CHAPTER 4152. REINSURANCE INTERMEDIARIES - Texas Statutes

INSURANCE CODE

TITLE 13. REGULATION OF PROFESSIONALS

SUBTITLE D. OTHER PROFESSIONALS

CHAPTER 4152. REINSURANCE INTERMEDIARIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 4152.001. DEFINITIONS. In this chapter:

(1) "Actuary" means a member in good standing of the American

Academy of Actuaries.

(2) "Broker" means a person, other than an officer or employee

of an insurer, who solicits, negotiates, or places reinsurance

business on behalf of an insurer and who may not exercise the

authority to bind reinsurance on behalf of that insurer.

(3) "Control" has the meaning described by Sections 823.005 and

823.151.

(4) "Insurer" means a commercially domiciled insurer or other

person legally organized in this state to engage in the business

of insurance as an insurance company, including:

(A) a capital stock insurance company;

(B) a mutual insurance company;

(C) a title insurance company;

(D) a fraternal benefit society;

(E) a local mutual aid association;

(F) a statewide mutual assessment company;

(G) a county mutual insurance company;

(H) a Lloyd's plan;

(I) a reciprocal or interinsurance exchange;

(J) a stipulated premium company;

(K) a group hospital service corporation;

(L) a farm mutual insurance company; and

(M) a risk retention group.

(5) "Manager" means a person who has the authority to bind

reinsurance or who manages all or part of the reinsurance

business of an insurer, including the management of a separate

division, department, or underwriting office, and who acts as an

agent for that insurer. The term does not include:

(A) an employee of the insurer;

(B) a manager of the United States branch of an alien insurer;

(C) an underwriting manager who, under a contract, manages all

of the reinsurance operations of an insurer, who is under common

control with the insurer under Chapter 823, and whose

compensation is not based on the volume of premiums written; or

(D) a manager of a group, association, pool, or other

organization of insurers who engages in joint underwriting or

joint reinsurance and who is subject to examination by the

insurance commissioner or other appropriate officer of the state

in which the manager's principal business office is located.

(6) "Person" means an individual or a corporation, partnership,

association, or other private legal entity.

(7) "Qualified United States financial institution" means an

institution that is:

(A) organized or, in the case of a United States office of a

foreign banking organization, licensed under the laws of the

United States or a state; and

(B) regulated, supervised, and examined by United States federal

or state authorities who have regulatory authority over banks and

trust companies.

(8) "Reinsurance" means a written contract that for

consideration transfers an insurance risk of loss between

insurers and indemnifies a ceding insurer against all or part of

the loss that the ceding insurer may sustain under an insurance

policy the ceding insurer has issued or assumed. The term does

not include a contract for the bulk sale, transfer, and

assumption of direct insurance policy liability to the insureds.

(9) "Reinsurance intermediary" means a broker or manager.

(10) "Reinsurer" means an insurer who has the authority to

assume reinsurance, including retrocessions. The term includes a

retrocessionaire.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.002. CLASSIFICATION AS COMMERCIALLY DOMICILED INSURER.

(a) For purposes of this chapter, a foreign or alien insurer

authorized to engage in the business of insurance in this state

is a commercially domiciled insurer if during the period

described by Subsection (b) the average of the gross premiums

written by the insurer in this state is:

(1) more than the average of the gross premiums written by the

insurer in the insurer's state of domicile; and

(2) 20 percent or more of the total gross premiums written by

the insurer in the United States, as reported in the insurer's

three most recent annual statements.

(b) The period applicable to Subsection (a) is:

(1) the three most recent fiscal years of the insurer that

precede the fiscal year in which the determination under this

section is made; or

(2) if the insurer has been authorized to engage in the business

of insurance in this state for less than the period described by

Subdivision (1), the period for which the insurer has been

authorized to engage in the business of insurance in this state.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.003. RIGHTS OF THIRD PARTIES NOT AFFECTED. This

chapter does not restrict the rights of or confer any additional

rights on a policyholder, claimant, creditor, or other third

party.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.004. RULES. The commissioner may adopt reasonable

rules as necessary to implement this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

SUBCHAPTER B. LICENSE REQUIREMENTS

Sec. 4152.051. LICENSE REQUIRED. (a) A person may not act as a

broker or manager in this state for an insurer engaged in the

business of insurance or reinsurance in this state unless the

person holds an appropriate license under this chapter.

(b) A person who holds a manager license is not required to

obtain a broker license but must comply with Subchapter D to act

as a broker.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.052. QUALIFICATIONS. The commissioner may establish

qualifications for a reinsurance intermediary license as

reasonably necessary to fulfill the requirements of this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.053. APPLICATION. (a) An application for a

reinsurance intermediary license may not be accepted unless the

application shows on its face that the applicant has been engaged

in the business of insurance or reinsurance for at least three

years.

(b) Each person authorized under Section 4152.057 to act as a

reinsurance intermediary under a reinsurance intermediary license

issued to an entity must be named in the application and any

supplement to the application.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.054. SERVICE OF NOTICE, ORDERS, AND PROCESS. (a) An

applicant for a reinsurance intermediary license who is not a

resident of this state must:

(1) designate the commissioner as agent for service of process

in the manner, and with the same legal effect, as provided by

Chapter 804 for service of process on unauthorized insurers; and

(2) provide the commissioner with the name and address of a

resident of this state on whom a notice or order of the

commissioner or process affecting the applicant may be served.

(b) A license holder who is a nonresident shall notify the

commissioner in writing of each change in the license holder's

designated agent under Subsection (a)(2) not later than the 30th

day after the date on which the license holder makes the change.

The change does not take effect until acknowledged by the

commissioner.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.055. FEES. (a) The department shall collect a

nonrefundable licensing fee from each reinsurance intermediary

who applies for an original or renewal license in this state.

(b) The commissioner shall set the fees for original, renewal,

and reciprocal licenses in amounts that are reasonable and

necessary to cover the costs of the licensing program.

(c) The fees shall be deposited to the credit of the Texas

Department of Insurance operating account. Money deposited in the

account under this subsection may be used by the department only

to enforce this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.056. LICENSE ISSUANCE. The commissioner shall issue a

reinsurance intermediary license to a person who complies with

this chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.057. PERSONS AUTHORIZED TO ACT UNDER LICENSE. (a) A

reinsurance intermediary license issued to a firm or association

authorizes each member of the firm or association and any

designated employee to act as a reinsurance intermediary under

the license.

(b) A reinsurance intermediary license issued to a corporation

authorizes each officer and any designated employee or director

of the corporation to act as a reinsurance intermediary under the

license.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.058. BOND OR ERRORS AND OMISSIONS POLICY. (a) The

commissioner may require a reinsurance intermediary to:

(1) file a bond with the commissioner for the protection of all

insurers represented; or

(2) maintain an errors and omissions policy.

(b) The issuer of the bond or the errors and omissions policy

must be acceptable to the commissioner. The bond or the policy

must be in an amount determined by the commissioner to be

customary and adequate under the circumstances.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.059. LICENSE EXPIRATION AND RENEWAL. (a) A

reinsurance intermediary license is valid for two years from the

date of issuance and may be renewed for two-year terms.

(b) The commissioner may adopt standards for the renewal of a

reinsurance intermediary license.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

SUBCHAPTER C. EXAMINATION OF REINSURANCE INTERMEDIARIES

Sec. 4152.101. EXAMINATION BY COMMISSIONER. (a) A reinsurance

intermediary is subject to examination by the commissioner of the

reinsurance intermediary's:

(1) financial condition; and

(2) compliance with the laws of this state affecting the conduct

of the reinsurance intermediary's business.

(b) A manager may be examined as if the manager were an insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.102. ACCESS TO AND MAINTENANCE OF BOOKS, BANK

ACCOUNTS, AND RECORDS. (a) The commissioner is entitled to

access to all books, bank accounts, and records of a reinsurance

intermediary.

(b) A reinsurance intermediary shall maintain books, bank

accounts, and records in a form usable by the commissioner.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.103. CONDUCT OF EXAMINATION. The commissioner, one or

more commissioned examiners, a certified public accountant, or

another person qualified to perform the examination shall conduct

an examination under this subchapter as the commissioner

considers necessary.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.104. EXAMINATION EXPENSE. (a) A reinsurance

intermediary who is examined under this subchapter shall pay an

amount for the expense of the examination that the commissioner

certifies as just and reasonable.

(b) Expenses relating to an examination conducted under this

subchapter may be charged to the person examined in accordance

with Sections 401.151, 401.152, 401.155, and 401.156.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Amended by:

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

730, Sec. 2J.005, eff. April 1, 2009.

SUBCHAPTER D. REQUIREMENTS RELATING TO BROKERS

Sec. 4152.151. CONTRACT BETWEEN BROKER AND INSURER. (a) A

broker and an insurer represented by the broker may enter into a

transaction only under a written contract that:

(1) is executed by a responsible officer of both the broker and

the insurer; and

(2) specifies the responsibilities of each party.

(b) At a minimum, a contract entered into under this section

must:

(1) authorize the insurer to terminate the broker's authority in

writing at any time;

(2) require the broker to:

(A) provide accounts to the insurer at least quarterly that

accurately detail all material transactions, including

information necessary to support all commissions, charges, and

other fees received by or owing to the broker;

(B) pay all money due the insurer not later than the 30th day

after the date of receipt;

(C) hold all money collected for the insurer's account in a

fiduciary capacity in a bank that is a qualified United States

financial institution; and

(D) if premiums or contributions are collected on behalf of or

for more than one insurer:

(i) maintain records to identify the ownership interest of each

insurer in money held in a fiduciary capacity; and

(ii) provide to each insurer on request a copy of the records

relating to deposits and withdrawals on behalf of or for that

insurer;

(3) state that the broker will:

(A) comply with:

(i) Section 4152.153; and

(ii) the written standards established by the insurer for the

cession or retrocession of risks ceded;

(B) disclose to the insurer any relationship with a reinsurer to

which business will be ceded or retroceded; and

(C) provide annually to each insurer with whom the broker

transacts business an audited statement of the broker's financial

condition prepared by a certified public accountant;

(4) identify:

(A) the name and address of the insurer;

(B) the kinds of insurance to be reinsured or retroceded;

(C) the type of reinsurance or retrocessions; and

(D) the limits of coverage; and

(5) state the effective date and expiration date of the

contract.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.152. PLACEMENT OF REINSURANCE WITH UNAUTHORIZED

REINSURER. Unless the ceding insurer releases the broker in

writing from the broker's obligations under this section, a

broker who places reinsurance on behalf of an authorized ceding

insurer with a reinsurer that is not authorized, accredited, or

trusteed in this state under Chapter 492 or 493 shall:

(1) exercise due diligence in inquiring into the financial

condition of the reinsurer;

(2) disclose to the ceding insurer the broker's findings in

connection with the inquiry under Subdivision (1); and

(3) make available to the ceding insurer a copy of the current

financial statement of the reinsurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Amended by:

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

730, Sec. 2J.006, eff. April 1, 2009.

Sec. 4152.153. TRANSACTION RECORDS. (a) For at least 10 years

after the expiration of each contract of reinsurance transacted

by a broker, the broker shall maintain a complete record for each

transaction that contains:

(1) the type of contract, limits, underwriting restrictions,

classes of risks, and territory;

(2) the period of coverage, including effective and expiration

dates, cancellation provisions, and notice requirements regarding

cancellation;

(3) reporting and settlement requirements regarding balances;

(4) the rate used to compute the reinsurance premium;

(5) the name and address of each ceding or assuming insurer;

(6) the rates of all reinsurance commissions, including the

commissions on any retrocessions handled by the broker;

(7) related correspondence and memoranda;

(8) proof of placement;

(9) details regarding retrocessions handled by the broker,

including the identity and address of each retrocessionaire and

the respective percentage of each contract assumed or ceded;

(10) financial records, including premium and loss accounts; and

(11) if the broker procures a reinsurance contract on behalf of

an authorized ceding insurer:

(A) written evidence that the assuming insurer has agreed to

assume the risk if the contract is procured directly from an

assuming insurer; or

(B) written evidence that the reinsurer has delegated binding

authority to the representative who has agreed to assume the risk

and that the representative is qualified to act as a manager

under this chapter if the contract is procured through a

representative of the assuming insurer, other than an employee.

(b) Each insurer subject to a contract of reinsurance transacted

by a broker is entitled to access to the information maintained

by the broker under Subsection (a) and may copy and audit all

accounts and records maintained by the broker related to the

insurer's business. The broker shall maintain the information in

a form usable by the insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.154. EMPLOYMENT OF PERSON BY INSURER AND BROKER. A

person may not be employed by an insurer and a broker with whom

the insurer transacts business unless the broker is:

(1) under common control with the insurer; and

(2) subject to Chapter 823.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

SUBCHAPTER E. REQUIREMENTS RELATING TO MANAGERS

Sec. 4152.201. CONTRACT BETWEEN MANAGER AND INSURER. (a) A

manager and an insurer represented by the manager may enter into

a transaction only under a written contract that:

(1) is executed by a responsible officer of both the manager and

the insurer;

(2) is approved by the insurer's board of directors or attorney

in fact;

(3) specifies the responsibilities of each party;

(4) identifies the rate, terms, and purpose of each commission,

charge, or other fee the manager may assess the insurer; and

(5) at a minimum, incorporates the requirements of Sections

4152.202-4152.214.

(b) Not later than the 30th day before the date the insurer

assumes or cedes business through the manager, a copy of the

executed contract must be filed with the commissioner for

approval.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.202. TERMINATION OF CONTRACT. An insurer may:

(1) terminate a contract entered into under Section 4152.201 for

cause on written notice to the manager by certified mail, return

receipt requested; and

(2) suspend the authority of the manager to assume or cede

business during any dispute regarding the cause for termination.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.203. ACCOUNTING FOR TRANSACTIONS. A manager who

enters into a contract with an insurer under Section 4152.201

shall provide accounts to the insurer at least quarterly that

accurately detail all material transactions, including

information necessary to support all commissions, charges, and

other fees received by or owing to the manager.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.204. MANAGEMENT OF MONEY. (a) A manager shall pay an

insurer at least monthly all money due the insurer under a

contract entered into under Section 4152.201.

(b) The manager must hold all money collected for the insurer's

account in a fiduciary capacity in a bank that is a qualified

United States financial institution. The manager may not retain

more than three months of estimated claims payments and allocated

loss adjustment expenses.

(c) If premiums or contributions are collected on behalf of or

for more than one insurer, the manager shall:

(1) keep a separate account for each insurer;

(2) maintain a copy of the records for each account; and

(3) provide to each insurer on request a copy of the records

relating to deposits and withdrawals on behalf of or for that

insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.205. TRANSACTION RECORDS. (a) For at least 10 years

after the expiration of each reinsurance contract transacted by a

manager, the manager shall maintain a complete record for each

transaction that contains:

(1) the type of contract, limits, underwriting restrictions,

classes of risks, and territory;

(2) the period of coverage, including effective and expiration

dates, cancellation provisions and notice requirements regarding

cancellation, and disposition of outstanding reserves on covered

risks;

(3) reporting and settlement requirements regarding balances;

(4) the rate used to compute the reinsurance premium;

(5) the name and address of each ceding or assuming insurer;

(6) the rates of all reinsurance commissions, including the

commissions on any retrocessions handled by the manager;

(7) related correspondence and memoranda;

(8) proof of placement;

(9) details regarding retrocessions handled by the manager, as

permitted by Section 4152.254, including the identity and address

of each retrocessionaire and the respective percentage of each

contract assumed;

(10) financial records, including premium and loss accounts; and

(11) if the manager procures a reinsurance contract on behalf of

a ceding insurer:

(A) written evidence that the assuming insurer has agreed to

assume the risk if the contract is procured directly from an

assuming insurer; or

(B) written evidence that the reinsurer has delegated binding

authority to the representative who has agreed to assume the risk

and that the representative is qualified to act as a manager

under this chapter if the contract is procured through a

representative of the assuming insurer, other than an employee.

(b) Each insurer is entitled to access to the information

maintained by the manager and may copy all accounts and records

maintained by the manager related to the insurer's business. The

manager shall maintain the information in a form usable by the

insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.206. CONTRACT ASSIGNMENT PROHIBITED. A manager may

not assign in whole or in part a contract entered into under

Section 4152.201.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.207. COMPLIANCE WITH UNDERWRITING AND RATING STANDARDS

OF INSURER. A manager shall comply with the written underwriting

and rating standards established by an insurer with whom the

manager has entered into a contract under Section 4152.201 for

the acceptance, rejection, or cession of all risks.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.208. SETTLEMENT OF CLAIMS. (a) This section applies

only to a contract entered into under Section 4152.201 that

permits a manager to settle claims on behalf of an insurer.

(b) All claims must be reported to the insurer at least

quarterly.

(c) The manager shall send a copy of the claim file to the

insurer at the insurer's request or as soon as it is known that

the claim:

(1) has the potential to exceed the lesser of:

(A) an amount determined by the commissioner; or

(B) the limit set by the insurer;

(2) involves a coverage dispute;

(3) may exceed the manager's claims settlement authority;

(4) has been open for more than six months; or

(5) has been closed by payment of the lesser of:

(A) an amount determined by the commissioner; or

(B) the limit set by the insurer.

(d) A claim file is the joint property of the insurer and

manager, except that on an order of liquidation of the insurer

the file becomes the sole property of the insurer or the

insurer's estate. The manager is entitled to reasonable access to

the claim file and may copy the file on a timely basis.

(e) Any settlement authority granted to the manager may be

terminated for cause on the insurer's written notice by certified

mail, return receipt requested, to the manager or on the

termination of the contract. The insurer may suspend the

settlement authority during any dispute regarding the cause of

termination.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.209. PAYMENT OF INTERIM PROFITS. If a contract

entered into under Section 4152.201 provides for the sharing of

interim profits by the manager, interim profits may not be paid

until:

(1) the first anniversary of the end of each underwriting period

for property business, the fifth anniversary of the end of each

underwriting period for casualty business, or the expiration of

the period set by the executive director for those or other

specified kinds of insurance; and

(2) the adequacy of reserves on remaining claims has been

verified under Section 4152.213.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.210. AUDITED STATEMENT OF MANAGER'S FINANCIAL

CONDITION. (a) A manager shall provide annually to each insurer

and reinsurer with whom the manager transacts business an audited

statement of the manager's financial condition.

(b) The statement must be prepared by an independent certified

public accountant in a form acceptable to the commissioner.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.211. DISCLOSURE OF RELATIONSHIPS WITH OTHER INSURERS.

Before ceding or assuming any business on behalf of an insurer

under a contract entered into under Section 4152.201, a manager

shall disclose to the insurer any relationship the manager has

with another insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.212. ACTS OF MANAGER CONSIDERED ACTS OF INSURER. The

acts of a manager are considered to be the acts of the insurer on

whose behalf the manager is acting.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.213. ACTUARY'S OPINION ON ADEQUACY OF LOSS RESERVES.

In addition to any other required loss reserve certification, a

manager who establishes loss reserves shall provide annually, or

more frequently as required by other law, an opinion from an

actuary attesting to the adequacy of the loss reserves

established for losses incurred and outstanding on business

produced by the manager.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.214. PLACEMENT OF REINSURANCE WITH UNAUTHORIZED

REINSURER. (a) Unless the ceding insurer releases the manager

in writing from the manager's obligations under this section, a

manager who places reinsurance on behalf of an authorized ceding

insurer with a reinsurer that is not authorized, accredited, or

trusteed in this state under Chapter 492 or 493 shall:

(1) exercise due diligence in inquiring into the financial

condition of the reinsurer;

(2) disclose to the ceding insurer the manager's findings in

connection with the inquiry under Subdivision (1); and

(3) make available to the ceding insurer a copy of the current

financial statement of the reinsurer.

(b) A ceding insurer that releases a manager from the manager's

obligations under Subsection (a) assumes those obligations.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Amended by:

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

730, Sec. 2J.007, eff. April 1, 2009.

Sec. 4152.215. PROHIBITIONS. (a) A reinsurance intermediary

acting as a manager may not:

(1) bind retrocessions on behalf of an insurer, except that the

manager may bind facultative retrocessions under obligatory

retrocessional agreements if the contract entered into with the

insurer under Section 4152.201 contains reinsurance underwriting

guidelines for those retrocessions that include:

(A) a list of reinsurers with whom those automatic agreements

are in effect; and

(B) for each reinsurer:

(i) the coverages and amounts or percentages that may be

reinsured; and

(ii) commission schedules;

(2) commit an insurer to participate in a reinsurance syndicate;

(3) appoint or contract with a broker without ensuring that the

broker is qualified to act as a manager under this chapter;

(4) without prior approval of the insurer, pay or commit an

insurer to pay a claim that exceeds the lesser of:

(A) an amount specified by the insurer; or

(B) one percent of the insurer's policyholders' surplus as of

December 31 of the last complete calendar year; or

(5) collect a payment from a retrocessionaire or commit an

insurer to a claim settlement with a retrocessionaire without

prior approval of the insurer.

(b) If prior approval is given as provided by Subsection (a)(5),

a report must be forwarded to the reinsurer as provided by

Section 4152.203.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.216. EMPLOYMENT OF PERSON BY INSURER AND MANAGER. A

person may not be employed by an insurer and a manager with whom

the insurer transacts business unless the manager is:

(1) under common control with the insurer; and

(2) subject to Chapter 823.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

SUBCHAPTER F. REQUIREMENTS RELATING TO INSURERS

Sec. 4152.251. ENGAGEMENT OF SERVICES OF UNLICENSED BROKER OR

MANAGER. (a) Except as provided by Subsection (b), an insurer

may not engage the services of a person to act as a broker or

manager on the insurer's behalf unless the person holds a license

if required by Section 4152.051.

(b) An insurer, or an employee, attorney, or actuary of an

insurer, may negotiate and obtain reinsurance for that insurer

without holding a broker or manager license or without using the

services of a broker or manager if that insurer, employee,

attorney, or actuary does not otherwise hold the person out as a

broker or manager or perform the duties or provide the services

of a broker or manager.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.252. AUDITED STATEMENT OF MANAGER'S FINANCIAL

CONDITION. An insurer shall obtain annually an audited statement

as provided by Section 4152.210 of the financial condition of

each manager with whom the insurer transacts business.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.253. REVIEW OF UNDERWRITING AND CLAIMS PROCESSING

OPERATIONS. An insurer shall conduct at least semiannually an

on-site review of the underwriting and claims processing

operations of a manager with whom the insurer enters into a

contract under Section 4152.201.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.254. AUTHORITY FOR RETROCESSIONAL CONTRACTS OR

PARTICIPATION IN REINSURANCE SYNDICATES. Binding authority for

all retrocessional contracts or participation in reinsurance

syndicates rests with an officer of the insurer. That officer may

not be affiliated with a manager acting for the insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.255. NOTIFICATION OF TERMINATION OF MANAGER'S

CONTRACT. (a) Not later than the 30th day after the date an

insurer terminates a manager's contract, the insurer shall

provide written notice to the commissioner of the termination,

including the reasons for termination.

(b) The notice is a privileged communication and is not subject

to public disclosure or admission into evidence in any

proceeding.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.256. APPOINTMENT OF CERTAIN PERSONS TO BOARD OF

DIRECTORS PROHIBITED. (a) This section does not apply to a

relationship governed by Chapter 823.

(b) An insurer may not appoint to the insurer's board of

directors an officer, director, employee, controlling

shareholder, or submanager of a manager acting for that insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

SUBCHAPTER G. DISCIPLINE AND ENFORCEMENT

Sec. 4152.301. GROUNDS FOR LICENSE DENIAL OR DISCIPLINARY

ACTION. The department may deny an application for a license or

discipline a license holder under Subchapter C, Chapter 4005, if

the department determines that the applicant or license holder,

or a person who would be authorized to act on behalf of the

applicant or license holder under Section 4152.057, has:

(1) wilfully violated or participated in the violation of this

chapter or another insurance law of this state;

(2) intentionally made a material misstatement in the license

application;

(3) obtained or attempted to obtain the license by fraud or

misrepresentation;

(4) misappropriated, converted to the person's own use, or

illegally withheld money required to be held in a fiduciary

capacity;

(5) materially misrepresented the terms or effect of any

contract of insurance or reinsurance, or engaged in any

fraudulent transaction; or

(6) been convicted of a felony or of a misdemeanor of which

criminal fraud is an essential element.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.

Sec. 4152.302. IMPOSITION OF SANCTIONS. (a) The commissioner

may impose or seek any sanction authorized by law, including the

penalties authorized by Chapters 82 and 83, against a reinsurance

intermediary, insurer, or reinsurer who the commissioner

determines, after notice and hearing as provided by this code,

has violated this chapter.

(b) The commissioner may impose or seek any sanction authorized

by law, including the penalties authorized by Chapter 101,

against a nonlicensed reinsurance intermediary who violates this

chapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 7, eff. April 1,

2005.