|(a) Filing Requirements. Filing and other regulatory requirements
for acquisitions or changes of control and certain other matters as specified
in the Act, §5(a), are governed by the Act, §5(a). For purposes
of this subsection, a domestic insurer as defined in the Act, §5(a)(2),
shall include any person controlling a domestic insurer, including a commercially
domiciled insurer, unless such person is either directly or through its affiliates
primarily engaged in business other than the business of insurance. A change
or substitution of an attorney-in-fact of a Lloyds' or reciprocal or interinsurance
exchange is subject to the Act, §5. An acquisition of control of a domestic
insurer is subject to the Act, §5, regardless of the domestic insurer's
exemption from regulation under the Act, §2(r). A failure to file complete
and accurate information in all material respects is grounds for a denial
by the commissioner under the Act, §5(c).
(b) Form and content of statement. The statement required by
subsection (a) of this section (elsewhere referred to as acquisition statement)
shall be made in accordance with §7.209 of this title (relating to Form
A), the acquisition statement. The acquiring party shall provide additional
financial information in the form or substance as required by the commissioner
which is material to the finding required by the Act, §5(c)(1)(iii).
Any financial information required under the Act, §5(b)(3), may be waived
by the commissioner if such information is not deemed material. No statement
required by subsection (a) of this section shall be deemed filed with the
commissioner until on the date all such material required and sufficient to
constitute a full statement has been provided.
(c) Partnerships and corporate filings. If the person required
to file the acquisition statement is a partnership, limited partnership, syndicate,
or other group, the commissioner may require that the information called for
by §7.209 of this title (relating to Form A) be given with respect to
each partner of such partnership or limited partnership, each member of such
syndicate or group, and each person who controls such partner or member. If
any such partner, member, or person is a corporation or if the person required
to file the statement referred to in subsection (a) of this section is a corporation,
the commissioner may require that the information called for by §7.209
be given with respect to such corporation and by each executive officer and
director of such corporation, and each person who is directly or indirectly
the beneficial owner of more than 10% of the outstanding voting securities
of such corporation.
(d) Amendment. If any material change occurs in the facts set
forth in the acquisition statement filed with the commissioner, an amendment
setting forth such change, together with copies of all documents and other
material relevant to such change, shall be filed with the commissioner and
sent to the domestic insurer within two business days after the person learns
of such change.
(e) Acquisition of a domestic insurer as defined in subsection
(a) of this section.
(1) If the person being acquired is a domestic insurer solely
because of the provisions of subsection (a) of this section, the name of the
domestic insurer on the cover page should be indicated as follows: "ABC Insurance
Company, a subsidiary of XYZ Holding Company."
(2) Where a domestic insurer as defined in subsection (a) of
this section is being acquired, references to "the insurer" contained in §7.209
of this title (relating to Form A) shall refer to both the domestic subsidiary
insurer and the person being acquired.
(f) Approval or denial by commissioner; hearings. All mergers,
acquisitions or changes of control, and other matters as specified in the
Act, §5(a), and mergers contemplated by the Insurance Code Article 21.28-A, §1,
are subject to the Act, §5(c). The acquiring party shall have the burden
of providing sufficient competent evidence for the commissioner to make the
determinations required under the Act, §5(c)(1).
(g) Notices; payment of expenses.
(1) Notices, payments of expenses, and other matters as specified
in the Act, §5(d), shall comport with that subsection.
(2) All provisions of the Insurance Code, Article 21.49-1,
and of this subchapter relating to the timely mailing of a copy of the acquisition
statement, and relating to the timely mailing of a copy of the notice of hearing
thereon before the commissioner to an insurer, may be waived by the written
unanimous consent of the insurer and the person or persons filing such acquisition
statement. Such written waiver shall acknowledge receipt of a copy of the
(h) Exemptions. The provisions of this section shall not apply
to transactions and other matters exempted under the Act, §5(e). A restructuring
within an insurance holding company system which results in a direct or indirect
change in control of a domestic insurer is subject to the Act, §5(e)(3)(i).
An acquisition of a voting security of a domestic insurer specified in the
Act, §5(e)(4) and (6), shall be disclosed by amendment to the registration
statement as provided in §7.203(f) of this title (relating to Registration
of Insurers). The written application for exemption in the acquisition of
a voting security specified in the Act, §5(e)(5), shall be made in accordance
with §7.213 of this title (relating to Form E), the exemption statement.
The approval of an application under §7.213 shall be deemed an amendment
under §7.203 to an insurer's registration statement without further filing.
An acquisition of a voting security of a domestic insurer by a security holder
controlling, directly and indirectly, 50% of the then issued and outstanding
voting securities of such domestic insurer, shall be subject to the Act, §5(e)(5).
An acquisition of a voting security of an insurer domiciled in this state
which is not subject to the Act, §5(a)(1), by virtue of the Act, §5(a)(2),
shall be subject to the Act, §5(e)(3)(ii).
(i) Retention of control.
(1) For certain matters relating to certain violations of the
Act, see the Act, §5(f)(1).
(2) For certain matters relating to retention of control, see
the Act, §5(f) (2).
(j) Duty of insurer. Authorized insurers are under a duty to
notify the commissioner of control of, or of actions to acquire control of,
an insurer as required by the Act, §5(g).
(k) Preliminary filings. Any acquisition statement may, at
the discretion of the person or persons filing the same, be preliminarily
filed with the commissioner for the purpose of obtaining a preliminary review
by the commissioner. Any such filing shall be clearly marked or designated
as a preliminary filing. Such preliminary filing shall not invoke the requirements
of this subchapter or the Insurance Code, Article 21.49-1, requiring that
notice thereof be given to such affected insurer involved. Such preliminary
filing shall have no legal effect and shall not constitute compliance with
the Insurance Code, Article 21.49-1, and this subchapter. The commissioner
shall not be bound by the preliminary review nor deemed to have in any manner
approved such filing.
(l) Violations. The following shall be violations of this section:
(1) the failure to file any statement, amendment, or other
material required to be filed pursuant to this section; or
(2) the effectuation of, or any attempt to effectuate, an acquisition
or change of control of, or merger with, a domestic insurer unless the commissioner
has given his approval thereto.
(m) Additional violations. Each director or officer of an insurance
company subject to these sections, or of an insurance holding company system
subject to these sections, who knowingly and willfully violates, participates
in, or assents to or who knowingly and willfully permits any of the officers,
agents, or employees of the insurer or holding company system to engage in
transactions or make investments that have not been properly reported or submitted
under these sections or that knowingly and willfully violate these sections,
is subject to administrative penalty under the Insurance Code §§84.001-84.051.
(n) Additional sanctions. An entity that holds a certificate
of authority granted by the Texas Department of Insurance or the commissioner
and that violates the Insurance Code is subject to the sanctions authorized
under the Insurance Code §§82.001-82.056.
(o) Producer-controlled property and casualty insurer.
(1) For purposes of this section, a controlling producer, as
defined in §7.202(a)(8) of this title (relating to Definitions), is subject
to the filing requirements of the Act, §5, in addition to the following
(A) No acquisition of an insurer by a controlling producer
in another state may be approved by the commissioner pursuant to the Act, §5(c)(1),
unless the acquiring party demonstrates, to the satisfaction of the commissioner,
compliance with the requirements contained in subparagraph (B) of this paragraph.
(B) Approval of the acquisition of an insurer by a controlling
producer in another state may not be approved unless the following requirements
(i) Required contract provisions. A controlled insurer shall
not accept business from a controlling producer and a controlling producer
shall not place business with a controlled insurer unless there is a written
contract between the controlling producer and the controlled insurer specifying
the responsibilities of each party, which contract has been approved by the
board of directors of the controlled insurer and which contains the following:
(I) a provision that the controlled insurer may terminate the
contract for cause, upon written notice to the controlling producer. The controlled
insurer shall suspend the authority of the controlling producer to write business
during the pendency of any dispute regarding the cause for the termination;
(II) a provision that the controlling producer shall render
accounts to the controlled insurer detailing all material transactions, including
information necessary to support all commissions, charges, and other fees
received by, or owing to, the controlling producer;
(III) a provision that the controlling producer shall remit
all funds due under the terms of the contract to the controlled insurer on
a least a monthly basis. The due date shall be fixed so that the premiums
or installments thereof collected shall be remitted no later than 90 days
after the effective date of any policy placed with the controlled insurer
under this contract;
(IV) a provision that all funds collected for the controlled
insurer's account shall be held by the controlling producer in a fiduciary
capacity, in one or more appropriately identified bank accounts in banks that
are members of the Federal Reserve System;
(V) a provision that the controlling producer shall maintain
separately identifiable records of business written for the controlled insurer;
(VI) a provision that the contract shall not be assigned in
whole or in part by the controlling producer;
(VII) a provision that the controlled insurer shall provide
the controlling producer with its underwriting standards, rules, procedures,
manuals setting forth the rates to be charged, and the conditions for the
acceptance or rejection of risks. The controlling producer shall adhere to
the standards, rules, procedures, rates, and conditions. The standards, rules,
procedures, rates, and conditions shall be the same as those applicable to
comparable business placed with the controlled insurer by a producer other
than the controlling producer;
(VIII) a provision establishing the rate and terms of the controlling
producer's commissions, charges, or other fees and the purposes for those
charges or fees. The rates of the commissions, charges and other fees shall
be no greater than those applicable to comparable business placed with the
controlled insurer by producers other than controlling producers. For purposes
of this subclause and subclause (VII) of this clause, examples of "comparable
business" include the same lines of insurance, same kinds of insurance, same
kinds of risks, similar policy limits, and similar quality of business;
(IX) a provision that, if the contract provides that the controlling
producer, on insurance business placed with the insurer, is to be compensated
contingent upon the insurer's profits on that business, then such compensation
shall not be determined and paid until at least five years after the premiums
on liability insurance are earned and at least one year after the premiums
are earned on any other insurance. In no event shall the commissions be paid
until the adequacy of the controlled insurer's reserves on remaining claims
has been independently verified;
(X) a provision limiting the controlling producer's writings
in relation to the controlled insurer's surplus and total writings. The controlled
insurer may establish a different limit for each line or subline of business.
The controlled insurer shall notify the controlling producer when the applicable
limit is approached and shall not accept business from the controlling producer
if the limit is reached. The controlling producer shall not place business
with the controlled insurer if it has been notified by the controlled insurer
that the limit has been reached; and