CHAPTER 2204. TEXAS INSURANCE EXCHANGE
INSURANCE CODE
TITLE 10. PROPERTY AND CASUALTY INSURANCE
SUBTITLE G. POOLS, GROUPS, PLANS, AND SELF-INSURANCE
CHAPTER 2204. TEXAS INSURANCE EXCHANGE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2204.001. DEFINITIONS. In this chapter:
(1) "Directors" means the board of directors of the exchange.
(2) "Exchange" means the Texas Insurance Exchange.
(3) "Member" means a person, firm, corporation, or underwriting
syndicate authorized by the directors to insure or reinsure risks
through the exchange.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2204.002. EXEMPTION. (a) This chapter, Chapters 251 and
261, and rules adopted by the commissioner or comptroller, as
applicable, apply to the exchange, a member, and insurance and
reinsurance written through the exchange, except to the extent
exempted by rules adopted by the commissioner or comptroller, as
applicable.
(b) An exemption may not be:
(1) unfairly discriminatory; or
(2) detrimental to the solvency of an insurer authorized to
engage in the business of insurance in this state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2204.003. RULES. The commissioner shall adopt rules for
the operation and management of the exchange.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
SUBCHAPTER B. OPERATION AND MANAGEMENT
Sec. 2204.051. PURPOSE OF EXCHANGE; SPECIFIC AUTHORIZATION FOR
CERTAIN INSURANCE. (a) The exchange shall provide a facility
for underwriting:
(1) reinsurance of any kind of insurance;
(2) direct insurance of any kind of risk located entirely
outside the United States;
(3) direct insurance of any kind of risk that:
(A) is located in another state; and
(B) qualifies for placement under the excess and surplus lines
requirements of the jurisdiction in which the risk is located;
and
(4) a risk located in this state that has been submitted to and
certified as rejected by a committee representing at least three
and not more than seven insurers authorized to engage in the
business of insurance in this state and subject to conditions
imposed by rules adopted by the commissioner.
(b) For purposes of Chapter 101, insurance or reinsurance a
member writes to cover a risk described by Subsection (a)(4) is
considered to be specifically authorized by the laws of this
state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2204.052. OPERATION OF EXCHANGE. The exchange shall
operate under:
(1) a constitution and bylaws adopted by the exchange and
approved by the department; and
(2) rules adopted by the commissioner under Section 2204.003.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2204.053. CONSTITUTION AND BYLAWS. (a) In this section:
(1) "Principal office" means an office at which officers and
personnel who are engaged in administration, underwriting, claims
adjustment, policyholders' service, marketing, accounting,
recordkeeping, and support services are located.
(2) "Subscriber" means a person, firm, corporation, or other
organization that, on payment of fees or dues required by the
constitution and bylaws, the directors designate as a subscriber.
(b) The constitution and bylaws of the exchange must provide
for:
(1) the election of nine directors, four of whom represent the
public interest and are not members, subscribers, or agents of
the exchange;
(2) the locations of the principal offices of the exchange and
the members in this state for transacting business described by
Section 2204.051(a);
(3) the submission by the exchange, members, and applicants for
membership in the exchange of financial information required by
rules adopted by the commissioner;
(4) the establishment and maintenance by the exchange of a
security fund in a form and amount specified by rules adopted by
the commissioner;
(5) the voting power of members; and
(6) members' rights and duties, including the manner of
conducting business, financial stability, dues, membership fees,
mandatory arbitration, and any other matter necessary or
appropriate to conduct business authorized by this chapter.
(c) For an agent transacting business on the exchange to
participate in the operation and management of the exchange, the
constitution and bylaws of the exchange must provide for the
voting power and other rights granted to a nonprofit corporation
under the Business Organizations Code.
For expiration of Subsections (c-1) and (c-2), see Subsection
(c-2)
(c-1) Notwithstanding Subsection (c), on or before December 31,
2009, for an agent transacting business on the exchange to
participate in the operation and management of the exchange, the
constitution and bylaws of the exchange must provide for the
voting power and other rights granted to a nonprofit corporation
under the Texas Non-Profit Corporation Act (Article 1396-1.01 et
seq., Vernon's Texas Civil Statutes) or the Business
Organizations Code, as applicable.
(c-2) This subsection and Subsection (c-1) expire January 1,
2010.
(d) In a manner that complies with the requirements adopted
under this section, the exchange may, with the department's
approval, amend the exchange's constitution or bylaws in
accordance with the terms of the constitution and bylaws.
(e) The constitution, a bylaw, or an amendment to the
constitution or a bylaw is invalid without the department's
approval.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2204.054. DIRECTORS. (a) The directors shall operate and
manage the exchange in accordance with rules adopted under
Section 2204.003.
(b) The directors shall be elected by the members and any other
person authorized by the exchange's constitution and bylaws to
vote in an election of directors.
(c) At least two-thirds of the directors must be citizens of the
United States.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
SUBCHAPTER C. FINANCES
Sec. 2204.101. TAXES. (a) Except as provided by this section
and Chapters 251 and 261, the exchange is not subject to state or
local taxes that are measured by income, premiums, or gross
receipts.
(b) A direct premium written, procured, or received by a member
through the exchange on a risk located in this state is:
(1) considered written, procured, or received by the exchange;
and
(2) subject to the premium taxes imposed under Subtitle B, Title
3.
(c) Premium taxes shall be reported, paid, and administered as
provided by Subtitle B, Title 3.
(d) The exchange and the members are considered insurers for
purposes of:
(1) Sections 201.052, 201.053, and 201.054;
(2) Chapters 4, 202, 203, 221, 222, 224, 227, 228, 251, 257, and
1109; and
(3) Section 171.0525, Tax Code.
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.007, eff. April 1, 2009.
Sec. 2204.102. INVESTMENTS IN MEMBER OR AGENT. (a) The
commissioner by rule may establish limitations on investments in
a member.
(b) An investment, directly or indirectly, in a member by an
agent transacting business on the exchange or in an agent
transacting business on the exchange by a member is limited in
the aggregate to:
(1) less than 20 percent of the total investment in the member
or agent; or
(2) a lesser amount provided by a rule adopted by the
commissioner.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.
Sec. 2204.103. COVERAGE BY GUARANTY FUNDS. (a) The performance
of a contractual obligation of the exchange or a member entered
into under this chapter is not covered by an insurance guaranty
fund provided by the laws of this state.
(b) This section does not apply to the security fund established
under Section 2204.053(b)(4).
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 2, eff. April 1, 2007.