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AN ACT
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relating to the disclosure of information concerning the corporate |
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governance structure of certain insurers and related entities; |
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providing an administrative penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle B, Title 6, Insurance Code, is amended |
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by adding Chapter 831 to read as follows: |
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CHAPTER 831. CORPORATE GOVERNANCE ANNUAL DISCLOSURE |
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Sec. 831.0001. APPLICABILITY AND PURPOSE. (a) The purpose |
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of this chapter is to promote the public interest by: |
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(1) requiring annual disclosure of an insurer or |
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insurance group's corporate governance structure, policies, and |
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practices to permit the commissioner to gain and maintain an |
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understanding of the insurer's corporate governance framework; and |
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(2) providing for the confidential treatment of the |
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corporate governance annual disclosure and related information as |
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the disclosure and related information will contain confidential |
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and sensitive information related to an insurer or insurance |
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group's internal operations and proprietary and trade-secret |
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information which, if made public, could potentially cause the |
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insurer or insurance group competitive harm or disadvantage. |
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(b) This chapter may not be construed to prescribe or impose |
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corporate governance standards and internal procedures beyond that |
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which is required under applicable state corporate law. |
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(c) Notwithstanding Subsection (b), this chapter may not be |
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construed to limit the commissioner's authority, or the rights or |
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obligations of third parties, under Chapter 401. |
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(d) This chapter applies to each insurer domiciled in this |
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state, except that this chapter does not apply to a domestic insurer |
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that is authorized, admitted, or eligible to engage in the business |
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of insurance only in this state. For the purposes of this chapter, |
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an insurer is not considered to be authorized, admitted, or |
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eligible to engage in the business of insurance only in this state |
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if the insurer is a member of an insurance group that writes or |
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assumes insurance in any manner in another state. |
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Sec. 831.0002. DEFINITIONS. In this chapter: |
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(1) "Disclosure" means the confidential corporate |
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governance annual disclosure filed by the insurer or insurance |
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group in accordance with the requirements of this chapter. |
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(2) "Insurance group" means the insurers and |
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affiliates included within an insurance holding company system as |
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described by Section 823.006. |
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(3) "Insurer" has the meaning assigned by Section |
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823.002. The term includes a health maintenance organization |
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authorized to engage in business under Chapter 843. |
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Sec. 831.0003. DISCLOSURE REQUIRED. (a) Except as |
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provided by Subsection (b), an insurer, or the insurance group of |
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which the insurer is a member, shall, not later than June 1 of each |
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calendar year, submit to the commissioner a corporate governance |
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annual disclosure that contains the information described by |
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Section 831.0008(c). |
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(b) Notwithstanding any request from the commissioner under |
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Subsection (d), an insurer that is a member of an insurance group |
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shall submit the report required by Subsection (a) to the |
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commissioner of the lead state for the insurance group, in |
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accordance with the laws of the lead state, as determined by the |
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procedures adopted by the National Association of Insurance |
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Commissioners. |
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(c) The disclosure must include a signature of the insurer |
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or insurance group's chief executive officer or corporate secretary |
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attesting to the best of that individual's belief and knowledge |
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that the insurer has implemented the corporate governance practices |
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described in the disclosure and that a copy of the disclosure has |
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been provided to the insurer's board of directors or the |
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appropriate committee of the insurer's board of directors. |
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(d) An insurer not otherwise required to submit a disclosure |
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under this chapter shall submit a disclosure on the commissioner's |
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request. |
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Sec. 831.0004. LEVEL OF REPORTING. (a) For purposes of |
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completing the disclosure under Section 831.0003, an insurer or |
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insurance group may provide information regarding corporate |
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governance at the ultimate controlling parent level, an |
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intermediate holding company level, or the individual legal entity |
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level, depending on how the insurer or insurance group has |
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structured the insurer's or insurance group's system of corporate |
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governance. |
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(b) An insurer or insurance group is encouraged to make the |
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disclosure: |
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(1) at the level at which the insurer's or insurance |
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group's risk appetite is determined; |
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(2) at the level at which the earnings, capital, |
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liquidity, operations, and reputation of the insurer are overseen |
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collectively and at which the supervision of those factors are |
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coordinated and exercised; or |
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(3) at the level at which legal liability for failure |
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of general corporate governance duties would be placed. |
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(c) If an insurer or insurance group determines the level of |
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reporting based on the criteria described by Subsection (b), the |
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insurer or insurance group shall indicate which of the three |
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criteria was used to determine the level of reporting and explain |
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any subsequent changes in level of reporting. |
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Sec. 831.0005. REVIEW OF DISCLOSURE; REQUEST FOR ADDITIONAL |
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INFORMATION. The review of the disclosure and any additional |
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requests for information shall be made through the lead state as |
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determined by the procedures adopted by the National Association of |
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Insurance Commissioners described by Section 831.0003(b). |
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Sec. 831.0006. SUBSTANTIALLY SIMILAR INFORMATION. An |
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insurer that provides information substantially similar to the |
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information required by this chapter in other documents provided to |
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the commissioner, including proxy statements filed in conjunction |
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with Form B requirements or other state or federal filings provided |
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to the department, is not required to duplicate that information in |
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the disclosure but is required only to cross-reference the document |
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in which the information is included. |
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Sec. 831.0007. PART OF EXAMINATION PROCESS. The disclosure |
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and any additional information requested by the commissioner and |
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provided to the department as described by this chapter is |
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considered part of the process of examination of insurers under |
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this code, including Chapter 401. |
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Sec. 831.0008. CONTENTS OF DISCLOSURE. (a) An insurer or |
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insurance group has discretion over the responses to the disclosure |
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inquiries, provided the disclosure must contain the material |
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information necessary to permit the commissioner to gain an |
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understanding of the insurer's or insurance group's corporate |
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governance structure, policies, and practices. |
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(b) The commissioner may request additional information |
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that the commissioner considers material and necessary to provide |
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the commissioner with a clear understanding of: |
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(1) the corporate governance policies; and |
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(2) the reporting, information system, or controls |
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implementing those policies. |
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(c) Notwithstanding Subsections (a) and (b), the disclosure |
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shall be prepared consistent with rules adopted by the |
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commissioner. Documentation and supporting information must be |
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maintained and made available on examination or on request of the |
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commissioner. |
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Sec. 831.0009. CONFIDENTIALITY. (a) Documents, materials, |
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or other information, including a disclosure, in the possession or |
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control of the department that is obtained by, created by, or |
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disclosed to the commissioner or any other person under this |
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chapter is confidential and privileged and is: |
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(1) not subject to disclosure under Chapter 552, |
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Government Code; |
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(2) not subject to subpoena; and |
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(3) not subject to discovery or admissible in evidence |
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in any private civil action. |
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(b) Documents, materials, or other information, including a |
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disclosure, in the possession or control of the department that is |
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obtained by, created by, or disclosed to the commissioner or any |
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other person under this chapter is recognized by this state as being |
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proprietary and to contain trade secrets. |
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(c) The commissioner may use the documents, materials, or |
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other information described in this section to further any |
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regulatory or legal action brought as part of the commissioner's |
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official duties. The commissioner may not otherwise make the |
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documents, materials, or other information public without the prior |
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written consent of the insurer. Nothing in this section may be |
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construed to require written consent of the insurer before the |
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commissioner may share or receive documents, materials, or other |
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information under Subsection (e). |
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(d) The commissioner and any other person who receives |
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documents, materials, or other information under this chapter, |
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through examination, or otherwise under any other law, while acting |
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under the authority of the commissioner, or with whom the |
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documents, materials, or other information is shared under this |
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chapter may not testify or be required to testify in any private |
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civil action concerning any documents, materials, or other |
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information subject to Subsection (a) or (b). |
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(e) In order to assist in the performance of the |
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commissioner's regulatory duties, the commissioner may, on |
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request, share documents, materials, or other information, |
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including confidential and privileged documents, materials, or |
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information subject to Subsection (a) or (b) and proprietary and |
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trade-secret documents, materials, or information, with: |
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(1) other state, federal, and international financial |
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regulatory agencies, including members of a supervisory college |
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described by Section 823.0145; |
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(2) the National Association of Insurance |
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Commissioners; and |
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(3) a third-party consultant under Section 831.0012. |
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(f) Before the commissioner may share information under |
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this section, the recipient shall: |
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(1) agree in writing to maintain the confidential and |
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privileged status of the documents, materials, or other information |
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shared under this section; and |
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(2) verify in writing the recipient's legal authority |
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to maintain the confidential and privileged status of that |
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information. |
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(g) In order to assist in the performance of the |
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commissioner's regulatory duties, the commissioner may receive |
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documents, materials, or other governance-related information, |
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including confidential and privileged documents, materials, or |
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information and proprietary and trade-secret documents, materials, |
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or information from: |
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(1) regulatory officials of other state, federal, and |
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international financial regulatory agencies, including members of |
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a supervisory college described by Section 823.0145; and |
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(2) the National Association of Insurance |
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Commissioners. |
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(h) The commissioner shall maintain as confidential or |
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privileged any documents, materials, or information received under |
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Subsection (g) with notice or the understanding that it is |
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confidential or privileged under the laws of the jurisdiction that |
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is the source of the document, material, or information. |
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Sec. 831.0010. AUTHORITY OF COMMISSIONER NOT AFFECTED. The |
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sharing of documents, materials, or other information by the |
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commissioner under this chapter does not constitute a delegation of |
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regulatory authority or rulemaking, and the commissioner is solely |
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responsible for the administration, execution, and enforcement of |
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the provisions of this chapter. |
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Sec. 831.0011. PRIVILEGE AND CONFIDENTIALITY NOT WAIVED. A |
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waiver of an applicable privilege or claim of confidentiality in |
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documents, materials, or other information, including proprietary |
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and trade-secret materials, does not occur as a result of |
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disclosure of the document, materials, or information to the |
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commissioner under this chapter or as a result of sharing as |
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authorized by this chapter. |
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Sec. 831.0012. NATIONAL ASSOCIATION OF INSURANCE |
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COMMISSIONERS AND THIRD-PARTY CONSULTANTS. (a) The commissioner |
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may retain, at the insurer's expense, third-party consultants, |
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including attorneys, actuaries, accountants, and other experts not |
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otherwise part of the commissioner's staff as may be reasonably |
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necessary to assist the commissioner in reviewing the disclosure |
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and related information or the insurer's compliance with this |
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chapter. |
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(b) A person retained under Subsection (a) is under the |
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direction and control of the commissioner and acts in a purely |
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advisory capacity. |
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(c) The National Association of Insurance Commissioners and |
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a third-party consultant are subject to the same confidentiality |
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standards and requirements as the commissioner. |
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(d) As part of the retention process, a third-party |
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consultant shall verify to the commissioner, with notice to the |
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insurer, that the consultant: |
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(1) is free of a conflict of interest; and |
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(2) has internal procedures in place to: |
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(A) monitor compliance with a conflict; and |
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(B) comply with the confidentiality standards |
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and requirements of this chapter. |
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(e) A written agreement with the National Association of |
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Insurance Commissioners or a third-party consultant governing |
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sharing and use of information provided under this chapter must |
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expressly require the written consent of the insurer before |
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information provided under this chapter is made public and contain: |
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(1) specific procedures and protocols for maintaining |
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the confidentiality and security of disclosure-related information |
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shared with the National Association of Insurance Commissioners or |
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the third-party consultant under this chapter; |
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(2) procedures and protocols for the sharing by the |
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National Association of Insurance Commissioners of |
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disclosure-related documents, materials, or other information only |
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with other state regulators from states in which an affected |
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insurance group has domiciled insurers, including a requirement |
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that the recipient agrees in writing to maintain the confidential |
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and privileged status of the shared documents, materials, or other |
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information and has verified in writing the recipient's legal |
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authority to maintain the confidential and privileged status of |
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that information; |
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(3) a provision specifying that ownership of |
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disclosure-related documents, materials, or other information |
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shared with the National Association of Insurance Commissioners or |
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a third-party consultant remains with the department and the use of |
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the information by the National Association of Insurance |
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Commissioners or third-party consultant is subject to the direction |
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of the commissioner; |
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(4) a provision that prohibits the National |
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Association of Insurance Commissioners or third-party consultant |
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from storing disclosure-related documents, materials, or other |
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information shared under this chapter in a permanent database after |
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the underlying analysis is completed; |
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(5) a provision requiring the National Association of |
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Insurance Commissioners or third-party consultant to provide |
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prompt notice to the commissioner and to the insurer or insurance |
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group regarding any subpoena, request for disclosure, or request |
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for production of the insurer's disclosure-related documents, |
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materials, or other information; and |
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(6) a requirement that the National Association of |
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Insurance Commissioners or third-party consultant consents to |
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intervention by an insurer in any judicial or administrative action |
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in which the National Association of Insurance Commissioners or |
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third-party consultant may be required to disclose confidential |
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information about the insurer shared with the National Association |
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of Insurance Commissioners or third-party consultant under this |
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chapter. |
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Sec. 831.0013. ADMINISTRATIVE PENALTY. (a) An insurer |
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that, without good cause, fails to timely file the disclosure as |
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required by this chapter commits a violation subject to an |
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administrative penalty under Chapter 84. |
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(b) Each day the violation continues is a separate violation |
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for purposes of this section. |
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(c) The commissioner may reduce the amount of the penalty |
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assessed under this section if the insurer demonstrates to the |
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commissioner that the imposition of the penalty would constitute a |
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financial hardship to the insurer. |
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Sec. 831.0014. RULES. (a) The commissioner shall adopt |
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rules as necessary to enforce this chapter. |
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(b) A rule adopted under Subsection (a) is not subject to |
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Section 2001.0045, Government Code. |
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SECTION 2. An insurer is not required to file a corporate |
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governance annual disclosure under Chapter 831, Insurance Code, as |
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added by this Act, before June 1, 2020. |
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SECTION 3. This Act takes effect September 1, 2019. |
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______________________________ |
______________________________ |
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President of the Senate |
Speaker of the House |
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I certify that H.B. No. 3306 was passed by the House on May 3, |
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2019, by the following vote: Yeas 140, Nays 0, 2 present, not |
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voting. |
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______________________________ |
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Chief Clerk of the House |
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I certify that H.B. No. 3306 was passed by the Senate on May |
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22, 2019, by the following vote: Yeas 31, Nays 0. |
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______________________________ |
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Secretary of the Senate |
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APPROVED: _____________________ |
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Date |
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_____________________ |
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Governor |