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  S.B. No. 1431
 
 
 
 
AN ACT
  relating to the functions of insurance holding company systems.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 823.002, Insurance Code, is amended by
  adding Subdivisions (3-a), (3-b), and (4-a) and amending
  Subdivision (6) to read as follows:
               (3-a)  "Divesting person" means a person who has
  control of a domestic insurer and who intends to divest control of
  the domestic insurer.
               (3-b)  "Divestiture" means an abandonment of control of
  a domestic insurer by a divesting person that does not result in the
  transfer of control to another person.
               (4-a)  "Enterprise risk" means any activity,
  circumstance, event, or series of events involving one or more
  affiliates of an insurer that, if not remedied promptly, is likely
  to have a material adverse effect on the financial condition or
  liquidity of the insurer or its insurance holding company system as
  a whole, including anything:
                     (A)  that would cause the insurer's risk-based
  capital to fall into company action level; or
                     (B)  that would cause the insurer to be in
  hazardous financial condition.
               (6)  "Insurer" means any insurance company organized
  under the laws of this state, a commercially domiciled insurer, or
  an insurer authorized to engage in the business of insurance in this
  state. The term includes a capital stock company, mutual company,
  farm mutual insurance company, title insurance company, fraternal
  benefit society, local mutual aid association, statewide mutual
  assessment company, county mutual insurance company, Lloyd's plan,
  reciprocal or interinsurance exchange, stipulated premium
  insurance company, and group hospital service corporation. The
  term does not include an agency, authority, or instrumentality of
  the United States, its possessions and territories, the
  Commonwealth of Puerto Rico, the District of Columbia, or a state[,
  or an agency, authority, instrumentality,] or political
  subdivision of a state.
         SECTION 2.  Section 823.010, Insurance Code, is amended by
  amending Subsections (c) and (d) and adding Subsections (e) through
  (h) to read as follows:
         (c)  Except as provided by Subsection (d), [After] the
  disclaimer shall be deemed to have been allowed unless, not later
  than 60 days after the receipt of a complete disclaimer, [is filed:
               [(1)     the insurer is not required to register or report
  under Subchapter B because of a duty that arises out of the
  insurer's relationship with the person unless] the commissioner
  notifies the filing party that [disallows] the disclaimer is
  disallowed[, in which event the duty to register or report begins on
  the date of the disallowance; and
               [(2)     the person is not required to comply with
  Sections 823.154, 823.155, 823.159, and 823.160 unless the
  commissioner disallows the disclaimer].
         (d)  Notwithstanding Subsection (c), if the commissioner at
  any time determines that the information disclosed in the
  disclaimer is incomplete or inaccurate or is no longer accurate,
  the [The] commissioner may disallow the disclaimer [only after:
               [(1)     providing to each party in interest notice of and
  the opportunity to be heard on the disallowance; and
               [(2)     making specific findings of fact to support the
  disallowance].
         (e)  If the commissioner disallows a disclaimer, the party
  who filed the disclaimer may request an administrative hearing.  
  The commissioner shall grant the request for the hearing.
         (f)  Except as provided by Subsection (h), if the
  commissioner allows a disclaimer:
               (1)  the insurer is not required to register or report
  under Subchapter B due to a duty arising from the insurer's
  relationship with the party who filed the disclaimer; and
               (2)  the party who filed the disclaimer is not required
  to comply with Section 823.154, 823.155, 823.159, or 823.160.
         (g)  If the commissioner allows a disclaimer, the
  commissioner at the same time may also waive another provision of
  this chapter with relation to the party who filed the disclaimer.  
  The commissioner may require reasonable controls and safeguards
  that are consistent with the purposes of this chapter in granting a
  waiver under this subsection.
         (h)  If the commissioner disallows a disclaimer under
  Subsection (d):
               (1)  effective on the date of the disallowance, the
  insurer shall register and report as required by Subchapter B; and
               (2)  the party who filed the disclaimer shall comply
  with Sections 823.154, 823.155, 823.159, and 823.160.
         SECTION 3.  Section 823.011, Insurance Code, is amended by
  amending Subsections (a), (b), and (d) and adding Subsections (e)
  through (i) to read as follows:
         (a)  This section applies only to information, including
  documents and copies of documents, that is:
               (1)  reported under Subchapter B; [or]
               (2)  disclosed to the commissioner under Section
  823.010; or
               (3)  obtained by or disclosed to the commissioner or
  another person in the course of an examination or investigation
  under Subchapter H.
         (b)  The information shall be confidential and privileged
  for all purposes [treated confidentially and is not subject to
  subpoena]. Except as provided by Subsections (c) and (d), the
  information may not be disclosed without the prior written consent
  of the insurer to which it pertains.
         (d)  Except as provided by Subsection (e), if the recipient
  of documents or other information agrees in writing to maintain the
  confidential and privileged status of the documents or other
  information, and verifies in writing the legal authority to
  maintain the confidential and privileged status of the documents or
  information, the [The] commissioner or another person may disclose
  the information to any of the following entities functioning in an
  official capacity:
               (1)  a commissioner of insurance or an insurance
  department of another state;
               (2)  an authorized law enforcement official;
               (3)  a district attorney of this state;
               (4)  the attorney general; [or]
               (5)  a grand jury;
               (6)  members of a supervisory college described by
  Section 823.0145; or
               (7)  the National Association of Insurance
  Commissioners and its affiliates and subsidiaries.
         (e)  Notwithstanding Subsection (d), the commissioner may
  share confidential and privileged information reported under
  Section 823.0595 only with the commissioner of insurance of a state
  that has a statute or rule substantially similar to Subsection (d)
  who agrees in writing not to disclose the information.
         (f)  Information described by Subsection (a), including
  information in the possession of the National Association of
  Insurance Commissioners under this section, is confidential and
  privileged for all purposes, including for purposes of:
               (1)  Chapter 552, Government Code;
               (2)  a response to a subpoena; or
               (3)  discovery or admissibility in evidence in a civil
  action.
         (g)  The commissioner shall enter into written agreements
  with the National Association of Insurance Commissioners that
  comply with the requirements of Subsection (d) regarding the
  sharing and use of information provided under this chapter.  An
  agreement entered into under this subsection must:
               (1)  specify procedures and protocols regarding the
  confidentiality and security of information shared with the
  National Association of Insurance Commissioners and its affiliates
  and subsidiaries under this chapter, including procedures and
  protocols for sharing by the National Association of Insurance
  Commissioners with other state, federal, or international
  regulators;
               (2)  specify that ownership of information shared with
  the National Association of Insurance Commissioners and its
  affiliates and subsidiaries under this chapter remains with the
  commissioner, and that use of the information by the National
  Association of Insurance Commissioners is subject to the direction
  of the commissioner;
               (3)  require prompt notice to an insurer whose
  confidential information is in the possession of the National
  Association of Insurance Commissioners under this chapter that the
  information is subject to a request or subpoena to the National
  Association of Insurance Commissioners for disclosure or
  production; and
               (4)  require the National Association of Insurance
  Commissioners and its affiliates and subsidiaries to give consent
  to intervention by an insurer in any judicial or administrative
  action in which the National Association of Insurance Commissioners
  and its affiliates and subsidiaries may be required to disclose
  confidential information about the insurer shared with the National
  Association of Insurance Commissioners and its affiliates and
  subsidiaries under this chapter.
         (h)  This section may not be construed to prevent the
  commissioner from using information described by Subsection (a) in
  the furtherance of a legal or regulatory action relating to the
  administration of this code.
         (i)  The commissioner remains solely responsible for the
  administration, execution, and enforcement of this chapter, and the
  commissioner's sharing of information does not constitute a
  delegation of regulatory or rulemaking authority.
         SECTION 4.  Subchapter A, Chapter 823, Insurance Code, is
  amended by adding Section 823.0145 to read as follows:
         Sec. 823.0145.  SUPERVISORY COLLEGES. (a)  With respect to
  any insurer registered under Subchapter B, and in accordance with
  Subsection (c), the commissioner may participate in a supervisory
  college for a domestic insurer that is part of an insurance holding
  company system with international operations in order to determine
  the insurer's compliance with this chapter. The commissioner may:
               (1)  initiate the establishment of a supervisory
  college;
               (2)  clarify the membership and participation of other
  entities in the supervisory college;
               (3)  clarify the functions of the supervisory college
  and the role of other entities in the supervisory college;
               (4)  establish a group-wide supervisor;
               (5)  coordinate the ongoing activities of the
  supervisory college, including meetings, regulatory activities,
  and processes for information sharing; and
               (6)  establish a crisis management plan.
         (b)  In order to assess the business strategy, financial
  position, legal and regulatory position, risk exposure, risk
  management and governance processes, and as part of the examination
  of individual insurers under Subchapter H, the commissioner may
  participate in a supervisory college with other entities that
  regulate the insurer or its affiliates, including other state,
  federal, and international regulatory entities. The commissioner
  may enter into agreements under Section 823.011 to cooperate with
  other regulatory entities. Nothing in this section shall be
  construed as delegating to the supervisory college the
  commissioner's authority to regulate the insurer or its affiliates.
         (c)  A registered insurer subject to this section shall pay
  the reasonable expenses, including reasonable travel expenses, of
  the commissioner's participation in a supervisory college under
  Subsection (b). For purposes of this section, a supervisory
  college may be convened as either a temporary or permanent forum for
  communication and cooperation between the entities that regulate
  the insurer or its affiliates, and the commissioner may establish a
  regular assessment to the insurer for the payment of expenses
  related to the regulation of the insurer.
         SECTION 5.  Section 823.052, Insurance Code, is amended by
  amending Subsections (b) and (c) and adding Subsections (c-1) and
  (c-2) to read as follows:
         (b)  The registration statement must be in a format
  prescribed by the National Association of Insurance Commissioners
  or adopted by rule of the commissioner and contain current
  information about:
               (1)  the identity and relationship of each affiliate in
  the insurance holding company system of which the insurer is a part;
               (2)  the capital structure, general financial
  condition, and ownership and management of the insurer, the
  insurer's holding company, the insurer's subsidiaries, and, if the
  commissioner considers the information necessary, any of the
  insurer's other affiliates; and
               (3)  any pledge of stock of the insurer or a subsidiary
  or controlling affiliate of the insurer for a loan made to a member
  of the insurer's insurance holding company system.
         (c)  The registration statement must also contain
  information about:
               (1)  each outstanding loan the insurer makes to an
  affiliate of the insurer or an affiliate makes to the insurer;
               (2)  each purchase, sale, or exchange of securities or
  other investment between the insurer and an affiliate of the
  insurer;
               (3)  each purchase, sale, or exchange of assets between
  the insurer and an affiliate of the insurer;
               (4)  each management and service contract or
  cost-sharing arrangement between the insurer and an affiliate of
  the insurer;
               (5)  each reinsurance agreement between the insurer and
  an affiliate of the insurer that covers one or more lines of
  insurance of the ceding company;
               (6)  each agreement between the insurer and an
  affiliate of the insurer to consolidate federal income tax returns;
               (7)  each transaction between the insurer and an
  affiliated financial institution;
               (8)  each transaction between the insurer and an
  affiliate of the insurer that is not in the ordinary course of
  business;
               (9)  each guarantee or undertaking, other than an
  insurance contract entered into in the ordinary course of the
  insurer's business, for the benefit of an affiliate of the insurer
  that results in a contingent exposure of the insurer's assets to
  liability;
               (10)  each dividend or distribution to the insurer's
  shareholders; [and]
               (11)  each transaction between the insurer and an
  affiliate of the insurer not specified by this subsection that is
  subject to Section 823.102, 823.103, or 823.104;
               (12)  the corporate governance and internal control
  responsibilities of the insurer's board of directors, including a
  statement that:
                     (A)  the insurer's senior management or officers
  have approved and implemented, and continue to maintain and
  monitor, corporate governance and internal control procedures; and
                     (B)  the insurer's board of directors oversees
  corporate governance and internal controls; and
               (13)  any other information that the commissioner
  requires by rule.
         (c-1)  On request of the commissioner, an insurer shall
  include with the statement a copy of all financial statements for
  the insurance holding company system and all affiliates of the
  holding company system, including annual audited financial
  statements filed with the United States Securities and Exchange
  Commission pursuant to the Securities Act of 1933 (15 U.S.C.
  Section 77a et seq.) or the Securities Exchange Act of 1934 (15
  U.S.C. Section 78a et seq.).  An insurer may not be required to
  submit financial statements for an affiliate that is privately
  owned by not more than five security holders, each of whom is an
  individual, unless the commissioner determines that the operations
  of the affiliate may materially affect the operations, management,
  or financial condition of an insurer in a holding company system.  
  An affiliate may seek judicial review of a request for financial
  statements under this subsection.
         (c-2)  An insurer required by the commissioner to submit
  financial statements under this section, Section 823.201, or
  Section 823.351 may satisfy the requirement by submitting to the
  commissioner:
               (1)  the financial statements that the insurer's parent
  corporation most recently filed with the United States Securities
  and Exchange Commission; and
               (2)  if the insurer is required to submit financial
  statements for an affiliate, the financial statements that the
  affiliate most recently filed with an agency that regulates the
  affiliate.
         SECTION 6.  Subchapter B, Chapter 823, Insurance Code, is
  amended by adding Section 823.0595 to read as follows:
         Sec. 823.0595.  ENTERPRISE RISK REPORT. (a)  Except as
  provided by Subsections (d) and (f), the ultimate controlling
  person, as defined by Section 823.055, of each insurer required to
  file an annual registration shall file with the registration an
  annual enterprise risk report. The report must, to the best of the
  ultimate controlling person's knowledge, identify the material
  risks within the insurance holding company system that may pose
  enterprise risk to the insurer. The report must be filed with the
  lead state commissioner of the insurance holding company system, as
  determined by the commissioner.  In determining the lead state
  commissioner, the commissioner shall consider the procedures
  adopted by the National Association of Insurance Commissioners.
         (b)  The ultimate controlling person of an insurer shall file
  the first enterprise risk report required by this section with the
  first annual registration statement due after:
               (1)  July 1, 2013, if the total direct or assumed annual
  premiums of the insurer were $5 billion or more during the preceding
  12-month period;
               (2)  January 1, 2014, if the total direct or assumed
  annual premiums of the insurer were more than $1 billion but less
  than $5 billion during the preceding 12-month period;
               (3)  January 1, 2015, if the total direct or assumed
  annual premiums of the insurer were more than $500 million but less
  than $1 billion during the preceding 12-month period; or
               (4)  January 1, 2016, if the total direct or assumed
  annual premiums of the insurer were $300 million or more but less
  than $500 million during the preceding 12-month period.
         (c)  Subsection (b) and this subsection expire January 2,
  2015.
         (d)  Except as provided by Subsection (e), the ultimate
  controlling person of an insurer with total direct or assumed
  annual premiums of less than $300 million is not required to submit
  an enterprise risk report under Subsection (a).
         (e)  Regardless of total direct or assumed annual premium,
  the ultimate controlling person of an insurer that is not in
  compliance with applicable risk-based capital standards or that is
  otherwise in hazardous condition, as determined by the
  commissioner, shall file an enterprise risk report required by
  Subsection (a) as directed by the commissioner.
         (f)  An insurer or health maintenance organization that in
  the preceding calendar year had direct written and assumed premiums
  of more than $300 million but less than $500 million may request an
  exemption from the reporting requirements of Subsection (a) by
  filing with the commissioner a written statement describing the
  undue financial or organizational hardship the insurer or health
  maintenance organization would suffer as a result of complying with
  Subsection (a). The commissioner may grant the exemption if the
  commissioner finds that compliance with Subsection (a) would impose
  an undue financial or organizational hardship on the insurer or
  health maintenance organization.
         (g)  The ultimate controlling person of an insurance holding
  company system is not required to submit an enterprise risk report
  under Subsection (a) if:
               (1)  the ultimate controlling person:
                     (A)  has owned a controlling interest in the
  voting securities of an insurer described by Subdivision (2) since
  September 1, 1991, or before;
                     (B)  is a charitable foundation, trust, or both;
  and
                     (C)  has not filed or received a disclaimer under
  Section 823.010; and
               (2)  the insurer in which the ultimate controlling
  person owns a controlling interest:
                     (A)  was organized under the laws of this state
  before January 1, 1910;
                     (B)  is registered under this subchapter;
                     (C)  has issued equity shares of stock registered
  under Section 12, Securities Exchange Act of 1934 (15 U.S.C.
  Section 781);
                     (D)  on September 1, 2011, owns or controls an
  insurance company subsidiary that is part of the same insurance
  holding company system as the insurer; and
                     (E)  files with the commissioner all registration
  statements and information relating to material changes of the
  insurance holding company system required under this subchapter,
  including the financial statements of the ultimate controlling
  person described by Subdivision (1).
         (h)  An exemption under Subsection (g) applies only for the
  period during which the ultimate controlling person described by
  Subsection (g)(1) satisfies the requirements of Subsection (g) and
  expires on the date of a change in control of the insurer described
  by Subsection (g)(2) involving at least 50 percent of the voting
  securities of the insurer.  An insurance holding company system may
  reapply for an exemption under Subsection (g) after the change in
  control if the system continues to meet the requirements of
  Subsection (g).
         (i)  An ultimate controlling person described by Subsection
  (g)(1) and an insurer described by Subsection (g)(2) shall respond
  to reasonable inquiries from the department related to the
  administration of Chapter 404.
         SECTION 7.  Section 823.060, Insurance Code, is amended to
  read as follows:
         Sec. 823.060.  VIOLATION OF SUBCHAPTER. The failure to file
  a registration statement or an amendment to a registration
  statement, or an enterprise risk report, within the time specified
  for filing the statement, [or] amendment, or report, as required by
  this subchapter, is a violation of this subchapter.
         SECTION 8.  The heading to Section 823.101, Insurance Code,
  is amended to read as follows:
         Sec. 823.101.  STANDARDS FOR TRANSACTION WITHIN AN INSURANCE
  HOLDING COMPANY SYSTEM [WITH AFFILIATE].
         SECTION 9.  Section 823.101, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (b-1) to read as
  follows:
         (a)  This section applies only to a material transaction
  within an insurance holding company system to which an [between a
  registered insurer and an affiliate of the] insurer subject to a
  registration under Section 823.052 is a party.
         (b-1)  An agreement, including an agreement for
  cost-sharing, services, or management, must include all provisions
  required by rule of the commissioner.
         SECTION 10.  Section 823.102, Insurance Code, is amended by
  amending Subsection (a) and adding Subsections (d) and (e) to read
  as follows:
         (a)  This section applies only to a sale, purchase, exchange,
  loan or other extension of credit, or investment between a domestic
  insurer and any person in the insurer's insurance holding company
  system, including an amendment or modification of an affiliate
  agreement previously filed under this section, that involves more
  than the lesser of 5 percent of the insurer's admitted assets or 25
  percent of the insurer's surplus, as of December 31 of the year
  preceding the year in which the transaction occurs.
         (d)  The notice described by Subsection (c) must include:
               (1)  the reasons for entering into or changing the
  transaction; and
               (2)  the financial impact of the transaction on the
  domestic insurer.
         (e)  Not later than the 30th day after the termination of a
  previously filed agreement, the domestic insurer shall give notice
  of the termination to the commissioner.
         SECTION 11.  Section 823.103, Insurance Code, is amended by
  amending Subsection (a) and adding Subsections (e) and (f) to read
  as follows:
         (a)  This section applies only to:
               (1)  a sale, purchase, exchange, loan or other
  extension of credit, or investment between a domestic insurer and
  any person in the insurer's insurance holding company system,
  including an amendment or modification of an affiliate agreement
  previously filed under this section:
                     (A)  that involves more than the lesser of
  one-half of one percent of the insurer's admitted assets or five
  percent of the insurer's surplus, as of December 31 of the year
  preceding the year in which the transaction occurs; and
                     (B)  the approval of which is not required under
  Section 823.102;
               (2)  a reinsurance agreement, including a reinsurance
  treaty or pooling agreement, or an amendment or modification of an
  agreement previously filed under this section, between a domestic
  insurer and any person in the insurer's holding company system [or a
  modification of such an agreement];
               (3)  a rendering of services between a domestic insurer
  and any person in the insurer's holding company system on a regular
  or systematic basis, including a tax-allocation agreement, or an
  amendment or modification of an agreement previously filed under
  this section; or
               (4)  any material transaction between a domestic
  insurer and any person in the insurer's holding company system that
  is specified by rule and that the commissioner determines may
  adversely affect the interests of the insurer's policyholders or of
  the public, including an amendment or modification of an agreement
  previously filed under this section.
         (e)  The notice described by Subsection (c) must include:
               (1)  the reasons for entering into or changing the
  transaction; and
               (2)  the financial impact of the transaction on the
  domestic insurer.
         (f)  Not later than the 30th day after the termination of a
  previously filed agreement, the domestic insurer shall give notice
  of the termination to the commissioner.
         SECTION 12.  Section 823.154, Insurance Code, is amended to
  read as follows:
         Sec. 823.154.  REQUIREMENTS FOR ACQUISITION OR EXERCISE OF
  CONTROL OR DIVESTITURE OF DOMESTIC INSURER. (a)  Before a person
  who directly or indirectly controls, or after the acquisition would
  directly or indirectly control, a domestic insurer may in any
  manner acquire a voting security of a domestic insurer or before a
  person may otherwise acquire control of a domestic insurer or
  exercise any control over a domestic insurer, or before a person may
  initiate a divestiture of control of a domestic insurer:
               (1)  the acquiring person shall file with the
  commissioner a statement that satisfies the requirements of
  Subchapter E; [and]
               (2)  the acquisition or divestiture of control must be
  approved by the commissioner in accordance with this subchapter;
  and
               (3)  if the person is initiating a divestiture of
  control, the divesting person shall file with the commissioner a
  notice of divestiture on a form adopted by the National Association
  of Insurance Commissioners or adopted by the commissioner by rule.
         (b)  The acquiring person or divesting person shall send a
  copy of the statement filed under this section to the domestic
  insurer.
         (c)  A statement or notice filed under this section must be
  filed not later than the 60th day before the proposed effective date
  of the acquisition or change of control or divestiture and is
  subject to public inspection at the office of the commissioner.
         (d)  Notwithstanding Subsection (a), a divesting person is
  not required to provide the commissioner with notice of divestiture
  required by Subsection (a)(3) if an acquiring person submits the
  statement required by Subsection (a)(1) and that acquisition is
  approved by the commissioner.
         SECTION 13.  Section 823.157, Insurance Code, is amended to
  read as follows:
         Sec. 823.157.  APPROVAL OF ACQUISITION, CHANGE, OR
  DIVESTITURE OF CONTROL. (a)  The commissioner shall approve or
  deny an acquisition, [or] change, or divestiture of control for
  which a statement or notice is filed under Section 823.154 not later
  than the 60th day after the date the statement required by that
  section is filed. The 60-day period may be waived by the person
  filing the statement or notice required by Section 823.154 and the
  domestic insurer. On the request of either the person filing the
  statement or notice required by Section 823.154, or the domestic
  insurer, the commissioner shall hold a hearing on a denial.
         (b)  In considering whether to approve or deny, the
  commissioner shall consider whether:
               (1)  immediately on the acquisition, [or] change, or
  divestiture of control the domestic insurer would not be able to
  satisfy the requirements for the issuance of a new certificate of
  authority to write the line or lines of insurance for which the
  insurer holds a certificate of authority;
               (2)  the effect of the acquisition, [or] change, or
  divestiture of control would be substantially to lessen competition
  in a line or subclassification lines of insurance in this state or
  tend to create a monopoly in a line or subclassification lines of
  insurance in this state;
               (3)  the financial condition of the acquiring person
  may jeopardize the financial stability of the domestic insurer or
  prejudice the interest of the domestic insurer's policyholders;
               (4)  the acquiring person has a plan or proposal to
  liquidate the domestic insurer or cause the insurer to declare
  dividends or make distributions, sell any of its assets,
  consolidate or merge with any person, make a material change in its
  business or corporate structure or management, or enter into a
  material agreement, arrangement, or transaction of any kind with
  any person, and that the plan or proposal is unfair, prejudicial,
  hazardous, or unreasonable to the insurer's policyholders and not
  in the public interest;
               (5)  due to a lack of competence, trustworthiness,
  experience, and integrity of the persons who would control the
  operation of the domestic insurer, the acquisition or change of
  control would not be in the interest of the insurer's policyholders
  and the public;
               (5-a)  the divestiture of control may jeopardize the
  financial stability of the domestic insurer or prejudice the
  interest of the domestic insurer's policyholders and other
  claimants; or
               (6)  the acquisition, [or] change, or divestiture of
  control would violate the law of this or another state or the United
  States.
         (c)  If a proposed acquisition, change, or divestiture of
  control will require the approval of more than one commissioner,
  the commissioner may participate in a public hearing referred to in
  this chapter held on a consolidated basis on request of the person
  filing the statement required by Section 823.154. The person
  filing the statement under Section 823.154 shall file the statement
  with the National Association of Insurance Commissioners within
  five days of making the request for a public hearing. A hearing
  conducted on a consolidated basis shall be public and shall be held
  within the United States before the commissioners of the states in
  which the insurers are domiciled. The commissioners shall hear and
  receive evidence at the hearing. The commissioner may attend the
  hearing in person or by telecommunication.
         (d)  This section does not require the commissioner to hold a
  hearing before approving or denying an acquisition, change, or
  divestiture of control.
         SECTION 14.  Section 823.201, Insurance Code, is amended by
  adding Subsections (d) and (e) to read as follows:
         (d)  The acquiring person shall agree to provide the annual
  enterprise risk report required by Section 823.0595 for as long as
  the acquiring person maintains control of the insurer.
         (e)  The acquiring person and all subsidiaries within the
  acquiring person's control in the insurance holding company system
  shall provide information to the commissioner on request of the
  commissioner as the commissioner deems necessary to evaluate
  enterprise risk to the insurer.
         SECTION 15.  Section 823.205, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  An insurer required to file information under Section
  823.154 may satisfy the requirement of Section 823.052(c-1) by
  providing the commissioner with the most recently filed parent
  corporation reports that have been filed with the United States
  Securities and Exchange Commission, if required by the
  commissioner.
         SECTION 16.  Section 823.351, Insurance Code, is amended by
  amending Subsections (a) and (b) and adding Subsections (a-1) and
  (b-1) to read as follows:
         (a)  Subject to Section 823.352, the commissioner may order
  an insurer registered under Subchapter B to produce records, books,
  or other information papers in the possession of the insurer or an
  affiliate of the insurer that are necessary to ascertain the
  financial condition or legality of conduct of the insurer,
  including the enterprise risk to the insurer by the ultimate
  controlling party, or by any entity or combination of entities
  within the insurance holding company system, or by the insurance
  holding company system on a consolidated basis.
         (a-1)  To determine compliance with this chapter, the
  commissioner may order any insurer registered under Subchapter B to
  produce information not in the possession of the insurer if the
  insurer can obtain access to the information pursuant to
  contractual relationships, statutory obligations, or other
  methods. In the event that the insurer is unable to obtain the
  information requested by the commissioner, the insurer shall
  provide the commissioner with a detailed explanation of the reason
  why the insurer is unable to obtain the information, and the
  identity of the holder of information. If it appears to the
  commissioner that the insurer's explanation is without merit, the
  commissioner may after notice and hearing:
               (1)  require the insurer to pay a penalty of not less
  than $100 for each day the insurer delays producing the
  information; or
               (2)  suspend or revoke the insurer's license.
         (b)  If an insurer fails to comply with an order under this
  section [Subsection (a)], the commissioner by order may require the
  examination of each holding company of the insurer and each
  controlled person or affiliate in the insurer's insurance holding
  company system if the commissioner has cause to believe that:
               (1)  the operations of that person may materially
  affect the operations, management, or financial condition of any
  controlled insurer in that system; and
               (2)  the commissioner is unable to obtain relevant
  information from the controlled insurer.
         (b-1)  The commissioner may issue subpoenas, administer
  oaths, and examine under oath any person for purposes of
  determining compliance with this section. On the failure or
  refusal of a person to obey a subpoena, the commissioner may
  petition a court of competent jurisdiction, and on proper showing,
  the court may enter an order compelling the witness to appear and
  testify or produce documentary evidence. Failure to obey the court
  order is punishable as contempt of court. A person shall attend as
  a witness at the place specified in the subpoena, when subpoenaed,
  at any location in this state. The person is entitled to the same
  fees and mileage, if claimed, as a witness in district court.  Fees,
  mileage, and actual expenses necessarily incurred in securing the
  attendance of a witness shall be itemized and charged against, and
  be paid by, the insurer being examined.
         SECTION 17.  Section 823.452, Insurance Code, is amended by
  adding Subsection (a-1) to read as follows:
         (a-1)  If the commissioner determines that a person has
  committed a violation of Subchapter D that prevents the full
  understanding of the enterprise risk to the insurer by affiliates
  or by the insurance holding company system, the violation may serve
  as an independent basis for disapproving dividends or distributions
  and for issuing an order under Chapter 404 or Chapter 441.
         SECTION 18.  (a)  Subject to Subsection (b) of this section,
  the Texas Department of Insurance may not implement Section
  823.0595, Insurance Code, as added by this Act, until the 180th day
  after the date the commissioner of insurance determines that the
  National Association of Insurance Commissioners has completed an
  enterprise risk form and has proposed a master confidentiality
  agreement and places notice of that determination in the Texas
  Register.
         (b)  An insurer is not required to file an enterprise risk
  report under Section 823.0595, Insurance Code, as added by this
  Act, until January 1, 2014.
         SECTION 19.  This Act takes effect September 1, 2011.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 1431 passed the Senate on
  April 28, 2011, by the following vote: Yeas 31, Nays 0; and that
  the Senate concurred in House amendment on May 23, 2011, by the
  following vote: Yeas 30, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 1431 passed the House, with
  amendment, on May 13, 2011, by the following vote: Yeas 124,
  Nays 3, four present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor