Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 2 - TEXAS DEPARTMENT OF BANKING › Chapter 25 - PREPAID FUNERAL CONTRACTS › Subchapter B - REGULATION OF LICENSES › Section 25.14 - Uniform Risk Ratings

Current through Reg. 49, No. 28; July 12, 2024
(a) In general. All
				  prepaid funeral benefit permit holders are subject to periodic examination. As
				  a result of the examination, the permit holder will be assigned a confidential
				  uniform risk rating of 1 to 5 as further described in this section. The uniform
				  risk rating represents a judgment of the overall risk profile presented by the
				  permit holder in relation to the purposes of regulation. In general, a rating
				  of 1 indicates the highest level of compliance and the least degree of
				  supervisory concern, and a rating of 5 indicates the lowest level of compliance
				  and the highest degree of supervisory concern. A rating of 3, 4 or 5 is
				  considered less than satisfactory for purposes of Finance Code §
										RSA
				  154.053(b)(1)(A).
(b) Overall risk profile. Evaluation of the
				  overall risk profile of the permit holder can be described as involving three
				  interrelated attributes or components, although these attributes are not
				  separately rated.
(1) Management. This
				  attribute or portion of the evaluation involves judgment of the ability, skill,
				  and motivation of management and staff of the permit holder to identify,
				  measure, monitor, and control potential problems and risks. Competent
				  management should be able to develop and apply management practices and
				  procedures suitable to the size of the permit holder and the nature and
				  complexity of its activities. In addition, the willingness and ability of
				  management to comply with applicable laws and regulations are important
				  considerations.
(2) Compliance.
				  This attribute or portion of the evaluation involves judgment of the degree to
				  which the permit holder administers prepaid funeral contracts in accordance
				  with governing instruments and applicable laws and regulations and the degree
				  to which the permit holder adheres to sound fiduciary principles. The examiner
				  will consider the extent and nature of violations discovered during the
				  examination, and will assess the manner and methods by which the permit holder
				  discovers and corrects violations. Correction of violations cited in previous
				  examinations will also be considered.
(3) Financial condition. This attribute or
				  portion of the evaluation involves judgment of the overall financial condition
				  of the permit holder in relation to the risks imposed by its size and the
				  nature and complexity of its activities. An important consideration is the
				  extent of the financial resources available to the permit holder for the
				  purpose of fulfilling its responsibilities and obligations over the life of the
				  prepaid funeral contracts under its control, including those currently
				  outstanding and those reasonably anticipated to exist in the future.
				  Availability of financial resources can be demonstrated through or enhanced by
				  undertakings of a parent company or associated holding company.