CHAPTER 2551. TITLE INSURERS - Texas Statutes

INSURANCE CODE

TITLE 11. TITLE INSURANCE

SUBTITLE B. ORGANIZATION OF TITLE INSURANCE COMPANIES

CHAPTER 2551. TITLE INSURERS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2551.001. APPLICABILITY OF TITLE AND OTHER LAW. (a)

Except as provided by Subsection (c) and unless the business of

title insurance or title insurance companies are expressly

mentioned, the provisions of this code other than this title do

not apply to:

(1) a corporation incorporated or engaging in business

exclusively under this title; or

(2) any title insurance business engaged in by a corporation

created under:

(A) Subdivision 57, Article 1302, Revised Statutes;

(B) Chapter 861; or

(C) any other law.

(b) A law enacted after September 7, 1951, does not apply to a

title insurance company or title insurance business described by

Subsection (a) unless the law expressly states that it applies.

(c) To the extent applicable, the following provisions of this

code apply to a title insurance company:

(1) Articles 1.09-1 and 21.47;

(2) Subsection (b), Article 1.04D;

(3) Chapters 33, 82, 83, 84, 86, 102, 261, 281, 401, 402, 493,

494, 541, 547, 555, 701, 801, 802, 824, 828, 1805, and 2204;

(4) Chapter 31, other than Section 31.005;

(5) Chapter 32, other than Section 32.022(b);

(6) Chapter 36, other than Sections 36.003, 36.004, and

36.101-36.106;

(7) Subchapter A, Chapter 38;

(8) Subchapters A-G, Chapter 101;

(9) Chapter 982, other than Sections 982.003, 982.051, 982.101,

982.105, 982.106(b), 982.109, and 982.113; and

(10) Sections 37.052, 39.001, 39.002, 81.001, 81.002, 81.004,

201.004, 201.005, 201.051, 201.055, 403.001, 403.051, 403.101,

521.002-521.004, 805.021, 822.001, 822.051, 822.052(1), (2), and

(3), 822.053, 822.057, except Subsection (a)(4), 822.058,

822.059, 822.060, 822.155, 822.157, 822.158, except Subsection

(a)(5), 841.004, 841.251, 841.252(a)-(c), and 4001.103.

(d) This title governs in any conflict between a provision

listed by Subsection (c) and a provision of this title.

(e) This title does not regulate the practice of law by an

attorney. The actions of an attorney in examining title, in

examining records regarding an interest insured under Chapter

2751, or in closing a real property or personal property

transaction, regardless of whether a title insurance policy is

issued, does not constitute the business of title insurance,

unless the attorney elects to be licensed as an escrow officer.

(f) Subsection (e) does not prohibit the commissioner from

promulgating a premium for title insurance.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

543, Sec. 4, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2I.001, eff. April 1, 2009.

Acts 2009, 81st Leg., R.S., Ch.

447, Sec. 1, eff. September 1, 2009.

Sec. 2551.002. APPLICABILITY OF LAW GOVERNING CORPORATIONS. A

title insurance company is subject to the Texas Business

Corporation Act, the Texas Miscellaneous Corporation Laws Act

(Article 1302-1.01 et seq., Vernon's Texas Civil Statutes), and

any other law of this state that governs corporations in general,

to the extent those laws are not inconsistent with this title.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.003. RULEMAKING; AUTHORITY OF DEPARTMENT AND

COMMISSIONER. (a) The commissioner may adopt and enforce rules:

(1) that prescribe underwriting standards and practices on which

a title insurance contract must be issued;

(2) that define risks that may not be assumed under a title

insurance contract, including risks that may not be assumed

because of the insolvency of the parties to the transaction; and

(3) that the commissioner determines are necessary to accomplish

the purposes of this title.

(b) With respect to a company operating under this title that

engages in the kinds of business described by Section

2551.051(b)(1) or (2) in a manner that might subject the company

to another regulatory statute of this state, all examination and

regulation shall be exercised by the department rather than any

other state agency named in the other regulatory statute, as long

as the corporation engages in the business of title insurance.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

SUBCHAPTER B. FORMATION

Sec. 2551.051. FORMATION; GENERAL PURPOSES AND POWERS. (a) A

private corporation may be created and licensed under this title

for the following purposes:

(1) to compile and own or lease, or to acquire and own or lease,

records or abstracts of title to real property or interests in

real property in this state or other jurisdictions, to insure

titles to that real property or interests in that real property,

and to indemnify the owners of that real property, or the holders

of interests in or liens on that real property, against loss or

damage resulting from an encumbrance on or defect in the title to

the real property or interests in the real property;

(2) in transactions in which title insurance is to be or is

being issued, to supervise or approve the signing of legal

instruments affecting the interest to be insured, disbursement of

money, prorations, delivery of legal instruments, closing of

transactions, or issuance of commitments for title insurance

specifying the requirements for title insurance and the defects

in title necessary to be cured or corrected; and

(3) to issue personal property title insurance under Chapter

2751.

(b) A corporation described by Subsection (a) may exercise any

of the following powers by including the power in the

corporation's charter:

(1) to make and sell abstracts of title in any county of this

state or another state;

(2) to accumulate and lend money and to purchase, sell or deal

in notes, bonds, and securities, but without banking privileges;

(3) to act as trustee under a lawful trust committed to the

corporation by contract or will or by appointment by a court as

trustee, receiver, or guardian; and

(4) to act as executor or guardian under the terms of a will or

as an administrator of a decedent's estate under the appointment

of a court.

(c) Notwithstanding any other provision of this section, a

corporation described by Subsection (a) is not authorized to

practice law, as that term is defined by the courts of this

state. A corporation described by Subsection (a) is not

authorized to prepare a legal instrument described by Subsection

(a)(2).

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

543, Sec. 5, eff. September 1, 2007.

Sec. 2551.052. NAME. (a) The name of a corporation chartered

or operating under this title may contain the words "Title and

Trust Company."

(b) The name of a corporation chartered or operating under this

title may not contain the word "Trust" alone. If the word "Trust"

appears in the corporation's letterhead or literature, the

corporation shall include the words "Without Banking Privileges."

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.053. STOCK AND SURPLUS REQUIREMENTS. (a) Except as

provided by Section 2552.053(b), a title insurance company must

have a paid-up capital of at least $1 million and a surplus of at

least $1 million.

(b) The capital stock and minimum surplus requirements of a

title insurance company must be maintained intact over and above

all outstanding liabilities, except contingent liabilities on

title insurance policies.

(c) If a title insurance company suffers the impairment of its

capital stock or minimum surplus requirements, the company shall

immediately report the impairment to the department.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.054. PURCHASE OF OWN STOCK. (a) Subject to Section

2551.053(a) and the Texas Business Corporation Act, a title

insurance company may purchase its own shares of stock. A

purchase of its own shares is not considered an investment and

does not constitute a violation of a provision of this code

relating to admissible investments.

(b) A title insurance company that purchases its own shares

must, not later than the 10th day after the date of purchase,

file with the commissioner a statement listing:

(1) the name of each shareholder from whom the shares have been

purchased; and

(2) the amount paid for the shares.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.055. CHARTER OF CORPORATION ENGAGING IN BUSINESS OF

TITLE INSURANCE. (a) The incorporators of a corporation

engaging in the business of title insurance and incorporated

under this title, Subdivision 57, Article 1302, Revised Statutes,

Chapter 40, Acts of the 41st Legislature, Regular Session, 1929

(Article 1302a, Vernon's Texas Civil Statutes), or any other law

shall file the corporation's original charter only with the

department and shall certify the charter only to the department.

(b) Only the department may collect from a company described by

this section any filing fees required by law.

(c) A corporation described by this section is not subject to

another law to the extent that the law conflicts with this

section.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.056. REGULATION OF CERTAIN CORPORATIONS. (a) A

corporation incorporated under Subdivision 57, Article 1302,

Revised Statutes, before February 27, 1929, and engaging in

business in this state on February 27, 1929:

(1) may continue to engage in business;

(2) is subject to this title; and

(3) shall comply with the requirements of this title regarding

investments and deposits.

(b) A shareholder in a company acting under this title is not

liable in the event of default in the payment of any debt or

liability of the company beyond the shareholder's subscription

for stock.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 2551.101. CERTIFICATE OF AUTHORITY REQUIRED. A title

insurance company may not engage in the business of title

insurance in this state unless the company holds a certificate of

authority issued under this title.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.102. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a)

Subject to Subsection (c), the department shall issue a

certificate of authority to engage in the business of title

insurance if, following any examination the department considers

proper, the department makes a determination favorable to the

title insurance company with respect to:

(1) the payment of capital stock and surplus as required by this

title; and

(2) the value of the assets used to pay the capital stock and

surplus.

(b) The title insurance company shall pay the expense of any

examination conducted under Subsection (a).

(c) Issuance of a certificate of authority to a foreign

corporation is governed by Section 2553.001.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

SUBCHAPTER D. GENERAL POWERS AND DUTIES

Sec. 2551.151. ADMISSIBLE INVESTMENTS. (a) A title insurance

company shall hold all investments in cash or in the following:

(1) an abstract plant or plants, provided that:

(A) the corporation is organized under this title and has the

right to engage in the business of title insurance;

(B) except as provided by Subsection (b), the investment is not

more than 50 percent of the corporation's capital stock; and

(C) the valuation of the plant or plants is approved by the

department;

(2) securities described by Subchapter D, Chapter 425, other

than Sections 425.202 and 425.229-425.232, or investments

authorized for title insurance companies under the laws of any

other state in which the company is authorized to engage in

business;

(3) real property or any real property interest that is:

(A) required for the company's convenient accommodation in the

transaction of business with reasonable regard to future needs;

(B) acquired in connection with a claim under a title insurance

policy;

(C) acquired in satisfaction or on account of loans, mortgages,

liens, judgments, or decrees previously owed to the company in

the course of business;

(D) acquired in partial payment of the consideration of the sale

of real property owned by the company if the transaction results

in a net reduction in the company's investment in real property;

or

(E) reasonably necessary to maintain or enhance the sale value

of real property previously acquired or held by the company under

this subdivision;

(4) a first mortgage note secured by any of the following,

provided that the amount of the note does not exceed 80 percent

of the appraised value of the security for the note:

(A) an abstract plant and connected personal property in or

outside this state;

(B) stock of a title insurance agent in or outside this state;

(C) a construction contract to build an abstract plant and

connected personal property; or

(D) any two or more of the items listed in this subdivision;

(5) the shares of any federal home loan bank in an amount

necessary to qualify for membership and any additional amounts

approved by the commissioner;

(6) foreign securities that are substantially of the same kinds,

classes, and investment grade as securities otherwise qualified

for investment under this section, provided that, unless the

investment is also qualified under Subdivision (2), the aggregate

amount of foreign investments made under this subdivision does

not exceed:

(A) five percent of the insurer's admitted assets at the end of

the preceding year;

(B) two percent of the insurer's admitted assets at the end of

the preceding year invested in the securities of all entities

domiciled in any one foreign country; and

(C) one-half of one percent of the insurer's admitted assets at

the end of the preceding year invested in the securities of any

one individual entity domiciled in a foreign country;

(7) securities lending, repurchase, reverse repurchase, and

dollar roll transactions, as described by Section 425.121; or

(8) money market funds, as described by Section 425.123.

(b) If a corporation maintains with the department a deposit

described by Subchapter E in the amount of $100,000, the

corporation may invest more than 50 percent of the corporation's

capital stock under Subsection (a)(1), as considered necessary by

the corporation's board of directors.

(c) A corporation created or operating under this title may own

or acquire more than one abstract plant in any one county, but

only one abstract plant in any one county is admissible as an

investment under Subsection (a)(1).

(d) A title insurance company may not hold real property

acquired under Subsection (a)(3)(B), (C), or (D) for more than 10

years without written approval of the department.

(e) Any investment that does not qualify under this section and

was owned by the title insurance company on October 1, 1967,

continues to qualify.

(f) If any otherwise valid investment qualified under this

section exceeds in amount any of the limitations on investment

provided by this section, the investment is inadmissible only to

the extent that it exceeds the limitation.

(g) A title insurance company may invest in a certified capital

company in the manner provided by Chapter 228.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

99, Sec. 2, eff. September 1, 2005.

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2I.002, eff. April 1, 2009.

Sec. 2551.152. ANNUAL STATEMENT. (a) Not later than March 1 of

each year, each title insurance company shall file with the

commissioner a verified statement.

(b) The statement must be in a form required by the commissioner

and must:

(1) provide a statement of the business engaged in by the title

insurance company during the preceding year; and

(2) describe the condition of the company's affairs on December

31 of the preceding year.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.153. FEES. The general laws applicable to payment of

a filing fee by a corporation having capital stock apply to a

corporation subject to this title.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.154. TRANSFER OF CERTAIN BUSINESS TO STATE BANKS OR

TRUST COMPANIES. (a) This section applies to a corporation

chartered under Section 2551.051, or its antecedents, Article

9.01, Texas Insurance Code, or Chapter 40, Acts of the 41st

Legislature, Regular Session, 1929 (Article 1302a, Vernon's Texas

Civil Statutes), and empowered to act as:

(1) trustee under a lawful trust committed to the corporation by

contract or will or by appointment by a court as trustee,

receiver, or guardian; and

(2) executor or guardian under the terms of a will or as an

administrator of a decedent's estate under the appointment of the

court.

(b) A corporation described by Subsection (a) may transfer and

assign to one of the following entities all of the corporation's

fiduciary business in which the corporation is named or acts as

guardian, trustee, executor, or administrator or in any other

fiduciary capacity:

(1) a state bank created under Subtitle A, Title 3, Finance

Code, or a predecessor to that law; or

(2) a state trust company created under Chapter 181, Finance

Code, or a predecessor to that law.

(c) On a corporation's transfer or assignment to a state bank or

trust company under this section, the state bank or trust company

shall, without the necessity of any action in a court of this

state or any action by the creator or beneficiary of the trust or

estate:

(1) continue the guardianship, trust, executorship,

administration, or other fiduciary relationship related to the

trust or estate;

(2) perform all of the duties and obligations of the corporation

related to the trust or estate; and

(3) exercise any powers and authority:

(A) related to the trust or estate; and

(B) exercised by the corporation at the time of the transfer or

assignment.

(d) A transfer or assignment by a corporation under this section

is not a resignation or refusal by the corporation to act on

behalf of the guardianship, trust, executorship, administration,

or other fiduciary relationship.

(e) On a corporation's transfer or assignment to a state bank or

trust company under this section, the naming or designation by a

testator or the creator of a living trust of the corporation to

act as trustee, guardian, or executor or in any other fiduciary

capacity includes the naming or designation of the state bank or

trust company and authorizes the state bank or trust company to

act in that capacity.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

SUBCHAPTER E. REQUIRED DEPOSIT

Sec. 2551.201. DEPOSIT REQUIRED; AMOUNT. (a) Except as

provided by Section 2551.202, a title insurance company shall

deposit and maintain in the state treasury, or other depository

in this state named by the company and approved by the

department, either:

(1) cash; or

(2) securities described by Section 2551.151.

(b) A title insurance company's deposit under this section must

be in an amount equal to the lesser of:

(1) one-fourth of the authorized capital of the company; or

(2) $100,000.

(c) A deposit under this section is for the benefit of all

policyholders.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.202. EXCEPTION: FOREIGN TITLE INSURANCE COMPANY. (a)

A foreign title insurance company is not required to make a

deposit under Section 2551.201 if the company has on deposit with

insurance regulatory bodies in the United States an aggregate

amount of deposit that:

(1) is equal to the amount required by Section 2551.201; and

(2) secures all policyholders of the company, regardless of

their location.

(b) The foreign title insurance company must file with the

department a certificate of deposit under the hand and seal of

each insurance regulatory body holding a deposit of the company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.203. WITHDRAWAL AND SUBSTITUTION OF DEPOSIT. A title

insurance company may withdraw the deposit of securities made

under Section 2551.201, or any portion of the deposit, after

substituting other securities of a sufficient value to maintain

the amount of deposit required under that section.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.204. USE OF DEPOSIT. (a) Except as otherwise

provided by Subsection (e), a deposit made under this subchapter

may be used only to pay an obligation connected with title

insurance.

(b) On the insolvency or dissolution of a title insurance

company, the company's deposit shall be used to protect title

insurance policyholders even if no accrued title insurance claims

exist and other unpaid obligations do exist, except as permitted

by Subsection (e).

(c) A title insurance company's deposit must be applied to:

(1) the complete payment of any obligations and liabilities of

the company connected with title insurance business; and

(2) the establishment of adequate reserves or reinsurance to

protect any subsequently accruing or maturing title insurance

obligations and liabilities.

(d) The amount, handling, and distribution of any reserves

required under Subsection (c)(2) are subject to the control and

discretion of the department and are reviewable in judicial

proceedings governed by rules applicable to review of rates under

Subchapters D and E, Chapter 2703.

(e) Any deposit amount remaining after payments under Subsection

(c) must be applied to:

(1) payment of other obligations and liabilities of the title

insurance company; or

(2) distribution to shareholders.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

SUBCHAPTER F. RESERVES

Sec. 2551.251. STATUTORY PREMIUM RESERVE REQUIRED. (a) Each

domestic title insurer shall establish and maintain a statutory

premium reserve. The reserve is cumulative. The reserve must

consist of the amounts required under Sections 2551.252-2551.260

and must be established and maintained during the period and for

the uses and purposes provided by those sections.

(b) The reserve required under this section:

(1) is considered to be unearned portions of the original

premium; and

(2) must be charged as a reserve liability of the title insurer

in determining the insurer's financial condition.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.252. AMOUNTS ADDED TO RESERVE FOR CALENDAR YEAR 1997;

REDUCTIONS. (a) The total charges of a domestic title insurer

for title insurance policies written or assumed on or after

January 1, 1997, and before January 1, 1998, are computed by

adding the following, as described in the insurer's annual

statement:

(1) the direct premium written by the insurer;

(2) the escrow and settlement service fees paid directly to and

collected by the insurer;

(3) other title fees and service charges paid directly to and

collected by the insurer, including fees for closing protection

letters; and

(4) premiums for any reinsurance assumed by the insurer, less

premiums for reinsurance ceded by the insurer during that year.

(b) The amount a domestic title insurer must set aside in the

statutory premium reserve for the 1997 calendar year is computed

by multiplying the total charges computed under Subsection (a)

by:

(1) 6-1/5 percent if the insurer had $250 million or more in

direct premium written for the year 1996; or

(2) 3-1/2 percent if the insurer had less than $250 million in

direct premium written for the year 1996.

(c) A domestic title insurer shall reduce additions to the

statutory premium reserve set aside for title insurance policies

written or assumed during the year 1997 over a 20-year period

beginning in the year after the year in which the policies are

written or assumed, as provided by Subsection (d), by:

(1) 26 percent of the additions in the first year following the

year of addition;

(2) 20 percent of the additions in the second year following the

year of addition;

(3) 10 percent of the additions in the third year following the

year of addition;

(4) nine percent of the additions in the fourth year following

the year of addition;

(5) five percent of the additions in the fifth and sixth years

following the year of addition;

(6) three percent of the additions in the seventh, eighth, and

ninth years following the year of addition;

(7) two percent of the additions in the 10th through 14th years

following the year of addition; and

(8) one percent of the additions in the last six years of the

20-year period.

(d) A domestic title insurer shall make the annual reductions

under Subsection (c) in increments of one-fourth of the

appropriate percentage of the additions each on March 31, June

30, September 30, and December 31 of each year.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.253. AMOUNTS ADDED TO RESERVE FOR CALENDAR YEARS AFTER

1997; REDUCTIONS. (a) Out of total charges for title insurance

policies written or assumed on or after January 1, 1998, and

before January 1, 2005, a domestic title insurer shall add to and

set aside in the statutory premium reserve an amount equal to the

total of the following, as described in the insurer's annual

statement:

(1) 25 cents per $1,000 of net retained liability if the insurer

had $250 million or more in direct written premiums written for

the most recent calendar year; or

(2) 30 cents per $1,000 of net retained liability if the insurer

had less than $250 million in direct written premiums written for

the most recent calendar year.

(b) Out of total charges for title insurance policies written or

assumed on or after January 1, 2005, a domestic title insurer

shall add to and set aside in the statutory premium reserve an

amount equal to the total of 18.5 cents per $1,000 of net

retained liability for the most recent calendar year, as

described in the insurer's annual statement.

(c) A domestic title insurer shall reduce additions to the

statutory premium reserve set aside for title insurance policies

written or assumed after the year 1997 over a 20-year period

beginning in the year after the year in which the policies are

written or assumed in the manner and under the same percentages

applied under Sections 2551.252(c) and (d).

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

56, Sec. 1, eff. September 1, 2005.

Sec. 2551.254. TRANSITIONAL RELEASE; TRANSITIONAL CHARGE. (a)

In addition to the requirements described by Sections 2551.252

and 2551.253, each domestic title insurer shall compute a total

statutory premium reserve balance for all policy years combined

as of December 31, 1996.

(b) A domestic title insurer shall compute the balance under

Subsection (a) as if Section 2551.252 were in effect during the

20-year period ending December 31, 1996. That balance, less the

total actual statutory premium reserve balance carried by the

insurer on December 31, 1996, is the insurer's transitional

charge if the resulting amount is more than zero or is the

insurer's transitional release if the resulting amount is zero or

less.

(c) If a domestic title insurer has a transitional charge under

Subsection (b), in addition to any changes to the statutory

premium reserve otherwise required by this subchapter, the

insurer shall add to its statutory premium reserve, on December

31 of each year for 10 consecutive years beginning on December

31, 1997, an amount equal to one-tenth of the transitional

charge.

(d) If a domestic title insurer has a transitional release under

Subsection (b), in addition to any changes to the statutory

premium reserve otherwise required by this subchapter, the

insurer shall reduce its statutory premium reserve, on December

31 of each year for 10 consecutive years beginning on December

31, 1997, by an amount equal to one-tenth of the transitional

release.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.255. RUNOFF BALANCE. (a) At the end of each calendar

year beginning in 1997, each domestic title insurer shall compute

a total statutory premium reserve balance for all policy years

before January 1, 1997, combined. The balance shall be computed

as of the year-end evaluation date and as if Section 2551.252

were in effect during the 20-year period ending December 31,

1996. The balance computed under this subsection is the runoff

balance.

(b) A domestic title insurer shall reduce its statutory premium

reserve by an amount equal to the difference between:

(1) the runoff balance computed under Subsection (a); and

(2) the runoff balance computed for the preceding calendar year.

(c) The reduction of the statutory premium reserve under

Subsection (b) is in addition to any other changes to the

statutory premium reserve required by this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.256. ACTUARIAL CERTIFICATION. (a) Each domestic or

foreign title insurer shall file annually with the insurer's

annual statement required under Section 2551.152 an actuarial

certification made by a member in good standing of the American

Academy of Actuaries.

(b) An actuarial certification must:

(1) conform to the annual statement instructions for a title

insurer adopted by the National Association of Insurance

Commissioners; and

(2) include the actuary's professional opinion of the insurer's

reserves as of the date of the annual statement.

(c) The reserves analyzed under this section must include

reserves for known claims, including adverse development on known

claims, and reserves for incurred but not reported claims.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.257. SUPPLEMENTAL RESERVE. Each domestic or foreign

title insurer shall establish a supplemental reserve in an amount

equal to the amount by which the actuarially certified reserves

exceed the total of the known claim reserve and statutory premium

reserve as set forth in the insurer's annual statement required

under Section 2551.152.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.258. REEVALUATION OF CERTAIN RESERVE REQUIREMENTS.

(a) The commissioner may:

(1) reevaluate the adequacy of the statutory premium reserves

required under Section 2551.253; and

(2) based on an actuarial review, change by order the amount of

the statutory premium reserve required of any domestic title

insurer or all domestic title insurers.

(b) Any change in the amount of a statutory premium reserve

under Subsection (a)(2) is considered a statutory premium reserve

and is not considered a supplemental reserve.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

56, Sec. 2, eff. September 1, 2005.

Sec. 2551.259. STATUTORY PREMIUM RESERVE AND SUPPLEMENTAL

RESERVE FUND. The statutory premium reserve and supplemental

reserve fund shall be:

(1) held in cash; or

(2) invested in first mortgage notes or other securities

admissible for investment by title insurers under Section

2551.151.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.260. EFFECT OF INSOLVENCY OR DISSOLUTION. On the

insolvency or dissolution of a title insurer, the statutory

premium reserve and supplemental reserve fund shall be used to

protect title insurance policyholders, even if no accrued title

insurance claims exist and other unpaid obligations do exist.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.261. RESERVE FOR UNPAID LOSSES AND LOSS EXPENSES. (a)

A title insurance company shall establish and maintain, in

addition to any other reserves, a reserve against:

(1) unpaid losses; and

(2) loss expense for costs of defense of an insured and other

costs expected to be paid to other parties in the defense,

settlement, or processing of a claim under the terms of a title

insurance policy.

(b) A title insurance company shall compute the amount of the

reserve required by this section by carefully estimating any loss

and loss expense likely to be incurred on a proper disposition of

each claim presented, under notice from or on behalf of the

insured, of a title defect in or lien or adverse claim against a

title insured by the company.

(c) The total expenses of the title insurance company are equal

to the estimate under Subsection (b) for payment of loss and

costs of defense of the insured and other costs expected to be

paid to other parties in the defense, settlement, or processing

of the claim under the terms of the title insurance policy. The

title insurance company shall revise the estimate at least

annually and may additionally revise the estimate as

circumstances warrant.

(d) The amounts set aside in the reserve in any year shall be

deducted in determining the net profits for that year of any

title insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

SUBCHAPTER G. LIABILITY AND REINSURANCE

Sec. 2551.301. MAXIMUM POLICY LIABILITY. (a) Except as

provided by Subsection (b), a title insurance company may not

issue a title insurance policy on any real property located in

this state involving a potential policy liability of more than 50

percent of the company's capital stock and surplus as stated in

the most recent annual statement of the company.

(b) A title insurance company may exceed the limit described by

Subsection (a) if the excess liability is reinsured in due course

in an authorized title insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.302. REQUIREMENTS FOR REINSURING POLICIES. A title

insurance company may reinsure any of its policies and contracts

issued on real property located in this state or on policies and

contracts issued in this state under Chapter 2751, if:

(1) the reinsuring title insurance company is authorized to

engage in business in this state under this title; and

(2) the department first approves the form of the reinsurance

contract.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

543, Sec. 6, eff. September 1, 2007.

Sec. 2551.303. FORM OF REINSURANCE CONTRACT. (a) If the

department approves a form of reinsurance contract for a title

insurance company, the company may continue using the form

without submitting individual reinsurance contracts to the

department for approval.

(b) The department may alter the required form of a reinsurance

contract previously approved by the department after first giving

written notice to each title insurance company affected by the

alteration.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.304. ACCEPTANCE OF REINSURANCE. A title insurance

company may accept a reinsurance risk on real property located in

this state or on interests described by Section 2751.002(2) only

from an authorized title insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

543, Sec. 7, eff. September 1, 2007.

Sec. 2551.305. CERTAIN REINSURANCE ALLOWED. (a)

Notwithstanding any other provision of this subchapter, the

department may, on application and hearing, permit a title

insurance company to acquire reinsurance on an individual policy

or facultative basis from a title insurance company not

authorized to engage in the business of title insurance in this

state, if:

(1) the company has exhausted the opportunity to acquire

reinsurance from all other authorized title insurance companies;

and

(2) the title insurance company from which the reinsurance is

acquired has a combined capital and surplus of at least $1.4

million as stated in its annual statement preceding the

acceptance of reinsurance.

(b) Notwithstanding any other provision of this subchapter, the

department may, on application and hearing, permit a title

insurance company, including an authorized reinsuring title

insurance company, to retain an additional potential liability of

not more than 40 percent of the company's capital stock and

surplus as stated in the most recent annual statement of the

company, if:

(1) the company has exhausted the opportunity to acquire

reinsurance under Subsection (a); and

(2) the additional potential liability of the company is

incurred only if the loss suffered by the insured under the

policy exceeds the amount of insurance and reinsurance accepted

by the company and its reinsuring title insurance companies under

the other provisions of this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

SUBCHAPTER H. ENFORCEMENT AND INTERVENTION

Sec. 2551.351. FORFEITURE OF RIGHT TO ENGAGE IN BUSINESS. (a)

A foreign or domestic corporation forfeits any right to engage in

business in this state if the corporation:

(1) issues any form of title insurance policy, or any other

adopted or approved form, on real property in this state other

than a form prescribed by the department;

(2) charges any premium rate on an owner, mortgagee, or other

title insurance policy, or on any other adopted or approved form,

on real property in this state other than a premium rate

prescribed by the commissioner; or

(3) otherwise engages in the business of title insurance in

relation to real property in this state on a form or for a

premium rate not prescribed by the department or commissioner.

(b) This section does not apply to a premium rate charged in

connection with a reinsurance transaction between two or more

title insurance companies, provided that the reinsurance contract

complies with Subchapter G.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.352. REVOCATION OF PERMIT AND FORFEITURE OF CHARTER.

(a) A domestic corporation engaged in the business of title

insurance that violates this title is subject to:

(1) revocation by the commissioner of the corporation's permit;

and

(2) forfeiture of the corporation's charter.

(b) A foreign corporation engaged in the business of title

insurance that violates this title is subject to revocation by

the commissioner of the corporation's permit.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.353. PROCEDURE FOR REVOCATION OF CERTIFICATE. (a) If

the commissioner determines that a domestic or foreign

corporation that holds a certificate of authority to engage in

business in this state has violated this title, the commissioner

shall notify the company that the commissioner intends to revoke

the company's certificate of authority on the expiration of the

30-day period following the date actual notice is delivered or

mailed under this section.

(b) Notice under this section must:

(1) be in writing; and

(2) be delivered to an executive officer of the company by

personal service or by registered mail.

(c) If a company receiving notice under this section does not

fully comply before the expiration of the period described by

Subsection (a), the commissioner shall revoke the company's

certificate of authority.

(d) A company whose certificate of authority is revoked under

this section is ineligible for another certificate of authority

until the later of:

(1) the date on which the company fully and in good faith

complies; or

(2) the first anniversary of the date of the revocation.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.

Sec. 2551.354. APPEAL OF COMMISSIONER ACTION. (a) A company

qualified or seeking to qualify under this title and aggrieved by

an action of the commissioner, including any action against the

company, may file an appeal of the commissioner's action in a

district court in Travis County.

(b) The appeal must be filed not later than the 30th day after

the date the commissioner issues the order or ruling, except that

if the order or ruling is directed against the company, whether

or not directed against any other party, the company has 30 days

after the date of receipt of official notice of the

commissioner's action to review the action.

(c) An appeal under this section is subject to the same standard

of review as an appeal under this code in accordance with Section

36.203.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 6, eff. April 1,

2005.