CHAPTER 2201. RISK RETENTION GROUPS AND PURCHASING GROUPS
INSURANCE CODE
TITLE 10. PROPERTY AND CASUALTY INSURANCE
SUBTITLE G. POOLS, GROUPS, PLANS, AND SELF-INSURANCE
CHAPTER 2201. RISK RETENTION GROUPS AND PURCHASING GROUPS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2201.001. PURPOSE OF CHAPTER. The purpose of this chapter
is to:
(1) regulate the formation and operation of risk retention
groups and purchasing groups in this state formed under:
(A) the Product Liability Risk Retention Act of 1981 (15 U.S.C.
Section 3901 et seq.); or
(B) the Liability Risk Retention Act of 1986 (15 U.S.C. Section
3901 et seq.); and
(2) protect the public by the appropriate regulation of groups
described by Subdivision (1) to the extent permitted by law.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.002. GENERAL DEFINITIONS. In this chapter:
(1) "Agent" includes the terms "agent" and "broker" as used in
the Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901
et seq.).
(2) "Hazardous financial condition" means a condition in which a
risk retention group, based on the group's present or reasonably
anticipated financial condition and although the group is 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.
(3) "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 laws of this state.
(4) "State" means any state of the United States or the District
of Columbia.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.003. LIABILITY DEFINED. (a) In this chapter, except
as provided by Subsection (b) or as otherwise provided by this
chapter:
(1) "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.
(2) "Liability" means legal liability for damages, including
costs of defense, legal costs, fees, and other claims expenses,
incurred because of personal injury, property damage, or other
damage or loss to another person resulting from or arising out
of:
(A) a product, trade, or business, regardless of whether the
business operates for profit;
(B) operations, premises, or services, including professional
services; or
(C) any activity of:
(i) a state or local government; or
(ii) an agency or political subdivision of a state or local
government.
(3) "Product liability" means liability for damages incurred
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 that person when the incident giving
rise to the claim occurred.
(b) In this chapter, "liability" does not include:
(1) liability for damages incurred because of personal injury,
property damage, or other damage or loss resulting from a
personal, familial, or household activity or responsibility; or
(2) an employer's liability with respect to the employer's
employees other than legal liability under the Federal Employers'
Liability Act (45 U.S.C. Section 51 et seq.).
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.004. AGENT LICENSE REQUIRED. (a) A person, firm,
partnership, or corporation may not act or offer to act as an
agent for, or aid in any manner in the solicitation, negotiation,
or placement of insurance on behalf of, a risk retention group or
purchasing group operating in this state or a group member in
this state without first obtaining a license as an agent under:
(1) Chapter 4051, if a resident of this state; or
(2) Chapter 4056, if a nonresident of this state.
(b) A person, firm, partnership, or corporation must comply with
Chapter 981 before the person, firm, partnership, or corporation,
on behalf of a purchasing group or a group member in this state:
(1) acts or offers to act as an agent for an insurer not
authorized to engage in business in this state; or
(2) aids in any manner in the solicitation, negotiation, or
placement of insurance with an insurer not authorized to engage
in business in this state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.005. EXEMPTION FROM CERTAIN REQUIREMENTS. (a) A
provision of Chapter 981, 4055, or 4056 does not apply to an
agent described by Subsection (b) if the provision:
(1) requires residency in this state;
(2) requires countersignatures;
(3) prohibits the solicitation of insurance in this state by a
nonresident or the payment of commissions to a nonresident; or
(4) prohibits a nonresident from acting as a surplus or excess
lines agent.
(b) The exemption provided by Subsection (a) applies to an agent
licensed under Chapter 981, 4055, or 4056 who is acting on behalf
of a risk retention group or purchasing group operating in this
state or a group member in this state in providing or placing
liability insurance for risks located in this state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.006. AUTHORITY OF COMMISSIONER. (a) To enforce the
laws of this state, the commissioner may use any authority
provided by this code that is not specifically preempted by the
Product Liability Risk Retention Act of 1981, as amended by the
Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901 et
seq.), including the authority to investigate, issue a subpoena,
conduct a deposition or hearing, issue an order, and impose a
penalty.
(b) The commissioner shall rely on the procedural laws and rules
of this state with regard to an investigation, an administrative
proceeding, or litigation.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.007. ANNUAL REPORT TO COMMISSIONER. An agent licensed
as required by Section 2201.004 shall report to the commissioner
not later than March 1 of each year the activities and scope of
services being provided to a risk retention group or purchasing
group. The report must be made in accordance with rules adopted
by the commissioner.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.008. RULES. The commissioner may adopt rules relating
to risk retention groups and purchasing groups that are necessary
to carry out this chapter.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
SUBCHAPTER B. RISK RETENTION GROUP QUALIFICATIONS
Sec. 2201.051. GENERAL QUALIFICATIONS OF RISK RETENTION GROUP.
A risk retention group must be a corporation or other limited
liability association that:
(1) is organized primarily to assume and spread, and engages
primarily in assuming and spreading, all or any portion of the
liability exposure of the group's members; and
(2) otherwise meets the qualifications of this subchapter.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.052. NAME OF GROUP. A risk retention group must
include in its name the phrase "risk retention group."
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.053. STATUS AS LIABILITY INSURER REQUIRED. A
corporation or other limited liability association must be
chartered and authorized to engage in the business of insurance
as a liability insurer under the laws of any state to act as a
risk retention group.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.054. QUALIFICATIONS REGARDING AUTHORITY OF CERTAIN
ENTITIES TO ENGAGE IN BUSINESS. (a) In this section, "completed
operations liability" and "product liability" have the meanings
assigned by the Product Liability Risk Retention Act of 1981 (15
U.S.C. Section 3901 et seq.) before the effective date of the
Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901 et
seq.).
(b) Notwithstanding Section 2201.053, a corporation or other
limited liability association may be considered a risk retention
group if:
(1) before January 1, 1985, the corporation or association:
(A) was chartered and authorized to engage in the business of
insurance under the laws of Bermuda or the Cayman Islands; and
(B) had certified to the commissioner, director, or
superintendent of insurance of at least one state that it
satisfied the capitalization requirements of that state; and
(2) since January 1, 1985, the corporation or association has
been continuously engaged in business solely to continue to
provide insurance to cover completed operations liability or
product liability.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.055. QUALIFICATIONS REGARDING MEMBERSHIP. (a) A risk
retention group must be composed of members who 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 product, trade, business, operations,
premises, or services.
(b) A risk retention group must have:
(1) as members, only persons who are provided insurance by the
group; or
(2) as the sole owner, an organization that has:
(A) as members, only persons who comprise the membership of the
group; and
(B) as owners, only persons who comprise the membership of the
group and are provided insurance by the group.
(c) A risk retention group may not exclude a person from
membership in the group solely to provide a competitive advantage
for group members over that person.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.056. AUTHORIZED ACTIVITIES. (a) A risk retention
group may provide:
(1) liability insurance for assuming and spreading all or any
portion of the liability of the group's members; and
(2) reinsurance with respect to the liability of another risk
retention group, or a member of that group, engaged in businesses
or activities that meet the requirements of Section 2201.055(a)
for membership in the group providing reinsurance.
(b) A risk retention group may not engage in activities that
include providing insurance other than the insurance described by
Subsection (a).
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
SUBCHAPTER C. RISK RETENTION GROUPS
CHARTERED IN THIS STATE
Sec. 2201.101. ELIGIBILITY REQUIREMENTS. Except as otherwise
provided by this chapter, a risk retention group that applies to
be chartered in this state must:
(1) be chartered and authorized to engage in the business of
insurance under Chapter 822, 861, 883, or 942; and
(2) comply with all the laws, rules, and requirements, including
Chapter 804, applicable to insurers authorized to engage in
business under those chapters and with Subchapter D to the extent
those requirements do not limit the laws, rules, or requirements
of this state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.102. CHARTER APPLICATION. (a) A risk retention group
that applies to be chartered in this state shall provide to the
commissioner with the application for charter the following in
accordance with rules adopted by the commissioner:
(1) the group's name;
(2) the identity of the group's initial members;
(3) the identity of the individuals who organized the group or
who will provide administrative services or otherwise influence
or control the group's activities;
(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.
(b) Immediately on receipt of an application for charter, the
commissioner shall provide summary information concerning the
filing, including the information provided under Subsection (a),
to the National Association of Insurance Commissioners.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.103. PLAN OF OPERATION; REVISIONS. (a) Except as
provided by Subsection (b), before a risk retention group
chartered in this state may offer insurance in any state, the
group must submit to the commissioner for approval a plan of
operation as described by Section 2201.202.
(b) A risk retention group is not required to submit a plan of
operation under this section with respect to any kind or
classification of liability insurance that:
(1) was defined in the Product Liability Risk Retention Act of
1981 (15 U.S.C. Section 3901 et seq.), as that Act existed before
October 27, 1986; and
(2) was offered before October 27, 1986, by any risk retention
group that had been chartered and operating for at least three
years before that date.
(c) The risk retention group must submit a revision of the
group's plan of operation to the commissioner and the
commissioner must approve the revision before the group:
(1) offers an additional line of insurance in this state or in
any other state; or
(2) effects a change in the group's operations as described in
the plan of operation.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.104. FILING FEE. (a) In addition to all other fees
imposed on an insurer chartered and authorized to engage in
business under Chapter 822, 861, 883, or 942, a risk retention
group chartered in this state shall pay a filing fee in an amount
not to exceed $1,000 as set by rules adopted by the commissioner.
(b) Fees collected under this section shall be deposited to the
credit of the Texas Department of Insurance operating account to
pay expenses incurred by the commissioner under Sections 2201.102
and 2201.103.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
SUBCHAPTER D. RISK RETENTION GROUPS
NOT CHARTERED IN THIS STATE
Sec. 2201.151. COMPLIANCE REQUIRED. A risk retention group
chartered and authorized to engage in business in another state,
Bermuda, or the Cayman Islands shall comply with this subchapter
to engage in business as a risk retention group in this state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.152. PREREQUISITES TO OFFERING INSURANCE. (a) Before
offering insurance in this state, a risk retention group not
chartered in this state must submit to the commissioner:
(1) a statement that:
(A) identifies the state or states in which the group is
chartered and authorized to engage in business as a liability
insurer, the date of charter, and the group's principal place of
business; and
(B) provides any other information the commissioner requires to
verify that the group qualifies as a risk retention group under
Subchapter B, including information on the group's membership;
(2) except as provided by Subsection (b), a copy of the group's
plan of operation, as described by Section 2201.202, and
revisions of that plan submitted to the state in which the group
is chartered and authorized to engage in business; and
(3) a statement of registration that designates the commissioner
as the group's agent for the purpose of receiving service of
legal documents or process as provided by Chapter 804.
(b) A risk retention group is not required to submit a plan of
operation under this section with respect to any line or
classification of liability insurance that:
(1) was defined in the Product Liability Risk Retention Act of
1981 (15 U.S.C. Section 3901 et seq.), as that Act existed before
October 27, 1986; and
(2) was offered before October 27, 1986, by any risk retention
group that had been chartered and operating for at least three
years before that date.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.153. REQUIREMENTS FOR CONTINUING BUSINESS. (a) A
risk retention group not chartered in this state that engages in
business in this state shall submit to the commissioner:
(1) a copy of the group's financial statement submitted to the
state in which the group is chartered and authorized to engage in
business;
(2) a copy of each examination of the group as certified by the
commissioner, director, or superintendent of insurance of another
state or other public official conducting the examination;
(3) on the commissioner's request, a copy of any audit performed
with respect to the group; and
(4) any other information required to verify that the group
continues to qualify as a risk retention group under Subchapter
B.
(b) A financial statement submitted under Subsection (a)(1)
must:
(1) be certified by an independent public accountant; and
(2) contain a statement of opinion on loss and loss adjustment
expense reserves made:
(A) under criteria established by the National Association of
Insurance Commissioners; and
(B) by a member of the American Academy of Actuaries or a
qualified loss reserve specialist.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.154. FILING FEES. (a) The commissioner by rule shall
impose a filing fee in an amount not to exceed $500 for filing
the items described by Sections 2201.152(a)(1) and (2).
(b) The commissioner by rule may impose a filing fee in an
amount not to exceed $500 for filing the financial statement
under Section 2201.153(a)(1). A risk retention group shall
provide to the comptroller all information the comptroller
requests in connection with the reporting, collection,
enforcement, and administration of the fee.
(c) Fees collected under this section shall be deposited to the
credit of the Texas Department of Insurance operating account.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.155. PAYMENT OF TAXES. (a) A risk retention group
not chartered in this state is liable for the payment of premium
and maintenance taxes and taxes on premiums of direct business
for risks located in this state and shall report to the
commissioner the net premiums written for risks located in this
state. The group is subject to taxation, and any fine or penalty
related to that taxation, on the same basis as a foreign admitted
insurer in accordance with Chapters 4, 201, 202, 203, 221, 222,
224, 227, 228, and 251-257.
(b) A risk retention group shall provide to the comptroller all
information the comptroller requests in connection with the
reporting, collection, enforcement, and administration of taxes
under this section.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2H.006, eff. April 1, 2009.
Sec. 2201.156. EXAMINATION OF FINANCIAL CONDITION; DISSOLUTION
OR DELINQUENCY PROCEEDINGS. (a) A risk retention group not
chartered in this state must submit to an examination by the
commissioner to determine the group's financial condition if the
commissioner of insurance of the jurisdiction in which the group
is chartered and authorized to engage in business has not
initiated an examination on or before the 60th day after the date
the commissioner of this state requests an examination.
(b) The commissioner shall:
(1) coordinate the examination under Subsection (a) to avoid
unjustified repetition; and
(2) conduct the examination in an expeditious manner under
Sections 401.051, 401.052, 401.054-401.062, 401.103-401.106,
401.151, 401.152, 401.155, and 401.156 and Chapters 86 and 803 in
accordance with the National Association of Insurance
Commissioners Financial Condition Examiner's Handbook.
(c) A risk retention group not chartered in this state that
engages in business in this state must comply with an order
issued in a voluntary dissolution proceeding or in a delinquency
proceeding commenced by the commissioner or by a commissioner of
another jurisdiction if, after an examination under this section,
there is a finding that the group is financially impaired.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.157. APPLICABILITY OF STATE LAWS PROHIBITING CERTAIN
ACTS OR PRACTICES. (a) A risk retention group not chartered in
this state shall comply with the laws of this state relating to
deceptive, false, or fraudulent acts or practices, including
Chapters 541 and 543.
(b) A risk retention group not chartered in this state and the
group's agents and representatives shall comply with Chapter 542.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.158. INJUNCTIVE RELIEF. (a) A risk retention group
not chartered in this state must comply with the terms of an
injunction issued by a court of this state or any other state
based on a finding that the group is in a hazardous financial
condition or is financially impaired.
(b) Injunctive relief must be issued by a court if the
commissioner 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 group; or
(3) soliciting or selling insurance or operating when the group
is in a hazardous financial condition or is financially impaired.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
SUBCHAPTER E. PROVISIONS REGULATING GENERAL OPERATION
OF RISK RETENTION GROUPS
Sec. 2201.201. SCOPE OF AUTHORITY. A risk retention group may
engage in the business of insurance in this state only:
(1) as a risk retention group; and
(2) to conduct the activities described in this chapter.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.202. PLAN OF OPERATION. A plan of operation submitted
to the commissioner under Section 2201.103 or 2201.152 must be in
the form of an analysis that presents the expected activities and
results of a risk retention group, including, at a minimum:
(1) information sufficient to verify that the group's members
are engaged in businesses or activities that are similar or
related with respect to the liability to which those members are
exposed by virtue of any related, similar, or common product,
trade, business, operations, premises, or services;
(2) for each state in which the group intends to operate, the
coverages, deductibles, coverage limits, rates, and rating
classification systems for each line of insurance the group
intends to offer;
(3) historical and expected loss experience of the proposed
members and national experience of similar exposures to the
extent that this experience is reasonably available;
(4) pro forma financial statements and projections;
(5) appropriate opinions, including a determination of minimum
premium or participation levels required to begin operations and
to prevent a hazardous financial condition, by:
(A) a qualified, independent casualty actuary who is a member in
good standing of the American Academy of Actuaries; or
(B) an individual who the commissioner recognizes as having
comparable training and experience;
(6) identification of management, underwriting and claims
procedures, marketing methods, managerial oversight methods, and
investment policies; and
(7) other matters prescribed by the insurance laws of the state
in which the group is chartered.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.203. AGENT TO VERIFY AUTHORITY. 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 the insurer's domiciliary jurisdiction to write
the liability insurance policy the agent proposes to procure from
the insurer.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.204. APPLICABILITY OF CERTAIN REQUIREMENTS FOR
LIABILITY INSURERS. A risk retention group authorized to engage
in business in this state under Subchapter C or D must
participate on the same basis as a liability insurer holding a
certificate of authority to engage in the business of insurance
in this state in:
(1) the Texas Windstorm Insurance Association;
(2) joint underwriting associations;
(3) mandatory liability and assigned risk pools; and
(4) residual market facilities.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.205. RISK RETENTION GROUP PARTICIPATION IN INSOLVENCY
GUARANTY FUND PROHIBITED. A risk retention group may not be
required or permitted to join or contribute financially to any
insurance insolvency guaranty fund or similar mechanism in this
state. A risk retention group, and any of the group's insureds
or claimants against an insured, may not receive any benefit from
an insurance insolvency guaranty fund or similar mechanism in
this state for a claim arising under an insurance policy issued
by the group.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.206. REQUIRED NOTICE. (a) Any policy issued by a
risk retention group must contain in 10-point type on the front
page and on the declarations page the following notice:
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.
(b) Each person, firm, partnership, or corporation licensed
under Chapter 981, 4051, or 4056 shall inform each prospective
insured on business to be placed with a risk retention group of
the notice required by Subsection (a).
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.207. PROHIBITED ACTIVITIES. A risk retention group
may not:
(1) solicit or sell insurance to any person who is not eligible
for membership in the group;
(2) solicit or sell insurance or operate if the group is in a
hazardous financial condition or is financially impaired; or
(3) engage in business in this state if an insurer is directly
or indirectly a member or owner of the group, unless all of the
group members are insurers.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.208. INJUNCTIVE RELIEF. An order issued by a United
States district court 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.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.209. PENALTIES. (a) A risk retention group that is
authorized to engage in business in this state under Subchapter C
or D and that violates this chapter is subject to all sanctions
and penalties applicable to an insurer that holds a certificate
of authority under Chapters 822 and 861, including revocation of
the authority to engage in business in this state.
(b) A risk retention group not chartered in this state that
violates this chapter is also subject to any fine or penalty
applicable to a foreign admitted insurer generally, including
revocation of the authority to engage in business in this state.
(c) A risk retention group engaging in business in this state
that is not authorized to engage in business under Subchapter C
or D is considered an unauthorized insurer and is subject to
Section 823.457, Subchapters A-P, Chapter 442, and Chapters 101,
441, 804, and 801, other than Section 801.056.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
SUBCHAPTER F. PURCHASING GROUPS
Sec. 2201.251. GENERAL QUALIFICATIONS OF PURCHASING GROUP. (a)
A purchasing group must:
(1) have as one of the group's purposes the purchase of
liability insurance on a group basis;
(2) be composed of members whose businesses or activities are
similar or related with respect to the liability to which those
members are exposed by virtue of any related, similar, or common
product, trade, business, operations, premises, or services; and
(3) purchase group liability insurance only for the group's
members and only to cover the members' similar or related
liability exposure as described in Subdivision (2).
(b) A purchasing group may be domiciled in any state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.252. DETERMINATION OF LOCATION. (a) For purposes of
this subchapter, a purchasing group is considered to be located
in the state in which the highest aggregate premiums are in force
on the date the group insurance policy is written or renewed.
The group's location is ascertained on each placement or renewal
of insurance by the group with an insurer or risk retention
group.
(b) For purposes of this section, a group insurance policy is
considered to be renewed annually.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.253. LIMITATIONS ON AUTHORITY. (a) A purchasing
group located in this state may 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
engage in the business of insurance in this state unless the
purchase is effected through a licensed agent acting under
Chapter 981.
(b) A purchasing group may not offer insurance policy coverage
declared unlawful by the Texas Supreme Court.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.254. APPLICATION OF STATE LAW. (a) A purchasing
group meeting the criteria established under the Liability Risk
Retention Act of 1986 (15 U.S.C. Section 3901 et seq.) is exempt
from any law of this state that:
(1) relates to the creation of groups for the purchase of
insurance;
(2) requires countersignatures;
(3) prohibits group purchasing; or
(4) discriminates against a purchasing group or the group's
members.
(b) An insurer is exempt from any law of this state that
prohibits providing or offering to provide to a purchasing group
or the group's members advantages based on the group's or
members' loss and expense experience that are not afforded to
other persons with respect to rates, policy forms, coverages, or
other matters.
(c) A purchasing group is subject to all other applicable laws
of this state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.255. NOTICE TO COMMISSIONER; FILING FEE. (a) Before
engaging in business in this state, a purchasing group must
provide notice to the commissioner. The notice must:
(1) identify the state in which the group is domiciled;
(2) specify the lines and classifications of liability insurance
the group intends to purchase;
(3) specify the method by which and the persons, if any, through
whom insurance will be offered to group members whose risks are
located in this state;
(4) identify the insurer from which the group intends to
purchase group insurance and the domicile of that insurer;
(5) identify the group's principal place of business and, if
ascertainable at the time of filing, the group's location; and
(6) provide other information the commissioner requires to
verify that the group qualifies as a purchasing group under
Section 2201.251.
(b) The commissioner by rule shall impose a filing fee in an
amount not to exceed $100 for filing notice under this section.
Fees collected under this subsection shall be deposited to the
credit of the Texas Department of Insurance operating account.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.256. REGISTRATION REQUIREMENT; FEES. (a) A
purchasing group shall register with and designate the
commissioner or other appropriate authority as the group's agent
solely for the purpose of receiving service of legal documents or
process unless the group:
(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 the group's insurance
from an insurer authorized to engage in business in any state,
and after October 27, 1986, purchased the group's insurance from
an insurer authorized to engage in business in any state;
(3) was a purchasing group under the requirements of the Product
Liability Risk Retention Act of 1981 (15 U.S.C. Section 3901 et
seq.) 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.
(b) The commissioner by rule may impose a fee in an amount not
to exceed $50 for each document served on the commissioner and
forwarded to the purchasing group. Fees collected under this
subsection shall be deposited to the credit of the Texas
Department of Insurance operating account.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.257. PAYMENT OF PREMIUM TAXES. (a) Premiums paid for
coverage of risks located in this state by a purchasing group or
any group member are subject to taxation at the same rate and
subject to the same interest, fines, and penalties for nonpayment
that apply to premiums paid for similar coverage by other
insureds.
(b) Title 3 is used to compute applicable tax rates for a
purchasing group or any group member that pays premiums for
coverage of risks located in this state to:
(1) an insurer holding a certificate of authority to engage in
the business of insurance in this state; or
(2) a risk retention group authorized to engage in business in
this state.
(c) To the extent that a purchasing group or group member pays
premiums as described by Subsection (b), the insurer or risk
retention group receiving those premiums shall remit the tax to
the department.
(d) Chapter 225 is used to compute applicable tax rates for a
purchasing group or any group member that pays premiums for
coverage of risks located in this state to an eligible surplus
lines insurer. If a purchasing group or member pays those
premiums, the surplus lines agent shall report and remit the tax.
If the agent does not remit the tax, the purchasing group shall
remit the tax.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.258. PURCHASING GROUP PARTICIPATION IN INSOLVENCY
GUARANTY FUND PROHIBITED; EXCEPTION. (a) A claim against a
purchasing group or a group member may not be paid from any
insurance insolvency guaranty fund or similar mechanism in this
state.
(b) A purchasing group, a group member, or any claimant against
the group or group member may not receive any benefit from an
insurance insolvency guaranty fund or similar mechanism in this
state for a claim arising under an insurance policy procured
through the group unless the policy is underwritten by an insurer
authorized to engage in business in this state that, at the time
of the policy's issuance:
(1) has capital and surplus of at least $25 million; or
(2) is a member of a company group that has combined capital and
surplus of at least $25 million.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2201.259. REQUIRED NOTICE. (a) A purchasing group that
obtains liability insurance from an insurer or a risk retention
group shall provide notice to each group member that has a risk
located in this state that the risk is not protected by an
insurance insolvency guaranty fund in this state and that the
insurer or risk retention group may not be subject to all the
insurance laws and rules of this state.
(b) Each person, firm, partnership, or corporation licensed
under Chapter 981, 4051, or 4056 shall inform each prospective
insured on business to be written through a purchasing group of
the notice required by Subsection (a).
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.