S.B. No. 655
 
 
 
 
AN ACT
  relating to own risk and solvency assessment by insurers and
  insurance groups; providing a penalty.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle B, Title 6, Insurance Code, is amended
  by adding Chapter 830 to read as follows:
  CHAPTER 830.  OWN RISK AND SOLVENCY ASSESSMENT
         Sec. 830.001.  APPLICABILITY AND PURPOSE. (a)  This chapter
  applies to each domestic insurer unless exempt under Section
  830.006.
         (b)  The purpose of this chapter is to provide the
  requirements for maintaining a risk management framework and
  completing an own risk and solvency assessment and to provide
  guidance and instructions for filing an own risk and solvency
  assessment summary report with the commissioner.
         (c)  The own risk and solvency assessment summary report will
  contain confidential and sensitive information related to an
  insurer or insurance group's identification of risks material and
  relevant to the insurer or insurance group filing the report.  This
  information will include proprietary and trade secret information
  that has the potential for harm and competitive disadvantage to the
  insurer or insurance group if the information is made public.  The
  summary report is a confidential document filed with the
  commissioner, and the commissioner may share the summary report
  only as stated in this chapter in order to assist the commissioner
  in the performance of the commissioner's duties.  An own risk and
  solvency assessment summary report is not subject to public
  disclosure in any event.
         Sec. 830.002.  DEFINITIONS.  In this chapter:
               (1)  "Guidance manual" means the version of the Own
  Risk and Solvency Assessment Guidance Manual developed and adopted
  by the National Association of Insurance Commissioners that is in
  effect at the time a summary report is provided. A change in the
  guidance manual becomes effective on the January 1 following the
  calendar year in which the changes are adopted by the National
  Association of Insurance Commissioners.
               (2)  "Insurance group" means the insurers and
  affiliates included within an insurance holding company system as
  described by Section 823.006.
               (3)  "Insurer" has the meaning assigned by Section
  823.002(6).
               (4)  "Own risk and solvency assessment" means a
  confidential internal assessment, appropriate to the nature,
  scale, and complexity of an insurer or insurance group, conducted
  by that insurer or insurance group, of the material and relevant
  risks associated with the insurer or insurance group's current
  business plan and the sufficiency of capital resources to support
  those risks.
               (5)  "Summary report" means a confidential, high-level
  summary of an insurer's or insurance group's own risk and solvency
  assessment.
         Sec. 830.003.  RISK MANAGEMENT FRAMEWORK.  An insurer shall
  maintain a risk management framework to assist the insurer with
  identifying, assessing, monitoring, managing, and reporting on the
  insurer's material and relevant risks. This requirement may be
  satisfied if the insurance group of which the insurer is a member
  maintains a risk management framework applicable to the operations
  of the insurer.
         Sec. 830.004.  OWN RISK AND SOLVENCY ASSESSMENT REQUIREMENT.  
  (a)  Subject to Section 830.006, an insurer, or the insurance group
  of which the insurer is a member, shall regularly conduct,
  consistent with a process comparable to the guidance manual, an own
  risk and solvency assessment, appropriate to the nature, scale, and
  complexity of the insurer or insurance group, of the material and
  relevant risks associated with the insurer's or insurance group's
  current business plan and the sufficiency of capital resources to
  support those risks.
         (b)  The insurer, or the insurance group of which the insurer
  is a member, shall conduct the own risk and solvency assessment
  described by Subsection (a):
               (1)  annually; and
               (2)  at any other time there are significant changes to
  the risk profile of the insurer or the insurance group of which the
  insurer is a member.
         Sec. 830.005.  SUMMARY REPORT REQUIRED.  (a)  On the
  commissioner's request, an insurer shall submit to the commissioner
  a summary report or a combination of reports that together contain
  the information described in the guidance manual. The commissioner
  may not make a request under this subsection more than once each
  year.
         (b)  Without regard to whether the commissioner has made a
  request under Subsection (a), if the insurer is a member of an
  insurance group, the insurer shall submit to the commissioner the
  reports required by Subsection (a) if the commissioner is the lead
  state commissioner of the insurance group.
         (c)  In determining the lead state commissioner for purposes
  of this section, the commissioner shall consider the procedures
  adopted by the National Association of Insurance Commissioners.
         (d)  The reports must include a signature of the insurer's or
  insurance group's chief risk officer or other executive responsible
  for the oversight of the insurer's enterprise risk management
  process attesting to the best of the officer's or executive's belief
  and knowledge that:
               (1)  the insurer applies the enterprise risk management
  process described in the summary report; and
               (2)  a copy of the report has been provided to the
  insurer's board of directors or the appropriate committee of the
  board of directors.
         (e)  An insurer may comply with Subsection (a) or (b) by
  providing the most recent and substantially similar report that the
  insurer or another member of an insurance group of which the insurer
  is a member provided to the commissioner of another state or to a
  supervisor or regulator of a foreign jurisdiction, if that report
  provides information that is comparable to the information
  described in the guidance manual.  A report in a language other than
  English must be accompanied by a translation of that report into the
  English language.
         Sec. 830.006.  EXEMPTION.  (a)  An insurer is exempt from
  the requirements of this chapter if:
               (1)  the insurer has annual direct written and
  unaffiliated assumed premium, including international direct and
  assumed premium but excluding premiums reinsured with the Federal
  Crop Insurance Corporation and Federal Flood Program, of less than
  $500 million; and
               (2)  the insurance group of which the insurer is a
  member has annual direct written and unaffiliated assumed premium,
  including international direct and assumed premium but excluding
  premiums reinsured with the Federal Crop Insurance Corporation and
  Federal Flood Program, of less than $1 billion.
         (b)  If an insurer qualifies for exemption under Subsection
  (a)(1), but the insurance group of which the insurer is a member
  does not qualify for exemption under Subsection (a)(2), then the
  summary report required under Section 830.005 must include every
  insurer within the insurance group.
         (c)  An insurer may satisfy the requirement under Subsection
  (b) by submitting more than one summary report for any combination
  of insurers if the combination of reports includes each insurer
  within the insurance group.
         (d)  If an insurer does not qualify for exemption under
  Subsection (a)(1), but the insurance group of which it is a member
  qualifies for exemption under Subsection (a)(2), then the insurer
  must submit a summary report under Section 830.005 that is
  applicable to that insurer.
         (e)  An insurer that does not qualify for exemption under
  Subsection (a) may apply to the commissioner for a waiver from the
  requirements of this chapter based on unique circumstances.  In
  deciding whether to grant the insurer's request for waiver, the
  commissioner may consider the type and volume of business written,
  the ownership and organizational structure, and any other factor
  the commissioner considers relevant to the insurer or insurance
  group of which the insurer is a member.  If the insurer is part of an
  insurance group with insurers domiciled in more than one state, the
  commissioner shall coordinate with the lead state commissioner and
  with the other domiciliary commissioners in considering whether to
  grant the insurer's request for a waiver.
         (f)  Notwithstanding the exemptions stated in this section,
  the commissioner may require that an insurer maintain a risk
  management framework, conduct an own risk and solvency assessment,
  and file a summary report if:
               (1)  there are unique circumstances, including the type
  and volume of business written, the ownership and organizational
  structure, federal agency requests, and international supervisor
  requests;
               (2)  the insurer has risk-based capital for a company
  action level event as set forth in department rules;
               (3)  the insurer meets one or more of the standards of
  an insurer considered to be in hazardous financial condition under
  Chapter 404 or department rule; or
               (4)  the insurer otherwise exhibits qualities of a
  troubled insurer as determined by the commissioner.
         (g)  If an insurer that qualifies for an exemption under
  Subsection (a) subsequently ceases to qualify for that exemption
  due to changes in premium as reflected in the insurer's most recent
  annual statement or in the most recent annual statements of the
  insurers within the insurance group of which the insurer is a
  member, the insurer must comply with the requirements of this
  chapter not later than December 31 of the calendar year following
  the calendar year the threshold is exceeded.
         Sec. 830.007.  CONTENTS OF SUMMARY REPORT.  (a)  An insurer
  shall prepare a summary report in accordance with the guidance
  manual and subject to the requirements of Subsection (b).  An
  insurer shall maintain documentation and supporting information
  and shall make the documentation and supporting information
  available on examination or on request of the commissioner.
         (b)  When reviewing the summary report or making requests for
  additional information, the department shall use procedures
  similar to the procedures currently used in the analysis and
  examination of multistate or global insurers and insurance groups.
         Sec. 830.008.  CONFIDENTIALITY.  (a)  Documents, materials,
  or other information, including a summary report, in the possession
  or control of the department that is obtained by, created by, or
  disclosed to the commissioner or any other person under this
  chapter, including documents, materials, and other information
  shared or received under Subsection (e), and documents, materials,
  or other information in the possession or control of the National
  Association of Insurance Commissioners or third-party consultant
  under this chapter, are confidential and privileged and not subject
  to:
               (1)  Chapter 552, Government Code;
               (2)  a response to subpoena; or
               (3)  discovery or admissibility in evidence in any
  civil action.
         (b)  Documents, materials, or other information, including a
  summary report prepared under this chapter and additional
  information submitted under Section 830.007, in the possession or
  control of the department that is obtained by, created by, or
  disclosed to the commissioner or any other person under this
  chapter is recognized by this state as being proprietary and to
  contain trade secrets.
         (c)  The commissioner may use the documents, materials, or
  other information described in this section to further any
  regulatory or legal action brought as part of the commissioner's
  official duties.  The commissioner shall not otherwise make the
  documents, materials, or other information public without the prior
  written consent of the insurer.
         (d)  The commissioner and any other person who receives own
  risk and solvency assessment-related information under this
  chapter, in an examination, or otherwise under any other law may not
  testify or be required to testify in any private civil action
  concerning any documents, materials, or information subject to
  Subsection (a) or (b).
         (e)  In order to assist in the performance of the
  commissioner's regulatory duties, the commissioner may, on
  request, share documents, materials, or other own risk and solvency
  assessment-related information, including confidential and
  privileged documents, materials, or information subject to
  Subsection (a) or (b) or confidential or privileged documents,
  materials, or information subject to Chapter 401, 404, or 823, as
  necessary, with:
               (1)  other state, federal, and international financial
  regulatory agencies or insurance supervisors;
               (2)  members of a supervisory college described in
  Section 823.0145;
               (3)  the National Association of Insurance
  Commissioners; or
               (4)  a third-party consultant designated by the
  commissioner.
         (f)  Before the commissioner may share information under
  this section, the recipient of the information shall:
               (1)  agree in writing to maintain the confidential and
  privileged status of the documents, materials, or other information
  shared under this section; and
               (2)  verify in writing the recipient's legal authority
  to maintain the confidential and privileged status of that
  information.
         (g)  The commissioner may receive documents, materials, or
  other own risk and solvency assessment-related information or any
  other relevant information, including otherwise confidential and
  privileged documents, materials, or information and proprietary
  and trade-secret information or documents, from:
               (1)  a regulatory official of a foreign or domestic
  jurisdiction, including a member of a supervisory college described
  in Section 823.0145; and
               (2)  the National Association of Insurance
  Commissioners.
         (h)  The commissioner shall maintain as confidential or
  privileged any documents, materials, or information received under
  Subsection (g) with notice and understanding that it is
  confidential or privileged under the laws of the jurisdiction that
  is the source of the document, material, or information.
         Sec. 830.009.  AGREEMENT CONCERNING CONFIDENTIAL AND
  PRIVILEGED INFORMATION.  (a)  The commissioner shall enter into a
  written agreement with the National Association of Insurance
  Commissioners or a third-party consultant that governs the sharing
  and use of information provided under this chapter. The agreement
  must comply with and contain all the requirements listed in this
  section.
         (b)  The agreement must specify procedures and protocols
  regarding the confidentiality and security of information shared
  with the National Association of Insurance Commissioners or
  third-party consultant under this chapter, including procedures
  and protocols for sharing by the National Association of Insurance
  Commissioners with other state regulators from states in which the
  insurance group has domiciled insurers.
         (c)  The agreement must provide that the recipient:
               (1)  agrees in writing to maintain the confidential and
  privileged status of the own risk and solvency assessment-related
  documents, materials, or other information; and
               (2)  has verified in writing the legal authority to
  maintain the confidential and privileged status of the information.
         (d)  The agreement must specify that ownership of
  information shared with the National Association of Insurance
  Commissioners or third-party consultant under this chapter remains
  with the commissioner and that the National Association of
  Insurance Commissioners' or third-party consultant's use of the
  information is subject to the direction of the commissioner.
         (e)  The agreement must prohibit the National Association of
  Insurance Commissioners or third-party consultant from storing the
  information shared under this chapter in a permanent database after
  the underlying analysis is completed.
         (f)  The agreement must require prompt notice to be given to
  an insurer whose confidential information in the possession of the
  National Association of Insurance Commissioners or third-party
  consultant under this chapter is subject to a request or subpoena to
  the National Association of Insurance Commissioners or third-party
  consultant for disclosure or production.
         (g)  The agreement must require the National Association of
  Insurance Commissioners or third-party consultant to consent to
  intervention by an insurer in any judicial or administrative action
  in which the National Association of Insurance Commissioners or
  third-party consultant may be required to disclose confidential
  information about the insurer shared with the National Association
  of Insurance Commissioners or third-party consultant under this
  chapter.
         (h)  The agreement must provide for the insurer's written
  consent in the case of an agreement involving a third-party
  consultant.
         Sec. 830.010.  AUTHORITY OF COMMISSIONER NOT AFFECTED.  The
  commissioner's sharing of information and documents under this
  chapter does not constitute a delegation of regulatory authority or
  rulemaking, and the commissioner is solely responsible for the
  administration, execution, and enforcement of the provisions of
  this chapter.
         Sec. 830.011.  PRIVILEGE AND CONFIDENTIALITY NOT WAIVED.  A
  waiver of an applicable privilege or claim of confidentiality in a
  document, proprietary and trade-secret materials, or other own risk
  and solvency assessment-related information does not occur as a
  result of disclosure of the document, materials, or other
  information to the commissioner under this chapter or as a result of
  sharing as authorized by this chapter.
         Sec. 830.012.  ADMINISTRATIVE PENALTY.  (a)  An insurer
  that, without good cause, fails to timely file the summary report as
  required by this chapter commits a violation subject to an
  administrative penalty under Chapter 84.
         (b)  Each day the violation continues is a separate violation
  for purposes of this section.
         (c)  The commissioner may reduce the amount of the penalty
  assessed under this section if the insurer demonstrates to the
  commissioner that the imposition of the penalty would constitute a
  financial hardship to the insurer.
         SECTION 2.  Notwithstanding Chapter 830, Insurance Code, as
  added by this Act, an insurer is not required to submit a summary
  report as required by that chapter before January 1, 2016.
         SECTION 3.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2015.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 655 passed the Senate on
  April 9, 2015, by the following vote:  Yeas 30, Nays 1.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 655 passed the House on
  May 6, 2015, by the following vote:  Yeas 133, Nays 14, two
  present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor