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  83R1522 PMO-F
 
  By: Eiland H.B. No. 837
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to credit to certain ceding insurers for reinsurance ceded
  to certain certified assuming insurers.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 492.102(a), Insurance Code, is amended
  to read as follows:
         (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; or
               (4)  is determined by the commissioner to meet the
  requirements of Sections 492.1033-492.1038, as applicable.
         SECTION 2.  Subchapter C, Chapter 492, Insurance Code, is
  amended by adding Sections 492.1033, 492.1034, 492.1035, 492.1036,
  492.1037, 492.1038, and 492.1039 to read as follows:
         Sec. 492.1033.  CREDIT ALLOWED FOR CERTAIN CERTIFIED
  REINSURERS.  (a)  Credit shall be allowed when the reinsurance is
  ceded to an assuming insurer that:
               (1)  is certified by the commissioner as a reinsurer in
  this state; and
               (2)  secures its obligations in accordance with the
  requirements of this section and Sections 492.1034-492.1038.
         (b)  To be eligible for certification, the assuming insurer
  must:
               (1)  be domiciled and licensed to transact insurance or
  reinsurance in a jurisdiction listed as qualified on the list
  published by the commissioner under Section 492.1035;
               (2)  maintain minimum capital and surplus in an amount
  required by the commissioner by rule;
               (3)  maintain a financial strength rating from not
  fewer than two rating agencies determined to be acceptable in
  accordance with rules adopted by the commissioner;
               (4)  agree to submit to the jurisdiction of any court of
  competent jurisdiction in any state of the United States;
               (5)  appoint the commissioner as its agent for service
  of process in this state;
               (6)  provide security for 100 percent of the assuming
  insurer's liabilities for reinsurance ceded by United States ceding
  insurers if the assuming insurer resists enforcement of a final
  judgment of a court of the United States;
               (7)  meet application information filing requirements
  as established by the commissioner by rule, for the initial
  application for certification and on an ongoing basis; and
               (8)  satisfy any other requirements for certification
  required by rule adopted by the commissioner.
         Sec. 492.1034.  CERTAIN ASSOCIATIONS MAY BE CERTIFIED
  REINSURERS.  (a)  An association that includes incorporated and
  individual unincorporated underwriters may be a certified
  reinsurer under Section 492.1033. To be eligible for certification
  the association must satisfy the requirements of Section 492.1033
  and this section.
         (b)  The association must satisfy minimum capital and
  surplus requirements through the capital and surplus equivalents,
  net of liabilities, of the association and its members, that must
  include a joint central fund, in an amount determined by the
  commissioner to provide adequate protection, that may be applied to
  any unsatisfied obligation of the association or any of its
  members.
         (c)  The incorporated members of the association acting as
  members of the association may not be engaged in any business other
  than underwriting and are subject to the same level of regulation
  and solvency control by the association's domiciliary regulator as
  are the unincorporated members.
         (d)  Not later than the 90th day after the date the
  association's financial statements are due to be filed with the
  association's domiciliary regulator, the association shall provide
  to the commissioner:
               (1)  an annual certification by the association's
  domiciliary regulator of the solvency of each underwriter member;
  or
               (2)  if a certification described by Subdivision (1) is
  unavailable, financial statements, prepared by independent public
  accountants, of each underwriter member of the association.
         Sec. 492.1035.  QUALIFIED JURISDICTIONS.  (a)  The
  commissioner shall develop and publish a list of qualified
  jurisdictions in which an assuming insurer may be licensed and
  domiciled in order to be considered for certification by the
  commissioner under Section 492.1033 as a certified reinsurer.  In
  developing the list, the commissioner shall consider the list of
  qualified jurisdictions published through the National Association
  of Insurance Commissioners committee process.
         (b)  In order to determine whether a jurisdiction of an
  assuming insurer located outside of the United States is eligible
  to be recognized as a qualified jurisdiction under Subsection (a),
  the commissioner shall evaluate the appropriateness and
  effectiveness of the reinsurance supervisory system of the
  jurisdiction, both initially and on an ongoing basis, and consider
  the rights, benefits, and extent of reciprocal recognition afforded
  by the jurisdiction to reinsurers licensed and domiciled in the
  United States.
         (c)  In order to be qualified a jurisdiction must agree to
  share information and cooperate with the commissioner with respect
  to all certified reinsurers doing business in the jurisdiction.
         (d)  A jurisdiction may not be recognized as a qualified
  jurisdiction if the commissioner has determined that the
  jurisdiction does not adequately and promptly enforce final United
  States judgments and arbitration awards. Additional factors may be
  considered in the discretion of the commissioner.
         (e)  If the commissioner approves under this section a
  jurisdiction as qualified that does not appear on the list of
  qualified jurisdictions published through the National Association
  of Insurance Commissioners committee process, the commissioner
  shall provide documentation in accordance with rules adopted by the
  commissioner.  The rules must include a requirement for a
  thoroughly documented justification of the approval.
         (f)  The commissioner shall include as a qualified
  jurisdiction under this section a United States jurisdiction that
  meets the requirement for accreditation under the National
  Association of Insurance Commissioners financial standards and
  accreditation program.
         (g)  If a certified reinsurer's domiciliary jurisdiction
  ceases to be a qualified jurisdiction, the commissioner may suspend
  the reinsurer's certification indefinitely, instead of revoking
  the certification.
         Sec. 492.1036.  FINANCIAL REQUIREMENTS FOR CERTIFIED
  REINSURER.  (a)  The commissioner shall assign a financial strength
  rating to each certified reinsurer after considering the financial
  strength ratings that have been assigned by rating agencies
  recognized by the commissioner.
         (b)  The commissioner shall publish a list of the ratings
  assigned under this section for all certified reinsurers.
         (c)  A certified reinsurer shall secure obligations assumed
  from ceding insurers domiciled in the United States in accordance
  with the rating assigned by the commissioner under Subsection (a)
  and in accordance with this section.
         (d)  For a domestic ceding insurer to qualify for full
  financial statement credit for reinsurance ceded to a certified
  reinsurer, the certified reinsurer must maintain security:
               (1)  in a form acceptable to the commissioner and
  consistent with the insurance laws of this state; or
               (2)  in a multibeneficiary trust in accordance with
  Subchapter D, except as otherwise provided.
         (e)  If a certified reinsurer maintains a trust under
  Subchapter D to secure its obligations, and chooses to secure its
  obligations incurred as a certified reinsurer with a
  multibeneficiary trust, the certified reinsurer shall maintain
  separate trust accounts for the obligations incurred under
  reinsurance agreements the certified reinsurer issued or renewed
  with reduced security as permitted by this section or comparable
  laws of other United States jurisdictions and for its obligations
  subject to Subchapter D. It is a condition to the grant of
  certification under this section that the certified reinsurer has
  bound itself, by the language of the trust agreement and agreement
  with the commissioner with principal regulatory oversight of each
  trust account, to fund, on termination of the trust account, out the
  remaining surplus of the trust any deficiency of any other trust
  account described by this subsection.
         (f)  The minimum trusteed surplus requirements provided in
  Subchapter D do not apply to a multibeneficiary trust described by
  this section, except that the trust shall maintain a minimum
  trusteed surplus of $10,000,000.
         (g)  With respect to obligations incurred by a certified
  reinsurer under this section, if the security is insufficient, the
  commissioner:
               (1)  shall reduce the allowable credit by an amount
  proportionate to the deficiency; and
               (2)  may impose further reductions in allowable credit
  on finding that there is a material risk that the certified
  reinsurer's obligations will not be paid in full when due.
         (h)  For purposes of this section, a reinsurer whose
  certification has been revoked, suspended, or voluntarily
  surrendered or whose certification status has become inactive for
  any reason shall be treated as a reinsurer required to secure 100
  percent of its obligations, except that if the commissioner
  continues to assign to the reinsurer a higher financial strength
  rating as permitted by this section, the security requirement does
  not apply to a reinsurer whose certification has been suspended or
  whose certification status has become inactive.
         Sec. 492.1037.  CERTIFICATION BY NATIONAL ASSOCIATION OF
  INSURANCE COMMISSIONERS.  If an applicant for certification has
  been certified as a reinsurer in a National Association of
  Insurance Commissioners accredited jurisdiction:
               (1)  the commissioner may defer to the accredited
  jurisdiction's certification and the financial strength rating
  assigned by that jurisdiction; and
               (2)  the applicant shall be considered to be a
  certified reinsurer in this state.
         Sec. 492.1038.  SUSPENSION OR REVOCATION OF CERTIFICATION;
  INACTIVE STATUS.  (a)  A certified reinsurer that ceases to assume
  new business in this state may request to maintain its
  certification in inactive status to continue to qualify for a
  reduction in security for in-force business.  An inactive certified
  reinsurer shall continue to comply with all applicable requirements
  of this section, and the commissioner shall assign a financial
  strength rating that takes into account, if relevant, the reasons
  the reinsurer is not assuming new business.
         (b)  If an accredited or certified reinsurer ceases to meet
  the requirements for accreditation or certification, the
  commissioner may, after notice and opportunity for hearing, suspend
  or revoke the reinsurer's accreditation or certification.  A
  suspension or revocation may not take effect until after the date of
  the commissioner's order on the hearing, unless:
               (1)  the reinsurer waives its right to hearing;
               (2)  the commissioner's order is based on regulatory
  action by the reinsurer's domiciliary jurisdiction or the voluntary
  surrender or termination of the reinsurer's eligibility to transact
  insurance or reinsurance business in its domiciliary jurisdiction
  or in the primary certifying state of the reinsurer under this
  section; or
               (3)  the commissioner finds that an emergency requires
  immediate action and a court of competent jurisdiction has not
  stayed the commissioner's action.
         (c)  While a reinsurer's accreditation or certification is
  suspended, a reinsurance contract issued or renewed after the
  effective date of the suspension does not qualify for credit except
  to the extent that the reinsurer's obligations under the contract
  are secured in accordance with Subchapter D.
         (d)  If a reinsurer's accreditation or certification is
  revoked, credit for reinsurance may not be granted after the
  effective date of the revocation except to the extent that the
  reinsurer's obligations under the contract are secured in
  accordance with Section 492.1036 or Subchapter D.
         Sec. 492.1039.  CONCENTRATION RISK.  (a)  A ceding insurer
  shall manage its reinsurance recoverable proportionate to its book
  of business. A domestic ceding insurer shall notify the
  commissioner not later than the 30th day after the date reinsurance
  recoverable from any single assuming insurer, or group of
  affiliated assuming insurers, exceeds or is likely to exceed 50
  percent of the domestic ceding insurer's last reported surplus to
  policyholders. The notification shall demonstrate that the
  exposure is safely managed by the domestic ceding insurer.
         (b)  A ceding insurer shall diversify its reinsurance
  program. A domestic ceding insurer shall notify the commissioner
  not later than the 30th day after the date the insurer cedes to any
  single assuming insurer, or group of affiliated assuming insurers,
  an amount that exceeds or is likely to exceed 20 percent of the
  ceding insurer's gross written premium in the prior calendar year.
  The notification shall demonstrate that the exposure is safely
  managed by the domestic ceding insurer.
         SECTION 3.  Section 492.151, Insurance Code, is amended to
  read as follows:
         Sec. 492.151.  APPLICABILITY OF SUBCHAPTER. This subchapter
  applies to:
               (1)  a trust that is used to qualify for a reinsurance
  credit under Section 492.102(a)(3) and as described by Sections
  492.1036(e) and (f); and
               (2)  [to] the assuming insurer that maintains the trust
  fund.
         SECTION 4.  Section 492.152, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (a-1) to read as
  follows:
         (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, except after the assuming insurer has permanently
  discontinued underwriting new business secured by the trust for not
  less than three calendar years, the commissioner with principal
  regulatory oversight of the trust may authorize a reduction in the
  required trusteed surplus, but only after a finding, based on an
  assessment of the risk, that the new required surplus level is
  adequate for the protection of United States ceding insurers,
  policyholders, and claimants in light of reasonably foreseeable
  adverse loss development.
         (a-1)  The risk assessment described by Subsection (a)(2)
  may involve an actuarial review, including an independent analysis
  of reserves and cash flows, and must consider all material risk
  factors, including when applicable, the lines of business involved,
  the stability of the incurred loss estimates, and the effect of the
  surplus requirements on the assuming insurer's liquidity or
  solvency. The minimum required trusteed surplus may not be reduced
  to an amount less than 30 percent of the assuming insurer's
  liabilities attributable to reinsurance ceded by United States
  ceding insurers.
         SECTION 5.  Section 492.155(b), Insurance Code, is amended
  to read as follows:
         (b)  To enable the commissioner to determine the sufficiency
  of the trust fund under Section 492.102(a)(3) and for purposes of
  Sections 492.1036(e) and (f), 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.
         SECTION 6.  Section 492.156(a), Insurance Code, is amended
  to read as follows:
         (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, or certified 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.
         SECTION 7.  Section 493.102(a), Insurance Code, is amended
  to read as follows:
         (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 493.103; [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; or
               (4)  is determined by the commissioner to meet the
  requirements of Sections 493.1033-493.1038, as applicable.
         SECTION 8.  Subchapter C, Chapter 493, Insurance Code, is
  amended by adding Sections 493.1033, 493.1034, 493.1035, 493.1036,
  493.1037, 493.1038, and 493.1039 to read as follows:
         Sec. 493.1033.  CREDIT ALLOWED FOR CERTAIN CERTIFIED
  REINSURERS. (a) Credit shall be allowed when the reinsurance is
  ceded to an assuming insurer that:
               (1)  is certified by the commissioner as a reinsurer in
  this state; and
               (2)  secures its obligations in accordance with the
  requirements of this section and Sections 493.1034-493.1038.
         (b)  To be eligible for certification, the assuming insurer
  must:
               (1)  be domiciled and licensed to transact insurance or
  reinsurance in a jurisdiction listed as qualified on the list
  published by the commissioner under Section 493.1035;
               (2)  maintain minimum capital and surplus in an amount
  required by the commissioner by rule;
               (3)  maintain a financial strength rating from not
  fewer than two rating agencies determined to be acceptable in
  accordance with rules adopted by the commissioner;
               (4)  agree to submit to the jurisdiction of any court of
  competent jurisdiction in any state of the United States;
               (5)  appoint the commissioner as its agent for service
  of process in this state;
               (6)  provide security for 100 percent of the assuming
  insurer's liabilities for reinsurance ceded by United States ceding
  insurers if the assuming insurer resists enforcement of a final
  judgment of a court of the United States;
               (7)  meet application information filing requirements
  as established by the commissioner by rule, for the initial
  application for certification and on an ongoing basis; and
               (8)  satisfy any other requirements for certification
  required by rule adopted by the commissioner.
         Sec. 493.1034.  CERTAIN ASSOCIATIONS MAY BE CERTIFIED
  REINSURERS. (a) An association that includes incorporated and
  individual unincorporated underwriters may be a certified
  reinsurer under Section 493.1034. To be eligible for certification
  the association must satisfy the requirements of Section 493.1033
  and this section.
         (b)  The association must satisfy minimum capital and
  surplus requirements through the capital and surplus equivalents,
  net of liabilities, of the association and its members, that must
  include a joint central fund, in an amount determined by the
  commissioner to provide adequate protection, that may be applied to
  any unsatisfied obligation of the association or any of its
  members.
         (c)  The incorporated members of the association acting as
  members of the association may not be engaged in any business other
  than underwriting and are subject to the same level of regulation
  and solvency control by the association's domiciliary regulator as
  are the unincorporated members.
         (d)  Not later than the 90th day after the date the
  association's financial statements are due to be filed with the
  association's domiciliary regulator, the association shall provide
  to the commissioner:
               (1)  an annual certification by the association's
  domiciliary regulator of the solvency of each underwriter member;
  or
               (2)  if a certification described by Subdivision (1) is
  unavailable, financial statements, prepared by independent public
  accountants, of each underwriter member of the association.
         Sec. 493.1035.  QUALIFIED JURISDICTIONS. (a) The
  commissioner shall develop and publish a list of qualified
  jurisdictions in which an assuming insurer may be licensed and
  domiciled in order to be considered for certification by the
  commissioner under Section 493.1033 as a certified reinsurer.  In
  developing the list, the commissioner shall consider the list of
  qualified jurisdictions published through the National Association
  of Insurance Commissioners committee process.
         (b)  In order to determine whether a jurisdiction of an
  assuming insurer located outside of the United States is eligible
  to be recognized as a qualified jurisdiction under Subsection (a),
  the commissioner shall evaluate the appropriateness and
  effectiveness of the reinsurance supervisory system of the
  jurisdiction, both initially and on an ongoing basis, and consider
  the rights, benefits, and extent of reciprocal recognition afforded
  by the jurisdiction to reinsurers licensed and domiciled in the
  United States.
         (c)  In order to be qualified a jurisdiction must agree to
  share information and cooperate with the commissioner with respect
  to all certified reinsurers doing business in the jurisdiction.
         (d)  A jurisdiction may not be recognized as a qualified
  jurisdiction if the commissioner has determined that the
  jurisdiction does not adequately and promptly enforce final United
  States judgments and arbitration awards. Additional factors may be
  considered in the discretion of the commissioner.
         (e)  If the commissioner approves under this section a
  jurisdiction as qualified that does not appear on the list of
  qualified jurisdictions published through the National Association
  of Insurance Commissioners committee process, the commissioner
  shall provide documentation in accordance with rules adopted by the
  commissioner.  The rules must include a requirement for a
  thoroughly documented justification of the approval.
         (f)  The commissioner shall include as a qualified
  jurisdiction under this section a United States jurisdiction that
  meets the requirement for accreditation under the National
  Association of Insurance Commissioners financial standards and
  accreditation program.
         (g)  If a certified reinsurer's domiciliary jurisdiction
  ceases to be a qualified jurisdiction, the commissioner may suspend
  the reinsurer's certification indefinitely, instead of revoking
  the certification.
         Sec. 493.1036.  FINANCIAL REQUIREMENTS FOR CERTIFIED
  REINSURER. (a) The commissioner shall assign a financial strength
  rating to each certified reinsurer after considering the financial
  strength ratings that have been assigned by rating agencies
  recognized by the commissioner.
         (b)  The commissioner shall publish a list of the ratings
  assigned under this section for all certified reinsurers.
         (c)  A certified reinsurer shall secure obligations assumed
  from ceding insurers domiciled in the United States in accordance
  with the rating assigned by the commissioner under Subsection (a)
  and in accordance with this section.
         (d)  For a domestic ceding insurer to qualify for full
  financial statement credit for reinsurance ceded to a certified
  reinsurer, the certified reinsurer must maintain security:
               (1)  in a form acceptable to the commissioner and
  consistent with the insurance laws of this state; or
               (2)  in a multibeneficiary trust in accordance with
  Subchapter D, except as otherwise provided.
         (e)  If a certified reinsurer maintains a trust under
  Subchapter D to secure its obligations, and chooses to secure its
  obligations incurred as a certified reinsurer with a
  multibeneficiary trust, the certified reinsurer shall maintain
  separate trust accounts for the obligations incurred under
  reinsurance agreements the certified reinsurer issued or renewed
  with reduced security as permitted by this section or comparable
  laws of other United States jurisdictions and for its obligations
  subject to Subchapter D. It is a condition to the grant of
  certification under this section that the certified reinsurer has
  bound itself, by the language of the trust agreement and agreement
  with the commissioner with principal regulatory oversight of each
  trust account, to fund, on termination of the trust account, out the
  remaining surplus of the trust any deficiency of any other trust
  account described by this subsection.
         (f)  The minimum trusteed surplus requirements provided in
  Subchapter D do not apply to a multibeneficiary trust described by
  this section, except that the trust shall maintain a minimum
  trusteed surplus of $10,000,000.
         (g)  With respect to obligations incurred by a certified
  reinsurer under this section, if the security is insufficient, the
  commissioner:
               (1)  shall reduce the allowable credit by an amount
  proportionate to the deficiency; and
               (2)  may impose further reductions in allowable credit
  on finding that there is a material risk that the certified
  reinsurer's obligations will not be paid in full when due.
         (h)  For purposes of this section, a reinsurer whose
  certification has been revoked, suspended, or voluntarily
  surrendered or whose certification status has become inactive for
  any reason shall be treated as a reinsurer required to secure 100
  percent of its obligations, except that if the commissioner
  continues to assign to the reinsurer a higher financial strength
  rating as permitted by this section, the security requirement does
  not apply to a reinsurer whose certification has been suspended or
  whose certification status has become inactive.
         Sec. 493.1037.  CERTIFICATION BY NATIONAL ASSOCIATION OF
  INSURANCE COMMISSIONERS.  If an applicant for certification has
  been certified as a reinsurer in a National Association of
  Insurance Commissioners accredited jurisdiction:
               (1)  the commissioner may defer to the accredited
  jurisdiction's certification and the financial strength rating
  assigned by that jurisdiction; and
               (2)  the applicant shall be considered to be a
  certified reinsurer in this state.
         Sec. 493.1038.  SUSPENSION OR REVOCATION OF CERTIFICATION;
  INACTIVE STATUS.  (a)  A certified reinsurer that ceases to assume
  new business in this state may request to maintain its
  certification in inactive status to continue to qualify for a
  reduction in security for in-force business. An inactive certified
  reinsurer shall continue to comply with all applicable requirements
  of this section, and the commissioner shall assign a financial
  strength rating that takes into account, if relevant, the reasons
  the reinsurer is not assuming new business.
         (b)  If an accredited or certified reinsurer ceases to meet
  the requirements for accreditation or certification, the
  commissioner may, after notice and opportunity for hearing, suspend
  or revoke the reinsurer's accreditation or certification. A
  suspension or revocation may not take effect until after the date of
  the commissioner's order on the hearing, unless:
               (1)  the reinsurer waives its right to hearing;
               (2)  the commissioner's order is based on regulatory
  action by the reinsurer's domiciliary jurisdiction or the voluntary
  surrender or termination of the reinsurer's eligibility to transact
  insurance or reinsurance business in its domiciliary jurisdiction
  or in the primary certifying state of the reinsurer under this
  section; or
               (3)  the commissioner finds that an emergency requires
  immediate action and a court of competent jurisdiction has not
  stayed the commissioner's action.
         (c)  While a reinsurer's accreditation or certification is
  suspended, a reinsurance contract issued or renewed after the
  effective date of the suspension does not qualify for credit except
  to the extent that the reinsurer's obligations under the contract
  are secured in accordance with Subchapter D.
         (d)  If a reinsurer's accreditation or certification is
  revoked, credit for reinsurance may not be granted after the
  effective date of the revocation except to the extent that the
  reinsurer's obligations under the contract are secured in
  accordance with Section 493.1036 or Subchapter D.
         Sec. 493.1039.  CONCENTRATION RISK.  (a)  A ceding insurer
  shall manage its reinsurance recoverable proportionate to its book
  of business. A domestic ceding insurer shall notify the
  commissioner not later than the 30th day after the date reinsurance
  recoverable from any single assuming insurer, or group of
  affiliated assuming insurers, exceeds or is likely to exceed 50
  percent of the domestic ceding insurer's last reported surplus to
  policyholders.  The notification shall demonstrate that the
  exposure is safely managed by the domestic ceding insurer.
         (b)  A ceding insurer shall diversify its reinsurance
  program. A domestic ceding insurer shall notify the commissioner
  not later than the 30th day after the date the insurer cedes to any
  single assuming insurer, or group of affiliated assuming insurers,
  an amount that exceeds or is likely to exceed 20 percent of the
  ceding insurer's gross written premium in the prior calendar year.
  The notification shall demonstrate that the exposure is safely
  managed by the domestic ceding insurer.
         SECTION 9.  Section 493.151, Insurance Code, is amended to
  read as follows:
         Sec. 493.151.  APPLICABILITY OF SUBCHAPTER. This subchapter
  applies to:
               (1)  a trust that is used to qualify for a reinsurance
  credit under Section 493.102(a)(3) and as described by Sections
  493.1036(e) and (f); and
               (2)  [to] the assuming insurer that maintains the trust
  fund.
         SECTION 10.  Section 493.152, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (a-1) to read as
  follows:
         (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, except after the assuming insurer has permanently
  discontinued underwriting new business secured by the trust for not
  less than three calendar years, the commissioner with principal
  regulatory oversight of the trust may authorize a reduction in the
  required trusteed surplus, but only after a finding, based on an
  assessment of the risk, that the new required surplus level is
  adequate for the protection of United States ceding insurers,
  policyholders, and claimants in light of reasonably foreseeable
  adverse loss development.
         (a-1)  The risk assessment described by Subsection (a)(2)
  may involve an actuarial review, including an independent analysis
  of reserves and cash flows, and must consider all material risk
  factors, including when applicable, the lines of business involved,
  the stability of the incurred loss estimates, and the effect of the
  surplus requirements on the assuming insurer's liquidity or
  solvency. The minimum required trusteed surplus may not be reduced
  to an amount less than 30 percent of the assuming insurer's
  liabilities attributable to reinsurance ceded by United States
  ceding insurers.
         SECTION 11.  Section 493.155(b), Insurance Code, is amended
  to read as follows:
         (b)  To enable the commissioner to determine the sufficiency
  of the trust fund under Section 493.102(a)(3) and for purposes of
  Sections 493.1036(e) and (f), 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.
         SECTION 12.  Section 493.156(a), Insurance Code, is amended
  to read as follows:
         (a)  A ceding insurer may not be allowed credit under Section
  493.102(a)(3) for reinsurance ceded to an assuming insurer that is
  not authorized, [or] accredited, or certified 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.
         SECTION 13.  This Act applies only to a reinsurance contract
  that is entered into or renewed on or after January 1, 2014.  A
  reinsurance contract that is entered into or renewed before January
  1, 2014, is governed by the law as it existed immediately before the
  effective date of this Act, and that law is continued in effect for
  that purpose.
         SECTION 14.  This Act takes effect September 1, 2013.