### EAXTORNEY GENERAL
OFTEXAS

GERALD C.MANN AUSTINI~.TEXAS

Honorable 0. P. Lockhart, Chairman Board of InsuranceCommissioners Austin, Texas

Dear Sirr Opinion No. O-4636 Re: Can the Board of Insurance Cormissionersproperly limit the amount of a single risk to whiah a United States Branch of an alien insurer licensed in Texae may expose itselfwithout reinsurance in the manner provided inArticle 49327

Your letter of September 6, 1942, presenting the above question for
an opinion of this department,reader
"Article 4932, Se&ion 1, sets the limit to which a fire, fire and marine,marine or inland insurer,may expose itself to a single risk without reinsurenceat ten peroent of itr paid up oapital.

'The United States Branches of alien companieshave no oapital stock. Each Branch licensed in Texas is oertifiedby the Mew York Superintendent of Insuranceto have oompliedwith Se&ion 104 of the New York Insurance Law of 1939, requiring the maintenanoe of minimum depositswith the proper state officers for the benefit of all its policyholdersand oreditors in the United States. This deposit is a capital account, and when made, has heretofore been construedto be analogous to the capital stock requirement of our Article 4993 as one of the predioates to do business in Texas. On showing of satisfactoryoondition of the affairs of the United States Eranohes (without regard to the parent aompaniesabroad) by examination or annual statement,and themeeting of other eonditionenot pertinenthere, the Brancheshave been licensed in this stateunder Artiales 4666 and 4919.
"Each of the branches operating in Texas is also licensed in Mew York, and its requirementof maintenance of 'TrusteedSurplus'has been compliedwith, as set out and fully defined in Section 96 of its 1939 laws.
"Willyou kindly advise me whether this Departmentmay properly limit the amount of a single riak to which a United States Branch of an alien insurer licensed in Texasmay expose itselfwithout reinsurance in the manner provided inArtiole 4932: and if so,whether the ratio of the risk shall be to the 'statutorydeposittdesoribed in Section 104 or to the 'TrusteedSurplus* BLIdefined in Section 96 of the Mew York InsuranceLaws of 1939."Honorable 0. P. Lookhart, Chairman,Page 2 O-4838

Article 4932, Section 1, Revised Civil Statutes, 1925, provides:

"No fire, fire andmarine, marine or inland insuranoe company doing business in this State shall expose itself to any one risk, except when insuring cotton in bales, and grain, to an amount exceeding ten per cent of its paid up capital stock, unless the excess shall be insuredby such company in some other solvent insurance company legally authorized to do business in this State."
The above quoted section of Article 4932 was originally enacted by the Acts of 1875, 14th Legislature,being at that time a part of Section 8 of Chapter 31 of saidActs fromwhich section, our presentArticle 4919 is taken. By its languageas enacted, such limitationextended to not exceedingten percent (lO$) of the "paid up capital" of such companies. This provision so worded was brought forward in both the Revised Statutes of 1879 and 1896 as Articles 2967 and 3075, respectively. By the Acts of 1905, 29th Legislature, Chapter 80, this Article was amended by adding several sectionsand as it now appears in Section 1, the term "paid up capital stock"was adopted in lieu of "paidup capital".

It is pointed out by you that the United States branches of the alien companieshave no capital steak. Regardless of what distinction, if any, shouldbe made, it is apparent by the changeas above noted, that neither of the terms, "paidup capital"nor "paid up capital stock" are to be construedas equivalent to and meaning statutorydeposits or trusteed surpluses in or defined,by the laws of a particular foreign state.
Such oompaniesas named in this Article are governed by the provisions of Chapter 11, Title 78 of the Revised Civil Statutes, 1925,wherein is contained Article 4919 and we fail to find any statutoryauthority for the Board of InsuranceCommissionersto accept the depositsmade by United States branches of alien companies in the State of New York as either their "capital“ or "capital stock"within the purview of this statute.
This statute limits the risks to which such characterof insurance companiesmay be exposed to ten percent (10%) of its paid up capital stock. It is apparent that such alien branch companiesmust be considered
as having no paid up capital stock. It seems to us that any application of this statute as would construe the term "paid up capital stock" as meaning statutorydeposits or trusteed surplusesmade in and defined under the laws of any particular foreign state appears to have been refuted by the Supreme Court in Glens Falls InsuranceCompanyv. Hawkins, 126 S. W. 1114. Although a stock companywas there involved, the Courtheld that the surplus it could show of #2,433,826,and urged as a permissiblebasis of limitationof risksunder the laws of New York,was not to be considered, and therefore the Court refused to mandamus the Commissionerof Insuranceto issue a certificateto this foreign companywho had violated the statute..

Honorsble 0. P. Lockhart, Chairmen, Page 3 O-4838

We are not to be understood as holding herein that Article 4932, supra, does not apply to suoh alien branch companiesnor do we undertake to decide that there has been any violation of this statute. We have understood end discussedyour request solely upon the assumption that you would enforce this statute to one or the other capital accounts required end designatedunder the laws of New York as "statutorydeposit" or trusteed surplus",neither of which are within themeaning of "paid up oapital stock" as used in this statute.

You are therefore respectfullyadvised that in the opinion of this department,the Board of InsuranceCommissionersis not authorized to accept the statutorydeposit or the trusteed surplusmade in end as defined by the State of New York by United States branohes of alien companies doing business in Texas as its "paid up capital stock"within the provisions of Article 4932, Revised Civil Statutes of Texas, as same limits any one single risk to which such oharacter of companiesnamed thereinmay be exposed.

Yoursvery truly

ATTORNEY GENERAL OF TEXAS

By s/V& J. R. King

Wh. J. R. King Assistant c
%JRK:mp-wo
APPROW;', OCT. 24, 1942

APPROVED O?~NI@N COMMLTTEE BY Bin? Chairman