|(a) The following words and terms, when used in this
subchapter, have the following meanings, unless the context clearly
(1) Act--The Insurance Code, Chapter 823.
(2) Affiliate--An affiliate of, or person affiliated
with, a specific person is a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, the person specified. If the controlling person
includes a member of the immediate family of a person, any other person
that is an affiliate of the family member is deemed to be an affiliate
of the controlling person.
(3) Commercially domiciled insurer--A foreign or alien
insurer authorized to do business in this state, that during its three
preceding fiscal years taken together, or any lesser period if it
has been licensed to transact business in this state only for that
lesser period, has written an average of more gross premiums in this
state than it has written in its state of domicile during the same
period, and such gross premiums constitute 30 percent or more of its
total gross premiums everywhere in the United States for that three-year
or lesser period, as reported in its three most recent annual statements.
To determine if an insurer is a commercially domiciled insurer, the
annual average ratio for premium receipts addressed in subparagraphs
(A) and (B) of this paragraph must be calculated, as follows:
(A) total Texas premium for the preceding three fiscal
years (or any lesser period if licensed in Texas less than three years)
divided by total premium countrywide for the preceding three years;
(B) total premium in the state of domicile for the
preceding three years divided by total premium countrywide for the
preceding three years.
(4) Commissioner--The commissioner of insurance of
the State of Texas, the commissioner's associates or deputies, or
their designees, as appropriate.
(5) Control--The term "control," including the terms
"controlling," "controlled by," and "under common control with," means
the power, direct or indirect, to direct or cause the direction of
the management and policies of a person, whether through the ownership
of voting securities, by contract other than a commercial contract
for goods or nonmanagement services, or otherwise, unless the power
is the result of an official position with or corporate office held
by the person. Control is presumed to exist if any person, directly
or indirectly, or with members of the person's immediate family, owns,
controls, or holds the power to vote, or if any person other than
a corporate officer or director of a person holds proxies representing
10 percent or more of the voting securities or authority of any other
person, or if any person by contract or agreement is designated as
an attorney-in-fact for a Lloyd's plan insurer under Insurance Code
Chapter 941, or for a reciprocal or interinsurance exchange under
Insurance Code Chapter 942. This presumption may be rebutted by a
showing made in the manner provided by Insurance Code §823.005,
that control does not exist in fact. The commissioner may determine,
after furnishing all persons in interest with notice and opportunity
to be heard and making specific findings of fact to support the determination,
that control exists in fact, notwithstanding the absence of a presumption
to that effect, where a person exercises, directly or indirectly,
either alone or under an agreement with one or more other persons
such a controlling influence over the management or policies of an
authorized insurer as to make it necessary or appropriate in the public
interest or for the protection of the policyholders of the insurer
that the person be deemed to control the insurer.
(6) Controlled insurer--An insurer controlled directly
or indirectly by a holding company (as a holding company is defined
in this section).
(7) Controlled person--Any person, other than a controlled
insurer, who is controlled directly or indirectly by a holding company
(as a holding company is defined in this section).
(8) Controlling producer--An insurance broker or brokers
or any person, firm, association, or corporation domiciled, licensed,
or operating in a state other than Texas, when, for any compensation,
commission, or other thing of value, the person, firm, association,
or corporation acts or aids in any manner in soliciting, negotiating,
or procuring the making of any insurance contract on behalf of an
insured other than the person, firm, association, or corporation,
and who, directly or indirectly:
(A) controls or seeks to control a property and casualty
insurer as the term control is defined in paragraph (5) of this subsection;
(B) writes or places, in any calendar year, an aggregate
amount of gross written premiums with the controlled property and
casualty insurer which is equal to or greater than 5.0 percent of
the admitted assets of the insurer as reported in the insurer's quarterly
statement filed as of September 30 of the prior year. The term "producer"
or "controlling producer" as used in these sections is not intended
to include an agent or any independent agent acting on behalf of the
controlled insurer, licensed under Insurance Code Chapter 4001, Subchapter
A, and any subagent or representative of the agent, who acts in the
solicitation of, negotiation for, or procurement or making of an insurance
contract, if the agent is not also acting on behalf of an insured
as set forth in this paragraph, in the transaction in question. The
term "producer" or "controlling producer" as used in these sections
is not intended to include an attorney-in-fact acting on behalf of
a licensed Lloyd's or licensed reciprocal or interinsurance exchange.
(9) Director--A person elected or appointed as a member
of a board of directors responsible for the management of an insurer.
The term must also include an attorney-in-fact of a Lloyds or reciprocal
or interinsurance exchange who is charged with responsibility for
the management of an insurer.
(10) Divesting person--A person who has control of
a domestic insurer and who intends to divest control of the domestic
(11) Divestiture--An abandonment of control of a domestic
insurer by a divesting person that does not result in the transfer
of control to another person.
(12) Enterprise risk--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
(13) Executive officer--The chairman of the board of
directors, the president, any vice-president of an applicant in charge
of a principal business unit, division, or function (such as sales,
administration, finance, or underwriting), any other officer who performs
a policy-making function, or any other person who performs similar
policy-making functions for an applicant. Executive officers of subsidiaries
may be deemed executive officers of an applicant if they perform policy-making
functions for an applicant.
(14) Foreign insurer--Includes an alien insurer.
(15) Holding company--Any person who directly or indirectly
controls any insurer, but not including any agency, authority, or
instrumentality of the United States, its possessions and territories,
the Commonwealth of Puerto Rico, the District of Columbia, or a state
or political subdivision of a state or any corporation which is wholly
owned, directly or indirectly, by any of them.
(16) Immediate family--A person's spouse, father, mother,
children, brothers, sisters, and grandchildren, the father, mother,
brothers, and sisters of the person's spouse, and the spouse of the
person's child, brother, sister, mother, father, or grandparent.
(17) Insurance holding company system--Two or more
affiliated persons, one or more of which is an insurer.
(18) Insurer--Includes all insurance companies organized
or chartered under the laws of this state, commercially domiciled
insurers, or insurers licensed to do business in this state, including
capital stock companies, mutual companies, farm mutual insurance companies,
title insurance companies, fraternal benefit societies, local mutual
aid associations, local mutual burial associations, statewide mutual
assessment companies, county mutual insurance companies, Lloyds' plan
companies, reciprocal or interinsurance exchanges, stipulated premium
insurance companies, group hospital service companies and health maintenance
organizations, and any other entity which is subject to Insurance
Code Chapter 823 by applicable law, but does not include agencies,
authorities, or instrumentalities of the United States, its possessions
and territories, the Commonwealth of Puerto Rico, the District of
Columbia, or a state or political subdivision of a state.
(19) Person--An individual, corporation, partnership,
association, joint stock company, trust, unincorporated organization,
or similar entity or combination of them acting in concert, but not
a securities broker performing only the usual and customary broker's
(20) Security holder of a specified person--One who
owns any security of the person, including common stock, preferred
stock, debt obligations, and any other security convertible into or
evidencing the right to acquire any of the foregoing. The term "debt
obligation" does not include trade, commercial, or open accounts,
matured claims, or agents' commissions.
(21) Subsidiary of a specified person--An affiliate
controlled by the person directly or indirectly through one or more
(22) Ultimate controlling person--That person which
is not controlled by another person (as defined in this subsection).
(23) Voting security--Any security or other instrument
giving or granting to the holder the power to vote at a meeting of
shareholders, for or against the election of directors, or any other
matter involving the direction of the management and policies of the
person, or any other security or instrument the department deems to
be of similar nature including, but not limited to, those described
in the rules and regulations the department may prescribe in the public
interest as a voting security.
(b) Exemption--Commercially Domiciled Insurer.
(1) The commissioner may exempt from the provisions
of Insurance Code Chapter 823 and these sections, except the registration
requirement, any commercially domiciled insurer if the commissioner
determines the insurer has assets physically located in this state
or an asset to liability ratio sufficient to justify the conclusion
that there is no reasonable danger that the operations or conduct
of the business of the insurer could present a danger of loss to the
policyholders of this state. The exemption granted under this subsection
must set forth the specific criteria under which it is granted and
will be subject to annual review. The commissioner may, after notice
and opportunity for hearing, rescind an exemption granted to a commercially
domiciled insurer under the provisions of Insurance Code Chapter 823
and these sections. A rescission of an exemption must set forth the
rationale for the rescission. Requests for an exemption under this
subsection must be filed with Financial Analysis, Mail Code 303-1A,
Texas Department of Insurance, P.O. Box 149104, 333 Guadalupe, Austin,
Texas 78714-9104. The request must contain a signed and notarized
affidavit of an executive officer of the insurer that, should the
exemption be granted, the insurer will notify Financial Analysis within
10 days after it no longer meets the criteria set out in this section
on which the exemption is based. In determining that a commercially
domiciled insurer has sufficient assets to justify the conclusion
that there is no reasonable danger that the operations or conduct
of the business of the insurer could present a danger of loss to policyholders
of this state, the commissioner must give consideration to the matters
contacted in subparagraphs (A) - (D) of this paragraph in connection
with an exemption requested under Insurance Code §823.015, and
(A) Assets in Texas, which are either:
(i) permanent, free, and unencumbered and physically
located in Texas in an amount equal to the total unpaid losses attributable
to Texas risks; or
(ii) qualifying authorized investments under the Insurance
Code comprising 20 percent of the insurer's admitted assets and physically
located in Texas.
(B) Adequacy of policyholder surplus, based upon:
(i) an asset-to-liability ratio of two to one, if the
insurer is a property and casualty insurer;
(ii) an asset-to-liability ratio of one and one-half
to one, if the insurer is a life, accident and health insurer;
(iii) the insurer having capital and surplus equal
to 250 percent of the minimum risk-based capital described in §7.402
of this title (relating to Risk-Based Capital and Surplus Requirements
for Insurers and HMOs); or
(iv) the insurer having total capital and surplus of
at least $50 million.
(C) Consideration may be given to financial conditions
specified in §8.3 of this title (relating to Hazardous Conditions)
to justify the conclusion that there is no reasonable danger that
the operations or conduct of the business of the insurer could present
a danger of loss to the policyholders of this state.
(D) Consideration may be given to other positive factors
with regard to an insurer's operations or conduct.
(2) The provisions of this subchapter do not apply
to a foreign or alien insurer if the commissioner has approved a total
withdrawal plan from writing all lines of insurance for the insurer
under Insurance Code Chapter 827.