Texas Register, Volume 38, Number 47, Pages 8313-8478, November 22, 2013 Page: 8,364
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anticipated cost and do not distinguish costs arising under the
statute, additional costs from this proposal, and other costs that
may occur but are not based on a requirement.
Application. Insurance Code 964.057 requires an application
for a captive insurance company that includes "a financial state-
ment" and "a plan of operation and financial projections," includ-
ing an actuarial report. Insurance Code 964.059 requires the
commissioner to determine from the application that "the capital
structure of the applicant meets the requirements of the chapter;
and the officers and directors of the applicant have sufficient in-
surance experience, ability, standing and good record to make
success of the captive insurance company probable." The com-
missioner is also required to consider the amount and liquidity of
the applicant's assets relative to the risk to be assumed, the over-
all soundness of the applicant's plan of operation and the projec-
tions contained in that plan, and the adequacy of the expertise,
experience, and character of each individual who will manage
the applicant. Sections 6.202, 6.303, 6.401, 6.405, 6.407, and
6.408 establish the documents necessary to meet the legislative
requirements.
The costs of submitting an application and demonstrating that
the applicant meets the statutory requirements for a certificate
of authority is a result of statute and not as a result of the
adoption or enforcement of this proposal. Section 6.202 lists
the requirements for an application. Information required under
6.202(a)(1) - (10) should be readily available to the captive
insurance company applicant and not result in an additional
cost. This includes information required for redomesticating
captive insurance companies under 6.202(b) and captive insur-
ance companies with unaffiliated controlled businesses under
6.202(d). This information is necessary for the commissioner
to complete the analyses of officers, directors, and managers
required under Insurance Code 964.059.
Section 6.202(a)(11) lists the requirements for the plan of
operation that must be included with the application under
Insurance Code 964.057. Each captive insurance company's
actual costs to prepare a plan of operation will depend on
its size and organization, and may require the services of
actuaries, accountants, and lawyers. It is a business decision
of the captive insurance company to hire staff or contract for
services through a captive management company. While it is
not feasible to determine the actual cost of the employees for
all captive insurance companies, the United States Department
of Labor, Bureau of Labor Statistics' May 2012, Occupational
Employment Statistics report indicates that the average hourly
wages for these professions in Texas are: $52.58 for actuaries
(see http://www.bls.gov/oes/current/oes152011 .htm#st); $34.54
for accountants and auditors (see http://www.bls.gov/oes/cur-
rent/oes132011.htm#nat); and $62.27 for lawyers (see
http://www.bls.gov/oes/current/oes231011.htm).
The proposal does not require captive insurance companies to
hire these professional staff, and captive insurance companies
may contract with captive management companies for adminis-
trative services under this proposal. It is not feasible to estimate
the cost of contracting for each service for all captive insurance
companies. The method of compliance and ultimate cost of com-
pliance is a business decision of the insurance company and not
a requirement of this proposal.
Insurance Code 964.053 requires a captive insurance company
to be formed and operated as a business organization autho-
rized under the Texas Business Organizations Code. The costs
of forming a captive insurance company, including any require-ments to redomesticate it, result from the statute and are not a
result of this proposal.
The industry estimated overall application costs for both redo-
mestications and start-up captive insurance companies. Indus-
try did not allocate costs between statute, the proposal, and other
anticipated costs. Thus, these costs are not entirely the result
of this proposal, but include amounts required to comply with
statute and other costs that are anticipated but not required for
compliance. Estimated costs for general legal assistance (for
example, organizational document filings) for a redomestication
range from $5,000 to $25,000; while estimated legal costs range
from $2,500 to $15,000 for a start-up. Industry estimated costs
for actuarial services (for example, feasibility reports and actu-
arial opinions) range from no additional cost to $50,000 for a re-
domestication, and range from $2,500 to $50,000 for a start-up.
Industry-estimated accounting and auditing costs for financial
statements, audit reports, and related projections, as part of an
application process range from no additional cost to $25,000
for a redomestication, and range from no additional cost to
$100,000 for a start-up. Industry also estimated other costs,
such as travel expenses and meetings with regulators ranging
from $250 to $12,000 for a redomestication and ranging from
$250 to $15,000 for a start-up.
Maintenance and Operation. Section 6.301(6) and 6.303(b) re-
quire the captive insurance company to notify the commissioner
and request prior approval of any material changes in the cap-
tive insurance company's plan of operations. The notice may be
transmitted electronically at minimal cost, or by mail at a cost
estimated to be less than $5 in aggregate for postage, enve-
lope, paper, and mail preparation. The information related to the
change in the plan of operation should be readily available to the
captive insurance company applicant and not result in an addi-
tional cost.
Section 6.304(c) requires the captive insurance company to pro-
vide updates to financial projections if the change in the plan of
operation will result in a change in the projected net equity of
greater than 15 percent when compared to the most recent fi-
nancial projections. Each captive insurance company's actual
costs to prepare updated financial projections will depend on the
extent and complexity of the change in the plan of operation and
the operational structure of the captive insurance company, and
may require the services of accountants. It is a business deci-
sion of the captive insurance company to hire staff or contract
for services through a captive management company. While
it is not feasible to determine the actual cost of employees for
all captive insurance companies, the United States Department
of Labor, Bureau of Labor Statistics' May 2012, Occupational
Employment Statistics indicates that the average hourly wage in
Texas is $34.54 for accountants and auditors. It is not feasible
to estimate the cost of contracting for each service for all captive
insurance companies. The method of compliance and ultimate
cost of compliance is a business decision of the insurance com-
pany and not a requirement of this proposal.
Section 6.304(d) requires the captive insurance company to pro-
vide an actuarial opinion on the effect of the change in the plan
of operation if requested by the department. Each captive in-
surance company's actual costs to prepare an actuarial opin-
ion will depend on the extent and complexity of the change in
the plan of operation and the operational structure of the cap-
tive insurance company, and will require the services of actuar-
ies. It is a business decision of the captive insurance company
to hire staff or contract for services through a captive manage-38 TexReg 8364 November 22, 2013 Texas Register
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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/m1/52/: accessed July 17, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.