| (a) On policies written on and after July 1, 1970, by all stock and mutual insurance companies writing fire and allied lines of insurance in Texas within the contemplation of the Insurance Code of 1951, Chapter 5, Subchapter C, as amended, the company may not under such policies pay policyholder dividends until and unless the company proposing to pay such dividends shall have first applied to and secured the approval of the State Board of Insurance authorizing such payments in the amount proposed to be disbursed. Applications for such approvals shall be filed at least 60 days prior to the commencement of the period in which disbursements are proposed to be made. Approvals will be issued for periods no longer than 12 consecutive months. (b) Pertinent and primary statutory provisions applicable to dividends are the Insurance Code, Article 5.41, dealing with rebating and discrimination, and the Insurance Code, Article 21.31 and Article 21.32, concerning
unlawful dividends. (c) To avoid unlawful discrimination, the same company may not contemporaneously issue both participating and nonparticipating policies on fire and allied lines, and any company utilizing as its plan of operation the issuance of participating policies must include in all of its contracts on fire and allied lines the uniform provisions relative to profit sharing which have heretofore been prescribed by the board. (d) In order that the board may be certain that the company possesses appropriate surplus profits from which proposed policyholder dividends can be disbursed, companies shall include with such applications an analysis of its surplus account of the company upon forms prescribed by the board. (e) In addition, to satisfy the board that the dividends will not discriminate between individuals or between classes, each application for permission to disburse policyholder dividends shall set forth in detail
the basis upon which such dividends are proposed to be allocated. As a part of each application a giving effect balance sheet shall be submitted reflecting the effect that the payments of dividends will have upon the company, and the continued solvency of the company in the event of approval of the dividend payment. If the company proposes to pay a uniform percentage rate of dividend on all expiring fire and allied lines coverages, including coverages under the Texas Standard Policy and the fire and allied lines portions of the Texas Standard Farm and Ranchowners Policy, the board must find on the basis of the facts presented to it that such proposed dividends comply with the requirements of Article 5.41 as it relates to discrimination. (f) If the company applying for permission to disburse policyholder dividends on fire and allied lines desires to pay dividends on some classes and not on other classes, or desires to pay rates of dividends which will vary as between
different classes, the board will require the company to furnish appropriate factual data showing that its plan for disbursing dividends to its policyholders does not unlawfully discriminate between individuals or between classes. (g) These sections of the State Board of Insurance, and all applicable statutes, relating to the payment of dividends to policyholders on policies issued hereunder, are applicable to all such policies of insurance in this state irrespective of the domicile of the insurer. Dividends based on experience rating of individual risks are not precluded by these sections. (h) These sections will be construed and applied by the board with respect to each application presented hereunder in such manner as to give protection, to the fullest extent possible, to the policyholder, and in such manner as to comply with the duty of the board to protect the public interest. (i) An application form for approval of the
payment of dividends for fire and allied lines insurance is adopted herein by reference. Copies of that form may be obtained by contacting the Property Division, State Board of Insurance, 1110 San Jacinto Street, Austin, Texas 78786.
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