Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 7 - CORPORATE AND FINANCIAL REGULATION › Subchapter B - INSURANCE HOLDING COMPANY SYSTEMS › Section 7.204 - Transactions Subject to Prior Notice

Current through Reg. 49, No. 28; July 12, 2024
(a)
				  Prior approval and notice.
(1) The prior
				  written approval of the commissioner is required for the transactions specified
				  in the Act, §823.102.
				  This section only applies to sales, purchases, exchanges, loans or extensions
				  of credit or guarantees, or investments, including an amendment or modification
				  of an affiliate agreement previously filed under this section.
(2) The following transactions under the Act,
				  §823.103,
				  including any amendments or modification of an agreement as previously filed
				  between a domestic insurer and any person in its holding company system may not
				  be entered into unless the insurer has notified the commissioner in writing of
				  its intention to enter into any like transaction at least 30 days prior, or a
				  shorter period as the commissioner may permit, and the commissioner has not
				  disapproved it within the period:
(A) sales,
				  purchases, exchanges, loans or extensions of credit or guarantees, or
				  investments;
(B) reinsurance
				  agreements, including reinsurance treaties, or pooling agreements, or any
				  amendments or modification to any agreement, and those agreements that may
				  require as consideration the transfer of assets from an insurer to a
				  nonaffiliate, if an agreement or understanding exists between the insurer and
				  nonaffiliate that any portion of the assets will be transferred to one or more
				  affiliates of the insurer;
(C) any
				  contract, agreement, or arrangement for the furnishing or receiving of services
				  or facilities on a regular or systematic basis; or
(D) management or service agreements, cost
				  sharing agreements, rental or leasing agreements must at a minimum, to the
				  extent not inconsistent with applicable law or regulation, and as applicable:
(i) identify the person providing services
				  and the nature of the services;
(ii) set forth the methods to allocate costs
				  to include Insurance Code §823.101(e);
(iii) require timely settlement, at
				  least every 90 days, and compliance with the requirements in the Accounting
				  Practices and Procedures Manual published by the National Association of
				  Insurance Commissioners;
(iv)
				  prohibit advancement of funds by the insurer to the affiliate except to pay for
				  services defined in the agreement;
(v) state that the insurer will maintain
				  oversight for functions provided to the insurer by the affiliate and that the
				  insurer will monitor services annually for quality assurance;
(vi) define books and records of the insurer
				  to include all books and records developed or maintained under or related to
				  the agreement;
(vii) specify that
				  all books and records of the insurer are and remain the property of the insurer
				  and are subject to control of the insurer;
(viii) state that all funds and invested
				  assets of the insurer are the exclusive property of the insurer, held for the
				  benefit of the insurer and are subject to the control of the insurer;
(ix) include standards for
				  termination of the agreement with and without cause;
(x) include indemnifying the insurer in the
				  event of gross negligence or willful misconduct by the affiliate providing the
				  services;
(xi) specify that, if
				  the insurer is placed in receivership or seized by the commissioner under
				  Insurance Code Chapter 443:
(I) all of the
				  rights of the insurer under the agreement extend to the receiver or
				  commissioner; and
(II) all books
				  and records will immediately be made available to the receiver or the
				  commissioner, and must be turned over to the receiver or commissioner
				  immediately upon the receiver or the commissioner's request;
(xii) specify that the
				  affiliate has no automatic right to terminate the agreement if the insurer is
				  placed in receivership under Insurance Code Chapter 443; and
(xiii) specify that the affiliate will
				  continue to maintain any systems, programs, or other infrastructure
				  notwithstanding a seizure by the commissioner under Insurance Code Chapter 443,
				  and will make them available to the receiver, for so long as the affiliate
				  continues to receive timely payment for services rendered;
(E) agreements to consolidate federal income
				  tax returns, which agreements must provide that a domestic insurer will be
				  adequately indemnified in the event the Internal Revenue Service levies upon
				  the insurance company's assets for unpaid taxes in excess of the amount paid
				  under the agreement;
(F)
				  transactions with affiliated financial institutions, other than fully insured
				  deposits;
(G) participation in an
				  investment pool by a property and casualty insurer under Insurance Code Chapter
				  424; and
(H) any material
				  transactions which the commissioner has determined after notice may adversely
				  affect the interest of the insurer's policyholders or of the public.
(3) A domestic insurer
				  may not enter into transactions that are part of a plan or series of similar
				  transactions with persons within the holding company system to avoid the
				  statutory threshold amount and avoid review. If the commissioner determines
				  that the transactions were entered into over any 12-month period for that
				  purpose, the commissioner may consider the series of transactions with regard
				  to their cumulative effect and may apply the applicable statutory thresholds or
				  the commissioner may apply sanctions under the Code.
(4) Nothing in this rule will authorize or
				  permit any transactions which, in the case of a noncontrolled insurer, would be
				  otherwise contrary to law.
(5) The
				  commissioner, in reviewing transactions, must consider whether the transactions
				  comply with the standards set forth in subsection (c) of this section and
				  whether they may adversely affect the interest of policyholders. Any
				  disapproval by the commissioner of any of the transactions must set forth the
				  specific reasons for the disapproval.
(6) The approval of any transaction under
				  this subsection is deemed an amendment under §7.203(e) of this title (relating
				  to Registration of Insurers) to an insurer's registration statement without
				  further filing.