April 14, 1939

Honorable TomC. King State Auditor AmtIn, Texar Dear Sir: opinion lo. 0-W Rtr Examination of dome&k and foreign ~i.nNranCCcompaniccl.

Your letter of January 

### 13,1939, hertlnafter set out, ha6received the careful attention of this Department.

Weacknowledge with thanka the aesietanct rendered UIIthrough numerous convtraatlons with Mr. T. M.Markhamof your Department. In thin connection, wehave also received hlpful information fromthe Honorable R. L. Daniel, former Chairnumof the Board of Insurance Conunisniontr6 and membersof him department.

Your letter it as follows:

“Articles 4690, &OS, 46gOband 46gOcprovide for the: examination of inmrenct 

### comptnltt chartered in, or doing bu6lntss In, the State of Texa8, andfor appointment, qualification, compensation etc. of examiner8 therefor.

“Your opinion ir rtrpectfully requeatsd regarding the followlng: (1) The authority of the Chahmn of the Board of murance Comirrlonerr of Texar to accept t6aminat.i~ report6 from sxamintrr not comiraioned by himin writing. (2) The authorit of actuaries or examiner8 to accept compensation (tither per diem or 

### othtiwltt), gratuity, or refund6 of txpenrer incurred by themfrom any lnouranct company, 

### whileconnaisrloned by the Chairmanof the Board of 

### Inturanct

Commirrlontr6 

### ofTent. 

### (3) In caw of violation of authorlty InNo. 2above, what penalty la provided.” The first rcntence of 

### Article4690, Revised Civil Gtatutel, 1925, as ended by Chapter 152, Actr Regular Gession, knd Leglrlature, 1931, reads 

### a6follows:Hon. TomC. King, Page 2 (O-144)

or by one or more examiners commireloned by himin writing, visit each companyorganized under the laws of this State andexamine its financial condition and its ability to meet its liabilitiee, as well a8 it6 compliance with the law6of Texan afftctlng the conduct of itr burinear) andhemx rimilarly, Inptrron or by one or morecanmiariontd txamintr8, visit andexamine, tither alone or jointly with representatives of the insurance rupervlring department6 of other States, each insurance companynot organized under the law8 of this State but authorized to tranoact buainesr in this State

. . .” Article 46906 provides that the expenses of all Euchexaminatlonr &all be borne by the insurance coxpenles exanined andthat the eumsreceived for such purposes shall be deposited in the Insurance Examinstion Fundof the State Treamry. Fromsuch Fund, it ir,prescribed that the salaries and expense6 of all ntcesssry actuarier and~examinerr,of the department rhall be paid. Thlr statute also authorizes joint examinations between repreBentative6 of the State I ofTexas Insurance Department,and eimilar department8 of other States.

Article k6gObauthorize.8 the appointment of certain actuaries and examiners andprescribes the maximum ealariee that each ahall receive. The last paragraph of thi6 Article reads as followa:

“Neither the actuary to the Board of Insurance Commissioners

l nor any examiner or assistant shall continue to serve ab such if, while hold;rig such position, he shall, directly or indirectly, accept from &!y insurance rompany, any employment or pay or compensation or gratuity on account of any service rendered or to be rendered or on anyaccouc$ whatsoever.” Article 4690~ provides that examiners and assistant examiner6 shall take an oath of office andfile abond conditioned as prescribed by aaid Article.

Wecall your special attention to the difference in the requirement of Article 4690, as amended, in regard to examination of insurance companies organized under the law8 ofthis state and the examination of ether companies organized under laws of other States but having pernits to dobusiness in Texas. It is our' opinion th$ the requirements of the statute in regard to examination6 of domestic companies at leant once every twoyears are mandatory. It is equally apparent that the examination of foreign companies with permits to dobusiness in Texas is not mandatory, but maybe madeby the Chaiman of the Board of Insurance Commissioners, or hie representative, if, in hie judgment, such examination shouldbt made.

Since the statutes prescribe that the mandatory examinations must be madeby examiners commissioned bythe Chairmanin writing, it is our opinion that the acceptance by the Chal- of reports from examiners not commissioned by himin writing would not be a proper and sufficient compliance with these requirements ofthe statutes. Bythis w&donot meanthat it is improper for said chairmau to receive andhave amongthe papers andfiles of his office

.Hon. TomC. Kiug, Page 

### 3 (O-144)

!’ report-t madeby non-comaisrimed examinera, but it ir our opinion that the

acceptance of such report8 doe8 not constitute a compliance with the mandatory provirionr of there articler.

It ir, therefore, our opiuieu that qutatiou lo. 1 should be mowered ar followr:
At lea6t one txaminatlon every two yearn of each inmrance corporatleu orgauized under the laws of the State of Texanmuatbe madeby the Chairmanof the Board of Insurance Comainsionerm or his examiners, duly commissioned in writing. While said chairman mayaccept reports from non-commissioned exami.nerBfor the benefit of such information 80they maycontain, yet such reportr and 6uch examinationa would not satlafy the mandatory provisions of the statute. In regard to insurance corporationr not organized under the laws of the state ofTexam but operating in Texas under permits to dobusiness in Texas, it is our further opinion that nomandatory examination of ruch companies is required by Iltatute. If, however, said Chairmendetermines that such examinetlon should be xkde, the 6ax~mustbe madeby a duly commissioned examiner, which commission mustbe in writing. If, on the other hand, said Chairmandetermines that such examination of forelgu companlea la not necessary, there la, in our opinion, no statutory objection to his receiving reports from noncommissioned examiners for such information as they xay contain.

In anmfer to question lo. 2, tion of Article 46pObthat actuaries, it is clear from the above quoted porexaminers andaseistant examiners of the Board of Insurance Commissioners cannot continue to serve as such if, while holding such position, they shall directly or indirectly receive or accept from any insurance companyany employment or pay'or compensation or gratuity en account of any service rendered or to be rendered or on any account whatsoever. In answer to question Ro. 

### 3,the etatute doea not prescribe apenalty for a violation of the prohibited act except to disqualify such employees from further continuing to represent the State in aaid capacities. In our opinion the penalty should be the removal of 8uch employees from the positions they hold, unleaa their acceptance of such consideration constitutes aviolation of 8ptciflc criminal statutes, in which event, the penalties prescribed by such statute6 could also be inflicted.

Wetrust that thin ia the information you desire. vwB:R:IM APPROVRD: (Mened) Gerald C. Warm ATT= OBIWULOFTRXAS Yours very truly ATTORREY

(;ERwALOFTRXAS By(Signed) Victor W.Bouldin

Victor W.Bouldin

Assistant