2005 Texas Insurance Code CHAPTER 492. REINSURANCE FOR LIFE, HEALTH, AND ACCIDENT INSURANCE COMPANIES AND RELATED ENTITIES

INSURANCE CODE

CHAPTER 492. REINSURANCE FOR LIFE, HEALTH, AND ACCIDENT INSURANCE 
COMPANIES AND RELATED ENTITIES

SUBCHAPTER A. GENERAL PROVISIONS


	§ 492.001. DEFINITIONS.  In this chapter:                                   
		(1)  "Assuming insurer" means an insurer that, under a 
reinsurance contract, incurs an obligation to a ceding insurer, the 
performance of which is contingent on the ceding insurer's 
incurring liability or loss under the ceding insurer's insurance 
contract with a third person.
		(2)  "Qualified United States financial institution" 
means an institution that:
			(A)  is organized or, in the case of a United 
States branch or agency office of a foreign banking organization, 
licensed, under the laws of the United States or any state of the 
United States;  and
			(B)  is regulated, supervised, and examined by a 
federal or state authority that has regulatory authority over banks 
and trust companies. 

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.002. APPLICABILITY OF CHAPTER.  (a) Except as 
provided by Subsection (b), this chapter applies to:
		(1)  all life, health, and accident insurance companies 
regulated by the department, including:
			(A)  a stock or mutual life, health, or accident 
insurance company;        
			(B)  a fraternal benefit society;  and                                       
			(C)  a nonprofit hospital, medical, or dental 
service corporation, including a group hospital service 
corporation operating under Chapter 842;  and
		(2)  a health maintenance organization operating under 
Chapter 843.         
	(b)  This chapter does not apply to a ceding insurer 
domiciled in another state that regulates credit for reinsurance 
under statutes, rules, or regulations substantially similar in 
substance or effect to this chapter if the ceding insurer on request 
provides the commissioner with:
		(1)  evidence of the similarity in the form of those 
statutes, rules, or regulations;  and
		(2)  an interpretation of the statutes, rules, or 
regulations and the standards used by the state of domicile.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.003. RULES.  The commissioner may adopt rules 
implementing this chapter.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           

SUBCHAPTER B. REINSURANCE


	§ 492.051. REINSURANCE AUTHORIZED.  (a) An insurer 
authorized to engage in the business of insurance in this state may 
reinsure in any solvent assuming insurer any risk or part of a risk 
that both insurers are authorized to assume.
	(b)  A life insurance company authorized to engage in 
business in this state may provide reinsurance on the same basis as 
an insurer described by Section 493.051(b).
	(c)  The commissioner may adopt necessary and reasonable 
rules under Subsection (b) to protect the public interest.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.052. LIMITATION ON REINSURANCE OF ENTIRE 
OUTSTANDING BUSINESS.  (a) An insurer may not reinsure the 
insurer's entire outstanding business in an assuming insurer unless 
the assuming insurer is authorized to engage in the business of 
insurance in this state.
	(b)  Before the date of reinsurance:                                           
		(1)  the reinsurance contract must be submitted to the 
commissioner;  and   
		(2)  the commissioner must approve the contract as 
fully protecting the interests of all policyholders.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.053. LIMITATION ON REINSURANCE OF RISKS OF INSURER 
WITH LESS THAN MINIMUM CAPITAL AND SURPLUS.  An insurer operating 
under Section 841.204 may not reinsure any risk or part of a risk in 
an insurer that is not authorized to engage in the business of 
insurance in this state.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.054. FILING OF REINSURANCE SCHEDULES.  The 
commissioner shall require each insurer to file reinsurance 
schedules:
		(1)  when the insurer makes the insurer's annual 
report;  and               
		(2)  at other times as the commissioner directs.                              

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.055. ACCOUNTING FOR REINSURANCE CONTRACTS.  (a) An 
insurer shall account for reinsurance contracts and shall record 
the contracts in the insurer's financial statements in a manner 
that accurately reflects the effect of the contracts on the 
insurer's financial condition.
	(b)  A reinsurance contract may contain a provision allowing 
the offset of mutual debts and credits between the ceding insurer 
and the assuming insurer, whether arising out of one or more 
reinsurance contracts.
	(c)  The commissioner may adopt reasonable rules relating 
to:                
		(1)  the accounting and financial statement 
requirements of this section and the treatment of reinsurance 
contracts between insurers, including minimum risk transfer 
standards, asset debits or credits, reinsurance debits or credits, 
and reserve debits or credits relating to the transfer of all or any 
part of an insurer's risks or liabilities by reinsurance contracts;  
and
		(2)  any contingencies arising from reinsurance 
contracts.                  
	(d)  A rule adopted under Subsection (c) after September 1, 
1995, applies to:
		(1)  a reinsurance contract entered into on or after 
the effective date of the rule;  and
		(2)  a reinsurance contract that is amended on or after 
the effective date of the rule. 

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.056. LIMITATION ON RIGHTS AGAINST REINSURER.  A 
person does not have a right against a reinsurer that is not 
specifically stated in:
		(1)  the reinsurance contract;  or                                            
		(2)  a specific agreement between the reinsurer and the 
person.             

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           

SUBCHAPTER C. CREDIT FOR REINSURANCE


	§ 492.101. EXCLUSIVE PROCEDURE FOR TAKING CREDIT FOR 
REINSURANCE.  A ceding insurer may take a credit for reinsurance, 
as an asset or as a deduction from liability, only as provided by 
this chapter.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.102. CREDIT FOR REINSURANCE GENERALLY.  (a) A 
ceding insurer may be allowed credit for reinsurance ceded, as an 
asset or as a deduction from liability, only if the reinsurance is 
ceded to an assuming insurer that:
		(1)  is authorized to engage in the business of 
insurance or reinsurance in this state;
		(2)  is accredited as a reinsurer in this state, as 
provided by Section 492.103;  or
		(3)  subject to Subchapter D, maintains, in a qualified 
United States financial institution that has been granted the 
authority to operate with fiduciary powers, a trust fund to pay 
valid claims of:
			(A)  the assuming insurer's United States 
policyholders and ceding insurers;  and
			(B)  the policyholders' and ceding insurers' 
assigns and successors in interest.
	(b)  Notwithstanding Subsection (a), a ceding insurer may be 
allowed credit for reinsurance ceded to an assuming insurer that 
does not meet the requirements of that subsection, but only with 
respect to the insurance of risks located in a jurisdiction in which 
the reinsurance is required by the jurisdiction's law, including 
regulations, to be ceded to an assuming insurer that does not meet 
the requirements of that subsection.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.103. ACCREDITED REINSURER.  For purposes of Section 
492.102(a)(2), an insurer is accredited as a reinsurer in this 
state if the insurer:
		(1)  submits to this state's jurisdiction;                                    
		(2)  submits to this state's authority to examine the 
insurer's books and records;
		(3)  is domiciled and authorized to engage in the 
business of insurance or reinsurance in at least one state or, if 
the insurer is a United States branch of an alien assuming insurer, 
is entered through and authorized to engage in the business of 
insurance or reinsurance in at least one state;
		(4)  annually files with the department a copy of the 
annual statement the insurer files with the insurance department of 
the insurer's state of domicile;  and
		(5)  maintains a surplus as regards policyholders in an 
amount of at least $20 million.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.104. CREDIT FOR FUNDS SECURING REINSURANCE 
OBLIGATIONS.  (a) Subject to Subsection (b), any asset or deduction 
from liability for reinsurance ceded to an assuming insurer that 
does not meet the requirements of Section 492.102 shall be allowed 
in an amount that does not exceed the liabilities carried by the 
ceding insurer and in the amount of funds held by or on behalf of the 
ceding insurer under a reinsurance contract with the assuming 
insurer, including funds held in trust for the ceding insurer, as 
security for the payment of obligations under the contract.
	(b)  The funds held as security:                                               
		(1)  must be held in the United States subject to 
withdrawal solely by and under the exclusive control of the ceding 
insurer or, in the case of a trust, held in a qualified United 
States financial institution that has been granted the authority to 
operate with fiduciary powers;  and
		(2)  may be in the form of:                                                   
			(A)  cash;                                                                   
			(B)  securities that:                                                        
				(i)  are readily marketable over a national 
exchange;                     
				(ii)  have a maturity date of not later than 
one year;                    
				(iii)  are listed by the Securities 
Valuation Office of the National Association of Insurance 
Commissioners;  and
				(iv)  qualify as admitted assets;                                           
			(C)  subject to Section 492.105, a clean, 
irrevocable, unconditional letter of credit, issued or confirmed by 
a qualified United States financial institution that has been 
determined by the commissioner or the Securities Valuation Office 
of the National Association of Insurance Commissioners to meet the 
standards of financial condition and standing that are considered 
necessary and appropriate to regulate the quality of financial 
institutions whose letters of credit will be acceptable to the 
commissioner;  or
			(D)  another form of security acceptable to the 
commissioner.              

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.105. ACCEPTABILITY OF CERTAIN LETTERS OF CREDIT.  A 
letter of credit issued or confirmed by an institution that meets 
the standards prescribed by Section 492.104(b)(2)(C) as of the date 
the letter is issued or confirmed, but later fails to meet those 
standards, continues to be acceptable as security under Section 
492.104 until the earliest of:
		(1)  the letter's expiration;                                                 
		(2)  the letter's extension, renewal, modification, or 
amendment after the date the institution fails to meet those 
standards;  or
		(3)  the expiration of the three-month period after the 
date the institution fails to meet those standards.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.106. CREDIT FOR REINSURANCE:  DIRECT PAYMENT ON 
LIABILITY REQUIRED.  A ceding insurer may not be given credit for 
reinsurance ceded, as an asset or as a deduction from liability, in 
an accounting or financial statement unless the reinsurance is 
payable by the assuming insurer:
		(1)  on the liability of the ceding insurer under the 
contracts reinsured, without diminution because of the ceding 
insurer's insolvency;  and
		(2)  directly to the ceding insurer or to the ceding 
insurer's domiciliary liquidator or receiver.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.107. REQUEST FOR INFORMATION FROM ASSUMING 
INSURER.  (a) The commissioner may request that an assuming insurer 
not meeting the requirements of Section 492.102 file:
		(1)  financial statements certified and audited by an 
independent certified public accountant;
		(2)  a certified copy of the certificate or letter of 
authority from the domiciliary jurisdiction;  and
		(3)  information on the principals and management of 
the assuming insurer.  
	(b)  If an assuming insurer does not comply with a request 
under this section, the commissioner may issue a directive 
prohibiting all authorized insurers from taking credit for business 
ceded to the assuming insurer after the effective date of the 
directive.
	(c)  An unauthorized insurer that is included in the most 
recent quarterly listing published by the International Insurers 
Department of the National Association of Insurance Commissioners 
is considered to have complied with a request under this section.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           

SUBCHAPTER D. REQUIREMENTS FOR TRUST CREDIT ALLOWANCE


	§ 492.151. APPLICABILITY OF SUBCHAPTER.  This subchapter 
applies to a trust that is used to qualify for a reinsurance credit 
under Section 492.102(a)(3) and to the assuming insurer that 
maintains the trust fund.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.152. COMPOSITION OF TRUST.  (a) If the assuming 
insurer is a single insurer, the trust must:
		(1)  consist of a trusteed account representing the 
assuming insurer's liabilities attributable to business written in 
the United States;  and
		(2)  include a trusteed surplus of at least $20 
million.                    
	(b)  If the assuming insurer is a group of insurers that 
includes an unincorporated individual insurer:
		(1)  the trust must:                                                          
			(A)  consist of a trusteed account representing 
the group's liabilities attributable to business written in the 
United States;  and
			(B)  include a trusteed surplus of at least $100 
million;  and             
		(2)  the group shall make available to the department 
an annual certification by the group's domiciliary regulator and 
its independent public accountants of each underwriter's solvency.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.153. FORM OF TRUST.  The trust must be established 
in a form approved by the commissioner. 

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.154. TERMS OF TRUST.  (a) The trust instrument must 
provide that contested claims are valid and enforceable on the 
final order of any court in the United States.
	(b)  The trust must vest legal title to the trust's assets in 
the trustees of the trust for:
		(1)  the trust's United States policyholders and ceding 
insurers;  and      
		(2)  the policyholders' and ceding insurers' assigns 
and successors in interest.
	(c)  The trust must remain in effect as long as the assuming 
insurer has outstanding obligations under a reinsurance contract 
subject to the trust.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.155. REPORTS AND CERTIFICATION.  (a) Not later than 
February 28 of each year, the trustees of the trust shall:
		(1)  report to the department in writing, showing the 
balance of the trust and listing the trust's investments at the end 
of the preceding year;  and
		(2)  certify the date of termination of the trust, if 
termination is planned, or certify that the trust will not expire 
before December 31 of the year of the report.
	(b)  To enable the commissioner to determine the sufficiency 
of the trust fund under Section 492.102(a)(3), the assuming insurer 
shall report to the department not later than March 1 of each year 
information substantially the same as the information required to 
be reported by an authorized insurer on the National Association of 
Insurance Commissioners' Annual Statement form.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.156. CERTAIN TRUSTEED ASSUMING INSURERS:  
REQUIREMENTS FOR REINSURANCE CONTRACT.  (a) A ceding insurer may 
not be allowed credit under Section 492.102(a)(3) for reinsurance 
ceded to an assuming insurer that is not authorized or accredited to 
engage in the business of insurance or reinsurance in this state 
unless the assuming insurer agrees in the reinsurance contract:
		(1)  that, if the assuming insurer fails to perform the 
assuming insurer's obligations under the reinsurance contract, the 
assuming insurer, at the request of the ceding insurer, will:
			(A)  submit to the jurisdiction of a court in any 
state of the United States;
			(B)  comply with all requirements necessary to 
give the court jurisdiction;  and
			(C)  abide by the final decision of that court or, 
if the court's decision is appealed, of the appellate court;  and
		(2)  to designate the commissioner or an attorney as an 
agent for service of process in any action, suit, or proceeding 
instituted by or on behalf of the ceding insurer.
	(b)  This section is not intended to conflict with or 
override a provision in a reinsurance contract that requires the 
parties to arbitrate the parties' disputes.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           


	§ 492.157. EXAMINATION OF TRUST AND ASSUMING 
INSURER.  The trust and the assuming insurer are subject to 
examination as determined by the commissioner.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.