| (a) An insurer may be found to be in hazardous condition
when one or more of the following conditions are found to exist by
the commissioner:
(1) an insurer does not file a financial statement
within the time required by the Insurance Code, or as requested by
the agency;
(2) an insurer files financial information which is
false or misleading; releases false or misleading financial information
to lending institutions or the general public; or makes a false or
misleading entry or omits an entry of material amount in the insurer's
books;
(3) an insurer fails to respond to inquiries related
to the condition of the insurer or furnishes false and misleading
information concerning an inquiry;
(4) an insurer does not amend its financial statement
when requested by the agency;
(5) an insurer overstates its surplus by 25 percent
or more;
(6) an insurer's unassigned surplus has a deficit which
is in excess of 20 percent of surplus;
(7) an insurer's financial ratios are outside the acceptable
ranges as established by the National Association of Insurance Commissioners
or the insurer's financial condition is otherwise hazardous as identified
in the financial analysis tools and reports of the National Association
of Insurance Commissioners;
(8) adverse findings are reported in financial condition
and market conduct examination reports, audit reports, and actuarial
opinions, reports, or summaries of an insurer;
(9) the net reduction (excluding net income and change
in paid-in capital and change in paid-in or contributed surplus) to
the insurer's surplus is greater than 25 percent of beginning surplus
on the insurer's annual financial statements;
(10) an insurer's operating loss in the last 12-month
period or any shorter period of time, including net capital gain or
loss, change in non-admitted assets and cash dividends paid to shareholders,
is greater than 50 percent of the insurer's remaining surplus in excess
of the minimum required;
(11) an insurer's operating loss in the last 12-month
period or any shorter period of time, excluding net capital gains,
is greater than 20 percent of the insurer's remaining surplus in excess
of the minimum required;
(12) a projection by the agency of an insurer's current
financial condition indicates that the sum of its paid-in capital,
paid-in surplus, and contributed surplus will be reduced within the
next 12 months;
(13) an insurer has grown so rapidly and to such an
extent that it lacks adequate financial and administrative capacity
to meet its obligations in a timely manner;
(14) an insurer has experienced, or will experience
in the foreseeable future, cash flow or liquidity problems;
(15) an insurer's aggregate net retained risk, direct
or assumed, under any one insurance policy or certificate of insurance
under a group policy, is more than 10 percent of the insurer's surplus,
except where otherwise permitted by law;
(16) contingent liabilities, pledges, or guaranties
which, either individually or collectively, involve a total amount
which, in the opinion of the commissioner, may affect the solvency
of the insurer;
(17) an insurer has not made adequate provision, according
to presently accepted actuarial standards of practice, for the anticipated
cash flows required by the contractual obligations and related expenses
of the insurer, when considered in light of the assets held by the
insurer with respect to the reserves and related actuarial items,
including, but not limited to, the investment earnings on such assets,
and the considerations anticipated to be received and retained under
such policies and contracts;
(18) management establishes reserves that do not comply
with minimum standards established by state insurance laws, regulations,
statutory accounting standards, sound actuarial principles and standards
of practice, or persistently engages in material under-reserving that
results in adverse development;
(19) an insurer's reserves for losses and loss adjustment
expenses are discounted more than 10 percent of surplus without the
commissioner's prior written approval;
(20) an insurer has reinsurance reserve credits, recoverables,
or receivables which are disputed by the reinsurer, or are due and
payable and remain unpaid, and such reinsurance credits, recoverables,
and receivables are more than 10 percent of an insurer's surplus;
or a reinsurer does not have the ability to perform and the insurer's
reinsurance program does not provide sufficient protection for the
insurer's remaining surplus, after taking into account the insurer's
cash flow, the classes of business written, and the financial condition
of the reinsurer; or the reinsurer is insolvent or threatened with
insolvency or delinquent in payment of its monetary or other obligations
and which, in the opinion of the commissioner, may affect the solvency
of the insurer;
(21) in the opinion of the commissioner, the age and
collectability of the insurer's receivables may affect the solvency
of the insurer;
(22) any entity within the insurer's insurance holding
company system is unable to pay its obligations as they become due
and payable, is insolvent, threatened with insolvency, or delinquent
in payment of its monetary or other obligations and which, in the
opinion of the commissioner, may affect the solvency of the insurer;
(23) an entity conducting business with the insurer
is delinquent in the transmitting or payment of net premiums to the
insurer;
(24) a life, accident, and health insurer has premium
writings which result in surplus being less than 5 percent of the
aggregate general account reserves for the life insurance in force
plus 25 percent of the net annualized accident and health premium
writings;
(25) a property and casualty insurer has net premium
writings which, if annualized, would be an amount more than 300 percent
of surplus;
(26) an insurer consistently issues subordinate premium
or surplus debentures to finance its operations;
(27) an insurer does not maintain books and records
sufficient to permit examiners to determine the financial condition
of the insurer, examples of which include, but are not limited to:
(A) books and records of a domestic insurer maintained
outside the state of Texas in violation of the Insurance Code Chapter
803;
(B) person(s) responsible for generating or maintaining
books of original entry for a domestic insurer are officed outside
the state of Texas; or
(C) an insurer moves, or maintains, the location of
the books and records necessary to conduct an examination without
notifying the agency of such location;
(28) an insurer has reinsurance agreements affecting
20 percent or more of the insurer's gross written premiums, direct
or assumed, and the assuming insurers are not licensed to do insurance
business in the state of Texas;
(29) an insurer has reinsurance credits taken or assets
claimed on which there is not complete evidence of reinsurance agreements
with insurers, signed by the reinsurer, and which are more than 10
percent of surplus;
(30) an insurer has transactions among affiliates,
subsidiaries, or controlling persons for which the insurer receives
assets or capital gains that do not provide sufficient value, liquidity,
or diversity to assure the insurer's ability to meet its outstanding
obligations as they mature, or which require all surplus funds which
are in excess of an insurer's statutory minimum capital and surplus,
or equivalent, to be distributed;
(31) an insurer's management, including officers, directors,
or any other person who directly or indirectly controls the operation
of an insurer, does not have the experience, competence, fitness,
reputation, or trustworthiness to operate the insurer in a safe and
sound manner;
(32) an insurer's management engages in unlawful transactions,
including, but not limited to, failing to meet financial and holding
company filing requirements, in the absence of a reason satisfactory
to the commissioner;
(33) an insurer or an affiliate does not comply with
the terms of an agreement entered into between the insurer and affiliate;
(34) the administration of an insurer's business is
delegated to a person who, directly or indirectly, produces more than
25 percent of the insurer's gross written premiums, or an insurer
delegates an insurance function necessary to the insurer's survival
without adequate controls or which creates a conflict of interest;
(35) one person, other than a full time, salaried employee,
controls production of more than 10 percent of the gross written premiums
of an insurer;
(36) an insurer has a pattern of not settling valid
claims within a reasonable time after due proofs of loss have been
received;
Cont'd... |
