CHAPTER 406. SPECIAL DEPOSITS REQUIRED UNDER POTENTIALLY HAZARDOUS CONDITIONS
INSURANCE CODE
TITLE 4. REGULATION OF SOLVENCY
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 406. SPECIAL DEPOSITS REQUIRED UNDER POTENTIALLY
HAZARDOUS CONDITIONS
Sec. 406.001. DEFINITION. In this chapter, "insurer" includes:
(1) a capital stock insurance company;
(2) a reciprocal or interinsurance exchange;
(3) a Lloyd's plan;
(4) a fraternal benefit society;
(5) a mutual company, including a mutual assessment company;
(6) a statewide mutual assessment company;
(7) a local mutual aid association;
(8) a burial association;
(9) a county mutual insurance company;
(10) a farm mutual insurance company;
(11) a fidelity, guaranty, or surety company;
(12) a title insurance company;
(13) a stipulated premium company;
(14) a group hospital service corporation;
(15) a health maintenance organization;
(16) a risk retention group; and
(17) any other organization or person engaged in the business of
insurance.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.
Sec. 406.002. APPLICABILITY OF CHAPTER. This chapter applies
to a person or organization engaged in the business of insurance
without regard to whether the person or organization is listed in
Section 406.001, unless another statute specifically cites this
chapter and exempts the person or organization from this chapter.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.
Sec. 406.003. REQUIRED DEPOSIT: STANDARDS AND CRITERIA. The
commissioner, in the commissioner's sole discretion, may require
an insurer to make a deposit under this chapter if the
commissioner determines that one of the following conditions, if
not rectified, may potentially be hazardous to the insurer's
policyholders, enrollees, or creditors, or to the public:
(1) the insurer's financial or operating condition, reviewed in
conjunction with the kinds and nature of risks insured;
(2) the insurer's method of operation;
(3) the insurer's relationship with affiliates;
(4) the nature and amount of the insurer's investments;
(5) the insurer's contracts that may lead to a contingent
liability; or
(6) the insurer's agreements with respect to guaranty and
surety.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.
Sec. 406.004. REQUIRED DEPOSIT: FORM OF SECURITY. A deposit
required under Section 406.003 must be made with the comptroller
and approved by the commissioner. The deposit must be made in:
(1) cash;
(2) securities authorized under this code to be a legal
investment for the insurer that:
(A) are readily marketable over a national exchange with a
maturity date of not more than one year, are listed by the
Securities Valuation Office of the National Association of
Insurance Commissioners, and qualify as admitted assets; or
(B) are clean, irrevocable, and unconditional letters of credit
issued or confirmed by a financial institution organized and
licensed under the laws of the United States or a state of the
United States; or
(3) another form of security acceptable to the commissioner.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.
Sec. 406.005. DURATION OF DEPOSIT. Subject to Section 406.006,
the comptroller shall hold a deposit required under this chapter
until the commissioner issues a written order finding that the
condition for which the deposit was required no longer exists.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.
Sec. 406.006. SUBSTITUTION OR WITHDRAWAL OF DEPOSIT. (a) An
insurer may file a written application with the commissioner
requesting:
(1) withdrawal of all or part of the deposit held by the
comptroller under this chapter; or
(2) substitution of all or part of the deposited securities held
by the comptroller under this chapter.
(b) The application must state the basis for the request to
withdraw the deposit or to substitute the deposited security.
(c) An insurer's application for the substitution of a deposited
security must provide specific information regarding the security
to be deposited as a substitute for the security held by the
comptroller.
(d) The commissioner shall issue an order approving or denying
an application under this section not later than the 30th day
after the date the department receives the application. If the
commissioner does not approve or deny the application within that
period, the application is denied.
(e) The commissioner may, in the commissioner's sole discretion,
approve an application to withdraw a deposit or substitute a
deposited security if the commissioner determines that the
withdrawal or substitution will not be hazardous to the insurer's
policyholders, enrollees, or creditors, or to the public.
(f) The comptroller may not release a deposit made under this
chapter, or any part of the deposit, and may not accept a
substitute for a deposited security unless the commissioner
issues an order approving the withdrawal or substitution.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.
Sec. 406.007. APPEAL. An insurer may appeal an action of the
commissioner under this chapter in accordance with Subchapter D,
Chapter 36.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.
Sec. 406.008. CUMULATIVE OF OTHER DEPOSITS. A deposit required
to be made under this chapter is in addition to any other deposit
that the insurer is required or authorized to make under this
code.
Added by Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 1C.001, eff. April 1, 2009.