CHAPTER 403. DIVIDENDS
INSURANCE CODE
TITLE 4. REGULATION OF SOLVENCY
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 403. DIVIDENDS
SUBCHAPTER A. PAYMENT OF DIVIDENDS
Sec. 403.001. LIMITATION ON DIVIDENDS. An insurer organized
under the laws of this state, including a life, health, fire,
marine, or inland marine insurance company, may not pay a
dividend except from surplus profits arising from the insurer's
business.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 403.002. DIVIDENDS TO POLICYHOLDERS IN COMMERCIAL LINES.
(a) An insurer may pay to a commercial policyholder or group of
commercial policyholders a dividend that covers more than one
class or line of commercial business only:
(1) after the insurer establishes on an aggregate basis adequate
loss reserves for the classes or lines of commercial insurance
included within the dividend; and
(2) if the insurer has sufficient surplus from which to pay the
dividend.
(b) Not later than the 15th day before an insurer pays a
dividend described by Subsection (a), the insurer shall file with
the department notice of the insurer's intent to pay the
dividend.
(c) The classes or lines of commercial business for which
dividends are authorized under this section include any
commercial class or line of commercial business regulated by
Title 10 or Chapter 5.
(d) An insurer's limitation of a dividend on one or more classes
or lines of commercial business to a group of commercial
policyholders is not unfair discrimination if the group:
(1) has clearly identifiable underwriting characteristics; or
(2) is an association or group of business entities engaged in
similar undertakings.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
SUBCHAPTER B. ESTIMATE OF PROFITS
Sec. 403.051. ESTIMATE OF PROFITS. An insurer organized under
the laws of this state may not include the following in the
estimate of the insurer's profits for the purpose of paying
dividends under Section 403.001:
(1) the reserve on all unexpired risks computed in the manner
provided by this code;
(2) the amount of all unpaid losses, whether adjusted or
unadjusted; and
(3) all other debts due and payable, or to become due and
payable, by the insurer.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 403.052. ESTIMATE OF PROFITS OF CERTAIN INSURERS. A life,
health, fire, marine, or inland marine insurance company
organized under the laws of this state may not include the
following in the estimate of the company's profits for the
purpose of paying dividends under Section 403.001:
(1) the reserve on all unexpired risks computed in the manner
provided by this code;
(2) the amount of all unpaid losses, whether adjusted or
unadjusted;
(3) each amount due the company on bonds, mortgages, stocks, or
book-accounts on which no part of the principal or interest has
been paid during the year preceding the estimate of profits and
for which:
(A) a suit for foreclosure or collection has not been commenced;
or
(B) a judgment obtained in a suit for foreclosure or collection
has remained unsatisfied for a period of more than two years and
no interest has been paid on the judgment; and
(4) if no interest has been paid on a judgment described by
Subdivision (3)(B), any interest that is due or accrued on the
judgment and remains unpaid.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 403.053. ACQUIRED EARNED SURPLUS. (a) This section
applies only to:
(1) a stock domestic insurance company authorized to engage in
the business of life, accident, or health insurance in this
state;
(2) a stock foreign or alien life, health, or accident insurance
company;
(3) a stock insurance company authorized to engage in the
business of property, casualty, or fire insurance; and
(4) a domestic Lloyd's plan, reciprocal or interinsurance
exchange, or title insurance company.
(b) In determining the amount of "surplus profits arising from
the insurer's business" or "earned surplus" for the purpose of
paying dividends to shareholders, the insurer may include the
acquired earned surplus of an insurance subsidiary acquired by
the insurer to the extent that:
(1) the inclusion is permitted by an order of the commissioner
made in accordance with commissioner rules; and
(2) the earned surplus of the acquired subsidiary on the date of
acquisition that exists on the date of the commissioner's order
is not otherwise reflected in the insurer's earned surplus.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
SUBCHAPTER C. PENALTIES
Sec. 403.101. PENALTIES. (a) The department may revoke the
charter of an insurer organized under the laws of this state that
pays a dividend in violation of Sections 403.001 and 403.051. If
the department revokes an insurer's charter under this
subsection, the department shall immediately revoke the insurer's
certificate of authority.
(b) Not later than the 10th day before the date on which the
department intends to revoke an insurer's certificate of
authority under this section, the department shall give the
insurer written notice of the department's intent. The notice
must include the specific reasons for the revocation.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.
Sec. 403.102. PENALTIES FOR CERTAIN INSURERS. The department
may revoke the charter of a life, health, fire, marine, or inland
marine insurance company organized under the laws of this state
that pays a dividend in violation of Sections 403.001 and
403.052. If the department revokes a company's charter under
this section, the department shall immediately revoke the
company's certificate of authority.
Added by Acts 2005, 79th Leg., Ch.
727, Sec. 1, eff. April 1, 2007.