CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN MUTUAL LIFE INSURANCE COMPANIES
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES
CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN MUTUAL LIFE
INSURANCE COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 883.001. DEFINITIONS. In this chapter:
(1) "Domestic mutual insurance company" means a mutual insurance
company organized under this chapter.
(2) "Foreign mutual insurance company" means a mutual insurance
company organized under the laws of a jurisdiction other than
this state and authorized to engage in the business of insurance
on a mutual plan in any state, district, or territory.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.002. APPLICABILITY OF CERTAIN GENERAL LAWS. (a)
Except as otherwise provided by law, domestic and foreign mutual
insurance companies organized or operating under this chapter are
subject to the laws applicable to:
(1) a stock insurance company engaging in the same kind of
insurance;
(2) investments;
(3) valued policies;
(4) policy forms and rates;
(5) reciprocal or retaliatory laws;
(6) insolvency and liquidation; and
(7) publication and defamatory statements.
(b) This chapter does not exempt a domestic mutual insurance
company from being subject to other laws of this state governing
the incorporation, organization, regulation, and operation of a
company or organization writing insurance in this state.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.003. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT.
Except to the extent of any conflict with this code, the Texas
Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
Texas Civil Statutes) applies to a domestic mutual insurance
company. The commissioner has each power and duty of, and shall
perform each act to be performed by, the secretary of state under
that Act with respect to mutual insurance companies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER B. FORMATION, STRUCTURE, AND MANAGEMENT OF COMPANY
Sec. 883.051. FORMATION OF COMPANY. (a) Twenty or more
persons, a majority of whom are residents of this state, may
incorporate in accordance with this chapter to engage in the
business of mutual insurance as provided by this chapter.
(b) To form a mutual insurance company, each incorporator must
sign and acknowledge the articles of incorporation of the
company.
(c) The incorporators of a proposed mutual insurance company are
subject to Sections 822.001, 822.051, 822.057(a)(1)-(3), (b), and
(c), 822.058(a), 822.059, 822.060, and 822.201, except that:
(1) the minimum number of persons required to adopt and sign the
proposed company's articles of incorporation under Section
822.051 is equal to the number of the proposed company's
incorporators as provided by Subsection (a); and
(2) the unencumbered surplus of the mutual insurance company is
capital structure for purposes of Section 822.201.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.052. ARTICLES OF INCORPORATION. Articles of
incorporation of a proposed mutual insurance company must
specify:
(1) the name of the company;
(2) the purpose for which the company is being formed;
(3) the location of the company's principal or home office;
(4) the name and place of residence of each incorporator; and
(5) the name and address of each member of the initial board of
directors.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.053. COMPANY'S NAME. (a) The name of a mutual
insurance company must contain the word "mutual."
(b) A mutual insurance company's name may not be so similar to
the name of any other mutual insurance company organized or
engaging in business in the United States, that it is confusing
or misleading.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.054. LOCATION OF PRINCIPAL OR HOME OFFICE. The
principal or home office of a mutual insurance company must be
located in this state.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.055. BEGINNING OF CORPORATE EXISTENCE. The corporate
existence of a mutual insurance company begins on the date on
which the commissioner issues a certificate of authority to the
company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.056. BOARD OF DIRECTORS. (a) The board of directors
named in a mutual insurance company's articles of incorporation
shall manage the company until the initial meeting of the members
of the company.
(b) After a mutual insurance company is issued a certificate of
authority, the company's board of directors may:
(1) adopt bylaws;
(2) accept applications for insurance; and
(3) transact the business of the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.057. MEMBERSHIP OF PUBLIC OR PRIVATE ENTITIES IN
COMPANY AUTHORIZED. (a) Any public or private corporation,
board, association, or estate may make an application for, enter
into an agreement for, or hold a policy in a mutual insurance
company. An officer, shareholder, trustee, or legal
representative may act on behalf of the entity for that
participation.
(b) An officer, shareholder, trustee, or legal representative of
a public or private entity described by Subsection (a) may not be
held personally liable on a contract of insurance executed by the
person in the person's capacity as a representative of the entity
under Subsection (a).
(c) The right of a corporation organized under the laws of this
state to participate as a member of a mutual insurance company
is:
(1) incidental to the purpose for which the corporation was
organized; and
(2) in addition to the corporate rights or powers expressly
conferred in the corporation's articles of incorporation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.058. MEMBERSHIP VOTES. Each member of a mutual
insurance company is entitled to one vote on each matter
submitted to a vote unless a different number of votes is
authorized by the company's bylaws based on:
(1) the insurance in force;
(2) the number of policies held by the member; or
(3) the amount of the premium paid by the member.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE
Sec. 883.101. MUTUAL INSURANCE BUSINESS. Mutual insurance of
any kind may not be written in this state except as authorized by
this chapter or any other law.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.102. CHARTER AND CERTIFICATE OF AUTHORITY REQUIRED. A
domestic mutual insurance company may not engage in the business
of insurance until:
(1) the company obtains a charter as provided by Chapter 822;
and
(2) the commissioner issues to the company a certificate of
authority for that purpose.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.103. AUTHORIZATION OF FOREIGN MUTUAL INSURANCE COMPANY
TO ENGAGE IN BUSINESS. (a) The department shall authorize a
foreign mutual insurance company to write the kinds of insurance
authorized by the company's charter or articles of incorporation
in this state if the company:
(1) is solvent as determined under this chapter;
(2) files with the department:
(A) a copy of the company's bylaws certified by the company's
secretary; and
(B) a certified copy of the company's charter or articles of
incorporation;
(3) appoints the commissioner as the company's agent for service
of process as provided by Chapter 804;
(4) files a financial statement under oath in a form as required
by the department; and
(5) complies with legal requirements applicable to the filing of
documents and the furnishing of information by a stock insurance
company that files an application with the department for
authority to transact the same kind of insurance as the company.
(b) A foreign mutual insurance company's name may not be so
similar to a name of a mutual insurance company or foreign mutual
insurance company organized or authorized to engage in business
in this state that it is confusing or misleading.
(c) A foreign mutual insurance company authorized to engage in
the business of insurance under this section has, to the same
extent, all of the powers granted to and privileges of a mutual
insurance company organized and operating under this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER D. POWERS, DUTIES, AND OPERATION OF COMPANY
Sec. 883.151. AUTHORITY TO WRITE CERTAIN INSURANCE. A domestic
mutual insurance company may write any kind of insurance that may
be lawfully written in this state, other than life insurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.152. PRIOR AUTHORITY NOT AFFECTED. This chapter does
not affect any authority that existed before September 6, 1955,
that allowed mutual insurance companies to write non-assessable
policies in this state, subject to any prerequisite imposed by
law on that authority.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.153. POLICY RATES. A mutual insurance company
operating under this chapter shall charge the insurance rates
prescribed by the commissioner and is subject to the same rate
requirements as a domestic insurance company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.154. MAXIMUM PREMIUMS. (a) The maximum premium of an
insurance policy issued by a domestic mutual insurance company
must be stated in the policy.
(b) A policy's maximum premium may consist only of:
(1) a cash premium; or
(2) a cash premium and a contingent premium in an amount equal
to one additional cash premium.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.155. ISSUANCE OF POLICY FOR CASH PREMIUM ONLY. (a) A
domestic mutual insurance company may not issue an insurance
policy for a cash premium only unless:
(1) the company possesses surplus above all liabilities in an
amount at least equal to the minimum capital and surplus required
of a stock insurance company engaging in the same kinds of
insurance;
(2) the company files with the department:
(A) an application for the issuance of this type of policy; and
(B) a certified copy of the resolution of the company's board of
directors authorizing the issuance; and
(3) the commissioner approves the documents filed under
Subdivision (2).
(b) A mutual insurance company that issues a policy for a cash
premium only may waive all contingent premiums in any outstanding
policies.
(c) A foreign mutual insurance company authorized to engage in
the business of insurance in this state may issue an insurance
policy for a cash premium only and may waive contingent premiums
on any of its outstanding policies in the same manner and subject
to the same requirements as a mutual insurance company under this
section that is engaged in the same kinds of insurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.156. ASSESSMENT ON POLICYHOLDERS. (a) A policyholder
is not liable for an assessment imposed on a policy issued by a
mutual insurance company with approval of the commissioner under
Section 883.155(a).
(b) An assessment may not be imposed on the holder of a policy
described by Section 883.155(a) by:
(1) the officers or directors of a mutual insurance company;
(2) the department;
(3) a receiver; or
(4) a liquidator.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.157. REINSURANCE OF POLICY. (a) Subject to Subsection
(c), a mutual insurance company authorized to engage in the
business of insurance in this state may enter into an agreement
with an insurer to cede to or accept from the insurer all or part
of an insurance risk.
(b) A reinsurance agreement under this section does not create
or confer contingent liability, participation, or membership
unless otherwise provided by the agreement.
(c) A mutual insurance company may not enter into an agreement
with a reinsurer that has been disapproved for that purpose by
written order of the commissioner filed in the department's
offices.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.158. REQUIREMENTS FOR COMPANIES WRITING BONDS. A
mutual insurance company qualifying to write bonds under this
chapter is subject to the same legal requirements as any other
insurance company writing bonds under this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.159. NECESSARY OR INCIDENTAL POWERS. A domestic mutual
insurance company has such powers as are necessary or incidental
to the transaction of its business.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.160. RIGHTS AND PRIVILEGES OF CERTAIN COMPANIES
RETAINED. A mutual insurance company engaged in business under
Chapters 5, 9, 12, 13, 14, and 15, Title 78, Revised Statutes,
before their repeal by Section 18, Chapter 40, Acts of the 41st
Legislature, 1st Called Session, 1929, as amended by Section 1,
Chapter 60, Acts of the 41st Legislature, 2nd Called Session,
1929, retains the rights and privileges under the repealed law to
the extent provided by those sections.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.161. DIVIDENDS. On advance approval of the
commissioner, a mutual insurance company may pay dividends to its
members.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.162. LOANS TO COMPANY. (a) A person, including a
director, officer, or member of a mutual insurance company, may
loan to the company money necessary:
(1) for the company to engage in the company's business; or
(2) to enable the company to comply with a legal requirement.
(b) The mutual insurance company may repay a loan and agreed
interest, at an annual rate not to exceed 20 percent, only from
the surplus remaining after the company provides for the
company's reserves, other liabilities, and required surplus.
(c) A loan under this section or interest on a loan is not
otherwise a liability or claim against the company or any of its
assets.
(d) A mutual insurance company may not pay a commission or
promotion expense in connection with a loan made to the company.
(e) A mutual insurance company shall report in its annual
statement the amount of each loan made to the company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.163. IMMEDIATE NOTIFICATION WHEN ASSETS ARE
INSUFFICIENT; EXAMINATION. The president and the secretary of a
mutual insurance company operating under the law providing for
the incorporation of mutual fire, lightning, hail, and storm
insurance companies shall immediately notify the commissioner any
time the admitted assets of the company are less than the largest
single risk for which the company is liable. The commissioner may
make an examination into the affairs of the company as the
commissioner considers best.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER E. REGULATION OF COMPANY
Sec. 883.201. SURPLUS REQUIREMENTS. A domestic mutual insurance
company must possess a surplus over and above all liabilities in
an amount equal to the minimum capital stock and surplus required
of a stock insurance company engaged in the same kinds of
insurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.202. REQUIRED DEPOSIT FOR COMPANIES WRITING BONDS. (a)
A domestic mutual insurance company that writes fidelity and
surety bond coverage shall maintain on deposit with the
comptroller cash or securities of the kind described by a
provision of Subchapter B, Chapter 424, other than Section
424.052, 424.072, or 424.073, in an amount equal to the amount of
cash or securities required of a domestic stock insurance
company.
(b) The commissioner must approve for deposit the cash or
securities required by this section.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.075, eff. April 1, 2009.
Sec. 883.203. RESERVES. (a) A domestic mutual insurance
company shall maintain unearned premiums and other reserves
separately for each kind of insurance. The reserves must be
maintained on the same basis as those reserves are required to be
maintained by a domestic stock insurance company engaging in the
same kinds of insurance.
(b) A mutual insurance company operating under this chapter is
subject to the same reserve requirements as a domestic insurance
company under law.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.204. ANNUAL REPORT. (a) Domestic and foreign mutual
insurance companies organized or operating under this chapter
shall submit to the commissioner an annual report in the form
required by the commissioner.
(b) To the extent practicable, the commissioner shall adopt a
form that is similar to a form that is generally used for
submission of the annual report throughout the United States.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.205. EXAMINATION OF FOREIGN MUTUAL INSURANCE COMPANY.
To the extent practicable, an examination of a foreign mutual
insurance company must be conducted in cooperation with the
insurance departments of other states in which the foreign
company is authorized to transact business.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.206. FEES. Each domestic or foreign mutual insurance
company organized or operating under this chapter is subject to a
fee imposed by law on a stock insurance company engaging in the
same kinds of insurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.207. PREMIUM TAX. Each domestic or foreign mutual
insurance company organized or operating under this chapter is
subject to taxes imposed by law on that company. The company
shall pay the tax on the gross premiums received for direct
insurance written on property or risks located in this state. The
tax payable must be computed on the portion of the gross premiums
remaining after deducting:
(1) premiums charged on policies not taken;
(2) premiums returned on canceled policies; and
(3) any refund or other return made to the policyholders other
than for the incurrence of a loss.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER O. CRIMINAL PENALTIES
Sec. 883.701. VIOLATION OF CHAPTER. (a) Except as otherwise
provided by this subchapter, a person or corporation commits an
offense if the person or corporation violates this chapter.
(b) An offense under this section is a misdemeanor punishable by
a fine of not less than $50 or more than $500.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.702. FAILURE TO REPORT CONDITION. (a) A person
commits an offense if the person is a president or secretary
described by Section 883.163 and the person fails to make the
report required by that section.
(b) An offense under this section is a misdemeanor punishable by
a fine of not less than $100 or more than $500.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 883.703. FALSE STATEMENT OR MISAPPROPRIATION. (a) A
person commits an offense if the person intentionally submits a
false statement or misappropriates the funds of a mutual
insurance company organized under the laws providing for the
incorporation of mutual fire, lightning, hail, and storm
insurance companies.
(b) An offense under this section is a felony punishable by
confinement in the Texas Department of Criminal Justice for not
less than 5 years or more than 10 years.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
87, Sec. 25.122, eff. September 1, 2009.
Sec. 883.704. UNAUTHORIZED MUTUAL FIRE INSURANCE. (a) A person
commits an offense if the person engages in the business of
mutual fire insurance in this state in violation of the laws
regulating mutual fire insurance.
(b) An offense under this section is a misdemeanor punishable by
a fine of not less than $50 or more than $500.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.