CHAPTER 2201. RISK RETENTION GROUPS AND PURCHASING GROUPS

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-10-property-and-casualty-insurance > Chapter-2201-risk-retention-groups-and-purchasing-groups

INSURANCE CODE

TITLE 10. PROPERTY AND CASUALTY INSURANCE

SUBTITLE G. POOLS, GROUPS, PLANS, AND SELF-INSURANCE

CHAPTER 2201. RISK RETENTION GROUPS AND PURCHASING GROUPS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2201.001. PURPOSE OF CHAPTER. The purpose of this chapter

is to:

(1) regulate the formation and operation of risk retention

groups and purchasing groups in this state formed under:

(A) the Product Liability Risk Retention Act of 1981 (15 U.S.C.

Section 3901 et seq.); or

(B) the Liability Risk Retention Act of 1986 (15 U.S.C. Section

3901 et seq.); and

(2) protect the public by the appropriate regulation of groups

described by Subdivision (1) to the extent permitted by law.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.002. GENERAL DEFINITIONS. In this chapter:

(1) "Agent" includes the terms "agent" and "broker" as used in

the Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901

et seq.).

(2) "Hazardous financial condition" means a condition in which a

risk retention group, based on the group's present or reasonably

anticipated financial condition and although the group is not yet

financially impaired or insolvent, is unlikely to be able to:

(A) meet obligations to policyholders with respect to known

claims and reasonably anticipated claims; or

(B) pay other obligations in the normal course of business.

(3) "Insurance" means primary insurance, excess insurance,

reinsurance, surplus lines insurance, and any other arrangement

for transferring and distributing risk that is determined to be

insurance under the laws of this state.

(4) "State" means any state of the United States or the District

of Columbia.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.003. LIABILITY DEFINED. (a) In this chapter, except

as provided by Subsection (b) or as otherwise provided by this

chapter:

(1) "Completed operations liability" means liability, including

liability for activities that are completed or abandoned before

the date of the occurrence giving rise to the liability, arising

out of the installation, maintenance, or repair of any product at

a site that is not owned or controlled by:

(A) a person who performs that work; or

(B) a person who hires an independent contractor to perform that

work.

(2) "Liability" means legal liability for damages, including

costs of defense, legal costs, fees, and other claims expenses,

incurred because of personal injury, property damage, or other

damage or loss to another person resulting from or arising out

of:

(A) a product, trade, or business, regardless of whether the

business operates for profit;

(B) operations, premises, or services, including professional

services; or

(i) a state or local government; or

(ii) an agency or political subdivision of a state or local

government.

(3) "Product liability" means liability for damages incurred

because of any personal injury, death, emotional harm,

consequential economic damage, or property damage, including

damage resulting from the loss of use of property, arising out of

the manufacture, design, importation, distribution, packaging,

labeling, lease, or sale of a product, but does not include the

liability of any person for those damages if the product involved

was in the possession of that person when the incident giving

rise to the claim occurred.

(b) In this chapter, "liability" does not include:

(1) liability for damages incurred because of personal injury,

property damage, or other damage or loss resulting from a

personal, familial, or household activity or responsibility; or

(2) an employer's liability with respect to the employer's

employees other than legal liability under the Federal Employers'

Liability Act (45 U.S.C. Section 51 et seq.).

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.004. AGENT LICENSE REQUIRED. (a) A person, firm,

partnership, or corporation may not act or offer to act as an

agent for, or aid in any manner in the solicitation, negotiation,

or placement of insurance on behalf of, a risk retention group or

purchasing group operating in this state or a group member in

this state without first obtaining a license as an agent under:

(1) Chapter 4051, if a resident of this state; or

(2) Chapter 4056, if a nonresident of this state.

(b) A person, firm, partnership, or corporation must comply with

Chapter 981 before the person, firm, partnership, or corporation,

on behalf of a purchasing group or a group member in this state:

(1) acts or offers to act as an agent for an insurer not

authorized to engage in business in this state; or

(2) aids in any manner in the solicitation, negotiation, or

placement of insurance with an insurer not authorized to engage

in business in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.005. EXEMPTION FROM CERTAIN REQUIREMENTS. (a) A

provision of Chapter 981, 4055, or 4056 does not apply to an

agent described by Subsection (b) if the provision:

(1) requires residency in this state;

(2) requires countersignatures;

(3) prohibits the solicitation of insurance in this state by a

nonresident or the payment of commissions to a nonresident; or

(4) prohibits a nonresident from acting as a surplus or excess

lines agent.

(b) The exemption provided by Subsection (a) applies to an agent

licensed under Chapter 981, 4055, or 4056 who is acting on behalf

of a risk retention group or purchasing group operating in this

state or a group member in this state in providing or placing

liability insurance for risks located in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.006. AUTHORITY OF COMMISSIONER. (a) To enforce the

laws of this state, the commissioner may use any authority

provided by this code that is not specifically preempted by the

Product Liability Risk Retention Act of 1981, as amended by the

Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901 et

seq.), including the authority to investigate, issue a subpoena,

conduct a deposition or hearing, issue an order, and impose a

penalty.

(b) The commissioner shall rely on the procedural laws and rules

of this state with regard to an investigation, an administrative

proceeding, or litigation.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.007. ANNUAL REPORT TO COMMISSIONER. An agent licensed

as required by Section 2201.004 shall report to the commissioner

not later than March 1 of each year the activities and scope of

services being provided to a risk retention group or purchasing

group. The report must be made in accordance with rules adopted

by the commissioner.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.008. RULES. The commissioner may adopt rules relating

to risk retention groups and purchasing groups that are necessary

to carry out this chapter.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

SUBCHAPTER B. RISK RETENTION GROUP QUALIFICATIONS

Sec. 2201.051. GENERAL QUALIFICATIONS OF RISK RETENTION GROUP.

A risk retention group must be a corporation or other limited

liability association that:

(1) is organized primarily to assume and spread, and engages

primarily in assuming and spreading, all or any portion of the

liability exposure of the group's members; and

(2) otherwise meets the qualifications of this subchapter.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.052. NAME OF GROUP. A risk retention group must

include in its name the phrase "risk retention group."

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.053. STATUS AS LIABILITY INSURER REQUIRED. A

corporation or other limited liability association must be

chartered and authorized to engage in the business of insurance

as a liability insurer under the laws of any state to act as a

risk retention group.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.054. QUALIFICATIONS REGARDING AUTHORITY OF CERTAIN

ENTITIES TO ENGAGE IN BUSINESS. (a) In this section, "completed

operations liability" and "product liability" have the meanings

assigned by the Product Liability Risk Retention Act of 1981 (15

U.S.C. Section 3901 et seq.) before the effective date of the

Liability Risk Retention Act of 1986 (15 U.S.C. Section 3901 et

seq.).

(b) Notwithstanding Section 2201.053, a corporation or other

limited liability association may be considered a risk retention

group if:

(1) before January 1, 1985, the corporation or association:

(A) was chartered and authorized to engage in the business of

insurance under the laws of Bermuda or the Cayman Islands; and

(B) had certified to the commissioner, director, or

superintendent of insurance of at least one state that it

satisfied the capitalization requirements of that state; and

(2) since January 1, 1985, the corporation or association has

been continuously engaged in business solely to continue to

provide insurance to cover completed operations liability or

product liability.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.055. QUALIFICATIONS REGARDING MEMBERSHIP. (a) A risk

retention group must be composed of members who are engaged in

similar or related businesses or activities with respect to the

liability to which those members are exposed by virtue of any

related, similar, or common product, trade, business, operations,

premises, or services.

(b) A risk retention group must have:

(1) as members, only persons who are provided insurance by the

group; or

(2) as the sole owner, an organization that has:

(A) as members, only persons who comprise the membership of the

group; and

(B) as owners, only persons who comprise the membership of the

group and are provided insurance by the group.

membership in the group solely to provide a competitive advantage

for group members over that person.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.056. AUTHORIZED ACTIVITIES. (a) A risk retention

group may provide:

(1) liability insurance for assuming and spreading all or any

portion of the liability of the group's members; and

(2) reinsurance with respect to the liability of another risk

retention group, or a member of that group, engaged in businesses

or activities that meet the requirements of Section 2201.055(a)

for membership in the group providing reinsurance.

(b) A risk retention group may not engage in activities that

include providing insurance other than the insurance described by

Subsection (a).

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

SUBCHAPTER C. RISK RETENTION GROUPS

CHARTERED IN THIS STATE

Sec. 2201.101. ELIGIBILITY REQUIREMENTS. Except as otherwise

provided by this chapter, a risk retention group that applies to

be chartered in this state must:

(1) be chartered and authorized to engage in the business of

insurance under Chapter 822, 861, 883, or 942; and

(2) comply with all the laws, rules, and requirements, including

Chapter 804, applicable to insurers authorized to engage in

business under those chapters and with Subchapter D to the extent

those requirements do not limit the laws, rules, or requirements

of this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.102. CHARTER APPLICATION. (a) A risk retention group

that applies to be chartered in this state shall provide to the

commissioner with the application for charter the following in

accordance with rules adopted by the commissioner:

(1) the group's name;

(2) the identity of the group's initial members;

(3) the identity of the individuals who organized the group or

who will provide administrative services or otherwise influence

or control the group's activities;

(4) the amount and nature of initial capitalization;

(5) the coverages to be afforded; and

(6) the states in which the group intends to operate.

(b) Immediately on receipt of an application for charter, the

commissioner shall provide summary information concerning the

filing, including the information provided under Subsection (a),

to the National Association of Insurance Commissioners.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.103. PLAN OF OPERATION; REVISIONS. (a) Except as

provided by Subsection (b), before a risk retention group

chartered in this state may offer insurance in any state, the

group must submit to the commissioner for approval a plan of

operation as described by Section 2201.202.

(b) A risk retention group is not required to submit a plan of

operation under this section with respect to any kind or

classification of liability insurance that:

(1) was defined in the Product Liability Risk Retention Act of

1981 (15 U.S.C. Section 3901 et seq.), as that Act existed before

October 27, 1986; and

(2) was offered before October 27, 1986, by any risk retention

group that had been chartered and operating for at least three

years before that date.

group's plan of operation to the commissioner and the

commissioner must approve the revision before the group:

(1) offers an additional line of insurance in this state or in

any other state; or

(2) effects a change in the group's operations as described in

the plan of operation.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.104. FILING FEE. (a) In addition to all other fees

imposed on an insurer chartered and authorized to engage in

business under Chapter 822, 861, 883, or 942, a risk retention

group chartered in this state shall pay a filing fee in an amount

not to exceed $1,000 as set by rules adopted by the commissioner.

(b) Fees collected under this section shall be deposited to the

credit of the Texas Department of Insurance operating account to

pay expenses incurred by the commissioner under Sections 2201.102

and 2201.103.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

SUBCHAPTER D. RISK RETENTION GROUPS

NOT CHARTERED IN THIS STATE

Sec. 2201.151. COMPLIANCE REQUIRED. A risk retention group

chartered and authorized to engage in business in another state,

Bermuda, or the Cayman Islands shall comply with this subchapter

to engage in business as a risk retention group in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.152. PREREQUISITES TO OFFERING INSURANCE. (a) Before

offering insurance in this state, a risk retention group not

chartered in this state must submit to the commissioner:

(1) a statement that:

(A) identifies the state or states in which the group is

chartered and authorized to engage in business as a liability

insurer, the date of charter, and the group's principal place of

business; and

(B) provides any other information the commissioner requires to

verify that the group qualifies as a risk retention group under

Subchapter B, including information on the group's membership;

(2) except as provided by Subsection (b), a copy of the group's

plan of operation, as described by Section 2201.202, and

revisions of that plan submitted to the state in which the group

is chartered and authorized to engage in business; and

(3) a statement of registration that designates the commissioner

as the group's agent for the purpose of receiving service of

legal documents or process as provided by Chapter 804.

(b) A risk retention group is not required to submit a plan of

operation under this section with respect to any line or

classification of liability insurance that:

(1) was defined in the Product Liability Risk Retention Act of

1981 (15 U.S.C. Section 3901 et seq.), as that Act existed before

October 27, 1986; and

(2) was offered before October 27, 1986, by any risk retention

group that had been chartered and operating for at least three

years before that date.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.153. REQUIREMENTS FOR CONTINUING BUSINESS. (a) A

risk retention group not chartered in this state that engages in

business in this state shall submit to the commissioner:

(1) a copy of the group's financial statement submitted to the

state in which the group is chartered and authorized to engage in

business;

(2) a copy of each examination of the group as certified by the

commissioner, director, or superintendent of insurance of another

state or other public official conducting the examination;

(3) on the commissioner's request, a copy of any audit performed

with respect to the group; and

(4) any other information required to verify that the group

continues to qualify as a risk retention group under Subchapter

(b) A financial statement submitted under Subsection (a)(1)

must:

(1) be certified by an independent public accountant; and

(2) contain a statement of opinion on loss and loss adjustment

expense reserves made:

(A) under criteria established by the National Association of

Insurance Commissioners; and

(B) by a member of the American Academy of Actuaries or a

qualified loss reserve specialist.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.154. FILING FEES. (a) The commissioner by rule shall

impose a filing fee in an amount not to exceed $500 for filing

the items described by Sections 2201.152(a)(1) and (2).

(b) The commissioner by rule may impose a filing fee in an

amount not to exceed $500 for filing the financial statement

under Section 2201.153(a)(1). A risk retention group shall

provide to the comptroller all information the comptroller

requests in connection with the reporting, collection,

enforcement, and administration of the fee.

credit of the Texas Department of Insurance operating account.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.155. PAYMENT OF TAXES. (a) A risk retention group

not chartered in this state is liable for the payment of premium

and maintenance taxes and taxes on premiums of direct business

for risks located in this state and shall report to the

commissioner the net premiums written for risks located in this

state. The group is subject to taxation, and any fine or penalty

related to that taxation, on the same basis as a foreign admitted

insurer in accordance with Chapters 4, 201, 202, 203, 221, 222,

224, 227, 228, and 251-257.

(b) A risk retention group shall provide to the comptroller all

information the comptroller requests in connection with the

reporting, collection, enforcement, and administration of taxes

under this section.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Amended by:

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

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

Sec. 2201.156. EXAMINATION OF FINANCIAL CONDITION; DISSOLUTION

OR DELINQUENCY PROCEEDINGS. (a) A risk retention group not

chartered in this state must submit to an examination by the

commissioner to determine the group's financial condition if the

commissioner of insurance of the jurisdiction in which the group

is chartered and authorized to engage in business has not

initiated an examination on or before the 60th day after the date

the commissioner of this state requests an examination.

(b) The commissioner shall:

(1) coordinate the examination under Subsection (a) to avoid

unjustified repetition; and

(2) conduct the examination in an expeditious manner under

Sections 401.051, 401.052, 401.054-401.062, 401.103-401.106,

401.151, 401.152, 401.155, and 401.156 and Chapters 86 and 803 in

accordance with the National Association of Insurance

Commissioners Financial Condition Examiner's Handbook.

engages in business in this state must comply with an order

issued in a voluntary dissolution proceeding or in a delinquency

proceeding commenced by the commissioner or by a commissioner of

another jurisdiction if, after an examination under this section,

there is a finding that the group is financially impaired.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.157. APPLICABILITY OF STATE LAWS PROHIBITING CERTAIN

ACTS OR PRACTICES. (a) A risk retention group not chartered in

this state shall comply with the laws of this state relating to

deceptive, false, or fraudulent acts or practices, including

Chapters 541 and 543.

(b) A risk retention group not chartered in this state and the

group's agents and representatives shall comply with Chapter 542.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.158. INJUNCTIVE RELIEF. (a) A risk retention group

not chartered in this state must comply with the terms of an

injunction issued by a court of this state or any other state

based on a finding that the group is in a hazardous financial

condition or is financially impaired.

(b) Injunctive relief must be issued by a court if the

commissioner seeks to enjoin a risk retention group not chartered

in this state from:

(1) violating the law of this state prohibiting deceptive,

false, or fraudulent acts or practices;

(2) soliciting or selling insurance to a person who is not

eligible for membership in the group; or

(3) soliciting or selling insurance or operating when the group

is in a hazardous financial condition or is financially impaired.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

SUBCHAPTER E. PROVISIONS REGULATING GENERAL OPERATION

OF RISK RETENTION GROUPS

Sec. 2201.201. SCOPE OF AUTHORITY. A risk retention group may

engage in the business of insurance in this state only:

(1) as a risk retention group; and

(2) to conduct the activities described in this chapter.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.202. PLAN OF OPERATION. A plan of operation submitted

to the commissioner under Section 2201.103 or 2201.152 must be in

the form of an analysis that presents the expected activities and

results of a risk retention group, including, at a minimum:

(1) information sufficient to verify that the group's members

are engaged in businesses or activities that are similar or

related with respect to the liability to which those members are

exposed by virtue of any related, similar, or common product,

trade, business, operations, premises, or services;

(2) for each state in which the group intends to operate, the

coverages, deductibles, coverage limits, rates, and rating

classification systems for each line of insurance the group

intends to offer;

(3) historical and expected loss experience of the proposed

members and national experience of similar exposures to the

extent that this experience is reasonably available;

(4) pro forma financial statements and projections;

(5) appropriate opinions, including a determination of minimum

premium or participation levels required to begin operations and

to prevent a hazardous financial condition, by:

(A) a qualified, independent casualty actuary who is a member in

good standing of the American Academy of Actuaries; or

(B) an individual who the commissioner recognizes as having

comparable training and experience;

(6) identification of management, underwriting and claims

procedures, marketing methods, managerial oversight methods, and

investment policies; and

(7) other matters prescribed by the insurance laws of the state

in which the group is chartered.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.203. AGENT TO VERIFY AUTHORITY. Before placing

business with a risk retention group, each agent shall secure

from the appropriate insurance regulatory authority a certified

copy of the certificate of authority verifying that the insurer

is authorized in the insurer's domiciliary jurisdiction to write

the liability insurance policy the agent proposes to procure from

the insurer.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.204. APPLICABILITY OF CERTAIN REQUIREMENTS FOR

LIABILITY INSURERS. A risk retention group authorized to engage

in business in this state under Subchapter C or D must

participate on the same basis as a liability insurer holding a

certificate of authority to engage in the business of insurance

in this state in:

(1) the Texas Windstorm Insurance Association;

(2) joint underwriting associations;

(3) mandatory liability and assigned risk pools; and

(4) residual market facilities.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.205. RISK RETENTION GROUP PARTICIPATION IN INSOLVENCY

GUARANTY FUND PROHIBITED. A risk retention group may not be

required or permitted to join or contribute financially to any

insurance insolvency guaranty fund or similar mechanism in this

state. A risk retention group, and any of the group's insureds

or claimants against an insured, may not receive any benefit from

an insurance insolvency guaranty fund or similar mechanism in

this state for a claim arising under an insurance policy issued

by the group.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.206. REQUIRED NOTICE. (a) Any policy issued by a

risk retention group must contain in 10-point type on the front

page and on the declarations page the following notice:

NOTICE

This policy is issued by your risk retention group. Your risk

retention group may not be subject to all of the insurance laws

and regulations of your state. State insurance insolvency

guaranty funds are not available for your risk retention group.

(b) Each person, firm, partnership, or corporation licensed

under Chapter 981, 4051, or 4056 shall inform each prospective

insured on business to be placed with a risk retention group of

the notice required by Subsection (a).

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.207. PROHIBITED ACTIVITIES. A risk retention group

may not:

(1) solicit or sell insurance to any person who is not eligible

for membership in the group;

(2) solicit or sell insurance or operate if the group is in a

hazardous financial condition or is financially impaired; or

(3) engage in business in this state if an insurer is directly

or indirectly a member or owner of the group, unless all of the

group members are insurers.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.208. INJUNCTIVE RELIEF. An order issued by a United

States district court enjoining a risk retention group from

soliciting or selling insurance or operating in any state, in all

states, or in any territory or possession of the United States on

a finding that the group is in a hazardous financial condition,

is financially impaired, or is insolvent is enforceable in the

courts of this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.209. PENALTIES. (a) A risk retention group that is

authorized to engage in business in this state under Subchapter C

or D and that violates this chapter is subject to all sanctions

and penalties applicable to an insurer that holds a certificate

of authority under Chapters 822 and 861, including revocation of

the authority to engage in business in this state.

(b) A risk retention group not chartered in this state that

violates this chapter is also subject to any fine or penalty

applicable to a foreign admitted insurer generally, including

revocation of the authority to engage in business in this state.

that is not authorized to engage in business under Subchapter C

or D is considered an unauthorized insurer and is subject to

Section 823.457, Subchapters A-P, Chapter 442, and Chapters 101,

441, 804, and 801, other than Section 801.056.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

SUBCHAPTER F. PURCHASING GROUPS

Sec. 2201.251. GENERAL QUALIFICATIONS OF PURCHASING GROUP. (a)

A purchasing group must:

(1) have as one of the group's purposes the purchase of

liability insurance on a group basis;

(2) be composed of members whose businesses or activities are

similar or related with respect to the liability to which those

members are exposed by virtue of any related, similar, or common

product, trade, business, operations, premises, or services; and

(3) purchase group liability insurance only for the group's

members and only to cover the members' similar or related

liability exposure as described in Subdivision (2).

(b) A purchasing group may be domiciled in any state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.252. DETERMINATION OF LOCATION. (a) For purposes of

this subchapter, a purchasing group is considered to be located

in the state in which the highest aggregate premiums are in force

on the date the group insurance policy is written or renewed.

The group's location is ascertained on each placement or renewal

of insurance by the group with an insurer or risk retention

group.

(b) For purposes of this section, a group insurance policy is

considered to be renewed annually.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.253. LIMITATIONS ON AUTHORITY. (a) A purchasing

group located in this state may not purchase liability insurance

from a risk retention group that is not chartered in a state or

from an insurer that does not hold a certificate of authority to

engage in the business of insurance in this state unless the

purchase is effected through a licensed agent acting under

Chapter 981.

(b) A purchasing group may not offer insurance policy coverage

declared unlawful by the Texas Supreme Court.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.254. APPLICATION OF STATE LAW. (a) A purchasing

group meeting the criteria established under the Liability Risk

Retention Act of 1986 (15 U.S.C. Section 3901 et seq.) is exempt

from any law of this state that:

(1) relates to the creation of groups for the purchase of

insurance;

(2) requires countersignatures;

(3) prohibits group purchasing; or

(4) discriminates against a purchasing group or the group's

members.

(b) An insurer is exempt from any law of this state that

prohibits providing or offering to provide to a purchasing group

or the group's members advantages based on the group's or

members' loss and expense experience that are not afforded to

other persons with respect to rates, policy forms, coverages, or

other matters.

of this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.255. NOTICE TO COMMISSIONER; FILING FEE. (a) Before

engaging in business in this state, a purchasing group must

provide notice to the commissioner. The notice must:

(1) identify the state in which the group is domiciled;

(2) specify the lines and classifications of liability insurance

the group intends to purchase;

(3) specify the method by which and the persons, if any, through

whom insurance will be offered to group members whose risks are

located in this state;

(4) identify the insurer from which the group intends to

purchase group insurance and the domicile of that insurer;

(5) identify the group's principal place of business and, if

ascertainable at the time of filing, the group's location; and

(6) provide other information the commissioner requires to

verify that the group qualifies as a purchasing group under

Section 2201.251.

(b) The commissioner by rule shall impose a filing fee in an

amount not to exceed $100 for filing notice under this section.

Fees collected under this subsection shall be deposited to the

credit of the Texas Department of Insurance operating account.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.256. REGISTRATION REQUIREMENT; FEES. (a) A

purchasing group shall register with and designate the

commissioner or other appropriate authority as the group's agent

solely for the purpose of receiving service of legal documents or

process unless the group:

(1) was domiciled before April 1, 1986, in any state of the

United States and is domiciled on and after October 27, 1986, in

any state of the United States;

(2) before October 27, 1986, purchased the group's insurance

from an insurer authorized to engage in business in any state,

and after October 27, 1986, purchased the group's insurance from

an insurer authorized to engage in business in any state;

(3) was a purchasing group under the requirements of the Product

Liability Risk Retention Act of 1981 (15 U.S.C. Section 3901 et

seq.) before October 27, 1986; and

(4) does not purchase insurance that was not authorized for

purposes of an exemption under that Act as effective before

October 27, 1986.

(b) The commissioner by rule may impose a fee in an amount not

to exceed $50 for each document served on the commissioner and

forwarded to the purchasing group. Fees collected under this

subsection shall be deposited to the credit of the Texas

Department of Insurance operating account.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.257. PAYMENT OF PREMIUM TAXES. (a) Premiums paid for

coverage of risks located in this state by a purchasing group or

any group member are subject to taxation at the same rate and

subject to the same interest, fines, and penalties for nonpayment

that apply to premiums paid for similar coverage by other

insureds.

(b) Title 3 is used to compute applicable tax rates for a

purchasing group or any group member that pays premiums for

coverage of risks located in this state to:

(1) an insurer holding a certificate of authority to engage in

the business of insurance in this state; or

(2) a risk retention group authorized to engage in business in

this state.

premiums as described by Subsection (b), the insurer or risk

retention group receiving those premiums shall remit the tax to

the department.

(d) Chapter 225 is used to compute applicable tax rates for a

purchasing group or any group member that pays premiums for

coverage of risks located in this state to an eligible surplus

lines insurer. If a purchasing group or member pays those

premiums, the surplus lines agent shall report and remit the tax.

If the agent does not remit the tax, the purchasing group shall

remit the tax.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.258. PURCHASING GROUP PARTICIPATION IN INSOLVENCY

GUARANTY FUND PROHIBITED; EXCEPTION. (a) A claim against a

purchasing group or a group member may not be paid from any

insurance insolvency guaranty fund or similar mechanism in this

state.

(b) A purchasing group, a group member, or any claimant against

the group or group member may not receive any benefit from an

insurance insolvency guaranty fund or similar mechanism in this

state for a claim arising under an insurance policy procured

through the group unless the policy is underwritten by an insurer

authorized to engage in business in this state that, at the time

of the policy's issuance:

(1) has capital and surplus of at least $25 million; or

(2) is a member of a company group that has combined capital and

surplus of at least $25 million.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

Sec. 2201.259. REQUIRED NOTICE. (a) A purchasing group that

obtains liability insurance from an insurer or a risk retention

group shall provide notice to each group member that has a risk

located in this state that the risk is not protected by an

insurance insolvency guaranty fund in this state and that the

insurer or risk retention group may not be subject to all the

insurance laws and rules of this state.

(b) Each person, firm, partnership, or corporation licensed

under Chapter 981, 4051, or 4056 shall inform each prospective

insured on business to be written through a purchasing group of

the notice required by Subsection (a).

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 2, eff. April 1, 2007.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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