(a)-(b)(No change.) (c)Financial Operation of the Association. (1)Collection, investment, and allocation of funds. (A)(No change.) (B)Investment. All funds collected by the association which are not otherwise required to be expended as provided in paragraph (3) [(4)] of this subsection may be retained in a checking account or accounts in any bank or banks doing business in the State of Texas and/or may be invested only in the following: (i)-(iv)(No change.) (C)(No change.) (2)(No change.) [(3)Distributions to the members.] [(A)The only distributions to members which may be made on or after May 1, 1985, without the prior approval of the Commissioner are for the recovery of assessments made on or after May 1, 1985, which are not recoverable as a tax credit by the members under the Insurance Code, Article 21.49, §19. Any other distribution shall be for the sole purpose of paragraph (4)(C) or (4)(G) of this subsection and requires the prior approval of the Commissioner. The Commissioner may not unreasonably refuse to approve a request to distribute funds. In making any distribution, the board of directors may offset amounts otherwise due to a member with amounts then due from that member.] [(B)If the association obtains a disbursement of funds from the catastrophe reserve trust fund maintained by the Department pursuant to Section 8 (i) of the Act, the funds disbursed to the association may be spent by the association only to pay losses and loss adjustment expenses of policyholders in the event of an occurrence or a series of occurrences within the defined catastrophe area that results in insureds losses and operating expenses of the association greater than $100 million. Funds disbursed from the catastrophe reserve trust fund maintained by the Department may not be distributed to any member of the association for any purpose, and any of these amounts disbursed to the association from the catastrophe reserve trust fund that remain unspent after payment of all losses and loss adjustment expenses arising out of such occurrence or series of occurrences shall be remitted to the Department or to the Treasurer of the State of Texas for deposit in the catastrophe reserve trust fund.] (3)[(4)] Use of funds. (A)All monies collected or received by the association [on or after May 1, 1985,] are required to be expended in the following ways and in the following sequence: (i) [(A)] first, to pay the expenses and claims of the association and to pay premiums for reinsurance under any reinsurance program approved by the Commissioner; (ii)second, to make payment of the net equity of association members on an annual basis, including all premium and other revenue of the association in excess of incurred losses and operating expenses, directly to the comptroller for deposit in the catastrophe reserve trust fund to be held by the comptroller outside the state treasury on behalf of, and with legal title in, the Texas Department of Insurance. (B)Funds are to be disbursed from the catastrophe reserve trust fund in accordance with §5.9903(c) of this title (relating to Operation of the Trust Fund). Funds disbursed from the catastrophe reserve trust fund may not be distributed to any member of the association for any purpose, and any funds disbursed to the association from the catastrophe reserve trust fund that remain unspent after payment of all losses and loss adjustment expenses arising out of an occurrence or series of occurrences shall be remitted to the comptroller for redeposit in the catastrophe reserve trust fund. [(B)second, to reimburse members for amounts reallocated from insolvent insurers' inability to pay, as provided in paragraph (2)(E) of this subsection, to the extent such amounts are not recoverable as a tax credit under the Insurance Code, Article 21.49;] [(C)third, to reimburse members for assessments made on or after May 1, 1985, which are not recoverable as a tax credit by the members under the Insurance Code, Article 21.49;] [(D)fourth, to reimburse members for the time value of money for the period of time between the assessment date on or after May 1, 1985, and the distribution date;] [(E)fifth, to either pay premiums for reinsurance under a reinsurance program approved by the Commissioner to cover some or all of the claims liabilities of the association, or to make payment of the net equity of a member, including all premium and other revenue of the association in excess of incurred losses and operating expenses, to a catastrophe reserve trust fund to be held by the Texas Department of Insurance;] [(F)sixth, to establish a reserve for catastrophe losses;] [(G)seventh, as distribution to members of the association after approval by the Commissioner.] (d)-(e)(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State, on May 23, 2001
TRD-200102874 Lynda Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: July 8, 2001
For further information, please call: (512) 463-6327
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