Opinion ID: 66467
Heading Depth: 3
Heading Rank: 3

Heading: Under Texas Law

Text: The Texas Insurance Code specifically authorizes the establishment of reciprocal insurance exchanges and establishes rules relating to their operation. See Tex. Ins. Code Ann. § 942 (2008); see also 44 Tex. Jur.3d Insurance Companies § 57. The statute provides that subscribers of this state may exchange reciprocal or interinsurance contracts with other subscribers of this state or of another state or country to provide indemnity among those subscribers for a loss for which insurance coverage may be obtained under other law. Tex. Ins.Code Ann. § 942.002(a). A subscriber is defined as an individual, partnership, or corporation who, through an attorney in fact, enters into a reciprocal or interinsurance contract. Id. § 942.001(4). A reciprocal or interinsurance contract is defined as an insurance policy or other contract that provides indemnity among a group of subscribers for certain losses, id. § 942.001(3), and the statute provides that such a contract may be executed by an attorney in fact appointed by the subscribers of an exchange, id. § 942.051. The statute requires subscribers, through an attorney in fact, to file a declaration specifying the name of the proposed exchange, the kinds of insurance to be provided, a copy of the power of attorney or other authorization of the attorney in fact, the location of the exchange's offices, and an affidavit stating that the capital and surplus is the bona fide property of the exchange and that the information in the declaration is true. Id. § 942.053. The statute imposes financial requirements on exchanges relating to the maintenance of sufficient unencumbered surplus and reserves. Id. § 942.155. The primary purpose of [such requirements are] to provide policyholder security in the event of adverse or catastrophic loss experience. Reinmuth, supra, at 119.