. 51
et seq.).
(7) "Personal risk liability" means liability for damages
because of injury to any person, damage to property, or other loss
or damage resulting from any personal, familial, or household
responsibilities or activities rather than responsibilities or
activities covered by Subdivision (6) of this section.
(8) "Plan of operation or feasibility study" means an
analysis that presents the expected activities and results of a
risk retention group including, at a minimum:
(A) information sufficient to verify that its members are
engaged in businesses or activities that are similar or related
with respect to the liability to which such members are exposed by
virtue of any related, similar, or common business, trade, product,
services, premises, or operations;
(B) for each state in which it intends to operate, the
coverages, deductibles, coverage limits, rates, and rating
classification systems for each line of insurance the group intends
to offer;
(C) historical and expected loss experience of the proposed
members and national experience of similar exposures to the extent
that this experience is reasonably available;
(D) pro forma financial statements and projections;
(E) appropriate opinions by a qualified, independent
casualty actuary who is a member in good standing of the American
Academy of Actuaries or an individual who is recognized by the
commissioner of this state as having comparable training and
experience, including a determination of minimum premium or
participation levels required to commence operations and to prevent
a hazardous financial condition;
(F) identification of management, underwriting and claims
procedures, marketing methods, managerial oversight methods, and
investment policies; and
(G) other matters as may be prescribed by the insurance laws
of the state in which the risk retention group is chartered.
(9) "Purchasing group" means any group that:
(A) has as one of its purposes the purchase of liability
insurance on a group basis;
(B) purchases such insurance only for its group members and
only to cover their similar or related liability exposure, as
described in Paragraph (C) of this subdivision;
(C) is composed of members whose businesses or activities
are similar or related with respect to the liability to which
members are exposed by virtue of any related, similar, or common
business, trade, product, services, premises, or operations; and
(D) is domiciled in any state.
(10) "Risk retention group" means any corporation or other
limited liability association:
(A) which is organized for the primary purpose of conducting
the activity described under Paragraph (B) of this subdivision;
(B) whose primary activity consists of assuming and
spreading all or any portion of the liability exposure of its group
members; and
(C) which:
(i) is chartered and licensed as a liability insurance
company and authorized to engage in the business of insurance under
the laws of any state; or
(ii) before January 1, 1985, was chartered or licensed and
authorized to engage in the business of insurance under the laws of
Bermuda or the Cayman Islands and, before such date, had certified
to the commissioner of at least one state that it satisfied the
capitalization requirements of that state, except that any such
group shall be considered to be a risk retention group only if it
has been engaged in business continuously since such date and only
for the purpose of continuing to provide insurance to cover product
liability or completed operations liability as those terms were
defined in the Product Liability Risk Retention Act of 1981 before
the effective date of the federal Liability Risk Retention Act of
1986;
(D) which does not exclude any person from membership in the
group solely to provide for members of that group a competitive
advantage over such a person;
(E) which:
(i) has as its members only persons who comprise the
membership of the risk retention group and who are provided
insurance by such group; or
(ii) has as its sole owner an organization which has as its
members only persons who comprise the membership of the risk
retention group and which has as its owners only persons who
comprise the membership of the risk retention group and who are
provided insurance by such group;
(F) whose members are engaged in similar or related
businesses or activities with respect to the liability to which
those members are exposed by virtue of any related, similar, or
common business trade, product, services, premises, or operations;
(G) whose activities do not include the provision of
insurance other than liability insurance for assuming and spreading
all or any portion of the liability of its group members, and
reinsurance with respect to the liability of any other risk
retention group, or any members of such other group, which is
engaged in businesses or activities so that the group or member
meets the requirement of Subdivision (6) of this section for
membership in the risk retention group which provides the
reinsurance; and
(H) the name of which includes the phrase "Risk Retention
Group".
(11) "State" means any state of the United States or the
District of Columbia.
(12) "Hazardous financial condition" means that, based on
its present or reasonably anticipated financial condition, a risk
retention group, although not yet financially impaired or
insolvent, is unlikely to be able to:
(A) meet obligations to policyholders with respect to known
claims and reasonably anticipated claims; or
(B) pay other obligations in the normal course of business.
(13) "Agent" includes the terms "agent" and "broker" as used
in the federal Liability Risk Retention Act of 1986.
(14) "Located" or "location," for the purposes of
determining the state in which a purchasing group is located, means
the state in which the highest aggregate premiums are in force on
the date the group policy is written or renewed and shall be
ascertained upon each placement of renewal by the purchasing group
of insurance with an insurer or risk retention group. For the
purpose of determining the purchasing group's location, the group
policy shall be deemed to be renewed annually.
Risk retention groups chartered in this state
Sec. 3. (a) Except as otherwise provided by this article, a
risk retention group seeking to be chartered in this state must:
(1) be chartered and licensed as an insurance company
authorized by Chapter 2, 8, 15, or 19 of this code; and
(2) comply with all of the laws, rules, regulations, and
requirements applicable to insurers chartered and licensed under
those chapters and with Section 4 of this article to the extent such
requirements are not a limitation on laws, rules, regulations, or
requirements of this state.
Text of subsec. (b) as amended by Acts 1987, 70th Leg., ch. 46, Sec.
6
(b) Except as required by this article, a risk retention
group seeking to be chartered in this state must be chartered and
licensed as an insurance company authorized by Chapters 2 and 8 of
this code and must comply with all of the laws, rules, regulations,
and requirements, including Article 1.36 of this code, applicable
to insurers chartered and licensed under those chapters.
Text of subsec. (b) as amended by Acts 1987, 70th Leg., ch. 115,
Sec. 1
(b) Before it may offer insurance in any state, each risk
retention group also must submit for approval to the commissioner
of this state a plan of operation or a feasibility study. The risk
retention group shall not offer any additional lines of insurance
in this state or in any other state or effect any change in its
operations as described in its plan of operation before a revision
of the plan is submitted to and approved by the commissioner.
(c) The provisions of Subsection (b) of this section
relating to the submission of a plan of operation or feasibility
study shall not apply with respect to any kind or classification of
liability insurance which:
(1) was defined in the federal Product Liability Risk
Retention Act of 1981 (Public Law 97-45) before October 27, 1986;
and
(2) was offered before such date by any risk retention group
which had been chartered and operating for not less than three years
before such date.
(d) With its application for charter, a risk retention group
seeking to be chartered in this state shall provide to the
commissioner of this state in accordance with rules adopted by the
board, the following:
(1) the name of the risk retention group;
(2) the identity of the initial members of the group;
(3) the identity of those individuals who organized the
group or who will provide administrative services or otherwise
influence or control the activities of the group;
(4) the amount and nature of initial capitalization;
(5) the coverages to be afforded; and
(6) the states in which the group intends to operate.
(e) Immediately on receipt of an application for charter,
the commissioner of this state shall provide summary information
concerning the filing to the National Association of Insurance
Commissioners, including the information furnished pursuant to
Subsection (d) of this section.
(f) In addition to all other fees imposed on an insurance
company chartered and licensed pursuant to Chapter 2, 8, 15, or 19
of this code, the risk retention group shall pay a filing fee not to
exceed $1,000 as established by board regulation for expenses
incurred by the board in connection with Subsections (b), (d), and
(e) of this section. Fees collected under this section shall be
deposited in the State Treasury to the credit of the State Board of
Insurance operating fund.
Risk retention groups not chartered in this state
Sec. 4. (a) A risk retention group chartered and licensed in
another state, Bermuda, or the Cayman Islands and seeking to do
business as a risk retention group in this state must comply with
this section.
(b) Before offering insurance in this state, a risk
retention group shall submit to the commissioner of this state the
following:
(1) a statement identifying the state or states in which the
risk retention group is chartered and licensed as a liability
insurance company, date of chartering, its principal place of
business, and such other information, including information on its
membership, as the commissioner of this state may require to verify
that the group qualifies as a risk retention group under the
definition in Subdivision (10) of Section 2 of this article;
(2) a copy of its plan of operation or a feasibility study
and revisions of that plan or study submitted to the state in which
it is chartered and licensed, provided, however, this provision
relating to the submission of a plan of operation or feasibility
study shall not apply with respect to any line or classification of
liability insurance which:
(A) was defined in the Product Liability Risk Retention Act
of 1981 before October 27, 1986; and
(B) was offered before such date by any risk retention group
which had been chartered and operating for not less than three years
before that date; and
(3) a statement of registration that designates the
commissioner as its agent for the purpose of receiving service of
legal documents or process as provided by Chapter 804.
(c) A filing fee not to exceed $500 as established by board
regulation shall be imposed for filing the items under Subdivisions
(1) and (2) of Subsection (b) of this section. Fees collected under
Subsection (b) shall be deposited in the State Treasury to the
credit of the State Board of Insurance operating fund.
(d) Any such risk retention group doing business in this
state shall submit to the commissioner of this state:
(1) a copy of the group's financial statement submitted to
the state in which the risk retention group is chartered and
licensed, which shall be certified by an independent public
accountant and contain a statement of opinion on loss and loss
adjustment expense reserves made by a member of the American
Academy of Actuaries or a qualified loss reserve specialist, under
criteria established by the National Association of Insurance
Commissioners;
(2) a copy of each examination of the risk retention group
as certified by the commissioner or public official conducting the
examination;
(3) on request by the commissioner of this state, a copy of
any audit performed with respect to the risk retention group; and
(4) such information as may be required to verify its
continuing qualification under the definition of risk retention
group in Subdivision (10) of Section 2 of this article.
(e) A filing fee not to exceed $500 as established by
commissioner regulation may be imposed for the filing of the
financial statement under Subdivision (1) of Subsection (d) of this
section. Fees collected for filing the statement shall be
deposited in the State Treasury to the credit of the general revenue
fund to be reallocated to the Texas Department of Insurance
operating fund.
(f) Such risk retention group shall be liable for the
payment of premium and maintenance taxes and taxes on premiums of
direct business for risks located within this state and shall
report to the commissioner of this state the net premiums written
for risks located within this state. Such risk retention group
shall be subject to taxation, and any applicable fines and
penalties related thereto, on the same basis as a foreign admitted
insurer pursuant to Chapters 4 and 5 of this code. Groups shall
provide to the comptroller all information the comptroller may
request in connection with the reporting, collection, enforcement,
and administration of taxes due under this article and of the fee
imposed under Subsection (e) of this section.
(g) A risk retention group and its agents and
representatives shall comply with Article 21.21-2 of this code.
(h) A risk retention group shall comply with the laws of
this state relating to deceptive, false, or fraudulent acts or
practices, including Articles 21.21 and 21.21-A of this code.
(i) A risk retention group must submit to an examination by
the commissioner of this state to determine its financial condition
if the commissioner of the jurisdiction in which the group is
chartered and licensed has not initiated an examination or does not
initiate an examination within 60 days after the date the request is
made by the commissioner of this state. Any such examination shall
be coordinated to avoid unjustified repetition and conducted in an
expeditious manner in accordance with the National Association of
Insurance Commissioners Examiner Handbook and pursuant to Articles
1.15, 1.16, 1.17, 1.18, 1.19, and 1.28 of this code.
(j) A risk retention group not chartered in this state and
doing business in this state must comply with a lawful order issued
in a voluntary dissolution proceeding or in a delinquency
proceeding commenced by a commissioner if there has been a finding
of financial impairment after an examination under Subsection (i)
of this section.
(k) A risk retention group not chartered in this state must
comply with the terms of an injunction issued by a court of
competent jurisdiction of this state or any other state based upon a
finding that such group is in hazardous financial condition or is
financially impaired.
(l) Any risk retention group which was doing business in
this state prior to the enactment of this article shall, within 30
days after the effective date of this article, furnish notice to the
commissioner of this state pursuant to the provisions of Subsection
(b) of this section and shall thereafter comply with all other
provisions pertaining to risk retention groups not chartered in
this state as provided by this article.
(m) A risk retention group which violates any provision of
this article shall be subject to fines and penalties applicable to
foreign admitted insurers generally, including revocation of its
right to do business in this state.
Risk retention groups; notice, prohibited solicitation and
ownership
Sec. 5. (a) Any policy issued by a risk retention group shall
contain in 10-point type on the front page and the declaration page
the following notice:
This policy is issued by your risk retention group. Your risk
retention group may not be subject to all of the insurance laws and
regulations of your state. State insurance insolvency guaranty
funds are not available for your risk retention group.
NOTICE
(b) The following acts by a risk retention group are
prohibited:
(1) the solicitation or sale of insurance by a risk
retention group to any person who is not eligible for membership in
the group; and
(2) the solicitation or sale of insurance by or operation of
a risk retention group that is in a hazardous financial condition or
is financially impaired.
(c) A risk retention group shall not do business in this
state if an insurance company is directly or indirectly a member or
owner of the risk retention group, other than in the case of a risk
retention group all of whose members are insurance companies.
(d) A risk retention group may engage in the business of
insurance in this state only as such a group and only for conducting
the activities described in this article.
Purchasing groups: exemption from certain laws relating to group
purchase of insurance
Sec. 6. Any purchasing group meeting the criteria established
under the federal Liability Risk Retention Act of 1986 shall be
exempt from any law of this state relating to the creation of groups
for the purchase of insurance, the requirement of
countersignatures, or the prohibition of group purchasing or any
law that would discriminate against a purchasing group or its
members. Also, an insurer shall be exempt from any law of this
state that prohibits providing or offering to provide to a
purchasing group or its members advantages based on their loss and
expense experience not afforded to other persons with respect to
rates, policy forms, coverages, or other matters. A purchasing
group shall be subject to all other applicable laws of this state.
Notice and registration requirements of purchasing groups
Sec. 7. (a) A purchasing group that intends to do business in
this state shall, prior to doing such business, furnish notice to
the commissioner of this state. A filing fee not to exceed $100 as
established by board regulation shall be imposed for the filing of
such notice. Fees collected under this subsection shall be
deposited in the State Treasury to the credit of the State Board of
Insurance operating fund. The notice shall:
(1) identify the state in which the group is domiciled;
(2) specify the lines and classifications of liability
insurance that the purchasing group intends to purchase;
(3) specify the method by which and the person or persons,
if any, through whom insurance will be offered to its members whose
risks are located in this state;
(4) identify the insurance company from which the group
intends to purchase its insurance and the domicile of that company;
(5) identify the principal place of business of the group
and, if ascertainable at the time of filing, the location of the
group; and
(6) provide such other information as may be required by the
commissioner of this state to verify that the purchasing group is
qualified under Subdivision (9) of Section 2 of this article.
(b) The purchasing group shall register with and designate
the commissioner of this state or other appropriate authority as
its agent solely for the purpose of receiving service of legal
documents or process, except that these requirements do not apply
in the case of a purchasing group which:
(1) was domiciled before April 1, 1986, in any state of the
United States and is domiciled on and after October 27, 1986, in any
state of the United States;
(2) before October 27, 1986, purchased its insurance from an
insurance carrier licensed in any state and since October 27, 1986,
purchased its insurance from an insurance carrier licensed in any
state;
(3) was a purchasing group under the requirements of the
Product Liability Risk Retention Act of 1981 before October 27,
1986; and
(4) does not purchase insurance that was not authorized for
purposes of an exemption under that Act, as effective before
October 27, 1986.
A fee not to exceed $50 as established by board regulation may
be imposed for each document served on the commissioner of this
state and forwarded to the purchasing group. Fees collected under
this subsection shall be deposited in the State Treasury to the
credit of the State Board of Insurance operating fund.
(c) Any purchasing group which was doing business in this
state prior to the enactment of this article shall, within 30 days
after the effective date of this article, furnish notice to the
commissioner pursuant to the provisions of Subsection (a) of this
section such information as may be required pursuant to Subsection
(b) of this section.
Restrictions on insurance purchased by purchasing groups
Sec. 8. (a) A purchasing group located in this state shall not
purchase liability insurance from a risk retention group that is
not chartered in a state or from an insurer that does not hold a
certificate of authority to do the business of insurance in the
state in which the purchasing group is located, unless the purchase
is effected through a licensed agent acting pursuant to Article
1.14-2 of this code.
(b) A purchasing group which obtains liability insurance
from an insurer or a risk retention group shall inform each of the
members of such group which have a risk located in this state that
such risk is not protected by an insurance insolvency guaranty fund
in this state and that such risk retention group or such insurer may
not be subject to all insurance laws and regulations of this state.
(c) No purchasing group may offer insurance policy coverage
declared unlawful by the highest court of this state.
Taxation of premiums paid by purchasing groups
Sec. 9. (a) Premiums paid for coverage of risks located in
this state by purchasing groups or any members of the purchasing
group are subject to taxation at the same rate and subject to the
same interest, fines, and penalties for nonpayment as that
applicable to premiums paid for similar coverage by other insureds.
(b) Chapter 4 of this code shall be used to calculate
applicable tax rates when the purchasing group or any members of the
purchasing group pay premiums for coverage of risks located in this
state to an insurance company holding a certificate of authority to
do the business of insurance in this state or a risk retention group
qualified to do business in this state. Article 1.14-2 of this code
is to be used to calculate the applicable tax rates when the
purchasing group or any members of the purchasing group pay
premiums for coverage of risks located in this state to a surplus
lines insurance carrier.
(c) To the extent that the purchasing group or its members
pay premiums for coverage of risks located within this state to an
insurance company holding a certificate of authority to do the
business of insurance in this state or a risk retention group
qualified to do business in this state, the insurance company or
risk retention group receiving those premiums is responsible for
remitting the tax to the board.
(d) To the extent that the purchasing group or its members
pay premiums for coverage of risks located within this state to a
surplus lines insurance carrier, the surplus lines agent shall
report and pay the taxes for premiums. To the extent the surplus
lines agent does not remit the tax, the purchasing group shall pay
the tax for coverage of risks located in this state.
Duty of agents
Sec. 10. (a) No person, firm, partnership, or corporation
shall act or offer to act as an agent for a risk retention group, or
aid in any manner in the solicitation, negotiation, or placement of
insurance on behalf of a risk retention group operating in this
state or any of its members in this state without first obtaining a
license as an agent under Article 21.14 of this code in the case of a
resident of this state or Article 21.11 of this code in the case of a
nonresident of this state.
(b) No person, firm, partnership, or corporation shall act
or offer to act as an agent for a purchasing group or aid in any
manner in the solicitation, negotiation, or placement of insurance
on behalf of a purchasing group operating in this state or any of
its members in this state without first obtaining a license as an
agent pursuant to Article 21.14 of this code in the case of a
resident of this state or Article 21.11 of this code in the case of a
nonresident of this state. Furthermore, no person, firm,
partnership, or corporation shall act or offer to act as an agent or
aid in any manner in the solicitation, negotiation, or placement of
insurance with an insurer not qualified to do business in this state
on behalf of a purchasing group or its members located in this state
without first complying with Article 1.14-2 of this code. No
person, firm, partnership, or corporation shall solicit members of
the purchasing group for coverage under the purchasing group's
policy without first obtaining proper licensing to act as an
insurance agent.
(c) Any provision of Article 1.14-2, 21.09, or 21.11 of this
code, requiring residency in this state, requiring
countersignatures, prohibiting the payment of commissions to a
nonresident, prohibiting the solicitation of insurance in this
state by a nonresident, or prohibiting a nonresident from acting as
a surplus or excess lines agent shall not apply in the case of an
agent licensed pursuant to those articles when the agent acts on
behalf of a risk retention group or purchasing group operating in
this state or any of their members in this state in the provision or
placement of liability insurance for risks located in this state.
(d) Before placing business with a risk retention group,
each agent shall secure from the appropriate insurance regulatory
authority a certified copy of the certificate of authority
verifying that the insurer is authorized in its domiciliary
jurisdiction to write the liability insurance policy proposed to be
procured from it by the agent.
(e) An agent licensed as provided by Subsection (a) or (b)
of this section must report to the commissioner of this state not
later than March 1 of each year the activities and scope of services
being provided to the risk retention group or purchasing group in
accordance with rules promulgated by the board.
(f) Every person, firm, partnership, or corporation
licensed pursuant to the provisions of Article 1.14-2, 21.11, or
21.14 of this code on business placed with risk retention groups or
written through a purchasing group shall inform each prospective
insured of the provisions of the notice required by Subsection (a)
of Section 5 of this article in the case of a risk retention group
and Subsection (b) of Section 8 of this article in the case of a
purchasing group.
Compulsory associations
Sec. 11. (a) No risk retention group shall be required or
permitted to join or contribute financially to any insurance
insolvency guaranty fund or similar mechanism in this state, nor
shall a risk retention group or its insureds or claimants against
its insureds receive any benefit from such fund for claims arising
under the insurance policies issued by such retention group.
(b) No claim against a purchasing group or its members shall
be entitled to payment from any insurance insolvency guaranty fund
or similar mechanism in this state, nor shall a purchasing group or
its members or claimants against the group or its members receive
any benefit from such fund for claims arising under the insurance
policies procured through the purchasing group unless the policies
are underwritten by insurance companies that are licensed in this
state and have capital and surplus of at least $25 million, or
insurance companies that are licensed in this state that are
members of company groups with combined capital and surplus of at
least $25 million, at the time of policy issuance.
(c) A risk retention group chartered and licensed in this
state and a risk retention group qualified to do business in this
state must participate in the catastrophe property insurance pool,
joint underwriting associations, mandatory liability and assigned
risk pools, and residual market facilities on the same basis as a
liability insurer holding a certificate of authority to do the
business of insurance in this state.
Administrative and procedural authority regarding risk retention
groups and purchasing groups
Sec. 12. (a) The commissioner of this state is authorized to
make use of any of the powers under this code to enforce the laws of
this state so long as those powers are not specifically preempted by
the Product Liability Risk Retention Act of 1981, as amended by the
Liability Risk Retention Act of 1986. These powers include the
commissioner's administrative authority to investigate, issue
subpoenas, conduct depositions and hearings, issue orders, and
impose penalties.
(b) With regard to any investigation, administrative
proceedings, or litigation, the commissioner of this state shall
rely on the procedural law and regulations of the state.
(c) Injunctive relief must be issued by a court of competent
jurisdiction when the board seeks to enjoin a risk retention group
not chartered in this state from:
(1) violating the law of this state prohibiting deceptive,
false, or fraudulent acts or practices;
(2) soliciting or selling insurance to a person who is not
eligible for membership in the risk retention group; or
(3) soliciting or selling insurance by or operation of a
risk retention group that is in hazardous financial condition or is
financially impaired.
Penalties
Sec. 13. (a) A risk retention group that is qualified to do
business in this state under Section 3 or 4 of this article and that
violates this article is subject to all sanctions and penalties
applicable to an insurer that holds a certificate of authority
under Chapters 2 and 8 of this code including revocation of its
license and the right to do business in this state.
(b) A risk retention group doing business in this state that
is not qualified to do business in this state under Section 3 or 4 of
this article is considered an unauthorized insurer and is subject
to Articles 1.14, 1.14-1, 1.36, 21.28, and 21.28-A of this code.
Binding effect of orders issued in U.S. district court
Sec. 14. An order issued by any district court of the United
States enjoining a risk retention group from soliciting or selling
insurance or operating in any state, in all states, or in any
territory or possession of the United States on a finding that the
group is in a hazardous financial condition, is financially
impaired, or is insolvent is enforceable in the courts of this
state.
Rules
Sec. 15. The board may adopt rules relating to risk retention
groups and purchasing groups that are necessary to carry out this
article.
Added by Acts 1983, 68th Leg., p. 4991, ch. 893, Sec. 1, eff. June
19, 1983; Sec. 3(b) amended by Acts 1987, 70th Leg., ch. 46, Sec. 6,
eff. Sept. 1, 1987; Sec. 4(a) amended by Acts 1987, 70th Leg., ch.
46, Sec. 7, eff. Sept. 1, 1987; Sec. 14(b) amended by Acts 1987,
70th Leg., ch. 46, Sec. 8, eff. Sept. 1, 1987. Amended by Acts 1987,
70th Leg., ch. 115, Sec. 1, eff. May 19, 1987; Sec. 3(a), (f),
amended by Acts 1987, 70th Leg., 2nd C.S., ch. 67, Sec. 13, eff.
Aug. 4, 1987; Sec. 11(b) amended by Acts 1991, 72nd Leg., 2nd C.S.,
ch. 12, Sec. 1.23, eff. Jan. 1, 1992; Sec. 4(e), (f) amended by Acts
1993, 73rd Leg., ch. 685, Sec. 3.22, eff. Sept. 1, 1993; Sec. 11(b)
amended by Acts 1995, 74th Leg., ch. 1055, Sec. 11, eff. June 17,
1995; Sec. 4(b) amended by Acts 2001, 77th Leg., ch. 1419, Sec. 15,
eff. June 1, 2003.
Article: 21.49A. FAIR PLAN (FAIR ACCESS TO INSURANCE
REQUIREMENTS) ACT.
Article repealed effective April 1, 2007
Authority; Purpose
Sec. 1. (a) If the commissioner determines, after a public
hearing, that in all or any part of the state residential property
insurance is not reasonably available in the voluntary market to a
substantial number of insurable risks or that at least 25 percent of
the applicants to the residential property market assistance
program who are qualified under the plan of operation have not been
placed with an insurer in the previous six-month period, the
commissioner may establish a FAIR (Fair Access to Insurance
Requirements) Plan to deliver residential property insurance to
citizens of this state in underserved areas, which shall be
determined and designated by the commissioner by rule.
(a-1) Expired.
(b) Except as provided by this subsection, each insurer, as
defined herein, as a condition of its authority to transact
residential property insurance in this state, shall participate in
the FAIR Plan Association in accordance with this Act. The Texas
Windstorm Insurance Association established by Article 21.49 of
this code may not participate in the FAIR Plan Association for any
purpose.
(c) The FAIR Plan may not provide windstorm and hail
insurance coverage for a risk eligible for that coverage under
Article 21.49 of this code.
Definitions
Sec. 2. (1) "FAIR Plan Association" or "association" means a
nonprofit association established pursuant to this Act to develop
and administer a program to provide residential property insurance
in designated underserved areas in this state.
(2) "Insurer" means any licensed insurer writing property
and casualty insurance in this state, including:
(A) a Lloyd's plan company; and
(B) a reciprocal or interinsurance exchange.
(3) "Residential property insurance" means the coverage
against loss to real or tangible personal property at a fixed
location provided in a homeowners policy, residential fire and
allied lines policy, or farm and ranch owners policy.
(4) "Inspection bureau" means the organization or
organizations designated by the FAIR Plan Association with the
approval of the commissioner to make inspections to determine the
condition of the properties for which residential property
insurance is sought and to perform such other duties as may be
authorized by the FAIR Plan Association or the commissioner. The
manner and scope of the inspection and evaluation report for
residential property shall be prescribed by the association
pursuant to the plan of operation.
(5) "Net direct premiums" means gross direct written
premiums less return premiums upon canceled contracts
(irrespective of reinsurance assumed or ceded) written on
residential property pursuant to this Act.
(6) "Underserved area(s)" means area(s) designated as
underserved by the commissioner by rule. In determining which
areas will be designated as underserved, the commissioner shall
consider the factors specified in Section 1, Article 5.35-3, of
this code.
Governing Committee; Plan of Operation
Sec. 3. (a) The FAIR Plan shall be administered by the
governing committee of the association pursuant to a plan of
operation. Subject to the approval of the commissioner, the
governing committee shall develop the plan of operation and propose
amendments thereto. The plan of operation and any amendments
thereto shall be adopted by the commissioner by rule. The governing
committee may on its own initiative or at the request of the
commissioner amend the plan of operation.
(b) The governing committee shall be composed of 11 members
appointed by the commissioner as follows:
(1) five members who represent the interests of insurers;
(2) four public members who reside in this state; and
(3) two members who are licensed general property and
casualty agents.
(c) The commissioner or the commissioner's designated
representative from within the Texas Department of Insurance shall
serve as an ex officio member.
(d) To be eligible to serve on the governing committee as a
representative of insurers, a person must be a full-time employee
of an authorized insurer that is a member of the association. A
member of the governing committee may be removed by the
commissioner without cause and replaced in accordance with
Subsection (b) of this section.
(e) The plan of operation shall provide:
(1) for establishment of a FAIR Plan Association for the
issuing of residential property insurance pursuant to this Act and
the distribution of the losses and the expenses in the writing of
such insurance in this state;
(2) that all insurers licensed to write property insurance
and writing residential property insurance shall participate in the
assessments of the association, in the proportion that the net
direct premiums, of each participating insurer, written in this
state during the preceding calendar year, bear to the aggregate net
direct premium written in this state by all participating insurers;
such information shall be determined in accordance with the
residential property statistical plan adopted by the commissioner;
(3) that a participating insurer is entitled to receive
credit for similar insurance voluntarily written in a designated
underserved area and its participation in the assessments of the
association shall be reduced in accordance with the provisions of
the plan of operation;
(4) for the immediate binding of eligible risks; for the
use of premium installment payment plans, adequate marketing, and
service facilities; and for the establishment of reasonable
service standards;
(5) procedures for efficient, economical, fair, and
nondiscriminatory administration of the FAIR Plan Association;
(6) procedures for determining the net level of
participation required for each insurer in the FAIR Plan
Association;
(7) for the use of deductibles and other underwriting
devices and for assessment of all members in amounts sufficient to
operate the association; and establish maximum limits of liability
to be placed through the program; and commissions to be paid to the
licensed agents submitting applications;
(8) that the association issue policies in its own name;
(9) reasonable underwriting standards for determining
insurability of the risk;
(10) procedures for the assumption and ceding of
reinsurance by the association; and
(11) any other procedures or operational matters deemed
necessary by the governing committee or the commissioner.
(f) Notwithstanding Chapter 551, Government Code, or any
other law, members of the governing committee may meet by telephone
conference call, video conference, or other similar
telecommunication method. The governing committee may use
telephone conference call, video conference, or other similar
telecommunication method for purposes of establishing a quorum or
voting or for any other meeting purpose in accordance with this
subsection and Subsection (g) of this section. This subsection
applies without regard to the subject matter discussed or
considered by the members of the governing committee at the
meeting.
(g) A meeting held by telephone conference call, video
conference, or other similar telecommunication method:
(1) is subject to the notice requirements applicable to
other meetings of the governing committee;
(2) may not be held unless notice of the meeting specifies
the location of the meeting at which at least one member of the
governing committee is physically present;
(3) must be audible to the public at the location specified
in the notice under Subdivision (2) of this subsection; and
(4) must provide two-way audio communication between all
members of the governing committee attending the meeting during the
entire meeting, and if the two-way audio communication link with
members attending the meeting is disrupted so that a quorum of the
governing committee is no longer participating in the meeting, the
meeting may not continue until the two-way audio communication link
is reestablished.
FAIR Plan Association
Sec. 4. Pursuant to procedures and requirements set forth in
the plan of operation, the FAIR Plan Association (association)
shall develop and administer a program for participation by all
insurers licensed to write property insurance in this state and
writing residential property insurance in this state. The
association shall make residential property insurance available to
applicants in underserved areas whose property is insurable in
accordance with reasonable underwriting standards but who, after
diligent efforts, are unable to procure such insurance through the
voluntary market, as evidenced by two declinations from insurers
licensed to write and actually writing residential property
insurance in the state.
Powers of the Association; Centralized Operations Authorized
Sec. 5. (a) The association is authorized, for FAIR Plan
purposes only, to issue policies of insurance and endorsements
thereto in its own name or a trade name duly adopted for that
purpose, and to act on behalf of all participating insurers in
connection with said policies and otherwise in any manner necessary
to accomplish the purposes of this Act, including but not limited to
issuance of policies, collection of premiums, issuance of
cancellations, and payment of commissions, losses, judgments, and
expenses.
(b) The participating insurers shall be liable to the
association as provided in this Act and the plan of operation for
the expenses and liabilities so incurred by the association, and
the association shall make assessments against the participating
insurers as required to meet such expenses and liabilities. In
connection with any policy issued by the association:
(1) service of any notice, proof of loss, legal process, or
other communication with respect to the policy shall be made upon
the association; and
(2) any action by the insured constituting a claim under the
policy shall be brought only against the association, and the
association shall be the proper party for all purposes in any action
brought under or in connection with any such policy. The foregoing
requirements shall be set forth in any policy issued by the
association and the form and content of any such policy shall be
subject to the approval of the commissioner.
(c) The association is authorized to assume and cede
reinsurance in conformity with the plan of operation.
(d) Each insurer must participate in the assessments of the
association in the proportion that its net direct premiums written
bear to the aggregate net direct premiums written by all insurers.
Coverage for Windstorm and Hail Insurance; Coverage for Certain
Property Located Over Water
Sec. 5A. (a) A policy issued by the association may include
coverage against loss or damage by windstorm or hail for:
(1) a building or other structure that is built wholly or
partially over water; and
(2) the corporeal movable property contained in a building
or structure described by Subdivision (1) of this subsection.
(b) The association may impose appropriate limits of
coverage and deductibles for coverage described by Subsection (a)
of this section.
(c) The governing committee of the association shall submit
any proposed changes to the plan of operation necessary to
implement Subsections (a) and (b) of this section to the
commissioner for the approval of the commissioner in the manner
provided by Section 3(a) of this article.
(d) The commissioner shall adopt rules as necessary to
implement this section, including any rules necessary to implement
changes in the plan of operation proposed under Subsections (a) and
(b) of this section.
Property Inspection; FAIR Plan Procedure
Sec. 6. (a) Any person having an insurable interest in real or
tangible personal property at a fixed location in an underserved
area who, after diligent effort has been unable to obtain
residential property insurance, as evidenced by two current
declinations from insurers licensed to write property insurance and
actually writing residential property insurance in the state, is
entitled upon application to the association to an inspection and
evaluation of the property by representatives of the inspection
bureau.
(b) Applications may be made on behalf of the applicant by a
licensed general lines property and casualty agent and shall be
submitted on forms prescribed by the association.
(c) Promptly after the request for inspection is received,
an inspection must be made and an inspection report filed with the
association and made available to the applicant upon request.
(d) If the inspection bureau finds that the residential
property meets the reasonable underwriting standards established
in the plan of operation, the applicant shall be so informed in
writing and a policy or binder shall be issued by the association.
If the residential property does not meet the criteria, the
applicant shall be informed, in writing, of the reasons for the
failure of the residential property to meet the criteria.
(e) If, at any time, the applicant makes improvements in the
residential property or its condition which the applicant believes
are sufficient to make the residential property meet the criteria,
a representative of the inspection bureau shall reinspect the
residential property upon request. In any case, the applicant for
residential property insurance shall be eligible for one
reinspection any time within 60 days after the initial FAIR Plan
inspection. If upon reinspection the residential property meets
the reasonable underwriting standards established in the plan of
operation, the applicant shall be so informed in writing and a
policy or binder shall be issued by the association.
Approval of Rates
Sec. 7. The association shall file with the commissioner for
approval the proposed rates and supplemental rate information to be
used in connection with the issuance of policies or endorsements.
Rates shall be set in an amount sufficient to carry all claims to
maturity and to meet the expenses incurred in the writing and
servicing of the business. Within 60 days of the filing of the
proposed rates, the commissioner shall enter an order either
approving or disapproving, in whole or in part, the proposed rates.
The commissioner may, upon notice to the association, extend the
period for entering an order under this section an additional 30
days. No such policies or endorsements shall be issued until such
time as the commissioner approves the rates to be applied to the
policy or endorsement. An order disapproving a rate shall state the
grounds for the disapproval and the findings in support thereof.
Appeals; Judicial Review
Sec. 8. (a) Any applicant or affected insurer has the right of
appeal to the association. A decision of the association may be
appealed to the commissioner within 30 days after such decision.
(b) All orders or decisions of the commissioner made
pursuant to this Act are subject to judicial review in accordance
with Subchapter D, Chapter 36, of this code.
Immunity from Liability
Sec. 9. There is no liability on the part of, and no cause of
action against insurers, the inspection bureau, the association,
the governing committee, their agents or employees, or the
commissioner or the commissioner's authorized representatives,
with respect to any inspections required to be undertaken by this
Act or for any acts or omissions in connection therewith, or for any
statements made in any report and communication concerning the
insurability of the property, or in the findings required by the
provisions of this Act, or at the hearings conducted in connection
with such inspections.
Insolvency
Sec. 10. In the event any participating insurer fails, by
reason of insolvency, to pay any assessment, the association shall
cause the reimbursement ratios to be immediately recalculated,
excluding therefrom the amount of the insolvent insurer's
assessment determined by the commissioner to be uncollectible, so
that such uncollectible amount is, in effect, assumed and
redistributed among the remaining participating insurers.
Assessments and Premium Surcharges
Sec. 11. Should a deficit occur in the association, the
association, at the direction of the commissioner, shall either
request the issuance of public securities as authorized by Article
21.49A-1 of this code or assess participating insurers in
accordance with this section. As reimbursement for assessments
paid under this section or service fees paid under Article 21.49A-1
of this code, each insurer may charge a premium surcharge on every
property insurance policy issued by it insuring property in this
state, the effective date of which policy is within the three-year
period commencing 90 days after the date of assessment by the
association under this section or commencing 90 days after payment
of a service fee under Article 21.49A-1 of this code. The amount of
the surcharge shall be calculated on the basis of a uniform
percentage of the premium on such policies equal to one-third of the
ratio of the amount of an insurer's assessment or service fee
payment to the amount of its direct earned premiums as reported in
its financial statement to the department for the calendar year
immediately preceding the year in which the assessment is made,
such that over the period of three years the aggregate of all such
surcharges by an insurer shall be at least equal to the amount of
the assessment or service fee payment of such insurer. The amount
of any assessment paid and surcharged under this section may be
carried by the member insurer as an admitted asset of the insurer
for all purposes, including exhibition in annual statements under
Section 862.001 of this code, until collected. The commissioner
shall adopt rules and procedures as necessary to implement this
section.
Sanctions
Sec. 12. If the association, inspection bureau, or
participating insurer is found to be in violation of or in failure
to comply with this Act, each entity shall be subject to the
sanctions authorized in Chapter 82 of this code and administrative
penalties authorized under Chapter 84 of this code. The
commissioner may also utilize any other disciplinary procedures
authorized by this code, including the cease and desist procedures
authorized by Chapter 83 of this code.
Annual Report
Sec. 13. The association shall compile a calendar year annual
operating report and submit such annual report to the commissioner
on or before March 31 of the following calendar year. This annual
report shall be a matter of public record.
Powers of the Commissioner
Sec. 14. (a) In addition to any powers conferred upon the
commissioner by this or any other law, the commissioner is charged
with the authority to supervise the association and the inspection
bureau. In addition, the commissioner has the power:
(1) to examine the operation of the association and the
inspection bureau through free access to all the books, records,
files, papers, and documents relating to their operation and may
summon, qualify, and examine as witnesses all persons having
knowledge of such operations, including the governing committee,
officers, or employees thereof;
(2) to do all things necessary to enable the State of Texas
and the association to fully participate in any federal program of
reinsurance which may be enacted for purposes similar to the
purposes of this Act;
(3) to require such reports from the association concerning
risks insured by the association pursuant to this Act as may be
deemed necessary; and
(4) to adopt policy forms, endorsements, rates, and rating
and rule manuals for use by the association.
Retention of Profits
Sec. 15. The association shall retain any profits of the
association to be used for the purposes of the association. The
profits of the association shall be used to mitigate losses,
including the purchase of reinsurance and the offset of future
assessments, and may not be distributed to insurers.
Assets of Association
Sec. 16. On dissolution of the association, all assets of the
association shall be deposited in the general revenue fund.
Added by Acts 1995, 74th Leg., ch. 415, Sec. 6, eff. Aug 21.49A-1 21.49B 21.49C 21.50 21.52B 21.53X 21.54 21.58A 21.58B 21.58C 21.61 21.70 21.72 21.77
Last modified: August 10, 2007
|
|
