CHAPTER 2204. TEXAS INSURANCE EXCHANGE

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INSURANCE CODE

TITLE 10. PROPERTY AND CASUALTY INSURANCE

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

CHAPTER 2204. TEXAS INSURANCE EXCHANGE

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2204.001. DEFINITIONS. In this chapter:

(1) "Directors" means the board of directors of the exchange.

(2) "Exchange" means the Texas Insurance Exchange.

(3) "Member" means a person, firm, corporation, or underwriting

syndicate authorized by the directors to insure or reinsure risks

through the exchange.

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

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

Sec. 2204.002. EXEMPTION. (a) This chapter, Chapters 251 and

261, and rules adopted by the commissioner or comptroller, as

applicable, apply to the exchange, a member, and insurance and

reinsurance written through the exchange, except to the extent

exempted by rules adopted by the commissioner or comptroller, as

applicable.

(b) An exemption may not be:

(1) unfairly discriminatory; or

(2) detrimental to the solvency of an insurer authorized to

engage in the business of insurance in this state.

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

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

Sec. 2204.003. RULES. The commissioner shall adopt rules for

the operation and management of the exchange.

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

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

SUBCHAPTER B. OPERATION AND MANAGEMENT

Sec. 2204.051. PURPOSE OF EXCHANGE; SPECIFIC AUTHORIZATION FOR

CERTAIN INSURANCE. (a) The exchange shall provide a facility

for underwriting:

(1) reinsurance of any kind of insurance;

(2) direct insurance of any kind of risk located entirely

outside the United States;

(3) direct insurance of any kind of risk that:

(A) is located in another state; and

(B) qualifies for placement under the excess and surplus lines

requirements of the jurisdiction in which the risk is located;

and

(4) a risk located in this state that has been submitted to and

certified as rejected by a committee representing at least three

and not more than seven insurers authorized to engage in the

business of insurance in this state and subject to conditions

imposed by rules adopted by the commissioner.

(b) For purposes of Chapter 101, insurance or reinsurance a

member writes to cover a risk described by Subsection (a)(4) is

considered to be specifically authorized by the laws of this

state.

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

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

Sec. 2204.052. OPERATION OF EXCHANGE. The exchange shall

operate under:

(1) a constitution and bylaws adopted by the exchange and

approved by the department; and

(2) rules adopted by the commissioner under Section 2204.003.

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

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

Sec. 2204.053. CONSTITUTION AND BYLAWS. (a) In this section:

(1) "Principal office" means an office at which officers and

personnel who are engaged in administration, underwriting, claims

adjustment, policyholders' service, marketing, accounting,

recordkeeping, and support services are located.

(2) "Subscriber" means a person, firm, corporation, or other

organization that, on payment of fees or dues required by the

constitution and bylaws, the directors designate as a subscriber.

(b) The constitution and bylaws of the exchange must provide

for:

(1) the election of nine directors, four of whom represent the

public interest and are not members, subscribers, or agents of

the exchange;

(2) the locations of the principal offices of the exchange and

the members in this state for transacting business described by

Section 2204.051(a);

(3) the submission by the exchange, members, and applicants for

membership in the exchange of financial information required by

rules adopted by the commissioner;

(4) the establishment and maintenance by the exchange of a

security fund in a form and amount specified by rules adopted by

the commissioner;

(5) the voting power of members; and

(6) members' rights and duties, including the manner of

conducting business, financial stability, dues, membership fees,

mandatory arbitration, and any other matter necessary or

appropriate to conduct business authorized by this chapter.

participate in the operation and management of the exchange, the

constitution and bylaws of the exchange must provide for the

voting power and other rights granted to a nonprofit corporation

under the Business Organizations Code.

For expiration of Subsections (c-1) and (c-2), see Subsection

(c-2)

(c-1) Notwithstanding Subsection (c), on or before December 31,

2009, for an agent transacting business on the exchange to

participate in the operation and management of the exchange, the

constitution and bylaws of the exchange must provide for the

voting power and other rights granted to a nonprofit corporation

under the Texas Non-Profit Corporation Act (Article 1396-1.01 et

seq., Vernon's Texas Civil Statutes) or the Business

Organizations Code, as applicable.

(c-2) This subsection and Subsection (c-1) expire January 1,

2010.

(d) In a manner that complies with the requirements adopted

under this section, the exchange may, with the department's

approval, amend the exchange's constitution or bylaws in

accordance with the terms of the constitution and bylaws.

(e) The constitution, a bylaw, or an amendment to the

constitution or a bylaw is invalid without the department's

approval.

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

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

Sec. 2204.054. DIRECTORS. (a) The directors shall operate and

manage the exchange in accordance with rules adopted under

Section 2204.003.

(b) The directors shall be elected by the members and any other

person authorized by the exchange's constitution and bylaws to

vote in an election of directors.

United States.

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

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

SUBCHAPTER C. FINANCES

Sec. 2204.101. TAXES. (a) Except as provided by this section

and Chapters 251 and 261, the exchange is not subject to state or

local taxes that are measured by income, premiums, or gross

receipts.

(b) A direct premium written, procured, or received by a member

through the exchange on a risk located in this state is:

(1) considered written, procured, or received by the exchange;

and

(2) subject to the premium taxes imposed under Subtitle B, Title

provided by Subtitle B, Title 3.

(d) The exchange and the members are considered insurers for

purposes of:

(1) Sections 201.052, 201.053, and 201.054;

(2) Chapters 4, 202, 203, 221, 222, 224, 227, 228, 251, 257, and

1109; and

(3) Section 171.0525, Tax Code.

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.007, eff. April 1, 2009.

Sec. 2204.102. INVESTMENTS IN MEMBER OR AGENT. (a) The

commissioner by rule may establish limitations on investments in

a member.

(b) An investment, directly or indirectly, in a member by an

agent transacting business on the exchange or in an agent

transacting business on the exchange by a member is limited in

the aggregate to:

(1) less than 20 percent of the total investment in the member

or agent; or

(2) a lesser amount provided by a rule adopted by the

commissioner.

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

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

Sec. 2204.103. COVERAGE BY GUARANTY FUNDS. (a) The performance

of a contractual obligation of the exchange or a member entered

into under this chapter is not covered by an insurance guaranty

fund provided by the laws of this state.

(b) This section does not apply to the security fund established

under Section 2204.053(b)(4).

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

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

State Codes and Statutes

State Codes and Statutes

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