CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN MUTUAL LIFE INSURANCE COMPANIES - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE E. MUTUAL AND FRATERNAL COMPANIES AND RELATED ENTITIES

CHAPTER 883. MUTUAL INSURANCE COMPANIES OTHER THAN MUTUAL LIFE

INSURANCE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 883.001. DEFINITIONS. In this chapter:

(1) "Domestic mutual insurance company" means a mutual insurance

company organized under this chapter.

(2) "Foreign mutual insurance company" means a mutual insurance

company organized under the laws of a jurisdiction other than

this state and authorized to engage in the business of insurance

on a mutual plan in any state, district, or territory.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.002. APPLICABILITY OF CERTAIN GENERAL LAWS. (a)

Except as otherwise provided by law, domestic and foreign mutual

insurance companies organized or operating under this chapter are

subject to the laws applicable to:

(1) a stock insurance company engaging in the same kind of

insurance;

(2) investments;

(3) valued policies;

(4) policy forms and rates;

(5) reciprocal or retaliatory laws;

(6) insolvency and liquidation; and

(7) publication and defamatory statements.

(b) This chapter does not exempt a domestic mutual insurance

company from being subject to other laws of this state governing

the incorporation, organization, regulation, and operation of a

company or organization writing insurance in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.003. APPLICABILITY OF TEXAS NON-PROFIT CORPORATION ACT.

Except to the extent of any conflict with this code, the Texas

Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's

Texas Civil Statutes) applies to a domestic mutual insurance

company. The commissioner has each power and duty of, and shall

perform each act to be performed by, the secretary of state under

that Act with respect to mutual insurance companies.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER B. FORMATION, STRUCTURE, AND MANAGEMENT OF COMPANY

Sec. 883.051. FORMATION OF COMPANY. (a) Twenty or more

persons, a majority of whom are residents of this state, may

incorporate in accordance with this chapter to engage in the

business of mutual insurance as provided by this chapter.

(b) To form a mutual insurance company, each incorporator must

sign and acknowledge the articles of incorporation of the

company.

(c) The incorporators of a proposed mutual insurance company are

subject to Sections 822.001, 822.051, 822.057(a)(1)-(3), (b), and

(c), 822.058(a), 822.059, 822.060, and 822.201, except that:

(1) the minimum number of persons required to adopt and sign the

proposed company's articles of incorporation under Section

822.051 is equal to the number of the proposed company's

incorporators as provided by Subsection (a); and

(2) the unencumbered surplus of the mutual insurance company is

capital structure for purposes of Section 822.201.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.052. ARTICLES OF INCORPORATION. Articles of

incorporation of a proposed mutual insurance company must

specify:

(1) the name of the company;

(2) the purpose for which the company is being formed;

(3) the location of the company's principal or home office;

(4) the name and place of residence of each incorporator; and

(5) the name and address of each member of the initial board of

directors.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.053. COMPANY'S NAME. (a) The name of a mutual

insurance company must contain the word "mutual."

(b) A mutual insurance company's name may not be so similar to

the name of any other mutual insurance company organized or

engaging in business in the United States, that it is confusing

or misleading.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.054. LOCATION OF PRINCIPAL OR HOME OFFICE. The

principal or home office of a mutual insurance company must be

located in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.055. BEGINNING OF CORPORATE EXISTENCE. The corporate

existence of a mutual insurance company begins on the date on

which the commissioner issues a certificate of authority to the

company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.056. BOARD OF DIRECTORS. (a) The board of directors

named in a mutual insurance company's articles of incorporation

shall manage the company until the initial meeting of the members

of the company.

(b) After a mutual insurance company is issued a certificate of

authority, the company's board of directors may:

(1) adopt bylaws;

(2) accept applications for insurance; and

(3) transact the business of the company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.057. MEMBERSHIP OF PUBLIC OR PRIVATE ENTITIES IN

COMPANY AUTHORIZED. (a) Any public or private corporation,

board, association, or estate may make an application for, enter

into an agreement for, or hold a policy in a mutual insurance

company. An officer, shareholder, trustee, or legal

representative may act on behalf of the entity for that

participation.

(b) An officer, shareholder, trustee, or legal representative of

a public or private entity described by Subsection (a) may not be

held personally liable on a contract of insurance executed by the

person in the person's capacity as a representative of the entity

under Subsection (a).

(c) The right of a corporation organized under the laws of this

state to participate as a member of a mutual insurance company

is:

(1) incidental to the purpose for which the corporation was

organized; and

(2) in addition to the corporate rights or powers expressly

conferred in the corporation's articles of incorporation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.058. MEMBERSHIP VOTES. Each member of a mutual

insurance company is entitled to one vote on each matter

submitted to a vote unless a different number of votes is

authorized by the company's bylaws based on:

(1) the insurance in force;

(2) the number of policies held by the member; or

(3) the amount of the premium paid by the member.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS IN THIS STATE

Sec. 883.101. MUTUAL INSURANCE BUSINESS. Mutual insurance of

any kind may not be written in this state except as authorized by

this chapter or any other law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.102. CHARTER AND CERTIFICATE OF AUTHORITY REQUIRED. A

domestic mutual insurance company may not engage in the business

of insurance until:

(1) the company obtains a charter as provided by Chapter 822;

and

(2) the commissioner issues to the company a certificate of

authority for that purpose.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.103. AUTHORIZATION OF FOREIGN MUTUAL INSURANCE COMPANY

TO ENGAGE IN BUSINESS. (a) The department shall authorize a

foreign mutual insurance company to write the kinds of insurance

authorized by the company's charter or articles of incorporation

in this state if the company:

(1) is solvent as determined under this chapter;

(2) files with the department:

(A) a copy of the company's bylaws certified by the company's

secretary; and

(B) a certified copy of the company's charter or articles of

incorporation;

(3) appoints the commissioner as the company's agent for service

of process as provided by Chapter 804;

(4) files a financial statement under oath in a form as required

by the department; and

(5) complies with legal requirements applicable to the filing of

documents and the furnishing of information by a stock insurance

company that files an application with the department for

authority to transact the same kind of insurance as the company.

(b) A foreign mutual insurance company's name may not be so

similar to a name of a mutual insurance company or foreign mutual

insurance company organized or authorized to engage in business

in this state that it is confusing or misleading.

(c) A foreign mutual insurance company authorized to engage in

the business of insurance under this section has, to the same

extent, all of the powers granted to and privileges of a mutual

insurance company organized and operating under this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER D. POWERS, DUTIES, AND OPERATION OF COMPANY

Sec. 883.151. AUTHORITY TO WRITE CERTAIN INSURANCE. A domestic

mutual insurance company may write any kind of insurance that may

be lawfully written in this state, other than life insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.152. PRIOR AUTHORITY NOT AFFECTED. This chapter does

not affect any authority that existed before September 6, 1955,

that allowed mutual insurance companies to write non-assessable

policies in this state, subject to any prerequisite imposed by

law on that authority.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.153. POLICY RATES. A mutual insurance company

operating under this chapter shall charge the insurance rates

prescribed by the commissioner and is subject to the same rate

requirements as a domestic insurance company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.154. MAXIMUM PREMIUMS. (a) The maximum premium of an

insurance policy issued by a domestic mutual insurance company

must be stated in the policy.

(b) A policy's maximum premium may consist only of:

(1) a cash premium; or

(2) a cash premium and a contingent premium in an amount equal

to one additional cash premium.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.155. ISSUANCE OF POLICY FOR CASH PREMIUM ONLY. (a) A

domestic mutual insurance company may not issue an insurance

policy for a cash premium only unless:

(1) the company possesses surplus above all liabilities in an

amount at least equal to the minimum capital and surplus required

of a stock insurance company engaging in the same kinds of

insurance;

(2) the company files with the department:

(A) an application for the issuance of this type of policy; and

(B) a certified copy of the resolution of the company's board of

directors authorizing the issuance; and

(3) the commissioner approves the documents filed under

Subdivision (2).

(b) A mutual insurance company that issues a policy for a cash

premium only may waive all contingent premiums in any outstanding

policies.

(c) A foreign mutual insurance company authorized to engage in

the business of insurance in this state may issue an insurance

policy for a cash premium only and may waive contingent premiums

on any of its outstanding policies in the same manner and subject

to the same requirements as a mutual insurance company under this

section that is engaged in the same kinds of insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.156. ASSESSMENT ON POLICYHOLDERS. (a) A policyholder

is not liable for an assessment imposed on a policy issued by a

mutual insurance company with approval of the commissioner under

Section 883.155(a).

(b) An assessment may not be imposed on the holder of a policy

described by Section 883.155(a) by:

(1) the officers or directors of a mutual insurance company;

(2) the department;

(3) a receiver; or

(4) a liquidator.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.157. REINSURANCE OF POLICY. (a) Subject to Subsection

(c), a mutual insurance company authorized to engage in the

business of insurance in this state may enter into an agreement

with an insurer to cede to or accept from the insurer all or part

of an insurance risk.

(b) A reinsurance agreement under this section does not create

or confer contingent liability, participation, or membership

unless otherwise provided by the agreement.

(c) A mutual insurance company may not enter into an agreement

with a reinsurer that has been disapproved for that purpose by

written order of the commissioner filed in the department's

offices.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.158. REQUIREMENTS FOR COMPANIES WRITING BONDS. A

mutual insurance company qualifying to write bonds under this

chapter is subject to the same legal requirements as any other

insurance company writing bonds under this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.159. NECESSARY OR INCIDENTAL POWERS. A domestic mutual

insurance company has such powers as are necessary or incidental

to the transaction of its business.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.160. RIGHTS AND PRIVILEGES OF CERTAIN COMPANIES

RETAINED. A mutual insurance company engaged in business under

Chapters 5, 9, 12, 13, 14, and 15, Title 78, Revised Statutes,

before their repeal by Section 18, Chapter 40, Acts of the 41st

Legislature, 1st Called Session, 1929, as amended by Section 1,

Chapter 60, Acts of the 41st Legislature, 2nd Called Session,

1929, retains the rights and privileges under the repealed law to

the extent provided by those sections.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.161. DIVIDENDS. On advance approval of the

commissioner, a mutual insurance company may pay dividends to its

members.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.162. LOANS TO COMPANY. (a) A person, including a

director, officer, or member of a mutual insurance company, may

loan to the company money necessary:

(1) for the company to engage in the company's business; or

(2) to enable the company to comply with a legal requirement.

(b) The mutual insurance company may repay a loan and agreed

interest, at an annual rate not to exceed 20 percent, only from

the surplus remaining after the company provides for the

company's reserves, other liabilities, and required surplus.

(c) A loan under this section or interest on a loan is not

otherwise a liability or claim against the company or any of its

assets.

(d) A mutual insurance company may not pay a commission or

promotion expense in connection with a loan made to the company.

(e) A mutual insurance company shall report in its annual

statement the amount of each loan made to the company.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.163. IMMEDIATE NOTIFICATION WHEN ASSETS ARE

INSUFFICIENT; EXAMINATION. The president and the secretary of a

mutual insurance company operating under the law providing for

the incorporation of mutual fire, lightning, hail, and storm

insurance companies shall immediately notify the commissioner any

time the admitted assets of the company are less than the largest

single risk for which the company is liable. The commissioner may

make an examination into the affairs of the company as the

commissioner considers best.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER E. REGULATION OF COMPANY

Sec. 883.201. SURPLUS REQUIREMENTS. A domestic mutual insurance

company must possess a surplus over and above all liabilities in

an amount equal to the minimum capital stock and surplus required

of a stock insurance company engaged in the same kinds of

insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.202. REQUIRED DEPOSIT FOR COMPANIES WRITING BONDS. (a)

A domestic mutual insurance company that writes fidelity and

surety bond coverage shall maintain on deposit with the

comptroller cash or securities of the kind described by a

provision of Subchapter B, Chapter 424, other than Section

424.052, 424.072, or 424.073, in an amount equal to the amount of

cash or securities required of a domestic stock insurance

company.

(b) The commissioner must approve for deposit the cash or

securities required by this section.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

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

730, Sec. 2E.075, eff. April 1, 2009.

Sec. 883.203. RESERVES. (a) A domestic mutual insurance

company shall maintain unearned premiums and other reserves

separately for each kind of insurance. The reserves must be

maintained on the same basis as those reserves are required to be

maintained by a domestic stock insurance company engaging in the

same kinds of insurance.

(b) A mutual insurance company operating under this chapter is

subject to the same reserve requirements as a domestic insurance

company under law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.204. ANNUAL REPORT. (a) Domestic and foreign mutual

insurance companies organized or operating under this chapter

shall submit to the commissioner an annual report in the form

required by the commissioner.

(b) To the extent practicable, the commissioner shall adopt a

form that is similar to a form that is generally used for

submission of the annual report throughout the United States.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.205. EXAMINATION OF FOREIGN MUTUAL INSURANCE COMPANY.

To the extent practicable, an examination of a foreign mutual

insurance company must be conducted in cooperation with the

insurance departments of other states in which the foreign

company is authorized to transact business.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.206. FEES. Each domestic or foreign mutual insurance

company organized or operating under this chapter is subject to a

fee imposed by law on a stock insurance company engaging in the

same kinds of insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.207. PREMIUM TAX. Each domestic or foreign mutual

insurance company organized or operating under this chapter is

subject to taxes imposed by law on that company. The company

shall pay the tax on the gross premiums received for direct

insurance written on property or risks located in this state. The

tax payable must be computed on the portion of the gross premiums

remaining after deducting:

(1) premiums charged on policies not taken;

(2) premiums returned on canceled policies; and

(3) any refund or other return made to the policyholders other

than for the incurrence of a loss.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER O. CRIMINAL PENALTIES

Sec. 883.701. VIOLATION OF CHAPTER. (a) Except as otherwise

provided by this subchapter, a person or corporation commits an

offense if the person or corporation violates this chapter.

(b) An offense under this section is a misdemeanor punishable by

a fine of not less than $50 or more than $500.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.702. FAILURE TO REPORT CONDITION. (a) A person

commits an offense if the person is a president or secretary

described by Section 883.163 and the person fails to make the

report required by that section.

(b) An offense under this section is a misdemeanor punishable by

a fine of not less than $100 or more than $500.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 883.703. FALSE STATEMENT OR MISAPPROPRIATION. (a) A

person commits an offense if the person intentionally submits a

false statement or misappropriates the funds of a mutual

insurance company organized under the laws providing for the

incorporation of mutual fire, lightning, hail, and storm

insurance companies.

(b) An offense under this section is a felony punishable by

confinement in the Texas Department of Criminal Justice for not

less than 5 years or more than 10 years.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

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

87, Sec. 25.122, eff. September 1, 2009.

Sec. 883.704. UNAUTHORIZED MUTUAL FIRE INSURANCE. (a) A person

commits an offense if the person engages in the business of

mutual fire insurance in this state in violation of the laws

regulating mutual fire insurance.

(b) An offense under this section is a misdemeanor punishable by

a fine of not less than $50 or more than $500.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.