Texas Register, Volume 38, Number 47, Pages 8313-8478, November 22, 2013 Page: 8,359
8313-8478 p. ; 28 cm.View a full description of this periodical.
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than 90 days. This is necessary to ensure that registered cap-
tive managers are active participants in the Texas market and
not simply seeking a designation. Further, the requirement for
reentry into the market is extremely low, and the sections do not
prohibit a captive management company from applying for a reg-
istration at the time a captive insurance company that it will man-
age begins the more extensive process of seeking a certificate
of authority.
Subsection (d) establishes that a captive management company
with an expired registration must resubmit its registration. The
subsection also provides that the commissioner may waive re-
quirements for certain information if requested by the registrant
and the department determines that the information is unneces-
sary.
6.103. Designated Responsible Party. Subsection (a) specifies
the qualification for an individual to be designated a responsible
party and the information that must be provided about the des-
ignated individual. This includes identifying information, profes-
sional background information, criminal history, and, unless ex-
empt, a criminal history background check using the procedure
under 1.509 of this title as authorized by Government Code
411.106.
If the designated responsible party has submitted a set of fin-
gerprints to the department for a license that is currently active,
the individual is not required to submit another set of fingerprints
under 1.504(b)(1). Otherwise, fingerprint background checks
will be conducted using established department processes spec-
ified in 1.509. Electronic fingerprinting is preferred and is done
through the Texas Department of Public Safety's (DPS) vendor.
The print is electronically determined to be usable at the time of
collection, forwarded to the DPS and FBI for review, and the re-
sults are made available securely to the department within a few
days. Persons may also submit paper fingerprint cards. How-
ever, reprints are often required if the DPS determines after it
receives the prints that they are unsuitable for scanning into an
electronic format. Payment of fees is required under 1.509.
The vendor, DPS, and the FBI establish fee and payment re-
quirements.
The designated responsible party must not have a prior criminal
history that would bar the person from licensure under 1.502 of
this title.
6.104. Administrative Services Contracts. This section
addresses administrative service contracts between captive
management and captive insurance company or other captive
management companies. The captive insurance company
may elect to perform administrative service functions in-house,
directly contract with separate captive management companies
to perform different administrative service functions, contract
with a captive management company that will then contract with
other captive management companies, or some combination of
these structures.
Subsection (a) provides that the captive insurance company may
contract with a number of captive management companies. Sub-
section (b) provides that captive management companies may
contract with other captive management companies if the cap-
tive insurance company approves.
However, as addressed in subsection (c), regardless of the con-
tractual relationships, the captive insurance company remains
responsible for compliance with all statutory and regulatory re-
quirements. The captive insurance company is the entity obli-
gated on the risk, and it has a duty to manage that risk in com-pliance with the law. Subsection (d) provides that subsection (c)
does not limit the duty of the captive management company to
also comply with statutes and regulations. The department in-
tends to allow for flexible structures; however, compliance can-
not be avoided by attempting to shift blame for a violation be-
tween the entities.
The Insurance Code and other laws require persons perform-
ing certain functions to have a license. For example, adjusters
require a license. To the extent the entity or the employee per-
forming a function is required to have a license, subsection (e)
requires them to hold the license. A captive management com-
pany registration does not authorize the captive management
company or its employees to perform a licensed service without
the required license.
6.105. Agreements to Provide Administrative Services. This
section establishes certain provisions that must be incorpo-
rated into a captive management contract. Insurance Code
964.059(b)(3) and (5) authorize the commissioner to consider
the overall soundness of the captive insurance company's plan
of operations and factors relevant to determining whether the
captive insurance company will be able to meet its policyholder
obligations. The requirements are basic, but have presented
impediments to insurers fulfilling their obligations in the depart-
ment's regulatory experience.
Further, as provided in Insurance Code 964.055, books and
records are subject to Insurance Code Chapter 803. Insurance
Code 803.005 requires that the books, records, accounts, or of-
fices of a domestic company must be under the company's direct
supervision, management, and control. Section 803.008 autho-
rizes the commissioner to adopt rules to authorize a domestic
company to maintain its books and records with a nonaffiliated
entity other than an agency. This section establishes contracting
requirements.
Subchapter C. Captive Insurance Company Application
Process. This subchapter establishes the procedure for sub-
mitting a captive insurance company certificate of authority
application and the information the department will require to
process that application. The procedure is intended to minimize
delay and create a reasonable and flexible process within the
scope of the statute. Further, while not required by these sec-
tions, an applicant may request an initial meeting and cursory
business plan review prior to filing an application, to expedite
the process. Because the department's financial evaluation
and qualifying examination of the proposed captive insurance
company may require significantly more time than the Secretary
of State's review and issuance of a certificate of filing, the
sections do not require the company to be formed prior to the
department commencing its review.
6.201. Captive Insurance Company Certificate of Authority Re-
quired. This section requires an applicant to submit an applica-
tion providing the information in 6.202 of this title and the re-
quired fee to apply for a certificate of authority. The department
has chosen not to require or adopt a specific form or format for
submitting the information, because the applicant, in particular
those applicants redomesticating to Texas from other domiciles,
may have the required information on other forms and in other
formats. The department seeks to work with these applicants in
minimizing the cost, delay, and effort required in applying for a
Texas certificate of authority.
Until January 1, 2019, Insurance Code 964.057(d) establishes
an application fee of $1,500. Insurance Code 964.057(c) re-PROPOSED RULES November 22, 2013 38 TexReg 8359
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Texas. Secretary of State. Texas Register, Volume 38, Number 47, Pages 8313-8478, November 22, 2013, periodical, November 22, 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth379965/m1/47/: accessed July 17, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.