CHAPTER 402. DISCLOSURE OF MATERIAL TRANSACTIONS
INSURANCE CODE
TITLE 4. REGULATION OF SOLVENCY
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 402. DISCLOSURE OF MATERIAL TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 402.001. APPLICABILITY OF CHAPTER. (a) Except as provided
by Subsection (b), this chapter applies to:
(1) each of the following domestic or commercially domiciled
insurers:
(A) a capital stock insurance company;
(B) a mutual insurance company;
(C) a title insurance company;
(D) a fraternal benefit society;
(E) a Lloyd's plan;
(F) a reciprocal or interinsurance exchange;
(G) a group hospital service corporation or a nonprofit
hospital, medical, or dental service corporation;
(H) a risk retention group; and
(I) a nonprofit legal services corporation; and
(2) a domestic or commercially domiciled health maintenance
organization.
(b) This chapter does not apply to a domestic insurer that
engages in the business of insurance only in this state or to a
domestic health maintenance organization that engages in the
business of a health maintenance organization only in this state
until the insurer or health maintenance organization is
authorized to engage in the business of insurance or the business
of a health maintenance organization, as applicable, in another
state.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.002. GENERAL REPORTING REQUIREMENTS. (a) An insurer
or health maintenance organization shall file with the department
a report, including any necessary exhibit or other attachment,
that discloses:
(1) the material acquisition or disposition of assets; or
(2) the material nonrenewal, cancellation, or revision of a
ceded reinsurance agreement.
(b) The insurer or health maintenance organization shall file
the report required under Subsection (a) not later than the 15th
day after the last day of the calendar month in which any
transaction for which a report is required occurs.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.003. EXCEPTIONS TO REPORTING REQUIREMENTS. An insurer
or health maintenance organization is not required to file a
report under Section 402.002 if:
(1) the acquisition or disposition of assets or the nonrenewal,
cancellation, or revision of a ceded reinsurance agreement is not
material; or
(2) the insurer's or health maintenance organization's material
acquisition or disposition of assets or material nonrenewal,
cancellation, or revision of a ceded reinsurance agreement has
been submitted to the commissioner for review, approval, or
information under another provision of this code or another law,
regulation, or requirement.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.004. REPORT MADE ON NONCONSOLIDATED BASIS. (a) An
insurer or health maintenance organization shall report each
material acquisition or disposition and each material nonrenewal,
cancellation, or revision of a ceded reinsurance agreement on a
nonconsolidated basis unless the insurer or health maintenance
organization:
(1) is part of a consolidated group of insurers or health
maintenance organizations that uses a pooling arrangement or a
100 percent reinsurance agreement that affects the solvency and
integrity of the insurer's or health maintenance organization's
reserves; and
(2) has ceded substantially all of the insurer's or health
maintenance organization's direct and assumed business to the
pooling arrangement.
(b) For purposes of Subsection (a), an insurer or health
maintenance organization is considered to have ceded
substantially all of the insurer's or health maintenance
organization's direct and assumed business to a pooling
arrangement if:
(1) the insurer or health maintenance organization has, during a
calendar year, less than $1 million total direct and assumed
written premiums that are not subject to a pooling arrangement;
and
(2) the net income of the business that is not subject to the
pooling arrangement represents less than five percent of the
insurer's or health maintenance organization's capital and
surplus.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.005. CONFIDENTIALITY OF REPORT. (a) A report obtained
by or disclosed to the commissioner under this chapter is
confidential and is not subject to a subpoena, other than a grand
jury subpoena.
(b) The report may not be disclosed by the commissioner, the
National Association of Insurance Commissioners, or any other
person without the prior written consent of the affected insurer
or health maintenance organization unless the commissioner, after
providing notice and an opportunity for a hearing to the affected
insurer or health maintenance organization, determines that the
interest of shareholders, holders of policies or evidences of
coverage, or the public will be served by publishing the report.
If the commissioner makes that determination, the department may:
(1) disclose the report to the public; and
(2) publish any part of the report in a manner the commissioner
considers appropriate.
(c) The report may be disclosed to the insurance department of
another state or another authorized governmental agency without
complying with Subsection (b).
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
SUBCHAPTER B. ACQUISITION AND DISPOSITION OF ASSETS
Sec. 402.051. ACQUISITIONS AND DISPOSITIONS CONSIDERED MATERIAL.
For purposes of this chapter, an acquisition, or the aggregate
of a series of related acquisitions during a 30-day period, or a
disposition, or the aggregate of a series of related dispositions
during a 30-day period, is material if it:
(1) is not recurring;
(2) is not in the ordinary course of business; and
(3) involves more than five percent of the reporting insurer's
or health maintenance organization's total admitted assets as
reported in the insurer's or health maintenance organization's
most recent statutory statement filed with the department.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.052. ACQUISITIONS AND DISPOSITIONS SUBJECT TO CHAPTER.
(a) An asset acquisition subject to this chapter includes a
purchase, lease, exchange, merger, consolidation, succession, or
other acquisition of assets, except the construction or
development of real property by or for the reporting insurer or
health maintenance organization or the acquisition of materials
for that purpose.
(b) An asset disposition subject to this chapter includes a
sale, lease, exchange, merger, consolidation, mortgage,
hypothecation, assignment, whether for the benefit of a creditor
or otherwise, abandonment, destruction, or other disposition of
assets.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.053. CONTENT OF REPORT CONCERNING MATERIAL ACQUISITIONS
AND DISPOSITIONS. In a report of a material acquisition or
disposition of assets under Section 402.002, an insurer or health
maintenance organization shall disclose:
(1) the date of the transaction;
(2) the manner of acquisition or disposition;
(3) a description of the assets involved;
(4) the nature and amount of the consideration given or
received;
(5) the purpose of the transaction;
(6) the manner by which the amount of consideration was
determined;
(7) the gain or loss recognized or realized as a result of the
transaction; and
(8) the name of each person from whom the assets were acquired
or to whom they were disposed.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
SUBCHAPTER C. NONRENEWAL, CANCELLATION, AND REVISION
OF CEDED REINSURANCE AGREEMENTS
Sec. 402.101. NONRENEWALS, CANCELLATIONS, AND REVISIONS
CONSIDERED MATERIAL. For purposes of this chapter, a nonrenewal,
cancellation, or revision of a ceded reinsurance agreement is
material if, on an annual basis, as reported in an insurer's or
health maintenance organization's most recent statutory statement
filed with the department, the nonrenewal, cancellation, or
revision affects:
(1) for property and casualty business, including accident and
health business when written as property and casualty business,
more than 50 percent of the insurer's or health maintenance
organization's ceded written premium; or
(2) for life, annuity, and accident and health business, more
than 50 percent of the total reserve credit taken for business
ceded by the insurer or health maintenance organization.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.102. CONDITIONS UNDER WHICH REPORT CONCERNING
NONRENEWAL, CANCELLATION, OR REVISION REQUIRED. Except as
provided by Section 402.103, an insurer or health maintenance
organization shall file a report of a material nonrenewal,
cancellation, or revision of ceded reinsurance under Section
402.002, without regard to which party initiated the nonrenewal,
cancellation, or revision, if:
(1) the entire cession has been canceled, nonrenewed, or
revised, and ceded indemnity and loss adjustment expense reserves
after the nonrenewal, cancellation, or revision represent less
than 50 percent of the comparable reserves that would have been
ceded had the nonrenewal, cancellation, or revision not occurred;
(2) an authorized or accredited reinsurer has been replaced by
an unauthorized reinsurer on an existing cession, and the result
of the revision affects more than 10 percent of the cession; or
(3) a collateral requirement previously established for an
unauthorized reinsurer has been reduced, in that the requirement
to collateralize incurred but unreported claim reserves has been
waived for at least one unauthorized reinsurer newly
participating in an existing cession, and the result of the
revision affects more than 10 percent of the cession.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.103. CONDITIONS UNDER WHICH REPORT CONCERNING
NONRENEWAL, CANCELLATION, OR REVISION NOT REQUIRED. An insurer
or health maintenance organization is not required to file a
report under Section 402.002 if the insurer's or health
maintenance organization's ceded written premium of the total
reserve credit taken for business ceded is, on an annual basis,
less than an amount equal to:
(1) 10 percent of direct and assumed written premiums; or
(2) 10 percent of the statutory reserve requirement before a
cession.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 402.104. CONTENT OF REPORT CONCERNING MATERIAL NONRENEWALS,
CANCELLATIONS, AND REVISIONS. In a report of a material
nonrenewal, cancellation, or revision of a ceded reinsurance
agreement under Section 402.002, an insurer or health maintenance
organization shall disclose:
(1) the effective date of the nonrenewal, cancellation, or
revision;
(2) a description of the transaction that identifies the
initiator of the transaction;
(3) the purpose of the transaction; and
(4) if applicable, the identity of each replacement reinsurer.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.