CHAPTER 4053. MANAGING GENERAL AGENTS
INSURANCE CODE
TITLE 13. REGULATION OF PROFESSIONALS
SUBTITLE B. AGENTS
CHAPTER 4053. MANAGING GENERAL AGENTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4053.001. DEFINITIONS. In this chapter:
(1) "Affiliate" means a person who is classified as an affiliate
under Section 823.003(a).
(2) "Insurer" means an insurance company, carrier, corporation,
reciprocal or interinsurance exchange, mutual, association,
county mutual insurance company, Lloyd's plan, or other insurance
carrier authorized to engage in the business of insurance in this
state.
(3) "Managing general agent" means a person, firm, or
corporation that has supervisory responsibility for the local
agency and field operations of an insurer in this state or that
is authorized by an insurer to accept or process on the insurer's
behalf insurance policies produced and sold by other agents.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.002. EXCEPTION. An agent licensed under Subchapter E,
Chapter 981, Subchapters B-E or I, Chapter 4051, or Chapter 4056
is not a managing general agent unless the agent accepts 50
percent or more of the agent's total annual business or does
$500,000 or more of total annual business as measured by premium
volume, whichever amount is less, from insurance policies
produced and sold by other agents.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
548, Sec. 2.25, eff. September 1, 2007.
Sec. 4053.003. INAPPLICABILITY OF CHAPTER. This chapter does
not apply to:
(1) the transaction of the business of life, health, and
accident insurance, including variable life insurance and
variable annuity contracts;
(2) a full-time salaried employee of an insurer acting for and
in connection with the insurance business of the insurer; or
(3) an adjuster or inspector of risks for an insurer.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.004. REGULATION OF MANAGING GENERAL AGENTS. This
title applies to the licensing and regulation of a person acting
as a managing general agent.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.005. RULES. The commissioner may adopt reasonable
rules for the administration of this chapter.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
SUBCHAPTER B. LICENSE REQUIREMENTS
Sec. 4053.051. LICENSE REQUIRED; EXEMPTIONS. (a) Except as
provided by Subsection (b), a person, firm, or corporation may
not act as a managing general agent unless the person, firm, or
corporation holds a license issued under this chapter.
(b) A business corporation is not required to hold a license
issued under this chapter to act as a managing general agent if:
(1) the corporation is authorized to engage in business in this
state;
(2) all of the corporation's outstanding stock is solely owned
by an insurer authorized to engage in business in this state and
the corporation's business affairs are completely controlled by
that insurer;
(3) the principal purpose for which the corporation exists is to
facilitate the accumulation of commissions from the insurer and
its subsidiaries and affiliates for the account of and payment to
an agent who could otherwise lawfully receive the commissions
directly from the insurer and its subsidiaries and affiliates;
and
(4) the corporation does not engage in any other act of a
managing general agent as provided by this chapter.
(c) Notwithstanding Subsection (b), the managing general agent
shall execute on the insurer's behalf a contract entered into
with an agent.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.052. ISSUANCE OF TEMPORARY OR EMERGENCY LICENSE. The
commissioner may, without requiring an examination, issue a
temporary or emergency license under this chapter to an applicant
for a period not to exceed six months:
(1) on the death or disability of a managing general agent or
for another good cause satisfactory to the commissioner; and
(2) if the applicant meets the other requirements of this
chapter.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.053. SINGLE LICENSE REQUIRED. A license issued under
this chapter entitles the license holder to represent or act for
one or more insurers as a managing general agent. The license
holder is not required to hold a separate license for each
insurer the license holder represents.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.054. NOTICE AND APPROVAL OF APPOINTMENT. (a) Each
appointment to act as a managing general agent shall be reported
to the commissioner on a form prescribed by the commissioner.
(b) The form must include:
(1) the details required by rules adopted under this chapter;
(2) the insurer's name and identifying number;
(3) the managing general agent's name and address;
(4) a statement by an officer of the insurer that the officer or
the officer's agent has personal knowledge that the managing
general agent has had experience or instruction that qualifies
the agent to act as a managing general agent;
(5) a statement of whether the managing general agent may
exercise claim settlement authority for the insurer and, if so:
(A) whether that authority exceeds $25,000 on any one claim; and
(B) whether that authority includes third-party liability other
than property damage; and
(6) a statement of whether funds exceeding $100,000 are
customarily held by the managing general agent to pay losses and
loss adjustment expenses for the insurer.
(c) For each additional appointment for which a managing general
agent applies, the agent shall pay a nonrefundable fee in an
amount not to exceed $16 as determined by the department.
(d) If approval of an additional appointment is not received
from the commissioner before the eighth day after the date the
commissioner receives the completed application and fee, the
managing general agent and insurer may assume, in the absence of
notice of disapproval from the commissioner, that the
commissioner approves the application and the managing general
agent may act for the insurer.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.055. LAPSE OF LICENSE. If a license holder is not
appointed or under appointment to represent an insurer at the
time the license is subject to renewal, the license lapses and
the commissioner shall deny the renewal application.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
SUBCHAPTER C. POWERS AND DUTIES OF MANAGING GENERAL AGENTS
Sec. 4053.101. GENERAL POWERS AND DUTIES. A managing general
agent acting for an insurer may:
(1) receive and pass on daily reports and monthly accounts;
(2) receive and be responsible for agency balances;
(3) handle the adjustment of losses; or
(4) appoint or direct general property and casualty agents and
personal lines property and casualty agents in this state.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
548, Sec. 2.26, eff. September 1, 2007.
Sec. 4053.102. CONTRACTS. (a) An insurer may not accept
business from a managing general agent and the agent may not
place business with the insurer without a written contract that
addresses:
(1) the responsibilities of each party;
(2) cancellation or termination;
(3) reports, records, and auditing; and
(4) if applicable:
(A) premium volume limits;
(B) appointment or cancellation of agents;
(C) claims settlement;
(D) underwriting; and
(E) reinsurance.
(b) The commissioner may adopt rules establishing requirements
for a contract with a managing general agent.
(c) A contract with a managing general agent and a report or
record submitted under that contract are subject to review by the
department under Section 38.001.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.103. ACCOUNT REPORT. (a) At least once each calendar
quarter, a managing general agent shall submit an account report
to each insurer with whom the agent has a contract.
(b) The account report must include, as applicable, a statement
of:
(1) written, earned, and unearned premiums;
(2) losses and loss expenses paid and outstanding;
(3) losses incurred but not reported; and
(4) management fees.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.104. SEPARATE RECORDS. (a) For each insurer with
which a managing general agent has a contract, the agent shall
maintain separate records of the business handled by the agent
for the insurer.
(b) The managing general agent shall make a record required
under Subsection (a) available for inspection by:
(1) each insurer; and
(2) the department's examiners.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.105. ESCROW ACCOUNT. (a) A managing general agent
shall maintain an escrow account in a bank that:
(1) is a member of the Federal Reserve System; and
(2) has its accounts insured by the Federal Deposit Insurance
Corporation.
(b) On receipt, the managing general agent shall deposit in the
escrow account all money collected for each insurer with which
the agent has a contract.
(c) Except as provided by the contract required by Section
4053.102, a managing general agent may not use, take as an
offset, or convert money that is or should have been deposited in
the escrow account.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.106. FIDUCIARY CAPACITY. A managing general agent
holds money on behalf of an insured or insurer in a fiduciary
capacity and shall properly account for that money as required by
law, department rules, and a contract with an insurer. The
department's examiners may audit money held in a fiduciary
capacity.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.107. FINANCIAL EXAMINATION. (a) As the commissioner
considers necessary, a managing general agent shall submit to an
examination of the agent's financial condition and the agent's
compliance with the laws of this state affecting the conduct of
the agent's business.
(b) The examination may be conducted by:
(1) the commissioner;
(2) one or more commissioned examiners; or
(3) a certified public accountant or other person or firm
qualified to perform those examinations.
(c) The managing general agent shall pay the examination
expenses in an amount the commissioner certifies as just and
reasonable.
(d) A person with whom another state contracts to perform any
examination initiated by the other state of a managing general
agent licensed under this chapter shall register with and provide
the following information to the department's chief examiner:
(1) the person's name;
(2) if the person is not an individual, the identity of each
examiner or other person who will perform any part of the
examination;
(3) the name of the state that contracted with the person;
(4) the identity of the managing general agent to be examined;
and
(5) a description of each issue that the person has been
contracted to examine.
(e) It is a violation of this code for a person to accept
compensation from multiple states for the same examination, if
doing so results in duplicative costs to the managing general
agent being examined. It is not a violation of this code for:
(1) an examiner to conduct an examination of a managing general
agent for the benefit of multiple states in a coordinated
examination; and
(2) the examiner to accept compensation from the states
participating in the coordinated examination to reduce the
examination costs to the managing general agent being examined.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
1030, Sec. 3, eff. June 19, 2009.
Sec. 4053.108. REQUIRED NOTICES TO DEPARTMENT. (a) On forms
prescribed by the department, a managing general agent shall
notify the department not later than the 30th day after the date
any of the following occurs:
(1) balances due to an insurer for more than 90 days exceed:
(A) $1 million; or
(B) 10 percent of the insurer's policyholder surplus, as
reported in the annual statement filed with the department;
(2) balances due for more than 60 days from a property and
casualty agent or managing general agent appointed by or
reporting to the managing general agent exceed $500,000;
(3) authority to settle claims for an insurer is withdrawn;
(4) money held for an insurer for losses is greater than an
amount that is $100,000 more than the amount necessary to pay the
losses and loss adjustment expenses expected to be paid on the
insurer's behalf within the next 60-day period; or
(5) the contract required under Section 4053.102 is canceled or
terminated.
(b) Notwithstanding the time limitation imposed by Subsection
(a), the requirement to file under Subsections (a)(1), (2), and
(4) may be met with a single annual report if:
(1) the managing general agent routinely operates above the
limits established by those subsections; and
(2) the department verifies that fact in accordance with rules
adopted by the commissioner.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.109. REINSURANCE. (a) A managing general agent may
not knowingly cede, arrange, facilitate, or bind an insurer to
reinsurance.
(b) Notwithstanding Subsection (a), a managing general agent may
bind a facultative reinsurance contract in accordance with an
obligatory facultative agreement if the contract with the insurer
contains reinsurance underwriting guidelines including, for both
assumed and ceded reinsurance:
(1) a list of reinsurers with whom the automatic agreements are
in effect;
(2) the coverages and amounts or percentages that may be
reinsured; and
(3) commission schedules.
(c) A managing general agent may not commit an insurer to
participate in insurance or reinsurance syndicates.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.110. REDEMPTION OF CORPORATE SHARES. A corporation
acting as a managing general agent may redeem the shares of a
shareholder or a deceased shareholder:
(1) on terms agreed on by the board of directors and the
shareholder or the shareholder's personal representative; or
(2) at a price and on terms provided in the articles of
incorporation, the bylaws, or an existing contract entered into
between the shareholders.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
SUBCHAPTER D. ENFORCEMENT
Sec. 4053.151. DISCIPLINARY ACTION. A person, firm, or
corporation that violates this chapter or a rule or order adopted
under this title, including this chapter, is subject to:
(1) Subchapters B and C, Chapter 4005; and
(2) Chapter 82.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.
Sec. 4053.152. GUARANTY FUND REIMBURSEMENT. (a) If a court
finds by a final nonappealable judgment that a violation of this
chapter by a managing general agent contributes materially to the
insolvency of an insurer under which the agent held an
appointment, the agent shall reimburse the appropriate guaranty
fund for money paid to cover losses of the insolvent insurer in
an amount equal to all payments made from that guaranty fund in
excess of:
(1) gross earned premiums and investment income earned on those
premiums; and
(2) loss reserves for that business.
(b) The reimbursement made under this section shall be used for
losses, loss adjustments, and administrative expenses on business
placed by the managing general agent.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,
2005.