Texas Register, Volume 38, Number 47, Pages 8313-8478, November 22, 2013 Page: 8,382
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(C) in aggregate of all letters of credit issued to any one
captive insurer by one financial institution, exceed 10% of the financial
institution's total equity capital, as shown in its most recent report of
condition as filed with the appropriate federal or state financial institu-
tion regulatory agency.
(5) The term of the letter of credit must be for at least one
year and must contain an evergreen clause that prevents the expiration
of the letter of credit without written notice from the issuer. The ever-
green clause will provide for a period of no less than 30 days' written
notice to the commissioner prior to expiry date or nonrenewal.
(6) In the event a letter of credit is not renewed or replaced,
the commissioner must not be precluded from withdrawing the balance
of the letter of credit and placing such sums in trust to secure continu-
ing obligations until a renewal letter of credit or a substitution in lieu
thereof has been received.
(7) In the event that a letter of credit is not renewed, re-
placed, or is suspended, the captive insurance company and the issuing
bank must give immediate notice to the commissioner of such nonre-
newal, replacement, or inactive status.
(b) A letter of credit used for reinsurance purposes must meet
the requirements of 7.610 of this title (relating to Letter of Credit Qual-
ified under Insurance Code, Article 3.10, (d)(3), or Article 5.75-1,
(d)(3)).
6. 409. Policyholder Dividends.
A captive insurance company must notify the commissioner of a poli-
cyholder dividend within 30 days of issuing the dividend.
6. 410. Application of Holding Company Requirements.
A captive insurance company must comply with Insurance Code Chap-
ter 823 and regulations implementing that chapter if the captive in-
surance company is affiliated with another insurance company that is
part of a holding company and subject to Insurance Code Chapter 823.
The regulations include 7.201 - 7.205 and 7.209 - 7.214 of this
title (relating to Forms Filings, Definitions, Registration of Insurers;
Transactions Subject to Prior Notice; Acquisition or Divestiture State-
ments--Filing Requirements, Form A, Form B, Form C, Form D, Form
E, and Form F).
The agency certifies that legal counsel has reviewed the pro-
posal and found it to be within the state agency's legal authority
to adopt.
Filed with the Office of the Secretary of State on November 8,
2013.
TRD-201305158
Sara Waitt
General Counsel
Texas Department of Insurance
Earliest possible date of adoption: December 22, 2013
For further information, please call: (512) 463-6327
SUBCHAPTER F. WORKERS' COMPENSA-
TION
28 TAC 6.501
STATUTORY AUTHORITY. The department proposes the new
section under the Government Code 411.083, 411.087, and
411.106, and Insurance Code 401.002, 401.006, 401.051,
803.005, 803.008, 964.002, 964.051 - 964.060, 964.062,964.063, 964.065 - 964.067, 964.069, 964.071, and 36.001.
Government Code 411.106 authorizes the department to re-
ceive criminal history information from DPS regarding insurance
company principals and officers and applicants for any entity
holding or seeking a license, certificate, permit, registration, or
other authorization issued by the department to engage in a
regulated activity under the Insurance Code. Government Code
411.083 and 411.087 authorize the department to obtain,
through DPS, criminal history information from the FBI on those
individuals described in Government Code 411.106.
Section 401.002 provides that the purpose of Insurance Code
Chapter 401 Subchapter A is to require an annual audit by an
independent certified public accountant of the financial state-
ments, reporting on the financial condition and the results of
operations, of each insurer or health maintenance organization.
Section 401.006 provides for a procedure to obtain an exemp-
tion from the requirement to file an audited financial report if the
insurer has less than $1 million in direct premiums written in this
state during a calendar year. Section 401.051 establishes the
department's duty to examine insurers under Insurances Code
Chapter 401, Subchapter B.
Section 803.005 requires the books, records, accounts, or of-
fices of a domestic company to be under the company's direct
supervision, management, and control. Section 803.008 autho-
rizes the commissioner to adopt rules to authorize a domestic
company to maintain its books and records with a nonaffiliated
entity other than an agency.
Section 964.002 provides that a captive insurance company is
subject to Insurance Code Chapters 401 and 823. Further, the
section provides that Insurance Code Chapter 823 applies to a
captive insurance company only if the company is affiliated with
another insurer that is subject to Chapter 823.
Section 964.051 provides that a captive insurance company may
only insure the operational risks of the company's affiliates and
risks of a controlled, unaffiliated business. The section further
provides that a captive insurance company is authorized to issue
a contractual reimbursement policy to an affiliated certified self-
insurer authorized under Chapter 407, Labor Code, or an affiliate
that is insured by a workers' compensation insurance policy with
a negotiated deductible endorsement.
Insurance Code 964.052 provides the types of reinsurance that
the captive insurance company may write, including workers'
compensation insurance and employer liability policies issued
to affiliates, if the insurer that directly issues workers' compen-
sation insurance and employer's liability policies or its licensed,
if required by law, administrator or adjuster services all claims
incurred during the policy period, and complies with all require-
ments for an insurer under the Insurance Code, including Chap-
ter 462, and under Title 5, Labor Code. The section further al-
lows a credit for reserves on risks or portions of risks ceded to
reinsurers under Chapter 492, Subchapter C, and Chapter 493,
Subchapter C.
Section 964.053 provides that a captive insurance company may
be formed and operated in any form of business organization au-
thorized under the Business Organizations Code except as a risk
retention group or general partnership. The section further pro-
vides that the captive insurance company must have a board of
directors or governing body. Section 964.054 requires the cap-
tive insurance company to use generally accepted accounting
principles as an accounting basis, except that a captive insur-
ance company that is required to hold a certificate of authority38 TexReg 8382 November 22, 2013 Texas Register
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Texas. Secretary of State. Texas Register, Volume 38, Number 47, Pages 8313-8478, November 22, 2013, periodical, November 22, 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth379965/m1/70/?rotate=270: accessed July 18, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.